mpg-10k_20161231.htm

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

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.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The aggregate market value of the voting common stock held by nonaffiliates of the registrant on July 1, 2016 (the last business day of the most recently completed second fiscal quarter) was approximately $202.0 million; computed by reference to the closing sale price as reported on the New York Stock Exchange on such date.

As of March 2, 2017, the registrant had 67,923,410 shares of voting common stock outstanding.

The information required to be included in Part III of this Annual Report on Form 10-K will be provided in accordance with Instruction G(3) to Form 10-K no later than May 1, 2017.

This Annual Report on Form 10-K (“10-K”), including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7, contains forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. We may also make forward-looking statements in other reports filed with the Securities and Exchange Commission (the “SEC”), including the documents incorporated herein by reference, in materials delivered to stockholders, and in press releases. In addition, our officers and representatives may from time to time make oral forward-looking statements.

All statements other than statements of historical fact or relating to present facts or current conditions included in this 10-K are forward-looking statements. Forward-looking statements give our current beliefs, expectations and assumptions relating to our financial condition, results of operations, plans, projections, objectives, strategies, anticipated events and trends, future performance, and business, the economy and other future conditions. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “estimate,” “expect,” “will,” “project,” “plan,” “intend,” “believe,” “may,” “should,” “could,” “can have,” “likely,” “goal,” “seek,” “strategy,” “future,” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. Examples of forward-looking statements include, among others, statements we make regarding:

The forward-looking statements contained in this 10-K are based on assumptions that we have made. As you read and consider this 10-K, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties (many of which are beyond our control), and assumptions and you should not rely on any of these forward-looking statements. Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors are difficult to predict and could affect our actual operating and financial performance and cause our performance to differ materially from the performance anticipated in the forward-looking statements, including may factors that are outside of our control. We believe these factors include, but are not limited to, those described under or incorporated in “Item 1A. Risk Factors,” “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 7A. Quantitative and Qualitative Disclosures About Market Risk.” Should one or more of these risks or uncertainties materialize, or should any of these assumptions prove incorrect, our actual operating and financial performance may vary in material respects from the performance projected in these forward-looking statements.

Any forward-looking statement made by us in this 10-K is based only on information currently available to us and speaks only as of the date on which we make it. Factors or events that could cause our actual operating and financial performance to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

Through its website (www.mpgdriven.com), the Company will make available, free of charge, its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, any amendments to those reports, and other filings with the SEC, as soon as reasonably practicable after they are filed or furnished. The Company also makes the following documents available on its website: the Audit Committee Charter; the Compensation Committee Charter; the Nominating and Corporate Governance Committee Charter; the Company’s Corporate Governance Guidelines; the Company’s Code of Business Conduct and Ethics; and the Company’s Related Party Transaction, Insider Trading, Whistleblower, Environmental, and Safety & Health policies. Copies of these posted materials are also available in print, free of charge, to any stockholder upon request from: MPG Investor Relations, One Towne Square, Suite 550, Southfield, MI, or via telephone in the U.S. at (248) 727-1829, or e-mail at investors@mpgdriven.com. The inclusion of our website address in this report is an inactive textual reference only and is not intended to include or incorporate by reference the information on our website into this 10-K. The public may also read and copy any materials we file with the SEC at the SEC's Public Reference Room at 100 F Street, NE., Washington, DC 20549. The public may also obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that contains our reports, proxy and information statements, and other information about the Company on its website (www.sec.gov).

Metaldyne Performance Group Inc. (“MPG”) is a Delaware corporation incorporated on June 9, 2014. Our business was formed through the combination of three metal-forming technology manufacturing companies, ASP HHI Holdings, Inc. (together with its subsidiaries, “HHI”), ASP MD Holdings, Inc. (together with its subsidiaries, “Metaldyne”), and ASP Grede Intermediate Holdings LLC (together with its subsidiaries, “Grede”) on August 4, 2014 (the “Combination”). Each of the three operating groups was owned primarily by certain private equity funds affiliated with American Securities LLC (together with its affiliates, “American Securities”). American Securities acquired its interest in HHI in October 2012, Metaldyne in December 2012, and Grede in June 2014.

Effective December 12, 2014, MPG completed an initial public offering (the “IPO”) and began trading on the New York Stock Exchange under the ticker symbol “MPG.” Unless otherwise stated in this 10-K, references to “MPG,” the “Company,” “we,” “our,” “us,” and similar terms refer to Metaldyne Performance Group Inc. and all of its subsidiaries.

This 10-K presents HHI as the predecessor to MPG for financial reporting purposes. The period prior to October 6, 2012 is referred to as the Predecessor Period and the periods from October 6, 2012 to December 31, 2016 are referred to as the Successor Period. The Combination has been accounted for as a reorganization of entities under common control in a manner similar to a pooling of interests, and, as such, the bases of accounting of HHI, Metaldyne and Grede were carried over to MPG. These consolidated financial statements reflect the retrospective application of MPG’s capital structure and consolidated presentation of the Combination for the Successor Period. Our historical capital structure has been retroactively adjusted to reflect our post-Combination capital structure for the Successor Period.

On November 3, 2016, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with American Axle & Manufacturing Holdings, Inc., a Delaware corporation (“AAM”) and Alpha SPV I, Inc., a Delaware corporation and wholly owned subsidiary of AAM (“Merger Sub”), pursuant to which Merger Sub will be merged with and into the Company (the “AAM Merger”) with the Company surviving the AAM Merger as a wholly owned subsidiary of AAM. The Merger Agreement and the transactions contemplated thereby have been approved and adopted by the boards of directors of both AAM and the Company. The Merger Agreement will be presented to the Company’s stockholders for adoption and approval as well as to AAM’s stockholders to approve the issuance of shares of AAM common stock to the Company’s stockholders in the AAM Merger (the “AAM Share Issuance”), and such stockholder approvals are currently expected during the first half of 2017.

At the effective time of the AAM Merger, each share of our common stock issued and outstanding (other than any shares of our common stock held by AAM, Merger Sub or any other wholly owned subsidiary of AAM, treasury shares held by us and shares owned by stockholders who have properly made and not withdrawn a demand for appraisal rights under Delaware law) will be converted into the right to receive $13.50 in cash, without interest and 0.5 share of AAM common stock (the “Merger Consideration”). In addition, immediately prior to the effective time of the AAM Merger, all then-outstanding unvested Company restricted stock awards, restricted stock units and stock options will be accelerated in full and, upon completion of the AAM Merger (i) all then-outstanding Company restricted stock awards and restricted stock units will be converted into the right to receive the Merger Consideration, and (ii) all then-outstanding Company stock options will be converted into the right to receive an amount in cash equal to the Merger Consideration, less the exercise price of such options. The consummation of the AAM Merger remains subject to the

receipt of Mexican antitrust approval, stockholder approvals and the satisfaction of other customary closing conditions. The transaction is expected to close in the first half of 2017. If completed, the AAM Merger will result in the Company becoming a wholly owned subsidiary of AAM and our shares will no longer be listed on any public market.

Additional information about the AAM Merger and the Merger Agreement, including circumstances under which the Merger Agreement can be terminated and the ramifications of such termination, as well as other terms and conditions, is set forth in our Current Report on Form 8-K filed with the Securities and Exchange Commission on November 3, 2016 (the “Transaction 8-K”). In addition, as described in the Transaction 8-K, in connection with the transactions contemplated by the Merger Agreement, an affiliate of American Securities entered into a voting agreement with AAM whereby it agreed to vote a portion of its shares of our common stock in favor of the adoption of the Merger Agreement at our stockholders’ meeting and the remainder of its shares proportionately with our other stockholders.

