ANNUAL REPORT 2015
Company Overview
For over 20 years, vehicle manufacturers around the world have entrusted AAM
to design, engineer and manufacture driveline systems for their vehicles. Over that
time, we have delivered innovative technologies and solutions that are smarter,
lighter, electric, more efficient and more powerful. We are in the business of
Delivering POWER that keeps the world moving.
Founded: 1994
Customers: More than 100 worldwide
Associates: Approximately 13,000
Locations: 37 facilities in 13 countries
• Brazil
• China
• Germany
• India
• Japan
• Luxembourg
• Mexico
• Poland
• Scotland
• South Korea
• Sweden
• Thailand
• United States
Financial Highlights
(in millions, except per share data)
Statement of income data
Net sales
Gross profit
Operating income
Net income
Diluted earnings per share
Balance sheet data
Cash and cash equivalents
Total assets
Total long-term debt, net
AAM stockholders’ equity
Statement of cash flow data
2015
$ 3,903.1
635.4
358.1
235.6
3.02
$
$ 282.5
3,202.7
1,375.7
301.5
Cash provided by operating activities
Cash used in investing activities
$ 377.6
(188 .1)
2014
$ 3,696.0
522.8
267.6
143.0
1.85
$
$ 249.2
3,240.4
1,504.6
113.4
$ 318.4
(195.3)
To Our
Shareholders
David C. Dauch
Chairman of the Board & Chief Executive Officer
2
$3.9
$3.7
$3.2
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2013
2014
2015
2013
2014
2015
2013
2014
2015
AAM had an outstanding year in 2015. On the strength of North American
light vehicle production volumes and our solid operational performance, AAM achieved record sales and
record gross profit for the year. For the three-year period between 2013 and 2015, AAM’s compound
annual growth rate (CAGR) of sales has been over 10%, with a CAGR of nearly 20% for our non-GM sales.
This growth is significantly faster than the CAGR of the US Seasonally Adjusted Annual Rate (SAAR) of
sales and North American light vehicle production during that same time period.
Our growing sales and solid operational performance resulted in increased business diversification,
record profitability and strong operating cash flow generation in 2015. This has allowed AAM to continue
supporting organic growth initiatives through capital expenditures and critical research and development
investments. In addition, AAM voluntarily elected to prepay our Term Loan – three years in advance of its
scheduled maturity in 2018. By prioritizing organic growth and debt reduction over the last several years,
we are achieving our long-standing financial plan and have meaningfully strengthened our balance sheet.
3
Delivering POWER
AAM has a reputation as an innovative and efficient global
of operational excellence across our growing business, using
automotive supplier and systems integrator of driveline solutions.
a people-focused culture to drive the consistent application of
Propelling us past the competition, our success is the direct result
technical principles on a global basis.
of AAM’s steadfast commitment, year after year, to focusing on
what matters most to you — our valued stakeholders.
Delivering POWER is our value proposition. It is central in shaping
our performance-driven culture. Delivering POWER enables
At AAM, we strive every day, and in everything we do, to
us to act courageously, to challenge the status quo, and to
Deliver POWER.
We remain strongly committed to Delivering the POWER of quality,
producing the most reliable and durable products in our market.
We are dedicated to Delivering the POWER of innovation in our
continue our relentless pursuit of innovation and profitable
growth opportunities. Delivering POWER also encourages us to
diversify our portfolio offerings and to actively forge the strategic
partnerships that will help launch AAM into a successful future.
research and development of cutting-edge technologies that
As we look back on yet another successful year in AAM’s history,
enhance passenger safety and vehicle performance, increase
I am pleased to share the numerous ways in which we Delivered
connectivity and electrification, and improve fuel efficiency and
POWER to our stakeholders throughout 2015.
CO2 emissions reductions. Additionally, we Deliver the POWER
4
Quality
Assurance
The POWER of Quality
At the very heart of AAM’s mission to Deliver POWER is our
In order to achieve the best in product quality standards,
unwavering pledge to manufacture the most reliable, durable,
AAM employs a home-grown quality assurance system
high-quality products in the industry today. We are committed to
we call Q4 (Q-to-the-fourth). Q4 ensures that quality is built
offering our customers the highest-level automotive performance
into our products in station and is monitored consistently
year after year and continue to operate at world-class levels.
across AAM’s global operations. It is a system anchored in
In an environment of significant recall activity and increased
industry standards and regulations, our customers’ expectations
have become more stringent than ever before. Our commitment
to product quality has never been more valuable to our customers.
continuous improvement that involves extensive hands-on
training at every facility to make certain that all our associates
possess the highest understanding of AAM policies,
procedures, processes and best practices. Q4 ensures
standardization and product excellence at all of our locations.
5
5
The POWER of Innovation
The automotive industry is one of the most influential driving
global automotive mega trends – Green, Safety and Vehicle
forces behind the advancement of global technology, and at AAM,
Performance, and Electrification and Connectivity. EcoTrac®
we are passionate about fueling that progress. Our research
has been a source of growth and diversification for us since its
and development activities focus on innovative products and
launch in 2013. And in 2015, we announced another significant
manufacturing processes to achieve greener and safer vehicles,
new business win featuring this technology. With this new award,
to enhance performance, and to advance our products’ capacity
our industry-leading EcoTrac® technology will be supporting
for connectivity and electrification. We are motivated to deliver
multiple global vehicle platforms by 2018. Meanwhile, we
industry-leading solutions to differentiate our company within
continue to advance the development of our next-generation
the competitive global market and to successfully address
disconnecting AWD systems technology, aiming to provide even
the numerous challenges our industry faces today. In 2015,
further vehicle performance and fuel-efficiency gains.
AAM invested approximately $114 million into research and
development to advance our efforts in these areas.
As the automotive industry exhibits a growing demand for hybrid
and electric vehicles and driveline systems, AAM is leading the
One example of the POWER of our technology leadership is
way in advancing the design, engineering, and manufacturing
our EcoTrac® Disconnecting All Wheel Drive (AWD) Systems.
of these systems. Our electrification solutions, comprehensively
The benefits of this technology are directly in line with the
known as e-AAM™ hybrid and electric driveline solutions,
6
are centered on the continuous improvement of vehicle
economy. AAM’s latest driveshaft technologies, including our
efficiency, performance, and safety dynamics. e-AAM is
SYLENT™ aluminum driveshafts, improve safety, ride and NVH
highly customizable for applications ranging from mild hybrids
of the vehicle. When it comes to connectivity and electrification,
to fully electric vehicles. We believe our innovative electrified
we have developed capabilities in the areas of mechatronics
driveline solutions have the potential to Deliver POWER
as well as vehicle and subsystem level software controls to
the same way our EcoTrac® Disconnecting AWD Systems
further integrate electronic components. This includes motors,
have delivered sales growth and diversification.
actuators and sensors into AAM’s mechanical technologies
In addition, we are delivering leading-edge manufacturing
technologies in the areas of driveline and drivetrain system
components and metal-formed products. Our PowerDense™
gears and PowerLite™ products encompass lightweight
materials, such as aluminum, along with advanced component
design and process technology, which deliver higher torque
capacity for improved efficiency, reduced mass and better fuel
to enhance vehicle performance and power density. We also
continue to increase the utilization of innovative manufacturing
techniques, such as laser welding, to assist our customers in
achieving even greater mass reduction targets. Meanwhile, our
Advanced Engineering Team is finalizing the development of a
revolutionary way to manufacture our traditional axle to reduce
weight and streamline the manufacturing process.
7
7
The POWER of Operational Excellence
Integral to AAM’s ability to Deliver the POWER of a world-class quality product portfolio is our
company’s commitment to achieving Operational Excellence. For us, Operational Excellence represents
a global responsibility to perform our operations safely, train our associates effectively and run our
manufacturing processes efficiently to profitably grow our business.
Supported by a strong, people-focused culture that embraces continuous improvement and team
problem solving, AAM incorporates consistent practices, integrated information technology systems
and proactive data analysis across each and every one of our global locations. We refer to this
approach as “the AAM Operating System,” which is our foundation for success and improvement
and is critical to delivering operational excellence on a daily basis.
As part of the AAM Operating System, we have been continuously increasing the connectivity within
our manufacturing process and among key supporting functions. “Data is the new natural resource”
and the integration of our manufacturing, quality and enterprise resource planning systems provides
our teams with the capability to analyze data and act predictively instead of reactively. Recently, we
made significant investments to standardize these systems globally and improve our data analysis
capabilities. With a constant eye on our key performance indicators, proactive data management
improves the quality and speed of problem solving and decision making – which leads to improved
customer satisfaction, lean production and efficient cost management.
8
Delivering POWER in 2016 and Beyond
The modern automobile is one of the most sophisticated,
cash flow generation – driving a high free cash flow yield for
powerful pieces of technology in the hands of consumers today.
the benefit of all our key stakeholders.
Nearly every aspect of today’s vehicle is embedded with lighter
materials enhanced with electrification and mechatronics. The
market continues to evolve and consumers continue to demand
more in vehicle safety, sustainability, power, and connectivity.
And today, AAM pledges to deliver.
AAM is positioned to evolve into the future through both organic
and potentially strategic growth initiatives. As the automotive
industry is entering a new, more advanced phase of innovation
and design, we see great opportunities for AAM. We are
focused on growing the business and ensuring that we have
Building on the solid success of 2015, the years ahead will
the technology and scale to Deliver POWER into the future.
be an exciting time for AAM. We will continue to embrace our
excellence-driven culture, our talented team of associates,
our industry-leading processes, and leverage the full strength
of our brand.
AAM will forge ahead in the competitive landscape, leveraging
our three core competencies – world-class quality performance,
technology leadership and unsurpassed operational excellence
– and we are poised to achieve long-term value for our
In 2016, we will further advance AAM’s technology leadership
shareholders.
with the expansion of our Advanced Technology Development
Center in Detroit, Michigan – our center for the acceleration
The future of AAM has never been brighter.
of innovation, collaboration, and the development of advanced
Thank you for your loyal and continued support of AAM.
product, process and system technology. We are also on track
to further diversify the business through 17 new program and
product launches in 2016 with global customers including Ford,
Nissan, Mercedes-Benz, Jaguar Land Rover, and Isuzu. And we
David C. Dauch
expect another strong year of profitable growth and operating
Chairman of the Board & Chief Executive Officer
9
Making a Difference
Our associates continue to build on a legacy of community
involvement. AAM volunteers all over the world donate their
resources, talent, time and hearts to support projects that
benefit those in need.
AAM’s largest annual fundraising endeavors in 2015 supported
the Boy Scouts of America, United Way, and The Boys & Girls
Clubs of Southeastern Michigan. Multi-week fundraising
campaigns were held to support each organization. In addition,
associates participated in a series of organized AAM Team
Advantage volunteering events across our local communities
such as St. Judes Children’s Research Hospital, Habitat for
Humanity, Focus: HOPE, Junior Achievement and Gleaners
Community Food Bank.
The contributions our associates made spanned the globe in
2015 as well. Associates from our Araucária Manufacturing
Facility in Brazil continued their support of a local orphanage
by providing food and clothing to children in need. In Mexico
and India, AAM associates assisted their local centers for
children with disabilities. AAM teams in Europe ran to support
the German Sport Aid and Disabled Youth Foundations, while
our associates in Asia spread goodwill by providing assistance
to the children and the elderly of their communities.
AAM associates truly embrace the POWER to move their
communities and make the world a better place!
AAM associates hosted the annual Holiday Party for the Boys & Girls Club
at the Dick & Sandy Dauch campus in Detroit, MI.
In Mexico, AAM supports the local Center for Infant Rehabilitations.
10
Team AAM was the top fundraising team for the Metro-Detroit St. Jude
Walk/Run to End Childhood Cancer.
AAM associates volunteered at a Habitat for Humanity site by
helping build a house for a local family.
In Thailand, our associates donate backpacks and school supplies for local children
in recognition of National Children’s Day.
AAM associates helped to package food for local families in need at the
Gleaners Distribution Center.
AAM associates from our European Headquarters participated in a race to raise money
for the German Sport Aid Foundation and the German Disabled Youth Foundation.
®
11
A People-First Culture
Great companies start with great people. At AAM, we are focused
on recruiting, developing and retaining the best and brightest
talent globally. We provide our associates with the tools to develop
technically and grow professionally, wherever they are, into the
leaders that will guide AAM into the future. Empowerment of
our associates is essential to continuously improving our quality
performance, technology leadership and operational excellence.
Our passion for cultivating a positive culture that embodies
AAM’s mission and values can be seen in the engagement of our
executive leadership. Our leaders are directly involved in talent
building and organizational development – a branded strategy
we call LEVEL UP.
LEVEL UP is a coordinated effort across our enterprise to realize
the benefits of sustainable and adaptable systems for training,
development, and performance. Through this effort, we have
developed a number of learning and enablement programs, such
as our Gear Academy Learning series and Leading-Through-
Others workshops, and have mapped career paths for global
functions. AAM is also partnering with local leaders in our
communities across the globe on regional training programs
designed to not only offer development opportunities to our
associates, but also help develop the home-grown talent within
these locations.
Our associates work hard every day to exceed customer quality
standards, advance our technology leadership and achieve
operational excellence. It is our critical responsibility to help
them realize their potential and provide our associates with
the resources they need to Deliver POWER for AAM each and
every day.
“AAM is a great company primarily because of the
caliber and quality of our associates. We have a great
team of men and women around the world who are
dedicated to excellence. Teamwork is the key to our
success. Always has been. Always will be.”
– Michael K. Simonte, President
12
AAM Leadership
Officers
David C. Dauch
Chairman of the Board &
Chief Executive Officer
Michael K. Simonte
President
Timothy E. Bowes
Senior Vice President –
Corporate Planning
Alberto L. Satine
President – Driveline
Norman Willemse
President – Metal
Formed Products
Mark S. Barrett
Group Vice President –
Driveshafts
Steven J. Proctor
Group Vice President –
Strategic & Business
Development
Michael J. Bly
President – AAM Europe
David A. Culton
Vice President –
Cost Engineering
Philip R. Guys
Vice President – Driveline
Product Engineering &
Chief Technology Officer
Allan R. Monich
Vice President –
Global Quality, Warranty
& AAM Operating Systems
Donald L. Joseph
President – AAM Asia
Tolga I. Oal
President – AAM North America
Terri M. Kemp
Vice President –
Human Resources
Michael J. Lynch
Vice President –
Driveline Business Performance
& Cost Management
John S. Sofia
Vice President – Global Program
Management
Thomas J. Szymanski
Vice President –
Driveline Manufacturing Services
Nigel J. Francis
Vice President – Advanced
Engineering & Electrification
Systems
Christopher J. May
Vice President &
Chief Financial Officer
Board of Directors
David C. Dauch 4, 5
Chairman of the Board &
Chief Executive Officer
William L. Kozyra 2, 3, 5
Chairman of the Board & Chief Executive Officer
TI Automotive, Ltd.
William P. Miller II 1, 5
Head of Asset Allocation
Saudi Arabian Investment Company
Elizabeth A. Chappell 2, 3, 5
President & Chief Executive Officer
Detroit Economic Club
Peter D. Lyons 1, 2, 5
Partner & Co-Head of Mergers
& Acquisitions Group
Freshfields Bruckhaus Deringer US LLP
Steven B. Hantler 3, 5
Director of Policy Initiatives for
The Marcus Family Group
James A. McCaslin 2, 3, 4, 5
Retired President & Chief Operating Officer
Harley-Davidson Motor Company
John F. Smith 1, 5
Principal of Eagle Advisors
Retired Group Vice President General Motors
Samuel Valenti III 1, 2, 3, 4, 5
Chairman & Chief Executive Officer
Valenti Capital LLC
and World Capital Partners
Board Committee Assignments
1 Audit Committee
2 Nominating & Corporate Governance Committee
3 Compensation Committee
4 Executive Committee
5 Strategy & Technology Committee
13
AAM’s Global Footprint
World Headquarters
Three Rivers Manufacturing Facility
Colfor – Minerva Manufacturing Facility
Rochester Hills Technical Center
Silao Manufacturing Facility
Guanajuato Manufacturing Complex
Araucária Manufacturing Facility
Colfor – Minerva Manufacturing Facility
Guanajuato Forge
Guanajuato Manufacturing Complex
Information Technology Center
Mechatronics Technical Center
MSP Industries
Oxford Forge
Rochester Hills Technical Center
Rochester Manufacturing Facility
Silao Manufacturing Facility
Three Rivers Manufacturing Facility
SOUTH AMERICA
Araucária Manufacturing Facility
NORTH AMERICA
World Headquarters
AccuGear – Ft. Wayne
AccuGear – Silao
Advanced Technology Development
Center
Auburn Hills Manufacturing
Colfor – Malvern Manufacturing Facility
14
AAM Winter Test Center
Europe Headquarters & Engineering Center
Changshu Manufacturing Facility
Pune Manufacturing Facility
Świdnica Manufacturing Facility
Chennai Manufacturing Facility
Rayong Manufacturing Facility
EUROPE
Europe Headquarters & Engineering Center
AAM Winter Test Center
Glasgow Manufacturing Facility
Luxembourg Business Office
Świdnica Manufacturing Facility
Trollhättan Technical Center
ASIA
Asia Headquarters & Engineering Center
Changshu Manufacturing Facility
Hefei – AAM I Manufacturing Facility
Hefei – AAM II Manufacturing Facility
Rayong Manufacturing Facility
Seoul Business Office
Shanghai Business Office
Tokyo Business Office
INDIA
Chennai Manufacturing Facility
Pantnagar Manufacturing Facility
Pune Business Office & Engineering Center
Pune Engineering & Development Center
Pune Manufacturing Facility
15
15
Stockholder Information
American Axle & Manufacturing Holdings, Inc.
One Dauch Drive
Detroit, Michigan 48211-1198
Telephone: (313) 758-2000
Internet: www.aam.com
Corporate News Releases
Corporate news releases are available on our website
at www.aam.com.
Annual Meeting of Stockholders
The 2016 Annual Meeting of Stockholders will be held on
May 5, 2016 at 8:00 a.m. EST at:
AAM World Headquarters
One Dauch Drive
Detroit, Michigan 48211-1198
Form 10-K Annual Report
AAM’s Form 10-K Annual Report for 2015, filed with the Securities
and Exchange Commission, is available on our website or from:
American Axle & Manufacturing Holdings, Inc.
Investor Relations
One Dauch Drive
Detroit, Michigan 48211-1198
Telephone: (313) 758-4635
Equity Securities
Inquiries related to shareholder records; change of name, address,
or ownership of stock; and lost or stolen stock certificates should be
directed to the transfer agent and registrar.
Computershare
211 Quality Circle, Suite 210
College Station, TX 77845
Telephone: (877) 282-1168
Internet: www.computershare.com
Stock Listing
The New York Stock Exchange is the principal market for AAM
common stock. Ticker Symbol: AXL
Stockholders
As of March 8, 2016, there were xxx stockholders of record.
Stock Performance
Comparison of cumulative total return of AAM with the cumulative
total return of our competitor peer group (Autoliv Inc., BorgWarner
Inc., Dana Corporation, Lear Corporation, Magna International Inc.,
Meritor Inc., Tenneco Automotive Inc. and Visteon Corporation)
and the Standard & Poor’s 500 Composite Index assuming $100
invested on December 31, 2010, through December 31, 2015. The
closing price of AXL as of December 31, 2015 was $18.94.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among American Axle & Manufacturing Holdings, Inc., the S&P 500 Index,
SIC Code 3714 - Motor Vehicle Parts & Accessories, and Peer Group
$200
$180
$160
$140
$120
$100
$80
$60
$40
$20
$0
12/10
12/11
12/12
12/13
12/14
12/15
American Axle & Manufacturing Holdings, Inc.
S&P 500
SIC Code 3714 - Motor Vehicle Parts & Accessories
Peer Group
*$100 invested on 12/31/10 in stock or index, including reinvestment of dividends.
Fiscal year ending December 31.
Copyright© 2015 S&P, a division of McGraw Hill Financial. All rights reserved.
16
Graph produced by Research Data Group, Inc.
1/18/2016
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2015
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
(State or other jurisdiction of
incorporation or organization)
ONE DAUCH DRIVE, DETROIT, MICHIGAN
(Address of principal executive offices)
38-3161171
(I.R.S. Employer
Identification No.)
48211-1198
(Zip Code)
313-758-2000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
COMMON STOCK, PAR VALUE $0.01 PER SHARE
PREFERRED SHARE PURCHASE RIGHTS, PAR VALUE $0.01 PER SHARE
Title of Each Class
Name of Each Exchange on Which Registered
NEW YORK STOCK EXCHANGE
NEW YORK STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes
No
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 and posted on its corporate Web site, if any, every Interactive Data File required to be
submitted and posted 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 and post such files). Yes
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of
“accelerated filer”, “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act).
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
(Do not check if small reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
No
The closing price of the Common Stock on June 30, 2015 as reported on the New York Stock Exchange was $20.91 per share and the aggregate market value of the
registrant's Common Stock held by non-affiliates was approximately $1,582.3 million.
As of February 10, 2016, the number of shares of the registrant's Common Stock, $0.01 par value, outstanding was 76,092,979 shares.
Portions of the registrant's Annual Report to Stockholders for the year ended December 31, 2015 and Proxy Statement for use in connection with its Annual Meeting of
Stockholders to be held on May 5, 2016, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after
December 31, 2015, are incorporated by reference in Part I (Items 1, 1A, 1B, 2, 3 and 4), Part II (Items 5, 6, 7, 7A, 8, 9, 9A and 9B), Part III (Items 10, 11, 12, 13 and
14) and Part IV (Item 15) of this Report.
Documents Incorporated by Reference
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
TABLE OF CONTENTS - ANNUAL REPORT ON FORM 10-K
Year Ended December 31, 2015
Part I
Item 1
Business
Item 1A Risk Factors
Item 1B Unresolved Staff Comments
Part II
Item 2
Item 3
Item 4
Item 5
Item 6
Item 7
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
Selected Financial Data
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Item 7A Quantitative and Qualitative Disclosures About Market Risk
Item 8
Item 9
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
Item 9A Controls and Procedures
Item 9B Other Information
Part III
Item 10 Directors, Executive Officers and Corporate Governance
Item 11
Executive Compensation
Item 12 Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Item 13 Certain Relationships and Related Transactions, and Director Independence
Item 14 Principal Accounting Fees and Services
Part IV
Item 15 Exhibits and Financial Statement Schedules
Page
Number
2
13
18
19
20
20
20
22
23
37
38
81
81
81
82
82
82
82
82
83
1
Item 1.
Business
Part I
As used in this report, except as otherwise indicated in information incorporated by reference, references to
“our Company,” "we," "our," "us" or “AAM” mean American Axle & Manufacturing Holdings, Inc. (Holdings) and its
subsidiaries and predecessors, collectively.
(a) General Development of Business
Holdings, a Delaware corporation, is a successor to American Axle & Manufacturing of Michigan, Inc., a
Michigan corporation, pursuant to a migratory merger between these entities in 1999.
(b) Financial Information About Segments
See Item 8, “Financial Statements and Supplementary Data - Note 11 - Segment and Geographic Information”
included in this report.
(c) Narrative Description of Business
Company Overview
We are a Tier I supplier to the automotive industry. We manufacture, engineer, design and validate driveline
and drivetrain systems and related components and chassis modules for light trucks, sport utility vehicles (SUVs),
passenger cars, crossover vehicles and commercial vehicles. Driveline and drivetrain systems include components
that transfer power from the transmission and deliver it to the drive wheels. Our driveline, drivetrain and related
products include axles, driveheads, chassis modules, driveshafts, power transfer units, transfer cases, chassis and
steering components, transmission parts, electric drive systems and metal-formed products. In addition to locations
in the United States (U.S.) (Michigan, Ohio and Indiana), we also have offices or facilities in Brazil, China, Germany,
India, Japan, Luxembourg, Mexico, Poland, Scotland, South Korea, Sweden and Thailand.
We are the principal supplier of driveline components to General Motors Company (GM) for its full-size rear-
wheel drive (RWD) light trucks and SUVs manufactured in North America, supplying substantially all of GM's rear
axle and four-wheel drive and all-wheel drive (4WD/AWD) axle requirements for these vehicle platforms. Sales to
GM were approximately 66% of our consolidated net sales in 2015, 68% in 2014, and 71% in 2013.
We are the sole-source supplier to GM for certain axles and other driveline products for the life of each GM
vehicle program covered by Lifetime Program Contracts and Long Term Program Contracts (collectively, LPCs).
Substantially all of our sales to GM are made pursuant to the LPCs. The LPCs have terms equal to the lives of the
relevant vehicle programs or their respective derivatives, which typically run 5 to 7 years, and require us to remain
competitive with respect to technology, design, quality and cost.
We also supply driveline system products for FCA US LLC (FCA) for heavy-duty Ram full-size pickup trucks
and its derivatives, the AWD Jeep Cherokee, the AWD Chrysler 200, and a passenger car driveshaft program.
Sales to FCA were approximately 20% of our consolidated net sales in 2015, 18% in 2014 and 12% in 2013. In
addition to GM and FCA, we supply driveline systems and other related components to Volkswagen AG
(Volkswagen), Audi AG (Audi), Mercedes-Benz, Jaguar Land Rover Automotive PLC (JLR), Honda Motor Co., Ltd.,
Ford Motor Company (Ford), Nissan Motor Co., Ltd. (Nissan), PACCAR Inc., Harley-Davidson Inc., Daimler Truck
and other original equipment manufacturers (OEMs) and Tier I supplier companies such as Jatco Ltd. and Hino
Motors Ltd. Our consolidated net sales to customers other than GM increased 10% to $1,317.1 million in 2015 as
compared to $1,199.9 million in 2014 and $926.7 million in 2013.
We estimate our principal served market to be approximately $38 billion based on information available at the
end of 2015. Our principal served market is the driveline market, which consists of driveline, drivetrain and related
components and chassis modules for light trucks, SUVs, passenger cars, crossover vehicles and commercial
vehicles, in the regions in which we compete.
2
The following chart sets forth the percentage of total revenues attributable to our products for the periods
indicated:
Year ended December 31,
2014
2013
2015
Axles and driveshafts ........................................................................
Drivetrain components, forged products and other ............................
Total ..............................................................................................
83%
17%
100%
82%
18%
100%
82%
18%
100%
Business Strategy
We are focused on profitable net sales growth and strengthening our balance sheet by capitalizing on our
competitive strengths and continuing to diversify our customer, product and geographic sales mix while providing
exceptional value to our customers.
We have aligned our business strategy to build value for our key stakeholders. This strategy emphasizes a
commitment to deliver industry leading quality, technology leadership and operational excellence. By focusing on
this commitment, we can achieve our key critical business objectives of product and customer diversification,
globalization and solid financial performance. This strategy includes the following actions:
Maintain our high quality standards which are the foundation of our product durability and reliability.
• AAM has an outstanding daily track record for delivering quality products, having averaged less than 10
discrepant parts per million (PPM) in 2015, as measured by our customers.
•
In 2014, our Colfor Minerva Facility in Ohio, Auburn Hills Manufacturing location in Michigan and
Changshu Manufacturing Facility in China were recognized with the GM Supplier Quality Excellence
Award for outstanding performance.
• AAM has an enhanced internal quality assurance system that drives continuous improvement to not only
meet but exceed the growing expectations of our OEM customers.
Achieve technology leadership by delivering innovative driveline products which improve the diversification of
our product portfolio while increasing our total global served market.
• AAM's significant investment in research and development (R&D) has resulted in the development of
advanced technology products designed to assist our customers in meeting the market demands for
improved fuel efficiency; lower emissions; enhanced power density; advanced, sophisticated electronic
controls; improved safety, ride and handling performance; and enhanced reliability and durability for light
trucks, SUVs, passenger cars, crossover vehicles and commercial vehicles.
• AAM's EcoTrac® Disconnecting AWD system is a fuel-efficient and environmentally friendly driveline
system that provides OEMs the option of an all-wheel-drive system that disconnects when not needed to
improve fuel efficiency and reduce CO2 emissions compared to conventional AWD systems. AAM's
EcoTrac® Disconnecting AWD system is featured on the AWD Jeep Cherokee and the AWD Chrysler 200.
We are currently designing the next generation of our EcoTrac® Disconnecting AWD system which is
smaller, lighter in weight and aims to recover up to 90% of fuel penalty, compared to 80% currently.
•
e-AAM Driveline Systems AB (e-AAM) was created to design and commercialize battery electric and
hybrid driveline systems designed to improve fuel efficiency, reduce CO2 emissions and provide AWD
capability. We will continue engineering, developing and commercializing electric and hybrid driveline
systems for passenger cars and crossover vehicles. In 2015, we secured a new driveline systems
contract featuring patented e-AAM™ electric driveline systems technology with a premier global OEM.
3
• AAM has established a high efficiency product portfolio that is designed to improve axle efficiency and
fuel economy through innovative product design technologies. As our customers focus on reducing
weight through the use of aluminum and other conventional means, AAM is well positioned to offer
innovative, industry leading solutions for lightweighting. Our portfolio includes high efficiency axles,
aluminum axles and also AWD applications for plug-in hybrid electrical vehicles to full-electric vehicles.
• AAM continues to invest in R&D in emerging technology such as torque biasing capability. We have
developed capabilities in the areas of control systems and mechatronics to further integrate electronic
components such as motors, actuators, and sensors into AAM's mechanical technology to enhance
vehicle performance and provide superior torque management.
• To accelerate AAM's technological advancements, in 2015 we began the move-in phase of our Advanced
Technology Development Center (ATDC) at our Detroit Campus. This state-of-the-art facility will be our
center for technology benchmarking, prototype development, advanced technology development, supplier
collaboration, customer showcasing and associate training on our future products, processes, and
systems.
Sustain our operational excellence and focus on cost management to deliver exceptional value to our
customers.
•
In 2015, we successfully launched 18 programs and facilities to support our customers. These launches
included front and rear drive axles for a new global passenger car program for JLR at our Swidnica
Manufacturing Facility in Poland, rear axles for a global light truck program for Ford at our Rayong
Manufacturing Facility in Thailand and front and rear axles for a full-size pickup truck program for Nissan
at our Guanajuato Manufacturing Complex in Mexico.
• We continue to focus on cost management through the implementation of the AAM Operating System to
improve quality, eliminate waste and reduce lead time and total costs globally.
• Our stand-alone agreement with the United Automobile, Aerospace and Agricultural Implement Workers
of America (UAW), which covers hourly associates at our Three Rivers Manufacturing Facility, ensures
market competitiveness at AAM's largest U.S. facility into 2017. The collective bargaining agreements
that cover hourly associates at our MSP Industries Corporation and Colfor Manufacturing Inc.
subsidiaries expire in 2017 and 2018, respectively.
Diversify our business through the growth of new and existing customer relationships and expansion of our
product portfolio.
•
In addition to maintaining and building upon our longstanding relationships with GM and FCA, we are
focused on generating profitable growth with new and existing global OEM customers. New business
launches in 2015 included business with key international customers such as Ford, JLR, Nissan,
Mercedes-Benz and others.
• We have accelerated the development and launch of products for passenger cars and crossover vehicles
and the global light truck and commercial vehicle markets. We have approximately $725 million of new
and incremental business backlog launching from 2016 to 2018, of which approximately 75% relates to
AWD and RWD applications for passenger cars and crossover vehicles.
• Approximately 60% of our new and incremental business backlog launching from 2016 to 2018 is for
customers other than GM. In addition, we are working on $1.5 billion in quoted and emerging new
business opportunities. These opportunities would allow us to continue the diversification and expansion
of our customer base, product portfolio and global footprint. Substantially all of these opportunities are for
customers other than GM and feature our advanced technology such as our EcoTrac® Disconnecting
AWD system and e-AAM™ electric driveline systems technology.
• We also continue to evaluate and consider strategic opportunities that will complement our core strengths
and supplement our diversification strategies while providing future, profitable growth prospects.
4
Achieve globalization by increasing our presence in global markets to support our customers' platforms.
• As our customers continue to design their products for global markets, they will continue to require global
support from their suppliers. For this reason, it is critical that we maintain a global presence in these
markets in order to remain competitive for new contracts. Over the past few years, we have significantly
increased our installed capacity in cost competitive global markets to support current programs and future
opportunities. Specific actions included expanding capacity in Brazil, China, Mexico, Poland, Thailand
and the U.S. and constructing new facilities in Mexico and the U.S.
