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Business Combinations | 3 Months Ended
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Mar. 31, 2017
Business Combinations [Abstract] |
Business Combination Disclosure [Text Block] |
3. | BUSINESS COMBINATIONS
Acquisition of USM Mexico On March 1, 2017, AAM completed the acquisition of 100% of USM Mexico, a former subsidiary of U.S. Manufacturing Corporation (USM). The purchase price was funded entirely with available cash and the acquisition was accounted for under the acquisition method with the purchase price allocated to the identifiable assets and liabilities of the acquired company based on the respective fair values of the assets and liabilities. USM Mexico includes USM's operations in Guanajuato, Mexico, which has historically been one of the largest suppliers to AAM's Guanajuato Manufacturing Complex. This acquisition allows AAM to vertically integrate the supply chain and helps ensure continuity of supply for certain parts to our largest manufacturing facility. The following represents the estimated fair value of the assets acquired and liabilities assumed resulting from the acquisition, as well as the calculation of goodwill:
(in millions)
Contractual purchase price | $ | 162.5 |
Adjustments to contractual purchase price for capital equipment | 4.9 |
Adjustment to contractual purchase price for settlement of existing accounts payable balance | (22.8 | )
Cash acquired | (0.5 | )
Adjusted purchase price, net of cash acquired | $ | 144.1 |
Accounts receivable | 1.1 |
Inventories | 4.8 |
Prepaid expenses and other | 2.4 |
Property, plant and equipment | 39.1 |
Intangible assets | 31.7 |
Total assets acquired | $ | 79.1 |
Accounts payable | 10.8 |
Accrued expenses and other | 2.7 |
Deferred income tax liabilities | 1.2 |
Net assets acquired | $ | 64.4 |
Goodwill | $ | 79.7 |
The purchase agreement specifies a period of time subsequent to the acquisition date for calculating the final working capital amount of USM Mexico as of the acquisition date. Additionally, we are in the process of reviewing the preliminary estimates of fair value based on independent appraisals and valuations of property, plant and equipment and intangible assets. As a result, the purchase price, working capital, property, plant and equipment, intangible assets and goodwill amounts as included in the table above are considered provisional and are subject to adjustment. We expect these provisional amounts to be finalized in the second quarter of 2017. None of the goodwill is expected to be deductible for tax purposes. AAM had an existing accounts payable balance of $22.8 million with USM Mexico as of the date of acquisition. As a result of the acquisition, this pre-existing accounts payable balance was settled and AAM accounted for this settlement separately from the acquisition. This resulted in a reduction of the purchase price of $22.8 million and this portion of the cash paid to acquire USM Mexico has been reflected as an operating cash outflow in our Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 2017. The operating results of USM Mexico from the acquisition date through March 31, 2017 were insignificant to AAM's Condensed Consolidated Statement of Income for the three months ended March 31, 2017. Further, we have not included pro forma revenue and earnings for the three months ended March 31, 2017 and March 31, 2016 as the inclusion of USM Mexico would be insignificant to AAM's consolidated results for these periods. Acquisition of MPG On April 6, 2017, AAM completed its acquisition of 100% of the equity interests of MPG for a total purchase price of approximately $1.5 billion plus the assumption of approximately $1.7 billion in net debt (comprised of approximately $1.9 billion in debt less approximately $0.2 billion of MPG cash and cash equivalents). The acquisition of MPG will be accounted for under the acquisition method of accounting. MPG provides highly-engineered components for use in powertrain and safety-critical platforms for the global light, commercial and industrial vehicle markets. MPG produces these components using complex metal-forming manufacturing technologies and processes for a global customer base of OEMs and Tier I suppliers, which help their customers meet fuel economy, performance and safety standards. Our acquisition of MPG contributes significantly to diversifying our global customer base and end markets, while also allowing us to expand our presence as a global Tier I supplier to the commercial and industrial markets, in addition to our existing presence as a global Tier I supplier to the automotive industry. The aggregate cash consideration for the acquisition of MPG was financed using (i) the net