We use the following industry terms in this 10-K describing our business, our products, and how they are organized and sourced in our industry:

MPG provides highly-engineered components for use in Powertrain and Safety-Critical Platforms for the global light, commercial, and industrial vehicle markets. We produce these components using complex metal-forming manufacturing technologies and processes for a global customer base of vehicle OEMs and Tier I suppliers. Our components help OEMs meet fuel economy, performance, and safety standards.

Our metal-forming manufacturing technologies and processes include Aluminum Die Casting, Forging, Iron Casting, and Powder Metal Forming, as well as value-added manufacturing processes such as Advanced Machining and Assembly. These technologies and processes are used to create a wide range of customized Powertrain and Safety-Critical components that address requirements for power density (increased component strength to weight ratio), power generation, power/torque transfer, strength, and NVH.

HHI: HHI manufactures highly-engineered metal-based components for the North American light vehicle market. These components include transmission components, driveline components, wheel hubs, axle ring and pinion gears, sprockets, balance shaft gears, timing drive systems, variable valve timing (“VVT”) components, transfer case components, and wheel bearings.

Metaldyne: Metaldyne manufactures highly-engineered metal-based Powertrain components for the global light vehicle markets. These components include connecting rods, VVT components, balance shaft systems, crankshaft dampers, differential gears, pinions and assemblies, valve bodies, hollow and solid shafts, clutch modules, and assembled end covers.

Grede: Grede manufactures cast, machined and assembled components for the light, commercial and industrial (agriculture, construction, mining, rail, wind energy and oil field) vehicle and equipment end-markets. These components include turbocharger housings, differential carriers and cases, scrolls and covers, brake calipers and housings, knuckles, control arms, and axle components.

See Note 22 of the notes to the consolidated financial statements contained within “Item 8. Financial Statements and Supplementary Data” for financial information reported by segment and geographic area.

We primarily serve the global light vehicle and North American commercial and industrial vehicle and equipment end-markets. Demand in these end-markets, and therefore our products, is driven by consumer preferences, regulatory requirements (particularly related to fuel economy and safety standards) and macro-economic factors.

Our business is moderately seasonal because our largest North American customers typically halt operations for approximately two weeks in July and one week in December. Customers in Europe have historically shut down vehicle production during a portion of August and December as well. In addition, third quarter automotive production traditionally is lower as new models enter production.

We depend on major vehicle OEMs for our sales. For the year ended December 31, 2016, Ford Motor Company (“Ford”), General Motors Company (“GM”), and Fiat Chrysler Automobiles (“FCA”) accounted for approximately 25%, 21%, and 14% of our end-customer sales, respectively. Other significant customers include Daimler AG (“Daimler”), Toyota Motor Corporation (“Toyota”), and Honda Motor Company (“Honda”), which together accounted for approximately 9% of our end-customer sales for the year ended December 31, 2016.

We procure our raw materials from a variety of suppliers for use in our manufacturing processes. In 2016, our top ten suppliers constituted less than 35% of our purchases. Based on available quality and supply, we seek to obtain materials in the region in which our products are manufactured in order to minimize transportation and other costs. The primary raw materials used to produce the majority of our products are steel scrap, steel bar, pig iron, aluminum, copper, molybdenum, and other metallic materials. We believe our principal suppliers have steel making capabilities and capacity to support our customers’ specifications and volume expectations. We typically source raw materials or components from single suppliers. Although we are generally able to substitute suppliers for raw materials and components without material short-term costs, in some cases, it could be difficult and expensive for us to change suppliers and may require customer approval.

Generally, we apply raw material surcharges to our customers to mitigate volatility in our cost of scrap, steel bar, aluminum, and other inputs. Surcharge prices on our raw materials may vary based on industry indices or on actual prices paid to suppliers. We also sell certain manufacturing scrap which may be subject to fluctuations in commodity prices.

We maintain technical and commercial engineering centers in major regions of the world to develop and provide advanced products, processes and manufacturing support for all of our manufacturing sites and to provide our customers with local engineering capabilities and design support. Our efforts related to research and development are focused on process improvement, higher performance materials, and increased product performance.

We believe that our engineering and technical expertise, together with our emphasis on continuing product and process development, allow us to use the latest technologies, processes, and sophisticated materials to provide cost-effective solutions to our customers. We believe that continued engineering activities are critical to support our pipeline of technologically advanced products and increasing the technical and performance capabilities of our products. We maintain our engineering activities around our core technologies and processes, allocating our capital and resources to those products with differentiated technologies and attractive returns on invested capital.

We pursue patents where specific technology or innovation is well positioned for protection under intellectual property laws. While no individual patent or group of patents, taken alone, is considered material to our business, taken in the aggregate, these patents provide meaningful protection for certain of our products and product innovations. We continually make determinations as to whether a product or process is best protected through a patent application or other means.

Incremental business backlog, which we measure as anticipated net product sales from incremental business for the next four years, net of Programs being phased out and any contractual pricing changes, was approximately $443 million as of December 31, 2016. We are typically awarded Programs one to three years prior to the start of production on new and replacement business which ramp up over time. Due to the timing of the OEM sourcing cycle, our anticipated net product sales were measured based on contracts to be fulfilled during 2017 through 2020. Our estimate of anticipated net product sales includes formally awarded new Programs, Programs which we believe are highly probable of being awarded to us, and expected volume and pricing changes on existing Programs. Our estimate may be impacted by various assumptions including vehicle production levels on new and replacement Programs, customer price reductions, scrap prices, material price indices, currency exchange rates and the timing of Program launches. Therefore, this anticipated net product sales information could differ significantly from actual firm orders or firm commitments, and awards of business do not represent guarantees of production volumes or revenues.

Although the number of our competitors has decreased due to ongoing industry consolidation, the automotive components industry remains very competitive. OEMs and Tier I suppliers rigorously evaluate suppliers on the basis of product quality, price competitiveness, reliability and timeliness of delivery, product design capability, technical expertise and development capability, new product innovation, financial viability, application of lean principles, operational flexibility, customer service, and overall management. In addition, our customers generally require that suppliers demonstrate improved efficiencies, through cost reductions and/or price improvement, on a year-over-year basis.

The following table lists our primary competitors for components we produce using our manufacturing technologies and value-added processes:

We are subject to a variety of federal, state, local, and foreign environmental laws and regulations, including those governing the discharge of pollutants into the air or water, the management and disposal of hazardous substances or wastes, and the remediation of contaminated sites. Some of our operations require environmental permits and controls to prevent and reduce air and water pollution. These permits are subject to modification, renewal, and revocation by issuing authorities. We believe we are in substantial compliance with all applicable material laws and regulations. Historically, our costs of achieving and maintaining compliance with environmental, health, and safety requirements have not been material to our results.

As of December 31, 2016, we employed approximately 12,000 employees in 13 countries. As of December 31, 2016, approximately 45% of our employees were employed under the terms of collective bargaining agreements with industrial trade unions or employed under international workers’ councils.

Provided below is a cautionary discussion of what we believe to be the most important risk factors applicable to the Company, although they are not the only ones we face. Additional risks and uncertainties not presently known to us or that we do not currently deem material may also impact our business operations. If any of the following risks occur, our business, including its financial performance, financial condition, results of operations, and cash flows may be adversely affected. Discussion of these factors is incorporated by reference into and considered an integral part of Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

The proposed AAM Merger may not be consummated or may not be consummated in the timeframe or manner currently anticipated, which could have a material adverse effect on our business, results of operations and/or our stock price.

