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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

Commission File Number: 1-14303
 

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

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

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).     Yes   x     No   o

     As of May 5, 2003, the latest practicable date, the number of shares of the registrant’s Common Stock, par value $0.01 per share, outstanding was 49,998,908 shares.
 

Website Access to Reports

     American Axle & Manufacturing Holdings, Inc.’s internet website is www.aam.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available free of charge through our website as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission.

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CAUTIONARY STATEMENTS

     Certain statements in this Quarterly Report on Form 10-Q (“Quarterly Report”) are forward-looking in nature and relate to trends and events that may affect our future financial position and operating results. Such statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The terms “will,” “expect,” “anticipate,” “intend,” “project” and similar words or expressions are intended to identify forward-looking statements. These statements speak only as of the date of this Quarterly Report. The statements are based on our current expectations, are inherently uncertain, are subject to risks and should be viewed with caution. Actual results and experience may differ materially from the forward-looking statements as a result of many factors, including, but not limited to:

	•		adverse changes in the economic conditions or political stability of our principal markets (particularly North America, Europe and South America);
	•		reduced demand for our customers’ products, particularly light trucks and sport-utility vehicles (“SUVs”) produced by General Motors Corporation (“GM”) and DaimlerChrysler AG’s (“DaimlerChrysler”) heavy-duty Dodge Ram full-size pickup trucks (“Dodge Ram program”);
	•		reduced purchases of our products by GM, DaimlerChrysler or other customers;
	•		our ability and our customers’ ability to successfully launch new product programs;
	•		our ability to respond to changes in technology or increased competition;
	•		supply shortages or price fluctuations in raw materials, utilities or other operating supplies;
	•		our ability to attract and retain key associates;
	•		our ability to maintain satisfactory labor relations and avoid work stoppages;
	•		our customers’ ability to maintain satisfactory labor relations and avoid work stoppages;
	•		risks of noncompliance with environmental regulations;
	•		liabilities arising from legal proceedings to which we are or may become a party or claims against us or our products;
	•		availability of financing for working capital, capital expenditures, research and development or other general corporate purposes;
	•		adverse changes in laws, government regulations or market conditions affecting our products or our customers’ products (including the Corporate Average Fuel Economy regulations); and
	•		other unanticipated events and conditions that may hinder our ability to compete.

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

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PART I. FINANCIAL INFORMATION

Item 1.   Financial Statements

AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

See accompanying notes to condensed consolidated financial statements.

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AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

See accompanying notes to condensed consolidated financial statements.

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AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

See accompanying notes to condensed consolidated financial statements.

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AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2003

1.   Organization and Basis of Presentation

     Organization. American Axle & Manufacturing Holdings, Inc. (“Holdings”) and its subsidiaries (collectively, “we,” “our,” “us” or “AAM”), is a premier Tier I supplier to the automotive industry and a worldwide leader in the manufacture, engineering, design and validation of driveline systems and related powertrain components and modules for light trucks, SUVs and passenger cars. Driveline systems include components that transfer power from the transmission and deliver it to the drive wheels. Our driveline and related powertrain products include axles, modules, driveshafts, chassis and steering components, driving heads, crankshafts, transmission parts and forged products. In addition to our 14 locations in the United States (“U.S.”) (in Michigan, New York and Ohio), we have offices and facilities in Brazil, England, Germany, Japan, Mexico and Scotland.

     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, as amended. These condensed consolidated financial statements are unaudited but include all 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, 2002 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 for complete consolidated financial statements.

     For further information, refer to the audited consolidated financial statements and notes thereto included in our Annual Report on
Form 10-K for the year ended December 31, 2002 (“Annual Report”).

2.   Inventories

     We state our inventories at the lower of cost or market. The cost of our U.S. inventories is determined principally using the last-in, first-out method (“LIFO”). The cost of our foreign inventories and all of our indirect inventories is determined principally using the first-in, first-out method (“FIFO”). We classify indirect inventories, which include perishable tooling, repair parts and other materials consumed in the manufacturing process but not incorporated into our finished products, as raw materials.

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

     Inventories consist of the following:

3.   Long-Term Debt

     Long-term debt consists of the following:

     In March 2003, we entered into an additional $10.0 million uncommitted money market line of credit, increasing our total availability under such uncommitted facilities to $34.0 million. At March 31, 2003, $3.0 million was outstanding and $31.0 million was available under these uncommitted bank credit lines.

     The weighted average interest rate of our long-term debt outstanding was 5.6% at March 31, 2003 as compared to 5.8% at December 31, 2002.

     The 9.75% Notes are unsecured senior subordinated obligations of American Axle & Manufacturing, Inc. (“AAM Inc.”) and are fully and unconditionally guaranteed by Holdings. Holdings is the survivor of a migratory merger with American Axle & Manufacturing of Michigan, Inc. (“AAMM”) and has no significant assets other than its 100% ownership of AAM Inc.

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

Holdings has no other subsidiaries other than AAM Inc. Holdings is restricted from obtaining funds from AAM Inc. by dividend or loan pursuant to the terms of the indenture relating to the 9.75% Notes.

     We have sufficient availability to refinance all current maturities of long-term debt through the Bank Credit Facilities, the Receivables Facility and the Money Market Lines and have, therefore, classified such obligations as long-term debt at March 31, 2003.

4.   Earnings Per Share (“EPS”)

     The following table sets forth the computation of basic and diluted EPS:

5.   Comprehensive Income

     Comprehensive income consists of the following:

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

6.   Stock-Based Compensation

     As permitted by FASB Statement No. 123, “Accounting for Stock-Based Compensation,” we account for our employee stock options in accordance with APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. Although it is our practice to grant options with no intrinsic value, we measure compensation cost as the excess, if any, of the market price of our common stock at the date of grant over the amount our associates must pay to acquire the stock.

     Had we determined compensation cost based upon the fair value of the options at the grant date consistent with the alternative fair value method set forth in FASB Statement No. 123, our net income and EPS would have been adjusted to the pro forma amounts indicated as follows:

     We estimated the fair value of our employee stock options granted in the first quarter of 2003 and the first quarter of 2002 on the date of grant using the Black-Scholes option-pricing model with the following assumptions: