Delaware

~~Delaware~~

38-3161171

(State or Other Jurisdiction of Incorporation or Organization)

(I.R.S. Employer Identification No.)

One Dauch Drive,

Detroit,

Michigan

48211-1198

(Address of Principal Executive Offices)

(Zip Code)

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

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



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

As of October ~~29, 2019,~~27, 2020, the latest practicable date, the number of shares of the registrant's Common Stock, par value $0.01 per share, outstanding was ~~112,475,824~~113,272,990 shares.

Internet Website Access to Reports

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, ~~2019~~2020

TABLE OF CONTENTS

FORWARD-LOOKING STATEMENTS

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

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

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

•global economic conditions;

•reduced purchases of our products by General Motors Company (GM), FCA US LLC (FCA), Ford Motor Company (Ford) or other customers;

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

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

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

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

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

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

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

•risks inherent in our global operations (including tariffs and the potential consequences thereof to us, our suppliers, and our customers and their suppliers, adverse changes in trade agreements, such as ~~NAFTA, or proposed trade agreements, such as the~~ USMCA, immigration policies, political stability, taxes and other law changes, potential disruptions of production and supply, and currency rate fluctuations);

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

•negative or unexpected tax consequences;

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

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

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

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

•an impairment of our goodwill, other intangible assets, or long-lived assets if our business or market conditions indicate that the carrying values of those assets exceed their ~~suppliers' ability to maintain satisfactory labor relations and avoid work stoppages;~~fair values;

~~global economic conditions;~~

•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;

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

~~supply shortages or price increases in raw material and/or freight, utilities or other operating supplies for us~~ability or our ~~customers as~~customers' and suppliers' ability to successfully launch new product programs on a ~~result of natural disasters or otherwise;~~timely basis;

•our ability to ~~successfully integrate the business~~maintain satisfactory labor relations and ~~information systems of MPG~~avoid work stoppages;

•our suppliers', our customers' and their suppliers' ability to ~~realize the anticipated benefits of the merger;~~maintain satisfactory labor relations and avoid work stoppages;

~~negative or unexpected tax consequences;~~

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

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

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

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

~~potential liabilities or litigation relating to, or assumed in, the MPG merger;~~

~~potential adverse reactions or changes to business relationships resulting from the completion of the merger with MPG;~~

•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 ~~current and former~~ facilities, or reputational damage;

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

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

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

•our ability to attract and retain key associates; and

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

It is not possible to foresee or identify all such factors and any or all of the foregoing factors may be exacerbated by COVID-19. Further, we make no commitment to update any forward-looking statement or to disclose any facts, events or circumstances after the date hereof that may affect the accuracy of any forward-looking statement.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


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

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

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

Gross profit	249.8		248.7		346.2		719.2

Selling, general and administrative expenses	66.5		92.7		230.6		274.7

Amortization of intangible assets	21.6		23.7		65.0		73.6

Impairment charges (Note 1 and Note 3)	0		225.0		510.0		225.0

Restructuring and acquisition-related costs	9.7		11.7		38.6		36.0

Loss on sale of business	0		0		1.0		0

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

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

Interest income	3.4		2.2		9.2		3.4

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

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

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

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

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

Net income attributable to noncontrolling interests	0		(0.1)		(0.1)		(0.4)

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

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

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

Three Months Ended Nine Months Ended
September 30, September 30,
2019 2018 2019 2018
(in millions, except per share data)

Net sales $ 1,677.4
$ 1,817.0
$ 5,100.9
$ 5,576.3

Cost of goods sold 1,428.7
1,549.6
4,381.7
4,661.2

Gross profit 248.7
267.4
719.2
915.1

Selling, general and administrative expenses 92.7
96.3
274.7
288.6

Amortization of intangible assets 23.7
24.8
73.6
74.5

Impairment charge (Note 2) 225.0
—
225.0
—

Restructuring and acquisition-related costs 11.7
11.7
36.0
66.8

Gain on sale of business —
—
—
(15.5 )

Operating income (loss) (104.4 ) 134.6
109.9
500.7

Interest expense (54.3 ) (54.9 ) (163.9 ) (162.5 )

Investment income 2.2
0.6
3.4
1.6

Other income (expense)
Debt refinancing and redemption costs (5.1 ) —
(7.5 ) (14.6 )
Gain on settlement of capital lease —
—
—
15.6
Other expense, net (2.9 ) (4.8 ) (9.0 ) (4.6 )

Income (loss) before income taxes (164.5 ) 75.5
(67.1 ) 336.2

Income tax expense (benefit) (40.4 ) 11.5
(37.4 ) 31.4

Net income (loss) $ (124.1 ) $ 64.0
$ (29.7 ) $ 304.8

Net income attributable to noncontrolling interests (0.1 ) (0.2 ) (0.4 ) (0.5 )

Net income (loss) attributable to AAM $ (124.2 ) $ 63.8
$ (30.1 ) $ 304.3

Basic earnings (loss) per share $ (1.10 ) $ 0.55
$ (0.27 ) $ 2.65

Diluted earnings (loss) per share $ (1.10 ) $ 0.55
$ (0.27 ) $ 2.63

See accompanying notes to condensed consolidated financial statements.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)


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

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

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

Net income attributable to noncontrolling interests	0		(0.1)		(0.1)		(0.4)
Foreign currency translation adjustments attributable to noncontrolling interests	0		0		0.3		0

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

Three Months Ended Nine Months Ended
September 30, September 30,
2019 2018 2019 2018
(in millions)
Net income (loss) $ (124.1 ) $ 64.0
$ (29.7 ) $ 304.8

Other comprehensive income (loss)

Defined benefit plans, net of tax ^(a)
(1.3 ) 1.0
0.5
14.5
     Foreign currency translation adjustments (37.1 ) (11.9 ) (34.7 ) (55.0 )
     Changes in cash flow hedges, net of tax ^(b)
(6.4 ) 12.4
(24.7 ) 19.6
Other comprehensive income (loss) (44.8 ) 1.5
(58.9 ) (20.9 )

Comprehensive income (loss) $ (168.9 ) $ 65.5
$ (88.6 ) $ 283.9

     Net income attributable to noncontrolling interests (0.1 ) (0.2 ) (0.4 ) (0.5 )

Comprehensive income (loss) attributable to AAM $ (169.0 ) $ 65.3
$ (89.0 ) $ 283.4



(a)		Amounts are net of tax of $(0.4) million and $(1.2) million for the three and nine months ended September 30, 2020, and $0.3 million and $(0.2) million for the three and nine months ended September 30, 2019, ~~and $(0.3)~~respectively.
(b)		Amounts are net of tax of $(0.2) million and ~~$(4.8)~~$1.6 million for the three and nine months ended September 30, ~~2018, respectively.~~
~~(b)~~	~~Amounts are net of tax of~~2020, and $1.1 million and $7.3 million for the three and nine months ended September 30, 2019, ~~and $(0.5) million and $(1.7) million for the three and nine months ended September 30, 2018,~~ respectively.

See accompanying notes to condensed consolidated financial statements.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS


	September 30, 2019			December 31, 2018				September 30, 2020		December 31, 2019
	(Unaudited)							(Unaudited)
Assets	(in millions)						Assets	(in millions)
Current assets							Current assets
Cash and cash equivalents	$	375.1		$	476.4		Cash and cash equivalents	$	537.3	$	532.0
Accounts receivable, net	976.9			966.5			Accounts receivable, net	900.8		815.4
Inventories, net	403.1			459.7			Inventories, net	315.8		373.6
Prepaid expenses and other	130.9			127.2			Prepaid expenses and other	158.7		136.8
Current assets held-for-sale	312.2			—

Total current assets	2,198.2			2,029.8			Total current assets	1,912.6		1,857.8

Property, plant and equipment, net	2,326.4			2,514.4			Property, plant and equipment, net	2,157.9		2,358.4
Deferred income taxes	61.9			45.5			Deferred income taxes	104.6		64.1
Goodwill	1,127.5			1,141.8			Goodwill	183.6		699.1
Other intangible assets, net	881.5			1,111.1			Other intangible assets, net	801.5		864.5
GM postretirement cost sharing asset	223.1			219.4			GM postretirement cost sharing asset	221.9		223.3
Other assets and deferred charges	497.7			448.7			Other assets and deferred charges	560.0		577.4
Total assets	$	7,316.3		$	7,510.7		Total assets	$	5,942.1	$	6,644.6

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

Current portion of long-term debt	$	23.8		$	121.6		Current portion of long-term debt	$	26.5	$	28.7
Accounts payable	703.7			840.2			Accounts payable	622.0		623.5
Accrued compensation and benefits	165.1			179.0			Accrued compensation and benefits	163.5		154.4
Deferred revenue	22.6			44.3			Deferred revenue	22.8		18.9
Accrued expenses and other	220.2			171.7			Accrued expenses and other	189.5		200.9
Current liabilities held-for-sale	101.7			—

Total current liabilities	1,237.1			1,356.8			Total current liabilities	1,024.3		1,026.4

Long-term debt, net	3,673.3			3,686.8			Long-term debt, net	3,555.4		3,612.3
Deferred revenue	83.1			77.6			Deferred revenue	75.6		83.7
Deferred income taxes	21.6			92.6			Deferred income taxes	19.7		19.6
Postretirement benefits and other long-term liabilities	891.6			810.6			Postretirement benefits and other long-term liabilities	923.6		922.2
Total liabilities	5,906.7			6,024.4			Total liabilities	5,598.6		5,664.2

Stockholders' equity							Stockholders' equity
Common stock, par value $0.01 per share; 150.0 million shares authorized;							Common stock, par value $0.01 per share; 150.0 million shares authorized;
120.1 million shares issued as of September 30, 2019 and 118.9 million shares issued as of December 31, 2018	1.2			1.2
121.3 million shares issued as of September 30, 2020 and 120.2 million shares issued as of December 31, 2019							121.3 million shares issued as of September 30, 2020 and 120.2 million shares issued as of December 31, 2019	1.2		1.2
Paid-in capital	1,310.1			1,292.6			Paid-in capital	1,328.3		1,313.9
Retained earnings	703.0			703.5
Treasury stock at cost, 7.6 million shares as of September 30, 2019 and 7.2 million shares as of December 31, 2018	(209.3		)	(201.8		)
Retained earnings (Accumulated deficit)							Retained earnings (Accumulated deficit)	(355.8)		248.6
Treasury stock at cost, 8.0 million shares as of September 30, 2020 and 7.6 million shares as of December 31, 2019							Treasury stock at cost, 8.0 million shares as of September 30, 2020 and 7.6 million shares as of December 31, 2019	(212.0)		(209.3)
Accumulated other comprehensive loss							Accumulated other comprehensive loss
Defined benefit plans, net of tax	(241.1		)	(213.9		)	Defined benefit plans, net of tax	(254.9)		(259.9)
Foreign currency translation adjustments	(131.3		)	(96.6		)	Foreign currency translation adjustments	(130.9)		(101.2)
Unrecognized loss on cash flow hedges, net of tax	(25.8		)	(1.1		)	Unrecognized loss on cash flow hedges, net of tax	(35.0)		(15.7)
Total AAM stockholders' equity	1,406.8			1,483.9			Total AAM stockholders' equity	340.9		977.6
Noncontrolling interests in subsidiaries	2.8			2.4			Noncontrolling interests in subsidiaries	2.6		2.8
Total stockholders' equity	1,409.6			1,486.3			Total stockholders' equity	343.5		980.4
Total liabilities and stockholders' equity	$	7,316.3		$	7,510.7		Total liabilities and stockholders' equity	$	5,942.1	$	6,644.6

See accompanying notes to condensed consolidated financial statements.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended
September 30,
2019 2018
(in millions)
Operating activities
Net income (loss) $ (29.7 ) $ 304.8
Adjustments to reconcile net income (loss) to net cash provided by operating activities
Depreciation and amortization 411.5
390.9
Impairment charges (Note 2 and Note 4) 225.0
26.6
Deferred income taxes (87.6 ) 51.7
Stock-based compensation 17.5
20.7
Pensions and other postretirement benefits, net of contributions (10.4 ) (3.1 )
Gain on sale of business —
(15.5 )
Loss (gain) on disposal of property, plant and equipment, net 1.3
(3.3 )
Debt refinancing and redemption costs and (gain) on settlement of capital lease 7.5
(0.8 )
Changes in operating assets and liabilities
Accounts receivable (108.4 ) (248.0 )
Inventories 18.8
(67.2 )
Accounts payable and accrued expenses 8.6
188.7
Deferred revenue (12.9 ) 13.3
Other assets and liabilities (62.6 ) (145.6 )
Net cash provided by operating activities 378.6
513.2

Investing activities

Purchases of property, plant and equipment (335.3 ) (391.8 )
Proceeds from sale of property, plant and equipment 2.0
3.2
Investment in joint venture (2.2 ) —
Purchase buyouts of leased equipment —
(0.5 )
Proceeds from sale of business, net —
47.1
Acquisition of business —
(1.3 )
Net cash used in investing activities (335.5 ) (343.3 )

Financing activities

Payments of long-term debt and finance lease obligations (477.7 )
(568.0 )
Proceeds from issuance of long-term debt 348.4

481.3
Debt issuance costs (3.3 )
(6.9 )
Purchase of noncontrolling interest —
(2.2 )
Purchase of treasury stock (7.5 )
(3.7 )
Net cash used in financing activities (140.1 )
(99.5 )

Effect of exchange rate changes on cash (4.3 )
(5.3 )

Net increase (decrease) in cash, cash equivalents and restricted cash (101.3 )
65.1

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

376.8

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

$ 441.9

Supplemental cash flow information

Interest paid $ 136.3
$ 127.8
Income taxes paid, net of refunds $ 45.7
$ 33.6

See accompanying notes to condensed consolidated financial statements.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY


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

Stock-based compensation	—	—		5.7		—		—		—		—
Purchase of treasury stock	0	—		—		—		(0.2)		—		—
Changes in cash flow hedges	—	—		—		—		—		(15.8)		—
Foreign currency translation adjustments	—	—		—		—		—		4.9		—
Defined benefit plans, net	—	—		—		—		—		1.1		—

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

Stock-based compensation	—	—		6.3		—		—		—		—

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

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

Common Stock Accumulated Noncontrolling
Shares Par Paid-in Retained Treasury Other Comprehensive Interest
Outstanding Value Capital Earnings Stock Income (Loss) in Subsidiaries
Balance at January 1, 2018 111.3
$ 1.2
$ 1,264.6
$ 761.0
$ (198.1 ) $ (292.7 ) $ 4.0
Net income —
—
—
89.4
—
—
0.1
Exercise of stock options and vesting of restricted stock units and performance shares 0.6
—
—
—
—
—
—
Stock-based compensation —
—
6.6
—
—
—
—
Purchase of treasury stock (0.2 ) —
—
—
(3.5 ) —
—
Changes in cash flow hedges —
—
—
—
—
15.1
—
Foreign currency translation adjustments —
—
—
—
—
37.9
—
Defined benefit plans, net —
—
—
—
—
1.3
—
Purchase of noncontrolling interest —
—
—
—
—
—
(0.9 )
Balance at March 31, 2018 111.7
$ 1.2
$ 1,271.2
$ 850.4
$ (201.6 ) $ (238.4 ) $ 3.2
Net income —
—
—
151.1
—
—
0.2
Stock-based compensation —
—
7.1
—
—
—
—
Purchase of treasury stock —
—
—
—
(0.1 ) —
—
Changes in cash flow hedges —
—
—
—
—
(7.9 ) —
Foreign currency translation adjustments —
—
—
—
—
(81.0 ) —
Defined benefit plans, net —
—
—
—
—
12.2
—
Purchase of noncontrolling interest —
—
—
—
—
—
(1.4 )
Balance at June 30, 2018 111.7
$ 1.2
$ 1,278.3
$ 1,001.5
$ (201.7 ) $ (315.1 ) $ 2.0
Net income —
—
—
63.8
—
—
0.2
Exercise of stock options —
—
0.1
—
—
—
—
Stock-based compensation —
—
7.1
—
—
—
—
Purchase of treasury stock (0.1 ) —
—
—
(0.1 ) —
—
Changes in cash flow hedges —
—
—
—
—
12.4
—
Foreign currency translation adjustments —
—
—
—
—
(11.9 ) —
Defined benefit plans, net —
—
—
—
—
1.0
—
Purchase of noncontrolling interest —
—
—
—
—
—
(0.1 )
Balance at September 30, 2018 111.6
$ 1.2
$ 1,285.5
$ 1,065.3
$ (201.8 ) $ (313.6 ) $ 2.1

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (CONTINUED)

(Unaudited)


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

Balance at March 31, 2020	113.0	$	1.2	$	1,318.5	$	(259.8)	$	(211.7)	$	(458.4)	$	2.6
Net loss	—	—		—		(213.2)		—		—		0
Vesting of restricted stock units and performance shares	0.3	—		—		—		—		—		—
Stock-based compensation	—	—		4.7		—		—		—		—
Purchase of treasury stock	0	—		—		—		(0.3)		—		—
Changes in cash flow hedges	—	—		—		—		—		8.7		—
Foreign currency translation adjustments	—	—		—		—		—		4.8		—
Defined benefit plans, net	—	—		—		—		—		1.7		—
Balance at June 30, 2020	113.3	$	1.2	$	1,323.2	$	(473.0)	$	(212.0)	$	(443.2)	$	2.6
Net income	—	—		—		117.2		—		—		0

Stock-based compensation	—	—		5.1		—		—		—		—

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

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

Common Stock Accumulated Noncontrolling
Shares Par Paid-in Retained Treasury Other Comprehensive Interest
Outstanding Value Capital Earnings Stock Income (Loss) in Subsidiaries
Balance at January 1, 2019 111.7
$ 1.2
$ 1,292.6
$ 703.5
$ (201.8 ) $ (311.6 ) $ 2.4
Net income —
—
—
41.6
—
—
0.1
Vesting of restricted stock units and performance shares 1.2
—
—
—
—
—
—
Stock-based compensation —
—
5.5
—
—
—
—
Modified-retrospective application of ASU 2016-02 —
—
—
1.9
—
—
—
Adoption of ASU 2018-02 —
—
—
27.7
—
(27.7 ) —
Purchase of treasury stock (0.4 ) —
—
—
(7.3 ) —
—
Changes in cash flow hedges —
—
—
—
—
(2.5 ) —
Foreign currency translation adjustments —
—
—
—
—
(2.5 ) —
Defined benefit plans, net —
—
—
—
—
0.7
—
Balance at March 31, 2019 112.5
$ 1.2
$ 1,298.1
$ 774.7
$ (209.1 ) $ (343.6 ) $ 2.5
Net income —
—
—
52.5
—
—
0.2
Stock-based compensation —
—
5.7
—
—
—
—
Purchase of treasury stock —
—
—
—
(0.2 ) —
—
Changes in cash flow hedges —
—
—
—
—
(15.8 ) —
Foreign currency translation adjustments —
—
—
—
—
4.9
—
Defined benefit plans, net —
—
—
—
—
1.1
—
Balance at June 30, 2019 112.5
$ 1.2
$ 1,303.8
$ 827.2
$ (209.3 ) $ (353.4 ) $ 2.7
Net loss —
—
—
(124.2 ) —
—
0.1
Stock-based compensation —
—
6.3
—
—
—
—
Changes in cash flow hedges —
—
—
—
—
(6.4 ) —
Foreign currency translation adjustments —
—
—
—
—
(37.1 ) —
Defined benefit plans, net —
—
—
—
—
(1.3 ) —
Balance at September 30, 2019 112.5
$ 1.2
$ 1,310.1
$ 703.0
$ (209.3 ) $ (398.2 ) $ 2.8

See accompanying notes to condensed consolidated financial statements.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, ~~2019~~2020

(Unaudited)

1. ORGANIZATION AND BASIS OF PRESENTATION

Organization We are a global Tier 1 supplier to the automotive industry. We design, engineer and manufacture driveline and metal forming ~~and casting~~ products that are making the next generation of vehicles smarter, lighter, safer and more efficient. We employ ~~over 25,000~~approximately 20,000 associates, operating at nearly 9080 facilities in 17 countries, to support our customers on global and regional platforms with a continued focus on delivering quality, operational excellence and technology leadership.

In the third quarter of 2019, we entered into a definitive agreement to sell the U.S. operations of our Casting segment to entities affiliated with Gamut Capital Management, L.P. As a result, the assets and liabilities associated with this business have met the criteria to be classified as held-for-sale in our Condensed Consolidated Balance Sheet as of September 30, 2019. See Note 2 - Assets Held-for-Sale for further detail.

In the first quarter of 2019, we initiated a new global restructuring program (the 2019 Program) to further streamline our business by consolidating our four existing segments into three segments. This activity occurred through the disaggregation of our Powertrain segment, with a portion moving into our Driveline segment and a portion moving into our Metal Forming segment. See Note 4 - Restructuring and Acquisition-Related Costs for more detail on this reorganization.

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

The balance sheet at December 31, ~~2018~~2019 presented herein has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States of America (GAAP) for complete consolidated financial statements.

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

For further information, refer to the audited consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, ~~2018.~~

~~Effect of New Accounting Standards~~

~~Accounting Standard Update 2018-15~~

2019.

~~On August 15, 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-15 -~~ ~~Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract (Topic 350-40).~~ ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a cloud computing or hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This guidance becomes effective at the beginning of our 2020 fiscal year and may be applied either retrospectively or prospectively. We expect to adopt this guidance prospectively on January 1, 2020 and we are currently assessing the impact that this standard will have on our consolidated financial statements.

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

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

~~Accounting Standards Update 2018-02~~

Manufacturing Facility Fire and Insurance Recovery

~~On February 14, 2018, the FASB issued ASU 2018-02 -~~ ~~Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (Topic 220).~~ ASU 2018-02 allows companies the option to reclassify disproportionate tax effects in accumulated other comprehensive income (AOCI) caused by the 2017 Tax Cuts and Jobs Act, also known as stranded tax effects, to retained earnings. ASU 2018-02 also requires expanded disclosures related to disproportionate income tax effects from AOCI, some of which are applicable to all companies regardless of whether the option to reclassify the stranded tax effects is exercised. This guidance became effective on January 1, 2019, and we elected to reclassify the stranded tax effects caused by the 2017 Tax Cuts and Jobs Act, resulting in a decrease in Accumulated other comprehensive income (loss) and an increase in Retained earnings of $27.7 million at January 1, 2019.

~~Accounting Standards Update 2016-02~~

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

~~On February 25, 2016,~~

Our insurance policies are expected to cover the ~~FASB issued ASU 2016-02 -~~ ~~Leases (Topic 842)~~,repair, replacement or actual cash value of the assets that incurred loss or damage, less our applicable deductible of $1 million. In addition, our insurance policies are expected to provide coverage for interruption to our business, including lost or reduced profits and ~~has subsequently issued ASU 2017-13 -~~ ~~Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840)~~reimbursement for certain expenses and ~~Leases (Topic 842)~~ ~~(collectively~~costs that are incurred relating to the Lease ASUs) which supersede the existing lease accounting guidance and establish new criteria for recognizing lease assets and liabilities. The most significant impact of these updates, to AAM, is that a lessee is required to recognize a "right-of-use" asset and lease liability for operating lease agreements that were not previously included on the balance sheet under previous lease guidance. Expense recognition in the statement of income, along with cash flow statement classification for both financing (capital) and operating leases under the new standard are not significantly changed from previous lease guidance. This guidance became effective for AAM on January 1, 2019. See Note 3 - Leasing for additional detail regarding the adoption of ASU 2016-02.

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

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

~~2. ASSETS HELD-FOR-SALE~~

fire. In the third quarter of ~~2019,~~2020, we ~~entered into~~recorded $28.4 million of charges primarily related to the write-down of property, plant and equipment (PP&E) as a ~~definitive agreement to sell~~result of damage from the ~~U.S. operations~~fire. We also recorded an insurance recovery receivable primarily associated with the write-down of ~~our Casting segment to entities affiliated with Gamut Capital Management, L.P. for a sales price~~PP&E of ~~$245.0 million, subject to certain customary adjustments. The sales price consists of $185.0~~$19.8 million in the third quarter of 2020, which is included in Prepaid expenses and other in our Condensed Consolidated Balance Sheet as of September 30, 2020. This resulted in a net pre-tax impact to our Condensed Consolidated Statement of Operations of approximately $8.6 million in Cost of goods sold for the three and nine months ended September 30, 2020, which includes our applicable deductible. We continue to assess the extent of the damage caused by the fire. As such, we cannot estimate the total impact, including potential insurance recoveries, on our results of operations, financial position or cash flows, or the timing of such impact.

Sale of U.S. Casting - Classification of Assets and ~~a $60.0 million deferred payment obligation, which will accrue interest at an annual rate of 6% beginning on January 1, 2020 for a period of twelve years. The sale is expected to close in~~Liabilities as Held-for-Sale

In the fourth quarter of ~~2019.~~

~~As a result,~~2019, we completed the sale of the U.S operations of our former Casting segment (the Casting Sale). In conjunction with the Casting Sale, the assets and liabilities associated with this business ~~have~~ met the criteria to be classified as held-for-sale in our Condensed Consolidated Balance Sheet as of September 30, 2019. Upon reclassification to held-for-sale in the third quarter of 2019, we recorded a pre-tax impairment charge of $225.0 million to reduce the carrying value of this business to fair value less cost to sell. The sale of the U.S. operations of our Casting segment did not qualify for classification as discontinued operations as the sale does not represent a strategic shift in our business that has had, or will have, a major effect on our operations and financial results.

~~The assets and liabilities classified as held-for-sale are as follows (in millions):~~

September 30, 2019

Accounts receivable, net $ 89.1
Inventories 32.8
Prepaid expenses and other 1.5
Property, plant and equipment, net 184.6
Intangible assets, net 158.2
Other assets and deferred charges 71.0
Impairment of carrying value (225.0 )
Total assets held-for-sale* $ 312.2

Accounts payable $ 71.3
Accrued compensation and benefits 6.8
Accrued expenses and other 3.4
Postretirement benefits and other long-term liabilities 20.2
Total liabilities held-for-sale* $ 101.7

* The assets and liabilities classified as held-for-sale are classified entirely as current in the September 30, 2019 Condensed Consolidated Balance Sheet as we expect to complete the sale in the fourth quarter of 2019. As this transaction does not qualify for classification as discontinued operations, no reclassification of the assets and liabilities in the December 31, 2018 Condensed Consolidated Balance Sheet was required.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Effect of New Accounting Standards and Other Regulatory Pronouncements

~~3. LEASING~~

Accounting Standard Update 2020-04

On ~~January 1, 2019, we adopted new accounting guidance under~~March 12, 2020, the Financial Accounting Standards ~~Codification Topic 842 (ASC 842)~~Board (FASB) issued Accounting Standard Update (ASU) 2020-04 - ~~Leases.~~ Reference Rate Reform (Topic 848)~~ASC 842 superseded~~. This guidance provides optional expedients and exceptions that are intended to ease the burden of updating contracts to contain a new reference rate due to the discontinuation of the London Inter-Bank Offered Rate (LIBOR). This guidance is available immediately and may be implemented in any period prior ~~lease~~to the guidance expiration on December 31, 2022. We are currently assessing which of our various contracts will require an update for a new reference rate and will determine the timing for our implementation of this guidance at the completion of that analysis.

Accounting Standard Update 2019-12

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

Accounting Standards Update 2016-13

On June 16, 2016, the ~~optional~~FASB issued 2016-13 - Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 replaces the incurred loss model under previous guidance, and requires entities to consider expected credit losses, in addition to past events and current conditions when measuring credit losses. This guidance applies to certain of our financial instruments and is primarily applicable to our trade accounts receivable. We adopted this guidance on January 1, 2020, using a modified-retrospective transition method ~~that allowed us to~~and the adoption of this standard did not ~~retrospectively revise prior period balance sheets to include operating leases, and to only include~~have a material impact on our condensed consolidated financial statements. See the ~~disclosures required under ASC 842~~Statement of Stockholders' Equity for the ~~periods subsequent~~implementation impact of ASU 2016-13.

Securities and Exchange Commission (SEC) Rule

In the first quarter of 2020, the SEC adopted "Financial Disclosures about Guarantors and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralize a Registrant's Securities," a rule that amends the financial disclosure requirements for guarantors and issuers of registered guaranteed securities. This rule eliminates the previous requirement to ~~adoption.~~

~~We have concluded that when an agreement grants us~~present guarantor financial statement information in the ~~right~~notes to ~~substantially all~~the financial statements and allows for the disclosure of summarized financial information for the ~~economic benefits associated with an identified asset,~~most recent year and interim period, as well as expanded non-financial disclosures, in Management's Discussion and Analysis (MD&A). The effective date for this rule is January 4, 2021, however, the SEC permitted voluntary compliance prior to this date and we ~~are able~~elected to ~~direct~~adopt the use of that asset throughout the term of the agreement, we have a lease. We lease certain facilities and furniture under finance leases, and we also lease certain commercial office and production facilities, manufacturing machinery and equipment, vehicles and other assets under operating leases. Some of our leases include options to extend or terminate the leases and these options have been includednew disclosure requirements in the ~~relevant lease term~~first quarter of 2020. As such, we no longer present guarantor financial statement information in the notes to the ~~extent that they are reasonably certain to be exercised.~~condensed consolidated financial statements in this Quarterly Report on Form 10-Q, but instead present the required information within MD&A.

The lease consideration for some of our facilities and machinery and equipment is variable, as it is based on various indices or usage of the underlying assets, respectively. Variable lease payments based on indices have been included in the related right-of-use assets and lease liabilities on our Condensed Consolidated Balance Sheet, while variable lease payments based on usage of the underlying asset have been excluded as they do not represent present rights or obligations.

~~Lease cost consists of the following:~~

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

Finance lease cost
Amortization of right-of-use assets $ 0.2
$ 0.6
Interest on lease liabilities 0.1
0.2
Total finance lease cost 0.3
0.8

Operating lease cost 6.5
19.9
Short-term lease cost 1.4
4.8
Variable lease cost 2.5
6.7

Total lease cost $ 10.7
$ 32.2

For the three months ended September 30, 2019, $8.0 million and $2.4 million were recorded to Cost of goods sold (COGS) and Selling, general and administrative expenses (SG&A), respectively, on our Condensed Consolidated Statement of Operations, as compared to $7.1 million and $2.4 million, respectively, for the three months ended September 30, 2018. For the nine months ended September 30, 2019, $24.0 million and $7.4 million were recorded to COGS and SG&A, respectively, on our Condensed Consolidated Statement of Operations, as compared to $21.4 million and $7.4 million, respectively for the nine months ended September 30, 2018.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Coronavirus Aid, Relief, and Economic Security Act

~~The following table summarizes additional information related to our lease agreements.~~

Nine Months Ended
September 30,
2019
(in millions, except lease term and rate)

Cash paid for amounts included in measurement of lease liabilities
Operating cash flows from finance leases $ 0.2
Operating cash flows from operating leases 18.2
Financing cash flows from finance leases 0.6

Weighted-average remaining lease term - finance leases 3.1 years
Weighted-average remaining lease term - operating leases 7.5 years

Weighted-average discount rate - finance leases 8.1 %
Weighted-average discount rate - operating leases 5.6 %

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

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

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

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

•The ability to claim an Employee Retention Credit (ERC), which is ~~typically unknown,~~a refundable payroll tax credit, for 50% of qualified wages or benefits, subject to certain limitations, that are paid to an employee when they are not providing services due to COVID-19. The ERC applies to qualified wages paid or incurred during the ~~discount rate used~~period March 13, 2020 through December 31, 2020 and is available to ~~determine~~eligible employers whose operations were fully or partially suspended due to COVID-19, or whose gross receipts declined by more than 50% when compared to the ~~lease liability for the majority of our leases is the collateralized incremental borrowing rate~~applicable period in the ~~applicable geographic area for a similar term and amount as the lease agreement.~~

~~Future undiscounted minimum payments under non-cancelable leases are as follows:~~prior year.

Finance Leases Operating Leases
(in millions)
2019 (excluding the nine months ended September 30, 2019) $ 0.3
$ 6.9
2020 1.1
25.6
2021 1.0
18.1
2022 0.9
14.5
2023 0.9
9.7
Thereafter —
38.9
Total future undiscounted minimum lease payments 4.2
113.7
Less: Impact of discounting (1.4 ) (20.0 )
Total $ 2.8
$ 93.7

~~For the full year 2019, we expect payments for short-term leases to be approximately $5.0 million.~~

~~The right-of-use assets and lease liabilities recorded on our Condensed Consolidated Balance Sheet as of September 30, 2019 are as follows:~~

Finance Leases Operating Leases
(in millions)
Property, plant and equipment, net $ 2.8
$ —
Other assets and deferred charges —
93.7
Total $ 2.8
$ 93.7

Accrued expenses and other $ 0.9
$ 21.4
Postretirement benefits and other long-term liabilities 1.9
72.3
Total $ 2.8
$ 93.7

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~ASC 842 Adoption of Practical Expedients~~

We have elected to adopt, for all classes of underlying assets, a package of practical expedients provided under ASC 842 that allow us to 1) not reassess whether existing or expired contracts contain or contained a lease; 2) not reassess the lease classification (operating or financing) of our existing leases at adoption; and 3) not reassess initial direct costs for existing leases.

ASC 842 also provides a practical expedient that allows companies to exclude balance sheet recognition of right-of-use assets and associated liabilities for lease terms of 12 months or less, which we have elected as part of our adoption of ASC 842 for all classes of underlying assets. We do not include right-of-use assets and operating lease liabilities on our Condensed Consolidated Balance Sheet for leases with a term of 12 months or less.

We have also elected to adopt the practical expedient under ASC 842 to not separate lease and non-lease components in contracts that contain both. These lease agreements are accounted for as a single lease component for all classes of underlying assets.

~~Leases Not Yet Commenced~~

As of September 30, 2019, we have entered into additional operating leases that have not yet commenced of approximately $1.4 million, which primarily reflects the lease of machinery and equipment with a term of 5 years that is expected to commence in 2019.

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

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

4.2. RESTRUCTURING AND ACQUISITION-RELATED COSTS

In 2016, AAM initiated actions under a global restructuring program (the 2016 Program) focused on creating a more streamlined organization in addition to reducing our cost structure and preparing for acquisition and integration activities. We incurred severance charges totaling $2.8 million and implementation costs totaling $29.6 million under the 2016 Program. There were no charges incurred under the 2016 Program during the first nine months of 2019 and we do not expect to incur any additional restructuring charges under the 2016 Program in future periods.

In the first quarter of 2019, we initiated a ~~new~~ global restructuring program (the 2019 Program) to further streamline our business by consolidating our four existing segments into three segments. This activity occurred through the disaggregation of our Powertrain segment, with a portion moving into our Driveline segment and a portion moving into our Metal Forming segment.. The primary objectives of ~~this consolidation are~~the 2019 Program were to further the integration of Metaldyne Performance Group, Inc. (MPG), align AAM's product and process technologies, and to achieve efficiencies within our corporate and business unit support teams to reduce cost in our business.

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

A summary of our restructuring activity for the first nine months of ~~2019~~2020 and ~~2018~~2019 is shown below:


														Severance Charges		Implementation Costs		Total
	Severance Charges			Implementation Costs			Asset Impairment Charges			Total
	(in millions)
Accrual at December 31, 2017	$	0.3		$	—		$	—		$	0.3
Charges	2.3			8.8			26.6			37.7
Cash utilization	(0.4		)	(6.6		)	—			(7.0		)
Non-cash utilization	—			—			(26.6		)	(26.6		)
Accrual at September 30, 2018	$	2.2		$	2.2		$	—		$	4.4
														(in millions)
Accrual at December 31, 2018	$	2.4		$	1.6		$	—		$	4.0		Accrual at December 31, 2018	$	2.4	$	1.6	$	4.0
Charges	10.4			13.1			—			23.5			Charges	10.4		13.1		23.5
Cash utilization	(11.7		)	(9.9		)	—			(21.6		)	Cash utilization	(11.7)		(9.9)		(21.6)

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

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

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

As part of our restructuring actions, we incurred total severance charges of approximately ~~$10.4~~$19.9 million and ~~$2.3 million, as well as total implementation costs of approximately $13.1 million and $8.8~~$10.4 million during the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively. We ~~expect to incur~~also incurred total implementation costs of approximately ~~$30~~$11.9 million ~~to $35~~and $13.1 million during the nine months ended September 30, 2020 and 2019, respectively. Implementation costs in both periods consist primarily of plant exit costs.

Approximately $22.9 million of the restructuring costs incurred during the nine months ended September 30, 2020 were under the 2020 Program. Approximately $14.4 million and $13.1 million of our total restructuring ~~charges in 2019, including~~ costs ~~incurred under the ongoing 2019 Program.~~

In the first nine months of 2018, we initiated actions to exit operations at manufacturing facilities in our Driveline, Metal Forming and former Powertrain segment. As a result of these actions, we were required to assess the associated long-lived assets for impairment. Based on our analysis, assets that were not to be redeployed to other AAM facilities were determined to be fully impaired resulting in a charge of $26.6 million for the nine months ended September 30, ~~2018. See Note 8 - Fair Value~~2020 related to our Driveline and Metal Forming segments, respectively, while the remainder were corporate costs. Approximately $2.0 million, $14.4 million and $0.7 million of our total restructuring costs for ~~further detail.~~the nine months ended September 30, 2019 related to our Driveline, Metal Forming and former Casting segments, respectively, while the remainder were corporate costs. We expect to incur approximately $70 million to $80 million of total restructuring charges in 2020, including costs incurred under the 2020 Program.

~~In 2017, we completed the acquisitions of MPG and USM Mexico Manufacturing LLC (USM Mexico).~~ During the nine months ended September 30, 2020 and 2019, we incurred the following integration charges primarily related to ~~these acquisitions:~~the integration of MPG:

These integration expenses primarily reflect costs incurred for information technology ~~systems~~infrastructure and ~~ongoing operational activities incurred in conjunction with the acquisition of MPG.~~enterprise resource planning systems. Total restructuring charges and acquisition-related charges are presented on a separate line item titled Restructuring and acquisition-related costs in our Condensed Consolidated Statements of ~~Operations. Restructuring~~Operations, and ~~acquisition-related costs~~ totaled $9.7 million and $38.6 million for the three and nine months ended September 30, 2020, respectively, and $11.7 million and $36.0 million for the three and nine months ended September 30, 2019, of which $23.5 million were restructuring charges and $12.5 million were acquisition-related charges, and $66.8 million for the nine months ended September 30, 2018, of which $37.7 million were restructuring charges and $29.1 million were acquisition-related charges.respectively.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5.3. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill The following table provides a reconciliation of changes in goodwill for the nine months ended September 30, ~~2019:~~2020:


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



Impairment charge	(210.8)		(299.2)		(510.0)
Foreign currency translation	(3.9)		(1.6)		(5.5)
Balance at September 30, 2020	$	183.6	$	0	$	183.6

In the first quarter of ~~2019,~~2020, the reduction in global automotive production volumes caused by the impact of COVID-19 represented an indicator to test our goodwill for impairment. This reduction in production volumes began in March of 2020 and resulted in lower forecasted sales volumes in the periods included in our long-range plan as revised in the first quarter of 2020.

