XML 88 R23.htm IDEA: XBRL DOCUMENT

Organization and Basis of Presentation Level 2 Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2014

Organization and Summary of Significant Accounting Policies [Abstract]

Consolidation, Policy [Policy Text Block]

PRINCIPLES OF CONSOLIDATION We include the accounts of Holdings and its subsidiaries in our consolidated financial statements. We eliminate the effects of all intercompany transactions, balances and profits in our consolidation.

Comparability of Prior Year Financial Data, Policy [Policy Text Block]

REVISION OF PRIOR PERIOD FINANCIAL STATEMENTS In connection with the preparation of our consolidated financial statements for the year ended December 31, 2014, we determined that entries recorded in the third quarter of 2014 to reduce certain accrued accounts payable balances by $8.4 million were previously recorded as a reduction of cost of goods sold but should have been recorded as an adjustment to opening accumulated deficit because the amounts giving rise to the correction originated in periods prior to January 1, 2012.

In accordance with ASC 250 Accounting Changes and Error Corrections as well as the SEC's Staff Accounting Bulletin No. 99, Materiality, we evaluated the materiality of this error on prior period financial statements and determined that it did not result in a material misstatement to the financial conditions, results of operations, or cash flows for any of the periods presented.

We also determined that the effect of recording the correction during the third quarter of 2014 was material to the financial statements for the three months ended September 30, 2014. As a result, prior period financial statements have been revised in accordance with ASC 250 and the SEC's Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, and accumulated deficit at January 1, 2012 was reduced by $6.9 million. Consequently, the previously reported December 31, 2013 balances for accounts payable of $445.8 million, accumulated deficit of $181.3 million and current deferred income tax assets of $36.4 million were reduced by $8.4 million, $6.9 million and $1.5 million, respectively.

Revenue Recognition, Policy [Policy Text Block]

REVENUE RECOGNITION We recognize revenue when products are shipped to our customers and title transfers under standard commercial terms or when realizable in accordance with our commercial agreements. If we are uncertain as to whether we will be successful collecting a balance in accordance with our understanding of a commercial agreement, we do not recognize the revenue or cost recovery until such time as the uncertainty is removed.

In the first quarter of 2014, we reached an agreement with General Motors Company (GM) to increase installed capacity and adjust product mix for our largest vehicle program. As a result of this agreement, we received $32.8 million in 2014 and recorded the payments as deferred revenue. We will recognize this deferred revenue into sales over the life of the program on a straight line basis over approximately 5 years, which is the period we expect GM to benefit from this capacity and mix change. In 2014, we recognized revenue of $5.4 million related to this agreement. As of December 31, 2014, we have $6.9 million of deferred revenue that is classified as a current liability and $20.5 million of deferred revenue that is recorded as a noncurrent liability on our Consolidated Balance Sheet.

Also in the first quarter of 2014, we reached an agreement with GM to recover certain costs related to the delay of another major product program. We received $9.3 million in 2014 related to this agreement and initially recorded deferred revenue of $9.3 million. We will recognize this deferred revenue into sales over the life of the program on a straight-line basis over approximately 8 years, which is the period we expect GM to benefit from this agreement. We began recognizing this deferred revenue as revenue in the third quarter of 2014 when this program launched in certain markets. In 2014, we recognized revenue of $0.5 million related to this agreement. As of December 31, 2014, we have recorded deferred revenue of $8.8 million, $1.1 million of which is classified as a current liability and $7.7 million which is recorded as a noncurrent liability on our Consolidated Balance Sheet.

In 2009, we entered into a settlement and commercial agreement (2009 Settlement and Commercial Agreement) with General Motors Company (GM). As part of this agreement, we received $110.0 million from GM, of which we recorded $79.7 million as deferred revenue. As of December 31, 2014, our deferred revenue related to the 2009 Settlement and Commercial Agreement is $37.5 million, $8.0 million of which is classified as a current liability and $29.5 million of which is recorded as a noncurrent liability on our Consolidated Balance Sheet. We recognize this deferred revenue into revenue on a straight-line basis over 120 months, which ends September 2019 and is the period that we expect GM to benefit under the 2009 Settlement and Commercial Agreement. We recognized revenue of $8.0 million, in 2014, 2013 and 2012 related to this agreement.

As of December 31, 2014, the majority of the remaining deferred revenue primarily relates to customer payments to implement capacity programs, which is generally recognized into revenue over the life of these programs. We recognized $7.5 million, $10.5 million and $13.1 million of revenue for these programs in 2014, 2013 and 2012, respectively.

Research and Development Expense, Policy [Policy Text Block]

RESEARCH AND DEVELOPMENT (R&D) COSTS We expense R&D, as incurred, in selling, general and administrative expenses on our Consolidated Statement of Income. R&D spending, net of engineering, design and development recoveries, was $103.9 million, $103.4 million and $123.4 million in 2014, 2013 and 2012, respectively.