The proposed AAM Merger remains subject to various closing conditions, including adoption of the Merger Agreement by the stockholders of the Company, approval of the AAM Share Issuance by the stockholders of AAM and the receipt of Mexican antitrust approval, among other customary closing conditions. It is possible that the stockholders of either the Company or AAM do not approve the relevant proposals at their respective stockholder meetings, or that a government entity may prohibit, delay or refuse to grant approval for the consummation of the AAM Merger. If any condition to the closing of the AAM Merger is not satisfied or, if permissible, waived, the AAM Merger will not be completed. In addition, satisfying the conditions to the closing of the AAM Merger may take longer than we expect. There can be no assurance that any of the remaining conditions to closing will be satisfied or, if permissible, waived or that other events will not intervene to delay or result in the failure to consummate the AAM Merger.

Any delay in completing the AAM Merger or the failure to complete the AAM Merger may adversely affect our business or results of operations, may adversely affect the benefits the Company’s stockholders expect to receive from the AAM Merger, or may negatively affect the price of our common stock or the price of the AAM common stock our stockholders may receive in the AAM Merger. Investor confidence could also decline.

Further, any delay in closing or a failure to close the AAM Merger could exacerbate any negative impact on our business and our relationships with our customers, suppliers, joint venture partners, other parties with which we maintain business relationships, or employees as described in the risk factors below, as well as negatively impact our ability to implement alternative business plans or pursue other strategic alternatives.

The occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement could have a material adverse effect on us and our stock price.

As described in the above risk factor, we could experience certain adverse consequences related to the termination of the Merger Agreement and failure to consummate the AAM Merger. Pursuant to the terms of the Merger Agreement, if the Merger Agreement is terminated under certain circumstances, a termination fee of approximately $50.9 million will be payable by us to AAM. We may also be required to reimburse AAM for certain fees and expenses relating to the proposed AAM Merger up to $15.0 million under certain circumstances. If triggered, payment of the termination fee and reimbursement of expenses may negatively impact our results of operations, financial condition and cash flows, and such impact will be in addition to the potential risks and consequences described above related to the failure to consummate the AAM Merger.

A lawsuit has been filed against MPG and members of the MPG board of directors challenging the disclosures concerning the AAM Merger, and additional lawsuits may be filed; an adverse ruling in any of such lawsuits may prevent the AAM Merger from becoming effective within the expected timeframe.

MPG and members of the MPG board of directors are named as defendants in a purported class action lawsuit brought by and on behalf of MPG stockholders challenging the disclosures concerning the AAM Merger, seeking, among other things, to enjoin the stockholder vote on the AAM Merger at the special meeting of our stockholders to be held to, among other things, consider and vote on the adoption of the Merger Agreement and approval of the transactions contemplated thereby. If the plaintiffs are successful in obtaining an injunction, then such injunction may prevent the AAM Merger from becoming effective within the expected timeframe. If the completion of the AAM Merger is delayed, it could result in substantial costs to AAM and MPG. In addition, AAM and MPG could incur significant costs in connection with the lawsuit, including costs associated with the indemnification of MPG’s directors and officers. MPG and the members of the MPG board of directors believe that the claims asserted in this lawsuit are without merit.

Disruption of management’s attention from our ongoing business operations due to the proposed AAM Merger may adversely affect business and results of operations.

We have expended, and continue to expend, significant management resources in an effort to complete the AAM Merger. Management’s attention may be diverted away from the day-to-day operations of our business and execution of our existing business plan in our efforts to complete the AAM Merger. This diversion of management resources could disrupt operations and have an adverse effect on our operating results and business.

While the AAM Merger is pending, we will be subject to business uncertainties that could adversely affect our operating results and business generally.

Whether or not the AAM Merger is ultimately consummated, our business may be adversely affected as a result of the announcement of the AAM Merger and uncertainty relating to the proposed transaction, including the following:

In addition, we may incur significant additional costs in order to maintain employee morale, retain key employees or continue business relationships. If, despite our efforts, key employees depart because of uncertainty or our business partners adversely alter their relationships with us, our business could be seriously harmed. Any delay in completing the AAM Merger may further increase such uncertainties and the adverse effects related thereto.

We have incurred and will continue to incur significant costs, fees and expenses in connection with the AAM Merger.

We have expended and will continue to expend significant costs, fees and expenses for professional services as well as transaction and integration costs in connection with the proposed AAM Merger. These costs will impact our results of operations regardless of whether or not the AAM Merger is consummated.

The Merger Agreement restricts our conduct of business prior to completion of the AAM Merger and limits our ability to pursue alternative strategic options.

The Merger Agreement restricts us from taking certain actions without AAM’s consent while the AAM Merger is pending. These restrictions may, among other matters, prevent us from pursuing otherwise attractive business opportunities or exercising our business strategy, making certain investments or acquisitions, selling assets, engaging in capital expenditures in excess of certain agreed limits, incurring certain indebtedness or making certain other changes to our business pending the closing of the AAM Merger. These restrictions could have an adverse effect on our business, financial condition or results of operations.

In addition, subject to certain exceptions, the Merger Agreement prohibits us from soliciting or engaging in discussions with respect to certain alternative business combination transactions and, in certain circumstances, we will be required to pay a termination fee of approximately $50.9 million to AAM and to reimburse AAM’s transaction-related expenses in order to terminate the Merger Agreement and pursue such an alternative transaction. These provisions may discourage third parties from pursuing business opportunities with us and limit our ability to pursue opportunities that could result in greater value to our stockholders.

Because the exchange ratio in the AAM Merger is fixed and the market value of shares of AAM common stock may fluctuate, there can be no guarantee of the market value of the stock consideration the Company’s stockholders will receive in the AAM Merger.

The per share portion of Merger Consideration pursuant to the Merger Agreement is fixed and will not be adjusted for changes in our business, assets, liabilities, prospects, outlook, financial condition or results of operations, changes in the business, assets, liabilities, prospects, outlook, financial condition or results of operations of AAM or any change in the market price of, analyst estimates of, or projections relating to, our common stock or AAM common stock. The market value of our common stock may vary significantly from the value of the per share portion of the Merger Consideration on the date the Merger Agreement was executed or at other later dates. In addition, because the exchange ratio will not be adjusted, the market value of the shares of AAM common stock issued to the Company’s stockholders in the AAM Merger may be higher or lower than the values of those shares on the date of the Merger Agreement or at other later dates.

Neither the Company nor AAM is permitted to terminate the Merger Agreement solely because of changes in the market price of either party’s respective common stock.

Volatility in the global economy has, and may continue to have, a severe and negative impact on the demand for new vehicles and, in turn, our products.

The demand for and pricing of our products are subject to economic conditions and other factors present in the geographic markets where our products are sold that are beyond our control, such as a worsening of global economic and political conditions as a result of rising interest rates or inflation, high unemployment, increased energy and fuel prices, increased volatility in global capital markets, terrorism and international conflicts, climate change, severe weather, regulatory changes, and many other factors. Demand for our products correlates to consumer demand for new vehicles containing our products. Adverse changes in global economic and political conditions, or sluggish or uneven recovery in specific countries or regions, may result in lower consumer confidence, which has a significant impact on consumer demand for vehicles. An economic downturn or other adverse industry conditions that result in even a relatively modest decline in vehicle production levels could reduce our sales and thereby adversely affect our business, financial condition, and results of operations.

A decline in vehicle production levels, particularly with respect to Platforms for which we are a significant supplier, or the financial distress of any of our major customers, could have a material adverse effect on our business.

Demand for our products is directly related to the vehicle production levels of our OEM end-customers. New vehicle sales and production can be affected by general economic or industry conditions, the level of consumer demand, recalls and other safety issues, labor relations issues, fuel prices, fuel efficiency, and vehicle safety regulations and other regulatory requirements, government initiatives, trade agreements, the availability and cost of credit, the availability to our customers and suppliers of critical components needed to complete the production of vehicles, restructuring actions of OEMs, our customers or suppliers, and many other factors. Financial difficulties experienced by any major customer could have a material adverse effect on us if such customer were unable to pay for the products we provide or we experienced a loss of, or material reduction in, business from that customer.

Cyclicality and seasonality in the light, industrial, and commercial vehicle markets could have a material adverse effect on our business.

The light, industrial, and commercial vehicle markets in which we operate are cyclical and seasonal. Some of our largest OEM customers typically shut down vehicle production during certain months or weeks of the year. For example, our OEM customers in North America and Europe typically shut down operations during portions of July and August and one week in December. During these manufacturing shutdown periods, our customers will generally reduce the number of production days because of lower demands and to reduce excess vehicle inventory. In addition, the sale of light, industrial, and commercial vehicles are cyclical and depend on general economic conditions and credit availability. Such cyclicality and seasonality could have a material adverse effect on our business, financial condition, and results of operations.

The automotive supply industry is highly competitive. We compete worldwide with other automotive suppliers on the basis of price, technological innovation, quality, delivery, Program launch support, and overall customer service, among other factors. Our ability to compete successfully depends, in large part, on our success in continuing to innovate and manufacture products utilized in Programs or Platforms that have commercial success with consumers, differentiate our products from those of our competitors, continue to deliver quality products in the time frames required by our customers, and maintain low-cost production. We continue to invest in technology and innovation which we believe will be critical to our long-term growth. Our ability to anticipate changes in technology and to successfully develop and introduce new and enhanced products and/or manufacturing processes on a timely basis will be a significant factor in our ability to remain competitive. If we are unsuccessful or are less successful than our competitors in consistently developing innovative products, processes, and/or use of materials, we may be placed at a competitive disadvantage. The inability to compete successfully could have a material adverse effect on our business, financial condition, and results of operations.

We are dependent on large-volume customers for current and future sales. The loss of any of these customers or a reduction in sales to these customers could have a material adverse impact on our business.

We depend on major vehicle OEMs for our sales. Our financial results are closely correlated to production by Ford, GM, FCA, Daimler, Toyota, and Honda, given our higher sales to these customers. For the year ended December 31, 2016, end-customer sales attributed to these OEMs accounted for approximately 69% of our net sales. We may make fewer sales to these customers for a variety of reasons. The loss of any one of these customers or a significant decrease in business from one or more of these customers could harm our business, reduce our revenues and cash flows, and limit our ability to spread fixed costs over a larger sales base, which could have a material adverse effect on our business, financial condition, and results of operations.

A reduction in outsourcing by our customers, or the loss of a material number of Programs, combined with a failure to secure sufficient alternative Programs, could have a material adverse effect on our business.

We depend on the outsourcing of components, modules, and assemblies by vehicle OEMs. The extent of vehicle manufacturer outsourcing is influenced by a number of factors, including: relative cost, quality and timeliness of production by suppliers as compared to vehicle manufacturers, capacity utilization, vehicle manufacturers’ perceptions regarding the strategic importance of certain components/modules to them, labor relations among vehicle manufacturers, their employees and unions, and other considerations. A number of our major OEM customers manufacture products for their own uses that directly compete with our products. These OEMs could elect to manufacture such products for their own uses in place of the products we currently supply. A reduction in outsourcing by vehicle manufacturers, or the loss of a material number of Programs combined with the failure to secure alternative Programs with sufficient volumes and margins, could have a material adverse effect on our business, financial condition, and results of operations.

As is common practice in the automotive industry, the majority of our products are sold under long-term contracts with prices scheduled at the time the contracts are established, many of which require price reductions in subsequent years. The inability to offset the impact of such price reductions through continued technology improvements, cost reductions, or other productivity initiatives could have a material adverse effect on our business, financial condition, and results of operations.

We may not realize all of the sales expected from awarded business, and we may not fully recover pre-production costs, which could have a material adverse effect on our business.

The sales to be generated from awarded business are inherently subject to a number of risks and uncertainties, including the number of vehicles produced, the timing of vehicle production, and the mix of options our customers, and the ultimate consumers may choose. Anticipated product sales could differ significantly from actual firm orders or firm commitments, and awards of business do not represent guarantees of production volumes or revenues. While we typically enter into long-term agreements for the customers’ purchasing requirements, ranging from one to six years with automatic renewal provisions that generally result in our contracts running for the life of the Program, many customer purchase orders contain provisions that purport to permit our customers to unilaterally cancel our contracts with limited or no notice. Our ability to obtain compensation from our customers for such cancellation, if the cancellation is through no fault of our own, is generally limited to the direct costs we have incurred for raw materials and work-in-process and, in certain instances, unamortized investment costs. If we do not realize all of the sales expected from awarded business, it could have a material adverse effect on our business, financial condition, and results of operations.

Typically, it takes two to three years from the time an OEM or Tier I supplier awards us a Program until it is launched and we begin production. In many cases, we must commit substantial resources in preparation for production under awarded Programs well in advance of the customer’s production start date. We may not realize substantially all of the revenue from our incremental business backlog. If we are unable to recover pre-production costs, it could have a material adverse effect on our business, financial condition, and results of operations.

Our failure to increase production capacity, or overexpansion of production, could harm our business and damage our customer relationships.

We may be unable to expand our business, satisfy customer requirements, maintain our competitive position, or improve profitability if we are unable to increase production capacity at our facilities to meet any increased demand for our products. Moreover, we may experience delays in receiving necessary equipment and be unable to meet any increases in customer demand. Failure to satisfy customer demand may result in a loss of market share to competitors and may damage our relationships with key customers.

Due to the lead time required to produce the equipment used in our manufacturing processes, it can take months and even years to obtain new machines after they are ordered. Accordingly, we are required to order production equipment well in advance of supplying components. In addition, the equipment used in our manufacturing process requires large capital investments. If our manufacturing facilities are not expanded or completed on a timely basis or if anticipated customer orders do not materialize, we may not be able to generate sufficient sales to offset the costs of new production equipment. Furthermore, we rely on longer-term forecasts from our customers to plan our capital expenditures. If these forecasts prove to be inaccurate, either we may have spent too much on capacity growth, which could require us to consolidate facilities, or we may have spent too little on capital expenditures, in which case we may be unable to satisfy customer demand, either of which could have a material adverse effect on our business. Furthermore, our ability to establish and operate new manufacturing facilities and expand production capacity is subject to significant risks and uncertainties, including:

If we are unable to establish or successfully increase production capacity as a result of the risks described above or otherwise, we may not be able to expand our business to meet any increased demand for our products. Alternatively, if we increase production capacity at our existing facilities, we may not be able to generate sufficient customer demand for our products to support the increased production levels, any of which could have a material adverse effect on our business, financial condition, and results of operations.

We rely on key machinery and tooling to manufacture components for Powertrain and Safety-Critical systems that cannot be easily replicated.