• We expect our EcoTrac® Disconnecting AWD products to support three global vehicle platforms by 2018,
based on our new and incremental business backlog launching from 2016 to 2018.
• Our joint venture (JV) with Hefei Automobile Axle Co., Ltd. (HAAC), a subsidiary of the JAC Group (Anhui
Jianghuai Automotive Group Co., Ltd.), which includes 100% of HAAC's light commercial axle business,
continues to be a strong advantage for building relationships with leading Chinese light truck
manufacturers. We supply front and rear beam axles to several leading Chinese light truck
manufacturers, including JAC and BAIC Foton.
• More than half of our $725 million of new and incremental business backlog launching from 2016 to 2018
is for end use markets outside the U.S. and nearly all has been sourced to our manufacturing facilities
outside the U.S.
Achieve solid financial performance to build value for our key stakeholders.
• Over the past five years, AAM's compound annual growth rate (CAGR) for sales has more than doubled
the growth rate of the industry. Included in this sales growth is an increase of 10% in our non-GM sales
in 2015.
• We have established a cost competitive, operationally flexible global manufacturing, engineering and
sourcing footprint to increase our presence in global growth markets, support global product development
initiatives and establish regional cost competitiveness. This includes having manufacturing and
engineering facilities in Brazil, China, Germany, India, Mexico, Poland, Sweden, Thailand and the U.S.
• As a result of our debt refinancing activities over the past few years, we reduced our weighted average
interest cost, extended our debt maturities and improved debt covenant terms and conditions. In 2015,
we took additional steps to reduce our long-term debt by voluntarily prepaying the remaining $135.9
million outstanding under our term facility, which included $2.8 million that was due in the fourth quarter of
2015. By taking advantage of favorable market conditions and paying down our term facility, we
improved our flexibility to manage and grow our business and to support AAM's long-term strategic
objectives. As of December 31, 2015, we had over $840 million in available liquidity and no significant
debt maturities until 2019.
Competition and Strengths
We compete with a variety of independent suppliers and distributors, as well as with the in-house operations of
certain OEMs. Our principal competitors include Dana Holding Corporation, GKN plc, Magna International Inc., ZF
Friedrichshafen AG, Linamar Corporation, Meritor Inc. and the in-house operations of various global OEMs. The
sector is also attracting new competitors, some of whom are entering our product segment through the acquisition
of non-core operations.
With a focus on engineering and manufacturing, we support our business strategy and differentiate ourselves
through outstanding long-term daily track records on quality, warranty, reliability, delivery and launch performance.
AAM has an outstanding daily track record for delivering quality products, having averaged less than 10 discrepant
parts per million (PPM) in 2015, as measured by our customers.
5
As global OEM’s race to meet tighter fuel efficiency emissions standards, the automotive industry is entering a
new, more advanced phase of innovation and design. This encompasses advanced powertrain applications, hybrid
and electric vehicles, autonomous vehicles and other equally sophisticated technologies. AAM is meeting these
challenges with an aggressive plan to increase our investment in advanced product, process and systems
technology.
All of our global facilities utilize the AAM Operating System, a business philosophy focused on lean
manufacturing designed to reduce costs, improve quality, decrease inventory and improve our operating flexibility.
Industry Trends
See Item 7, “Management's Discussion and Analysis - Industry Trends.”
Productive Materials
We believe that we have adequate sources of supply of productive materials and components for our
manufacturing needs. Most raw materials (such as steel) and semi-processed or finished items (such as castings)
are available within the geographical regions of our operating facilities from qualified sources in quantities sufficient
for our needs. We currently have contracts with our steel suppliers that ensure continuity of supply to our principal
operating facilities in North America. We also have validation and testing capabilities that enable us to strategically
qualify steel sources on a global basis. As we continue to expand our global manufacturing footprint, we will rely on
suppliers in local markets that have not yet proven their ability to meet our requirements.
Research and Development (R&D)
We continue to invest in the development of new products, processes and systems to improve efficiency and
flexibility in our operations and continue to deliver innovative new products, chassis modules and integrated
driveline systems to our customers.
In 2015, R&D spending, net of customer engineering, design and development recoveries, was $113.9 million
as compared to $103.9 million in 2014 and $103.4 million in 2013. The focus of this investment continues to be
developing innovative driveline and drivetrain systems and related components for light trucks, passenger cars,
SUVs, crossover vehicles and commercial vehicles in the global marketplace. Product development in this area
includes power transfer units, transfer cases, driveline and transmission differentials, multi-piece driveshafts,
constant velocity joints, torque transfer devices, chassis modules and front and rear drive axles. We continue to
focus on electronic integration in our existing and future products to advance their performance. We also continue
to support the development of hybrid and electric vehicle systems. Special emphasis is also placed on the
development of products and systems that provide our customers with advancements in fuel efficiency and
emissions reduction and improved performance metrics such as noise vibration harshness (NVH), power density
and traction control improvements for safety and stability. Our efforts in these areas have resulted in the
development of prototypes and various configurations of these driveline systems for several OEMs throughout the
world.
We have also developed and commercialized a disconnecting AWD system, which strengthens AAM's position
as a leader in global driveline systems technology. AAM's EcoTrac® Disconnecting AWD system is an industry-first
technology that seamlessly engages AWD functionality while improving fuel efficiency and reducing CO2 emissions.
This system is now featured on the award-winning Jeep Cherokee and the Chrysler 200.
AAM also develops and manufactures high-efficiency axle systems through the use of proprietary technologies
to optimize product design and lubrication management, while also significantly reducing friction and improving fuel
economy. Our high efficiency axles are featured on several premium OEM vehicles, including Cadillac, Mercedes-
Benz and Jaguar.
Our e-AAM subsidiary engineers and develops battery electric and hybrid driveline systems to be
commercialized for passenger cars and crossover vehicles. These systems are designed to improve fuel efficiency
by up to 30%, reduce CO2 emissions and provide AWD capability with the additional benefit of improved vehicle
stability when compared to traditional mechanical AWD systems.
6
Through the development of our EcoTrac® Disconnecting AWD system, our high efficiency axles and our
e-AAM™ hybrid and electric driveline systems, we have significantly improved fuel efficiency and ride and handling
performance while reducing emissions for our customer's products.
As our customers continue to focus on reducing vehicle weight through the use of aluminum or other
conventional means, AAM is well positioned to offer innovative, industry-leading solutions, through proprietary
technologies such as PowerLite® axles, PowerDense® gears and PowerFilm® lubricant for passenger car, light truck
and AWD applications.
Backlog
We typically enter into agreements with our customers to provide axles or other driveline or drivetrain products
for the life of our customers' vehicle programs. Our new and incremental business includes awarded programs and
incremental content and volume including customer requested engineering changes. Our backlog may be impacted
by various assumptions, many of which are provided by our customers based on their long range production plans.
These assumptions include future production volume estimates, changes in program launch timing and fluctuation
in foreign currency exchange rates.
Our new and incremental business backlog is approximately $725 million for programs launching from 2016 to
2018. Approximately 75% of our new and incremental business backlog relates to RWD and AWD applications for
passenger cars and crossover vehicles. More than half of our new and incremental business backlog will be for
end use markets outside the U.S. and nearly all has been sourced to our non-U.S. manufacturing facilities.
Approximately 60% of our new and incremental business backlog is for customers other than GM.
Patents and Trademarks
We maintain and have pending various U.S. and foreign patents, trademarks and other rights to intellectual
property relating to our business, which we believe are appropriate to protect our interest in existing products, new
inventions, manufacturing processes and product developments. We do not believe that any single patent or
trademark is material to our business nor would expiration or invalidity of any patent or trademark have a material
adverse effect on our business or our ability to compete.
Cyclicality and Seasonality
Our operations are cyclical because they are directly related to worldwide automotive production, which is also
cyclical and dependent on general economic conditions and other factors. Our business is also moderately
seasonal as our major OEM customers historically have an extended shutdown of operations (typically 1 to 2
weeks) in conjunction with their model year changeover and an approximate one-week shutdown in December.
Accordingly, our quarterly results may reflect these trends.
Environmental Matters
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 closely monitor our environmental conditions to ensure that we are in compliance
with applicable laws, regulations and ordinances. We have made, and will continue to make, capital and other
expenditures to comply with environmental requirements, including recurring administrative costs. Such
expenditures were not significant in 2015, 2014 and 2013.
7
Associates
We employ approximately 13,050 associates on a global basis, including our joint venture affiliates, of which
approximately 3,610 are employed in the U.S. Approximately 2,010 associates are represented by the UAW.
Approximately 1,290 of our hourly associates at our Three Rivers Manufacturing Facility in Michigan are subject to
a stand alone UAW agreement that expires September 13, 2017. An additional 720 associates at our MSP
Industries Corporation and Colfor Manufacturing, Inc. subsidiaries are represented by the UAW under collective
bargaining agreements that expire April 18, 2017 and June 8, 2018, respectively. In addition, approximately 130
associates at our Albion Automotive subsidiary in Scotland, approximately 3,480 associates at our Guanajuato
Manufacturing Complex in Mexico and approximately 480 associates at our Araucária Manufacturing Facility in
Brazil are represented by labor unions that are subject to collective bargaining agreements. The current collective
bargaining agreement at Albion will expire on March 31, 2017. The collective bargaining agreements in Mexico and
Brazil expire and are renegotiated annually.
Executive Officers of the Registrant
Name
Age
Position
David C. Dauch ..........................
Michael K. Simonte ....................
Timothy E. Bowes ......................
Alberto L. Satine ........................
Norman Willemse ......................
Mark S. Barrett ...........................
Steven J. Proctor .......................
Michael J. Bly .............................
David A. Culton ..........................
Nigel J. Francis ..........................
Philip R. Guys ............................
Donald L. Joseph........................
Terri M. Kemp ............................
Michael J. Lynch ........................
Christopher J. May .....................
Allan R. Monich ..........................
Tolga I. Oal .................................
John S. Sofia .............................
Thomas J. Szymanski ................
51
52
52
59
59
55
59
48
50
55
53
60
50
51
46
62
44
56
54
Chairman of the Board & Chief Executive Officer
President
Senior Vice President - Corporate Planning
President - Driveline, Senior Vice President - AAM Corporate
President - Metal Formed Products, Senior Vice President - AAM Corporate
Group Vice President - Driveshafts
Group Vice President - Strategic & Business Development
President - AAM Europe, Vice President - AAM Corporate
Vice President - Cost Engineering
Vice President - Advanced Engineering & Electrification Systems
Vice President - Driveline Product Engineering
President - AAM Asia, Vice President - AAM Corporate
Vice President - Human Resources
Vice President - Driveline Business Performance & Cost Management
Vice President & Chief Financial Officer
Vice President - Global Quality, Warranty & AAM Operating Systems
President - AAM North America, Vice President - AAM Corporate
Vice President - Global Program Management
Vice President - Driveline Manufacturing Services
David C. Dauch, age 51, has been AAM's Chief Executive Officer since September 2012. Mr. Dauch has
served on AAM's Board of Directors since April 2009 and was appointed Chairman of the Board in August 2013.
From September 2012 through August 2015, Mr. Dauch served as AAM’s President & CEO. Prior to that, Mr. Dauch
served as President & Chief Operating Officer (2008 - 2012) and held several other positions of increasing
responsibility from the time he joined AAM in 1995. Prior to joining AAM, Mr. Dauch held several positions at Collins
& Aikman Products Company, where he received the President’s Award for leadership and innovation. Mr. Dauch
also served on the Collins & Aikman Board of Directors from 2002 to 2007. Presently, he serves on the boards of
Business Leaders for Michigan, the Detroit Regional Chamber, the Great Lakes Council Boy Scouts of America, the
Boys & Girls Club of Southeast Michigan, the National Association of Manufacturers (NAM), the Original Equipment
Suppliers Association (OESA), Amerisure Mutual Holdings, Inc. and the Amerisure Companies (since December
2014) and Horizon Global Corporation (since June 2015). Mr. Dauch also serves on the Miami University Business
Advisory Council.
8
Michael K. Simonte, age 52, has been President since August 2015. Simonte previously served as Executive
Vice President & Chief Financial Officer (since December 2011); Executive Vice President - Finance & Chief
Financial Officer (since February 2009); Group Vice President - Finance & Chief Financial Officer (since December
2007); Vice President - Finance & Chief Financial Officer (since January 2006); Vice President & Treasurer (since
May 2004); and Treasurer (since September 2002). Mr. Simonte joined AAM in December 1998 as Director,
Corporate Finance. Prior to joining our Company, Mr. Simonte served as Senior Manager at the Detroit office of
Ernst & Young LLP. Mr. Simonte is a certified public accountant.
Timothy E. Bowes, age 52, has been Senior Vice President - Corporate Planning since joining our Company in
December 2015. Prior to joining AAM, Mr. Bowes served as Chief Executive Officer & President of Transtar
Corporation, since 2013. Prior to Transtar, Mr. Bowes served as Executive Officer & President - Commercial Truck
at Meritor Inc., which he joined in 2005. He has held various leadership positions during his 25-year automotive
and industrial career, managing business operations, strategic opportunities and sales & marketing for multiple
organizations. In addition to Transtar and Meritor, Mr. Bowes' career also includes working at Hilite International,
Wescast Industries, Intermet Corporation and ITT Automotive.
Alberto L. Satine, age 59, has been President - Driveline, Senior Vice President - AAM Corporate since August
2015. Prior to that, he served as Senior Vice President - Global Driveline Operations (since January 2014); Group
Vice President - Global Sales & Business Development (since December 2011); Vice President - Strategic &
Business Development (since November 2005); Vice President - Procurement (since January 2005); Executive
Director, Global Procurement Direct Materials (since January 2004); General Manager, Latin American Driveline
Sales and Operations (since August 2003) and General Manager of International Operations (since joining our
Company in May 2001). Prior to joining our Company, Mr. Satine held several management positions at Dana
Corporation, including the position of President of Dana's Andean Operations in South America from 1997 to 2000
and General Manager of the Spicer Transmission Division in Toledo, Ohio from 1994 to 1997.
Norman Willemse, age 59, has been President - Metal Formed Products, Senior Vice President - AAM
Corporate since August 2015. Prior to that, he served as Vice President - Metal Formed Product Business Unit
(since December 2011); Vice President - Global Metal Formed Product Business Unit (since October 2008); Vice
President - Global Metal Formed Product Operations (since December 2007); General Manager - Metal Formed
Products Division (since July 2006) and Managing Director - Albion Automotive (since joining our Company in
August 2001). Prior to joining our Company, Mr. Willemse served at ATSAS for seven years as Executive Director
Engineering & Commercial and John Deere for over 17 years in various engineering positions of increasing
responsibility. Mr. Willemse is a professional certified mechanical engineer.
Mark S. Barrett, age 55, has been Group Vice President - Driveshafts since May 2015. Prior to that, he served
as Group Vice President - Program Management, Material Cost Optimization, Procurement and Driveshaft
Business Unit (since November 2014); Group Vice President - Procurement, Program Management and Driveshaft
Business Unit (since August 2013); Group Vice President - Procurement and Program Management (since
February 2013); Group Vice President - Engineering & Procurement (since November 2012); Group Vice President
- Engineering, Product Development & Procurement (since December 2011); Vice President - Engineering &
Product Development (since October 2008); Executive Director, Engineering & Product Development (since
January 2008); Executive Director, Axle & Drivetrain (since November 2006); Executive Director, Powertrain,
Driveshaft and Halfshaft Engineering (since January 2006); Executive Director, Released and Domestic Programs
(since January 2004); Director, Mid Size Axle Programs (since December 1998) and Staff Project Engineer (since
joining our Company in March 1994). Prior to joining our Company, Mr. Barrett served at General Motors
for nine years in a variety of manufacturing and engineering positions.
Steven J. Proctor, age 59, has been Group Vice President - Strategic & Business Development since
December 2014. Prior to that, he served as Group Vice President - Global Sales and Business Development (since
January 2014); President - AAM Europe, Vice President - AAM Corporate (since June 2012), President - AAM Asia,
Vice President - AAM Corporate (since October 2008); Vice President - Sales & Marketing (since June 2004);
Executive Director, Driveline Sales & Marketing (since September 2003); President and Chief Operating Officer of
AAM do Brasil (since September 1999); Director, GMT-360, I-10/GMT-355 (since December 1998); Director,
Worldwide Programs (since February 1998); Director, Strategic Planning (since July 1996) and Director, General
Motors Programs (since joining our Company in March 1994). Prior to joining our Company, Mr. Proctor worked for
General Motors for 20 years in the areas of product and industrial engineering, production, material management
and sales.
9
Michael J. Bly, age 48, has been President - AAM Europe, Vice President - AAM Corporate since joining our
Company in January 2014. Prior to joining AAM, he spent more than 27 years with General Motors in a variety of
management roles in the areas of powertrain, engineering and electrification. Mr. Bly's position prior to leaving
General Motors was Vice President of European Powertrain Engineering.
David A. Culton, age 50, has been Vice President - Cost Engineering since May 2015. Prior to that, he served
as Vice President - Material Cost Optimization (since January 2014); President - AAM Americas, Vice President -
AAM Corporate (since June 2012); President - AAM Europe, Vice President - AAM Corporate (since November
2010); Vice President - Commercial (since September 2009); Vice President - Unibody Vehicle Business Unit (since
October 2008); Controller (since April 2007); Executive Director, Sales (since July 2006); Director, Commercial
Analysis (since August 2004); Director, Finance - Operations (Since June 2003); Finance Manager (since August
1999); and Assistant Finance Manager (since joining our Company in September 1998). Prior to joining our
Company, Mr. Culton served at Chrysler Corporation for 10 years in a variety of management, finance, engineering
and manufacturing positions.
Nigel J. Francis, age 55, has been Vice President - Advanced Engineering & Electrification Systems since
December 2015. Prior to that, he served as Vice President - Electrification Systems since May 2015 and Vice
President - Corporate Planning (since joining our Company in November 2014). Prior to joining AAM, Mr. Francis
has nearly 30 years of experience in the global automotive sector having held executive-level positions at OEM and
Tier I companies in North America and Europe including Senior Vice President, Automotive Office of the State of
Michigan and Senior Adviser to the Governor of Michigan; Chief Engineering and Program Management - Tata
Technologies; Chief Operating Officer and Chief Technology Officer - Trexa LLC; Executive Vice President - Bright
Automotive; and Vice President of Vehicle Engineering - Mercedes-Benz Technology. Mr. Francis has spent the
majority of his career in advanced design and engineering product development and in recent years has been
closely involved with clean technology through hybrid and electric vehicle development and strategic planning in the
global automotive sector.
Philip R. Guys, age 53, has been Vice President - Driveline Product Engineering since January 2015. Prior to
that, he served as Vice President - Product Engineering & Development (since November 2012), and Vice
President - Product Engineering (since joining AAM in December 2011). Prior to joining our Company, Mr. Guys
served for four years at Linamar Corporation in various senior management positions, including Vice President -
Engineering, and over 20 years in various engineering positions of increasing responsibility at Ford Motor Company
and General Motors.
Donald L. Joseph, age 60, has been President - AAM Asia, Vice President - AAM Corporate since January
2015. Mr. Joseph joined AAM in 1994 as a Manufacturing Manager at AAM's Three Rivers Manufacturing Facility.
Since then, he has served in various manufacturing and management positions with increasing responsibility
throughout AAM's global operations, including his most recent position of Managing Director - AAM Asia. Mr.
Joseph's professional career began with General Motors in 1977. While at General Motors, Mr. Joseph served in a
variety of positions with increasing responsibility at the Hydra-matic and Saginaw Divisions. He also spent time at
the NUMMI facility studying lean manufacturing.
Terri M. Kemp, age 50, has been Vice President - Human Resources since September 2012. Prior to that, she
served as Executive Director - Human Resources & Labor Relations (since November 2010); Executive Director -
Human Resources (since September 2009); Director - Human Resources Operations (since October 2008);
Director - Program Management (since March 2008); Director - Program Management, Mexico (since August 2006);
Launch Manager (since May 2006); Manager - Manufacturing (since August 2005); Manager - Manufacturing, Front
Axles and Gears (since June 2005); Area Manager - Plant 1 (since October 2004); Director - Personnel, Detroit
Gear and Axle (since January 2003); Area Manager - Plant 6 (since March 2002); Manager - Program Management
(since February 2001); Area Manager - Manufacturing Plant 8 (since June 1999); Supervisor - I.E. Plants 1, 6 and 8
(since August 1998); Production Coordinator (since September 1997); and Manager - Productivity since joining the
Company in July 1996. Prior to joining our Company, Mrs. Kemp served for nine years at Corning Incorporated,
where she progressed through a series of manufacturing positions with increasing responsibility, including Industrial
Engineer, Department Head and Operations Manager.
10
Michael J. Lynch, age 51, has been Vice President - Driveline Business Performance & Cost Management
since May 2015. Prior to that, he served as Vice President - Finance & Controller (since September 2012);
Executive Director & Controller (since October 2008); Director - Commercial Analysis (since July 2006); Director -
Finance, Driveline Americas (since March 2006); Director - Investment & Commercial Analysis (since November
2005); Director - Finance, Driveline (since October 2005); Director - Finance Operations, U.S. (since April 2005);
Manager - Finance (since June 2003); Manager - Finance, Forge Division (since September 2001); Finance
Manager - Albion Automotive (since October 1998); Supervisor - Cost Estimating (since February 1998) and
Financial Analyst at the Detroit Manufacturing Facility since joining AAM in September 1996. Prior to joining our
Company, Mr. Lynch served at Stellar Engineering for nine years in various capacities.
Christopher J. May, age 46, has been Vice President & Chief Financial Officer since August 2015. Prior to
that, he served as Treasurer (since December 2011); Assistant Treasurer - Capital Markets & Risk Management
(since September 2008); Director of Internal Audit (since September 2005); Divisional Finance Manager - Metal
Formed Products (since June 2003); Finance Manager - Three Rivers Manufacturing Facility (since August 2000);
Manager Financial Reporting (since November 1998) and Financial Analyst since joining AAM in 1994. Prior to
joining AAM, Mr. May served as a Senior Accountant for Ernst & Young. Mr. May is a certified public accountant.
Allan R. Monich, age 62, has been Vice President - Global Quality, Warranty & AAM Operating Systems since
October 2015. Prior to that, he served as Vice President - Quality, Warranty & Customer Satisfaction (since
November 2010); Executive Director - Warranty (since January 2010); Vice President - Quality Assurance &
Customer Satisfaction (since July 2006); Vice President - Program Management & Capital Planning (since October
2005); Vice President - Program Management & Launch (since May 2004); Vice President, Manufacturing Forging
Division (since October 2001); Vice President, Human Resources (since 1998); Vice President, Personnel (since
November 1997) and Plant Manager for the Buffalo Gear & Axle Plant in Buffalo, NY since the formation of our
Company in March 1994. Prior to joining our Company in March 1994, Mr. Monich worked for General Motors for
22 years in the areas of manufacturing, quality assurance, sales and engineering, including four years as a Plant
Manager.
Tolga I. Oal, age 44, has been President - AAM North America, Vice President - AAM Corporate since joining
our Company in September 2015. Prior to joining AAM, Mr. Oal served as Vice President of Global Electronics for
TRW Automotive, since 2012. Before that, Mr. Oal served in various manufacturing and management positions of
increasing responsibility within TRW for Global Electronics, including Director of Operations and as Director of
Finance. Prior to joining TRW, Mr. Oal held various leadership positions in engineering, sales, purchasing, and
finance at Siemens VDO Automotive/Continental.
John S. Sofia, age 56, has been Vice President - Global Program Management since November 2012. Prior to
that, he served as Vice President - Commercial Vehicle Business (since March 2008); Vice President - Product
Engineering, Commercial Vehicle Operations & Chief Technology Officer (since December 2007); Vice President -
Engineering & Product Development (since July 2006); Vice President - Quality Assurance & Customer Satisfaction
(since October 2004); Director, Advanced Quality Planning (since August 2002); Plant Manager, Detroit Forge
(since April 2001); Director, Product Engineering (since June 2000); Manager of the Current Production & Process
Engineering Group (since September 1997) and Engineering Manager (since joining our Company in May 1994).
Prior to joining our Company, Mr. Sofia served at Chrysler Corporation for 10 years in a variety of manufacturing
and engineering positions.
Thomas J. Szymanski, age 54, has been Vice President - Driveline Manufacturing Services since November
2014. Prior to that, he served as President - AAM North America, Vice President - AAM Corporate (since January
2014), Vice President - Operations - AAM Americas (since November 2012), Vice President - Global Manufacturing
Services (since November 2010); Executive Director - Manufacturing Planning (since October 2008); Executive
Director - Corporate Manufacturing Services Unibody Vehicles (since January 2008); Director - Cost Estimating &
Advanced Manufacturing Engineering (since August 2006); President & Chief Operating Officer - Colfor
Manufacturing, Inc. (since August 2004); Director - Corporate Manufacturing Engineering (since January 2003);
Plant Manager - Three Rivers Gear & Axle (since March 2000); Plant Manager - Tonawanda Forge (since
December 1998); Manufacturing Manager - Tonawanda Forge (since March 1994); and Area Manager, Axle
Assembly - Buffalo Gear & Axle (since the formation of our Company in March 1994). Prior to joining our Company
in March 1994, Mr. Szymanski worked for General Motors for 11 years in a variety of manufacturing and plant
management positions.
11
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(a) or 15(d) of the Securities Exchange Act of 1934 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. The information contained in the Company's website is not included, or incorporated by reference, in this
Annual Report on Form 10-K.
(d) Financial Information About Geographic Areas
International operations are subject to certain additional risks inherent in conducting business outside the U.S.,
such as changes in currency exchange rates, price and currency exchange controls, import restrictions,
nationalization, expropriation and other governmental action. Financial information relating to our operations by
geographic area is presented in the following table. Net sales are attributed to countries based upon location of
customer. Long-lived assets exclude deferred income taxes.
Net sales
United States ................................................................... $
Canada ............................................................................
Mexico .............................................................................
South America .................................................................
China ...............................................................................
All other Asia ...................................................................
Europe and other ............................................................
Total net sales ................................................................. $
Long-lived assets
United States ................................................................... $
Mexico .............................................................................
South America .................................................................
China ...............................................................................
All other Asia ...................................................................
Europe .............................................................................
Total long-lived assets ..................................................... $
2015
December 31,
2014
(in millions)
2013
2,121.9
119.3
1,060.2
106.6
185.5
185.2
124.4
3,903.1
824.0
522.6
48.5
85.8
103.7
120.3
1,704.9
$
$
$
2,073.6
64.6
1,055.5
156.5
71.3
167.3
107.2
3,696.0
$
$
867.1 (a) $
513.2
80.5
59.8
117.5
94.0
$
1,732.1 (a) $
1,682.0
74.4
865.6
201.1
34.4
220.8
129.0
3,207.3
827.9 (a)
469.3
100.2
63.8
112.9
93.2
1,667.3 (a)
(a) These amounts have been adjusted to reflect the impact of retrospectively adopting the new debt issuance cost
presentation accounting standard as described in Item 8. Financial Statements and Supplementary Data - Note 1 -
Organization and Summary of Significant Accounting Policies.
12
Item 1A. Risk Factors
The following risk factors and other information included in this Annual Report on Form 10-K should be
considered. If any of the following risks occur, our business, financial condition, operating results and cash flows
could be materially adversely affected.
Our business is significantly dependent on sales to GM and FCA.
We are the principal supplier of driveline components to GM for its full-size RWD light trucks and SUVs
manufactured in North America, supplying substantially all of GM's rear axle and 4WD/AWD axle requirements for
these vehicle platforms. Sales to GM were approximately 66% of our consolidated net sales in 2015, 68% in 2014,
and 71% in 2013. A reduction in our sales to GM or a reduction by GM of its production of RWD light trucks or
SUVs, as a result of market share losses of GM or otherwise, could have a material adverse effect on our results of
operations and financial condition.
We also supply driveline system products for FCA's heavy-duty Ram full-size pickup trucks and its derivatives,
the AWD Jeep Cherokee, the AWD Chrysler 200 and a passenger car driveshaft program. Sales to FCA accounted
for approximately 20% of our consolidated net sales in 2015, 18% in 2014 and 12% in 2013. A reduction in our
sales to FCA or a reduction by FCA of its production of the programs we support, as a result of market share losses
of FCA or otherwise, could have a material adverse effect on our results of operations and financial condition.
Our business may also be adversely affected by reduced demand for the product programs we currently
support, or anticipate supporting in the future, or if we do not obtain sales orders for successor programs that
replace our current product programs.
Our business is dependent on the rear-wheel drive light truck and SUV market segments in North
America.
A substantial portion of our revenue is derived from products supporting RWD light truck and SUV platforms in
North America. Sales and production levels of light trucks and SUVs can be affected by many factors, including
changes in consumer demand; product mix shifts favoring other types of light vehicles, such as front-wheel drive
based crossover vehicles and passenger cars; fuel prices; and government regulation, such as the corporate
average fuel economy (CAFE) regulations and related emissions standards promulgated by federal and state
regulators. The U.S. CAFE standards for cars and light-duty trucks require the equivalent of 54.5 miles per gallon
by 2025. Our customers are currently planning for these regulations and the potential impact on consumer
preferences and demand for vehicles. A reduction in the market segment we currently supply could have a material
adverse impact on our results of operations and financial condition.
We are under continuing pressure from our customers to reduce our prices.
Annual price reductions are a common practice in the automotive industry. The majority of our products are sold
under long-term contracts with prices scheduled at the time the contracts are established. Many of our contracts
require us to reduce our prices in subsequent years and most of our contracts allow us to adjust prices for
engineering changes. If we must accommodate a customer's demand for higher annual price reductions and are
unable to offset the impact of any such price reductions through continued technology improvements, cost
reductions or other productivity initiatives, our results of operations and financial condition could be adversely
affected.
13
Our business faces substantial competition.
The automotive industry is highly competitive. Our competitors include the driveline component manufacturing
facilities controlled by OEMs, as well as many other domestic and foreign companies possessing the capability to
produce some or all of the products we supply. Some of our competitors are affiliated with OEMs and others have
economic advantages as compared to our business, such as patents, existing underutilized capacity and lower
wage and benefit costs. Technology, design, quality, delivery and cost are the primary elements of competition in
our industry segment. As a result of these competitive pressures and other industry trends, OEMs and suppliers
are developing strategies to reduce costs. These strategies include supply base consolidation and global sourcing.
Our business may be adversely affected by increased competition from suppliers benefiting from OEM affiliate
relationships or financial and other resources that we do not possess. Our business may also be adversely affected
if we do not sustain our ability to meet customer requirements relative to technology, design, quality, delivery and
cost.
Our business could be adversely affected by disruptions in our supply chain and our customers' supply
chain.
We depend on a limited number of suppliers for certain key components and materials needed for our products.
We rely upon, and expect to continue to rely upon, certain suppliers for critical components and materials that are
not readily available in sufficient volume from other sources. As we continue to expand our global manufacturing
footprint, we need to rely on suppliers in local markets that have not yet proven their ability to meet our
requirements. These supply chain characteristics make us susceptible to supply shortages and price increases. If
production volumes increase rapidly, there can be no assurance that the suppliers of critical components and
materials will be able or willing to meet our future needs on a timely basis.
Our supply chain as well as our customers' supply chain is also at risk of unanticipated events such as natural
disasters that could cause a disruption in the supply of critical components to us and our customers. A significant
disruption in the supply of these materials could have a material adverse effect on our results of operations and
financial condition.
We may incur material losses and costs as a result of product recall or field action, product liability and
warranty claims, litigation and other disputes and claims.
We are exposed to warranty, product recall or field action and product liability claims in the event that our
products fail to perform as expected, and we may be required to participate in a recall of such products. We are not
responsible for certain warranty claims that may be incurred by our customers, which include returned components
for which no trouble was found upon inspection, discretionary acts of dealer goodwill, defects related to certain
directed buy components, and build-to-print design issues. We review warranty claim activity in detail, and we may
have disagreements with our customers as to responsibility for these types of costs incurred by our customers. In
addition, as we continue to diversify our customer base, we expect our obligation to share in the cost of providing
warranties as part of our agreements with new customers will increase. Costs and expenses associated with
warranties, field actions, product recalls and product liability claims could have a material adverse impact on our
results of operations and financial condition and may differ materially from the estimated liabilities that we have
recorded in our consolidated financial statements.
In addition to warranty claims relating directly to products we produce, potential product recalls for our
customers and their other suppliers, and the potential reputational harm that may result from such product recalls,
could have a material adverse impact on our results of operations and financial condition.