Cash and Cash Equivalents, Policy [Policy Text Block]

CASH AND CASH EQUIVALENTS Cash and cash equivalents include all cash balances and highly liquid investments in money market funds with maturities of 90 days or less at the time of purchase.

Trade and Other Accounts Receivable, Policy [Policy Text Block]

ACCOUNTS RECEIVABLE The majority of our accounts receivable are due from original equipment manufacturers (OEMs) in the automotive industry and are past due when payment is not received within the stated terms. Trade accounts receivable for our largest customer, GM, are generally due within approximately 50 days from the date of receipt.

Amounts due from customers are stated net of allowances for doubtful accounts. We determine our allowances by considering factors such as the length of time accounts are past due, our previous loss history, the customer's ability to pay its obligation to us, and the condition of the general economy and the industry as a whole. The allowance for doubtful accounts was $4.6 million and $4.9 million as of December 31, 2014 and 2013, respectively. We write-off accounts receivable when they become uncollectible.

Property, Plant and Equipment, Preproduction Design and Development Costs [Policy Text Block]

CUSTOMER TOOLING AND PRE-PRODUCTION COSTS RELATED TO LONG-TERM SUPPLY AGREEMENTS Engineering, R&D, and other pre-production design and development costs for products sold on long-term supply arrangements are expensed as incurred unless we have a contractual guarantee for reimbursement from the customer. Costs for tooling used to make products sold on long-term supply arrangements for which we have either title to the assets or the noncancelable right to use the assets during the term of the supply arrangement are capitalized in property, plant and equipment. Capitalized items and customer receipts in excess of tooling costs specifically related to a supply arrangement are amortized over the shorter of the term of the arrangement or over the estimated useful lives of the related assets.

Inventory, Policy [Policy Text Block]

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

Inventories consist of the following:



	December 31,
	2014			2013
	(in millions)
Raw materials and work-in-progress	$	243.8		$	263.4
Finished goods	32.9			25.7
Gross inventories	276.7			289.1
Inventory valuation reserves	(27.9		)	(27.3		)
Inventories, net	$	248.8		$	261.8

Property, Plant and Equipment, Policy [Policy Text Block]

PROPERTY, PLANT AND EQUIPMENT We state property, plant and equipment, including amortizable tooling, at historical cost, as adjusted for impairments. Construction in progress includes costs incurred for the construction of buildings and building improvements, and machinery and equipment in process. Repair and maintenance costs that do not extend the useful life or otherwise improve the utility of the asset beyond its existing useful state are expensed in the period incurred.

We record depreciation and tooling amortization on the straight-line method over the estimated useful lives of the depreciable assets. Depreciation and tooling amortization amounted to $166.5 million, $151.8 million and $130.9 million in 2014, 2013 and 2012, respectively.

Property, plant and equipment consists of the following:



	Estimated	December 31,
	Useful Lives	2014			2013
	(years)	(in millions)
Land		$	26.2		$	29.5
Land improvements	10-15	19.0			18.9
Buildings and building improvements	15-40	314.3			306.6
Machinery and equipment	3-12	1,770.7			1,648.6
Construction in progress		91.4			95.1
		2,221.6			2,098.7
Accumulated depreciation and amortization		(1,160.5		)	(1,040.2		)
Property, plant and equipment, net		$	1,061.1		$	1,058.5

Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block]

IMPAIRMENT OF LONG-LIVED ASSETS When impairment indicators exist, we evaluate the carrying value of long-lived assets for potential impairment. We consider projected future undiscounted cash flows, trends and other circumstances in making such estimates and evaluations. If impairment is deemed to exist, the carrying amount of the asset is adjusted based on its fair value. Recoverability of assets “held for use” is determined by comparing the forecasted undiscounted cash flows of the operations to which the assets relate to their carrying amount. When the carrying value of an asset group exceeds its fair value and is therefore nonrecoverable, those assets are written down to fair value. Fair value is determined based on market prices, when available, or a discounted cash flow analysis performed using management estimates.