We currently depend on key machinery and tooling used to manufacture components for Powertrain and Safety-Critical systems. Our machinery and tooling are complex, cannot be easily replicated, and have a long lead-time to manufacture. If there is a breakdown in such machinery and tooling that we or our service providers are unable to repair in a timely fashion, or equipment manufacturers fail to timely deliver new equipment, obtaining replacement machinery or rebuilding tooling could involve significant delays and costs, and may not be available to us on reasonable terms. If we or our service providers are unable to repair our equipment or tooling, in some cases, it could take several months, or longer, for a supplier to begin providing machinery and tooling to specification. Any disruption of machinery and tooling supplies could result in lost or deferred sales and customer charges which could have a material adverse effect on our business, financial condition, and results of operations.

If we experience Program launch difficulties, it could have a material adverse effect on our business.

The launch of a new Program is complex, and its success depends on a wide range of factors, including the production readiness of our and our suppliers’ manufacturing facilities and processes, tooling, equipment, employees, initial product quality, and other factors. Our failure to successfully launch new business or to contain launch costs could result in a loss of business or the incurrence of substantial unexpected costs, such as increased scrap or premium freight charges, which could have a material adverse effect on our business, financial condition, and results of operations.

A disruption in our supply or delivery chain could cause one or more of our customers to halt production.

In certain instances, we ship our products to customer vehicle assembly plants on a “just-in-time” basis in order for our customers to maintain low inventory levels. Our suppliers use a similar method in providing raw materials to us. However, the “just-in-time” method makes the logistics supply chain in our industry very vulnerable to disruptions. These disruptions may result for many reasons, including closures of supplier plants or critical manufacturing lines due to strikes, mechanical breakdowns, electrical outages, fire, explosions, as well as logistical complications resulting from labor disruptions, weather or other natural disasters, mechanical failures, and delayed customs processing. In addition, we may need to rely on suppliers in local markets that have not yet proven their ability to meet our requirements. The lack of even a small single subcomponent necessary to manufacture one of our products, for whatever reason, could force us to cease production, possibly for a prolonged period. Similarly, a potential quality issue could force us to halt deliveries while we contain nonconforming products or validate our process. Even where products are ready to be shipped, or have been shipped, delays may arise before they reach our customer. If we fail to timely deliver, we may have to absorb our own costs for identifying the cause and solving the problem, as well as expeditiously producing and shipping replacement products. Additionally, if we are unable to deliver our products to our customers in a timely manner, our customers may be forced to cease production and may seek to recover losses from us, which could be significant. Thus, any supply chain disruption could cause the complete shutdown of an assembly line of one of our customers, which could expose us to material claims for compensation and have a material adverse effect on our business, financial condition, and results of operations.

Our relationships with key third-party suppliers could be damaged or terminated.

We obtain raw materials and components from third-party suppliers. We typically source raw materials or components from single suppliers. Although we are generally able to substitute suppliers for raw materials and components without material short-term costs, in some cases it could be difficult and expensive for us to change suppliers. Various factors could result in the termination of our relationship with any supplier or the inability of suppliers to continue to meet our requirements on favorable terms. For example, volatility in the political or financial markets and uncertainty in the automotive sector could negatively impact the financial viability of certain key third-party suppliers. Severe financial difficulties at any of our suppliers could result in us being unable to obtain, on a timely basis and on similar economic terms, the quantity and quality of components and raw materials we require for the production of our products. In response to financial pressures, suppliers may also exit certain business lines or change the terms on which they are willing to provide raw materials and components to us. The loss of or damage to our relationships with these suppliers or any delay in receiving raw materials and components could impair our ability to deliver products to our customers, and accordingly, could have a material adverse effect on our business, financial condition, and results of operations.

Work stoppages or production limitations at one or more of our customers’ facilities could disrupt our production volumes.

A work stoppage or other limitation on production could occur at customer facilities for any number of reasons, including as a result of disputes under existing collective bargaining agreements with labor unions, or in connection with negotiation of new collective bargaining agreements, or as a result of supplier financial distress or other production constraints or difficulties, or due to disruptions in shipping, or for other factors. A disruption in production at the facilities of our large-volume customers could have a material adverse effect on our business, financial condition, and results of operations.

A catastrophic loss of one of our key manufacturing facilities could have a material adverse effect on our business.

While we manufacture our products in several facilities and maintain insurance covering our facilities, including business interruption insurance, a catastrophic loss of the use of all or a portion of one of our manufacturing facilities due to accident, labor issues, weather conditions, acts of war, political unrest, terrorist activity, natural disaster or otherwise, whether short- or long-term, could have a material adverse effect on our business, financial condition, and results of operations.

Failure to protect our intellectual property rights may undermine our competitive position and protecting our rights or defending against third-party allegations of infringement may be costly.

Protection of proprietary processes, know-how, trade secrets, documentation, and other technology is critical to our business. Failure to protect, monitor, and control the use of our existing know-how, trade secrets, and other intellectual property rights could cause us to lose our competitive advantage and incur significant expenses. We rely on trademarks, copyrights, patents, and contractual restrictions to protect our intellectual property rights, but these measures may be insufficient. While we enter into confidentiality and proprietary rights agreements and agreements for assignment of invention with our employees and third parties to protect our know-how, trade secrets, and intellectual property rights, such agreements and assignments could be breached and may not provide meaningful protection. Also, others may independently develop technologies or products that are similar to ours. In such case, our know-how and trade secrets would not prevent third parties from competing with us. Third parties may seek to oppose, cancel, or invalidate our intellectual property rights, which could have a material adverse effect on our business, financial condition, and results of operations. Our patents expire on various dates through 2031.

The costs associated with the protection of our know-how, trade secrets, intellectual property, and our proprietary rights and technology are ongoing. Third parties or employees may infringe or misappropriate our proprietary technologies or other intellectual property rights. Policing unauthorized use of intellectual property rights can be difficult and expensive, and adequate remedies may not be available. Failure to protect or enforce our intellectual property rights may undermine our competitive position, and protecting our rights or defending against third-party allegations of infringement may be costly, which could have a material adverse effect on our business, financial condition, and results of operations.

Any acquisitions or joint ventures we make could disrupt and materially harm our business.

We may grow through acquisitions of complementary businesses, products or technologies, or by entering into joint ventures. Acquisitions or strategic alliances involve numerous risks, including:

We cannot ensure that we will be able to successfully integrate acquisitions or incorporate joint ventures that we undertake or that such acquisitions or joint ventures will perform as planned or prove to be beneficial to our business and results of operations. The occurrence of any one or more of these or other factors could cause us not to realize the benefits anticipated to result from an acquisition or a joint venture, which could have a material adverse effect on our business, financial condition, and results of operations.

Our business is subject to volatility in pricing of raw materials used in our manufacturing processes, such as steel scrap, steel bar, pig iron, aluminum, copper, molybdenum, and other metallic materials. The costs of these products are subject to inflationary and market pricing pressures, and as such, have fluctuated over the past several years. Certain raw materials and other commodities used in our operations are generally only available from a few suppliers. Although agreements with our suppliers generally contain pass-through price adjustments, we may experience increasing costs or reduced scrap sales due to changing material prices and timing. Furthermore, our suppliers’ inability to handle raw material cost increases may lead to delivery delays, additional costs, production issues, or quality issues with our suppliers in the future and, accordingly, could have a material adverse effect on our business, financial condition, and results of operations.