We are also involved in various legal proceedings incidental to our business. Although we believe that none of
these matters are likely to have a material adverse effect on our results of operations or financial condition, there
can be no assurance as to the ultimate outcome of any such legal proceeding or any future legal proceedings.
14
Our company or our customers may not be able to successfully and efficiently manage the timing and
costs of new product program launches.
Certain of our customers are preparing to launch, or have recently launched, new product programs for which
we will supply newly developed driveline system products and related components. There can be no assurance
that we will successfully complete the transition of our manufacturing facilities and resources to support these new
product programs or other future product programs on a timely and cost efficient basis. Accordingly, the launch of
new product programs may adversely affect production rates or other operational efficiency and profitability
measures at our facilities. We may also experience difficulties with the performance of our supply chain on program
launches, which could result in our inability to meet our contractual obligations to key customers. Production
shortfalls or production delays, if any, could result in our failure to effectively manage our material and freight costs
relating to these program launches. In addition, our customers may delay the launch or fail to successfully execute
the launch of these new product programs, or any additional future product program for which we will supply
products. Our revenues, operating results and financial condition could be adversely impacted if our customers fail
to timely launch such programs or if we are unable to manage the timing requirements and costs of new product
program launches.
Our company may not realize all of the revenue expected from our new and incremental business
backlog.
The realization of incremental revenues from awarded business is inherently subject to a number of risks and
uncertainties, including the accuracy of customer estimates relating to the number of vehicles to be produced in
new and existing product programs and the timing of such production, as well as the fluctuation in exchange rates
for programs sourced in currencies other than our reporting currency. It is also possible that our customers may
delay or cancel a product program that has been awarded to us. Our revenues, operating results and financial
condition could be adversely affected relative to our current financial plans if we do not realize substantially all the
revenue from our new and incremental business backlog.
A failure of our information technology (IT) networks and systems, or the inability to successfully
implement upgrades to our enterprise resource planning systems, could adversely impact our business
and operations.
We rely upon information technology networks and systems to process, transmit and store electronic
information, and to manage or support a variety of business processes or activities. Additionally, we and certain of
our third-party vendors collect and store personal information in connection with human resources operations and
other aspects of our business. The secure operation of these information technology networks and systems and the
proper processing and maintenance of this information are critical to our business operations. We cannot be certain
that the security measures we have in place to protect these systems and data will be successful or sufficient to
protect our IT systems from current and emerging technology threats and damage from computer viruses,
unauthorized access, cyber attack and other similar disruptions. The occurrence of any of these events could
compromise our networks, and the information stored there could be accessed, publicly disclosed or lost. Any such
access, disclosure or other loss of information could result in legal claims or proceedings, liability or regulatory
penalties under laws protecting the privacy of personal information, the disruption of our operations or damage to
our reputation. We may be required to incur significant costs to protect against damage caused by these disruptions
or security breaches in the future.
On January 1, 2015, we began the implementation of a new release of our global Oracle enterprise resource
planning (ERP) system at our U.S. locations, which includes upgrades to many of our existing operating and
financial systems. We continued the implementation of these upgrades to our ERP system at our Brazil and Mexico
locations, during the second and third quarter of 2015. We will continue to upgrade our ERP systems at our
remaining global locations during the first quarter of 2016. Such an implementation is a major undertaking, both
financially and from a management and personnel perspective. Should the remaining systems not be implemented
successfully, or if the systems do not perform in a satisfactory manner once implementation is complete, our
business and operations could be disrupted and our results of operations could be adversely affected, including our
ability to report accurate and timely financial results.
15
Negative or unexpected tax consequences, as well as possible changes in foreign and domestic tax
laws could adversely affect our results of operations.
There have been recent global proposals brought forward by the Organisation for Economic Co-operation and
Development (OECD) alongside the Group of Twenty (G-20), for tax jurisdictions to evaluate reforming longstanding
corporate tax law principles and treaties that could adversely affect multi-national companies. The focus is on the
distribution of profits between affiliated entities in different tax jurisdictions, a concept known as Base Erosion and
Profit Shifting (BEPS). Although the OECD does not enact tax law, proposals like this or others that lead to
substantial changes in enacted tax law and treaties could have a material adverse impact on our results of
operations and financial condition.
We file income tax returns in the U.S. federal jurisdiction, as well as various states and foreign jurisdictions. We
are also subject to examinations of these income tax returns by the relevant tax authorities. Based on the status of
these audits and the protocol of finalizing audits by the relevant tax authorities, it is not possible to estimate the
impact of changes, if any, to previously recorded uncertain tax positions. Any negative or unexpected outcomes of
these examinations and audits could have a material adverse impact on our results of operations and financial
condition.
Our company's global operations are subject to risks and uncertainties.
We have business and technical offices and manufacturing facilities in many foreign countries, including Brazil,
China, India, Mexico, Poland, Scotland, Sweden and Thailand. Approximately 9,440 of our 13,050 associates are
located outside of the U.S. International operations are subject to certain risks inherent in conducting business
outside the U.S., such as changes in currency exchange rates, tax laws, price and currency exchange controls,
import restrictions, nationalization, expropriation and other governmental action. Our global operations also may be
adversely affected by political events and domestic or international terrorist events and hostilities. These
uncertainties could have a material adverse effect on the continuity of our business and our results of operations
and financial condition. As we continue to expand our business globally, our success will depend, in part, on our
ability to anticipate and effectively manage these and other risks.
Exchange rate fluctuations could adversely affect our company's global results of operations and
financial condition.
As a result of our international operations, we are exposed to foreign currency risks that arise from our normal
business operations, including risks associated with transactions that are denominated in currencies other than our
local functional currencies. Gains and losses resulting from the remeasurement of assets and liabilities in a
currency other than the functional currency of our foreign subsidiaries are reported in current period income. In the
future, unfavorable changes in exchange rate relationships between the functional currencies of our subsidiaries
and the currencies of their non-functional currency denominated assets and liabilities could have an adverse impact
on our results of operations and financial condition. While we use, from time to time, foreign currency forward
contracts to help mitigate certain of these risks and reduce the effects of fluctuations in exchange rates, our efforts
to manage these risks may not be successful.
We are also subject to currency translation risk as we are required to translate the financial statements of our
foreign subsidiaries to U.S. dollars. We report the effect of translation for our foreign subsidiaries that use the local
currency as their functional currency as a separate component of stockholders' equity. Unfavorable changes in the
exchange rate relationship between the U.S. dollar and the functional currencies of our foreign subsidiaries could
have an adverse impact on our results of operations and financial condition.
We may be unable to consummate and successfully integrate acquisitions and joint ventures.
As we continue to expand globally and accelerate our diversification efforts, we may pursue strategic growth
initiatives with greater frequency going forward. An inability to successfully achieve the levels of organic and
inorganic growth from our strategic growth initiative could adversely impact our results of operations and financial
condition. Further, engaging in acquisitions and joint ventures involves potential risks, including financial risks and
failure to successfully integrate and realize the expected benefits of such acquisitions and joint ventures.
Integrating acquired operations is a significant challenge and there is no assurance that we will be able to manage
the integrations successfully. Failure to successfully integrate acquired operations or to realize the expected
benefits of such acquisitions may have an adverse impact on our results of operations and financial condition.
16
Our business could be adversely affected if we fail to maintain satisfactory labor relations.
The majority of our hourly associates worldwide are members of industrial trade unions employed under the
terms of collective bargaining agreements. Substantially all of our hourly associates in the U.S. are represented by
the UAW. Approximately 3,960 of our hourly associates at our facilities in Mexico and Brazil are also covered by
collective bargaining agreements which expire annually. There can be no assurance that future negotiations with
our labor unions will be resolved favorably or that we will not experience a work stoppage or disruption that could
have a material adverse impact on our results of operations and financial condition. In addition, there can be no
assurance that such future negotiations will not result in labor cost increases or other terms and conditions that
could adversely affect our results of operations and financial condition or our ability to compete for future business.
Our business could be adversely affected by volatility in the price of raw materials.
Worldwide commodity market conditions in recent years have resulted in volatility in the cost of steel and other
metallic materials we use in production. During periods of general economic improvement and increases in
customer demands, we have seen the cost of steel and metallic materials needed for our products increase. If we
are unable to pass such cost increases on to our customers, this could have a material adverse effect on our results
of operations and financial condition.
If we are unable to respond timely to changes in regulation, technology, and market innovation, we risk
not being able to develop our intellectual property into commercially viable products.
Our results of operations and financial condition are impacted, in part, by our competitive advantage in
developing, engineering, and manufacturing innovative products. In the future, our ability to anticipate changes in
technology, successfully develop, engineer, and bring to market new innovative proprietary products will have a
significant impact on our market competitiveness. If we are unable to maintain our competitive advantage through
innovation, there could be a material adverse effect on our results of operations and financial condition.
We use important intellectual property in our business. If we are unable to protect our intellectual property
or if a third party makes assertions against us or our customers relating to intellectual property rights, our
business could be adversely affected.
We own important intellectual property, including patents, trademarks, copyrights and trade secrets, and are
involved in numerous licensing arrangements. Our intellectual property plays an important role in maintaining our
competitive position in a number of the markets that we serve. Our competitors may develop technologies that are
similar to our proprietary technologies or design around the patents we own or license. Further, as we expand our
operations in jurisdictions where the protection of intellectual property rights is less robust, the risk of others duplicating
our proprietary technologies increases, despite efforts we undertake to protect them. Developments or assertions by
or against us relating to intellectual property rights, and any inability to protect these rights, could materially adversely
affect our business and our competitive position.
Our company's ability to operate effectively could be impaired if we lose key personnel.
Our success depends, in part, on the efforts of our executive officers and other key associates, such as
engineers and global operational leadership. In addition, our future success will depend on, among other factors,
our ability to continue to attract and retain qualified personnel, particularly engineers and other employees with
critical expertise and skills that support key customers and products. The loss of the services of our executive
officers or other key associates, unexpected turnover, or the failure to attract or retain associates, could have a
material adverse effect on our results of operations and financial condition.
17
Our financial condition and operations may be adversely affected by a violation of financial and other
covenants.
Our revolving credit facility contains financial covenants related to secured and unsecured indebtedness
leverage and interest coverage. The revolving credit facility limits our ability to make certain investments, loans and
guarantees, declare dividends or distributions on capital stock, redeem or repurchase capital stock and certain debt
obligations, incur liens, incur indebtedness, enter into certain restrictive agreements, merge, make acquisitions or
sell all or substantially all of our assets. The indenture governing our senior unsecured notes also restricts our
ability to incur debt secured by liens, engage in consolidations or mergers or sell all or substantially all of our assets,
and engage in certain sale and leaseback transactions. The revolving credit facility also significantly restricts our
ability to incur additional secured debt. The revolving credit facility and the indentures governing our senior
unsecured notes also include customary events of default. Obligations under the revolving credit facility, the 7.75%
senior unsecured notes due 2019 (7.75% Notes), the 6.625% senior unsecured notes due 2022 (6.625% Notes),
the 6.25% senior unsecured notes due 2021 (6.25% Notes) and our 5.125% senior unsecured notes due 2019
(5.125% Notes) are required to be guaranteed by most of our U.S. subsidiaries that hold domestic assets. In
addition, the revolving credit facility is secured on a first priority basis by all or substantially all of the assets of AAM,
Inc., the assets of Holdings and each guarantor's assets, including a pledge of capital stock of our U.S. subsidiaries
that hold domestic assets, including each guarantor, and a portion of the capital stock of the first tier foreign
subsidiaries of AAM. A violation of any of these covenants or agreements could result in a default under these
contracts, which could permit the lenders or note holders, as applicable, to accelerate repayment of any borrowings
or notes outstanding at that time and levy on the collateral granted in connection with the revolving credit facility. A
default or acceleration under the revolving credit facility or the indentures governing the senior unsecured notes
may result in increased capital costs and defaults under our other debt agreements and may adversely affect our
ability to operate our business, our subsidiaries' and guarantors' ability to operate their respective businesses and
our results of operations and financial condition.
Our company faces substantial pension and other postretirement benefit obligations.
We have significant pension and other postretirement benefit obligations to certain of our associates and
retirees. Our ability to satisfy the funding requirements associated with these obligations will depend on our cash
flow from operations and our ability to access credit and the capital markets. The funding requirements of these
benefit plans, and the related expense reflected in our financial statements, are affected by several factors that are
subject to an inherent degree of uncertainty and volatility, including governmental regulation. Key assumptions
used to value these benefit obligations and the cost of providing such benefits, funding requirements and expense
recognition include the discount rate, the expected long-term rate of return on pension assets, mortality rates and
the health care cost trend rate. If the actual trends in these factors are less favorable than our assumptions, this
could have an adverse effect on our results of operations and financial condition.
Our business is subject to costs associated with environmental, health and safety regulations.
Our operations are subject to various federal, state, local and foreign laws and regulations governing, among
other things, emissions to air, discharge to waters and the generation, handling, storage, transportation, treatment
and disposal of waste and other materials. We believe that our operations and facilities have been and are being
operated in compliance, in all material respects, with such laws and regulations, many of which provide for
substantial fines and criminal sanctions for violations. The operation of our manufacturing facilities entails risks in
these areas, however, and there can be no assurance that we will not incur material costs or liabilities. In addition,
potentially significant expenditures could be required in order to comply with evolving environmental, health and
safety laws, regulations or other pertinent requirements that may be adopted or imposed in the future by
governmental authorities.
Item 1B. Unresolved Staff Comments
None.
18
Item 2.
Properties
We operate in 13 countries and have 37 manufacturing, engineering and business office facilities worldwide of
which the principal facilities are:
Name
Three Rivers Manufacturing Facility
Three Rivers, MI ....................................
Colfor Manufacturing, Inc.
Malvern, OH
Minerva, OH ..........................................
MSP Industries
Oxford, MI .............................................
Oxford Forge
Oxford, MI .............................................
AccuGear, Inc.
Fort Wayne, IN ......................................
Auburn Hills Manufacturing, Inc.
Auburn Hills, MI ....................................
Rochester Manufacturing Facility
Rochester, IN ........................................
Guanajuato Manufacturing Complex
Guanajuato, Mexico ..............................
Type of
Interest
Owned
Owned
Leased
Function
Front and rear axles, rear drive modules, power
transfer units, driveheads and steering linkages
Forged products
Forged and machined products, rear axles and
stabilizer bars
Forged and machined products
Owned
Forged products
Owned
Forged and machined products
Owned
Tool & die manufacturer, forged and machined
products
Owned Machined products
Owned
Rear axles and driveshafts, front axles, front
auxiliary driveshafts, forging products, rear drive
modules, power transfer units and transfer cases
Silao Manufacturing Facility
Leased
Machined products
Silao, Mexico .........................................
AccuGear - Silao
Silao, Mexico ........................................
Araucária Manufacturing Facility
Araucária, Brazil ....................................
Rayong Manufacturing Facility
Rayong, Thailand...................................
Albion Automotive
Glasgow, Scotland ................................
Changshu Manufacturing Facility
Changshu, China ..................................
Pantnagar Manufacturing Facility
Pantnagar, India ....................................
Pune Manufacturing Facility
Pune, India ............................................
Chennai Manufacturing Facility
Chennai, India .......................................
Swidnica Manufacturing Facility
Swidnica, Poland ..................................
World Headquarters
Detroit, MI ..............................................
Advanced Technology Development Center
Detroit, MI ..............................................
Owned
Forged and machined products
Owned
Front and rear axles, machining of forged and cast
products and constant velocity joints
Owned
Front and rear axles and driveshafts
Leased
Owned
Front and rear axles for medium and heavy-duty
trucks and buses and transfer cases
Front axles, independent rear drive axles, rear drive
modules, gear sets and machined cases
Owned
Rear axles and driveshafts
Owned
Rear axles and driveheads
Owned
Assembly of front and rear axles
Owned
Owned
Leased
Front and rear drive units, transmission differentials
and machined products
Executive and administrative offices and
engineering
Technology benchmarking, prototypes, advanced
technology development, supplier collaboration,
customer showcasing and associate training
Technical Center
Rochester Hills, MI.................................
Owned
R&D, design engineering, metallurgy, testing and
validation
We believe that our property and equipment is properly maintained and in good operating condition. We will
continue to evaluate capacity requirements in light of current and projected market conditions. We also intend to
continue redeploying assets in order to increase our capacity utilization and reduce future capital expenditures to
support program launches.
19
Item 3.
Legal Proceedings
We are involved in various legal proceedings incidental to our business. Although the outcome of these matters
cannot be predicted with certainty, we do not believe that any of these matters, individually or in the aggregate, will
have a material 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 closely monitor our environmental conditions to ensure that we are in compliance
with applicable laws, regulations and ordinances. We have made, and will continue to make, capital and other
expenditures to comply with environmental requirements, including recurring administrative costs. Such
expenditures were not significant in 2015, 2014 and 2013.
Item 4.
Mine Safety Disclosures
Not applicable.
Part II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Market Information
Our common stock, par value $0.01 per share, is listed for trading on the New York Stock Exchange (NYSE)
under the symbol “AXL.”
Stockholders and High and Low Sales Prices
2015
2014
High .......... $
Low ........... $
High .......... $
Low ........... $
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Full Year
25.86 $
22.20 $
21.15 $
17.84 $
26.04 $
20.91 $
19.61 $
17.29 $
21.45 $
19.06 $
19.81 $
16.77 $
22.76 $
18.64 $
22.79 $
16.40 $
26.04
18.64
22.79
16.40
Prices are the quarterly high and low closing sales prices for our common stock as reported by the NYSE. We
had approximately 245 stockholders of record as of February 10, 2016.
Dividends
We did not declare or pay any cash dividends on our common stock in 2015. Our revolving credit agreement
limits our ability to declare or pay dividends or distributions on capital stock.
20
Issuer Purchases of Equity Securities
In the fourth quarter of 2015, we withheld and repurchased shares of AAM stock to satisfy employee tax
withholding obligations due upon the vesting of restricted stock units and performance shares. The following table
provides information about our equity security purchases during the quarter ended December 31, 2015:
Period
October 1 - October 31, 2015 .............
November 1 - November 30, 2015 ......
December 1 - December 31, 2015 ......
Total ....................................................
Total Number
of Shares (Or
Units)
Purchased
Average
Price Paid
per Share
(or Unit)
— $
—
7,561
7,561 $
—
—
21.66
21.66
Securities Authorized for Issuance under Equity Compensation Plans
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
—
—
—
—
The information regarding our securities authorized for issuance under equity compensation plans is
incorporated by reference from our Proxy Statement.
21
Item 6. Selected Financial Data
FIVE YEAR CONSOLIDATED FINANCIAL SUMMARY
Year Ended December 31,
Statement of income data
Net sales ....................................................... $
Gross profit ...................................................
Selling, general and
administrative expenses .............................
Operating income .........................................
Net interest expense .....................................
Net income ...................................................
Net income attributable to AAM.....................
Diluted earnings per share ............................ $
277.3
358.1
(96.6)
235.6 (b)
235.6 (b)
3.02
Balance sheet data
Cash and cash equivalents ........................... $
Total assets ...................................................
Total long-term debt, net ...............................
Total AAM stockholders' equity (deficit).........
Dividends declared per share .......................
282.5
3,202.7
1,375.7
301.5
—
2015
2014
2013
2012
2011
(in millions, except per share data)
3,903.1
$ 3,696.0
$ 3,207.3
$ 2,930.9
$ 2,585.0
635.4
522.8
478.7
255.2
267.6
(97.8)
143.0 (a)
143.0 (a)
1.85
249.2
3,240.4 (f)
1,504.6 (f)
113.4
238.4
240.3
(115.3)
94.5 (b)
94.5 (b)
1.23
154.0
3,005.4 (f)
1,537.0 (f)
40.5
$
$
—
—
$
$
399.7
243.3
156.4
(101.0)
366.7 (b)(c)(d)
367.7 (b)(c)(d)
4.87
62.4
2,843.5 (f)
1,433.1 (f)
(113.9)
—
$
$
458.0
231.7
226.3
(82.7)
139.5 (b)(e)
145.2 (b)(e)
1.93
169.2
2,311.2 (f)
1,164.2 (f)
(418.6)
—
$
$
Statement of cash flows data
Cash provided by (used in) operating
activities ..................................................... $
Cash used in investing activities ...................
Cash provided by (used in) financing
activities .....................................................
Other data
377.6
$
318.4
$
223.0
$ (175.5)
$
(56.3)
(188.1)
(195.3)
(218.7)
(185.4)
(184.1)
(143.6)
(21.4)
88.8
253.5
167.2
Depreciation and amortization ...................... $
Capital expenditures .....................................
Proceeds from government grants ................
Proceeds from sale-leaseback of equipment
Purchase buyouts of leased equipment ........
198.4
193.5
$
199.9
206.5
5.1
—
—
2.1
—
—
$
177.0
$
152.2
$
139.4
251.9
—
24.1
—
207.6
—
12.1
—
163.1
—
—
13.4
(a)
Includes a settlement charge of $23.1 million, net of tax, related to our terminated vested lump-sum pension payout in the U.S.
(b)
Includes charges of $0.5 million, net of tax, in 2015, $35.1 million, net of tax, in 2013, $19.8 million in 2012, and $3.1 million in 2011
related to debt refinancing and redemption costs.
(c)
Includes net special charges, curtailment gains, asset impairments and asset redeployment and other restructuring costs associated
with plant closures of $40.6 million (including $28.7 million of expense related to contractual termination benefits provided to certain
eligible UAW associates as a result of the Detroit Manufacturing Complex and Cheektowaga Manufacturing Facility plant closures).
(d)
Includes the impact of the reversal of our valuation allowance on U.S. federal deferred tax assets of $337.5 million in the fourth
quarter of 2012.
(e)
Includes asset impairments, other non-recurring costs and tax refunds of $16.6 million (including $0.5 million related to the
noncontrolling interest portion of a $1.6 million asset impairment recorded by e-AAM).
(f) These amounts have been adjusted to reflect the impact of retrospectively adopting the new debt issuance cost presentation
accounting standard as described in Item 8. Financial Statements and Supplementary Data - Note 1 - Organization and Summary of
Significant Accounting Policies. As a result of implementation, total assets and total long-term debt, net decreased by $18.8 million,
$22.1 million, $21.0 million, and $16.0 million for the years ended December 31, 2014, 2013, 2012 and 2011, respectively.
22
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)
COMPANY OVERVIEW
American Axle & Manufacturing Holdings, Inc. (Holdings) and its subsidiaries (collectively, we, our, us or AAM)
is a Tier I supplier to the automotive industry. We manufacture, engineer, design and validate driveline and
drivetrain systems and related components and chassis modules for light trucks, sport utility vehicles (SUVs),
passenger cars, crossover vehicles and commercial vehicles. Driveline and drivetrain systems include components
that transfer power from the transmission and deliver it to the drive wheels. Our driveline, drivetrain and related
products include axles, chassis modules, driveshafts, power transfer units, transfer cases, chassis and steering
components, driveheads, transmission parts, electric drive systems and metal-formed products. In addition to
locations in the United States (U.S.) (Michigan, Ohio and Indiana), we also have offices or facilities in Brazil, China,
Germany, India, Japan, Luxembourg, Mexico, Poland, Scotland, South Korea, Sweden and Thailand.
We are the principal supplier of driveline components to General Motors Company (GM) for its full-size rear-
wheel drive (RWD) light trucks and SUVs manufactured in North America, supplying substantially all of GM's rear
axle and four-wheel drive and all-wheel drive (4WD/AWD) axle requirements for these vehicle platforms. Sales to
GM were approximately 66% of our consolidated net sales in 2015, 68% in 2014, and 71% in 2013.
We are the sole-source supplier to GM for certain axles and other driveline products for the life of each GM
vehicle program covered by Lifetime Program Contracts and Long Term Program Contracts (collectively, LPCs).
Substantially all of our sales to GM are made pursuant to the LPCs. The LPCs have terms equal to the lives of the
relevant vehicle programs or their respective derivatives, which typically run 5 to 7 years, and require us to remain
competitive with respect to technology, design, quality and cost.
We also supply driveline system products for FCA US LLC (FCA) for heavy-duty Ram full-size pickup trucks
and its derivatives, the AWD Jeep Cherokee, the AWD Chrysler 200, and a passenger car driveshaft program.
Sales to FCA were approximately 20% of our consolidated net sales in 2015, 18% in 2014 and 12% in 2013. In
addition to GM and FCA, we supply driveline systems and other related components to Volkswagen AG
(Volkswagen), Audi AG (Audi), Mercedes-Benz, Jaguar Land Rover Automotive PLC (JLR), Honda Motor Co., Ltd.,
Ford Motor Company (Ford), Nissan Motor Co., Ltd. (Nissan), PACCAR Inc., Harley-Davidson Inc., Daimler Truck
and other original equipment manufacturers (OEMs) and Tier I supplier companies such as Jatco Ltd. and Hino
Motors Ltd. Our consolidated net sales to customers other than GM increased 10% to $1,317.1 million in 2015 as
compared to $1,199.9 million in 2014 and $926.7 million in 2013.
INDUSTRY TRENDS
There are a number of significant trends affecting the highly competitive automotive industry. As general
economic and industry specific conditions have improved, intense competition, volatility in fuel, steel, metallic and
other commodity prices and significant pricing pressures persist within the global automotive industry. At the same
time, the industry is intently focused on investing in future products that will incorporate the latest technology, meet
changing customer demands and comply with more stringent government regulations. The continued advancement
of technology and product innovation, as well as having the capability to source programs on a global basis, are
critical to attracting and retaining business in today's automotive industry.
In 2015, the U.S. Seasonally Adjusted Annual Rate of sales (SAAR) increased to 17.4 million units, which
compares to 16.4 million units in 2014 and 15.5 million units in 2013. As a result of a continued reduction in oil
prices, improvement in employment rates, increases in customer demands and the availability of low interest credit,
we believe that the U.S. domestic OEMs and their suppliers will continue to be able to capitalize on these trends in
the near term.
MORE STRINGENT GOVERNMENT REGULATIONS FOR FUEL EFFICIENCY AND EMISSIONS
REDUCTIONS With a growing focus on environmental legislation and regulation, there has been an increased
demand for technologies designed to help reduce emissions, increase fuel economy and minimize the
environmental impact of vehicles. The U.S. CAFE standards for cars and light-duty trucks requires the equivalent
of 54.5 miles per gallon by 2025. As a result, OEMs and suppliers are competing intensely to develop and market
new and alternative technologies, such as electric vehicles, hybrid vehicles, fuel cells, fuel-efficient diesel engines
and efficiency improvements of driveline systems to improve fuel economy and emissions.
23
We are responding to the increases in CAFE standards with ongoing research and development (R&D) efforts
that focus on fuel economy, emission reduction and environmental improvements. These efforts have led to new
business awards for products that support AWD and RWD passenger cars and crossover vehicles and further
position us to compete in the marketplace. We are continuing to invest in the development of advanced products
focused on fuel economy, mass reductions, vehicle safety and performance by integrating electronics and
technology. Approximately 75% of AAM's new and incremental business backlog launching from 2016 to 2018,
which is an estimated $725 million, relates to AAM's newest AWD systems for passenger cars and crossover
vehicles. These systems are designed to improve fuel efficiency by up to 30%, reduce CO2 emissions and provide
AWD capability with the additional benefit of improved vehicle stability when compared to traditional mechanical
AWD systems. We also have developed and commercialized a disconnecting AWD system, which strengthens
AAM's position as a leader in global driveline systems technology. AAM's EcoTrac® Disconnecting AWD system is
an industry-first technology that seamlessly engages AWD functionality while improving fuel efficiency and reducing
CO2 emissions.
AAM has established a high-efficiency product portfolio that is designed to improve axle efficiency and fuel
economy through innovative product design technology. Our lineup of high-efficiency axles for rear-wheel drive and
AWD applications and our high efficiency rear-drive module are featured on multiple award winning vehicles.
Through the development of our EcoTrac® Disconnecting AWD system, our high efficiency axles, PowerLite® axles,
PowerDense® gears and our e-AAM™ hybrid and electric driveline systems, we have significantly advanced our
efforts to improve fuel efficiency and ride and handling performance while reducing emissions and mass.
INCREASE IN DEMAND FOR ELECTRONIC INTEGRATION The electronic content of vehicles continues to
expand, largely driven by consumer demand for greater vehicle performance, enhanced functionality, and
affordable convenience options. This demand is also a result of increasingly stringent regulatory standards for
energy efficiency, emissions reduction and increased safety. As electronically controlled systems continue to
become more affordable, we expect this trend to continue. The increased use of electronics provides greater
flexibility in vehicles to deliver the functionality required by both the consumer demand and regulatory requirements,
and Suppliers, such as AAM, with enhanced capability in electronic integration have greater sourcing opportunities
with OEMs and may be able to obtain more favorable pricing for these products.
PRICE PRESSURE Year-over-year price reductions are a common competitive practice in the automotive
industry. As OEMs continue to demand cost cutting initiatives, we anticipate sustained pressure to reduce the cost
of our own operations. The majority of our products are sold under long-term contracts with prices scheduled at the
time the contracts are established. Many of our contracts require us to reduce our prices in subsequent years and
most of our contracts allow us to adjust prices for engineering changes. We do not believe that the price reductions
we have committed to our customers will have a material adverse impact on our future operating results because
we intend to lessen the impact of such price reductions through continued cost reductions, efficiency improvements
or other productivity initiatives.
OEM RECALLS AND WARRANTY PROGRAMS An unprecedented level of vehicle recalls occurred during
2014 and continued through 2015, which resulted in tremendous negative attention for the automotive industry and,
consequently, pressure from legislators, media, regulators and the public. Throughout 2015, there has been a
continuing focus by the National Highway Transportation Safety Administration, Environmental Protection Agency,
automakers, the media, and consumers to demand a higher level of vehicle safety and regulatory compliance. As a
result, OEMs are becoming more cautious as it relates to recalls and are initiating recalls for a wide range of
components that in the past may not have resulted in recalls. Further, there is a notable rise in supplier
identification related to these recalls. In an attempt to reduce warranty costs per vehicle, OEMs are increasing their
efforts to have suppliers share the burden of these increasing warranty costs. This trend will put additional pressure
on the need for robust quality systems throughout the supply chain and may also increase warranty related
expenditures for the supply base.
24
GLOBAL AUTOMOTIVE PRODUCTION As our customers continue to design their products for global
markets, they will continue to require global support from their suppliers. For this reason, it is critical that we
maintain a global presence in these markets in order to compete for new contracts. Over the past several years,
we significantly increased our global installed capacity to support current programs and future opportunities. We
expanded our capacity in Brazil, China, Mexico, Poland, Thailand and the U.S. We also have engineering offices
around the world to support these markets. As we continue to diversify our product portfolio, we plan to increase
our investment in these resources in order to provide technical solutions to our customers on a regional basis. We
expect our business activity in these markets to increase significantly over the next several years. More than half of
our new and incremental business backlog is for end use markets outside the U.S. and nearly all has been sourced
to our manufacturing facilities outside the U.S.
EVOLUTION OF THE AUTOMOTIVE INDUSTRY AS DEMAND FOR CAR-SHARING, RIDE-SHARING AND
AUTONOMOUS VEHICLES INCREASES OEMs are increasingly focused on offering their own car-sharing rental
businesses and ride-sharing services in addition to selling vehicles. Car-sharing typically allows consumers to rent
an OEM’s car for a short period of time, while ride-sharing matches people to available carpools or other services
that provide on-demand rides with the use of an online application. With continued urbanization, population growth
and increased government regulations to ease congestion, it is expected that the markets for these services will
continue to grow. As such, many OEMs are vigorously exploring and expanding their own car-sharing and ride-
sharing efforts.
Another trend developing is the expectation that autonomous, self-driving cars will become more common with
continued advancements in technology. As the automotive industry remains one of the most highly regulated
industries, the government and regulating bodies will play a very active role in dictating the pace at which
autonomous vehicles become a viable option for consumers. These vehicles will radically change our current road
systems, requiring an overhaul of driving laws, road signs, traffic management, insurance regulations and liability
issues. Autonomous vehicles present many possible benefits, such as a reduction in deadly traffic collisions
caused by human error and reduced traffic congestion, but there are also foreseeable challenges such as liability
for damage, software reliability and the potential for a vehicle's computer being compromised.