In performing this test, we ~~initiated~~utilize a ~~global restructuring program (the 2019 Program)~~third-party valuation specialist to ~~further streamline our business by consolidating our four existing segments into three segments. See Note 4 - Restructuring and Acquisition-Related Costs for further detail on this reorganization~~assist management in determining the fair value of our ~~segments. Prior to this reorganization, our Powertrain segment was also a~~reporting units. Fair value of each reporting unit ~~for purposes~~is estimated based on a combination of ~~measuring~~discounted cash flows and the use of pricing multiples derived from an analysis of comparable public companies multiplied against historical and/or anticipated financial metrics of each reporting ~~goodwill. The~~unit. These calculations contain uncertainties as they require management to make assumptions including, but not limited to, market comparables, future cash flows of the reporting units, and appropriate discount and long-term growth rates. This fair value determination is categorized as Level 3 within the fair value hierarchy.

As a result of this goodwill impairment test in the first quarter of 2020, we determined that ~~was previously attributable to~~ the ~~Powertrain reporting unit was reallocated to the~~carrying values of both our Driveline and Metal Forming reporting units ~~based on the relative~~were greater than their respective fair ~~value~~values. As such, we recorded a goodwill impairment charge of ~~the respective portions that became attributable to those~~$210.8 million associated with our Driveline reporting ~~units.~~

~~The initiation~~unit and a goodwill impairment charge of ~~the 2019 Program and the reorganization of~~$299.2 million associated with our ~~business represented a triggering event~~Metal Forming reporting unit in the first quarter of ~~2019~~2020. The Metal Forming impairment charge represented a full impairment of the goodwill associated with that reporting unit.

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

The reduction in production volumes and changes to macro-economic factors caused by the impact of COVID-19 also represented an indicator to test ~~goodwill~~our long-lived assets, including other intangible assets and property, plant and equipment, for impairment. We completed this test in the first quarter of 2020 and there was no impairment ~~prior to reallocating the Powertrain goodwill to Driveline and Metal Forming. No impairment was identified as a result~~ of ~~completing this goodwill impairment test.~~these assets.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

Amortization expense for our intangible assets was $21.6 million and $65.0 million for the three and nine months ended September 30, 2020, respectively, and $23.7 million and $73.6 million for the three and nine months ended September 30, 2019, ~~respectively, and $24.8 million and $74.5 million for the three and nine months ended September 30, 2018,~~ respectively. Estimated amortization expense for the ~~full year 2019 is approximately $95 million and estimated amortization expense for each of the full~~ years 2020 through ~~2023~~2024 is expected to be in the range of approximately ~~$87 million.~~$80 million to $85 million per year.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

Inventories consist of the following:

September 30, 2019 December 31, 2018
(in millions)

Raw materials and work-in-progress $ 337.3
$ 375.1
Finished goods 88.0
99.0
Gross inventories 425.3
474.1
Inventory valuation reserves (22.2 ) (14.4 )
Inventories, net $ 403.1
$ 459.7

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Long-term debt consists of the following:

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

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

In April 2020, Holdings, AAM, Inc., and certain subsidiaries of Holdings entered into the ~~third quarter of 2019, we expensed $5.1 million for~~Second Amendment (Second Amendment) to the ~~write-off~~Credit Agreement. For the period from April 1, 2020 through March 31, 2022 (the Amendment Period), the Second Amendment, among other things, replaced the total net leverage ratio covenant with a new senior secured net leverage ratio covenant, reduced the minimum levels of the ~~unamortized debt issuance costs related~~cash interest expense coverage ratio covenant, and modified certain covenants restricting the ability of Holdings, AAM and certain subsidiaries of Holdings to create, incur, assume or permit to exist certain additional indebtedness and liens and to make certain restricted payments, voluntary payments and distributions. The Second Amendment also increased the ~~existing~~maximum levels of the total net leverage ratio covenant after the Amendment Period, modified the applicable margin with respect to interest rates under the Term Loan A Facility due 2024 and ~~a portion of~~interest rates and commitment fees under the ~~unamortized debt issuance costs related to our~~Revolving Credit Facility, and increased the minimum adjusted London Interbank Offered Rate for Eurodollar-based loans under the Term Loan A Facility due 2024 and Revolving Credit Facility. The applicable margin for the Term Loan B Facility ~~that we had been amortizing over~~remains unchanged. We paid debt issuance costs of $4.6 million in the ~~expected life of~~nine months ended September 30, 2020 related to the ~~borrowings.~~Second Amendment.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

At September 30, ~~2019,~~2020, we had ~~$890.8~~$891.4 million available under the Revolving Credit Facility. This availability reflects a reduction of ~~$34.2~~$33.6 million for standby letters of credit issued against the facility. The proceeds of the Revolving Credit Facility are used for general corporate purposes.

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

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

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

~~Foreign credit facilities~~ We utilize local currency credit facilities to finance the operations of certain foreign subsidiaries. At September 30, 2019, $107.8 million was outstanding under our foreign credit facilities, as compared to $127.1 million at December 31, 2018. At September 30, 2019, an additional $93.7 million was available under our foreign credit facilities.

~~Weighted-Average Interest Rate~~ ~~The weighted-average interest rate of our long-term debt outstanding was 5.8% at September 30, 2019 and 5.9% at December 31, 2018.~~

~~Capital lease obligations~~ ~~Upon our adoption of ASC 842~~ ~~Leases~~, our capital (finance) lease obligations are now presented in Accrued expenses and other, and Postretirement benefits and other long-term liabilities on our Condensed Consolidated Balance Sheet. See Note 3 - Leasing for additional detail regarding our adoption of ASC 842.

~~Redemption of 7.75%~~6.875% Notes due ~~2019~~2028 In the second quarter of ~~2019,~~2020, we issued $400 million in aggregate principal amount of 6.875% senior notes due 2028 (the 6.875% Notes). Proceeds from the 6.875% Notes were used primarily to fund the redemption of the remaining $350 million of 6.625% senior notes due 2022 described below and for general corporate purposes. We paid debt issuance costs of $6.4 million in the nine months ended September 30, 2020 related to the 6.875% Notes.

Redemption of 6.625% Notes due 2022 In the first quarter of 2020, we voluntarily redeemed ~~the remaining balance outstanding under~~a portion of our ~~7.75%~~6.625% Notes due ~~2019.~~2022. This resulted in a principal payment of $100 million and ~~$0.3~~$2.0 million in accrued interest. We also expensed approximately ~~$0.1~~$0.4 million for the write-off of the unamortized debt issuance costs that we had been amortizing over the expected life of the borrowing, and approximately ~~$2.2~~$1.1 million for an early redemption premium.

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

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

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

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

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

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

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

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

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

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

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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


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

Currency forward contracts	Cost of Goods Sold	$	0.9	$	(0.5)	$	(6.7)	$	1.3	$	2,926.7
Currency forward contracts	Other Income (Expense), net	0		0.1		(0.5)		(0.5)		(3.8)

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

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

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

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

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

September 30, 2019 December 31, 2018
Carrying Amount Fair Value Carrying Amount Fair Value Input
(in millions)
Balance Sheet Classification
Cash equivalents $ 160.7
$ 160.7
$ 44.0
$ 44.0
Level 1
Prepaid expenses and other

Cash flow hedges - currency forward contracts 2.3
2.3
1.3
1.3
Level 2
Cash flow hedges - variable-to-fixed interest rate swap 1.6
1.6
0.9
0.9
Level 2
Nondesignated - currency forward contracts 0.2
0.2
0.6
0.6
Level 2
Other assets and deferred charges
     Cash flow hedges - currency forward contracts 0.9
0.9
0.4
0.4
Level 2
     Cash flow hedges - fixed-to-fixed cross-currency swap 7.0
7.0
—
—
Level 2
     Cash flow hedges - variable-to-fixed interest rate swap 4.0
4.0
1.6
1.6
Level 2
Accrued expenses and other
     Cash flow hedges - currency forward contracts 0.3
0.3
0.8
0.8
Level 2
     Cash flow hedges - variable-to-fixed interest rate swap 10.0
10.0
0.7
0.7
Level 2
     Nondesignated - currency forward contracts 0.4
0.4
0.4
0.4
Level 2
Postretirement benefits and other long-term liabilities
     Cash flow hedges - currency forward contracts 0.1
0.1
0.9
0.9
Level 2
     Cash flow hedges - variable-to-fixed interest rate swap 24.2
24.2
6.9
6.9
Level 2

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

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

September 30, 2019 December 31, 2018
Carrying Amount Fair Value Carrying Amount Fair Value

Input
(in millions)

Revolving Credit Facility $ —
$ —
$ —
$ —
Level 2
Term Loan A Facility 340.0
334.9
83.8
79.5
Level 2
Term Loan B Facility 1,248.6
1,217.4
1,511.2
1,420.6
Level 2
7.75% Notes due 2019 —
—
100.0
102.1
Level 2
6.625% Notes due 2022 450.0
454.5
450.0
444.4
Level 2
6.50% Notes due 2027 500.0
474.4
500.0
446.3
Level 2
6.25% Notes due 2026 400.0
380.0
400.0
358.0
Level 2
6.25% Notes due 2025 700.0
665.0
700.0
636.7
Level 2

~~Long-Lived Assets~~ During the second quarter of 2018, we recorded asset impairment charges as a result of restructuring actions initiated during the quarter. See Note 4 - Restructuring and Acquisition-Related Costs for further detail. There were no such impairment charges incurred during the nine months ended September 30, 2019.

~~The following table summarizes the impairments of long-lived assets measured at fair value on a nonrecurring basis subsequent to initial recognition:~~

Balance Sheet Classification Fair Value at September 30, 2018 Asset Impairment for the Nine Months Ended September 30, 2018

Property, plant and equipment, net $ —
$ 25.7
Other assets and deferred charges —
0.9

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~Currency derivative contracts~~ From time to time, we use foreign currency forward contracts to reduce the effects of fluctuations in exchange rates relating to certain foreign currencies. As of September 30, 2019, we have currency forward contracts outstanding with a total notional amount of ~~$191.5 million~~ ~~that hedge our exposure to changes in foreign currency exchange rates for certain payroll expenses into the third quarter of 2022 and other items into the second quarter of 2020.~~

~~Fixed-to-fixed cross-currency swap~~ In the third quarter of 2019, we entered into a fixed-to-fixed cross-currency swap to reduce the variability of functional currency equivalent cash flows associated with changes in exchange rates on certain Euro-based intercompany loans. As of September 30, 2019, the notional amount of the fixed-to-fixed cross-currency swap was $217.9 million, and hedges our exposure to changes in exchange rates on the intercompany loans into the second quarter of 2024.

~~Variable-to-fixed interest rate swap~~ In 2018, we entered into a variable-to-fixed interest rate swap to reduce the variability of cash flows associated with interest payments on our variable rate debt. In the second quarter of 2019, we discontinued this variable-to-fixed interest rate swap, which was a liability of $9.7 million on the date that it was discontinued.

Also in the second quarter of 2019, we entered into a new variable-to-fixed interest rate swap to reduce the variability of cash flows associated with interest payments on our variable rate debt. We have the following notional amounts hedged in relation to our variable-to-fixed interest rate swap: $1.0 billion through May 2020, $900.0 million through May 2021, $750.0 million through May 2022, $600.0 million through May 2023 and $500.0 million through May 2024.

Location Gain (Loss) Reclassified During Total of Financial Gain (Loss) Expected
of Gain (Loss) Three Months Ended Nine Months Ended Statement to be Reclassified
Reclassified into September 30, September 30, Line Item During the
Net Income 2019 2018 2019 2018 2019 Next 12 Months
(in millions)

Currency forward contracts Cost of Goods Sold $ 0.9
$ (0.9 ) $ 1.8
$ (3.7 ) $ 4,381.7
$ 2.0
Fixed-to-fixed cross-currency swap Other Income (Expense), net 7.6
—
7.6
—
(9.0 ) —
Variable-to-fixed interest rate swap Interest Expense (1.7 ) 0.8
0.2
2.1
(163.9 ) (9.1 )

See Note 14 - Reclassifications Out of Accumulated Other Comprehensive Income (Loss) (AOCI) for amounts recognized in other comprehensive income (loss) during the three and nine months ended September 30, 2019 and 2018.

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

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

Gain (Loss) Recognized During Total of Financial
Location of Gain (Loss) Three Months Ended Nine Months Ended Statement Line
Recognized in September 30, September 30, Item
Net Income 2019
2018 2019 2018 2019
(in millions)

Currency forward contracts Cost of Goods Sold $ (0.5 ) $ 2.3
$ 1.3
$ 2.8
$ 4,381.7
Currency forward contracts Other Income (Expense), net 0.1
(0.5 ) (0.5 ) 1.3
(9.0 )

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

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

~~10.~~8. EMPLOYEE BENEFIT PLANS

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

The noncurrent liabilities associated with our pension and other postretirement benefit plans are classified as Postretirement benefits and other long-term liabilities on our Condensed Consolidated Balance Sheets. As of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, we have a noncurrent pension liability of ~~$113.0~~$105.4 million and ~~$128.6~~$118.2 million, respectively. As of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, we have a noncurrent other postretirement benefits liability of ~~$506.4~~$515.7 million and ~~$506.5~~$520.0 million, respectively.

Due to the availability of our pre-funded pension balances (previous contributions in excess of prior required pension contributions) related to certain of our U.S. pension plans, we expect our regulatory pension funding requirements in ~~2019~~2020 to be approximately ~~$2.2~~$1.5 million. We expect our cash payments for other postretirement benefit obligations in ~~2019,~~2020, net of GM cost sharing, to be approximately ~~$17.7~~$17 million.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~11.~~9. PRODUCT WARRANTIES

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

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

Three Months Ended Nine Months Ended
September 30, September 30,
2019 2018 2019 2018
(in millions)

Beginning balance $ 55.7
$ 58.4
$ 57.7
$ 49.5
     Accruals 5.3
4.4
14.7
14.9
Payments (0.9 ) (2.2 ) (8.2 ) (3.3 )
     Adjustment to prior period accruals 0.7
5.1
(3.6 ) 4.9
     Foreign currency translation (0.5 ) (0.2 ) (0.3 ) (0.5 )
Ending balance $ 60.3
$ 65.5
$ 60.3
$ 65.5

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~12.~~10. INCOME TAXES

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

Income tax was a benefit of $22.5 million for the three months ended September 30, 2020, an effective income tax rate of (23.8)%, as compared to a benefit of $40.4 million for the three months ended September 30, 2019, an effective income tax rate of 24.6%~~, as compared to expense~~. Income tax was a benefit of ~~$11.5~~$63.1 million for the ~~three~~nine months ended September 30, ~~2018,~~2020, an effective income tax rate of ~~15.2%. Income tax was~~9.6%, as compared to a benefit of $37.4 million for the nine months ended September 30, 2019, an effective income tax rate of 55.7%.

In accordance with the guidance in ASC 740 - Income Taxes, we review the likelihood that we will realize the benefit of deferred tax assets and estimate whether recoverability of our deferred tax assets is "more likely than not" based on the available evidence. During the previous three month period ended June 30, 2020, we determined that a portion of our deferred tax assets related to U.S. interest expense carryforwards were not more likely than not to be realized and, as ~~compared to~~such, we recorded a valuation allowance resulting in tax expense of ~~$31.4~~approximately $36.0 million during the second quarter of 2020.

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

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

During the nine months ended September 30, ~~2018,~~2020, we finalized an ~~effective income~~advance pricing agreement in a foreign jurisdiction, which resulted in a tax ~~rate~~benefit of ~~9.3%.~~approximately $6.8 million, and we recognized a tax benefit of approximately $7.0 million related to our ability to carry back projected current year losses under the CARES Act to years with the previous 35% tax rate. This is in addition to a net tax benefit of approximately $7.5 million that we recognized in the first quarter of 2020 related to our ability to carry back losses from prior years under the CARES Act. See Note 1 - Organization and Basis of Presentation for additional detail regarding the CARES Act.

Our effective income tax ~~rate~~rates for the three and nine months ended September 30, ~~2019 varies~~2020 vary from our effective income tax ~~rate~~rates for the three and nine months ended September 30, ~~2018 primarily due to an income tax benefit of $47.2 million recognized during the third quarter of~~ 2019, as a result of the ~~impairment charge recorded upon reclassifying the assets and liabilities of the U.S. Casting business to held-for-sale.~~

~~Our~~items discussed above. Further, our effective income tax rate for the nine months ended September 30, ~~2019~~2020 varies from our effective income tax rate for the nine months ended September 30, ~~2018, primarily~~2019 as a result of the impact of the goodwill impairment charge recorded during the first nine months of 2020, which had no corresponding income tax benefit. In addition, in the first nine months of 2019, we recognized an income tax benefit ~~associated with~~of $9.3 million related to final regulations issued by the ~~impairment charge as discussed above. In addition, as part~~Department of Treasury and Internal Revenue Service in the ~~Tax Cuts and Jobs Act~~first quarter of 2019. The final regulations changed the manner in ~~2017, a~~which we were required to compute the one-time transition tax ~~(Transition Tax)~~under the TCJA that was imposed on certain foreign earnings for which U.S. income tax was previously deferred. The Department of Treasury and Internal Revenue Service issued final regulations on February 5, 2019 regarding the Transition Tax, which changed the manner in which we are required to compute the Transition Tax when it is recognized over a two-year period. The application of the final regulations resulted in a $9.3 million income tax benefit, which has been recorded in the nine months ended September 30, 2019, the period in which the final regulations were issued.

Our effective income tax rate for the nine months ended September 30, 2018 was impacted by certain discrete income tax items recognized during this period. During the first nine months of 2018, we recognized a discrete tax benefit as a result of finalizing an advance pricing agreement in a foreign jurisdiction, which resulted in a reduction of our liability for unrecognized income tax benefits and related interest and penalties of $20.0 million. Also in the first nine months of 2018, we recognized a discrete tax expense related to the sale of the aftermarket business associated with our former Powertrain segment.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the three and nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, our effective income tax rates vary from the U.S. federal statutory rate ~~of 21%~~ primarily due to favorable foreign tax rates, ~~as well as~~ the impact of tax credits, and the effect of the ~~discrete~~ items described above.

We operate in multiple jurisdictions throughout the world and the income tax returns of several subsidiaries in various tax jurisdictions are currently under examination. We are currently under a U.S. federal income tax examination for the years 2015 through ~~2017. We continue to have years~~2018. Generally, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax ~~examination~~examinations by tax authorities for years prior to 2013. In the second quarter of 2020, we finalized an advance pricing agreement in ~~certain significant~~a foreign jurisdiction, which resulted in a cash payment to the tax ~~jurisdictions from 2013 to present.~~ authorities of $18.5 million and a reduction of our liability for unrecognized tax benefits and related interest and penalties of $25.3 million.