Although we also maintain pass-through arrangements with most of our customers, we may not always be able to effectively offset all of our increased raw material costs. Our ability to pass through increased raw material costs to our customers may be limited, and the recovery may be less than our cost or on a delayed basis, which impacts our operating income. These pricing pressures put significant operational and financial burdens on us and our suppliers. Our suppliers’ inability to absorb raw material cost increases may lead to delivery delays, additional costs, production issues, or quality issues with suppliers in the future. To the extent we are unable to offset raw material and commodity price increases and fluctuations by passing price increases to our customers, such price fluctuations or delays could have a material adverse effect on our business, financial condition, and results of operations.

We could be materially adversely affected by any failure to maintain a competitive cost structure.

We believe that our strong operating margins and cash flow generation are the result of our strong customer relationships, innovative metal forming process technologies, broad product portfolio, and disciplined capital investment approach. There are many factors that could affect our ability to manage our cost structure that we are not able to control, including the need for unexpected significant capital expenditures and unexpected changes in commodity or component pricing that we are unable to pass on to our customers. As a result, we may be unable to manage our operations to profitably meet current and expected market demand. Additionally, we have substantial indebtedness of approximately $1,846.1 million as of December 31, 2016. Our inability to maintain our cost structure could adversely impact our operating margins and our results of operations.

We may, from time to time, close high cost or less efficient manufacturing facilities. If we must close any of our facilities because of the consolidation of facilities, loss of business, or cancellation of Programs for which we manufacture products, the employee severance, asset retirement, and other costs to close these facilities may be significant. In certain locations where our facilities are subject to leases, we may continue to incur significant costs in accordance with the existing lease terms. We may be unsuccessful in renegotiating these leases or we may need to make large settlements or take other actions to terminate our leases. We attempt to align production capacity with demand; however, we cannot provide any assurance that we will not close manufacturing facilities in the future, which could result in adverse publicity and have a material adverse effect on our business, financial condition, and results of operations.

During 2016, the Company announced the exit of its wheel bearing business in Sandusky, Ohio and the planned closure of the Sandusky facility by early 2017. The lease term of the Sandusky facility continues to 2033 at approximately $4 million per year in lease payments. We may be unsuccessful in renegotiating the Sandusky facility lease or we may need to make settlements or take other actions to terminate this lease and related obligations.

We are subject to environmental and safety requirements and risks as a result of which we may incur significant costs, liabilities, and obligations.

We are subject to a variety of environmental and safety laws, regulations, initiatives, and permits that govern, among other things: activities or operations that may have an adverse environmental effect; soil, surface water, and groundwater contamination; the generation, storage, handling, use, disposal, and transportation of hazardous materials and waste; the emission and discharge of materials, including greenhouse gases into the environment; and health and safety. Failure to comply with these laws, regulations or permits could result in fines or sanctions, obligations to investigate or remediate existing or potential contamination, third-party property damage claims, personal injury claims, or modification or revocation of operating permits and may lead to temporary or permanent business interruptions. Environmental laws, regulations, and permits and the enforcement thereof change frequently and have tended to become increasingly stringent over time, which may necessitate substantial capital expenditures or operating costs or may require changes of production processes. Compliance with the requirements of laws and regulations affect ongoing operations and may increase capital costs and operating expenses, particularly if the applicable laws and regulations become increasingly stringent or more stringently enforced in the future. In addition, we may be required to use different materials in our production due to changing environmental restrictions or due to customer specifications. Material substitution may cause us to incur additional capital and operating costs.

We endeavor to conduct our operations according to all legal requirements, but we may not be in complete compliance with such laws and regulations at all times. We use, and in the past have used, hazardous materials and we generate, and in the past have generated, hazardous wastes. In addition, many of the locations that we own or operate used hazardous materials either before or after we began operating at those locations. We may be subject to claims under foreign, federal, state, and local statutes, and/or common law doctrines for personal injury, property damages, natural resource damages, and other damages, as well as the investigation and cleanup of soil, surface water, groundwater, and other media. Such claims may arise out of current or former activities at sites that we own or operate currently, as well as at sites that we owned or operated in the past, and at contaminated sites that have always been owned or operated by third parties. Our liability for such claims may be joint and several, so that we may be held responsible for more than our share of the remediation costs or other damages, or even for the entire cost without being entitled to claim compensation from third parties. We have from time to time been subject to claims arising out of contamination at our own and other facilities and may incur such liabilities in the future. Our costs, liabilities, and obligations relating to environmental matters may have a material adverse effect on our business, financial condition, and results of operations.

We are subject to governmental regulations that are already extensive and are growing, which will increase our costs.

We and the automotive industry as a whole are subject to a variety of federal, state, local, and foreign laws and regulations, including those relating to the reporting of certain claims, and those affecting taxes and levies, healthcare costs, and safety, international trade, and immigration, among other things, all of which may have a direct or indirect effect on our business. In addition, compliance with complex U.S. and foreign laws and regulations that apply to our international operations increases our cost of doing business and in some cases restricts our ability to conduct business. These regulations are numerous and sometimes conflicting, and include import and export laws, sanctioned country restrictions, competition (or antitrust) laws, anti-corruption laws such as the U.S. Foreign Corrupt Practices Act (the “FCPA”) and the U.K. Bribery Act, data privacy requirements, tax laws, and accounting requirements. Violations of these laws and regulations could result in civil and criminal fines, penalties, and sanctions against us, our officers, or our current or former employees, as well as prohibitions on the conduct of our business and on our ability to offer our products in one or more countries, and could have a material adverse effect on our business, financial condition, and results of operations.

Foreign, federal, state, and local regulatory and legislative bodies have proposed various legislative and regulatory measures relating to climate change, regulating greenhouse gas emissions and energy policies. Due to the uncertainty in the regulatory and legislative processes, as well as the scope of such requirements and initiatives, we cannot currently determine the effect such legislation and regulation may have on our operations or on the production of, or demand for, vehicles. Additionally, our OEM customers are subject to significant environmentally focused state, federal, and foreign laws and regulations that regulate vehicle emissions, fuel economy, and other matters related to the environmental impact of vehicles. To the extent that such laws and regulations ultimately impact automotive vehicle production, they could have a material adverse effect on our business, financial condition, and results of operations.

From time to time we are involved in legal proceedings, claims, or investigations that are incidental to the conduct of our business. Some of these claims allege damages against us relating to product warranties, environmental liabilities, regulatory violations, taxes, employment matters, or commercial or contractual disputes. Estimated warranty costs related to product warranties are accrued once the liability has become both probable and reasonably estimable, and we do not maintain insurance for nonconforming product recalls in the United States. We may incur substantial warranty expense related to existing or new products now or in the future or expansion in customer warranty programs. We cannot ensure that the costs, charges, and liabilities associated with legal proceedings, claims, or investigations will not be material or that those costs, charges, and liabilities will not exceed any related amounts accrued in our financial statements or be mitigated in any way by insurance. In future periods, we could be subject to cash costs or non-cash charges to earnings if any of these matters are resolved unfavorably to us.

We are currently, and may in the future become, subject to legal proceedings and commercial or contractual disputes. These claims typically arise in the normal course of business and may include commercial or contractual disputes with our customers and suppliers, intellectual property matters, personal injury, product liability, environmental, safety, and employment claims. These proceedings and claims could have a material adverse effect on our business, financial condition, and results of operations.

Our ability to operate effectively could be impaired if we are unable to recruit and retain key personnel.