AAM's advancements such as AAM’s EcoTrac® Technology, TracRite® Differential Technology and VecTrac™
Torque Vectoring Technology correlate well with the autonomous vehicle developments. We will continue to
develop our driveline systems and will pursue new opportunities to participate in these expanding markets.
RESULTS OF OPERATIONS
NET SALES Net sales increased by 6% to $3,903.1 million in 2015 as compared to $3,696.0 million in 2014
and $3,207.3 million in 2013.
The increase in sales in 2015, as compared to 2014, primarily reflects an increase of approximately 5% in
production volumes for the North American light truck and SUV programs we currently support for GM and FCA,
which was partially offset by a reduction in metal market pass throughs to our customers and foreign exchange
related to translation adjustments. The increase in sales in 2015 also reflects higher sales supporting a global
crossover program for GM and a passenger car driveshaft program for FCA, both of which launched in the second
half of 2014.
The increase in sales in 2014, as compared to 2013, primarily reflected an increase of approximately 8% in
production volumes for the North American light truck and SUV programs we supported for GM and FCA and higher
sales in support of FCA's AWD Jeep Cherokee.
Our content-per-vehicle (CPV) (as measured by the dollar value of our products supporting our customers'
North American light truck and SUV programs) was $1,645 in 2015, as compared to $1,667 in 2014 and $1,550 in
2013. The decrease in CPV in 2015 as compared to 2014, relates primarily to the reduction in metal market pass
throughs to our customers. The increase in CPV in 2014 as compared to 2013, principally reflects additional
content on GM and FCA's next generation full-size pickup truck programs.
Our 4WD/AWD penetration rate increased to 70.9% in 2015 as compared to 68.5% in 2014 and 66.1% in 2013.
We define 4WD/AWD penetration as the total number of front axles we produce divided by the total number of rear
axles we produce for the vehicle programs we support.
25
GROSS PROFIT Gross profit increased to $635.4 million in 2015 as compared to $522.8 million in 2014 and
$478.7 million in 2013. Gross margin was 16.3% in 2015 as compared to 14.1% in 2014 and 14.9% in 2013. The
increase in gross profit in 2015 as compared to 2014, primarily reflects the benefit of higher contribution margin on
increased sales, partially offset by higher warranty and incentive compensation accruals.
The increase in gross profit in 2014 as compared to 2013 is primarily due to the profit contribution from higher
sales, including our largest North American light truck programs and other global launches. Gross profit in 2014
also included the adverse impact of a $31.2 million settlement charge related to a voluntary lump-sum pension
payout which was offered to eligible terminated vested participants in our U.S. hourly pension plans.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (SG&A) SG&A (including R&D) was $277.3 million
in 2015 as compared to $255.2 million in 2014 and $238.4 million in 2013. SG&A as a percentage of net sales was
7.1% in 2015, 6.9% in 2014 and 7.4% in 2013. R&D spending in product, process and systems, net of customer
engineering, design and development (ED&D) recoveries, was $113.9 million in 2015 as compared to $103.9 million
in 2014 and $103.4 million in 2013. The change in SG&A in 2015 as compared to 2014 is primarily due to higher
R&D expense, increases in our salaried workforce and higher incentive compensation accruals.
The change in SG&A in 2014 as compared to 2013 was primarily due to an increase in costs associated with
upgrades to our enterprise resource planning systems. SG&A in 2014 also included the adverse impact of a $4.3
million settlement charge related to a voluntary lump-sum pension payout which was offered to eligible terminated
vested participants in our U.S. salaried pension plan.
OPERATING INCOME Operating income increased to $358.1 million in 2015 as compared to $267.6 million in
2014 and $240.3 million in 2013. Operating margin was 9.2% in 2015 as compared to 7.2% in 2014 and 7.5% in
2013. The changes in operating income and operating margin in 2015, 2014 and 2013 were due to the factors
discussed in Sales, Gross Profit and SG&A.
INTEREST EXPENSE Interest expense was $99.2 million in 2015, $99.9 million in 2014 and $115.9 million in
2013. The decrease in interest expense in 2014 as compared to 2013 reflected the decrease in our weighted-
average interest rate and lower average outstanding borrowings during 2014 as compared to 2013.
The weighted-average interest rate of our total debt outstanding was 6.3%, 6.3% and 7.3% during 2015, 2014
and 2013, respectively.
INVESTMENT INCOME Investment income was $2.6 million in 2015, $2.1 million in 2014, and $0.6 million in
2013. Investment income includes interest earned on cash and cash equivalents during the period.
OTHER INCOME (EXPENSE) Following are the components of Other Income (Expense) for 2015, 2014 and
2013:
Debt refinancing and redemption costs In 2015, we expensed $0.8 million of unamortized debt issuance
costs related to a voluntary election to prepay all of our outstanding term facility. In 2013, we expensed $36.8
million of unamortized debt issuance costs, discount and prepayment premiums related to the termination of our
class C loan facility, the purchase and voluntary redemption of $300.0 million of our 7.875% senior unsecured notes
(7.875% Notes) and the voluntary redemption of the remaining $340.0 million of our 9.25% senior secured notes
(9.25% Notes).
Other, net Other, net, which includes the net effect of foreign exchange gains and losses and our proportionate
share of earnings from equity in unconsolidated subsidiaries, was income of $12.0 million and $6.9 million in 2015
and 2014, respectively, and expense of $1.9 million in 2013. The increase in Other, net in 2015, as compared to
2014, is primarily due to the remeasurement of U.S. dollar denominated assets in Brazil as the Reais weakened, as
well as higher earnings from equity in our unconsolidated joint venture. The increase in Other, net in 2014, as
compared to 2013, is primarily due to the remeasurement of our Peso denominated assets and liabilities, as the
Peso continued to weaken against the U.S. dollar.
26
INCOME TAX EXPENSE (BENEFIT) Income tax expense (benefit) was expense of $37.1 million and $33.7
million in 2015 and 2014, respectively, as compared to a benefit of $8.2 million in 2013. Our effective income tax
rate was 13.6% in 2015 as compared to 19.1% in 2014 and negative 9.5% in 2013.
Our income tax expense and effective tax rate for 2015, 2014 and 2013 primarily reflect favorable foreign tax
rates, along with our inability to realize a tax benefit for current foreign losses. In the fourth quarter of 2015, we
recorded an $11.5 million reduction in tax expense related to uncertain tax positions attributable to transfer pricing
as a result of new information from our discussions with Mexican tax authorities.
In 2014, we recorded tax expense of $23.1 million for changes to prior year uncertain tax positions related to
transfer pricing and expense of $3.4 million for a change in estimate for U.S. tax on unremitted foreign earnings.
We also recorded a net tax benefit of $20.1 million in 2014 related to our ability to utilize tax credits in future periods
resulting in the recognition of a deferred tax asset.
In 2013, Mexican tax reform was enacted that, among other things, increased the tax rate related to
Maquiladora Companies from 17.5% to 30%. We recorded a tax benefit of $8.5 million as a result of revaluing our
deferred tax assets at the newly enacted rate. In 2013, we recorded tax expense of $4.8 million relating to changes
in estimates in the U.S. and certain foreign jurisdictions. During 2013, we also settled various income tax audits
resulting in a reduction of our liability for unrecognized income tax benefits of $8.4 million and a cash payment of
$4.7 million.
As of December 31, 2015 and 2014, we have a valuation allowance of $167.3 million and $156.9 million,
respectively, related to net deferred tax assets in several foreign jurisdictions and U.S. state and local jurisdictions.
NET INCOME AND EARNINGS PER SHARE (EPS) Net income was $235.6 million in 2015 as compared to
$143.0 million in 2014 and $94.5 million in 2013. Diluted earnings per share was $3.02 in 2015 as compared to
$1.85 per share in 2014 and $1.23 per share in 2013. Net Income and EPS were primarily impacted by the factors
discussed in Gross Profit, SG&A, Debt Refinancing and Redemption Costs and Income Tax Expense (Benefit).
LIQUIDITY AND CAPITAL RESOURCES
Our primary liquidity needs are to fund capital expenditures, debt service obligations and our working capital
requirements. We believe that operating cash flow, available cash and cash equivalent balances and available
committed borrowing capacity under our revolving credit facility will be sufficient to meet these needs.
OPERATING ACTIVITIES Net cash provided by operating activities was $377.6 million in 2015 as compared
to $318.4 million in 2014 and $223.0 million in 2013.
Sales and production volumes Cash provided by operating activities was favorably impacted by higher
profits related to an increase in sales and production activity in 2015, 2014 and 2013.
Pension and OPEB In December 2015, we voluntarily contributed $18.3 million to our U.K. pension trust,
which satisfies our estimated U.K. regulatory funding requirements for 2016 through 2018. Due to the availability of
our prefunding pension balances related to our U.S. pension plans, we were not required to make any cash
payments in 2015, 2014 or 2013 to satisfy our regulatory funding requirements, nor do we expect to make any cash
payments in 2016. Our annual pension charge, including settlements was income of $4.3 million in 2015, and
expense of $32.0 million and $5.7 million in 2014 and 2013, respectively.
Our cash outlay for OPEB, net of GM cost sharing, was $14.2 million in 2015, $11.8 million in 2014, and $11.2
million in 2013. This compares to our annual postretirement cost of $13.5 million in 2015, $13.4 million in 2014, and
$12.7 million in 2013. We expect our cash outlay for other postretirement benefit obligations in 2016, net of GM
cost sharing, to be approximately $16 million.
In 2014, we offered a voluntary one-time lump sum payment option to certain eligible terminated vested
participants in our U.S. pension plans that settled our pension obligations to them. The lump sum settlements,
which were paid from plan assets, reduced our liabilities and administrative costs going forward.
27
In total, 3,335 participants accepted the offer and we made a one-time lump sum payment from our pension
trust of $104.2 million in 2014. As a result of this settlement, we remeasured the assets and liabilities of our U.S.
pension plans, which reduced our projected benefit obligation by $131.1 million and resulted in a non-cash charge
of $35.5 million in 2014 related to the accelerated recognition of certain deferred losses.
Deferred revenue In 2014, we reached an agreement with GM to increase installed capacity and adjust
product mix for our largest vehicle program. As a result of this agreement, we received $32.8 million in 2014 and
recorded the payments as deferred revenue. We recognized $6.9 million and $5.4 million of revenue related to this
agreement in 2015 and 2014, respectively. As of December 31, 2015, we have $6.9 million of deferred revenue
that is classified as a current liability and $13.6 million of deferred revenue that is recorded as a noncurrent liability
on our Consolidated Balance Sheet.
Also in 2014, we reached an agreement with GM to recover certain costs related to the delay of another major
product program. We received $9.3 million in 2014 related to this agreement which was recorded as deferred
revenue. We began recognizing this deferred revenue as revenue in the third quarter of 2014 when this program
launched in certain markets. We recognized $1.1 million and $0.5 million of revenue related to this agreement in
2015 and 2014, respectively. As of December 31, 2015, we have recorded deferred revenue of $7.7 million, $1.1
million of which is classified as a current liability and $6.6 million which is recorded as a noncurrent liability on our
Consolidated Balance Sheet.
Inventories At year-end 2015, inventories were $230.5 million as compared to $248.8 million at year-end
2014 and $261.8 million at year-end 2013. The decrease in inventory in 2015, as compared to 2014, primarily
reflects a reduction in steel costs, foreign exchange and inventory reduction initiatives. The decrease in inventory in
2014, as compared to 2013, primarily reflects a reduction in launch related activities at year-end, as well as
inventory reduction initiatives.
Accounts receivable Accounts receivable at year-end 2015 were $539.1 million as compared to $532.7
million at year-end 2014 and $458.5 million at year-end 2013. The increase in our year-end 2014 accounts
receivable balance, as compared to 2013, was primarily due to increased sales in November and December 2014
as compared to November and December 2013, as well as the timing of weekly payments from GM.
Interest paid Interest paid in 2015 was $93.8 million as compared to $91.1 million in 2014 and $123.2 million
in 2013. The decrease in interest paid in 2014 as compared to 2013 primarily related to a reduction in interest
expense driven by lower average outstanding borrowings and lower average interest rates in 2014 as compared to
2013.
Accounts payable At year-end 2015, accounts payable were $412.7 million as compared to $444.3 million at
year-end 2014 and $437.4 million at year-end 2013. The decrease in our year-end 2015 accounts payable
balance, as compared to 2014, was primarily due to a reduction in inventory levels and the timing of payments
made to suppliers.
Income taxes In January 2016, we completed negotiations with the Mexican tax authorities to settle 2007
through 2009 transfer pricing audits. We made a payment of $22.9 million on January 29, 2016 that fully satisfies
our obligations for transfer pricing issues for tax years 2007 through 2013. Including this settlement, we expect our
total transfer pricing related payments in 2016 to the Mexican tax authorities to be in the range of $30 to $40 million.
INVESTING ACTIVITIES Capital expenditures were $193.5 million in 2015, $206.5 million in 2014 and $251.9
million in 2013. Our capital spending primarily supported our significant global program launches within our new
and incremental business backlog, as well as the upgrades to our ERP systems.
We expect our capital spending in 2016 to be approximately 6.0% of sales, which includes support for our
global program launches in 2016 and 2017 within our new and incremental business backlog.
We received proceeds of $5.1 million and $2.1 million in 2015 and 2014, respectively, related to a European
Union government incentive for capital expenditures related to new technology.
28
In 2014, we sold our Detroit Manufacturing Complex and received net proceeds of $9.2 million related to this
transaction. For the year ended December 31, 2014, we classified $7.2 million of these proceeds, which represents
the amount related to the land and building for which we will have no future continuing involvement, in the Investing
Activities section of our Consolidated Statement of Cash Flows.
In 2013 we entered into various sale-leaseback transactions for equipment purchased. We received proceeds
of $24.1 million related to these transactions.
FINANCING ACTIVITIES Net cash used in financing activities was $143.6 million and $21.4 million in 2015
and 2014, respectively, as compared to cash provided by financing activities of $88.8 million in 2013. Total debt
outstanding, net of debt issuance costs, was $1,379.0 million at year-end 2015, $1,517.6 million at year-end 2014
and $1,537.0 million at year-end 2013. The decrease in total debt outstanding at year-end 2015, as compared to
year-end 2014, was primarily due to our voluntary election to prepay our term facility in full in 2015. The decrease
in total debt outstanding at year-end 2014, as compared to year-end 2013, was primarily due to repayments on
certain current maturities of long-term debt.
REVOLVING CREDIT FACILITY AND TERM FACILITY As of December 31, 2015, the revolving credit facility
provided up to $523.5 million of revolving bank financing commitments through September 13, 2018. At
December 31, 2015, $513.1 million was available under the revolving credit facility, which reflected a reduction of
$10.4 million for standby letters of credit issued against the facility.
The credit agreement provides for a senior secured term loan A facility in an aggregate principal amount of
$150.0 million (term facility). During 2015, we made principal payments of $142.5 million on our term facility, of
which $135.9 million related to a voluntary election to prepay all outstanding principal, including $2.8 million that
was due in the fourth quarter of 2015. Upon prepayment, we expensed $0.8 million in 2015 related to the write-off
of the remaining unamortized debt issuance costs related to our term facility that we had been amortizing over the
expected life of the borrowing.
We paid remaining debt issuance costs of $0.1 million in 2014 associated with the execution of amendments to
our revolving credit facility and term facility. In 2013 we paid debt issuance costs of $6.9 million associated with the
amendments and restatements of our revolving credit facility.
Borrowings under the revolving credit facility and term facility bear interest at rates based on adjusted LIBOR or
an alternate base rate, plus an applicable margin. The applicable margin for LIBOR-based loans will be between
1.5% and 3.0%.
The revolving credit facility is secured on a first priority basis by all or substantially all of the assets of AAM and
each guarantor under the collateral agreement dated as of November 7, 2008, as amended and restated as of
September 13, 2013. In the event AAM achieves investment grade corporate credit ratings from Standard & Poor's
and Moody's, AAM may elect to release all of the collateral from the liens granted pursuant to the collateral
agreement, subject to notice requirements and other conditions.
The revolving credit facility provides back-up liquidity for our foreign credit facilities. We intend to use the
availability of long-term financing under the revolving credit facility 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 Consolidated Balance Sheet.
In 2013, we terminated our class C loan facility of $72.8 million, which would have matured on June 30, 2013.
Upon termination, we expensed $0.5 million of unamortized debt issuance costs related to the class C facility.
9.25% NOTES In 2009, we issued $425.0 million of 9.25% senior secured notes due 2017 (9.25% Notes). The
notes were issued at a discount of $5.5 million. Pursuant to the terms of our 9.25% Notes, in 2013, we voluntarily
redeemed the remaining outstanding 9.25% Notes using the proceeds from the term facility and the issuance of the
5.125% Notes. This resulted in a principal payment of $340.0 million and $18.9 million for redemption premiums,
as well as payments of accrued interest. We expensed $6.7 million in 2013 related to the write-off of the remaining
unamortized debt discount and issuance costs related to our 9.25% Notes.
29
7.875% NOTES In 2007, we issued $300.0 million of 7.875% senior unsecured notes due 2017 (7.875%
Notes). In 2013, we voluntarily purchased and redeemed $300.0 million of our 7.875% Notes, and paid accrued
interest. Upon purchase and redemption, we expensed $8.5 million related to redemption premiums, $0.1 million of
professional fees and unamortized debt issuance costs of $2.1 million related to this debt.
7.75% NOTES In 2011, we issued $200.0 million of 7.75% senior unsecured notes due 2019 (7.75% Notes).
6.625% NOTES In 2012, we issued $550.0 million of 6.625% senior unsecured notes due 2022 (6.625%
Notes). Net proceeds from the 6.625% Notes were used to fund the purchase and redemption of $250.0 million of
the outstanding 5.25% senior unsecured notes, including the payment of interest, the redemption of $42.5 million
aggregate principal amount of our 9.25% Notes, certain pension obligations and for other general corporate
purposes.
6.25% NOTES In 2013, we issued $400.0 million of 6.25% senior unsecured notes due 2021 (6.25% Notes).
Net proceeds from the 6.25% Notes were used to fund the purchase and redemption of our 7.875% Notes and for
other general corporate purposes. We paid debt issuance costs of $6.6 million in 2013 related to the 6.25% Notes.
5.125% NOTES In 2013, we issued $200.0 million of 5.125% senior unsecured notes due 2019 (5.125%
Notes). Net proceeds from the 5.125% Notes were used to redeem the remaining $190.0 million outstanding under
our 9.25% Notes. We paid debt issuance costs related to the 5.125% Notes of $0.2 million and $3.1 million in 2014
and 2013, respectively.
Foreign credit facilities We utilize local currency credit facilities to finance the operations of certain foreign
subsidiaries. At December 31, 2015, $38.0 million was outstanding under these facilities and an additional $47.9
million was available.
Credit ratings To access public debt capital markets, the Company relies on credit rating agencies to assign
short-term and long-term credit ratings to our securities as an indicator of credit quality for fixed income investors. A
credit rating agency may change or withdraw its ratings based on its assessment of our current and future ability to
meet interest and principal repayment obligations. Credit ratings affect our cost of borrowing under our revolving
credit facility and may affect our access to debt capital markets and other costs to fund our business. The credit
ratings and outlook currently assigned to our securities by the rating agencies are as follows:
Standard & Poor's ........................................
Moody's Investors Services .........................
Fitch Ratings ................................................
Corporate Family
Rating
BB-
B1
BB-
Senior Unsecured
Notes Rating
BB-
B2
BB-
Outlook
Stable
Positive
Positive
Dividend program We have not declared or paid any cash dividends on our common stock in 2015, 2014 or
2013.
Stock repurchase We repurchased shares of AAM common stock for $3.1 million, $0.3 million and $0.4
million, in 2015, 2014 and 2013, respectively, to satisfy employee tax withholding obligations due upon the vesting
of restricted stock units and performance shares.
Exercise of employee stock options We received $0.8 million in 2015, $1.2 million in 2014, and $1.1 million
in 2013 related to the exercise of employee stock options.
Off-balance sheet arrangements Our off-balance sheet financing relates principally to operating leases for
machinery and equipment, commercial office and production facilities, vehicles and other assets. We lease certain
machinery and equipment under operating leases with various expiration dates. In 2013 we entered into various
sale-leaseback transactions for $24.1 million related to machinery and equipment. Pursuant to these operating
leases, we may have the option to purchase the underlying equipment on specified dates. Remaining lease
repurchase options are $17.9 million through 2017.
30
Contractual obligations The following table summarizes payments due on our contractual obligations as of
December 31, 2015:
Current and long-term debt ........................ $
Interest obligations .....................................
Capital lease obligations ............................
Operating leases (1) ........................................
Purchase obligations (2) ..............................
Other long-term liabilities (3) ..........................
Total ........................................................... $
Payments due by period
Total
<1yr
1,388.0
$
496.3
5.6
63.2
104.1
625.9
14.6
92.8
0.8
20.4
93.7
78.4
1-3 yrs
(in millions)
21.0
$
183.0
1.8
26.1
10.4
136.1
3-5 yrs
>5 yrs
$
402.4
$
140.9
1.4
8.8
—
950.0
79.6
1.6
7.9
—
112.5
298.9
2,683.1
$
300.7
$
378.4
$
666.0
$
1,338.0
(1) Operating leases include all lease payments through the end of the contractual lease terms, which includes elections for
repurchase options and excludes any non-exercised purchase options. These commitments include machinery and
equipment, commercial office and production facilities, vehicles and other assets.
(2) Purchase obligations represent our obligated purchase commitments for capital expenditures and related project
expense.
(3) Other long-term liabilities represent our estimated pension and other postretirement benefit obligations, net of GM cost
sharing, that were actuarially determined through 2025, principal payments on a loan for a building we sold during 2014,
as well as our unrecognized income tax benefits.
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. Our business is also moderately
seasonal as our major OEM customers historically have an extended shutdown of operations (typically 1-2 weeks)
in conjunction with their model year changeover and an approximate one-week shutdown in December. Accordingly,
our quarterly results may reflect these trends.
LEGAL PROCEEDINGS
We are involved in various legal proceedings incidental to our business. Although the outcome of these matters
cannot be predicted with certainty, we do not believe that any of these matters, individually or in the aggregate, will
have a material 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 closely monitor our environmental conditions to ensure that we are in compliance
with applicable laws, regulations and ordinances. We have made, and will continue to make, capital and other
expenditures, including recurring administrative costs, to comply with environmental requirements. Such
expenditures were not significant in 2015, 2014 and 2013.
31
EFFECT OF NEW ACCOUNTING STANDARDS
On November 20, 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards
Update (ASU) 2015-17 - Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which
simplifies the accounting for deferred tax assets (DTAs) and deferred tax liabilities (DTLs). Under the new
guidance, entities would be required to classify all DTAs and DTLs as noncurrent in the balance sheet, as opposed
to the current U.S. GAAP standard, which requires entities to split their DTAs and DTLs between current and
noncurrent in the balance sheet based on the classification of the related asset or liability. The new standard will
still require entities to net DTAs and DTLs within each tax jurisdiction and prohibit netting of DTAs and DTLs
between different tax jurisdictions. The guidance becomes effective for AAM at the beginning of our 2017 fiscal
year, however as permitted, AAM elected to early adopt this standard using the prospective method in the fourth
quarter of 2015. Prior periods were not retrospectively adjusted. See Note 1 - Organization and Summary of
Significant Accounting Policies for more detail on the implementation of this new accounting guidance.
On May 1, 2015 the FASB issued ASU 2015-07 - Fair Value Measurement (Topic 820): Disclosures for
Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent), which changes the
disclosure requirements for investments in certain entities that calculate net asset value (NAV) per share. Under
current accounting standards entities are permitted to estimate the fair value of certain investments using the
investment's NAV as a practical expedient. The current disclosure guidance also permits entities to disclose the
investment at NAV in the fair value hierarchy table as either Level 2 or Level 3, based upon certain criteria. The
measurement basis utilizing NAV is different than the measurement criteria of all other investments which utilize
inputs to calculate fair value. Due to this inconsistency, the FASB issued this ASU which requires entities to remove
investments measured at NAV from the fair value hierarchy table. The guidance becomes effective for AAM at the
beginning of our 2016 fiscal year. Other than the change in presentation, the adoption of this new guidance will not
have an impact on our consolidated financial statements.
On April 7, 2015, the FASB issued ASU 2015-03 - Interest - Imputation of Interest (Subtopic 835-30):
Simplifying the Presentation of Debt Issuance Costs, which changes the presentation of debt issuance costs in
financial statements. Under the ASU, entities would present such costs in the balance sheet as a direct deduction
of the related debt liability rather than as an asset. Amortization of the costs will continue to be reported as interest
expense. This ASU becomes effective for AAM at the beginning of our 2016 fiscal year; however, as permitted,
AAM elected to early adopt this standard as of December 31, 2015. Based on the amounts currently outstanding
as of December 31, 2015, the effect of implementing this ASU on our consolidated financial statements was a
reduction to both our other assets and deferred charges and long-term debt of $14.6 million at December 31, 2015
and $18.8 million at December 31, 2014.
In 2014, the FASB issued ASU 2014-09 - Revenue from Contracts with Customers (Topic 606), which outlines a
single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and
supersedes most current revenue recognition guidance, including industry-specific guidance. The guidance is
based on the principle that an entity should recognize revenue to depict the transfer of goods or services to
customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for
those goods or services. The guidance also requires additional disclosure about the nature, amount, timing and
uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes
in judgments and assets recognized from costs incurred to fulfill a contract. Entities have the option of using either
a full retrospective or a modified retrospective approach for the adoption of the new standard. On August 12, 2015,
the FASB issued ASU 2015-14 - Revenue from Contracts with Customers (Topic 606): Deferral of the Effective
Date, to formally defer the initial standard's effective date by one-year, making this guidance effective for AAM at the
beginning of our 2018 fiscal year. We are currently assessing the impact that this standard will have on our
consolidated financial statements.
32
CRITICAL ACCOUNTING ESTIMATES
In order to prepare consolidated financial statements in conformity with accounting principles generally
accepted in the United States of America (GAAP), we are required to make estimates and assumptions that affect
the reported amounts and disclosures in our consolidated financial statements. These estimates are subject to an
inherent degree of uncertainty and actual results could differ from our estimates.
Other items in our consolidated financial statements require estimation. In our judgment, they are not as critical
as those disclosed below. We have discussed and reviewed our critical accounting estimates disclosure with the
Audit Committee of our Board of Directors.
PENSION AND OTHER POSTRETIREMENT BENEFITS In calculating our assets, liabilities and expenses
related to pension and OPEB, key assumptions include the discount rate, expected long-term rates of return on
plan assets, mortality projections and rates of increase in health care costs.
The discount rates used in the valuation of our U.S. pension and OPEB obligations were based on an actuarial
review of a hypothetical portfolio of long-term, high quality corporate bonds matched against the expected payment
stream for each of our plans. In 2015, the weighted-average discount rates determined on that basis were 4.40%
for the valuation of our pension benefit obligations and 4.45% for the valuation of our OPEB obligations. The
discount rate used in the valuation of our United Kingdom (U.K.) pension obligation was based on a review of long-
term bonds, including published indices in the applicable market. In 2015, the discount rate determined on that
basis was 3.90%. The expected long-term rates of return on our plan assets were 7.50% for our U.S. plans and
5.00% for our U.K. plan in 2015. We developed these rates of return assumptions based on future capital market
expectations for the asset classes represented within our portfolio and a review of long-term historical returns. The
asset allocation for our plans was developed in consideration of the demographics of the plan participants and
expected payment stream of the liability. Our investment policy allocates approximately 30-65% of the U.S. plans'
assets to equity securities, depending on the plan, with the remainder invested in fixed income securities, hedge
fund investments and cash. The rates of increase in health care costs are based on current market conditions,
inflationary expectations and historical information.
All of our assumptions were developed in consultation with our actuarial service providers. While we believe
that we have selected reasonable assumptions for the valuation of our pension and OPEB obligations at year-end
2015, actual trends could result in materially different valuations.
The effect on our pension plans of a 0.5% decrease in both the discount rate and expected return on assets is
shown below as of December 31, 2015, our valuation date.
Decline in funded status .................................................................................... $
Increase in 2015 expense ................................................................................. $
Discount
Rate
Expected
Return on
Assets
(in millions)
47.1
0.4 $
N/A
3.0
No changes in benefit levels or in the amortization of gains or losses have been assumed.
For 2016, we assumed a weighted-average annual increase in the per-capita cost of covered health care
benefits of 6.75% for OPEB. The rate is assumed to decrease gradually to 5.0% by 2023 and remain at that level
thereafter. A 0.5% decrease in the discount rate for our OPEB would have decreased total expense in 2015 and
increased the postretirement obligation, net of GM cost sharing, at December 31, 2015 by $0.9 million and $21.8
million, respectively. A 1.0% increase in the assumed health care trend rate would have increased total service and
interest cost in 2015 and the postretirement obligation, net of GM cost sharing, at December 31, 2015 by $1.7
million and $37.5 million, respectively.
AAM and GM share in the cost of OPEB for eligible retirees proportionally based on the length of service an
employee had with AAM and GM. We estimate the future cost sharing payments and present it as an asset on our
33
Consolidated Balance Sheet. As of December 31, 2015, we estimated $256.3 million in future GM cost sharing. If,
in the future, GM were unable to fulfill this financial obligation, our OPEB obligations could be different than our
current estimates.
PRODUCT WARRANTY We record a liability and related charge to cost of goods sold for estimated warranty
obligations at the dates our products are sold or when specific warranty issues are identified. Product warranties
not expected to be paid within one year are recorded as a noncurrent liability on our Consolidated Balance Sheet.
Our estimated warranty obligations for products sold are based on significant management estimates, with input
from our warranty, sales, engineering, quality and legal departments. For products and customers with actual
warranty payment experience, we estimate warranty costs principally based on past claims history. For certain
products and customers, actual warranty payment experience does not exist or is not mature. In these cases, we
estimate our costs based on the contractual arrangements with our customers, existing customers' warranty
program terms and internal and external warranty data, which includes a determination of our responsibility for
potential warranty issues or claims and estimates of repair costs. We actively study trends of our warranty claims
and take action to improve product quality and minimize warranty claims. We continuously evaluate these
estimates and our customers' administration of their warranty programs. We closely monitor actual warranty claim
data and adjust the liability, as necessary, on a quarterly basis.
In addition to our ordinary warranty provisions with our customers, we are also liable for product recalls and
field actions, which are recorded at the time our obligation is probable and can be reasonably estimated. For
warranty obligations of this nature, we bear the full responsibility of these costs.
Our warranty accrual was $36.6 million as of December 31, 2015 and $12.4 million as of December 31, 2014.
During 2015 and 2014, we made adjustments to our warranty accrual to reflect revised estimates regarding our
projected future warranty obligations. Actual experience could differ from the amounts estimated requiring
adjustments to these liabilities in future periods. It is possible that changes in our assumptions or future warranty
issues could materially affect our financial position and results of operations.
VALUATION OF DEFERRED TAX ASSETS AND OTHER TAX LIABILITIES Because we operate in many
different geographic locations, including several foreign, state and local tax jurisdictions, the evaluation of our ability
to use all recognized deferred tax assets is complex.
We are required to estimate whether recoverability of our deferred tax assets is "more likely than not," based on
forecasts of taxable income in the related tax jurisdictions. In these estimates, we use historical results, projected
future operating results based upon approved business plans, eligible carryforward periods, tax planning
opportunities and other relevant considerations. This includes the consideration of tax law changes, prior
profitability performance and the uncertainty of future projected profitability.
As of December 31, 2015, we have a valuation allowance of approximately $167.3 million related to net
deferred tax assets in several foreign jurisdictions and U.S. state and local jurisdictions. As of December 31, 2014
and 2013, our valuation allowance was $156.9 million and $163.7 million, respectively.
If, in the future, we generate taxable income on a sustained basis in foreign and U.S. state jurisdictions for
which we have recorded valuation allowances, our current estimate of the recoverability of our deferred tax assets
could change and result in the future reversal of some or all of the valuation allowance. While we believe we have
made appropriate valuations of our deferred tax assets, unforeseen changes in tax legislation, regulatory activities,
audit results, operating results, financing strategies, organization structure and other related matters may result in
material changes in our deferred tax asset valuation allowances or our tax liabilities.