Based on the status of ongoing tax audits, and the protocol of finalizing audits by the relevant tax authorities, it is not possible to estimate the impact of changes, if any, to previously recorded uncertain tax positions. ~~As of September 30, 2019 and December 31, 2018, we have recorded a liability for unrecognized income tax benefits and related interest and penalties of $51.9 million and $45.6 million, respectively.~~

During the next 12 months, we may finalize an advance pricing agreement in a foreign jurisdiction, which could result in a cash payment to the relevant tax authorities and a reduction of our liability for unrecognized tax benefits and related interest and penalties. Although it is difficult to estimate with certainty the amount of any audit settlement, we do not expect any potential settlement to be materially different from what we have recorded in unrecognized tax benefits. We will continue to monitor the progress and conclusions of all ongoing audits and other communications with tax authorities, and will adjust our estimated liability as necessary. As of September 30, 2020 and December 31, 2019, we have recorded a liability for unrecognized income tax benefits and related interest and penalties of $23.3 million and $52.6 million, respectively.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~13.~~ 11. EARNINGS (LOSS) PER SHARE (EPS)

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

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

Three Months Ended Nine Months Ended
September 30, September 30,
2019 2018 2019 2018
(in millions, except per share data)
Numerator

Net income (loss) attributable to AAM $ (124.2 ) $ 63.8
$ (30.1 ) $ 304.3
    Less: Net income attributable to participating securities —
(2.0 ) —
(8.9 )
Net income (loss) attributable to common shareholders - Basic and Dilutive $ (124.2 ) $ 61.8
$ (30.1 ) $ 295.4

Denominators

Basic common shares outstanding -

   Weighted-average shares outstanding 115.8
115.3
115.6
115.0
        Less: Participating securities (3.3 ) (3.6 ) (3.3 ) (3.4 )
    Weighted-average common shares outstanding 112.5
111.7
112.3
111.6

Effect of dilutive securities -

   Dilutive stock-based compensation —
1.0
—
0.7

Diluted shares outstanding -

   Adjusted weighted-average shares after assumed conversions 112.5
112.7
112.3
112.3

Basic EPS $ (1.10 ) $ 0.55
$ (0.27 ) $ 2.65

Diluted EPS $ (1.10 ) $ 0.55
$ (0.27 ) $ 2.63

Basic and diluted loss per share are the same for the three and nine months ended September 30, 2019 because the effect of dilutive performance shares of 0.3 million and 0.4 million, respectively, would have been antidilutive.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~14.~~ 12. RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (AOCI)

Reclassification adjustments and other activity impacting accumulated other comprehensive income (loss) during the three months ended September 30, ~~2019~~2020 and September 30, ~~2018~~2019 are as follows (in millions):


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

Other comprehensive income (loss) before reclassifications	0			14.0		(7.8)			6.2

Income tax effect of other comprehensive income (loss) before reclassifications	0			0		2.6			2.6

Amounts reclassified from accumulated other comprehensive loss	2.1		(a)	0		14.7		(b)	16.8

Income taxes reclassified into net income	(0.4)			0		(2.8)			(3.2)

Net change in accumulated other comprehensive loss	1.7			14.0		6.7			22.4

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

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

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

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

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

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

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

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


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

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

Income tax effect of other comprehensive income (loss) before reclassifications	0.6			0		(0.1)			0.5

Amounts reclassified from accumulated other comprehensive loss	1.3		(a)	0		(6.8)		(b)	(5.5)

Income taxes reclassified into net income	(0.3)			0		1.2			0.9

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

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

Defined Benefit Plans Foreign Currency Translation Adjustments Unrecognized Gain (Loss) on Cash Flow Hedges Total
Balance at June 30, 2018 $ (238.5 ) $ (77.2 ) $ 0.6
$ (315.1 )

Other comprehensive income (loss) before reclassifications —
(11.9 ) 12.8
0.9

Income tax effect of other comprehensive income (loss) before reclassifications —
—
(0.7 ) (0.7 )

Amounts reclassified from accumulated other comprehensive income (loss) 1.3
(a) —
0.1
(b) 1.4

Income taxes reclassified into net income (0.3 ) —
0.2
(0.1 )

Net change in accumulated other comprehensive income (loss) 1.0
(11.9 ) 12.4
1.5

Balance at September 30, 2018 $ (237.5 ) $ (89.1 ) $ 13.0
$ (313.6 )



(a)		~~The amount~~These amounts were reclassified from AOCI ~~included $1.2 million in COGS and $0.1 million in SG&A~~to Other income (expense), net for the three months ended September 30, ~~2019~~2020 and ~~$1.5~~September 30, 2019.

(b)		The amounts reclassified from AOCI included $1.3 million in ~~COGS and $(0.1)~~cost of goods sold (COGS), $4.1 million in ~~SG&A~~interest expense and $9.3 million in Other income (expense), net for the three months ended September 30, ~~2018.~~

~~(b)~~	~~The amounts reclassified from AOCI included~~2020 and $(0.9) million in COGS, $1.7 million in interest expense and $(7.6) million in ~~other~~Other income (expense), net for the three months ended September 30, ~~2019 and $0.9 million in COGS and $(0.8) million in interest expense for the three months ended September 30, 2018.~~2019.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Reclassification adjustments and other activity impacting accumulated other comprehensive income (loss) during the nine months ended September 30, ~~2019~~2020 and September 30, ~~2018~~2019 are as follows (in millions):

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

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

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

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

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

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

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


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

Other comprehensive income (loss) before reclassifications	0			(29.7)		(42.6)			(72.3)

Income tax effect of other comprehensive income (loss) before reclassifications	0			0		5.7			5.7

Amounts reclassified from accumulated other comprehensive loss	6.2		(a)	0		21.7		(b)	27.9

Income taxes reclassified into net income	(1.2)			0		(4.1)			(5.3)

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

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

Defined Benefit Plans Foreign Currency Translation Adjustments Unrecognized Gain (Loss) on Cash Flow Hedges Total
Balance at December 31, 2017 $ (252.0 ) $ (34.1 ) $ (6.6 ) $ (292.7 )

Other comprehensive income (loss) before reclassifications 14.7
(55.2 ) 19.7
(20.8 )

Income tax effect of other comprehensive income (loss) before reclassifications (3.6 ) —
(2.2 ) (5.8 )

Amounts reclassified from accumulated other comprehensive income (loss) 4.6
(b) 0.2
1.6
(c) 6.4

Income taxes reclassified into net income (1.2 ) —
0.5
(0.7 )

Net change in accumulated other comprehensive income (loss) 14.5
(55.0 ) 19.6
(20.9 )

Balance at September 30, 2018 $ (237.5 ) $ (89.1 ) $ 13.0
$ (313.6 )


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

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

Income tax effect of other comprehensive income (loss) before reclassifications	0.6			0		5.7			6.3

Amounts reclassified from accumulated other comprehensive income (loss)	3.8		(a)	0		(9.6)		(b)	(5.8)

Income taxes reclassified into net income	(0.8)			0		1.6			0.8

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

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


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

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

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

~~(b)~~	The amount reclassified from AOCI included $3.6 million in COGS and $0.2 million in SG&A for the nine months ended September 30, 2019 and $4.5 million in COGS and $0.1 million in SG&A for the nine months ended September 30, 2018.

~~(c)~~	The amounts reclassified from AOCI included $(1.8) million in COGS, $(0.2) million in interest expense and $(7.6) million in other income for the nine months ended September 30, 2019 and $3.7 million in COGS and $(2.1) million in interest expense for the nine months ended September 30, 2018.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~15.~~13. REVENUE FROM CONTRACTS WITH CUSTOMERS

~~Disaggregation of Net Sales~~

Net sales recognized from contracts with customers, disaggregated by segment and geographical location, are presented in the following table for the three and nine months ended September 30, ~~2019~~2020 and ~~2018.~~2019. Net sales are attributed to regions based on the location of production. Intersegment sales have been excluded from the table.

In the ~~first~~fourth quarter of 2019, we ~~reorganized~~completed the Casting Sale. The Casting Sale did not include the entities that conduct AAM's casting operations in El Carmen, Mexico, which are now included in our Driveline segment. The Casting Sale did not qualify for classification as discontinued operations, as it did not represent a strategic shift in our business that has had, or will have, a major effect on our operations and financial results. As such, we continue to ~~disaggregate our former Powertrain business unit, with~~present Casting as a ~~portion moving to our Driveline business unit and a portion moving to our Metal Forming business unit. As a result,~~segment in the ~~Powertrain amounts previously reported~~table below for the three and nine months ended September 30, ~~2018~~2019, and the reported amounts are now comprised entirely of the U.S. casting operations that were included in the sale. The amounts previously reported in our Casting segment for the retained operations in El Carmen, Mexico have been reclassified to our Driveline segment for the three and ~~Metal Forming.~~nine months ended September 30, 2019.

Three Months Ended September 30, 2019
Driveline Metal Forming Casting Total
North America $ 902.7
$ 296.9
$ 169.7
$ 1,369.3
Asia 131.0
10.3
—
141.3
Europe 77.9
61.1
—
139.0
South America 26.5
1.3
—
27.8
Total $ 1,138.1
$ 369.6
$ 169.7
$ 1,677.4

Three Months Ended September 30, 2018
Driveline Metal Forming Casting Total
North America $ 946.0
$ 316.8
$ 193.8
$ 1,456.6
Asia 160.7
8.9
—
169.6
Europe 85.1
69.8
—
154.9
South America 34.6
1.3
—
35.9
Total $ 1,226.4
$ 396.8
$ 193.8
$ 1,817.0

Nine Months Ended September 30, 2019
Driveline Metal Forming Casting Total
North America $ 2,644.1
$ 903.7
$ 553.9
$ 4,101.7
Asia 419.3
25.7
—
445.0
Europe 270.3
201.0
—
471.3
South America 78.2
4.7
—
82.9
Total $ 3,411.9
$ 1,135.1
$ 553.9
$ 5,100.9

Nine Months Ended September 30, 2018
Driveline Metal Forming Casting Total
North America $ 2,892.5
$ 983.6
$ 613.2
$ 4,489.3
Asia 481.6
33.7
—
515.3
Europe 240.3
228.8
—
469.1
South America 98.9
3.7
—
102.6
Total $ 3,713.3
$ 1,249.8
$ 613.2
$ 5,576.3


	Three Months Ended September 30, 2020
	Driveline		Metal Forming		Casting		Total
North America	$	870.8	$	252.1	$	0	$	1,122.9
Asia	116.7		12.2		0		128.9
Europe	94.1		53.4		0		147.5
South America	12.3		2.5		0		14.8
Total	$	1,093.9	$	320.2	$	0	$	1,414.1

	Three Months Ended September 30, 2019
	Driveline		Metal Forming		Casting		Total
North America	$	917.0	$	296.9	$	155.4	$	1,369.3
Asia	131.0		10.3		0		141.3
Europe	77.9		61.1		0		139.0
South America	26.5		1.3		0		27.8
Total	$	1,152.4	$	369.6	$	155.4	$	1,677.4


	Nine Months Ended September 30, 2020
	Driveline		Metal Forming		Casting		Total
North America	$	1,922.5	$	597.4	$	0	$	2,519.9
Asia	307.9		28.3		0		336.2
Europe	239.3		139.1		0		378.4
South America	32.7		5.7		0		38.4
Total	$	2,502.4	$	770.5	$	0	$	3,272.9

	Nine Months Ended September 30, 2019
	Driveline		Metal Forming		Casting		Total
North America	$	2,688.9	$	903.7	$	509.1	$	4,101.7
Asia	419.3		25.7		0		445.0
Europe	270.3		201.0		0		471.3
South America	78.2		4.7		0		82.9
Total	$	3,456.7	$	1,135.1	$	509.1	$	5,100.9

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Contract Assets and Liabilities

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

Accounts Receivable, Net Contract Liabilities (Current) Contract Liabilities (Long-term)
December 31, 2018 $ 966.5
$ 44.3
$ 77.6
September 30, 2019 976.9
22.6
83.1
Increase/(decrease) $ 10.4
$ (21.7 ) $ 5.5



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

Contract liabilities relate to deferred revenue associated with various settlements and commercial agreements for which we have a future performance obligation to the customer. We recognize this deferred revenue into revenue over the life of the associated program as we satisfy our performance obligations to the customer. We do not have contract assets as defined in ASC 606.

During the three and nine months ended September 30, ~~2019,~~2020, we amortized ~~$12.5~~$5.4 million and ~~$40.3~~$17.3 million, respectively, of previously recorded contract liabilities into revenue as we satisfied performance obligations with our customers.

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~16.~~14. SEGMENT REPORTING

~~Subsequent to the acquisition of MPG in 2017, our~~Our business was organized into four segments: Driveline, Metal Forming, Powertrain and Casting. In the first quarter of 2019, we reorganized our business to disaggregate our former Powertrain segment, with a portion moving to our Driveline segment and a portion moving to our Metal Forming segment. As a result, our business is ~~now~~ organized into Driveline and Metal Forming ~~and Casting~~ segments, with each representing a reportable segment under ASC 280 Segment Reporting. In the fourth quarter of 2019, we completed the Casting Sale, which did not include the entities that conduct AAM's casting operations in El Carmen, Mexico, which are now included in our Driveline segment. The ~~Powertrain Sales~~Casting Sale did not qualify for classification as discontinued operations, as it did not represent a strategic shift in our business that has had, or will have, a major effect on our operations and ~~Segment Adjusted EBITDA amounts previously reported~~financial results. As such, we continue to present Casting as a segment in the table below for the three and nine months ended September 30, ~~2018, as well as~~2019, and the ~~Total Assets~~reported amounts are now comprised entirely of the U.S. casting operations that were included in the sale. The amounts previously reported in our Casting segment for ~~Powertrain as of December 31, 2018,~~the retained operations in El Carmen, Mexico have been reclassified to our Driveline segment for the three and ~~Metal Forming in the tables below.~~nine months ended September 30, 2019.

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

Our product offerings by segment are as follows:

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

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

Casting products consist primarily of both thin wall castings and high strength ductile iron castings, as well as transmission pump bodies, steering knuckles, control arms, brake anchors and calipers, and ball joint housings for the global light vehicle, commercial and industrial markets.

We use Segment Adjusted EBITDA as the measure of earnings to assess the performance of each segment and determine the resources to be allocated to the segments. We define EBITDA to be earnings before interest expense, income taxes, depreciation and amortization. Segment Adjusted EBITDA is defined as EBITDA for our reportable segments excluding the impact of restructuring and acquisition-related costs, debt refinancing and redemption costs, gain (loss) on the sale of a business, impairment charges, pension settlements and non-recurring items.

The following tables represent information by reportable segment for the three months ended September 30, 2020 and 2019 ~~and 2018~~ ~~(in~~(in millions):


	Three Months Ended September 30, 2020
	Driveline		Metal Forming		Casting		Total
Sales	$	1,094.5	$	433.2	$	0	$	1,527.7
Less: intersegment sales	0.6		113.0		0		113.6
Net external sales	$	1,093.9	$	320.2	$	0	$	1,414.1

Segment Adjusted EBITDA	$	207.4	$	89.7	$	0	$	297.1

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

Segment Adjusted EBITDA	$	181.0	$	79.3	$	5.5	$	265.8

Three Months Ended September 30, 2019

Driveline
Metal Forming
Casting
Total
Sales
$ 1,146.7

$ 476.6

$ 209.0

$ 1,832.3
Less: intersegment sales
8.6

107.0

39.3

154.9
Net external sales $ 1,138.1

$ 369.6

$ 169.7
$ 1,677.4

Segment Adjusted EBITDA $ 171.6
$ 80.4
$ 13.8
$ 265.8

Three Months Ended September 30, 2018

Driveline
Metal Forming
Casting
Total
Sales
$ 1,228.2

$ 509.0

$ 219.1

$ 1,956.3
Less: intersegment sales
1.8

112.2

25.3

139.3
Net external sales $ 1,226.4

$ 396.8

$ 193.8

$ 1,817.0

Segment Adjusted EBITDA $ 176.9
$ 83.6
$ 14.5
$ 275.0

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The following tables represent information by reportable segment for the nine months ended September 30, ~~2019~~2020 and ~~2018~~2019 (in millions):

Nine Months Ended September 30, 2019
Driveline Metal Forming Casting Total
Sales $ 3,422.5
$ 1,444.1
$ 655.0
$ 5,521.6
Less: intersegment sales 10.6
309.0
101.1
420.7
Net external sales $ 3,411.9
$ 1,135.1
$ 553.9
$ 5,100.9

Segment Adjusted EBITDA $ 461.7
$ 253.7
$ 61.4
$ 776.8

Nine Months Ended September 30, 2018
Driveline Metal Forming Casting Total
Sales $ 3,718.6
$ 1,581.7
$ 701.3
$ 6,001.6
Less: intersegment sales 5.3
331.9
88.1
425.3
Net external sales $ 3,713.3
$ 1,249.8
$ 613.2
$ 5,576.3

Segment Adjusted EBITDA $ 570.9
$ 306.0
$ 63.0
$ 939.9


	Nine Months Ended September 30, 2020
	Driveline		Metal Forming		Casting		Total
Sales	$	2,529.9	$	1,005.8	$	0	$	3,535.7
Less: intersegment sales	27.5		235.3		0		262.8
Net external sales	$	2,502.4	$	770.5	$	0	$	3,272.9

Segment Adjusted EBITDA	$	315.5	$	142.8	$	0	$	458.3

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

Segment Adjusted EBITDA	$	485.9	$	250.2	$	40.7	$	776.8

~~The following table represents total assets by segment as of September 30, 2019 and December 31, 2018~~
~~(in millions)~~:

Driveline Metal Forming Casting Corporate and Elims Total
Total Assets at September 30, 2019 $ 3,649.4
$ 2,579.9
$ 454.7
$ 632.3
$ 7,316.3

Total Assets at December 31, 2018 3,529.2
2,723.0
664.7
593.8
7,510.7

The following table represents a reconciliation of Total Segment Adjusted EBITDA to consolidated income (loss) before income taxes for the three ~~months~~ and nine months ended September 30, ~~2019~~2020 and ~~2018~~2019 (in millions):

Three Months Ended September 30,
Nine Months Ended September 30,

2019
2018
2019
2018
Total segment adjusted EBITDA $ 265.8
$ 275.0
$ 776.8
$ 939.9
Interest expense (54.3 ) (54.9 ) (163.9 ) (162.5 )
Depreciation and amortization (134.2 ) (132.9 ) (411.5 ) (390.9 )
Restructuring and acquisition-related costs (11.7 ) (11.7 ) (36.0 ) (66.8 )
Gain on sale of business —
—
—
15.5
Gain on settlement of capital lease —
—
—
15.6
Debt refinancing and redemption costs (5.1 ) —
(7.5 ) (14.6 )
Impairment charge (225.0 ) —
(225.0 ) —
Income (loss) before income taxes $ (164.5 ) $ 75.5
$ (67.1 ) $ 336.2


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

Loss on sale of business	0		0		(1.0)		0

Debt refinancing and redemption costs	(5.2)		(5.1)		(6.7)		(7.5)
Impairment charges	0		(225.0)		(510.0)		(225.0)
Non-recurring items:
Malvern Fire charges, net of recoveries	(8.6)		0		(8.6)		0


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

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

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

~~17. SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS~~

Holdings has no significant assets other than its 100% ownership in AAM, Inc. and Metaldyne Performance Group, Inc. (MPG Inc.), and no direct subsidiaries other than AAM, Inc. and MPG Inc. The 6.625% Notes, 6.50% Notes, 6.25% Notes (due 2026), and 6.25% Notes (due 2025) 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. and MPG Inc.