Goodwill and Intangible Assets, Goodwill, Policy [Policy Text Block]

GOODWILL We record goodwill when the purchase price of acquired businesses exceeds the value of their identifiable net tangible and intangible assets acquired. We periodically evaluate goodwill for impairment in accordance with the accounting guidance for goodwill and other indefinite-lived intangibles. We completed impairment tests in 2014 and 2013 and concluded that there was no impairment of our goodwill. The following table provides a reconciliation of changes in goodwill:



	December 31,
	2014			2013
	(in millions)
Beginning balance	$	156.4		$	156.4
Foreign currency translation	(1.4		)	—
Ending balance	$	155.0		$	156.4

Goodwill and Intangible Assets, Intangible Assets, Policy [Policy Text Block]

INTANGIBLE ASSETS We are currently in the process of testing, validating and launching global enterprise resource planning (ERP) systems, at certain key locations, to upgrade many of our existing operating and financial systems. In connection with the development of these ERP systems, we have recorded an intangible asset of $19.2 million on our Consolidated Balance Sheet as of December 31, 2014. The intangible asset is related to costs incurred to obtain software licenses from a third party, as well as costs to design and develop this internal-use software. We incurred and capitalized $11.4 million and $7.8 million of these costs in 2014 and 2013, respectively. This intangible asset is classified as other assets and deferred charges on our Consolidated Balance Sheet and will be amortized over the estimated useful life of our ERP systems. We recorded $0.4 million and $0.1 million of expense for the amortization of these intangible assets in 2014 and 2013, respectively.

In connection with our e-AAM subsidiary, we have in-process research and development intangible assets which represent the technology that will be utilized in products to be launched in 2016. Accordingly, we will begin amortizing this asset on a straight-line basis at the start of production through the expected life cycle of the related products, which is expected to be approximately 5-7 years. These intangible assets are classified as other assets and deferred charges on our Consolidated Balance Sheet. The following table provides a reconciliation of changes in the carrying value of our in-process research and development intangible assets:



	December 31,
	2014			2013
	(in millions)
Beginning balance	$	7.4		$	7.4
Foreign currency translation	(1.2		)	—
Ending balance	$	6.2		$	7.4

Debt, Policy [Policy Text Block]

DEBT ISSUANCE COSTS The costs related to the issuance or modification of long-term debt are deferred and amortized into interest expense over the life of each debt issue. As of December 31, 2014 and December 31, 2013, our unamortized debt issuance costs were $29.5 million and $35.6 million, respectively. Deferred amounts associated with the extinguishment of debt are expensed and classified as debt refinancing and redemption costs on our Consolidated Statement of Income.

Derivatives, Policy [Policy Text Block]

DERIVATIVES We recognize all derivatives on the balance sheet at fair value and we are not subject to a master netting agreement. If a derivative qualifies under the accounting guidance as a hedge, depending on the nature of the hedge, changes in the fair value of the derivative are either offset against the change in fair value of the hedged asset, liability or firm commitment through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value, and changes in the fair value of derivatives that do not qualify as hedges, are immediately recognized in earnings. See Note 3 - Derivatives and Risk Management, for more detail on our derivatives.

Foreign Currency Transactions and Translations Policy [Policy Text Block]

CURRENCY TRANSLATION We translate the assets and liabilities of our foreign subsidiaries to U.S. dollars at end-of-period exchange rates. We translate the income statement elements of our foreign subsidiaries to U.S. dollars at average-period exchange rates. We report the effect of translation for our foreign subsidiaries that use the local currency as their functional currency as a separate component of stockholders' equity. Gains and losses resulting from the remeasurement of assets and liabilities in a currency other than the functional currency of a subsidiary are reported in current period income. We also report any gains and losses arising from transactions denominated in a currency other than the functional currency of a subsidiary in current period income. These foreign currency gains and losses resulted in a gain of $6.4 million and losses of $4.2 million and $6.3 million, for the years ended 2014, 2013 and 2012, respectively.

Use of Estimates, Policy [Policy Text Block]

USE OF ESTIMATES In order to prepare consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP), we are required to make estimates and assumptions that affect the reported amounts and disclosures in our consolidated financial statements. Actual results could differ from those estimates.

New Accounting Pronouncements, Policy [Policy Text Block]

EFFECT OF NEW ACCOUNTING STANDARDS On January 1, 2014, new accounting guidance became effective regarding financial statement presentation of an unrecognized tax benefit when a net operating loss (NOL) carryforward, a similar tax loss, or a tax credit carryforward exists. The new guidance requires entities to present an unrecognized tax benefit, or a portion of an unrecognized tax benefit, in the financial statements as a reduction to a deferred tax asset for an NOL carryforward, a similar tax loss, or a tax credit carryforward, except when one is not available as of the reporting date or the entity does not intend to use the deferred tax asset for this purpose. This guidance does not affect the tabular reconciliation of the total amounts of unrecognized tax benefits, as the tabular reconciliation presents the gross amount of unrecognized tax benefits. The adoption of this new guidance has had no impact on our consolidated financial statements.

In May 2014, new accounting guidance was issued that outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The guidance is based on the principle that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to fulfill a contract. Entities have the option of using either a full retrospective or a modified retrospective approach for the adoption of the new standard. This guidance becomes effective for AAM at the beginning of our 2017 fiscal year and early adoption is not permitted. We are currently assessing the impact that this standard will have on our consolidated financial statements.