We record uncertain tax positions on the basis of a two-step process whereby: (1) we determine whether it is
"more likely than not" that the tax positions will be sustained based on the technical merits of the position: and (2)
for those positions that meet the "more likely than not" recognition threshold, we recognize the largest amount of tax
benefit that is greater than 50% likely to be realized upon ultimate settlement with the related tax authority. We
record interest and penalties on uncertain tax positions in income tax expense (benefit).
As of December 31, 2015, 2014 and 2013, we recorded a liability for unrecognized income tax benefits and
related interest and penalties of $48.5 million, $59.5 million and $25.8 million, respectively. In January 2016, we
completed negotiations with the Mexican tax authorities to settle 2007 through 2009 transfer pricing audits. We
made a payment of $22.9 million on January 29, 2016 that fully satisfies our obligations for transfer pricing issues
34
for tax years 2007 through 2013. Based on the status of the Internal Revenue Service (IRS) audits and audits
outside the U.S., 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. Although it is difficult to estimate with
certainty the amount of an audit settlement, we do not expect the settlement amounts will be materially different
from what we have recorded. We will continue to monitor the progress and conclusions of all ongoing audits and
will adjust our estimated liability as necessary.
GOODWILL We record goodwill when the purchase price of acquired businesses exceeds the value of their
identifiable net tangible and intangible assets acquired. We periodically evaluate goodwill for impairment in
accordance with the accounting guidance for goodwill and other indefinite-lived intangibles that are not amortized.
We review our goodwill for impairment annually during the fourth quarter. In addition, we review goodwill for
impairment whenever adverse events or changes in circumstances indicate a possible impairment. This review
utilizes a two-step impairment test which is performed at a consolidated level, as AAM has a single reporting unit.
The first step involves a comparison of the fair value of the reporting unit with its carrying amount, including
goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is not
considered impaired and thus the second step of the impairment test is unnecessary. If the carrying amount of the
reporting unit exceeds its fair value, the second step of the process involves a measurement and comparison of the
fair value of goodwill with its carrying amount. If the carrying amount of the reporting unit's goodwill exceeds the fair
value of that goodwill, an impairment loss is recognized in an amount equal to the excess.
The determination of our reporting unit and impairment indicators require us to make significant judgments. In
order to approximate the fair value of our reporting unit for purposes of testing recoverability, we use the total
market capitalization of AAM, a market approach, which is then compared to the total carrying amount of AAM.
Under the market approach, the fair value is based on observed market prices. We performed our annual
impairment test in the fourth quarter and determined there was no impairment to goodwill in 2015.
IMPAIRMENT OF LONG-LIVED ASSETS Long-lived assets, excluding goodwill and other indefinite-lived
intangible assets, to be held and used are reviewed for impairment whenever adverse events or changes in
circumstances indicate a possible impairment. Recoverability of each “held for use” asset group affected by
impairment indicators is determined by comparing the forecasted undiscounted cash flows of the operations to
which the assets relate to their carrying amount. If the carrying amount of an asset group exceeds the
undiscounted cash flows and is therefore nonrecoverable, the assets in this group are written down to their
estimated fair value. We estimate fair value based on market prices, when available, or on a discounted cash flow
analysis. Long-lived assets held for sale are recorded at the lower of their carrying amount or fair value less cost to
sell. Significant judgments and estimates used by management when evaluating long-lived assets for impairment
include:
• An assessment as to whether an adverse event or circumstance has triggered the need for an impairment
review;
• Determination of asset groups, the primary asset within each group, and the primary asset's average
estimated useful life;
• Undiscounted future cash flows generated by the assets; and
• Determination of fair value when an impairment is deemed to exist, which may require assumptions related to
future general economic conditions, future expected production volumes, product pricing and cost estimates,
working capital and capital investment requirements, discount rates and estimated liquidation values.
ESTIMATED USEFUL LIVES FOR DEPRECIATION At December 31, 2015, approximately 81% of our
capitalized investment in property, plant and equipment was related to productive machinery and equipment used in
support of our manufacturing operations. The selection of appropriate useful life estimates for such machinery and
equipment is a critical element of our ability to properly match the cost of such assets with the operating profits and
cash flow generated by their use. We currently depreciate productive machinery and equipment on the straight-line
method using composite useful life estimates up to 12 years.
While we believe that the useful life estimates currently being used for depreciation purposes reasonably
approximate the period of time we will use such assets in our operations, unforeseen changes in product design
and technology standards or cost, quality and delivery requirements may result in actual useful lives that differ
materially from the current estimates.
35
Forward-Looking Statements
In this MD&A and elsewhere in this Annual 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:
• reduced purchases of our products by General Motors Company (GM), FCA US LLC (FCA), or other customers;
• reduced demand for our customers' products (particularly light trucks and sport utility vehicles (SUVs) produced by
GM and FCA);
• 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 respond to changes in technology, increased competition or pricing pressures;
• our ability to attract new customers and programs for new products;
• our ability to achieve the level of cost reductions required to sustain global cost competitiveness;
• supply shortages or price increases in raw materials, utilities or other operating supplies for us or our customers as
a result of natural disasters or otherwise;
• 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 realize the expected revenues from our new and incremental business backlog;
• our ability to successfully implement upgrades to our enterprise resource planning systems;
• negative or unexpected tax consequences;
• risks inherent in our international operations (including adverse changes in political stability, taxes and other law
changes, potential disruptions of production and supply, and currency rate fluctuations);
• our ability to consummate and integrate acquisitions and joint ventures;
• 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;
• price volatility in, or reduced availability of, fuel;
• global economic conditions;
• our ability to protect our intellectual property and successfully defend against assertions made against us;
• our ability to attract and retain key associates;
• 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;
• changes in liabilities arising from pension and other postretirement benefit obligations;
• risks of noncompliance with environmental laws and regulations or risks of environmental issues that could result in
unforeseen costs at our facilities;
• adverse changes in laws, government regulations or market conditions affecting our products or our customers'
products (such as the Corporate Average Fuel Economy (CAFE) regulations);
• our ability or our customers' and suppliers' ability to comply with the Dodd-Frank Act and other regulatory
requirements and the potential costs of such compliance; and
• other unanticipated events and conditions that may hinder our ability to compete.
It is not possible to foresee or identify all such factors and we make no commitment to update any forward-looking
statement or to disclose any facts, events or circumstances after the date hereof that may affect the accuracy of any
forward-looking statement.
36
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
MARKET RISK
Our business and financial results are affected by fluctuations in world 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 EXCHANGE RISK From time to time, we use foreign currency forward contracts to reduce the
effects of fluctuations in exchange rates, primarily relating to the Mexican Peso, Euro, Pound Sterling, Thai Baht,
Swedish Krona and Polish Zloty. At December 31, 2015 and December 31, 2014, we had forward contracts with a
notional amount of $190.0 million and $99.3 million outstanding, respectively. The potential decrease in fair value
of foreign exchange contracts, assuming a 10% adverse change in the foreign currency exchange rates, would be
approximately $17.3 million and $9.0 million at December 31, 2015 and December 31, 2014, respectively.
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 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. As of
December 31, 2015, there are no interest rate swaps in place. The pre-tax earnings and cash flow impact of a one-
percentage-point increase in interest rates (approximately 15% of our weighted-average interest rate at
December 31, 2015) on our long-term debt outstanding at December 31, 2015 and December 31, 2014 would be
approximately $0.3 million and $1.8 million, respectively, on an annualized basis.
37
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
Item 8.
Financial Statements and Supplementary Data
Consolidated Statements of Income
Year Ended December 31,
2015
2014
(in millions, except per share data)
2013
Net sales ....................................................................................... $
3,903.1 $
3,696.0 $
3,207.3
Cost of goods sold .........................................................................
3,267.7
3,173.2
2,728.6
Gross profit ....................................................................................
Selling, general and administrative expenses ...............................
Operating income ..........................................................................
635.4
277.3
358.1
522.8
255.2
267.6
478.7
238.4
240.3
Interest expense ............................................................................
(99.2)
(99.9)
(115.9)
Investment income ........................................................................
2.6
Other income (expense)
Debt refinancing and redemption costs .....................................
Other, net ..................................................................................
(0.8)
12.0
Income before income taxes .........................................................
272.7
Income tax expense (benefit) ........................................................
37.1
2.1
—
6.9
176.7
33.7
Net income .................................................................................... $
235.6 $
143.0 $
Basic earnings per share ............................................................... $
3.03 $
1.85 $
Diluted earnings per share ............................................................ $
3.02 $
1.85 $
0.6
(36.8)
(1.9)
86.3
(8.2)
94.5
1.23
1.23
See accompanying notes to consolidated financial statements
38
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
Consolidated Statements of Comprehensive Income
Year Ended December 31,
2015
2014
2013
(in millions)
Net income ................................................................................................. $
235.6 $
143.0 $
94.5
Other comprehensive income (loss)
Defined benefit plans, net of $(8.5) million, $23.2 million and $(41.3)
million of tax in 2015, 2014 and 2013, respectively ...............................
Foreign currency translation adjustments ..............................................
Changes in cash flow hedges ................................................................
Other comprehensive income (loss) ...........................................................
16.7
(70.3)
(6.0)
(59.6)
(42.7)
(30.3)
(7.7)
(80.7)
76.6
(26.2)
(2.0)
48.4
Comprehensive income .............................................................................. $
176.0 $
62.3 $
142.9
See accompanying notes to consolidated financial statements
39
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
Consolidated Balance Sheets
December 31,
2015
2014
(in millions, except per share data)
Assets
Current assets
Cash and cash equivalents ................................................................................... $
Accounts receivable, net .......................................................................................
Inventories, net .....................................................................................................
Deferred income taxes ..........................................................................................
Prepaid expenses and other .................................................................................
Total current assets ..................................................................................................
Property, plant and equipment, net ..........................................................................
Deferred income taxes .............................................................................................
Goodwill ...................................................................................................................
GM postretirement cost sharing asset .....................................................................
Other assets and deferred charges ..........................................................................
Total assets .............................................................................................................. $
Liabilities and Stockholders' Equity
Current liabilities
Current portion of long-term debt .......................................................................... $
Accounts payable ..................................................................................................
Accrued compensation and benefits .....................................................................
Deferred revenue ..................................................................................................
Deferred income taxes ..........................................................................................
Other accrued expenses .......................................................................................
Total current liabilities ...............................................................................................
Long-term debt, net ..................................................................................................
Deferred income taxes .............................................................................................
Deferred revenue .....................................................................................................
Postretirement benefits and other long-term liabilities .............................................
Total liabilities ...........................................................................................................
Stockholders' equity
Series A junior participating preferred stock, par value $0.01 per share;
0.1 million shares authorized; no shares outstanding in 2015 or 2014 ................
Preferred stock, par value $0.01 per share; 10.0 million shares
authorized; no shares outstanding in 2015 or 2014 .............................................
Common stock, par value $0.01 per share; 150.0 million shares authorized;
82.3 million and 81.9 million shares issued as of December 31, 2015 and
2014, respectively ................................................................................................
Series common stock, par value $0.01 per share; 40.0 million
shares authorized; no shares outstanding in 2015 or 2014 .................................
Paid-in capital ........................................................................................................
Retained earnings (Accumulated deficit) ...............................................................
Treasury stock at cost, 6.2 million shares in 2015 and 6.1 million shares in 2014 .
Accumulated other comprehensive loss
282.5 $
539.1
230.5
—
72.1
1,124.2
1,046.2
373.6
154.4
243.2
261.1
3,202.7 $
3.3 $
412.7
128.0
22.9
—
132.3
699.2
1,375.7
6.8
65.7
753.8
2,901.2
—
—
0.8
—
638.9
204.2
(185.9)
Defined benefit plans, net of tax ..........................................................................
Foreign currency translation adjustments ...........................................................
Unrecognized loss on cash flow hedges .............................................................
Total stockholders' equity .........................................................................................
Total liabilities and stockholders' equity.................................................................... $
(223.9)
(119.2)
(13.4)
301.5
3,202.7 $
See accompanying notes to consolidated financial statements
40
249.2
532.7
248.8
40.2
68.6
1,139.5
1,061.1
368.8
155.0
274.5
241.5
3,240.4
13.0
444.3
109.1
22.1
0.1
98.6
687.2
1,504.6
9.1
94.2
831.9
3,127.0
—
—
0.8
—
623.7
(31.4)
(182.8)
(240.6)
(48.9)
(7.4)
113.4
3,240.4
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
Consolidated Statements of Cash Flows
Year Ended December 31,
Operating activities
Net income .................................................................................................... $
Adjustments to reconcile net income to net cash provided by operating
activities
Depreciation and amortization .....................................................................
Deferred income taxes ................................................................................
Stock-based compensation .........................................................................
Pensions and other postretirement benefits, net of contributions .................
Loss (gain) on disposal of property, plant and equipment, net .....................
Debt refinancing and redemption costs ........................................................
Changes in operating assets and liabilities
Accounts receivable ..................................................................................
Inventories ................................................................................................
Accounts payable and accrued expenses .................................................
Deferred revenue ......................................................................................
Other assets and liabilities ........................................................................
Net cash provided by operating activities .......................................................
Investing activities
Purchases of property, plant and equipment ..................................................
Proceeds from sale of property, plant and equipment ....................................
Proceeds from sale-leaseback of equipment .................................................
Proceeds from government grants .................................................................
Net cash used in investing activities ...............................................................
Financing activities
Net short-term repayments under credit facilities ...........................................
Proceeds from issuance of long-term debt and other .....................................
Payments of long-term debt, capital lease obligations and other ....................
Debt issuance costs .......................................................................................
Purchase of noncontrolling interest ................................................................
Employee stock option exercises ...................................................................
Purchase of treasury stock .............................................................................
Net cash provided by (used in) financing activities .........................................
Effect of exchange rate changes on cash ......................................................
Net increase in cash and cash equivalents ....................................................
Cash and cash equivalents at beginning of year ............................................
2015
2014
(in millions)
2013
235.6
$
143.0
$
94.5
198.4
26.4
15.9
(25.6)
4.2
0.8
(17.9)
11.2
(2.1)
(26.8)
(42.5)
377.6
(193.5)
0.3
—
5.1
(188.1)
—
16.8
(157.0)
—
(1.1)
0.8
(3.1)
(143.6)
(12.6)
33.3
249.2
199.9
(9.2)
9.7
31.8
(2.6)
—
(78.3)
10.9
13.7
24.5
(25.0)
318.4
(206.5)
9.1
—
2.1
(195.3)
—
5.0
(27.0)
(0.3)
—
1.2
(0.3)
(21.4)
(6.5)
95.2
154.0
177.0
(18.7)
10.8
6.5
(3.5)
9.2
(0.3)
(42.5)
66.3
(5.6)
(70.7)
223.0
(251.9)
9.1
24.1
—
(218.7)
(29.9)
786.7
(652.0)
(16.7)
—
1.1
(0.4)
88.8
(1.5)
91.6
62.4
Cash and cash equivalents at end of year ..................................................... $
282.5
$
249.2
$
154.0
Supplemental cash flow information
Interest paid .............................................................................................. $
.............................................................................. $
Income taxes paid, net
93.8
11.3
$
$
91.1
11.3
$
$
123.2
11.6
See accompanying notes to consolidated financial statements
41
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
Consolidated Statement of Stockholders' Equity (Deficit)
Common Stock
Retained
Earnings
Accumulated
Other
Shares
Par
Paid-in
(Accumulated
Treasury Comprehensive
Outstanding
Value
Capital
Deficit)
Stock
Loss
(in millions)
Balance at January 1, 2013 .................................
74.8 $
0.8 $
600.9 $
(268.9) $
(182.1) $
(264.6)
Net income ............................................................
Changes in cash flow hedges ................................
Foreign currency translation ..................................
Defined benefit plans, net ......................................
Exercise of stock options and vesting of restricted
stock units .............................................................
Stock-based compensation ...................................
Purchase of treasury stock ....................................
94.5
(2.0)
(26.2)
76.6
0.8
—
1.1
10.8
(0.4)
Balance at December 31, 2013 ...........................
75.6 $
0.8 $
612.8 $
(174.4) $
(182.5) $
(216.2)
Net income ............................................................
Changes in cash flow hedges ................................
Foreign currency translation ..................................
Defined benefit plans, net ......................................
Exercise of stock options and vesting of restricted
stock units .............................................................
Stock-based compensation ...................................
Purchase of treasury stock ....................................
Balance at December 31, 2014 ...........................
Net income ............................................................
Changes in cash flow hedges ................................
Foreign currency translation ..................................
Defined benefit plans, net ......................................
143.0
0.2
—
1.2
9.7
75.8 $
0.8 $
623.7 $
(31.4) $
(0.3)
(182.8) $
235.6
(7.7)
(30.3)
(42.7)
(296.9)
(6.0)
(70.3)
16.7
Exercise of stock options and vesting of restricted
stock units and performance shares ......................
0.4
Stock-based compensation ...................................
Acquisition of noncontrolling interest .....................
Purchase of treasury stock ....................................
Balance at December 31, 2015 ...........................
0.9
15.9
(1.6)
(0.1)
76.1 $
0.8 $
638.9 $
204.2 $
(3.1)
(185.9) $
(356.5)
See accompanying notes to consolidated financial statements
42
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION American Axle & Manufacturing Holdings, Inc. (Holdings) and its subsidiaries (collectively,
we, our, us or AAM) is a Tier I supplier to the automotive industry. We manufacture, engineer, design and validate
driveline and drivetrain systems and related components and chassis modules for light trucks, sport utility vehicles
(SUVs), passenger cars, crossover vehicles and commercial vehicles. Driveline and drivetrain systems include
components that transfer power from the transmission and deliver it to the drive wheels. Our driveline, drivetrain
and related products include axles, chassis modules, driveshafts, power transfer units, transfer cases, chassis and
steering components, driveheads, transmission parts, electric drive systems and metal-formed products. In addition
to locations in the United States (U.S.) (Michigan, Ohio and Indiana), we also have offices or facilities in Brazil,
China, Germany, India, Japan, Luxembourg, Mexico, Poland, Scotland, South Korea, Sweden and Thailand.
PRINCIPLES OF CONSOLIDATION We include the accounts of Holdings and its subsidiaries in our
consolidated financial statements. We eliminate the effects of all intercompany transactions, balances and profits in
our consolidation.
REVENUE RECOGNITION We recognize revenue when products are shipped to our customers and title
transfers under standard commercial terms or when realizable in accordance with our commercial agreements. If
we are uncertain as to whether we will be successful collecting a balance in accordance with our understanding of a
commercial agreement, we do not recognize the revenue or cost recovery until such time as the uncertainty is
removed.
In 2014, we reached an agreement with General Motors Company (GM) to increase installed capacity and
adjust product mix for our largest vehicle program. As a result of this agreement, we received $32.8 million in 2014
and recorded the payments as deferred revenue. This deferred revenue is being recognized into sales over the life
of the program on a straight line basis over approximately 5 years, which is the period we expect GM to benefit from
this capacity and mix change. We recognized $6.9 million and $5.4 million of revenue related to this agreement in
2015 and 2014, respectively. As of December 31, 2015, we have $6.9 million of deferred revenue that is classified
as a current liability and $13.6 million of deferred revenue that is recorded as a noncurrent liability on our
Consolidated Balance Sheet.
Also in 2014, we reached an agreement with GM to recover certain costs related to the delay of another major
product program. We received $9.3 million in 2014 related to this agreement which was recorded as deferred
revenue. This deferred revenue is being recognized into sales over the life of the program on a straight-line basis
over approximately 8 years, which is the period we expect GM to benefit from this agreement. We recognized $1.1
million and $0.5 million of revenue related to this agreement in 2015 and 2014, respectively. As of December 31,
2015, we have remaining deferred revenue of $7.7 million, $1.1 million of which is classified as a current liability
and $6.6 million which is recorded as a noncurrent liability on our Consolidated Balance Sheet.
In 2009, we entered into a settlement and commercial agreement (2009 Settlement and Commercial
Agreement) with GM. As part of this agreement, we received $110.0 million from GM, of which we recorded $79.7
million as deferred revenue. As of December 31, 2015, our remaining deferred revenue related to the 2009
Settlement and Commercial Agreement is $29.5 million, $8.0 million of which is classified as a current liability and
$21.5 million of which is recorded as a noncurrent liability on our Consolidated Balance Sheet. We recognize this
deferred revenue into revenue on a straight-line basis over 120 months, which ends September 2019 and is the
period that we expect GM to benefit under the 2009 Settlement and Commercial Agreement. We recognized
revenue of $8.0 million, in 2015, 2014 and 2013 related to this agreement.
As of December 31, 2015, the majority of the remaining deferred revenue primarily relates to customer
payments to implement capacity programs, which is generally recognized into revenue over the life of these
programs. We recognized $7.4 million, $7.5 million and $10.5 million of revenue for these programs in 2015, 2014
and 2013, respectively.
RESEARCH AND DEVELOPMENT (R&D) COSTS We expense R&D, as incurred, in selling, general and
administrative expenses on our Consolidated Statement of Income. R&D spending, net of engineering, design and
development recoveries, was $113.9 million, $103.9 million and $103.4 million in 2015, 2014 and 2013,
respectively.
43
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CASH AND CASH EQUIVALENTS Cash and cash equivalents include all cash balances, savings accounts,
sweep accounts, and highly liquid investments in money market funds and certificates of deposit with maturities of
90 days or less at the time of purchase.
ACCOUNTS RECEIVABLE The majority of our accounts receivable are due from original equipment
manufacturers (OEMs) in the automotive industry and are past due when payment is not received within the stated
terms. Trade accounts receivable for our largest customer, GM, are generally due within approximately 50 days
from the date of receipt.
Amounts due from customers are stated net of allowances for doubtful accounts. We determine our allowances
by considering factors such as the length of time accounts are past due, our previous loss history, the customer's
ability to pay its obligation to us, and the condition of the general economy and the industry as a whole. The
allowance for doubtful accounts was $4.3 million and $4.6 million as of December 31, 2015 and 2014, respectively.
We write-off accounts receivable when they become uncollectible.
CUSTOMER TOOLING AND PRE-PRODUCTION COSTS RELATED TO LONG-TERM SUPPLY
AGREEMENTS Engineering, R&D, and other pre-production design and development costs for products sold on
long-term supply arrangements are expensed as incurred unless we have a contractual guarantee for
reimbursement from the customer. Costs for tooling used to make products sold on long-term supply arrangements
for which we have either title to the assets or the noncancelable right to use the assets during the term of the supply
arrangement are capitalized in property, plant and equipment. Capitalized items and customer receipts in excess of
tooling costs specifically related to a supply arrangement are amortized over the shorter of the term of the
arrangement or over the estimated useful lives of the related assets.
INVENTORIES We state our inventories at the lower of cost or market. The cost of our inventories is
determined using the FIFO 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:
Raw materials and work-in-progress ................................................................ $
Finished goods .................................................................................................
Gross inventories ..............................................................................................
Inventory valuation reserves .............................................................................
Inventories, net ................................................................................................. $
December 31,
2015
2014
(in millions)
228.7 $
31.1
259.8
(29.3)
230.5 $
243.8
32.9
276.7
(27.9)
248.8
44
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PROPERTY, PLANT AND EQUIPMENT We state property, plant and equipment, including amortizable tooling,
at historical cost, as adjusted for impairments. Construction in progress includes costs incurred for the construction
of buildings and building improvements, and machinery and equipment in process. Repair and maintenance costs
that do not extend the useful life or otherwise improve the utility of the asset beyond its existing useful state are
expensed in the period incurred.
We record depreciation and tooling amortization on the straight-line method over the estimated useful lives of
the depreciable assets. Depreciation and tooling amortization amounted to $163.6 million, $166.5 million and
$151.8 million in 2015, 2014 and 2013, respectively.
Property, plant and equipment consists of the following:
Land ....................................................................................................
Land improvements ............................................................................
Buildings and building improvements ..................................................
Machinery and equipment ...................................................................
Construction in progress .....................................................................
Estimated
Useful Lives
December 31,
2015
2014
(years)
Indefinite
$
10-15
15-40
3-12
(in millions)
24.9 $
18.8
315.5
1,853.1
88.4
2,300.7
26.2
19.0
314.3
1,770.7
91.4
2,221.6
Accumulated depreciation and amortization .......................................
Property, plant and equipment, net .....................................................
(1,254.5)
1,046.2 $
(1,160.5)
1,061.1
$
As of December 31, 2015, 2014 and 2013, we had unpaid purchases of plant and equipment in our Accounts
Payable of $43.6 million, $31.4 million and $46.2 million, respectively.
IMPAIRMENT OF LONG-LIVED ASSETS When impairment indicators exist, we evaluate the carrying value of
long-lived assets for potential impairment. We consider projected future undiscounted cash flows, trends and other
circumstances in making such estimates and evaluations. If impairment is deemed to exist, the carrying amount of
the asset is adjusted based on its fair value. Recoverability of assets “held for use” is determined by comparing the
forecasted undiscounted cash flows of the operations to which the assets relate to their carrying amount. When the
carrying value of an asset group exceeds its fair value and is therefore nonrecoverable, those assets are written
down to fair value. Fair value is determined based on market prices, when available, or a discounted cash flow
analysis performed using management estimates.
GOODWILL We record goodwill when the purchase price of acquired businesses exceeds the value of their
identifiable net tangible and intangible assets acquired. We test our goodwill annually, or more frequently if
necessary, for impairment in accordance with the accounting guidance for goodwill and other indefinite-lived
intangibles. We completed impairment tests in 2015 and 2014 and concluded that there was no impairment of our
goodwill. The following table provides a reconciliation of changes in goodwill:
Beginning balance ............................................................................................ $
Foreign currency translation ..............................................................................
Ending balance .................................................................................................. $
December 31,
2015
2014
(in millions)
155.0 $
(0.6)
154.4 $
156.4
(1.4)
155.0
45
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
INTANGIBLE ASSETS During 2015, we launched global enterprise resource planning (ERP) systems at
certain key locations to upgrade many of our existing operating and financial systems. In connection with the
development of these ERP systems we have recorded an intangible asset on our Consolidated Balance Sheet.
The intangible asset is related to costs incurred to obtain software licenses from a third party, as well as costs to
design and develop this internal-use software. This intangible asset is classified as other assets and deferred
charges on our Consolidated Balance Sheet and will be amortized over the estimated useful life of our ERP
systems. We recorded $3.2 million and $0.4 million of expense for the amortization of these intangible assets in
2015 and 2014, respectively.
The following table provides the gross intangible asset balance and related amortization recorded on our
Consolidated Balance Sheet as of December 31, 2015 and December 31, 2014:
Capitalized computer software intangible asset ............................................ $
Accumulated amortization .............................................................................
Capitalized computer software intangible asset, net ..................................... $
December 31,
2015
2014
(in millions)
28.7 $
(3.7)
25.0 $
19.7
(0.5)
19.2
In connection with our e-AAM subsidiary, we have in-process research and development intangible assets
which represent the technology that will be utilized in products to be launched in 2017. Accordingly, we will begin
amortizing this asset on a straight-line basis at the start of production through the expected life cycle of the related
products, which is expected to be approximately 5-7 years. These intangible assets are classified as other assets
and deferred charges on our Consolidated Balance Sheet.
The following table provides a reconciliation of changes in the carrying value of our in-process research and
development intangible assets:
Beginning balance ............................................................................................. $
Foreign currency translation ..............................................................................
Ending balance .................................................................................................. $
December 31,
2015
2014
(in millions)
6.2 $
(0.5)
5.7 $
7.4
(1.2)
6.2
DEBT ISSUANCE COSTS The costs related to the issuance or modification of long-term debt are deferred
and amortized into interest expense over the life of each debt issue. Based on the early adoption of ASU 2015-03 -
Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, our debt
issuance costs associated with our term facility and senior unsecured notes have been retrospectively reclassified
as a reduction to the related debt liability rather than a deferred asset as previously recorded. As of December 31,
2015 and December 31, 2014, our unamortized debt issuance costs were $22.5 million and $29.5 million,
respectively. Debt issuance costs of $7.9 million and $10.7 million related to our revolving credit facility, for which
there is no outstanding debt liability, remain classified as Other Assets and Deferred Charges on our Consolidated
Balance Sheets as of December 31, 2015 and December 31, 2014, respectively. Deferred amounts associated
with the extinguishment of debt are expensed and classified as debt refinancing and redemption costs on our
Consolidated Statement of Income.
DERIVATIVES We recognize all derivatives on the balance sheet at fair value and we are not subject to master
netting agreements. If a derivative qualifies under the accounting guidance as a hedge, depending on the nature of
the hedge, changes in the fair value of the derivative are either offset against the change in fair value of the hedged
asset, liability or firm commitment through earnings or recognized in other comprehensive income until the hedged
item is recognized in earnings. The ineffective portion of a derivative's change in fair value, and changes in the fair
value of derivatives that do not qualify as hedges, are immediately recognized in earnings. See Note 3 -
Derivatives and Risk Management, for more detail on our derivatives.
46
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CURRENCY TRANSLATION AND REMEASUREMENT We translate the assets and liabilities of our foreign
subsidiaries to U.S. dollars at end-of-period exchange rates. We translate the income statement elements of our
foreign subsidiaries to U.S. dollars at average-period exchange rates. We report the effect of translation for our
foreign subsidiaries that use the local currency as their functional currency as a separate component of
stockholders' equity. Gains and losses resulting from the remeasurement of assets and liabilities in a currency
other than the functional currency of a subsidiary are reported in current period income. We also report any gains
and losses arising from transactions denominated in a currency other than the functional currency of a subsidiary in
current period income. These foreign currency gains and losses resulted in a gain of $9.5 million and $6.4 million
and a loss of $4.2 million, for the years ended 2015, 2014 and 2013, respectively, in Other Income (Expense).
PENSION AND OTHER POSTRETIREMENT DEFINED BENEFIT PLANS Net pension and postretirement
benefit expenses and the related liabilities are determined on an actuarial basis. These plan expenses and
obligations are dependent on management's assumptions developed in consultation with our actuaries. We review
these actuarial assumptions at least annually and make modifications when appropriate. See Note 5 - Employee
Benefit Plans, for more detail on our pension and other postretirement defined benefit plans.
STOCK-BASED COMPENSATION We have stock-based compensation in the form of stock options, restricted
stock units (RSUs), performance shares, and performance awards. For non-performance based awards, the grant
date fair value is measured as the stock price at the date of grant. For performance based awards, fair value is
estimated using valuation techniques that require management to use estimates and assumptions. Certain awards
require that management's estimates and assumptions be evaluated at each reporting date to determine if
compensation expense related to the award should be adjusted, both on a catch-up and go-forward basis.
Compensation expense is recognized over the period during which the requisite service is provided, referred to as
the vesting period. See Note 6 - Stock-Based Compensation for more detail on our accounting for stock-based
compensation.
DEFERRED INCOME TAX ASSETS AND LIABILITIES AND VALUATION ALLOWANCES Our deferred
income tax assets and liabilities reflect the impact of temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the basis of such assets and liabilities as measured by tax laws.
In accordance with the accounting guidance for income taxes, we estimate whether recoverability of our
deferred tax assets is “more likely than not,” based on forecasts of taxable income in the related tax jurisdictions. In
this estimate, we use historical results, projected future operating results based upon approved business plans,
eligible carryforward periods, tax planning opportunities and other relevant considerations. This includes the
consideration of tax law changes, prior profitability performance and the uncertainty of future projected profitability.
We record a valuation allowance to reduce our deferred tax assets to the amount that is "more likely than not," to be
realized.
We record uncertain tax positions on the basis of a two-step process whereby: (1) we determine whether it is
"more likely than not" that the tax positions will be sustained based on the technical merits of the position: and (2)
for those positions that meet the "more likely than not" recognition threshold, we recognize the largest amount of tax
benefit that is greater than 50% likely to be realized upon ultimate settlement with the related tax authority. We
record interest and penalties on uncertain tax positions in income tax expense (benefit).
See Note 7 - Income Taxes, for more detail on our accounting for income taxes.
PRODUCT WARRANTY See Note 9 - Commitments and Contingencies, for more detail on our accounting for
product warranties.
USE OF ESTIMATES In order to prepare consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America (GAAP), we are required to make estimates and
assumptions that affect the reported amounts and disclosures in our consolidated financial statements. Actual
results could differ from those estimates.