proceeds of the issuance in March 2017 by AAM of $1.2 billion of new senior notes consisting of $700.0 million aggregate principal amount of 6.25% senior notes due 2025, and $500.0 million aggregate principal amount of 6.50% senior notes due 2027, and on April 6, 2017: (ii) borrowings by AAM of $100.0 million under a term loan that matures five years after completion of the acquisition of MPG, (iii) borrowings by AAM of $1.55 billion under a term loan that matures seven years after completion of the acquisition of MPG, and (iv) cash on hand. We are in the process of valuing MPG's assets acquired and liabilities assumed, as well as identifying and assessing any transactions to be recognized separately from the acquisition. The condensed consolidated financial statements presented in this Form 10-Q as of, and for the three months ended, March 31, 2017 do not include any amounts or balances of MPG as the merger was not completed until April 6, 2017. We will begin to include MPG results in our condensed consolidated financial statements in the second quarter of 2017. Pro Forma Financial Information Pro forma net sales for AAM, on a combined basis with MPG for the three months ended March 31, 2017 and March 31, 2016, were $1.8 billion and $1.7 billion, respectively, excluding MPG sales to AAM during those periods. These pro forma amounts were prepared as if the acquisition of MPG had been completed on January 1, 2016. The disclosure of pro forma net sales is for informational purposes only and does not purport to indicate the results that would actually have been obtained had the merger been completed on the assumed date for the periods presented, or which may be realized in the future. It is not practicable for us to provide pro forma earnings amounts for the three months ended March 31, 2017 and March 31, 2016 as the information necessary to calculate these amounts was not readily available as of the date of this filing. Goodwill The following table provides a reconciliation of changes in goodwill for the three months ended March 31, 2017:
| March 31,
| 2017
| (in millions)
Beginning balance | $ | 154.0 |
Acquisition of USM Mexico | 79.7 |
Foreign currency translation | 0.1 |
Ending balance | $ | 233.8 |
Intangible Assets As a result of the acquisition of USM Mexico, AAM identified and recognized certain intangible assets that are subject to amortization. The weighted-average amortization period for all intangible assets recognized as a result of the acquisition of USM Mexico is 13 years. The following table provides a breakout of the major intangible assets acquired by class:
| March 31,
| 2017
| (in millions)
Technology | $ | 29.5 |
Customer platforms | 2.2 |
Total | $ | 31.7 |
The following table provides a reconciliation of the gross carrying amount and associated accumulated amortization for AAM's total intangible assets, which are all subject to amortization:
| March 31, |  | December 31,
| 2017 |  | 2016
| Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount |  | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount
| (in millions)
Capitalized computer software | $ | 33.1 |  | $ | (9.9 | ) | $ | 23.2 |  |  | $ | 31.7 |  | $ | (8.5 | ) | $ | 23.2 |
e-AAM in-process research & development | 5.4 |  | — |  | 5.4 |  |  | 5.3 |  | — |  | 5.3 |
Technology | 29.5 |  | (0.2 | ) | 29.3 |  |  | — |  | — |  | — |
Customer platforms | 2.2 |  | — |  | 2.2 |  |  | — |  | — |  | — |
Total | $ | 70.2 |  | $ | (10.1 | ) | $ | 60.1 |  |  | $ | 37.0 |  | $ | (8.5 | ) | $ | 28.5 |

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1497-128463 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1490-128463 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1392-128463 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7008-128479 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1486-128463 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6927-128479 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=73530397&loc=d3e4845-128472 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 7 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1524-128463 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7000-128479 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=73530397&loc=d3e4922-128472 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=73530397&loc=d3e4934-128472 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=73530397&loc=d3e4926-128472 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 4A -URI http://asc.fasb.org/extlink&oid=73530397&loc=SL65897772-128472 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1383-128463 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6996-128479 + Details
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