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 Operations
Three Months Ended September 30,
(in millions)
Holdings AAM Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Elims Consolidated
2019
Net sales
External $ —
$ 205.7
$ 506.5
$ 965.2
$ —
$ 1,677.4
Intercompany —
0.5
77.0
16.5
(94.0 ) —
Total net sales —
206.2
583.5
981.7
(94.0 ) 1,677.4
Cost of goods sold —
221.2
529.6
771.9
(94.0 ) 1,428.7
Gross profit (loss) —
(15.0 ) 53.9
209.8
—
248.7
Selling, general and administrative expenses —
68.9
6.8
17.0
—
92.7
Amortization of intangible assets —
1.4
21.4
0.9
—
23.7
Impairment charges —
—
225.0
—
—
225.0
Restructuring and acquisition-related costs —
6.2
4.1
1.4
—
11.7
Operating income (loss) —
(91.5 ) (203.4 ) 190.5
—
(104.4 )
Non-operating income (expense), net —
(62.7 ) 2.3
0.3
—
(60.1 )
Income (loss) before income taxes —
(154.2 ) (201.1 ) 190.8
—
(164.5 )
Income tax expense (benefit) —
(8.5 ) (46.8 ) 14.9
—
(40.4 )
Earnings (loss) from equity in subsidiaries (124.2 ) 50.5
38.2
—
35.5
—
Net income (loss) before royalties (124.2 ) (95.2 ) (116.1 ) 175.9
35.5
(124.1 )
Royalties —
86.6
0.7
(87.3 ) —
—
Net income (loss) after royalties (124.2 ) (8.6 ) (115.4 ) 88.6
35.5
(124.1 )
Net income attributable to noncontrolling interests —
—
—
(0.1 ) —
(0.1 )
Net income (loss) attributable to AAM $ (124.2 ) $ (8.6 ) $ (115.4 ) $ 88.5
$ 35.5
$ (124.2 )
Other comprehensive income (loss), net of tax (44.8 ) (26.4 ) (35.4 ) (36.4 ) 98.2
(44.8 )
Comprehensive income (loss) attributable to AAM $ (169.0 ) $ (35.0 ) $ (150.8 ) $ 52.1
$ 133.7
$ (169.0 )

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

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

Holdings AAM Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Elims Consolidated
2018

Net sales

External $ —
$ 247.1
$ 544.3
$ 1,025.6
$ —
$ 1,817.0
Intercompany —
0.7
75.6
10.8
(87.1 ) —
Total net sales —
247.8
619.9
1,036.4
(87.1 ) 1,817.0
Cost of goods sold —
220.6
594.2
821.9
(87.1 ) 1,549.6
Gross profit —
27.2
25.7
214.5
—
267.4
Selling, general and administrative expenses —
63.4
19.6
13.3
—
96.3
Amortization of intangible assets —
1.0
22.9
0.9
—
24.8
Restructuring and acquisition-related costs —
5.0
3.9
2.8
—
11.7
Operating income (loss) —
(42.2 ) (20.7 ) 197.5
—
134.6
Non-operating income (expense), net —
(60.0 ) 2.8
(1.9 ) —
(59.1 )
Income (loss) before income taxes —
(102.2 ) (17.9 ) 195.6
—
75.5
Income tax expense (benefit) —
(1.0 ) 0.1
12.4
—
11.5
Earnings from equity in subsidiaries 63.8
68.1
33.8
—
(165.7 ) —
Net income (loss) before royalties 63.8
(33.1 ) 15.8
183.2
(165.7 ) 64.0
Royalties —
87.6
0.7
(88.3 ) —
—
Net income after royalties 63.8
54.5
16.5
94.9
(165.7 ) 64.0
Net income attributable to noncontrolling interests —
—
—
(0.2 ) —
(0.2 )
Net income attributable to AAM $ 63.8
$ 54.5
$ 16.5
$ 94.7
$ (165.7 ) $ 63.8
Other comprehensive income (loss), net of tax 1.5
1.0
(10.3 ) —
9.3
1.5
Comprehensive income attributable to AAM $ 65.3
$ 55.5
$ 6.2
$ 94.7
$ (156.4 ) $ 65.3

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

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

Condensed Consolidating Statements of Operations
Nine Months Ended September 30,
(in millions)
Holdings AAM Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Elims Consolidated
2019
Net sales
External $ —
$ 711.8
$ 1,561.8
$ 2,827.3
$ —
$ 5,100.9
Intercompany —
1.5
219.8
37.2
(258.5 ) —
Total net sales —
713.3
1,781.6
2,864.5
(258.5 ) 5,100.9
Cost of goods sold —
721.1
1,612.2
2,306.9
(258.5 ) 4,381.7
Gross profit (loss) —
(7.8 ) 169.4
557.6
—
719.2
Selling, general and administrative expenses —
208.9
22.4
43.4
—
274.7
Amortization of intangible assets —
4.3
66.6
2.7
—
73.6
Impairment charges —
—
225.0
—
—
225.0
Restructuring and acquisition-related costs —
17.1
12.3
6.6
—
36.0
Operating income (loss) —
(238.1 ) (156.9 ) 504.9
—
109.9
Non-operating income (expense), net —
(184.0 ) 7.0
—
—
(177.0 )
Income (loss) before income taxes —
(422.1 ) (149.9 ) 504.9
—
(67.1 )
Income tax expense (benefit) —
(23.2 ) (46.7 ) 32.5
—
(37.4 )
Earnings (loss) from equity in subsidiaries (30.1 ) 131.9
105.3
—
(207.1 ) —
Net income (loss) before royalties (30.1 ) (267.0 ) 2.1
472.4
(207.1 ) (29.7 )
Royalties —
241.2
2.2
(243.4 ) —
—
Net income (loss) after royalties (30.1 ) (25.8 ) 4.3
229.0
(207.1 ) (29.7 )
Net income attributable to noncontrolling interests —
—
—
(0.4 ) —
(0.4 )
Net income (loss) attributable to AAM $ (30.1 ) $ (25.8 ) $ 4.3
$ 228.6
$ (207.1 ) $ (30.1 )
Other comprehensive income (loss), net of tax (58.9 ) (40.2 ) (32.1 ) (29.5 ) 101.8
(58.9 )
Comprehensive income (loss) attributable to AAM $ (89.0 ) $ (66.0 ) $ (27.8 ) $ 199.1
$ (105.3 ) $ (89.0 )

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

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

Holdings AAM Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Elims Consolidated
2018

Net sales

External $ —
$ 851.4
$ 1,699.2
$ 3,025.7
$ —
$ 5,576.3
Intercompany —
4.0
231.6
31.1
(266.7 ) —
Total net sales —
855.4
1,930.8
3,056.8
(266.7 ) 5,576.3
Cost of goods sold —
804.5
1,713.3
2,410.1
(266.7 ) 4,661.2
Gross profit —
50.9
217.5
646.7
—
915.1
Selling, general and administrative expenses —
183.4
61.4
43.8
—
288.6
Amortization of intangible assets —
3.9
68.0
2.6
—
74.5
Restructuring and acquisition-related costs —
31.1
31.8
3.9
—
66.8
Gain on sale of business —
—
(15.5 ) —
—
(15.5 )
Operating income (loss) —
(167.5 ) 71.8
596.4
—
500.7
Non-operating income (expense), net —
(193.8 ) 11.0
18.3
—
(164.5 )
Income (loss) before income taxes —
(361.3 ) 82.8
614.7
—
336.2
Income tax expense —
8.1
0.6
22.7
—
31.4
Earnings from equity in subsidiaries 304.3
241.6
141.6
—
(687.5 ) —
Net income (loss) before royalties 304.3
(127.8 ) 223.8
592.0
(687.5 ) 304.8
Royalties —
256.8
2.6
(259.4 ) —
—
Net income after royalties 304.3
129.0
226.4
332.6
(687.5 ) 304.8
Net income attributable to noncontrolling interests —
—
—
(0.5 ) —
(0.5 )
Net income attributable to AAM $ 304.3
$ 129.0
$ 226.4
$ 332.1
$ (687.5 ) $ 304.3
Other comprehensive loss, net of tax (20.9 ) (2.6 ) (50.5 ) (37.3 ) 90.4
(20.9 )
Comprehensive income attributable to AAM $ 283.4
$ 126.4
$ 175.9
$ 294.8
$ (597.1 ) $ 283.4

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

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

Condensed Consolidating Balance Sheets
(in millions)
Holdings AAM Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Elims Consolidated
September 30, 2019
Assets
Current assets
    Cash and cash equivalents $ —
$ 79.4
$ 0.1
$ 295.6
$ —
$ 375.1
    Accounts receivable, net —
95.2
230.8
650.9
—
976.9
    Intercompany receivables —
4,864.1
4,722.1
183.0
(9,769.2 ) —
    Inventories, net —
62.8
116.9
223.4
—
403.1
    Prepaid expenses and other —
34.3
3.7
92.9
—
130.9
    Current assets held-for-sale —
—
312.2
—
—
312.2
Total current assets —
5,135.8
5,385.8
1,445.8
(9,769.2 ) 2,198.2
Property, plant and equipment, net —
294.1
554.5
1,477.8
—
2,326.4
Goodwill —
—
719.0
408.5
—
1,127.5
Intangible assets, net —
15.4
836.9
29.2
—
881.5
Intercompany notes and accounts receivable —
1,542.1
186.7
—
(1,728.8 ) —
Other assets and deferred charges —
339.7
118.1
324.9
—
782.7
Investment in subsidiaries 2,721.4
2,155.9
1,504.1
—
(6,381.4 ) —
Total assets $ 2,721.4
$ 9,483.0
$ 9,305.1
$ 3,686.2
$ (17,879.4 ) $ 7,316.3
Liabilities and Stockholders’ Equity

Current liabilities

Current portion of long-term debt $ —
$ 2.1
$ 5.3
$ 16.4
$ —
$ 23.8
Accounts payable —
101.3
169.1
433.3
—
703.7
Intercompany payables —
3,931.7
5,835.5
2.0
(9,769.2 ) —
Accrued expenses and other —
165.2
34.9
207.8
—
407.9
    Current liabilities held-for-sale —
—
101.7
—
—
101.7
Total current liabilities —
4,200.3
6,146.5
659.5
(9,769.2 ) 1,237.1
Intercompany notes and accounts payable 1,311.8
36.0
—
381.0
(1,728.8 ) —
Long-term debt, net —
3,581.8
—
91.5
—
3,673.3
Other long-term liabilities —
503.0
243.1
250.2
—
996.3
Total liabilities 1,311.8
8,321.1
6,389.6
1,382.2
(11,498.0 ) 5,906.7
Total AAM Stockholders’ equity 1,406.8
1,161.9
2,915.5
2,301.2
(6,378.6 ) 1,406.8
Noncontrolling interests in subsidiaries 2.8
—
—
2.8
(2.8 ) 2.8
Total stockholders’ equity 1,409.6
1,161.9
2,915.5
2,304.0
(6,381.4 ) 1,409.6
Total liabilities and stockholders’ equity $ 2,721.4
$ 9,483.0
$ 9,305.1
$ 3,686.2
$ (17,879.4 ) $ 7,316.3

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

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

Holdings AAM Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Elims Consolidated
December 31, 2018
Assets
Current assets
    Cash and cash equivalents $ —
$ 36.7
$ 0.2
$ 439.5
$ —
$ 476.4
    Accounts receivable, net —
122.7
287.7
556.1
—
966.5
    Intercompany receivables —
3,337.2
2,356.3
93.5
(5,787.0 ) —
    Inventories, net —
42.5
157.7
259.5
—
459.7
    Prepaid expenses and other —
34.4
6.0
86.8
—
127.2
Total current assets —
3,573.5
2,807.9
1,435.4
(5,787.0 ) 2,029.8
Property, plant and equipment, net —
275.8
758.6
1,480.0
—
2,514.4
Goodwill —
—
719.0
422.8
—
1,141.8
Intangible assets, net —
18.6
1,059.6
32.9
—
1,111.1
Intercompany notes and accounts receivable —
1,316.8
144.5
—
(1,461.3 ) —
Other assets and deferred charges —
319.8
126.4
267.4
—
713.6
Investment in subsidiaries 2,790.5
2,241.5
1,748.7
—
(6,780.7 ) —
Total assets $ 2,790.5
$ 7,746.0
$ 7,364.7
$ 3,638.5
$ (14,029.0 ) $ 7,510.7
Liabilities and Stockholders’ Equity

Current liabilities

Current portion of long-term debt $ —
$ 100.0
$ —
$ 21.6
$ —
$ 121.6
Accounts payable —
94.2
246.5
499.5
—
840.2
Intercompany payables —
2,050.0
3,615.7
121.3
(5,787.0 ) —
Accrued expenses and other —
169.0
35.8
190.2
—
395.0
Total current liabilities —
2,413.2
3,898.0
832.6
(5,787.0 ) 1,356.8
Intercompany notes and accounts payable 1,304.2
12.5
—
144.6
(1,461.3 ) —
Long-term debt, net —
3,578.3
3.0
105.5
—
3,686.8
Other long-term liabilities —
508.9
271.7
200.2
—
980.8
Total liabilities 1,304.2
6,512.9
4,172.7
1,282.9
(7,248.3 ) 6,024.4
Total AAM Stockholders’ equity 1,483.9
1,233.1
3,192.0
2,353.2
(6,778.3 ) 1,483.9
Noncontrolling interests in subsidiaries 2.4
—
—
2.4
(2.4 ) 2.4
Total stockholders’ equity 1,486.3
1,233.1
3,192.0
2,355.6
(6,780.7 ) 1,486.3
Total liabilities and stockholders’ equity $ 2,790.5
$ 7,746.0
$ 7,364.7
$ 3,638.5
$ (14,029.0 ) $ 7,510.7

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

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

Condensed Consolidating Statements of Cash Flows
Nine Months Ended September 30,
(in millions)
Holdings AAM Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Elims Consolidated
2019
Net cash provided by operating activities $ —
$ 214.1
$ 20.4
$ 144.1
$ —
$ 378.6
Investing activities

Purchases of property, plant and equipment —
(46.8 ) (91.0 ) (197.5 ) —
(335.3 )
Proceeds from sale of property, plant and equipment —
—
1.7
0.3
—
2.0
Investment in joint ventures —
—
—
(2.2 ) —
(2.2 )
Intercompany activity —
—
(12.0 ) 12.0
—
—
Net cash used in investing activities —
(46.8 ) (101.3 ) (187.4 ) —
(335.5 )
Financing activities

Net debt activity —
(113.8 ) (0.2 ) (15.3 ) —
(129.3 )
Debt issuance costs —
(3.3 ) —
—
—
(3.3 )
Purchase of treasury stock (7.5 ) —
—
—
—
(7.5 )
Intercompany activity 7.5

(7.5 ) 81.0
(81.0 ) —
—
Net cash used in financing activities —
(124.6 ) 80.8
(96.3 ) —
(140.1 )
Effect of exchange rate changes on cash —
—
—
(4.3 ) —
(4.3 )
Net increase (decrease) in cash, cash equivalents and restricted cash —
42.7
(0.1 ) (143.9 ) —
(101.3 )
Cash, cash equivalents and restricted cash at beginning of period —
36.7
2.7
439.5
—
478.9
Cash, cash equivalents and restricted cash at end of period $ —
$ 79.4
$ 2.6
$ 295.6
$ —
$ 377.6

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

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

Holdings AAM Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Elims Consolidated
2018
Net cash provided by operating activities $ —
$ 240.0
$ 103.0
$ 170.2
$ —
$ 513.2
Investing activities

Purchases of property, plant and equipment —
(51.8 ) (121.2 ) (218.8 ) —
(391.8 )
Proceeds from sale of property, plant and equipment —
—
2.7
0.5
—
3.2
Purchase buyouts of leased equipment —
—
(0.5 ) —
—
(0.5 )
Proceeds from sale of business, net —
—
42.7
4.4
—
47.1
Acquisition of business, net of cash acquired —
—
—
(1.3 ) —
(1.3 )
Intercompany activity —
—
(43.8 ) 43.8
—
—
Net cash used in investing activities —
(51.8 ) (120.1 ) (171.4 ) —
(343.3 )
Financing activities

Net debt activity —
(140.3 ) (0.6 ) 54.2
—
(86.7 )
Debt issuance costs —
(6.9 ) —
—
—
(6.9 )
Purchase of treasury stock (3.7 ) —
—
—
—
(3.7 )
Purchase of noncontrolling interest —
—
(2.2 ) —
—
(2.2 )
Intercompany activity 3.7
(3.7 ) 22.5
(22.5 ) —
—
Net cash provided by (used in) financing activities —
(150.9 ) 19.7
31.7
—
(99.5 )
Effect of exchange rate changes on cash —
—
—
(5.3 ) —
(5.3 )
Net increase in cash, cash equivalents and restricted cash —
37.3
2.6
25.2
—
65.1
Cash, cash equivalents and restricted cash at beginning of period —
91.9
0.1
284.8
—
376.8
Cash, cash equivalents and restricted cash at end of period $ —
$ 129.2
$ 2.7
$ 310.0
$ —
$ 441.9

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

This management’s discussion and analysis (MD&A) should be read in conjunction with the unaudited condensed consolidated financial statements and notes appearing elsewhere in this Quarterly Report and our Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019.

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

COMPANY OVERVIEW

We are a global Tier 1 supplier to the automotive industry. We design, engineer and manufacture driveline and metal forming ~~and casting~~ products that are making the next generation of vehicles smarter, lighter, safer and more efficient. We employ ~~over 25,000~~approximately 20,000 associates, operating at nearly 9080 facilities in 17 countries, to support our customers on global and regional platforms with a focus on quality, operational excellence and technology leadership.

Major Customers

We are a primary supplier of driveline components to General Motors Company (GM) for its full-size rear-wheel drive (RWD) light trucks, sport utility vehicles (SUVs), and ~~SUVs~~crossover vehicles manufactured in North America, supplying a significant portion of GM’s rear axle and four-wheel drive and all-wheel drive (4WD/AWD) axle requirements for these vehicle platforms. We also supply GM with various products from our Metal Forming ~~and Casting segments.~~segment. Sales to GM were approximately ~~38%~~40% of our consolidated net sales in the first nine months of ~~2019, and 41% of our consolidated net sales~~2020, 38% in ~~both~~ the first nine months of ~~2018~~2019, and 37% for the full year ~~2018.~~2019.

We also supply driveline system products to FCA US LLC (FCA) for heavy-duty Ram full-size pickup trucks and its derivatives, the AWD Jeep Cherokee, and a passenger car driveshaft program. In addition, we sell various products to FCA from our Metal Forming ~~and Casting segments.~~segment. Sales to FCA were approximately ~~16%~~18% of our consolidated net sales in the first nine months of 2020, 16% in the first nine months of 2019, and ~~13%~~17% for the full year 2019.

We are also a supplier to Ford Motor Company (Ford) for driveline system products on certain vehicle programs, and we sell various products to Ford from our Metal Forming segment. Sales to Ford were approximately 12% of our consolidated net sales in the first nine months of 2020, and were approximately 9% for both the first nine months of ~~2018~~2019 and ~~for~~ the full year ~~2018.~~of 2019.

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

Impact of Novel Coronavirus (COVID-19)

COVID-19 Operational Impact and AAM Actions

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

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

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

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

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

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

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

By the end of the first quarter of 2020, our manufacturing locations in Asia, which were impacted by COVID-19 earlier than other global regions, were beginning to stabilize and return to more normalized levels of production. We restarted operations in North America and Europe in May 2020, and we have continued to ramp up production, along with our customers and supply base, through the third quarter of ~~2019, we entered into a definitive agreement~~2020. Continuing to ~~sell~~maintain more normalized levels of production will depend on future developments, including the ~~U.S. operations~~potential extension of shelter-in-place orders and increased levels of production by our customers, which are outside of our ~~Casting segment~~control. We continue to ~~entities affiliated with Gamut Capital Management, L.P (the Casting Sale Agreement). As a result,~~monitor the ~~assets~~impact of COVID-19 on our suppliers, as well as on our customers and ~~liabilities~~their suppliers.