47
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
EFFECT OF NEW ACCOUNTING STANDARDS
On November 20, 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards
Update (ASU) 2015-17 - Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which
simplifies the accounting for deferred tax assets (DTAs) and deferred tax liabilities (DTLs). Under the new
guidance, entities would be required to classify all DTAs and DTLs as noncurrent in the balance sheet, as opposed
to the current US GAAP standard, which requires entities to split their DTAs and DTLs between current and
noncurrent in the balance sheet based on the classification of the related asset or liability. The new standard will
still require entities to net DTAs and DTLs within each tax jurisdiction and prohibit netting of DTAs and DTLs
between different tax jurisdictions. The guidance becomes effective for AAM at the beginning of our 2017 fiscal
year, however as permitted, AAM elected to early adopt this standard using the prospective method in the fourth
quarter of 2015. Prior periods were not retrospectively adjusted. The effect of implementing this ASU on our
consolidated financial statements was a reduction to our current deferred income tax assets of $39.2 million, a
reduction to our current deferred income tax liabilities of $0.1 million, an increase to our noncurrent deferred income
tax assets of $36.7 million, and a decrease to our noncurrent deferred income tax liabilities of $2.4 million at
December 31, 2015.
On May 1, 2015 the FASB issued ASU 2015-07 - Fair Value Measurement (Topic 820): Disclosures for
Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent), which changes the
disclosure requirements for investments in certain entities that calculate net asset value (NAV) per share. Under
current accounting standards entities are permitted to estimate the fair value of certain investments using the
investment's NAV as a practical expedient. The current disclosure guidance also permits entities to disclose the
investment at NAV in the fair value hierarchy table as either Level 2 or Level 3, based upon certain criteria. The
measurement basis utilizing NAV is different than the measurement criteria of all other investments which utilize
inputs to calculate fair value. Due to this inconsistency, the FASB issued this ASU which requires entities to remove
investments measured at NAV from the fair value hierarchy table. The guidance becomes effective for AAM at the
beginning of our 2016 fiscal year. Other than the change in presentation, the adoption of this new guidance will not
have an impact on our consolidated financial statements.
On April 7, 2015, the FASB issued ASU 2015-03 - Interest - Imputation of Interest (Subtopic 835-30):
Simplifying the Presentation of Debt Issuance Costs, which changes the presentation of debt issuance costs in
financial statements. Under the ASU, entities would present such costs in the balance sheet as a direct deduction
of the related debt liability rather than as an asset. Amortization of the costs will continue to be reported as interest
expense. This ASU becomes effective for AAM at the beginning of our 2016 fiscal year, however as permitted, AAM
elected to early adopt this standard as of December 31, 2015. The effect of implementing this ASU on our
consolidated financial statements was a reduction to both our other assets and deferred charges and long-term
debt of $14.6 million at December 31, 2015 and $18.8 million at December 31, 2014.
In 2014, the FASB issued ASU 2014-09 - Revenue from Contracts with Customers (Topic 606), which outlines a
single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and
supersedes most current revenue recognition guidance, including industry-specific guidance. The guidance is
based on the principle that an entity should recognize revenue to depict the transfer of goods or services to
customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for
those goods or services. The guidance also requires additional disclosure about the nature, amount, timing and
uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes
in judgments and assets recognized from costs incurred to fulfill a contract. Entities have the option of using either
a full retrospective or a modified retrospective approach for the adoption of the new standard. On August 12, 2015,
the FASB issued ASU 2015-14 - Revenue from Contracts with Customers (Topic 606): Deferral of the Effective
Date, to formally defer the initial standard's effective date by one-year, making this guidance effective for AAM at the
beginning of our 2018 fiscal year. We are currently assessing the impact that this standard will have on our
consolidated financial statements.
48
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. LONG-TERM DEBT AND LEASE OBLIGATIONS
Long-term debt, net consists of the following:
December 31,
2015
2014
Revolving Credit Facility ............................................................................ $
Term Facility ..............................................................................................
7.75% Notes ..............................................................................................
6.625% Notes ............................................................................................
6.25% Notes ..............................................................................................
5.125% Notes ............................................................................................
Foreign credit facilities ...............................................................................
Capital lease obligations ............................................................................
Debt ...........................................................................................................
Less: Current portion of long-term debt .................................................
Long-term debt ..........................................................................................
Less: Debt issuance costs .....................................................................
(in millions)
— $
—
200.0
550.0
400.0
200.0
38.0
5.6
1,393.6
3.3
1,390.3
14.6
Long-term debt, net ................................................................................... $
1,375.7 $
—
142.5
200.0
550.0
400.0
200.0
38.9
5.0
1,536.4
13.0
1,523.4
18.8
1,504.6
REVOLVING CREDIT FACILITY AND TERM FACILITY As of December 31, 2015, the revolving credit facility
provided up to $523.5 million of revolving bank financing commitments through September 13, 2018. At
December 31, 2015, $513.1 million was available under the revolving credit facility, which reflected a reduction of
$10.4 million for standby letters of credit issued against the facility.
The credit agreement provides for a senior secured term loan A facility in an aggregate principal amount of
$150.0 million (term facility). During 2015, we made principal payments of $142.5 million on our term facility, of
which $135.9 million related to a voluntary election to prepay all outstanding principal, including $2.8 million that
was due in the fourth quarter of 2015. Upon prepayment, we expensed $0.8 million in 2015 related to the write-off
of the remaining unamortized debt issuance costs related to our term facility that we had been amortizing over the
expected life of the borrowing.
We paid remaining debt issuance costs of $0.1 million in 2014 associated with the execution of amending our
revolving credit facility and term facility. In 2013, we paid debt issuance costs of $6.9 million associated with the
amendments and restatements of our revolving credit facility.
Borrowings under the revolving credit facility and term facility bear interest at rates based on adjusted LIBOR or
an alternate base rate, plus an applicable margin. The applicable margin for LIBOR-based loans will be between
1.5% and 3.0%.
The revolving credit facility is secured on a first priority basis by all or substantially all of the assets of AAM and
each guarantor under the collateral agreement dated as of November 7, 2008, as amended and restated as of
September 13, 2013. In the event AAM achieves investment grade corporate credit ratings from Standard & Poor's
and Moody's, AAM may elect to release all of the collateral from the liens granted pursuant to the collateral
agreement, subject to notice requirements and other conditions. The revolving credit facility limits our ability to
make certain investments, loans and guarantees, declare dividends or distributions on capital stock, redeem or
repurchase capital stock and certain debt obligations, incur liens, incur indebtedness, enter into certain restrictive
agreements, merge, make acquisitions or sell all or substantially all of our assets.
49
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The revolving credit facility provides back-up liquidity for our foreign credit facilities. We intend to use the
availability of long-term financing under the revolving credit facility 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 Consolidated Balance Sheet.
In 2013, we terminated our class C loan facility of $72.8 million, which would have matured on June 30, 2013.
Upon termination, we expensed $0.5 million of unamortized debt issuance costs related to the class C facility.
9.25% NOTES In 2009, we issued $425.0 million of 9.25% senior secured notes due 2017 (9.25% Notes). The
notes were issued at a discount of $5.5 million. Pursuant to the terms of our 9.25% Notes, in 2013, we voluntarily
redeemed the remaining outstanding 9.25% Notes using the proceeds from the Term Facility and the issuance of
the 5.125% Notes. This resulted in a principal payment of $340.0 million and $18.9 million for redemption
premiums, as well as payments of accrued interest. We expensed $6.7 million in 2013 related to the write-off of the
remaining unamortized debt discount and issuance costs related to our 9.25% Notes.
7.875% NOTES In 2007, we issued $300.0 million of 7.875% senior unsecured notes due 2017 (7.875%
Notes). In 2013, we voluntarily purchased and redeemed $300.0 million of our 7.875% Notes, and paid accrued
interest. Upon purchase and redemption, we expensed $8.5 million related to redemption premiums, $0.1 million of
professional fees and unamortized debt issuance costs of $2.1 million related to this debt.
7.75% NOTES In 2011, we issued $200.0 million of 7.75% senior unsecured notes due 2019 (7.75% Notes).
6.625% NOTES In 2012, we issued $550.0 million of 6.625% senior unsecured notes due 2022 (6.625%
Notes). Net proceeds from the 6.625% Notes were used to fund the purchase and redemption of $250.0 million of
the outstanding 5.25% senior unsecured notes, including the payment of interest, the redemption of $42.5 million
aggregate principal amount of our 9.25% Notes, certain pension obligations and for other general corporate
purposes.
6.25% NOTES In 2013, we issued $400.0 million of 6.25% senior unsecured notes due 2021 (6.25% Notes).
Net proceeds from the 6.25% Notes were used to fund the purchase and redemption of our 7.875% Notes and for
other general corporate purposes. We paid debt issuance costs of $6.6 million in 2013 related to the 6.25% Notes.
5.125% NOTES In 2013, we issued $200.0 million of 5.125% senior unsecured notes due 2019 (5.125%
Notes). Net proceeds from the 5.125% Notes were used to redeem the remaining $190.0 million outstanding under
our 9.25% Notes. We paid debt issuance costs related to the 5.125% Notes of $0.2 million and $3.1 million in 2014
and 2013, respectively.
LEASES We lease certain facilities and furniture under capital leases expiring at various dates. The gross
asset cost of our capital leases was $7.9 million and $6.7 million at December 31, 2015 and 2014, respectively.
The net book value included in property, plant and equipment, net on the balance sheet was $5.6 million and $5.0
million at December 31, 2015 and 2014, respectively. The weighted-average interest rate on these capital lease
obligations at December 31, 2015 was 7.2%.
We also lease certain manufacturing machinery and equipment, commercial office and production facilities,
vehicles and other assets under operating leases expiring at various dates. In 2013 we entered into various sale-
leaseback transactions for equipment to be used in production starting in 2013. We received proceeds of $24.1
million in 2013 as a result of these transactions. Future minimum payments under noncancelable operating leases
are as follows: $20.4 million in 2016, $17.0 million in 2017, $9.1 million in 2018, $4.4 million in 2019, and $4.4
million in 2020. Our total expense relating to operating leases was $25.3 million, $23.6 million and $17.6 million in
2015, 2014 and 2013, respectively.
FOREIGN CREDIT FACILITIES We utilize local currency credit facilities to finance the operations of certain
foreign subsidiaries. These credit facilities, some of which are guaranteed by Holdings and/or AAM, Inc., expire at
various dates through July 2019. At December 31, 2015, $38.0 million was outstanding under these facilities and
an additional $47.9 million was available.
50
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DEBT MATURITIES Aggregate maturities of long-term debt are as follows (in millions):
2016 ................................................................................................................................................ $
2017 ................................................................................................................................................
2018 ................................................................................................................................................
2019 ................................................................................................................................................
2020 ................................................................................................................................................
Thereafter .......................................................................................................................................
Total ................................................................................................................................................ $
15.4
4.8
18.0
403.1
0.7
951.6
1,393.6
INTEREST EXPENSE AND INVESTMENT INCOME Interest expense was $99.2 million in 2015, $99.9 million
in 2014 and $115.9 million in 2013. The decrease in interest expense in 2014 as compared to 2013 is primarily due
to the decrease in our weighted-average interest rate for the full year 2014 as compared to full year 2013. The
decrease is also driven by lower average outstanding borrowings in 2014 as compared to 2013.
We capitalized interest of $4.5 million in 2015, $5.8 million in 2014 and $6.6 million in 2013. The weighted-
average interest rate of our long-term debt outstanding at December 31, 2015 was 6.5% as compared to 6.4% and
6.3% at December 31, 2014 and 2013, respectively.
Investment income was $2.6 million in 2015 as compared to $2.1 million and $0.6 million in 2014 and 2013,
respectively. Investment income includes interest earned on cash and cash equivalents and realized and
unrealized gains and losses on our short-term investments during the period.
3. DERIVATIVES AND RISK MANAGEMENT
DERIVATIVE FINANCIAL INSTRUMENTS In the normal course of business, we are exposed to market risk
associated with changes in foreign currency exchange rates and interest rates. To manage a portion of these
inherent risks, we may purchase certain types of derivative financial instruments based on management's judgment
of the trade-off between risk, opportunity and cost. We do not hold or issue derivative financial instruments for
trading or speculative purposes. The ineffective portion of any hedge is included in current earnings. The impact of
hedge ineffectiveness was not significant in any of the periods presented.
CURRENCY FORWARD CONTRACTS From time to time, we use foreign currency forward contracts to
reduce the effects of fluctuations in exchange rates, primarily relating to the Mexican Peso, Euro, Pound Sterling,
Thai Baht, Swedish Krona and Polish Zloty. We had forward contracts with a notional amount of $190.0 million and
$99.3 million outstanding at December 31, 2015 and 2014, respectively, that hedge our exposure to changes in
foreign currency exchange rates for certain payroll expenses through June 2018 and certain direct and indirect
inventory and other working capital items through December 2016.
The following table summarizes the reclassification of pre-tax derivative gains (losses) into net income from
accumulated other comprehensive income (loss) for those derivative instruments designated as hedging
instruments under Accounting Standards Codification 815 - Derivatives and Hedging (ASC 815):
Location of Gain
(Loss)
Reclassified into
Net Income
Gain (Loss) Reclassified During
the Twelve Months Ended
December 31,
2015
2014
2013
(in millions)
Loss Expected
to be
Reclassified
During the
Next 12 Months
Currency forward contracts ............... Cost of Goods Sold
$
(10.9) $
0.9 $
2.8 $
(7.5)
See Note 10 - Reclassifications Out of Accumulated Other Comprehensive Income (Loss) for amounts
recognized in other comprehensive income (loss) during the years ended December 31, 2015, December 31, 2014
and December 31, 2013.
51
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following table summarizes the amount and location of gains (losses) recognized in the Consolidated
Statement of Income for those derivative instruments not designated as hedging instruments under ASC 815:
Location of Gain (Loss)
Reclassified into Net
Income
Gain (Loss) Recognized During the Twelve
Months Ended December 31,
2015
2014
2013
(in millions)
Currency forward contracts ........ Cost of Goods Sold
Currency forward contracts ........ Other Income (Expense), Net
$
(4.0) $
(1.6)
(1.8) $
—
0.1
—
CONCENTRATIONS OF CREDIT RISK In the normal course of business, we provide credit to customers.
We periodically evaluate the creditworthiness of our customers and we maintain reserves for potential credit losses.
Sales to GM were approximately 66% of our consolidated net sales in 2015, 68% in 2014, and 71% in 2013.
Accounts and other receivables due from GM were $361.1 million at year-end 2015 and $343.1 million at year-end
2014. Sales to FCA US LLC (FCA), were approximately 20% of our consolidated net sales in 2015, 18% in 2014
and 12% in 2013. Accounts receivable due from FCA were $96.8 million at year-end 2015 and $99.3 million at
year-end 2014. No other single customer accounted for more than 10% of our consolidated net sales in any year
presented.
In addition, our total GM postretirement cost sharing asset was $256.3 million as of December 31, 2015 and
$287.8 million as of December 31, 2014. See Note 5 - Employee Benefit Plans for more detail on this cost sharing
asset.
We diversify the concentration of invested cash and cash equivalents among different financial institutions and
we monitor the selection of counterparties to other financial instruments to avoid unnecessary concentrations of
credit risk.
52
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. FAIR VALUE
The fair value accounting guidance 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 values 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:
December 31, 2015
Carrying
Amount
Fair
Value
December 31, 2014
Carrying
Amount
Fair
Value
Input
(in millions)
Balance Sheet Classification
Cash equivalents ........................................................ $
Currency forward contracts - Prepaid expenses and
other current assets
Undesignated currency forward contracts ..............
Currency forward contracts - Other accrued
expenses
Cash flow hedges ...................................................
Undesignated currency forward contracts ..............
Currency forward contracts - Other long-term
liabilities
Cash flow hedges ...................................................
5.9
61.7 $
61.7 $
35.3 $
35.3
Level 1
0.2
0.2
—
— Level 2
7.5
1.9
7.5
1.9
5.9
7.2
1.1
7.2
1.1
Level 2
Level 2
0.1
0.1
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 values due to the frequent resetting of the interest rates. We
estimated the fair value of our outstanding debt using available market information and other observable data to be
as follows:
December 31, 2015
December 31, 2014
Carrying
Amount
Fair Value
Carrying
Amount
Fair Value
Input
(in millions)
Revolving Credit Facility ............................. $
Term Facility ...............................................
7.75% Notes ...............................................
6.625% Notes .............................................
6.25% Notes ...............................................
5.125% Notes .............................................
— $
—
200.0
550.0
400.0
200.0
— $
—
218.5
574.8
415.0
202.0
— $
142.5
200.0
550.0
400.0
200.0
—
141.1
224.0
583.0
419.0
202.6
Level 2
Level 2
Level 2
Level 2
Level 2
Level 2
Investments in our defined benefit pension plans are stated at fair value. See Note 5 - Employee Benefit Plans
for additional fair value disclosures of our pension plan assets.
53
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. EMPLOYEE BENEFIT PLANS
PENSION AND OTHER POSTRETIREMENT DEFINED BENEFIT PLANS We sponsor various qualified and
non-qualified defined benefit pension plans for our eligible associates. We also maintain hourly and salaried benefit
plans that provide postretirement medical, dental, vision and life insurance benefits (OPEB) to our eligible retirees
and their dependents in the U.S.
AAM and GM share proportionally in the cost of OPEB for eligible retirees based on the length of service an
employee had with AAM and GM. We have included in our OPEB obligation the amounts expected to be received
pursuant to this agreement of $256.3 million and $287.8 million at December 31, 2015 and December 31, 2014,
respectively. We have also recorded a corresponding asset for these amounts on our Consolidated Balance Sheet,
$13.1 million that is classified as a current asset and $243.2 million that is classified as a noncurrent asset as of
December 31, 2015.
Actuarial valuations of our benefit plans were made as of December 31, 2015 and 2014. The principal
weighted-average assumptions used in the year-end valuation of our U.S. and U.K. plans appear in the following
table. The U.S. discount rates are based on an actuarial review of a hypothetical portfolio of long-term, high quality
corporate bonds matched against the expected payment stream for each of our plans. The U.K. discount rate is
based on a review of long-term bonds, in consideration of the average duration of plan liabilities. The assumptions
for expected return on plan assets are based on future capital market expectations for the asset classes
represented within our portfolios and a review of long-term historical returns. The rates of increase in compensation
and health care costs are based on current market conditions, inflationary expectations and historical information.
Pension Benefits
OPEB
2015
2014
2013
2015
2014
2013
U.S.
U.K
U.S.
U.K
U.S.
U.K.
Discount rate ..............
4.40%
3.90% 4.10%
3.70% 5.00%
4.50% 4.45% 4.15% 4.95%
Expected return on
plan assets .................
Rate of compensation
increase .....................
7.50%
5.00% 7.50%
5.00% 7.50%
5.15%
N/A
N/A
N/A
4.00%
3.30% 4.00%
3.30% 4.00%
3.60% 4.00% 4.00% 4.00%
54
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The accumulated benefit obligation for all defined benefit pension plans was $678.6 million and $723.9 million
at December 31, 2015 and December 31, 2014, respectively. As of December 31, 2015, the accumulated benefit
obligation for our underfunded defined benefit pension plans was $553.2 million, the projected benefit obligation
was $565.1 million and the fair value of assets for these plans was $457.8 million. The following table summarizes
the changes in projected benefit obligations and plan assets and reconciles the funded status of the benefit plans,
which is the net benefit plan liability:
Change in benefit obligation
Benefit obligation at beginning of year .................... $
Service cost ............................................................
Interest cost ............................................................
Actuarial loss (gain) ................................................
Change in GM portion of OPEB obligation ..............
Participant contributions ..........................................
Settlements .............................................................
Benefit payments ....................................................
Currency fluctuations ..............................................
Net change ..............................................................
Benefit obligation at end of year .............................. $
Change in plan assets
Fair value of plan assets at beginning of year......... $
Actual return on plan assets....................................
Employer contributions ............................................
Participant contributions ..........................................
Benefit payments ....................................................
Settlements .............................................................
Currency fluctuations ..............................................
Net change ..............................................................
Fair value of plan assets at end of year .................. $
Pension Benefits
December 31,
OPEB
December 31,
2015
2014
2015
2014
(in millions)
755.4 $
3.5
654.7 $
0.4
36.1
119.3
—
0.4
(131.1)
(36.5)
(8.3)
15.0
(35.9)
(31.6)
—
—
(14.2)
—
(16.6)
738.8 $
(66.3)
588.4 $
738.8 $
3.2
28.6
(32.1)
—
0.4
—
(38.4)
(7.4)
(45.7)
693.1 $
643.7 $
713.4 $
(5.0)
20.1
0.4
(38.4)
—
(8.0)
(30.9)
612.8 $
77.2
1.9
0.4
(36.5)
(104.2)
(8.5)
(69.7)
643.7 $
— $
—
14.2
—
(14.2)
—
—
—
— $
577.9
0.3
15.3
41.2
31.8
—
—
(11.8)
—
76.8
654.7
—
—
11.8
—
(11.8)
—
—
—
—
During 2014, the Society of Actuaries issued updated mortality tables for our U.S. benefit plans. These new
mortality tables increased our projected benefit obligations for our U.S. pension and OPEB plans at December 31,
2014 by $25.2 million and $19.0 million, respectively.
55
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Amounts recognized in our Consolidated Balance Sheets are as follows:
Pension Benefits
December 31,
OPEB
December 31,
2015
2014
2015
2014
(in millions)
Noncurrent assets ...................................................... $
27.0 $
6.9 $
— $
Current liabilities .........................................................
Noncurrent liabilities ...................................................
(4.2)
(103.1)
(3.0)
(99.0)
(29.4)
(559.0)
Net liability .................................................................. $
(80.3) $
(95.1) $
(588.4) $
—
(29.6)
(625.1)
(654.7)
Pre-tax amounts recorded in accumulated other comprehensive income (loss) (AOCI), not yet recognized in net
periodic benefit cost as of December 31, 2015 and 2014, consists of:
Pension Benefits
December 31,
OPEB
December 31,
2015
2014
2015
2014
Net actuarial gain (loss) .............................................. $
Net prior service credit ...............................................
Total amounts recorded.............................................. $
(222.9) $
0.6
(222.3) $
The components of net periodic benefit cost (credit) are as follows:
(in millions)
(215.3) $
0.7
(214.6) $
1.1 $
12.7
13.8 $
(35.7)
15.4
(20.3)
Pension Benefits
2015
2014
2013
2015
OPEB
2014
2013
Service cost .................................... $
Interest cost ....................................
Expected asset return ....................
Amortized actuarial loss .................
Amortized prior service cost
(credit) ............................................
Settlement charge ..........................
Net periodic benefit cost (credit)..... $
3.2 $
3.5 $
28.6
(42.0)
6.0
(0.1)
—
(4.3) $
36.1
(48.4)
5.4
(0.1)
35.5
32.0 $
(in millions)
3.4 $
0.4 $
0.3 $
33.8
(45.8)
8.9
5.4
—
5.7 $
15.0
—
0.8
(2.7)
—
13.5 $
15.3
—
0.5
(2.7)
—
13.4 $
0.4
13.2
—
0.9
(1.8)
—
12.7
Our postretirement cost sharing asset from GM is measured on the same basis as the portion of the obligation
to which it relates. The actuarial gains and losses related to the GM portion of the OPEB obligation are recognized
immediately in the Consolidated Statement of Income as an offset against the gains and losses related to the
change in the corresponding GM postretirement cost sharing asset. These items are presented net in the change
in benefit obligation and net periodic benefit cost components disclosed above. Remaining actuarial gains and
losses are deferred and amortized over the expected future service periods of the active participants.
The estimated net actuarial loss and prior service credit for the defined benefit pension plans that is expected to
be amortized from AOCI into net periodic benefit credit in 2016 are $5.4 million and $0.1 million, respectively. The
estimated net actuarial loss and prior service credit for the other defined benefit postretirement plans that is
expected to be amortized from AOCI into net periodic benefit cost in 2016 are $0.5 million and $2.7 million,
respectively.
56
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For measurement purposes, a weighted average annual increase in the per-capita cost of covered health care
benefits of 6.75% was assumed for 2016. The rate was assumed to decrease gradually to 5.0% by 2023 and to
remain at that level thereafter. Health care cost trend rates have a significant effect on the amounts reported for the
health care plans. A 1.0% increase in the assumed health care cost trend rate would have increased total service
and interest cost in 2015 and the postretirement obligation, net of GM cost sharing, at December 31, 2015 by $1.7
million and $37.5 million, respectively. A 1.0% decrease in the assumed health care cost trend rate would have
decreased total service and interest cost in 2015 and the postretirement obligation, net of GM cost sharing, at
December 31, 2015 by $1.5 million and $31.2 million, respectively.
The expected future pension and other postretirement benefits to be paid, net of GM cost sharing, for each of
the next five years and in the aggregate for the succeeding five years thereafter are as follows: $55.5 million in
2016; $55.1 million in 2017; $55.5 million in 2018; $55.8 million in 2019; $56.5 million in 2020 and $295.5 million for
2021 through 2025. These amounts were estimated using the same assumptions that were used to measure our
2015 year-end pension and OPEB obligations and include an estimate of future employee service.
Contributions In December 2015, we voluntarily contributed $18.3 million to our U.K. pension trust, which
satisfies our estimated U.K. regulatory funding requirements for 2016 through 2018. Due to the availability of our
prefunding pension balances related to our U.S. pension plans, we do not expect to make any cash payments in
2016 to satisfy our regulatory funding requirements. We expect our cash outlay, net of GM cost sharing, for OPEB
to be approximately $16 million in 2016.
Terminated vested lump sum payout offer In 2014, we offered a voluntary one-time lump sum payment
option to certain eligible terminated vested participants in our U.S. pension plans that settled our pension
obligations to them (“AAM Pension Payout Offer”). The lump sum settlements, which were paid from plan assets,
reduced our liabilities and administrative costs going forward.
In total, 3,335 participants accepted the offer and we made a one-time lump sum payment from our pension
trust of $104.2 million in 2014. As a result of this settlement, we remeasured the assets and liabilities of our U.S.
pension plans, which reduced our projected benefit obligation by $131.1 million and resulted in a non-cash charge
of $35.5 million in 2014 related to the accelerated recognition of certain deferred losses.
Amendments to pension and OPEB plans and contractual termination benefits In 2013, we remeasured
the AAM Supplemental Executive Retirement Plan (SERP) due to the passing of our Co-Founder and former
Executive Chairman of the Board of Directors. As a result of this remeasurement, we recorded $4.7 million in
selling, general and administrative expense related to the acceleration of prior service cost.
Pension plan assets The weighted-average asset allocations of our pension plan assets at December 31,
2015 and 2014 appear in the following table. The asset allocation for our plans is developed in consideration of the
demographics of the plan participants and expected payment stream of the benefit obligation.
U.S.
Target
U.K.
Target
2015
2014
Allocation
2015
2014
Allocation
Equity securities ..................
34.8%
33.1%
30% - 65%
26.7%
28.7%
25% - 35%
Fixed income securities .......
Hedge funds ........................
Cash ....................................
46.2
17.8
1.2
47.3
18.3
1.3
35% - 55%
0% - 20%
0% - 5%
52.0
9.6
11.7
61.1
10.1
0.1
55% - 65%
5% - 15%
0% - 5%
Total.....................................
100.0%
100.0%
100.0%
100.0%
The primary objective of our pension plan assets is to provide a source of retirement income for participants
and beneficiaries. Our primary financial objectives for the pension plan assets have been established in
conjunction with a comprehensive review of our current and projected financial requirements. These objectives
include having the ability to pay all future benefits and expenses when due, maintaining flexibility and minimizing
volatility. These objectives are based on a long-term investment horizon.
57
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Defined Benefit Pension Plan Assets Investments in our defined benefit plans are stated at fair value. Level
1 assets are valued using quoted market prices that represent the asset value of the shares held by the trusts. The
level 2 assets are investments in pooled funds, which are valued using a model to reflect the valuation of their
underlying assets that are publicly traded with observable values. The fair value of our level 3 defined benefit
pension plan assets are measured by compiling the portfolio holdings and independently valuing the securities in
those portfolios. The fair values of our pension plan assets are as follows:
December 31, 2015
Asset Categories
Cash & Cash Equivalents ............................ $
Equity
U.S. Large Cap ...........................................
U.S. Small/Mid Cap ....................................
World Equity ...............................................
Fixed Income Securities
Government & Agencies.............................
Corporate Bonds - Investment Grade.........
Corporate Bonds - Non-investment Grade .
Emerging Market Debt................................
Other ..........................................................
Hedge Funds
Property Funds ...........................................
Multi Strategy Hedge Fund .........................
Total Plan Assets.......................................... $
December 31, 2014
Asset Categories
Cash & Cash Equivalents ............................ $
Equity
U.S. Large Cap ...........................................
U.S. Small/Mid Cap ....................................
World Equity ...............................................
Fixed Income Securities
Government & Agencies.............................
Corporate Bonds - Investment Grade.........
Corporate Bonds - Non-investment Grade .
Emerging Market Debt................................
Other ..........................................................
Hedge Funds
Property Funds ...........................................
Multi Strategy Hedge Fund .........................
Total Plan Assets.......................................... $
Level 1
Level 2
Level 3
Total
(in millions)
23.7 $
— $
— $
23.7
77.1
28.2
95.5
68.1
138.4
24.8
18.1
6.9
—
—
—
—
—
35.8
—
—
—
—
—
—
—
—
—
—
—
—
—
—
54.6
41.6
480.8 $
35.8 $
96.2 $
77.1
28.2
95.5
103.9
138.4
24.8
18.1
6.9
54.6
41.6
612.8
Level 1
Level 2
Level 3
Total
6.7 $
(in millions)
— $
— $
6.7
87.3
25.2
94.2
67.9
139.9
31.9
19.0
7.2
—
—
—
—
—
58.8
—
—
—
—
—
—
—
—
—
—
—
—
—
—
48.3
57.3
479.3 $
58.8 $
105.6 $
87.3
25.2
94.2
126.7
139.9
31.9
19.0
7.2
48.3
57.3
643.7
58
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The changes in the fair value of our level 3 assets in the Property Funds and Multi Strategy Hedge Fund are as
follows:
December 31,
2015
2014
(in millions)
Beginning balance .......................................................................................... $
105.6 $
64.5
Actual return on plan assets:
Relating to assets still held at the reporting date ..........................................
Purchases, sales and settlements, net .........................................................
Ending balance ............................................................................................... $
3.8
(13.2)
96.2 $
3.3
37.8
105.6
DEFINED CONTRIBUTION PLANS Most of our salaried U.S. associates are eligible to participate in voluntary
savings plans. Our maximum match is 50% of eligible salaried associates' contribution up to 10% of their eligible
salary. Matching contributions amounted to $4.6 million in 2015, $3.9 million in 2014 and $3.9 million in 2013. U.S.
salaried associates are eligible annually to receive an additional AAM Retirement Contribution (ARC) benefit
between 3% to 5% of eligible salary, depending on years of service. We made ARC contributions of $5.3 million,
$4.9 million and $4.6 million in 2015, 2014 and 2013, respectively.
Certain UAW represented associates at our original U.S. locations are eligible for a Company match on
associate contributions made to the voluntary savings plans. Our maximum match is 25% of hourly associates'
contribution up to the first 6% of their contributions. Matching contributions amounted to $0.1 million in 2015, 2014
and 2013. Certain UAW represented associates are also eligible to receive an ARC benefit of 5% of eligible wages.
We made ARC contributions of $2.5 million in 2015, $2.6 million in 2014 and $1.9 million in 2013 related to these
associates.
DEFERRED COMPENSATION PLAN Certain U.S. associates are eligible to participate in a non-qualified
deferred compensation plan. Payments of $0.7 million, $1.2 million and $6.1 million have been made in 2015, 2014
and 2013, respectively, to eligible associates that have elected distributions.
At December 31, 2015 and 2014, our deferred compensation liability was $5.1 million and $5.6 million,
respectively. Due to the changes in the value of this deferred compensation plan we increased our liability by $0.1
million, $0.3 million and $0.8 million in 2015, 2014 and 2013, respectively.
59
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. STOCK-BASED COMPENSATION
At December 31, 2015, we had stock-based awards outstanding under stock incentive compensation plans
approved by our stockholders. Under these plans, a total of 20.6 million shares have been authorized for issuance
to our directors, officers and certain other associates in the form of options, unvested restricted stock units,
performance shares or other awards that are based on the value of our common stock. Shares available for future
grants at December 31, 2015 were 3.8 million. The current stock plan will expire in April 2022.
STOCK OPTIONS Under the terms of the plans, stock options were granted at the market price of the stock on
the grant date. The contractual term of outstanding stock options is 10 years. We issue new shares to satisfy
stock-based awards.