Our success depends, in part, on the efforts of our executive officers and other key senior managers and employees and our ability to recruit, retain, and motivate highly-skilled sales, manufacturing, and engineering personnel. Competition for skilled employees in our industry is intense, and we may not be able to successfully recruit, train, or retain qualified personnel. If we fail to recruit and retain the necessary personnel, our ability to obtain new customers and retain existing customers, develop new products, and provide acceptable levels of customer service could suffer, which could have a material adverse effect on our business, financial condition, and results of operations.

We have entered into employment agreements with certain of our key personnel. However, we cannot ensure that these individuals will stay with us. If any of these persons were to leave our company, it could be difficult to replace them, and our operations, ability to manage day-to-day aspects of our business, and efforts to improve our cost competitiveness may be impaired, which could have a material adverse effect on our business, financial condition, and results of operations.

Any failure to maintain satisfactory labor relations could subject us to work stoppages.

Approximately 45% of our employees are members of U.S. industrial trade unions working under the terms of collective bargaining agreements or employed under international workers’ councils. There can be no assurance that future negotiations with our labor unions will be resolved favorably or that we will not experience a work stoppage or other labor disruptions. Certain terms contained in existing collective bargaining agreements may reduce our flexibility, or result in increased labor costs, to close or repurpose our manufacturing facilities. In addition, there can be no assurance that future negotiations will not result in labor cost increases or other terms and conditions. Any of these occurrences could have a material adverse effect on our business, financial condition, and results of operations.

Although most of our legacy pension and other postretirement benefit obligations were eliminated through our prior restructuring processes, we have limited pension and other postretirement benefit obligations to certain of our associates and retirees. Our ability to satisfy the funding requirements associated with our pension and other postretirement benefit obligations to our employees and retirees will depend on our cash flow from operations and our ability to access credit and the capital markets. The funding requirements of these benefit plans and the related expense reflected in our financial statements are affected by several factors that are subject to an inherent degree of uncertainty and volatility, including government regulation. For example, the pensions regulator in the United Kingdom has power in certain circumstances to issue contribution notices (“CNs”) or financial support directions (“FSDs”) with respect to the underfunded United Kingdom defined benefit pension scheme (the “U.K. DB Plan”) which, if issued, could result in additional liabilities. Liabilities imposed under a CN or a FSD may equal the difference between the value of the assets of the U.K. DB Plan and the cost of buying out the benefits of participants of the U.K. DB Plan. In practice, the risk of a CN being imposed may inhibit our freedom to undertake certain corporate activities without first seeking the agreement of the trustees of the U.K. DB Plan. Additional security may need to be provided to the trustees of the U.K. DB Plan before certain corporate activities can be undertaken (such as the payment of an unusual dividend) and any additional funding of the U.K. DB Plan may have an adverse effect on our financial condition and the results of our operations. We also have unfunded or underfunded pension obligations in the U.S., Germany, France, Korea and Spain where similar changes in regulations or governmental actions could cause additional funding requirements.

Key assumptions used to value our benefit obligations and the cost of providing such benefits, funding requirements and expense recognition include the discount rate, the expected long-term rate of return on pension assets, the health care cost trend rate and assumptions underlying actuarial methods. If the actual trends in these factors are less favorable than our assumptions, we may have to contribute cash to fund our obligations under these plans, thereby reducing the funds available to fund our operations, which could have a material adverse effect on our business, financial condition, and results of operations. As of December 31, 2016, the funded status of our pension plans was an obligation totaling $38.3 million.

For the year ended December 31, 2016, 36% of our net sales were derived from sales to customers outside the United States. We have manufacturing facilities in Brazil, China, the Czech Republic, France, Germany, Mexico, South Korea, Spain, and the United Kingdom, and a joint venture in India, all of which accounted for 25% of our net sales for the same period. We also sell our products to customers in countries in which we do not have manufacturing facilities, such as Canada, Austria, Sweden, Hungary, and Italy. Our global operations are subject to various risks, including:

As we continue to expand our business globally, our success will depend in large part on our ability to anticipate and effectively manage these and other risks associated with our global operations. However, any of these factors could adversely affect our global operations and, consequently, have a material adverse effect on our business, financial condition, and results of operations.

Expanding our global operations and entering new geographic markets pose competitive threats and commercial risks.

As part of our long-term growth strategy, we seek to further expand our operations globally and enter into new geographic markets. Such growth requires investments and resources that may not be available to us as needed. We cannot guarantee that we will be successful in our global expansion and, if we sign new contracts, we cannot guarantee that we will meet the needs of these customers and compete favorably in these markets. If these customers experience reduced demand for their products or financial difficulties, our future prospects will be negatively affected as well, and we may not be able to recover the costs associated with such efforts, which could have a material adverse effect on our business, financial condition, and results of operations.

Foreign exchange rate fluctuations may affect the Company’s ability to realize projected growth rates in sales and earnings.

As a result of our global operations, we generate a significant portion of our net sales and incur a significant portion of our expenses in currencies other than the U.S. dollar. To the extent that we have significantly more costs than sales generated in a currency other than the U.S. dollar, we are subject to risk if the currency in which our costs are paid appreciates against the currency in which we generate sales because the appreciation effectively increases our cost in that country. We may selectively employ derivative instruments to reduce our foreign currency exchange risk and generally hold most of our foreign cash in U.S. dollars. This strategy and these instruments may be ineffective or may not offset more than a portion of the adverse financial impact resulting from foreign currency variations. Additionally, the financial condition, results of operations, and cash flows of some of our operating entities are reported in currencies other than the U.S. dollar and then translated into U.S. dollars at the applicable exchange rate for inclusion in our financial statements. As a result, appreciation of the U.S. dollar against these other currencies generally will have a negative impact on our reported sales and profits while depreciation of the U.S. dollar against these other currencies will generally have a positive effect on reported sales and profits. Our primary currency exposures are the Euro, Mexican Peso, Korean Won, and Chinese Renminbi. Any significant decline in the value of these currencies as compared to the U.S. dollar may have a material adverse effect on our business, financial condition, and results of operations.

Future sales of our common stock or securities convertible into or exchangeable for common stock could depress the market price of our common stock.

Sales of substantial amounts of our common stock in the public market, or the perception that such sales could occur, could adversely affect the market price of our common stock. Shares held by our directors, executive officers, and American Securities are eligible to be sold in the public market, subject to general trading restrictions and the requirements of Rule 144. These sales, or the perception in the market that the holders of a large number of shares intend to or could sell shares, could reduce the market price of our common stock. Any decline in the price of shares of our common stock could impede our ability to raise capital through the issuance of additional shares of our common stock or other equity securities.

We have elected to take advantage of the “controlled company” exemption to the corporate governance rules for publicly-listed companies, which could make our common stock less attractive to some investors or otherwise harm our stock price.

Because we qualify as a “controlled company” under the corporate governance rules for publicly-listed companies, the majority of our directors are not independent, and our compensation committee and nominating and corporate governance committee are not comprised entirely of independent directors. Accordingly, should the interests of American Securities, as our controlling stockholder, differ from those of other stockholders, the other stockholders may not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance rules for publicly-listed companies. Our status as a controlled company could make our common stock less attractive to some investors or otherwise harm our stock price.

American Securities independently has substantial control over us and will be able to influence corporate matters with respect to us. American Securities may have interests that differ from our interests and from those of our other stockholders.

As of December 31, 2016, American Securities directly or indirectly held approximately 76% of the voting power of our outstanding common stock. As a result, American Securities is able to strongly influence the election of our directors and potentially control the outcome of any corporate transaction or other matter submitted to our stockholders for approval, including potential mergers or acquisitions, asset sales, and other significant corporate transactions.