Financial Impact of COVID-19

We estimate that the impact of COVID-19 on net sales was approximately $87 million and $1,203 million for the three and nine months ended September 30, 2020, respectively. Further, we estimate that the impact to gross profit of this reduction in net sales was approximately $16 million and $362 million for the three and nine months ended September 30, 2020, respectively. Due to the significant uncertainty associated with ~~this business have met~~ the ~~criteria to be classified as held-for-sale in our Condensed Consolidated Balance Sheet as of September 30, 2019. The sale~~extent of the ~~U.S. operations~~impact of COVID-19, including the possibility of a resurgence of COVID-19 cases and our ~~Casting segment did not qualify for classification as discontinued operations as~~ability to sustain more normalized levels of production, we cannot estimate the ~~sale does not represent a strategic shift in our business that has had, or will have, a major effect~~ultimate impact of COVID-19 on our results of operations and financial ~~results.~~condition.

In ~~2019,~~order to mitigate the financial impact of COVID-19, we ~~initiated a new global restructuring program (the 2019 Program)~~have continued our emphasis on cost management, and have implemented additional measures to ~~further streamline~~adjust to our ~~business~~customers’ revised production schedules, including:

•Continuing to flex our variable cost structure;

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

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

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

•Reducing our ~~four existing segments into three segments. This activity occurred~~projected capital expenditures for the year;

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

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

The measures we are taking to address the impact of COVID-19 are expected to remain in place until further clarity can be achieved regarding the recovery and stabilization of the global economy, as well as the resulting impact of COVID-19 on the global automotive industry. We expect to adjust our ~~former Powertrain segment, with a portion moving into our Driveline segment and a portion moving into our Metal Forming segment. The primary objectives~~use of this consolidation are to further the integration of MPG, align AAM's product and process technologies, and to achieve efficiencies within our corporate and business unit support teams to reduce cost in our business. Throughout this MD&A, amounts previously reported for the Powertrain segment have been reclassifiedthese measures, to the ~~Driveline~~extent possible, based on production volumes and ~~Metal Forming segments accordingly.~~

customer demand.

RESULTS OF OPERATIONS –– THREE MONTHS ENDED SEPTEMBER 30, ~~2019~~2020 AS COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, ~~2018~~2019

Net Sales Net sales were $1,414.1 million in the third quarter of 2020, as compared to $1,677.4 million in the third quarter of ~~2019 as compared to $1,817.0 million in the third quarter of 2018.~~2019. Our change in sales in the third quarter of ~~2019,~~2020, as compared to the third quarter of ~~2018,~~2019, primarily reflects an estimated reduction of approximately $87 million associated with the decline in global automotive production as a result of COVID-19, and a reduction of approximately ~~$57~~$155 million ~~associated with the impact~~as a result of the ~~GM work stoppage~~sale of the U.S. operations of our Casting business that ~~began during~~was completed in the ~~third~~fourth quarter of 2019 ~~and the impact of lower global automotive production volumes.~~(the Casting Sale). Net sales in the third quarter of ~~2019,~~2020, as compared to the third quarter of ~~2018,~~2019, also decreased by approximately ~~$50~~$15 million associated with the effect of metal market pass-throughs to our customers and the impact of foreign exchange related to translation adjustments. ~~These factors were partially offset by the impact of program launches associated with our new business backlog.~~

Cost of Goods Sold Cost of goods sold was $1,164.3 million in the third quarter of 2020, as compared to $1,428.7 million in the third quarter of ~~2019, as compared to $1,549.6 million in the third quarter of 2018.~~2019. The change in cost of goods sold principally reflects aan estimated reduction of approximately ~~$39~~$71 million associated with the ~~impact of the GM work stoppage, and the impact of lower~~decline in global automotive production ~~volumes.~~as a result of COVID-19, and a reduction of $153 million as a result of the Casting Sale. Cost of goods sold was also impacted by a decrease of approximately ~~$50~~$15 million related to metal market pass-through costs and the impact of foreign ~~exchange.~~exchange, as well as the impact of improved operating performance and lower launch costs and our emphasis on cost management, including the additional measures that we implemented in response to the impact of COVID-19.

For the three months ended September 30, ~~2019,~~2020, material costs were approximately ~~55%~~58% of total ~~costs~~cost of goods sold, as compared to approximately ~~58%~~55% for the three months ended September 30, ~~2018.~~2019.

Gross Profit Gross profit was $249.8 million in the third quarter of 2020, as compared to $248.7 million in the third quarter of ~~2019 as compared to $267.4 million~~2019. Gross margin was 17.7% in the third quarter of ~~2018. Gross margin increased~~2020, as compared to 14.8% in the third quarter of ~~2019 as compared to 14.7% in the third quarter of 2018.~~2019. Gross profit and gross margin were impacted by the factors discussed in Net Sales and Cost of Goods Sold above.

Selling, General and Administrative Expenses (SG&A) SG&A (including research and development (R&D)) was $66.5 million or 4.7% of net sales in the third quarter of 2020, as compared to $92.7 million or 5.5% of net sales in the third quarter of ~~2019 as compared to $96.3~~2019. R&D expense, net of customer engineering, design and development (ED&D) recoveries, was approximately $18.0 million ~~or 5.3% of net sales~~ in the third quarter of ~~2018. R&D spending was approximately~~2020, as compared to $37.4 million in the third quarter of ~~2019 as compared to $37.7 million in the third quarter of 2018.~~2019. The ~~change~~decrease in SG&A expense in the three months ended September 30, ~~2019,~~2020, as compared to the three months ended September 30, ~~2018, is~~2019, was primarily attributable to lower net R&D expense, which includes a customer ED&D recovery of approximately $15 million. The decrease in SG&A also reflects lower compensation-related ~~expense.~~expense due, in part, to our restructuring initiatives and the impact of our emphasis on cost management, including the additional measures that we implemented in response to the impact of COVID-19.

Amortization of Intangible Assets Amortization expense related to intangible assets was $21.6 million for the three months ended September 30, 2020 and $23.7 million for the three months ended September 30, ~~2019~~2019. The reduction in amortization expense related to intangible assets reflects the Casting Sale and ~~$24.8 million for~~ the ~~three months ended September 30, 2018.~~disposal of the intangible assets associated with this business.

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

~~Restructuring and Acquisition-Related Costs~~ Restructuring and acquisition-related costs were $11.7 million in the third quarter of both 2019 and 2018. As part of our restructuring actions, we incurred severance charges of approximately $2.2 million, as well as implementation costs of approximately $4.2 million during the three months ended September 30, 2019. This compares to severance charges of $0.3 million and implementation charges of $3.3 million for the three months ended September 30, 2018.

During the three months ended September 30, 2019, we incurred $5.3 million of integration expenses primarily associated with the ongoing integration of MPG. This compares to $0.1 million of acquisition-related costs and $5.3 million of integration expenses incurred during the three months ended September 30, 2018. Acquisition-related costs primarily consist of advisory, legal, accounting, valuation and certain other professional fees incurred. Integration expenses reflect costs incurred for information technology systems, ongoing operational activities, and consulting fees incurred in conjunction with acquisitions.

In the three months ended September 30, 2018, we initiated actions to exit operations at a manufacturing facility in our Driveline segment. As a result of these actions, we were required to assess the associated long-lived assets for impairment. Based on our analysis, assets that were not to be redeployed to other AAM facilities were determined to be fully impaired resulting in a charge of $2.7 million for the three months ended September 30, 2018.

~~Operating Income (Loss)~~ Operating loss was $104.4 million in the third quarter of 2019, as compared to operating income of $134.6 million in the third quarter of 2018. Operating margin was (6.2)% in the third quarter of 2019, as compared to 7.4% in the third quarter of 2018. The changes in operating income (loss) and operating margin were primarily due to factors discussed in Net Sales, Cost of Goods Sold, SG&A, and Impairment Charge above.

~~Interest Expense and Investment Income~~ ~~Interest expense was~~ ~~$54.3 million~~ ~~in the third quarter of 2019, as compared to~~ ~~$54.9 million~~ ~~in the third quarter of 2018. Investment income was $2.2 million in the third quarter of 2019 as compared to $0.6 million in the third quarter of 2018.~~

~~The weighted-average interest rate of our long-term debt outstanding was 5.8% in the third quarter of 2019 and 5.9% in the third quarter of 2018.~~

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

In the third quarter of 2019, we expensed $5.1 million for the write-off of the unamortized debt issuance costs related to the existing Term Loan A Facility and a portion of the unamortized debt issuance costs related to our Term Loan B Facility that we had been amortizing over the expected life of the borrowings.

~~Other Expense, Net~~ Other expense, net includes the net effect of foreign exchange gains and losses, our proportionate share of earnings from equity in unconsolidated subsidiaries, and all components of net periodic pension and postretirement benefit costs other than service cost. Other expense, net was $2.9 million in the third quarter of 2019, as compared to $4.8 million in the third quarter of 2018.

~~Income Tax Expense~~ Income tax was a benefit of $40.4 million for the three months ended September 30, 2019, as compared to expense of $11.5 million for the three months ended September 30, 2018. Our effective income tax rate was 24.6% in the third quarter of 2019, as compared to 15.2% in the third quarter of 2018.

Our effective income tax rate for the three months ended September 30, 2019 varies from our effective income tax rate for the three months ended September 30, 2018 primarily due to an income tax benefit of $47.2 million recognized during the third quarter of 2019 as a result of the impairment charge recorded upon reclassifying the assets and liabilities of the U.S. Casting business to held-for-sale.

For the three months ended September 30, 2019 and 2018, our effective income tax rates vary from the U.S. federal statutory rate of 21% primarily due to favorable foreign tax rates, as well as the impact of tax credits and the effect of the discrete item described above.

~~Net Income (Loss) Attributable to AAM and Earnings (Loss) Per Share (EPS)~~ Net income (loss) attributable to AAM was a loss of $124.2 million in the third quarter of 2019, as compared to income of $63.8 million in the third quarter of 2018. Diluted loss per share was $1.10 in the third quarter of 2019, as compared to diluted earnings per share of $0.55 in the third quarter of 2018. Net income (loss) attributable to AAM and EPS for the third quarters of 2019 and 2018 were primarily impacted by the factors discussed above.

~~RESULTS OF OPERATIONS –– NINE MONTHS ENDED SEPTEMBER 30, 2019 AS COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2018~~

~~Net Sales~~ Net sales were $5,100.9 million in the first nine months of 2019 as compared to $5,576.3 million in the first nine months of 2018. Our change in sales in the first nine months of 2019, as compared to the first nine months of 2018, primarily reflects the impact of lower full-size truck sales resulting from the in-sourcing by our largest customer of a portion of a replacement program that launched in the second half of 2018, as well as the impact of customer downtime as a result of program changeovers in the first quarter of 2019 and lower volumes on certain crossover vehicle programs that we support.

Net sales for the nine months ended September 30, 2019, as compared to the nine months ended September 30, 2018, also decreased by approximately $57 million associated with the impact of the GM work stoppage, and $96 million associated with the effect of metal market pass-throughs to our customers and the impact of foreign exchange related to translation adjustments. These factors were partially offset by the impact of program launches associated with our new business backlog.

~~The GM work stoppage continued into the fourth quarter of 2019 and we estimate the full year impact of the GM work stoppage on sales to be approximately $250 million.~~

~~Cost of Goods Sold~~ Cost of goods sold was $4,381.7 million in the first nine months of 2019 as compared to $4,661.2 million in the first nine months of 2018. The change in cost of goods sold principally reflects the impact of lower global automotive production volumes, a decrease of approximately $39 million associated with the impact of the GM work stoppage, and a decrease of approximately $96 million related to metal market pass-through costs and the impact of foreign exchange. This was partially offset by the impact of costs associated with program launches from our new business backlog, and an increase in depreciation expense of approximately $21 million as a result of significant program launch activity in 2018.

~~For the nine months ended September 30, 2019, material costs were approximately 56% of total costs of goods sold as compared to approximately 59% for the nine months ended September 30, 2018.~~

~~Gross Profit~~ Gross profit was $719.2 million in the first nine months of 2019 as compared to $915.1 million in the first nine months of 2018. Gross margin was 14.1% in the first nine months of 2019 as compared to 16.4% in the first nine months of 2018. Gross profit and gross margin were impacted by the factors discussed in Net Sales and Cost of Goods Sold above.

~~SG&A~~ SG&A (including R&D) was $274.7 million or 5.4% of net sales in the first nine months of 2019 as compared to $288.6 million or 5.2% of net sales in the first nine months of 2018. R&D spending was approximately $104.9 million in the first nine months of 2019 as compared to $110.3 million in the first nine months of 2018. The change in SG&A in the first nine months of 2019, as compared to the first nine months of 2018, was primarily attributable to a decrease in R&D spending and lower compensation-related expense.

~~Amortization of Intangible Assets~~ ~~Amortization expense related to intangible assets for the nine months ended September 30, 2019 was $73.6 million as compared to $74.5 million for the nine months ended September 30, 2018.~~

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

Restructuring and Acquisition-Related Costs Restructuring and acquisition-related costs were $36.0 million for the nine months ended September 30, 2019, as compared to $66.8 million for the nine months ended September 30, 2018. As part of our restructuring actions, we incurred severance charges of approximately ~~$10.4 million~~ and $2.3 million, as well as implementation costs, including professional expenses, of approximately $13.1 million and $8.8 million, during the nine months ended September 30, 2019 and 2018, respectively. We expect to incur approximately $30 million to $35 million of total restructuring charges in 2019, including costs incurred under the 2019 Program.

During the nine months ended September 30, 2019, we incurred $12.5 million of integration expenses primarily associated with the ongoing integration of MPG. This compares to $1.2 million of acquisition-related costs and $27.9 million of integration expenses incurred during the nine months ended September 30, 2018. We expect to incur total integration charges of approximately $15 million to $20$9.7 million in ~~2019 as we further~~ the ~~integration~~third quarter of ~~MPG.~~

~~Acquisition-related costs primarily consist of advisory, legal, accounting, valuation~~2020 and certain other professional fees incurred. Integration expenses reflect costs incurred for information technology systems, ongoing operational activities, and consulting fees incurred in conjunction with acquisitions.

In the first nine months of 2018, we initiated actions to exit operations at manufacturing facilities in our Driveline, Metal Forming and former Powertrain segments. As a result of these actions, we were required to assess the associated long-lived assets for impairment. Based on our analysis, assets that were not to be redeployed to other AAM facilities were determined to be fully impaired resulting in a charge of $26.6$11.7 million ~~for the nine months ended September 30, 2018.~~

~~Gain on Sale of Business~~ In April 2018, we completed the sale of the aftermarket business associated with our former Powertrain segment for approximately $50 million. As a result, we recorded a $15.5 million pre-tax gain, which is presented in the ~~Gain on sale~~third quarter of ~~business line item of our Condensed Consolidated Statement of Income~~2019. See Note 2 - Restructuring and Acquisition-Related Costs for ~~the nine months ended September 30, 2018.~~additional detail.

Operating Income (Loss) Operating income was ~~$109.9~~$152.0 million in the ~~first nine months~~third quarter of ~~2019~~2020, as compared to ~~$500.7~~operating loss of $104.4 million in the ~~first nine months~~third quarter of ~~2018.~~2019. Operating margin was ~~2.2%~~10.7% in the ~~first nine months~~third quarter of ~~2019~~2020, as compared to ~~9.0%~~(6.2)% in the ~~first nine months~~third quarter of ~~2018.~~2019. The changes in operating income (loss) and operating margin were primarily due to factors discussed in Net Sales, Cost of Goods Sold, SG&A and Impairment Charge ~~Restructuring and Acquisition-Related Costs and Gain on Sale of Business~~ above.

Interest Expense and ~~Investment~~Interest Income Interest expense was ~~$163.9~~$53.9 million in the ~~first nine months~~third quarter of ~~2019~~2020, as compared to ~~$162.5~~$54.3 million in the ~~first nine months~~third quarter of ~~2018. Investment~~2019. Interest income was $3.4 million in the ~~first nine months~~third quarter of ~~2019~~2020, as compared to ~~$1.6~~$2.2 million in the ~~first nine months~~third quarter of ~~2018.~~

2019. The weighted-average interest rate of our long-term debt outstanding was ~~5.9% for~~5.6% in the ~~nine months ended September 30, 2019~~third quarter of 2020 and 5.8% ~~for~~in the ~~nine months ended September 30, 2018. We expect our interest expense for the full year 2019 to be approximately $215 million to $225 million.~~third quarter of 2019.

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

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

~~In the third quarter of 2019,~~result, we expensed $5.1 million for the write-off of the unamortized debt issuance costs related to the existing Term Loan A Facility and a portion of the unamortized debt issuance costs related to our Term Loan B Facility that we had been amortizing over the expected life of the borrowings.

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

In March 2018, we made a tender offer for our 6.25% Notes due 2021. Under this tender offer, we retired $383.1 million of the 6.25% Notes due 2021. We redeemed the remaining $16.9 million of the 6.25% Notes due 2021 during the second quarter of 2018. During the nine months ended September 30, 2018, we expensed $2.5 million for the write-off of the remaining unamortized debt issuance costs that we had been amortizing over the expected life of the borrowing and $8.0 million in tender premiums.

In May 2018, we voluntarily redeemed a portion of our 6.625% Notes due 2022. This resulted in a principal payment of $100.0 million, and a payment of $0.8 million in accrued interest. During the nine months ended September 30, 2018, we expensed $0.8 million for the write-off of a portion of the remaining unamortized debt issuance costs that we had been amortizing over the expected life of the borrowing and $3.3 million for an early redemption premium.

~~Gain on Settlement of Capital Lease~~ In the second quarter of 2018, we reached a settlement agreement related to a capital lease obligation that we had recognized as a result of the acquisition of MPG. This settlement resulted in a gain of $15.6 million, including accrued interest.

Other Expense, Net Other expense, net includes the net effect of foreign exchange gains and losses, our proportionate share of earnings from equity in unconsolidated subsidiaries, and all components of net periodic pension and postretirement benefit costs other than service cost. Other expense, net was ~~$9.0~~$1.6 million in the ~~first nine months~~third quarter of ~~2019~~2020, as compared to ~~$4.6~~$2.9 million in the ~~first nine months~~third quarter of 2018. The change in other expense, net was primarily attributable to increased net expense associated with the components of net periodic pension and postretirement benefit costs other than service cost.2019.

Income Tax ~~Expense~~Benefit Income tax was a benefit of ~~$37.4~~$22.5 million for the ~~nine~~three months ended September 30, ~~2019~~2020, as compared to ~~expense~~a benefit of ~~$31.4~~$40.4 million for the ~~nine~~three months ended September 30, ~~2018.~~2019. Our effective income tax rate was ~~55.7%~~(23.8)% in the ~~first nine months~~third quarter of ~~2019~~2020, as compared to ~~9.3%~~24.6% in the ~~first nine~~third quarter of 2019.

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

As enacted under the Tax Cuts and Jobs Act (TCJA), on December 22, 2017, and as amended by the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act), section 163(j) of the Internal Revenue Code generally limits the deductibility of net business interest expense to 30% (or for certain years as provided under the CARES Act, 50%) of “adjusted taxable income” for taxable years beginning after December 31, 2017. On July 28, 2020, the Internal Revenue Service and the U.S. Department of Treasury issued final regulations (the Final Regulations) and concurrently issued new proposed regulations (the New Proposed Regulations) under section 163(j) that provide a number of important additional changes and clarifications to the Final Regulations. Based upon the Final Regulations and New Proposed Regulations, which were issued during the three months ended September 30, 2020, as well as the amendments to section 163(j) made by the CARES Act, we have determined that our deferred tax assets related to U.S. interest expense carryforwards are more likely than not to be realized and, as such, we have released the valuation allowance recorded during the second quarter of ~~2018.~~2020 resulting in approximately $36.0 million in tax benefit during the three month period ended September 30, 2020.