Stock option awards became exercisable in three approximately equal annual installments beginning one year
from the initial date of grant.
The following table summarizes activity relating to our stock options:
Weighted-
Number of
Average Exercise
Shares
Price Per Share
(in millions, except per share data)
Outstanding at January 1, 2013 .........................................................
Options granted ..................................................................................
Options exercised ...............................................................................
Options canceled ................................................................................
Outstanding at December 31, 2013 ....................................................
Options granted ..................................................................................
Options exercised ...............................................................................
Options canceled ................................................................................
Outstanding at December 31, 2014 ....................................................
Options granted ..................................................................................
Options exercised ...............................................................................
Options canceled ................................................................................
Outstanding at December 31, 2015 ....................................................
Exercisable at December 31, 2013 .....................................................
Exercisable at December 31, 2014 .....................................................
Exercisable at December 31, 2015 .....................................................
3.0 $
—
(0.1)
(0.9)
2.0 $
—
(0.1)
(1.0)
0.9 $
—
(0.1)
(0.2)
0.6 $
2.0 $
0.9 $
0.6 $
27.08
—
10.59
24.28
29.22
—
13.87
37.70
20.66
—
17.13
26.65
18.58
29.22
20.66
18.58
As of December 31, 2015, there were no unvested stock options. The total intrinsic value of options
outstanding and exercisable as of December 31, 2015 was $2.0 million. The total intrinsic value of stock options
exercised was $0.3 million in 2015, $0.5 million in 2014 and $0.8 million in 2013.
60
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following is a summary of the range of exercise prices for stock options that are outstanding and
exercisable at December 31, 2015:
Range of
Exercise Prices
$9.19 - $10.08 ...........................................................
$15.58 - $26.02 .........................................................
Stock Options
Weighted-
Outstanding and Average Exercise
Price Per Share
Exercisable
(in millions, except per share data)
9.43
0.2 $
0.4
0.6 $
21.47
18.58
Weighted-
Average
Contractual Life
(in years)
2.6
0.8
1.2
RESTRICTED STOCK UNITS We have awarded restricted stock units (RSUs). Compensation expense
associated with RSUs settled in stock is recorded to paid-in-capital ratably over the three-year vesting period.
The following table summarizes activity relating to our RSUs:
Weighted-Average
Number of
Grant Date Fair
Shares/Units
Value per Share/Unit
(in millions, except per share data)
Outstanding at January 1, 2013 ....................................................
Granted ........................................................................................
Vested ..........................................................................................
Canceled ......................................................................................
Outstanding at December 31, 2013 ...............................................
Granted ........................................................................................
Vested ..........................................................................................
Canceled ......................................................................................
Outstanding at December 31, 2014 ...............................................
Granted ........................................................................................
Vested ..........................................................................................
Canceled ......................................................................................
Outstanding at December 31, 2015 ...............................................
1.1 $
0.9
(0.7)
—
1.3 $
0.5
(0.1)
(0.1)
1.6 $
0.5
(0.3)
(0.1)
1.7 $
11.08
12.79
11.06
—
12.24
19.58
13.95
12.76
14.54
25.21
11.03
19.99
18.19
As of December 31, 2015, unrecognized compensation cost related to unvested RSUs totaled $10.9 million.
The weighted average period over which this cost is expected to be recognized is approximately one year. In 2015
and 2014, the total fair market value of RSUs vested was $9.5 million and $1.7 million, respectively.
PERFORMANCE SHARES As of December 31, 2015, we have performance shares (PS) outstanding under
our 2012 Omnibus Incentive Plan. We grant performance shares payable in stock to officers which vest in full over
a three-year performance period. These grants are based equally on a total shareholder return (TSR) measure and
AAM's three-year earnings before interest, taxes, depreciation and amortization (EBITDA) margin. The TSR metric
compares our TSR over the three-year performance period relative to the TSR of our pre-defined competitor peer
group. Share price appreciation and dividends paid are measured over the performance period to determine TSR.
As these awards are settled in stock, the compensation expense booked ratably over the vesting period is recorded
to paid-in-capital.
61
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following table summarizes activity relating to our performance shares:
EBITDA Awards
Outstanding at January 1, 2014 ....................................................
Granted ........................................................................................
Vested ..........................................................................................
Canceled ......................................................................................
Outstanding at December 31, 2014 ...............................................
Granted ........................................................................................
Vested ..........................................................................................
Canceled ......................................................................................
Outstanding at December 31, 2015 ...............................................
TSR Awards
Outstanding at January 1, 2014 ....................................................
Granted ........................................................................................
Vested ..........................................................................................
Canceled ......................................................................................
Outstanding at December 31, 2014 ...............................................
Granted ........................................................................................
Vested ..........................................................................................
Canceled ......................................................................................
Outstanding at December 31, 2015 ...............................................
Number of
Shares
Weighted Average
Grant Date Fair
Value per Share
(in millions, except per share data)
— $
0.2
—
—
0.2 $
0.1
—
—
0.3 $
— $
0.2
—
—
0.2 $
0.1
—
—
0.3 $
—
27.66
—
—
27.66
37.68
—
—
32.27
—
21.11
—
—
21.11
31.22
—
—
25.77
We estimate the fair value of our EBITDA performance shares on the date of grant using our estimated three-
year EBITDA margin, based on AAM's budget and long-range plan assumptions at that time, and adjust quarterly as
necessary. We estimated the fair value of our TSR performance shares on the date of grant using the Monte Carlo
simulation approach. The Monte Carlo simulation approach utilizes inputs on volatility assumptions, risk free rates,
the price of the Company’s and our competitor peer group's common stock and their correlation as of each
valuation date. Volatility assumptions are based on historical and implied volatility measurements.
Based on the current fair value, the estimated unrecognized compensation cost related to unvested PS totaled
$9.4 million, as of December 31, 2015. The weighted-average period over which this cost is expected to be
recognized is approximately one year.
PERFORMANCE AWARDS As of December 31, 2015, we have no TSR performance awards outstanding.
We granted performance awards payable in cash to our officers and executives which vested in full over a three
year performance period. The payout of these awards was based on a TSR measure that compared our TSR over
the three-year performance period relative to the TSR of our pre-defined competitor peer group. Share price
appreciation and dividends paid were measured over the performance period to determine TSR.
According to the applicable accounting guidance, these awards were considered to be stock-based
compensation because the final payout amount was based “at least in part” on the price of our shares. However, as
these awards were settled in cash, they are determined to be liability awards and have been remeasured at the end
of each reporting period until settlement. The fair value of the performance awards was calculated on a quarterly
basis using the Monte Carlo simulation approach, described above, and the liability was adjusted accordingly based
on changes to the fair value and the percentage of time vested.
62
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
We recognized compensation expense associated with these performance awards of approximately $1.4 million
in 2014 and $7.9 million in 2013. We made a cash payment of $3.7 million and $8.5 million in 2015 and 2014,
respectively, related to the TSR performance awards.
7.
INCOME TAXES
Income before income taxes for U.S. and non-U.S. operations was as follows:
2015
2014
(in millions)
2013
U.S. income (loss) .................................................................... $
Non - U.S. income ....................................................................
Total income before income taxes............................................ $
88.3 $
184.4
272.7 $
12.0 $
164.7
176.7 $
(23.8)
110.1
86.3
The following is a summary of the components of our provisions for income taxes:
Current
Federal ..................................................................................... $
Other state and local ................................................................
Foreign .....................................................................................
Total current ............................................................................. $
Deferred
Federal ..................................................................................... $
Foreign .....................................................................................
Total deferred ...........................................................................
Total income tax expense (benefit)........................................... $
2015
2014
(in millions)
2013
0.5 $
0.2
10.8
11.5 $
26.4 $
(0.8)
25.6
37.1 $
0.6 $
0.1
44.2
44.9 $
(11.6) $
0.4
(11.2)
33.7 $
(1.3)
0.1
12.1
10.9
(9.3)
(9.8)
(19.1)
(8.2)
The following is a reconciliation of our provision for income taxes to the expected amounts using statutory rates:
Federal statutory ......................................................................
Foreign income taxes ...............................................................
Change in enacted tax rate ......................................................
State and local .........................................................................
Tax Credits ...............................................................................
Valuation allowance .................................................................
U.S. tax on unremitted foreign earnings ...................................
Uncertain tax positions .............................................................
Other ........................................................................................
Effective income tax rate ..........................................................
2015
2014
2013
35.0%
(17.6)
—
0.1
(1.3)
2.6
0.2
(5.7)
0.3
35.0%
(25.1)
—
0.1
(11.4)
4.5
1.9
13.0
1.1
35.0 %
(48.5)
(9.9)
0.2
—
12.4
(0.2)
(0.5)
2.0
13.6%
19.1%
(9.5)%
Our income tax expense and effective tax rate for 2015, 2014 and 2013 primarily reflect favorable foreign tax
rates, along with our inability to realize a tax benefit for current foreign losses. In the fourth quarter of 2015, we
recorded an $11.5 million reduction in tax expense related to uncertain tax positions attributable to transfer pricing
as a result of new information from our discussions with foreign tax authorities.
63
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In 2014, we recorded tax expense of $23.1 million for changes to prior year uncertain tax positions related to
transfer pricing and expense of $3.4 million for a change in estimate for U.S. tax on unremitted foreign earnings.
We also recorded a net tax benefit of $20.1 million in 2014 related to our ability to utilize tax credits in future periods
resulting in the recognition of a deferred tax asset.
In 2013, Mexican tax reform was enacted that, among other things, increased the tax rate related to
Maquiladora Companies from 17.5% to 30%. We recorded a tax benefit of $8.5 million as a result of revaluing our
deferred tax assets at the newly enacted rate. In 2013, we recorded tax expense of $4.8 million relating to changes
in estimates in the U.S. and certain foreign jurisdictions. During 2013, we also settled various income tax audits
resulting in a reduction of our liability for unrecognized income tax benefits of $8.4 million and a cash payment of
$4.7 million.
As of December 31, 2015 and 2014, we have refundable income taxes of $2.5 million and $5.6 million,
respectively, classified as prepaid expenses and other on our Consolidated Balance Sheet. We also have income
taxes payable of $6.8 million and $3.0 million classified as other accrued expenses on our Consolidated Balance
Sheet as of December 31, 2015 and 2014, respectively. The increase in our income taxes payable relates primarily
to a reclassification from our long-term unrecognized income tax benefit related to the estimated payment to be
made in the first quarter of 2016 as a result of the resolution of transfer pricing audits with the Mexican tax
authorities. As of December 31, 2015 and 2014, we have accrued value added tax payable of $35.8 million and
$36.1 million, respectively, classified as other accrued expenses on our Consolidated Balance Sheet.
In November 2015, the FASB issued ASU 2015-17 - Income Taxes (Topic 740): Balance Sheet Classification of
Deferred Taxes, which simplifies the presentation of deferred income taxes. This ASU requires that deferred tax
assets and liabilities be classified as noncurrent in our Consolidated Balance Sheet. We early adopted this ASU
effective December 31, 2015 on a prospective basis. Adoption of this ASU resulted in a reclassification of our net
current deferred tax asset and liabilities, by jurisdiction, to the net noncurrent assets and liabilities on our
Consolidated Balance Sheet as of December 31, 2015. No prior periods were retrospectively adjusted. The
following is a summary of the significant components of our deferred tax assets and liabilities:
Current deferred tax assets
Employee benefits ................................................................................................ $
Inventory ...............................................................................................................
Prepaid taxes and other .......................................................................................
Valuation allowance ..............................................................................................
Total current deferred tax assets .......................................................................... $
Current deferred tax liabilities
Unrealized foreign exchange gain and other ........................................................
Current deferred tax asset, net ............................................................................. $
December 31,
2015
2014
(in millions)
— $
—
—
—
— $
—
— $
26.0
7.5
16.9
(10.2)
40.2
(0.1)
40.1
Current deferred tax assets and liabilities recognized in our Consolidated Balance Sheets are as follows:
December 31,
2015
2014
(in millions)
U.S. federal and state deferred tax asset, net ...................................................... $
Other foreign deferred tax asset, net ....................................................................
Current deferred tax asset, net ............................................................................. $
— $
—
— $
27.0
13.1
40.1
64
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following is a summary of the significant components of our noncurrent deferred tax assets and liabilities:
Noncurrent deferred tax assets
Employee benefits ................................................................................................ $
Inventory ...............................................................................................................
Net operating loss (NOL) carryforwards ...............................................................
Tax credit carryforwards .......................................................................................
Capital allowance carryforwards ...........................................................................
Fixed assets .........................................................................................................
Deferred revenue .................................................................................................
Capitalized expenditures ......................................................................................
Other ....................................................................................................................
Valuation allowances ............................................................................................
Noncurrent deferred tax assets ............................................................................ $
December 31,
2015
2014
(in millions)
211.1 $
9.4
117.0
25.8
13.6
13.5
15.0
120.5
22.4
(167.3)
381.0 $
193.9
—
104.7
69.8
14.4
6.6
12.6
111.2
2.3
(146.7)
368.8
Noncurrent deferred tax liabilities
Fixed assets and other .........................................................................................
Noncurrent deferred tax asset, net ....................................................................... $
(14.2)
366.8 $
(9.1)
359.7
Noncurrent deferred tax assets and liabilities recognized in our Consolidated Balance Sheets are as follows:
U.S. federal and state deferred tax asset, net ...................................................... $
Other foreign deferred tax asset (liability), net ......................................................
Noncurrent deferred tax asset, net ....................................................................... $
December 31,
2015
2014
(in millions)
354.7 $
12.1
366.8 $
362.2
(2.5)
359.7
DEFERRED INCOME TAX ASSETS AND LIABILITIES AND VALUATION ALLOWANCES The deferred
income tax assets and liabilities summarized above reflect the impact of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and the basis of such assets and liabilities
as measured by tax laws. As of December 31, 2015 and December 31, 2014, we had deferred tax assets from
domestic and foreign NOL and tax credit carryforwards of $156.4 million and $188.9 million, respectively.
Approximately $87.9 million of the deferred tax assets at December 31, 2015 relate to tax credits that can be
carried forward indefinitely with the remainder having carryover periods of 5 to 20 years. The deferred tax asset
relating to U.S. tax credit carryforwards as of December 31, 2015 is lower than the actual amount reported and
expected to be reported on our U.S. tax returns by $5.1 million. This difference is the result of tax deductions in
excess of financial statement amounts for stock based compensation. When this amount is realized, we will
increase our additional paid in capital and reduce our income taxes payable.
Accounting guidance for income taxes requires a deferred tax liability be established for the U.S. tax impact of
undistributed earnings of foreign subsidiaries unless it can be shown that these earnings will be permanently
reinvested outside the U.S. Deferred income taxes have not been provided on $724.1 million of undistributed
earnings of certain foreign subsidiaries as such amounts are considered permanently reinvested. The remittance of
these undistributed earnings may subject us to U.S. income taxes and certain foreign withholding taxes at the time
of remittance, however, the determination of the amount of unrecognized deferred tax liability relating to the
remittance of undistributed earnings is not practicable.
65
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In accordance with the accounting guidance for income taxes, we estimate whether recoverability of our
deferred tax assets is “more likely than not,” based on forecasts of taxable income in the related tax jurisdictions. In
this estimate, we use historical results, projected future operating results based upon approved business plans,
eligible carry forward periods, tax planning opportunities and other relevant considerations. This includes the
consideration of tax law changes, prior profitability performance and the uncertainty of future projected profitability.
As of December 31, 2015 and December 31, 2014, we have a valuation allowance of $167.3 million and $156.9
million, respectively, related to net deferred tax assets in several foreign jurisdictions and U.S. state and local
jurisdictions.
UNRECOGNIZED INCOME TAX BENEFITS To the extent our uncertain tax positions do not meet the “more
likely than not” threshold, we have derecognized such positions. To the extent our uncertain tax positions meet the
“more likely than not” threshold, we have measured and recorded the highest probable benefit, and have
established appropriate reserves for benefits that exceed the amount likely to be sustained upon examination.
A reconciliation of the beginning and ending amounts of unrecognized income tax benefits is as follows:
Balance at January 1, 2013 .................................................................. $
Increase in prior year tax positions .....................................................
Decrease in prior year tax positions ...................................................
Increase in current year tax positions .................................................
Settlement ..........................................................................................
Balance at December 31, 2013 ............................................................. $
Increase in prior year tax positions .....................................................
Decrease in prior year tax positions ...................................................
Increase in current year tax positions .................................................
Balance at December 31, 2014 ............................................................. $
Increase in prior year tax positions .....................................................
Decrease in prior year tax positions ...................................................
Increase in current year tax positions .................................................
Foreign currency remeasurement adjustment ....................................
Balance at December 31, 2015 ............................................................. $
Unrecognized
Income Tax
Benefits
Interest and
Penalties
(in millions)
20.7 $
6.1
(4.4)
4.0
(4.7)
21.7 $
10.5
(0.5)
15.6
47.3 $
—
(9.4)
8.8
(5.1)
41.6 $
10.2
0.1
(6.2)
—
—
4.1
8.1
—
—
12.2
1.4
(4.9)
—
(1.8)
6.9
At December 31, 2015 and December 31, 2014, we had $41.6 million and $47.3 million of net unrecognized
income tax benefits, respectively. The decrease in prior year tax positions at December 31, 2015 reflects a
reduction in our income tax expense of $11.5 million attributable to transfer pricing as a result of new information
from our discussions with Mexican tax authorities.
In 2015, 2014, and 2013, we recognized a benefit of $3.5 million, expense of $8.1 million and a benefit of $6.1
million, respectively, related to interest and penalties in income tax expense on our Consolidated Statement of
Income. We have a liability of $6.9 million and $12.2 million related to the estimated future payment of interest and
penalties at December 31, 2015 and 2014, respectively. The amount of the uncertain tax position as of December
31, 2015 that, if recognized, would affect the effective tax rate is $48.5 million.
We file income tax returns in the U.S. federal jurisdiction, as well as various states and foreign jurisdictions. The
Internal Revenue Service (IRS) commenced an examination of our U.S. income tax returns for 2012 and 2013 in
2015. In January 2016, we completed negotiations with the Mexican tax authorities to settle 2007 through 2009
transfer pricing audits. We made a payment of $22.9 million on January 29, 2016 that fully satisfies our obligations
for transfer pricing issues for tax years 2007 through 2013. Including this settlement, we expect our total transfer
pricing related payments in 2016 to the Mexican tax authorities to be in the range of $30 to $40 million.
66
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In 2015, we closed our transfer pricing examination for the 2010/2011 tax year with the India Tax Authorities
with no resulting adjustments. We are no longer subject to U.S. federal, state and local, or non-U.S. income tax
examinations by tax authorities for years before 2007. At this time, we are not aware of any examinations
underway in any other foreign jurisdictions.
The U.S. federal income tax examinations for the years 2010 and 2011 were settled in 2015. This settlement
resulted in no cash payment or reduction in our liability for unrecognized income tax benefits. The U.S. federal
income tax examination for the years 2008 and 2009 and the Mexico transfer pricing examination for the year 2006
were settled in 2013. These settlements resulted in a reduction of a portion of our liability for unrecognized income
tax benefits and a cash payment of $4.7 million in 2013.
Based on the status of the IRS audits and audits outside the U.S., 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. Although it is difficult to estimate with certainty the amount of an audit settlement, we do not expect
the settlement will be materially different from what we have recorded. We will continue to monitor the progress
and conclusions of all ongoing audits and will adjust our estimated liability as necessary.
67
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. EARNINGS 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 nonforfeitable 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):
2015
2014
2013
(in millions, except per share data)
Numerator
Net income attributable to AAM .......................................................... $
Less: Net income attributable to participating securities .................
Net income attributable to common shareholders - Basic ................... $
Undistributed earnings reallocated to common shareholders
under two step dilutive method .......................................................
Net income attributable to common shareholders - Dilutive ................ $
235.6 $
(5.3)
230.3 $
—
230.3 $
143.0 $
(2.9)
140.1 $
—
140.1 $
Denominators
Basic common shares outstanding -
Weighted-average shares outstanding ...........................................
Less: Participating securities ......................................................
Weighted-average common shares outstanding ............................
77.7
(1.8)
75.9
77.3
(1.6)
75.7
94.5
(1.9)
92.6
—
92.6
76.7
(1.5)
75.2
Effect of dilutive securities -
Dilutive stock-based compensation ................................................
0.4
0.2
0.1
Diluted shares outstanding -
Adjusted weighted-average shares after assumed conversions.....
76.3
75.9
75.3
Basic EPS ........................................................................................... $
3.03 $
1.85 $
1.23
Diluted EPS ........................................................................................ $
3.02 $
1.85 $
1.23
Certain exercisable stock options were excluded in the computations of diluted EPS because the exercise price
of these options was greater than the average annual market prices of our stock. The number of stock options
outstanding excluded from the calculation of diluted EPS was 0.2 million at year-end 2015, 0.5 million at year-end
2014 and 2.0 million at year-end 2013. The exercise price related to these stock options was $26.02 at year-end
2015, and a range of $19.54 - $26.65 at year-end 2014 and $19.54 - $40.83 at year-end 2013.
68
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. COMMITMENTS AND CONTINGENCIES
PURCHASE COMMITMENTS Obligated purchase commitments for capital expenditures and related project
expenses were approximately $104.1 million at December 31, 2015 and $109.8 million at December 31, 2014.
LEGAL PROCEEDINGS We are involved in various legal proceedings incidental to our business. Although the
outcome of these matters cannot be predicted with certainty, we do not believe that any of these matters,
individually or in the aggregate, will have a material 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 will continue to make, capital and
other expenditures to comply with environmental requirements, including recurring administrative costs. Such
expenditures were not significant during 2015, 2014 and 2013.
ENVIRONMENTAL OBLIGATIONS Due to the nature of our manufacturing operations, we have legal
obligations to perform asset retirement activities pursuant to federal, state, and local requirements. The process of
estimating environmental liabilities is complex. Significant uncertainty may exist related to the timing and method of
the settlement of these obligations. Therefore, these liabilities are not reasonably estimable until a triggering event
occurs that allows us to estimate a range and assess the probabilities of potential settlement dates and the potential
methods of settlement.
In the future, we will update our estimated costs and potential settlement dates and methods and their
associated probabilities based on available information. Any update may change our estimate and could result in a
material adjustment to this liability.
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
take actions to improve product quality and minimize warranty claims. We continuously evaluate these estimates
and our customers' administration of their warranty programs. We closely monitor actual warranty claim data and
adjust the liability, as necessary, on a quarterly basis.
During 2015 and 2014, we also made adjustments to our warranty accrual to reflect revised estimates
regarding our projected future warranty obligations. The following table provides a reconciliation of changes in the
product warranty liability:
Beginning balance ............................................................................................. $
Accruals .............................................................................................................
Settlements ........................................................................................................
Adjustments to prior period accruals ..................................................................
Foreign currency translation ...............................................................................
Ending balance ................................................................................................... $
December 31,
2015
2014
(in millions)
12.4 $
17.0
(6.1)
14.0
(0.7)
36.6 $
14.3
9.3
(2.2)
(8.7)
(0.3)
12.4
69
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Reclassification adjustments and other activity impacting accumulated other comprehensive income (loss)
(AOCI) during the year ended December 31, 2015, December 31, 2014 and December 31, 2013 are as follows (in
millions):
Defined
Benefit Plans
Foreign
Currency
Translation
Adjustments
Unrecognized
Loss on Cash
Flow Hedges
Total
Balance at December 31, 2014 ......... $
(240.6)
$
(48.9) $
(7.4)
$
(296.9)
Other comprehensive income (loss)
before reclassifications .....................
Income tax effect of other
comprehensive income (loss) before
reclassifications.................................
Amounts reclassified from
accumulated other comprehensive
loss into net income ..........................
Income taxes reclassified into net
income ..............................................
Net current period other
comprehensive income (loss) ...........
21.2
(7.2)
4.0 (a)
(1.3)
16.7
(70.3)
(16.9)
(66.0)
—
—
—
—
(7.2)
10.9 (b)
14.9
—
(1.3)
(70.3)
(6.0)
(59.6)
Balance at December 31, 2015 ......... $
(223.9)
$
(119.2) $
(13.4)
$
(356.5)
Balance at December 31, 2013 ......... $
Defined
Benefit Plans
(197.9)
$
Foreign
Currency
Translation
Adjustments
Unrecognized
Loss on Cash
Flow Hedges
0.3
(18.6) $
Total
$
(216.2)
Other comprehensive loss before
reclassifications.................................
Income tax effect of other
comprehensive income (loss) before
reclassifications.................................
Amounts reclassified from
accumulated other comprehensive
income (loss) into net income ...........
Income taxes reclassified into net
income ..............................................
Net current period other
comprehensive loss ..........................
(104.7)
(30.3)
(6.8)
(141.8)
36.6
38.8 (a)(c)
(13.4)
(42.7)
—
—
—
—
36.6
(0.9) (b)
37.9
—
(13.4)
(30.3)
(7.7)
(80.7)
Balance at December 31, 2014 ......... $
(240.6)
$
(48.9) $
(7.4)
$
(296.9)
70
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Balance at December 31, 2012
Other comprehensive income (loss)
before reclassifications
Income tax effect of other
comprehensive income (loss) before
reclassifications
Amounts reclassified from accumulated
other comprehensive income (loss) into
net income
Income taxes reclassified into net
income
Net current period other
comprehensive income (loss)
Defined
Benefit Plans
(274.5)
$
Foreign
Currency
Translation
Adjustments
7.6
$
Unrecognized
Gain on Cash
Flow Hedges
Total
$
2.3
$
(264.6)
104.4
(26.2)
(36.7)
13.5 (a)
(4.6)
76.6
—
—
—
(26.2)
0.8
—
(2.8) (b)
—
(2.0)
79.0
(36.7)
10.7
(4.6)
48.4
Balance at December 31, 2013
$
(197.9)
$
(18.6) $
0.3
$
(216.2)
(a) The amount reclassified from AOCI included $4.8 million in cost of goods sold (COGS) and $(0.8) million in
selling, general & administrative expenses (SG&A) for the year ended December 31, 2015, $36.0 million in COGS
and $2.8 million in SG&A for the year ended December 31, 2014 and $7.0 million in COGS and $6.5 million in
SG&A for the year ended December 31, 2013.
(b) The amounts reclassified from AOCI are included in COGS.
(c) Includes a reclassification of $23.1 million, net of tax, related to our terminated vested lump-sum pension
payout in the U.S.
71
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. SEGMENT AND GEOGRAPHIC INFORMATION
We operate in one reportable segment: the manufacture, engineer, design and validation of driveline systems
and related components and chassis modules for light trucks, SUVs, passenger cars, crossover vehicles and
commercial vehicles. Financial information relating to our operations by geographic area is presented in the
following table. Net sales are attributed to countries based upon location of customer. Long-lived assets exclude
deferred income taxes.
Net sales
United States ...................................................................... $
Canada ...............................................................................
Mexico ................................................................................
South America ....................................................................
China ..................................................................................
All other Asia ......................................................................
Europe and other ................................................................
Total net sales .................................................................... $
Long-lived assets
United States ...................................................................... $
Mexico ................................................................................
South America ....................................................................
China ..................................................................................
All other Asia ......................................................................
Europe ................................................................................
Total long-lived assets ........................................................ $
2015
December 31,
2014
(in millions)
2013
2,121.9
$
2,073.6
$
1,682.0
119.3
1,060.2
106.6
185.5
185.2
124.4
64.6
1,055.5
156.5
71.3
167.3
107.2
74.4
865.6
201.1
34.4
220.8
129.0
3,903.1
$
3,696.0
$
3,207.3
824.0
522.6
48.5
85.8
103.7
120.3
$
867.1 (a) $
513.2
827.9 (a)
469.3
80.5
59.8
117.5
94.0
100.2
63.8
112.9
93.2
1,667.3 (a)
1,704.9
$
1,732.1 (a) $
(a) These amounts have been adjusted to reflect the impact of retrospectively adopting the new debt issuance cost
presentation accounting standard as described in Item 8. Financial Statements and Supplementary Data - Note 1 -
Organization and Summary of Significant Accounting Policies.
72
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. UNAUDITED QUARTERLY FINANCIAL DATA
Three Months Ended,
March 31
June 30
September 30
December 31
(in millions, except per share data)
2015
Net sales ......................................................... $
Gross profit ......................................................
Net income ......................................................
Basic EPS (1) .................................................... $
Diluted EPS (1) ................................................. $
2014
Net sales ......................................................... $
Gross profit ......................................................
Net income ......................................................
Basic EPS (1) .................................................... $
Diluted EPS (1) ................................................. $
969.1 $
1,004.0 $
971.6 $
152.8
53.2
0.69 $
0.68 $
164.5
58.6
0.75 $
0.75 $
158.3
60.9
0.78 $
0.78 $
858.8 $
946.9 $
950.8 $
121.9
33.6
0.44 $
0.44 $
149.0
52.2
0.67 $
0.67 $
140.7
44.0
0.57 $
0.57 $
958.4
159.8
62.9
0.81
0.81
939.5
111.2
13.2
0.17
0.17
(1) Full year basic and diluted EPS will not necessarily agree to the sum of the four quarters because each
quarter is a separate calculation.
73
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
Holdings has no significant assets other than its 100% ownership in AAM, Inc. and no direct subsidiaries other than
AAM, Inc. The 7.75% Notes, 6.625% Notes, 6.25% Notes and 5.125% Notes are senior unsecured obligations of AAM
Inc.; all of which are fully and unconditionally guaranteed, on a joint and several basis, by Holdings and substantially all
domestic subsidiaries of AAM, Inc., which are 100% indirectly owned by Holdings.
These Condensed Consolidating Financial Statements are prepared under the equity method of accounting whereby
the investments in subsidiaries are recorded at cost and adjusted for the parent's share of the subsidiaries' cumulative
results of operations, capital contributions and distributions, and other equity changes.
Condensed Consolidating Statements of Income
2015
Net sales
Holdings
AAM Inc.
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
(in millions)
Elims
Consolidated
External .............................................................. $
— $
1,149.0
$
210.3
$
2,543.8
$
— $
3,903.1
(286.7)
(286.7)
(286.7)
—
3,903.1
3,267.7
635.4
277.3
358.1
(85.4)
272.7
37.1
—
235.6
—
235.6
(59.6)
176.0
Intercompany ......................................................
Total net sales ........................................................
Cost of goods sold ..................................................
Gross profit .............................................................
Selling, general and administrative expenses ........
Operating income (loss) .........................................
Non-operating income (expense), net ....................
Income (loss) before income taxes .........................
Income tax expense ...............................................
Earnings (loss) from equity in subsidiaries .............
Net income (loss) before royalties ..........................
Royalties ................................................................
Net income after royalties .......................................
Other comprehensive loss, net of tax .....................
—
—
—
—
—
—
—
—
—
235.6
235.6
—
235.6
(59.6)
9.4
1,158.4
1,114.5
43.9
210.6
(166.7)
(99.3)
(266.0)
21.6
262.3
(25.3)
260.9
235.6
(59.6)
258.3
468.6
385.2
83.4
0.1
83.3
10.1
93.4
5.5
(20.8)
67.1
—
67.1
(63.6)
19.0
2,562.8
2,054.7
508.1
66.6
441.5
3.8
445.3
10.0
—
435.3
(260.9)
174.4
(68.4)
—
—
—
—
—
—
(477.1)
(477.1)
—
(477.1)
191.6
Comprehensive income .......................................... $
176.0
$
176.0
$
3.5
$
106.0
$
(285.5) $
74
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2014
Net sales
Holdings
AAM Inc.
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Elims
Consolidated
External .............................................................. $
— $
1,099.5
$
225.1
$
2,371.4
$
— $
3,696.0
(281.6)
(281.6)
(281.6)
—
3,696.0
3,173.2
Intercompany ......................................................
Total net sales ........................................................
Cost of goods sold ..................................................
Gross profit .............................................................
Selling, general and administrative expenses ........
Operating income (loss) .........................................
Non-operating income (expense), net ....................
Income (loss) before income taxes .........................
Income tax expense (benefit) .................................
Earnings (loss) from equity in subsidiaries .............
Net income (loss) before royalties ..........................
Royalties ................................................................
Net income after royalties .......................................
Other comprehensive loss, net of tax .....................