Our effective income tax rate for the ~~nine~~three months ended September 30, ~~2019~~2020 varies from our effective income tax rate for the ~~nine months ended September 30, 2018, primarily due to an income tax benefit of $47.2 million recognized during the nine~~three months ended September 30, 2019 as a result of the ~~impairment charge recorded upon reclassifying~~items described above. For the assets and liabilities of the U.S. Casting business to held-for-sale. In addition, as part of the Tax Cuts and Jobs Act in 2017, a one-time transition tax (Transition Tax) was imposed on certain foreign earnings for which U.S. income tax was previously deferred. The Department of Treasury and Internal Revenue Service issued final regulations on February 5, 2019 regarding the Transition Tax, which changed the manner in which we are required to compute the Transition Tax when it is recognized over a two-year period. The application of the final regulations resulted in a $9.3 million income tax benefit, which has been recorded in the ninethree months ended September 30, ~~2019, the period in which the final regulations were issued.~~

Our effective income tax rate for the nine months ended September 30, 2018 was impacted by certain discrete income tax items recognized during this period. During the first nine months of 2018, we recognized a discrete tax benefit as a result of finalizing an advance pricing agreement in a foreign jurisdiction, which resulted in a reduction of our liability for unrecognized income tax benefits2020 and related interest and penalties of $20.0 million. Also in the first nine months of 2018, we recognized a discrete tax expense related to the sale of the aftermarket business associated with our former Powertrain segment.

~~For the nine months ended September 30,~~ 2019, ~~and 2018,~~ our effective income tax rates vary from the U.S. federal statutory rate of 21% primarily due to favorable foreign tax rates, as well as the impact of tax credits and the effect of the ~~discrete~~ items described above.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Net Income (Loss) Attributable to AAM and Earnings (Loss) Per Share (EPS) Net income (loss) attributable to AAM was a loss of $597.3 million in the first nine months of 2020 as compared to a loss of $30.1 million in the first nine months of ~~2019 as compared to income~~2019. Diluted EPS was a loss of ~~$304.3 million~~$5.28 per share in the first nine months of ~~2018. Diluted EPS was~~2020 as compared to a loss of $0.27 per share in the first nine months of ~~2019 as compared to earnings of $2.63 per share in the first nine months of 2018.~~

2019. Net income (loss) attributable to AAM and EPS for the first nine months of ~~2019~~2020 and ~~2018~~2019 were primarily impacted by the factors discussed above.

SEGMENT REPORTING

~~In the first quarter of 2019, we reorganized our~~Our business ~~to disaggregate our former Powertrain segment, with a portion moving to our Driveline segment and a portion moving to our Metal Forming segment. As a result, our business~~ is ~~now~~ organized into Driveline and Metal Forming ~~and Casting~~ segments, with each representing a reportable segment under ASC 280 Segment Reporting. In the fourth quarter of 2019, we completed the Casting Sale. The ~~Powertrain~~Casting Sale did not include the entities that conduct AAM's casting operations in El Carmen, Mexico, which are now included in our Driveline segment. The Casting Sale did not qualify for classification as discontinued operations, as it did not represent a strategic shift in our business that has had, or will have, a major effect on our operations and financial results. As such, we continue to present Casting as a segment in the tables below for the periods prior to the sale, and the reported amounts are now comprised entirely of the U.S. casting operations that were included in the sale. The amounts previously reported in our Casting segment for the ~~three and nine months ended September 30, 2018~~retained operations in El Carmen, Mexico have been reclassified to our Driveline ~~and Metal Forming.~~segment for the periods presented.

Our product offerings by segment are as follows:

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

Casting products consist of both thin wall castings and high strength ductile iron castings, as well as transmission pump bodies, steering knuckles, control arms, brake anchors and calipers, and ball joint housings for the global light vehicle, commercial and industrial markets.

The following table represents sales by reportable segment for the three and nine months ended September 30, ~~2019~~2020 and ~~2018~~2019 (in millions):


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

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
Driveline $ 1,146.7
$ 1,228.2
$ 3,422.5
$ 3,718.6
Metal Forming 476.6
509.0
1,444.1
1,581.7
Casting 209.0
219.1
655.0
701.3
Eliminations (154.9 ) (139.3 ) (420.7 ) (425.3 )
Net Sales $ 1,677.4
$ 1,817.0
$ 5,100.9
$ 5,576.3

The change in Driveline sales for the three months ended September 30, 2019, as compared to the three months ended September 30, 2018, primarily reflects the impact of the GM work stoppage, and a reduction of approximately $27 million associated with the effect of metal market pass-throughs to our customers and the impact of foreign exchange related to translation adjustments.

The change in Driveline sales for the nine months ended September 30, 2019, as compared to the nine months ended September 30, 2018, primarily reflects the impact of lower full-size truck sales resulting from the in-sourcing by our largest customer of a portion of a replacement program that launched in the second half of 2018, as well as lower volumes on certain crossover vehicle programs that we support. Driveline sales for the nine months ended September 30, 2019 were also negatively impacted by the GM work stoppage, and by approximately $70 million associated with the effect of metal market pass-throughs to our customers and the impact of foreign exchange related to translation adjustments. This was partially offset by the impact of program launches associated with our new business backlog.

~~The change in net sales in our Metal Forming segment in the three~~ and nine months ended September 30, ~~2019,~~2020, as compared to the three and nine months ended September 30, ~~2018, reflect lower~~2019, primarily reflects estimated reductions of approximately $73 million and $992 million, respectively, associated with the impact of the decline in global automotive production ~~volumes, as well~~ as a reduction in intersegment sales to our Driveline segment due to the factors discussed for Driveline above. Also for the three and nine months ended September 30, 2019, as compared to the three and nine months ended September 30, 2018, Metal Forming sales were negatively impacted byresult of COVID-19. These estimated reductions include approximately ~~$17~~$73 million and ~~$26~~$934 million, respectively, related to external customers. The

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

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

The change in net sales in our Casting segment in the three and nine months ended September 30, ~~2019,~~2020, as compared to the three and nine months ended September 30, ~~2018, reflect lower production volumes, partially offset by price increases to customers~~2019, is the result of ~~approximately $6 million for~~ the ~~three months and $9 million for~~Casting Sale that was completed in the ~~nine months ended September 30, 2019.~~fourth quarter of 2019 as AAM no longer operates in this business.

The amounts for Segment Adjusted EBITDA for the three and nine months ended September 30, ~~2019~~2020 and ~~2018~~2019 are as follows (in millions):


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

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
Driveline $ 171.6
$ 176.9
$ 461.7
$ 570.9
Metal Forming 80.4
83.6
253.7
306.0
Casting 13.8
14.5
61.4
63.0
Total segment adjusted EBITDA $ 265.8
$ 275.0
$ 776.8
$ 939.9

For the three months ended September 30, ~~2019,~~2020, as compared to the three months ended September 30, ~~2018,~~2019, the increase in Segment Adjusted EBITDA for the Driveline segment was primarily attributable to improved operating performance and lower launch costs, as well as the impact of a customer ED&D recovery of approximately $15 million during the third quarter of 2020. The increase in Driveline Segment Adjusted EBITDA also reflects our continued emphasis on cost management, and the additional measures that we implemented in response to COVID-19. These favorable factors were partially offset by lower net global automotive production volumes as a result of COVID-19.

For the nine months ended September 30, 2020, as compared to the nine months ended September 30, 2019, the change in Segment Adjusted EBITDA for the Driveline segment was primarily attributable to lower net global automotive production volumes as ~~well as~~ a ~~decrease associated with~~result of the ~~GM work stoppage.~~impact of COVID-19. This was partially offset by ~~approximately $8 million associated with~~improved operating performance and lower ~~net manufacturing costs.~~

For the nine months ended September 30, 2019, as compared to the nine months ended September 30, 2018, the change in Segment Adjusted EBITDA for the Driveline segment was primarily attributable to lower global automotive production volumes,launch costs, as well as the impact of a customer ED&D recovery of approximately $15 million. The change in ~~product mix due to customer downtime as a result of program changeovers in the first quarter of 2019, and~~Driveline Segment Adjusted EBITDA also reflects the impact of our continued emphasis on cost management, and the ~~GM work stoppage.~~additional measures that we implemented in response to the impact of COVID-19.

The ~~change~~increase in Metal Forming Segment Adjusted EBITDA for the three months ended September 30, ~~2019,~~2020, as compared to the three months ended September 30, ~~2018,~~2019, was primarily attributable to improved operating performance, as well as the impact of our continued emphasis on cost management, and the additional measures that we implemented in response to COVID-19. These favorable factors were partially offset by lower net global automotive production volumes ~~partially offset by approximately $5 million associated with lower net manufacturing costs. For~~as a result of COVID-19.

The change in Metal Forming Segment Adjusted EBITDA for the nine months ended September 30, ~~2019,~~2020, as compared to the nine months ended September 30, ~~2018,~~2019, was primarily attributable to the impact of the decline in global automotive production as a result of the impact of COVID-19. This was partially offset by improved operating performance, as well as the impact of our continued emphasis on cost management, and the additional measures that we implemented in response to the impact of COVID-19.

The change in Segment Adjusted EBITDA for ~~the Metal Forming~~our Casting segment ~~was primarily attributable to lower global automotive production volumes, as well as an increase~~ in ~~net manufacturing costs, including higher material, freight and tariff costs, of approximately $10 million.~~

~~The change in Casting Segment Adjusted EBITDA for~~ the three and nine months ended September 30, ~~2019,~~2020, as compared to the three and nine months ended September 30, ~~2018~~2019, was ~~primarily attributable to lower production volumes, offset by~~ the ~~impact~~result of ~~price increases to customers.~~the Casting Sale that was completed in the fourth quarter of 2019 as AAM no longer operates in this business.

Reconciliation of Non-GAAP and GAAP Information

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

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


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

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
Net income (loss) $ (124.1 ) $ 64.0
$ (29.7 ) $ 304.8
Interest expense 54.3
54.9
163.9
162.5
Income tax expense (benefit) (40.4 ) 11.5
(37.4 ) 31.4
Depreciation and amortization 134.2
132.9
411.5
390.9
EBITDA $ 24.0
$ 263.3

$ 508.3

$ 889.6
Restructuring and acquisition-related costs 11.7
11.7
36.0
66.8
Debt refinancing and redemption costs 5.1
—
7.5
14.6
Impairment charge 225.0
—
225.0
—
Gain on sale of business —
—
—
(15.5 )
Non-recurring items:
Gain on settlement of capital lease —
—
—
(15.6 )
Total segment adjusted EBITDA $ 265.8
$ 275.0

$ 776.8

$ 939.9

LIQUIDITY AND CAPITAL RESOURCES

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

COVID-19 Considerations Related to Liquidity and Capital Resources

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

•Continuing to flex our variable cost structure;

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

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

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

•Reducing our projected capital expenditures for the year;

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

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

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

Operating Activities In the first nine months of ~~2019,~~2020, net cash provided by operating activities was ~~$378.6~~$246.4 million as compared to ~~$513.2~~$378.6 million in the first nine months of ~~2018.~~2019. The following factors impacted cash from operating activities in the first nine months of ~~2019~~2020, as compared to the first nine months of ~~2018:~~2019:

~~Accounts receivable~~Impact of COVID-19 ~~For~~We experienced lower earnings and cash flows from operating activities as a result of the significant reduction in production volumes during the nine months ended September 30, ~~2019, we experienced an increase in cash flow from operating activities of approximately $140 million related~~2020 due to the change in our accounts receivable balance from December 31, 2018 to September 30, 2019, as compared to the change in our accounts receivable balance from December 31, 2017 to September 30, 2018. This changeimpact of COVID-19.

Income taxes Income taxes paid (refunds received), net was ~~primarily attributable to lower sales, as well as the timing~~a refund of ~~payments related to customer receivables.~~

~~Inventories~~ For the nine months ended September 30, 2019, we experienced an increase in cash flow from operating activities of approximately $86 million related to the change in our inventories balance from December 31, 2018 to September 30, 2019, as compared to the change in our inventories balance from December 31, 2017 to September 30, 2018. This change was primarily the result of increased levels of inventories as of September 30, 2018 in preparation for program changeovers and new launch activity that occurred in the second half of 2018. As of September 30, 2019, inventories have decreased as the program changeovers and new launch activity have transitioned into production, and as a result of inventory reduction initiatives in 2019.

~~Accounts payable and accrued expenses~~ For the nine months ended September 30, 2019, we experienced a decrease in cash flow from operating activities of approximately $180 million related to the change in our accounts payable and accrued expenses balances from December 31, 2018 to September 30, 2019, as compared to the change in our accounts payable and accrued expenses balances from December 31, 2017 to September 30, 2018. This change was attributable primarily to accounts payable and was the result of increased levels of accounts payable as of September 30, 2018 in preparation for program changeovers and new launch activity that occurred in the second half of 2018. As of September 30, 2019, there has been a decrease in accounts payable primarily associated with the decrease in inventories as discussed above.

~~Interest paid~~ ~~Interest paid in the first nine months of 2019 was $136.3 million, as compared to $127.8~~$5.2 million in the first nine months of ~~2018.~~2020 as compared to taxes paid of $45.7 million in the first nine months of 2019. During the third quarter of 2020, we received an income tax refund of approximately $31 million related to the utilization of net operating losses under the provisions of the CARES Act. See Note 1 - Organization and Basis of Presentation for additional detail regarding the CARES Act.

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

Restructuring and acquisition-related costs For the full year ~~2019,~~2020, we expect restructuring and acquisition-related payments in cash flows from operating activities to be between $55 million and ~~$65~~$70 million, and we expect the timing of cash payments to approximate the timing of charges incurred.

Pension and other postretirement benefits Due to the availability of our pre-funded pension balances (previous contributions in excess of prior required pension contributions) related to certain of our U.S. pension plans, we expect our regulatory pension funding requirements in ~~2019~~2020 to be approximately ~~$2.2~~$1.5 million. We expect our cash payments for other postretirement benefit obligations in ~~2019,~~2020, net of GM cost sharing, to be approximately ~~$17.7~~$17 million.

Investing Activities In the first nine months of ~~2019,~~2020, net cash used in investing activities was ~~$335.5~~$149.2 million as compared to ~~$343.3~~$335.5 million for the nine months ended September 30, ~~2018.~~2019. Capital expenditures were $146.3 million in the first nine months of 2020 as compared to $335.3 million in the first nine months of ~~2019 as compared to $391.8 million in the first nine months of 2018.~~2019. We expect our capital spending in ~~2019~~2020 to be approximately 7% of sales, which includes support for our global program launches in 2019 and 2020 within our new and incremental business backlog, as well as program capacity increases and future launches of replacement programs.up to $250 million.

In the second quarter of 2019, we made a payment of $2.2 million as part of our investment in the Liuzhou Wuling joint venture that was formed in 2018. We expect to make additional payments totaling approximately $8 million as part of this investment during the fourth quarter of 2019.

In the first nine months of 2018, we completed the sale of the aftermarket business associated with our Powertrain segment. As a result of this sale, we received net proceeds of approximately $47 million.

Financing Activities In the first nine months of ~~2019,~~2020, net cash used in financing activities was ~~$140.1~~$87.6 million, as compared to ~~net cash used in financing activities of $99.5~~$140.1 million in the first nine months of ~~2018.~~2019. The following factors impacted cash from financing activities in the first nine months of ~~2019~~2020 as compared to the first nine months of ~~2018:~~2019:

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

~~In July~~ 2019, Holdings, AAM, Inc., and certain subsidiaries of Holdings entered into the First Amendment (First Amendment) to the Credit ~~Agreement (as amended by the First Amendment, the Amended Credit Agreement).~~Agreement. The First Amendment, among other things, established $340 million in incremental term loan A commitments ~~under the Amended Credit Agreement~~ with a maturity date of July 29, 2024 (Term Loan A Facility due 2024), reduced the availability under the Revolving Credit Facility from $932 million to $925 million and extended the maturity date of the Revolving Credit Facility from April 6, 2022 to July 29, 2024, and modified the applicable margin with respect to interest rates under the Term Loan A Facility due 2024 and interest rates and commitment fees under the Revolving Credit Facility. The applicable margin and the maturity date for the Term Loan B Facility ~~remain~~remained unchanged. The proceeds of $340 million were used to repay all of the outstanding loans under the existing Term Loan A Facility and a portion of the outstanding Term Loan B Facility, resulting in no additional indebtedness. ~~In the third quarter of 2019, we paid $3.3 million of debt issuance costs related to this First Amendment.~~

~~At September 30, 2019, we had $890.8 million available~~This also satisfies all payment requirements under the ~~Revolving~~Term Loan B Facility until maturity in 2024.

In April 2020, Holdings, AAM, Inc., and certain subsidiaries of Holdings entered into the Second Amendment (Second Amendment) to the Credit ~~Facility. This availability reflects~~Agreement. For the period from April 1, 2020 through March 31, 2022 (the Amendment Period), the Second Amendment, among other things, replaced the total net leverage ratio covenant with a ~~reduction~~new senior secured net leverage ratio covenant, reduced the minimum levels of ~~$34.2 million for standby letters~~the cash interest expense coverage ratio covenant, and modified certain covenants restricting the ability of ~~credit issued against~~Holdings, AAM and certain subsidiaries of Holdings to create, incur, assume or permit to exist certain additional indebtedness and liens and to make certain restricted payments, voluntary payments and distributions. The Second Amendment also increased the ~~facility. The borrowings~~maximum levels of the total net leverage ratio covenant after the Amendment Period, modified the applicable margin with respect to interest rates under the Term Loan A Facility due 2024 and interest rates and commitment fees under the Revolving Credit Facility, ~~are used~~and increased the minimum adjusted London Interbank Offered Rate for ~~general corporate purposes.~~Eurodollar-based loans under the Term Loan A Facility due 2024 and Revolving Credit Facility. The applicable margin for the Term Loan B Facility remains unchanged. We paid debt issuance costs of $4.6 million in the nine months ended September 30, 2020 related to the Second Amendment.

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

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

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

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

~~6.25% Notes due 2026~~ In March 2018, we issued $400.0 million in aggregate principal amount of 6.25% senior notes due 2026 (the 6.25% Notes due 2026). Proceeds from the 6.25% Notes due 2026 were used primarily to fund the tender offer for the 6.25% senior notes due 2021 (the 6.25% Notes due 2021) described below. We paid debt issuance costs of $6.6 million in the first nine months of 2018 related to the 6.25% Notes due 2026.

~~Tender Offer of 6.25% Notes due 2021~~ Also in March 2018, we made a tender offer for our 6.25% Notes due 2021. Under this tender offer, we retired $383.1 million of the 6.25% Notes due 2021 in the first quarter of 2018. We redeemed the remaining $16.9 million of the 6.25% Notes due 2021 during the second quarter of 2018. During the nine months ended September 30, 2018, we expensed $2.5 million for the write-off of the remaining unamortized debt issuance costs that we had been amortizing over the expected life of the borrowing and $8.0 million in tender premiums.