—
—
—
—
—
—
—
—
—
143.0
143.0
—
143.0
(80.7)
13.1
1,112.6
1,112.4
0.2
194.0
(193.8)
(103.0)
(296.8)
(11.8)
204.0
(81.0)
224.0
143.0
(80.7)
246.9
472.0
396.1
75.9
0.2
75.7
9.0
84.7
0.9
(23.3)
60.5
—
60.5
(23.5)
21.6
2,393.0
1,946.3
446.7
61.0
385.7
3.1
388.8
44.6
—
344.2
(224.0)
120.2
(34.8)
—
—
—
—
—
—
(323.7)
(323.7)
—
(323.7)
139.0
Comprehensive income .......................................... $
62.3
$
62.3
$
37.0
$
85.4
$
(184.7) $
522.8
255.2
267.6
(90.9)
176.7
33.7
—
143.0
—
143.0
(80.7)
62.3
2013
Net sales
Holdings
AAM Inc.
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Elims
Consolidated
External ............................................................... $
— $
773.6
$
226.0
$
2,207.7
$
— $
3,207.3
Intercompany .......................................................
Total net sales ........................................................
Cost of goods sold ..................................................
Gross profit .............................................................
Selling, general and administrative expenses ........
Operating income (loss) .........................................
Non-operating income (expense), net ....................
Income (loss) before income taxes .........................
Income tax expense (benefit) .................................
Earnings (loss) from equity in subsidiaries .............
Net income (loss) before royalties ..........................
Royalties ................................................................
Net income after royalties .......................................
Other comprehensive income (loss), net of tax ......
—
—
—
—
—
—
—
—
—
94.5
94.5
—
94.5
48.4
15.3
788.9
769.4
19.5
182.4
(162.9)
(155.1)
(318.0)
(24.9)
167.0
(126.1)
220.6
94.5
48.4
226.1
452.1
389.0
63.1
0.1
63.0
10.7
73.7
0.9
(21.7)
51.1
—
51.1
(7.2)
14.0
2,221.7
1,825.6
396.1
55.9
340.2
(9.6)
330.6
15.8
—
314.8
(220.6)
94.2
(10.8)
(255.4)
(255.4)
(255.4)
—
—
—
—
—
—
(239.8)
(239.8)
—
(239.8)
(30.4)
—
3,207.3
2,728.6
478.7
238.4
240.3
(154.0)
86.3
(8.2)
—
94.5
—
94.5
48.4
Comprehensive income .......................................... $
142.9
$
142.9
$
43.9
$
83.4
$
(270.2) $
142.9
75
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Condensed Consolidating Balance Sheets
2015
Holdings
AAM Inc.
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Elims
Consolidated
Assets
Current assets
Cash and cash equivalents ........................... $
Accounts receivable, net ...............................
Intercompany receivables .............................
Inventories, net .............................................
Other current assets ......................................
Total current assets ...........................................
Property, plant and equipment, net ...................
Goodwill ............................................................
Intercompany notes and accounts receivable ...
Other assets and deferred charges ...................
Investment in subsidiaries .................................
Total assets ....................................................... $
Liabilities and stockholders' equity
Current liabilities
Current portion of long-term debt .................. $
Accounts payable ..........................................
Intercompany payables .................................
Other current liabilities ..................................
Total current liabilities........................................
Intercompany notes and accounts payable .......
Long-term debt, net ...........................................
Investment in subsidiaries obligation.................
Other long-term liabilities ..................................
Total liabilities ....................................................
Total stockholders' equity ..................................
Total liabilities and stockholders' equity............. $
— $
—
—
—
—
—
—
—
—
—
622.3
622.3
$
—
—
—
—
—
320.8
—
—
—
320.8
301.5
622.3
$
52.0
127.2
311.8
59.8
30.4
581.2
214.1
—
393.5
683.6
1,315.9
3,188.3
103.0
248.7
134.2
485.9
10.3
1,336.5
—
733.3
2,566.0
622.3
3,188.3
(in millions)
$
— $
19.7
249.7
31.1
0.5
301.0
91.9
147.8
252.2
41.4
—
834.3
$
— $
35.8
154.9
4.1
194.8
—
4.5
111.7
0.5
311.5
522.8
834.3
$
$
$
$
230.5
392.2
9.4
139.6
41.2
812.9
740.2
6.6
—
152.9
—
1,712.6
3.3
273.9
167.3
144.9
589.4
314.6
34.7
92.5
1,031.2
681.4
1,712.6
$
— $
—
(570.9)
—
—
(570.9)
—
—
(645.7)
—
(1,938.2)
$ (3,154.8) $
$
— $
—
(570.9)
—
(570.9)
(645.7)
—
(111.7)
—
(1,328.3)
(1,826.5)
$ (3,154.8) $
282.5
539.1
—
230.5
72.1
1,124.2
1,046.2
154.4
—
877.9
—
3,202.7
3.3
412.7
—
283.2
699.2
—
1,375.7
—
826.3
2,901.2
301.5
3,202.7
2014
Holdings
AAM Inc.
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Elims
Consolidated
Assets
Current assets
Cash and cash equivalents ........................... $
Accounts receivable, net ...............................
Intercompany receivables .............................
Inventories, net .............................................
Other current assets ......................................
Total current assets ...........................................
Property, plant and equipment, net ...................
Goodwill ............................................................
Intercompany notes and accounts receivable ...
Other assets and deferred charges ...................
Investment in subsidiaries .................................
Total assets ....................................................... $
Liabilities and stockholders' equity
Current liabilities
Current portion of long-term debt .................. $
Accounts payable ..........................................
Intercompany payables .................................
Other current liabilities ..................................
Total current liabilities........................................
Intercompany notes and accounts payable .......
Long-term debt, net ...........................................
Investment in subsidiaries obligation.................
Other long-term liabilities ..................................
Total liabilities ....................................................
Total stockholders' equity ..................................
Total liabilities and stockholders' equity............. $
— $
—
—
—
—
—
—
—
—
—
433.8
433.8
$
— $
—
—
—
—
320.4
—
—
—
320.4
113.4
433.8
$
69.7
137.5
231.0
64.9
53.6
556.7
230.0
—
509.4
717.8 (a)
1,134.6
3,148.5 (a) $
9.4
127.3
177.0
121.0
434.7
6.9
1,464.3 (a)
—
808.8
2,714.7 (a)
433.8
3,148.5 (a) $
$
— $
23.9
174.1
32.3
2.6
232.9
87.9
147.9
219.1
45.7
—
733.5
$
38.9
105.3
4.4
148.6
—
4.9
53.8
0.6
207.9
525.6
733.5
$
$
— $
179.5
371.3
10.0
151.6
52.6
765.0
743.2
7.1
—
121.3
—
1,636.6
3.6
278.1
132.8
104.5
519.0
401.2
35.4
—
125.8
1,081.4
555.2
1,636.6
$
— $
—
(415.1)
—
—
(415.1)
—
—
(728.5)
—
(1,568.4)
$ (2,712.0) $
$
— $
—
(415.1)
—
(415.1)
(728.5)
—
(53.8)
—
(1,197.4)
(1,514.6)
$ (2,712.0) $
249.2
532.7
—
248.8
108.8
1,139.5
1,061.1
155.0
—
884.8 (a)
—
3,240.4 (a)
13.0
444.3
—
229.9
687.2
—
1,504.6 (a)
—
935.2
3,127.0 (a)
113.4
3,240.4 (a)
(a) These amounts have been adjusted to reflect the impact of retrospectively adopting ASU 2015-03 as described in Item 8. Financial Statements and
Supplementary Data - Note 1 - Organization and Summary of Significant Accounting Policies.
76
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Condensed Consolidating Statements of Cash Flows
2015
Holdings
AAM Inc.
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
(in millions)
Elims
Consolidated
Net cash provided by operating activities.......... $
— $
163.7
$
68.1
$
145.8
$
— $
377.6
Investing activities
Purchases of property, plant and equipment ..........
Proceeds from sale of property, plant and
equipment ..............................................................
Proceeds from government grants .........................
Intercompany activity ..............................................
Net cash used in investing activities .......................
Financing activities
Net debt activity ......................................................
Employee stock option exercises ...........................
Purchase of treasury stock .....................................
Purchase of noncontrolling interest ........................
Intercompany activity ..............................................
Net cash provided by (used in) financing activities .
Effect of exchange rate changes on cash...............
Net increase (decrease) in cash and cash
equivalents .............................................................
Cash and cash equivalents at beginning of period .
—
—
—
—
—
—
—
(3.1)
—
3.1
—
—
—
—
(36.4)
(12.8)
(144.3)
0.1
—
—
(36.3)
0.1
—
(55.0)
(67.7)
(142.8)
(0.4)
0.8
—
—
(3.1)
(145.1)
—
(17.7)
69.7
—
—
—
—
(0.4)
—
—
—
0.1
5.1
—
(139.1)
3.0
—
—
(1.1)
55.0
56.9
(12.6)
51.0
179.5
—
—
—
55.0
55.0
—
—
—
—
(55.0)
(55.0)
—
—
—
Cash and cash equivalents at end of period........... $
— $
52.0
$
— $
230.5
$
— $
(193.5)
0.3
5.1
—
(188.1)
(140.2)
0.8
(3.1)
(1.1)
—
(143.6)
(12.6)
33.3
249.2
282.5
2014
Holdings
AAM Inc.
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Elims
Consolidated
Net cash provided by operating activities.......... $
— $
83.4
$
41.9
$
193.1
$
— $
318.4
Investing activities
Purchases of property, plant and equipment ..........
Proceeds from sale of property, plant and
equipment ..............................................................
Proceeds from government grants .........................
Intercompany activity ..............................................
Net cash used in investing activities .......................
Financing activities
Net debt activity ......................................................
Debt issuance costs ...............................................
Employee stock option exercises ...........................
Purchase of treasury stock .....................................
Intercompany activity ..............................................
Net cash provided by (used in) financing activities .
Effect of exchange rate changes on cash...............
Net increase in cash and cash equivalents ............
Cash and cash equivalents at beginning of period .
—
—
—
—
—
—
—
—
(0.3)
0.3
—
—
—
—
Cash and cash equivalents at end of period........... $
— $
(51.3)
(18.6)
(136.6)
0.4
—
(23.3)
(41.5)
0.8
2.1
—
(133.7)
(0.4)
(13.8)
—
—
—
—
(0.4)
—
—
—
—
—
—
23.3
9.5
(6.5)
62.4
117.1
—
—
—
23.3
23.3
—
—
—
—
(23.3)
(23.3)
—
—
—
(206.5)
9.1
2.1
—
(195.3)
(22.0)
(0.3)
1.2
(0.3)
—
(21.4)
(6.5)
95.2
154.0
249.2
$
— $
179.5
$
— $
7.9
—
—
(43.4)
(7.8)
(0.3)
1.2
—
(0.3)
(7.2)
—
32.8
36.9
69.7
77
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2013
Holdings
AAM Inc.
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Elims
Consolidated
Net cash provided by (used in) operating
activities ................................................................ $
— $
(35.9) $
64.9
$
194.0
$
— $
223.0
Investing activities
Purchases of property, plant and equipment ..........
Proceeds from sale of property, plant and
equipment ..............................................................
Proceeds from sale-leaseback of equipment..........
Intercompany activity ..............................................
Net cash used in investing activities .......................
Financing activities
Net debt activity ......................................................
Debt issuance costs ...............................................
Employee stock option exercises ...........................
Purchase of treasury stock .....................................
Intercompany activity ..............................................
Net cash provided by (used in) financing activities .
Effect of exchange rate changes on cash...............
Net increase in cash and cash equivalents ............
Cash and cash equivalents at beginning of period .
—
—
—
—
—
—
—
—
(0.4)
0.4
—
—
—
—
(61.2)
(12.5)
(178.2)
5.1
24.1
—
(32.0)
110.1
(16.6)
1.1
—
(0.4)
94.2
—
26.3
10.6
0.5
—
(52.6)
(64.6)
(0.3)
—
—
—
—
(0.3)
—
—
—
3.5
—
—
(174.7)
(5.0)
(0.1)
—
—
52.6
47.5
(1.5)
65.3
51.8
—
—
—
52.6
52.6
—
—
—
—
(52.6)
(52.6)
—
—
—
(251.9)
9.1
24.1
—
(218.7)
104.8
(16.7)
1.1
(0.4)
—
88.8
(1.5)
91.6
62.4
Cash and cash equivalents at end of period........... $
— $
36.9
$
— $
117.1
$
— $
154.0
78
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of American Axle & Manufacturing Holdings, Inc.:
Detroit, Michigan
We have audited the accompanying consolidated balance sheets of American Axle & Manufacturing Holdings, Inc.
and subsidiaries (the "Company") as of December 31, 2015 and 2014, and the related consolidated statements of
income, comprehensive income, cash flows, and stockholders' equity (deficit) for each of the three years in the
period ended December 31, 2015. Our audits also included the financial statement schedule listed in the Index at
Item 15. We also have audited the Company's internal control over financial reporting as of December 31, 2015,
based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for these
financial statements and financial statement schedule, for maintaining effective internal control over financial
reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the
accompanying Management Report on Internal Control over Financial Reporting. Our responsibility is to express an
opinion on these financial statements and financial statement schedule, and an opinion on the Company's internal
control over financial reporting based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement and whether effective internal control over
financial reporting was maintained in all material respects. Our audits of the financial statements included
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and evaluating the overall financial
statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material weakness exists, and testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also
included performing such other procedures as we considered necessary in the circumstances. We believe that our
audits provide a reasonable basis for our opinions.
A company's internal control over financial reporting is a process designed by, or under the supervision of, the
company's principal executive and principal financial officers, or persons performing similar functions, and effected
by the company's board of directors, management, and other personnel to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or
improper management override of controls, material misstatements due to error or fraud may not be prevented or
detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over
financial reporting to future periods are subject to the risk that the controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
79
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of American Axle & Manufacturing Holdings, Inc. and subsidiaries as of December 31, 2015 and
2014, and the results of their operations and their cash flows for each of the three years in the period ended
December 31, 2015, in conformity with accounting principles generally accepted in the United States of America.
Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. Also,
in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as
of December 31, 2015, based on the criteria established in Internal Control - Integrated Framework (2013) issued
by the Committee of Sponsoring Organizations of the Treadway Commission.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Detroit, Michigan
February 12, 2016
80
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None
Item 9A. 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 December 31, 2015.
Management Report on Internal Control over Financial Reporting
We are responsible for establishing and maintaining adequate internal control over financial reporting. Our
internal control system was designed to provide reasonable assurance to our management and Board of Directors
regarding the preparation and fair presentation of our consolidated financial statements.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31,
2015. In making this assessment, we used criteria established in Internal Control - Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our assessment,
management concluded that, as of December 31, 2015, our internal control over financial reporting was effective
based on those criteria.
The attestation report of our independent registered public accounting firm regarding internal control over
financial reporting is included in Item 8 - ”Financial Statements and Supplementary Data.”
Change in Internal Control over Financial Reporting
On January 1, 2015, we began the implementation of a new release of our global Oracle enterprise resource
planning (ERP) system at our U.S. locations, which includes upgrades to many of our existing operating and
financial systems. As part of this implementation, we modified the design and documentation of our internal
controls processes and procedures where appropriate. We continued the implementation of these upgrades to our
ERP system at our Brazil and Mexico locations during the second and third quarter of 2015, respectively. We will
continue to upgrade our ERP systems at our remaining global locations during early 2016.
There were no changes in our internal control over financial reporting during the fourth quarter ended
December 31, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control
over financial reporting.
Item 9B. Other Information
None
81
Part III
Item 10. Directors, Executive Officers and Corporate Governance
The information required by Item 401(b), (d) (e) and (f) of Regulation S-K about our executive officers is
furnished in Part I of this Form 10-K, Annual Report under the caption “Executive Officers of the Registrant.” All
other information required by Item 10 is incorporated herein by reference from our Proxy Statement which we
expect to file on or about March 24, 2016.
We have adopted a code of ethics that applies to our Chief Executive Officer and Chief Financial Officer and
the senior financial executives who report directly to our Chief Financial Officer. This code of ethics is available on
our website at www.aam.com. We will post on our website any amendment to or waiver from the provisions of the
code of ethics or our code of business conduct that applies to executive officers or directors of the Company.
Item 11.
Executive Compensation
The information required by Item 11 is incorporated by reference from our Proxy Statement.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
The information required by Item 12 is incorporated by reference from our Proxy Statement.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by Item 13 under Items 404 and 407(a) of Regulation S-K is incorporated by reference
from our Proxy Statement.
Item 14.
Principal Accounting Fees and Services
The information required by Item 8(e) of Schedule 14A is incorporated by reference from our Proxy Statement.
82
Part IV
Item 15. Exhibits and Financial Statement Schedules
The following documents are filed as a part of this report:
1. All Financial Statements
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Consolidated Statements of Stockholders' Equity (Deficit)
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
2. Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts for the years ended December 31, 2015, 2014
and 2013 is filed as part of this Form 10-K.
All other schedules have been omitted because they are not applicable or not required.
3. Exhibits
The following exhibits were previously filed unless otherwise indicated:
Number
Description of Exhibit
3.01
Amended and Restated Certificate of Incorporation
(Incorporated by reference to Exhibit 3.01 filed with American Axle & Manufacturing Holdings,
Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
3.02
Amended and Restated Bylaws of American Axle & Manufacturing Holdings, Inc.
(Incorporated by reference to Exhibit 3.02 filed with American Axle & Manufacturing Holdings,
Inc. Form 10-K for the year ended December 31, 2009.)
4.01
Specimen Certificate for shares of the Company's Common Stock
(Incorporated by reference to Exhibit 4.01 filed with American Axle & Manufacturing Holdings,
Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
4.02
4.03
Form of Indenture, among American Axle & Manufacturing, Inc., American Axle & Manufacturing
Holdings, Inc., as guarantor, certain subsidiary guarantors and U.S. Bank National Association, as
trustee
(Incorporated by reference to Exhibit 4.3 of Registration Statement on Form S-3 dated July 12,
2011.)
Indenture, dated as of November 3, 2011, among American Axle & Manufacturing, Inc., the
Guarantors and U.S. Bank National Association, as trustee
(Incorporated by Reference to Exhibit 4.1 of Current Report on Form 8-K dated October 31,
2011.)
4.04
Form of 7.75% Senior Notes due 2019
(Incorporated by Reference to Exhibit 4.2 of Current Report on Form 8-K dated October 31,
2011.)
83
Number
Description of Exhibit
4.05
Form of 6.625% Notes due 2022
(Incorporated by Reference to Exhibit 4.1 of Current Report on Form 8-K dated September 17,
2012.)
4.06
Form of 6.25% Notes due 2021
(Incorporated by Reference to Exhibit 4.1 of Current Report on Form 8-K dated February 28,
2013.)
4.07
Form of 5.125% Notes due 2019
(Incorporated by Reference to Exhibit 4.1 of Current Report on Form 8-K dated November 12,
2013.)
10.01
Asset Purchase Agreement, dated February 18, 1994, between AAM, Inc. and GM, and all
amendments thereto
(Incorporated by reference to Exhibit 10.01 filed with American Axle & Manufacturing Holdings,
Inc. Registration Statement on Form S-1 (Registration No. 333-53491))
10.02
Lifetime Program Contract for GMT-900 Products, between GM and AAM, Inc.
(Incorporated by reference to Exhibit 10.51 filed with American Axle & Manufacturing Holdings,
Inc. Form 10-Q for the quarterly period ended June 30, 2003.)
++10.03
Letter Agreement dated April 22, 2004 by and between DaimlerChrysler Corporation and AAM,
Inc.
(Incorporated by reference to Exhibit 10.43 filed with American Axle & Manufacturing Holdings,
Inc. Form 10-Q for the quarterly period ended June 30, 2004.)
‡10.04
Forms of Restricted Stock and Restricted Stock Unit Agreements under 1999 Stock Incentive
Plan
(Incorporated by reference to Exhibit 10.45 filed with American Axle & Manufacturing Holdings,
Inc. Form 10-Q for the quarterly period ended September 30, 2004.)
‡10.05
Form of 2005 Stock Option Agreement
(Incorporated by reference to Exhibit 10.4 of Current Report on Form 8-K dated October 26,
2005.)
‡10.06
Form of Nonqualified Stock Option Agreement
(Incorporated by reference to Exhibit 10.5 of Current Report on Form 8-K dated October 26,
2005.)
‡10.07
Restated 1999 American Axle & Manufacturing Holdings, Inc. Stock Incentive Compensation Plan
(Incorporated by reference to Exhibit 10.51 filed with American Axle & Manufacturing Holdings,
Inc. Form 10-K for the year ended December 31, 2005.)
++10.08
Letter Agreement between General Motors Corporation and American Axle & Manufacturing, Inc.
dated June 29, 2007
(Incorporated by reference to Exhibit 99.1 of Current Report on Form 8-K dated June 29,
2007.)
84
Number
Description of Exhibit
‡10.09
Form of 2008 Stock Option Award Agreement for executive officers of American Axle &
Manufacturing Holdings, Inc.
(Incorporated by reference to Exhibit 10.52 filed with American Axle & Manufacturing Holdings,
Inc. Form 10-K for the year ended December 31, 2007.)
10.10
Agreement between General Motors Corporation and American Axle & Manufacturing, Inc. dated
May 3, 2008, as amended May 16, 2008
(Incorporated by reference to Exhibit 10.1 of Current Report on Form 8-K dated May 23, 2008.)
‡10.11
Amended and Restated AAM 2009 Long-Term Incentive Plan
(Incorporated by reference to Exhibit 10.61 filed with American Axle & Manufacturing Holdings,
Inc. Form 10-Q for the quarter ended June 30, 2009.)
++10.12
Settlement and Commercial Agreement, dated as of September 16, 2009, among General Motors
Company, American Axle & Manufacturing Holdings, Inc. and American Axle & Manufacturing, Inc.
(Incorporated by reference to Exhibit 10.62 of Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 2009.)
10.13
First Lien Intercreditor Agreement dated as of December 18, 2009, among American Axle &
Manufacturing Holdings, Inc., American Axle & Manufacturing, Inc., certain domestic subsidiaries
of the Company, JPMorgan Chase Bank, N.A., U.S. Bank National Association and any additional
authorized representative from time to time party hereto
(Incorporated by reference to Exhibit 99.1 of Current Report on Form 8-K dated December 21,
2009.)
‡10.14
American Axle & Manufacturing Holdings, Inc. 2012 Omnibus Incentive Plan
(Incorporated by reference to Exhibit 10.1 of Current Report on Form 8-K dated May 1, 2012.)
‡10.15
Form of Nonqualified Stock Option Award Agreement under the 2012 Omnibus Incentive Plan
(Incorporated by reference to Exhibit 10.2 of Current Report on Form 8-K dated May 1, 2012.)
‡10.16
Form of Restricted Stock Unit Award Agreement for Non-employee Directors under the 2012
Omnibus Incentive Plan
(Incorporated by reference to Exhibit 10.3 of Current Report on Form 8-K dated May 1, 2012.)
‡10.17
Form of Restricted Stock Unit Award Agreement (Cliff Vesting) for Executive Officers under the
2012 Omnibus Incentive Plan
(Incorporated by reference to Exhibit 10.4 of Current Report on Form 8-K dated May 1, 2012.)
‡10.18
Form of Restricted Stock Unit Award Agreement (Installment Vesting) for Executive Officers under
the 2012 Omnibus Incentive Plan
(Incorporated by reference to Exhibit 10.5 of Current Report on Form 8-K dated May 1, 2012.)
‡10.19
Form of Performance Unit Award Agreement for Executive Officers under the 2012 Omnibus
Incentive Plan
(Incorporated by reference to Exhibit 10.6 of Current Report on Form 8-K dated May 1, 2012.)
‡10.20
American Axle & Manufacturing, Inc. Amended and Restated Supplemental Executive Retirement
Program Document
(Incorporated by reference to Exhibit 10.37 of Quarterly Report on Form 10-Q dated July 27,
2012.)
85
Number
Description of Exhibit
10.21
10.22
10.23
Amendment and Restatement Agreement dated as of September 13, 2013, among American Axle
& Manufacturing Holdings, Inc., JPMorgan Chase Bank, N.A., as Administrative Agent and as
Collateral Agent, and each financial institution party thereto as a lender, including as Exhibit A
thereto, the Amended and Restated Credit Agreement dated as of January 9, 2004 and amended
and restated as of September 13, 2013 among American Axle & Manufacturing, Inc., American
Axle & Manufacturing Holdings, Inc., the Lenders party thereto and JPMorgan Chase Bank, N.A.,
as Administrative Agent
(Incorporated by reference to Exhibit 10.1 of Current Report on Form 8-K dated September 16,
2013.)
Guarantee Agreement dated as of January 9, 2004, as amended and restated as of September
13, 2013, among American Axle & Manufacturing, Inc., American Axle & Manufacturing Holdings,
Inc., certain subsidiaries of American Axle & Manufacturing, Inc. identified therein, and JPMorgan
Chase Bank, N.A. as Administrative Agent for the lenders referred to therein
(Incorporated by reference to Exhibit 10.2 of Current Report on Form 8-K dated September 16,
2013.)
Collateral Agreement dated as of November 7, 2008, as amended and restated as of September
13, 2013, among American Axle & Manufacturing Holdings, Inc., American Axle & Manufacturing,
Inc., certain subsidiaries of American Axle & Manufacturing, Inc. identified therein and JPMorgan
Chase Bank, N.A., as Collateral Agent
(Incorporated by reference to Exhibit 99.1 of Current Report on Form 8-K dated September 16,
2013.)
‡10.24
Amended and Restated Employment Agreement dated September 27, 2013 by and between the
Company and David C. Dauch
(Incorporated by reference to Exhibit 10.1 of Current Report on Form 8-K dated October 3,
2013.)
‡10.25
Amended and Restated American Axle & Manufacturing, Inc. Incentive Compensation Plan for
Executive Officers effective as of January 1, 2013
(Incorporated by reference to Exhibit 10.35 of Quarterly Report on Form 10-Q dated November
1, 2013.)
‡10.26
Form of Performance Share Award Agreement (Relative TSR) for Executive Officers under the
2012 Omnibus Incentive Plan
(Incorporated by reference to Exhibit 10.35 of Annual Report on Form 10-K dated February 7,
2014.)
‡10.27
Form of Performance Share Award Agreement (EBITDA) for Executive Officers under the 2012
Omnibus Incentive Plan
(Incorporated by reference to Exhibit 10.36 of Annual Report on Form 10-K dated February 7,
2014.)
‡10.28
Form of Restricted Stock Unit Award Agreement (Cliff Vesting) for Executive Officers under the
2012 Omnibus Incentive Plan
(Incorporated by reference to Exhibit 10.37 of Annual Report on Form 10-K dated February 7,
2014.)
‡10.29
Form of Restricted Stock Unit Award Agreement for Board of Directors under the 2012 Omnibus
Incentive Plan
(Incorporated by reference to Exhibit 10.1 of Quarterly Report on Form 10-Q dated May 2,
2014.)
86
Number
Description of Exhibit
‡10.30
Amended and Restated Employment Agreement dated February 19, 2015 by and between the
Company and David C. Dauch
(Incorporated by reference to Exhibit 10.1 of Current Report on Form 8-K dated February 26,
2015.)
‡10.31
AAM Executive Officer Change in Control Plan dated February 19, 2015
(Incorporated by reference to Exhibit 10.2 of Current Report on Form 8-K dated February 26,
2015.)
‡10.32
Form of Performance Share Award Agreement (Relative TSR) for Executive Officers under the
2012 Omnibus Incentive Plan
(Incorporated by reference to Exhibit 10.3 of Current Report on Form 8-K dated February 26,
2015.)
‡10.33
Form of Performance Share Award Agreement (EBITDA) for Executive Officers under the 2012
Omnibus Incentive Plan
(Incorporated by reference to Exhibit 10.4 of Current Report on Form 8-K dated February 26,
2015.)
‡10.34
Form of Restricted Stock Unit Award Agreement for Executive Officers under the 2012 Omnibus
Incentive Plan
(Incorporated by reference to Exhibit 10.5 of Current Report on Form 8-K dated February 26,
2015.)
‡10.35
Form of Restricted Stock Unit Award Agreement for Non-Employee Directors under the 2012
Omnibus Incentive Plan
(Incorporated by reference to Exhibit 10.6 of Current Report on Form 8-K dated February 26,
2015.)
‡10.36
Amended and Restated American Axle & Manufacturing Holdings, Inc. 2012 Omnibus Incentive
Plan
(Incorporated by reference to Exhibit 10.1 of Current Report on Form 8-K dated May 1, 2015.)
‡10.37
Employment Agreement dated as of August 1, 2015 by and between the Company and Michael
K. Simonte
(Incorporated by reference to Exhibit 10.1 of Current Report on Form 8-K dated July 31, 2015.)
‡*10.38
Second Amended and Restated American Axle & Manufacturing, Inc. Incentive Compensation
Plan for Executive Officers effective as of January 1, 2016
*12
*21
*23
*31.1
*31.2
*32
Computation of Ratio of Earnings to Fixed Charges
Subsidiaries of the Registrant
Consent of Independent Registered Public Accounting Firm
Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act
Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act
Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
87
Number
Description of Exhibit
**101.INS
XBRL Instance Document
**101.SCH
XBRL Taxonomy Extension Schema Document
**101.PRE
XBRL Extension Presentation Linkbase Document
**101.LAB
XBRL Taxonomy Extension Label Linkbase Document
**101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
**101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
(All other exhibits are not applicable.)
++
‡
*
**
Confidential Treatment Request Granted by the SEC
Reflects Management or Compensatory Contract
Shown only in the original filed with the Securities and Exchange Commission
Submitted electronically with the original filed with the Securities and Exchange Commission
88
Schedule II - VALUATION AND QUALIFYING ACCOUNTS
Balance at
Additions -
Charged to Deductions -
Beginning of Costs and
Expenses
Period
See Notes
Below
(in millions)
Balance
At End of
Period
Year Ended December 31, 2013
Allowance for doubtful accounts ........................... $
6.5 $
2.3 $
3.9 (1) $
4.9
Allowance for deferred taxes ................................
Inventory valuation allowance ...............................
166.1
21.0
Year Ended December 31, 2014
Allowance for doubtful accounts ...........................
4.9
Allowance for deferred taxes ................................
163.7
Inventory valuation allowance ...............................
27.3
Year Ended December 31, 2015
Allowance for doubtful accounts ...........................
4.6
Allowance for deferred taxes ................................
156.9
Inventory valuation allowance ...............................
27.9
14.0
19.4
1.3
13.8
10.6
2.5
31.9
11.1
16.4
13.1 (2)
163.7
27.3
1.6 (1)
4.6
20.6 (3)
156.9
10.0 (2)
27.9
2.8 (1)
4.3
21.5 (4)
167.3
9.7 (2)
29.3
(1) Uncollectible accounts charged off net of recoveries.
(2) Primarily relates to inventory adjustments for physical quantity discrepancies and write-offs of excess and
obsolete inventories.
(3) Primarily relates to the reversal of a valuation allowance against an expiring net operating loss in China.
(4) Primarily reflects a reduction in deferred tax assets at various foreign locations due to the strengthening of the
U.S. dollar.
89
Pursuant to the requirements of Section 13 or 15(d) 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.
Signatures
AMERICAN AXLE & MANUFACTURING
HOLDINGS, INC.
(Registrant)
/s/ Christopher J. May
Christopher J. May
Vice President & Chief Financial Officer
(Chief Accounting Officer)
Date: February 12, 2016
90
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by
the following persons on behalf of the registrant and in the capacities on the dates indicated.
Signature
Title
Date
/s/ David C. Dauch
David C. Dauch
/s/ Christopher J. May
Christopher J. May
/s/ Elizabeth A. Chappell
Elizabeth A. Chappell
/s/ Steven B. Hantler
Steven B. Hantler
/s/ William L. Kozyra
William L. Kozyra
/s/ Peter D. Lyons
Peter D. Lyons
/s/ James A. McCaslin
James A. McCaslin
/s/ William P. Miller II
William P. Miller II
/s/ John F. Smith
John F. Smith
/s/ Samuel Valenti III
Samuel Valenti III
February 12, 2016
February 12, 2016
February 12, 2016
February 12, 2016
February 12, 2016
February 12, 2016
February 12, 2016
February 12, 2016
February 12, 2016
February 12, 2016
Chairman of the Board &
Chief Executive Officer
Vice President &
Chief Financial Officer
Director
Director
Director
Director
Director
Director
Director
Director
91
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