~~Redemption of 6.625% Notes due 2022~~ In May 2018, we voluntarily redeemed a portion of our 6.625% Notes due 2022. This resulted in a principal payment of $100.0 million, and a payment of $0.8 million in accrued interest. During the nine months ended September 30, 2018, we expensed $0.8 million for the write-off of a portion of the remaining unamortized debt issuance costs that we had been amortizing over the expected life of the borrowing and $3.3 million for an early redemption premium.

~~Settlement of Capital Lease Obligation~~ ~~In the third quarter of 2018, we paid $6.6 million related to the settlement of a capital lease obligation that we had recognized as a result of the acquisition of MPG.~~

Foreign credit facilities We utilize local currency credit facilities to finance the operations of certain foreign subsidiaries. At September 30, ~~2019, $107.8~~2020, $104.5 million was outstanding under our foreign credit facilities, as compared to ~~$127.1~~$106.0 million at December 31, ~~2018.~~2019. At September 30, ~~2019,~~2020, an additional ~~$93.7~~$54.7 million was available under our foreign credit facilities.

Treasury stock Treasury stock increased by ~~$7.5~~$2.7 million in the first nine months of ~~2019~~2020 to ~~$209.3~~$212.0 million as compared to ~~$201.8~~$209.3 million at year-end ~~2018,~~2019, due to the withholding and repurchase of shares of AAM stock to satisfy employee tax withholding obligations due upon the vesting of performance shares and restricted stock units.

Subsidiary Guarantees of Registered Debt Securities Our 6.875% Notes, 6.50% Notes, 6.25% Notes (due 2026), and 6.25% Notes (due 2025) (collectively, the Notes) are senior unsecured obligations of AAM, Inc. (Issuer); all of which are fully and unconditionally guaranteed, on a joint and several basis, by Holdings and substantially all domestic subsidiaries of AAM, Inc. and MPG Inc (Subsidiary Guarantors). Holdings has no significant assets other than its 100% ownership in AAM, Inc. and MPG Inc., and no direct subsidiaries other than AAM, Inc. and MPG Inc.

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

•a senior obligation of the relevant Subsidiary Guarantors;

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

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

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

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

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

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

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


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

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

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

Redeemable preferred stock	—		—
Noncontrolling interest	—		—

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

CRITICAL ACCOUNTING ESTIMATES

Subsequent to the ~~disaggregation of~~goodwill impairment charge that was recorded for our ~~Powertrain~~Driveline reporting unit ~~into the Driveline and Metal Forming reporting units~~ in the first quarter of ~~2019,~~2020, the fair value of ~~our Metal Forming~~this reporting unit ~~exceeded~~approximated its carrying ~~value by approximately 11%.~~value. Fair value of the reporting unit is estimated based on a combination of discounted cash flows and the use of pricing multiples derived from an analysis of comparable public companies multiplied against historical and/or anticipated financial metrics of the reporting unit. These calculations contain uncertainties as they require management to make assumptions including, but not limited to, market comparables, future cash flows of the reporting unit, and appropriate discount and long-term growth rates.

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

AAM's critical accounting estimates are included in our Annual Report on Form 10-K for the year ended December 31, ~~2018~~2019 and did not materially change during the nine months ended September 30, ~~2019.~~2020.

CYCLICALITY AND SEASONALITY

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

LITIGATION AND ENVIRONMENTAL MATTERS

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

We are subject to various federal, state, local and foreign environmental and occupational safety and health laws, regulations and ordinances, including those regulating air emissions, water discharge, waste management and environmental cleanup. We will continue to closely monitor our environmental conditions to ensure that we are in compliance with ~~applicable~~all laws, regulations and ordinances. We have made, and anticipate continuing to make, capital and other expenditures ~~including~~(including recurring administrative ~~costs,~~costs) to comply with environmental ~~requirements.~~requirements at our current and former facilities. Such expenditures were not significant in the third quarter of ~~2019.~~2020.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

MARKET RISK

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

Currency Exchange Risk From time to time, we use foreign currency forward contracts to reduce the effects of fluctuations in exchange rates relating to certain foreign currencies. At September 30, ~~2019,~~2020, we had currency forward contracts with a notional amount of ~~$191.5~~$155.8 million outstanding. The potential decrease in fair value of foreign exchange contracts, assuming a 10% adverse change in the foreign currency exchange rates, would be approximately ~~$17.5~~$14.2 million at September 30, ~~2019~~2020 and was approximately ~~$17.1~~$16.5 million at December 31, ~~2018.~~2019.

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

discontinued this cross-currency swap, which was in an asset position of $9.8 million on the date that it was discontinued. Also in the first quarter of 2020, we entered into a new fixed-to-fixed cross-currency swap to reduce the variability of functional currency equivalent cash flows associated with changes in exchange rates on certain Euro-based intercompany loans. At September 30, ~~2019,~~2020, the notional amount of the fixed-to-fixed cross-currency swap was ~~$217.9~~$234.4 million. The potential decrease in fair value of the fixed-to-fixed cross-currency swap, assuming a 10% adverse change in the foreign currency exchange rates, would be approximately ~~$21.8~~$23.4 million at September 30, 2020 and was approximately $22.4 million at December 31, 2019.

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

Interest Rate Risk We are exposed to variable interest rates on certain credit facilities. From time to time, we have used interest rate hedging to reduce the effects of fluctuations in market interest rates. In 2018, we entered into a variable-to-fixed interest rate swap to reduce the variability of cash flows associated with interest payments on our variable rate debt. In the second quarter of 2019, we discontinued this variable-to-fixed interest rate swap, which was a liability of $9.7 million on the date that it was discontinued.

~~Also in the second quarter of~~ 2019, we entered into a ~~new~~ variable-to-fixed interest rate swap to reduce the variability of cash flows associated with interest payments on our variable rate debt. We have the following notional amounts hedged in relation to our variable-to-fixed interest rate swap: ~~$1.0 billion through May 2020,~~ $900.0 million through May 2021, $750.0 million through May 2022, $600.0 million through May 2023 and $500.0 million through May 2024.

The pre-tax earnings and cash flow impact of a one-percentage-point increase in interest rates (approximately ~~17%~~18% of our weighted-average interest rate at September 30, ~~2019)~~2020) on our long-term debt outstanding, would be approximately ~~$6.9~~$7.3 million at September 30, ~~2019~~2020 and was approximately ~~$8.2~~$6.3 million at December 31, ~~2018,~~2019, on an annualized basis.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

Under the direction of our Chief Executive Officer and Chief Financial Officer, we evaluated our disclosure controls and procedures and internal control over financial reporting and concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) were effective as of September 30, ~~2019.~~2020.

Changes in Internal Control over Financial Reporting

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

As a result of temporarily closing certain of our global facilities due to the ~~remainder~~impact of ~~2019 and early~~COVID-19, a significant number of our associates have continued to work remotely during the third quarter of 2020.

~~Also~~ This has not had a material effect on ~~January 1, 2019, we adopted new accounting guidance under Accounting Standards Codification Topic 842 (ASC 842)~~ ~~Leases.~~ ~~As part of the adoption of ASC 842, we implemented changes to~~ our internal control over financial reporting as we have maintained our existing controls ~~including the implementation of a new software system for lease accounting~~ and reporting. Other changes to internal controls related to ASC 842 included updating our company policy associated with leases, determining the term of lease agreements, including whether options to extend or terminate a lease are reasonably certain to be exercised, and establishing the appropriate discount rates to calculate our lease liabilities.procedures over financial reporting during this period.

Except as described above with regard to implementation of ERP systems at certain legacy MPG locations, there were no changes in our internal control over financial reporting during the quarter ended September 30, ~~2019~~2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1A. Risk Factors

~~There were no material changes from~~In addition to the risk factors ~~previously~~that are included in Item 1A "Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2019 and in Item 1A "Risk Factors" in our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020, the following was identified as a significant risk to AAM during the nine months ended September 30, 2020.

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

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

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

Further, COVID-19 could exacerbate other risks disclosed in Item 1A. "Risk Factors" as included in our Annual Report on Form 10-K for the year ended December 31, ~~2018 Form 10-K.~~2019. These risks include, but are not limited to, dependency on certain customers, dependency on certain global automotive market segments, risks and uncertainties associated with our company’s global operations, dependency on certain key manufacturing facilities, cyclicality in the automotive industry, disruptions in our supply chain and our customers’ supply chain, and compliance with our debt covenants.

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

The following table provides information about our equity security purchases during the quarter ended September 30, ~~2019:~~2020:

ISSUER PURCHASES OF EQUITY SECURITIES

Period

Total Number of Shares (or Units) Purchased

Average Price Paid per Share (or Unit)

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

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

(in millions)

July 1 - July 31, ~~2019~~2020

—

August 1 - August 31, ~~2019~~2020

—

September 1 - September 30, ~~2019~~2020

—

Total

—

Item 6. Exhibits


Number						Description of Exhibit

~~Number~~ *10.1						~~Description of Exhibit~~ American Axle & Manufacturing Holdings, Inc. Executive Officer Severance Plan

*~~31.1~~10.2						American Axle & Manufacturing Holdings, Inc. Executive Retirement Savings Plan

*22						Subsidiary Guarantors and Issuers of Guaranteed Securities

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

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

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

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

**101.SCH						XBRL Taxonomy Extension Schema Document

**101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document

**101.LAB						XBRL Taxonomy Extension Label Linkbase Document

**101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document

**101.DEF						XBRL Taxonomy Extension Definition Linkbase Document

Filed herewith

Submitted electronically with this Report.

SIGNATURES

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

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

(Registrant)

/s/ James G. Zaliwski

James G. Zaliwski

Chief Accounting Officer

October 30, 2020

~~November 1, 2019~~

5649



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

	For the quarterly period ended	September 30, ~~2019~~ 2020

or

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

	For the transition period from _____________ to _____________


	September 30,							December 31,								September 30,						December 31,
	2019							2018								2020						2019
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount			Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
	(in millions)															(in millions)
Capitalized computer software	$	41.4	$	(26.0	)	$	15.4	$	38.0	$	(20.1	)	$	17.9	Capitalized computer software	$	47.2	$	(32.3)	$	14.9	$	45.8	$	(27.6)	$	18.2
Customer platforms	856.2		(158.6		)	697.6		952.2		(123.5		)	828.7		Customer platforms	856.2		(222.0)		634.2		856.2		(174.4)		681.8
Customer relationships	53.0		(8.5		)	44.5		147.0		(16.5		)	130.5		Customer relationships	53.0		(12.0)		41.0		53.0		(9.4)		43.6
Technology and other	155.7		(31.7		)	124.0		156.2		(22.2		)	134.0		Technology and other	156.1		(44.7)		111.4		156.0		(35.1)		120.9
Total	$	1,106.3	$	(224.8	)	$	881.5	$	1,293.4	$	(182.3	)	$	1,111.1	Total	$	1,112.5	$	(311.0)	$	801.5	$	1,111.0	$	(246.5)	$	864.5



			Page Number

FORWARD-LOOKING STATEMENTS			1

Part I		FINANCIAL INFORMATION	2

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

	Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	4132

	Item 3	Quantitative and Qualitative Disclosures About Market Risk	5245

	Item 4	Controls and Procedures	5346

Part II		OTHER INFORMATION	5347

	Item 1A	Risk Factors	5347

	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	5447

	Item 6	Exhibits	5548

		Signatures	5649



	September 30, 2019

Accounts receivable, net	$	89.1
Inventories	32.8
Prepaid expenses and other	1.5
Property, plant and equipment, net	184.6
Intangible assets, net	158.2
Other assets and deferred charges	71.0
Impairment of carrying value	(225.0		)
Total assets held-for-sale*	$	312.2

Accounts payable	$	71.3
Accrued compensation and benefits	6.8
Accrued expenses and other	3.4
Postretirement benefits and other long-term liabilities	20.2
Total liabilities held-for-sale*	$	101.7

* The assets and liabilities classified as held-for-sale are classified entirely as current in the September 30, 2019 Condensed Consolidated Balance Sheet as we expect to complete the sale in the fourth quarter of 2019. As this transaction does not qualify for classification as discontinued operations, no reclassification of the assets and liabilities in the December 31, 2018 Condensed Consolidated Balance Sheet was required.



	Finance Leases			Operating Leases
	(in millions)
2019 (excluding the nine months ended September 30, 2019)	$	0.3		$	6.9
2020	1.1			25.6
2021	1.0			18.1
2022	0.9			14.5
2023	0.9			9.7
Thereafter	—			38.9
Total future undiscounted minimum lease payments	4.2			113.7
Less: Impact of discounting	(1.4		)	(20.0		)
Total	$	2.8		$	93.7



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



	Driveline			Metal Forming			Powertrain			Casting		Consolidated
	(in millions)
Balance at December 31, 2018	$	212.1		$	552.4		$	377.3		$	—	$	1,141.8
Reorganization	187.2			190.1			(377.3		)	—		—
Foreign currency translation	(5.4		)	(8.9		)	—			—		(14.3		)
Balance at September 30, 2019	$	393.9		$	733.6		$	—		$	—	$	1,127.5


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

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


	September 30, 2020				December 31, 2019
	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Input
	(in millions)
Balance Sheet Classification
Cash equivalents	$	216.0	$	216.0	$	271.3	$	271.3	Level 1
Prepaid expenses and other
Cash flow hedges - currency forward contracts	0.5		0.5		5.0		5.0		Level 2
Cash flow hedges - variable-to-fixed interest rate swap	5.6		5.6		0.9		0.9		Level 2
Nondesignated - currency forward contracts	0		0		1.9		1.9		Level 2

Other assets and deferred charges
Cash flow hedges - currency forward contracts	0.7		0.7		3.4		3.4		Level 2
Cash flow hedges - fixed-to-fixed cross-currency swap	0		0		1.1		1.1		Level 2
Cash flow hedges - variable-to-fixed interest rate swap	10.5		10.5		2.2		2.2		Level 2
Accrued expenses and other
Cash flow hedges - currency forward contracts	3.1		3.1		0		0		Level 2
Cash flow hedges - variable-to-fixed interest rate swap	19.1		19.1		7.9		7.9		Level 2
Nondesignated - currency forward contracts	0.1		0.1		0		0		Level 2
Postretirement benefits and other long-term liabilities
Cash flow hedges - currency forward contracts	2.9		2.9		0		0		Level 2
Cash flow hedges - fixed-to-fixed cross-currency swap	8.6		8.6		0		0		Level 2
Cash flow hedges - variable-to-fixed interest rate swap	36.9		36.9		18.4		18.4		Level 2




Balance Sheet Classification	Fair Value at September 30, 2018		Asset Impairment for the Nine Months Ended September 30, 2018


Property, plant and equipment, net	$	—	$	25.7
Other assets and deferred charges	—		0.9


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

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


Settlement	0		0.4		0		0.4
Net periodic benefit credit	$	(1.6)	$	(0.9)	$	(4.8)	$	(3.4)

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

Service cost	$	0.1	$	0	$	0.3	$	0.2
Interest cost	2.6		3.3		7.7		9.7
Amortized loss	0.3		0		0.8		0.1
Amortized prior service credit	(0.4)		(0.4)		(1.2)		(1.2)


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




	Holdings		AAM Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Elims			Consolidated
2018
Net sales
External	$	—	$	247.1		$	544.3		$	1,025.6		$	—		$	1,817.0
Intercompany	—		0.7			75.6			10.8			(87.1		)	—
Total net sales	—		247.8			619.9			1,036.4			(87.1		)	1,817.0
Cost of goods sold	—		220.6			594.2			821.9			(87.1		)	1,549.6
Gross profit	—		27.2			25.7			214.5			—			267.4
Selling, general and administrative expenses	—		63.4			19.6			13.3			—			96.3
Amortization of intangible assets	—		1.0			22.9			0.9			—			24.8
Restructuring and acquisition-related costs	—		5.0			3.9			2.8			—			11.7
Operating income (loss)	—		(42.2		)	(20.7		)	197.5			—			134.6
Non-operating income (expense), net	—		(60.0		)	2.8			(1.9		)	—			(59.1		)
Income (loss) before income taxes	—		(102.2		)	(17.9		)	195.6			—			75.5
Income tax expense (benefit)	—		(1.0		)	0.1			12.4			—			11.5
Earnings from equity in subsidiaries	63.8		68.1			33.8			—			(165.7		)	—
Net income (loss) before royalties	63.8		(33.1		)	15.8			183.2			(165.7		)	64.0
Royalties	—		87.6			0.7			(88.3		)	—			—
Net income after royalties	63.8		54.5			16.5			94.9			(165.7		)	64.0
Net income attributable to noncontrolling interests	—		—			—			(0.2		)	—			(0.2		)
Net income attributable to AAM	$	63.8	$	54.5		$	16.5		$	94.7		$	(165.7	)	$	63.8
Other comprehensive income (loss), net of tax	1.5		1.0			(10.3		)	—			9.3			1.5
Comprehensive income attributable to AAM	$	65.3	$	55.5		$	6.2		$	94.7		$	(156.4	)	$	65.3



Condensed Consolidating Balance Sheets
(in millions)
	Holdings		AAM Inc.		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Elims			Consolidated
September 30, 2019
Assets
Current assets
Cash and cash equivalents	$	—	$	79.4	$	0.1	$	295.6	$	—		$	375.1
Accounts receivable, net	—		95.2		230.8		650.9		—			976.9
Intercompany receivables	—		4,864.1		4,722.1		183.0		(9,769.2		)	—
Inventories, net	—		62.8		116.9		223.4		—			403.1
Prepaid expenses and other	—		34.3		3.7		92.9		—			130.9
Current assets held-for-sale	—		—		312.2		—		—			312.2
Total current assets	—		5,135.8		5,385.8		1,445.8		(9,769.2		)	2,198.2
Property, plant and equipment, net	—		294.1		554.5		1,477.8		—			2,326.4
Goodwill	—		—		719.0		408.5		—			1,127.5
Intangible assets, net	—		15.4		836.9		29.2		—			881.5
Intercompany notes and accounts receivable	—		1,542.1		186.7		—		(1,728.8		)	—
Other assets and deferred charges	—		339.7		118.1		324.9		—			782.7
Investment in subsidiaries	2,721.4		2,155.9		1,504.1		—		(6,381.4		)	—
Total assets	$	2,721.4	$	9,483.0	$	9,305.1	$	3,686.2	$	(17,879.4	)	$	7,316.3
Liabilities and Stockholders’ Equity
Current liabilities
Current portion of long-term debt	$	—	$	2.1	$	5.3	$	16.4	$	—		$	23.8
Accounts payable	—		101.3		169.1		433.3		—			703.7
Intercompany payables	—		3,931.7		5,835.5		2.0		(9,769.2		)	—
Accrued expenses and other	—		165.2		34.9		207.8		—			407.9
Current liabilities held-for-sale	—		—		101.7		—		—			101.7
Total current liabilities	—		4,200.3		6,146.5		659.5		(9,769.2		)	1,237.1
Intercompany notes and accounts payable	1,311.8		36.0		—		381.0		(1,728.8		)	—
Long-term debt, net	—		3,581.8		—		91.5		—			3,673.3
Other long-term liabilities	—		503.0		243.1		250.2		—			996.3
Total liabilities	1,311.8		8,321.1		6,389.6		1,382.2		(11,498.0		)	5,906.7
Total AAM Stockholders’ equity	1,406.8		1,161.9		2,915.5		2,301.2		(6,378.6		)	1,406.8
Noncontrolling interests in subsidiaries	2.8		—		—		2.8		(2.8		)	2.8
Total stockholders’ equity	1,409.6		1,161.9		2,915.5		2,304.0		(6,381.4		)	1,409.6
Total liabilities and stockholders’ equity	$	2,721.4	$	9,483.0	$	9,305.1	$	3,686.2	$	(17,879.4	)	$	7,316.3