The interests of American Securities may not coincide with the Company’s or the best interests of other holders of our common stock. This concentration of voting power could also have the effect of delaying, deterring, or preventing a change of control or other business combination that might otherwise be beneficial to other holders of our common stock.

Our substantial indebtedness could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry, expose us to interest rate risk to the extent of our variable rate debt and prevent us from meeting our debt obligations.

As of December 31, 2016, we had total indebtedness, net of unamortized discount and debt issuance costs, of $1,846.1 million, including $1,011.5 million and $233.3 million in aggregate principal amount of indebtedness under the USD Term Loan and Euro Term Loan, respectively, and $600.0 million aggregate principal amount of the Senior Notes. As of December 31, 2016, we had an additional $236.8 million of borrowing capacity available under the Revolving Credit Facility after giving effect to $13.2 million of outstanding letters of credit. This high level of indebtedness could have significant negative consequences, including:

The occurrence of any one or more of these events could have a material adverse effect on our business, financial condition, and results of operations. If we add new debt to our outstanding debt levels, the risks related to our indebtedness would increase.

We, our customers, or our suppliers may be unable to obtain and maintain sufficient debt financing, including working capital lines.

Interest rate fluctuations, financial market volatility, and global credit market disruptions have made and may continue to make it difficult for companies to raise and maintain necessary operating liquidity. While we believe we have sufficient liquidity to operate, there can be no assurance that we will continue to have such ability. Our working capital requirements can vary significantly depending, in part, on the level, variability, and timing of the worldwide vehicle production of our OEM customers and the payment terms with our customers and suppliers. Our liquidity could be adversely impacted if circumstances arose causing our suppliers to suspend trade credit terms and require payment in advance or payment upon delivery. In addition, we may be required to raise capital from other sources, which may not be available to us on satisfactory terms and in adequate amounts, if at all.

Many of our customers and suppliers require significant financing to operate their businesses. Longer-term disruptions in the credit markets could further adversely affect our customers by making it increasingly difficult for them to obtain financing for their businesses and for their customers to obtain financing for vehicle purchases. If capital is not available to our customers and suppliers, or if its cost is prohibitively high, their businesses would be negatively impacted, which could result in their restructuring or even reorganization or liquidation under applicable bankruptcy laws. As a result, the need of our customers for and their ability to purchase our products may decrease, and our suppliers may increase their prices, reduce their output or change their terms of sale. Any inability of our customers to pay us for our products and services, or any demands by suppliers for different payment terms, could have a material adverse effect on our business, financial condition, and results of operations. Furthermore, our suppliers may not be successful in generating sufficient sales or securing alternate financing arrangements and therefore, may no longer be able to supply goods and services to us. In that event, we would need to find alternate sources of these goods and services, and there is no assurance that we would be able to find such alternate sources on favorable terms, if at all. Any such disruption in our supply chain could adversely affect our ability to manufacture and deliver our products on a timely basis, which in turn could have a material adverse effect on our business, financial condition, and results of operations.

We cannot assure you that we will pay dividends on our common stock, and our indebtedness could limit our ability to pay dividends on our common stock.

Our ability to pay cash dividends on our common stock is subject to our compliance with applicable law and depends on, among other things, our results of operations, financial condition, level of indebtedness, capital requirements, contractual restrictions, restrictions in our debt agreements, business prospects, and other factors that our Board of Directors may deem relevant. Our ability to pay dividends depends on our receipt of cash dividends from our operating subsidiaries, which may further restrict our ability to pay dividends as a result of the laws of their jurisdiction of organization or agreements of our subsidiaries, including agreements governing the Senior Credit Facilities and the Registered Notes. Future agreements may also limit our ability to pay dividends. There can be no assurance that we will continue to pay dividends.

Some provisions of Delaware law and our amended and restated certificate of incorporation and amended and restated bylaws may deter third parties from acquiring us and diminish the value of our common stock.

Our amended and restated certificate of incorporation and amended and restated bylaws provide for, among other things:

These provisions in our amended and restated certificate of incorporation and amended and restated bylaws may discourage, delay, or prevent a transaction involving a change in control of our Company that is in the best interest of our minority stockholders. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stock if they are viewed as discouraging future takeover attempts. These provisions could also make it more difficult for stockholders to nominate directors for election to our board of directors and take other corporate actions.

Our amended and restated certificate of incorporation provides that, subject to certain exceptions, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for certain stockholder litigation matters, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.

Our amended and restated certificate of incorporation provides that, subject to limited exceptions, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by, or any wrongdoing by, any of our directors, officers, or other employees to us or our stockholders, (iii) any action asserting a claim against us arising pursuant to any provision of the Delaware General Corporation Law, our certificate of incorporation (including as it may be amended from time to time) or our bylaws, (iv) any action to interpret, apply, enforce, or determine the validity of our certificate of incorporation or our bylaws, or (v) any other action asserting a claim against us that is governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and to have consented to the provisions of our amended and restated certificate of incorporation described above. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage lawsuits with respect to such claims. Alternatively, if a court were to find these provisions of our amended and restated certificate of incorporation inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could have a material adverse effect on our business, financial condition and results of operations.

We are exposed to a number of different tax uncertainties, which could have a material adverse effect on our results of operations.

We are required to pay taxes in multiple jurisdictions. We determine the tax liability we are required to pay based on our interpretation of applicable tax laws and regulations in the jurisdictions in which we file. Corporate tax reform continues to be a priority in the U.S. and other jurisdictions. We may be subject to unfavorable changes, including retroactive changes, in the tax laws and regulations to which we are subject. We are subject to tax audits by governmental authorities in the United States and numerous non-U.S. jurisdictions, which are inherently uncertain. Changes in tax laws or regulations or the interpretation given to them may expose us to negative tax consequences, including interest payments and potential penalties, which could have a material adverse effect on our business, financial condition, and results of operations.

The mix of profits and losses in the various jurisdictions in which we conduct our business may adversely impact our overall tax rate.

Our overall effective tax rate is equal to our total tax expense as a percentage of our income or loss before tax. However, tax expenses and benefits are determined separately for each of our taxpaying entities or groups of entities that are combined for tax purposes in each jurisdiction. Losses in such jurisdictions may provide no current financial statement tax benefit. As a result, changes in the mix of projected profits and losses among jurisdictions could have a significant impact on our overall effective tax rate, which could have a material adverse effect on our business, financial condition, and results of operations.

We are headquartered in Southfield, Michigan in 25,000 square feet of leased offices. These offices are utilized for management offices as well as certain sales, human resources, legal, finance, and audit functions. Our manufacturing is conducted in 55 production facilities strategically located close to our customers’ operations in 11 countries throughout North and South America, Europe, and Asia. Our 61 worldwide locations also support sales, engineering, administrative, and distribution functions. Approximately 39 of our facilities are leased or subject to land leases. We believe that our facilities are suitable and adequate to meet our current and reasonably anticipated needs.

Region	Segment	Location	Primary Process Description
North America	Corporate	Southfield, MI	Headquarters / Administrative / Sales / Finance
	Grede	Bessemer, AL	Foam Pattern Molding
	Grede	Brewton, AL	Iron Casting
	Grede	Columbiana, AL	Iron Casting
	Grede	New Castle, IN	Iron Casting
	Grede	Kingsford, MI	Iron Casting
	Grede	St. Cloud, MN	Iron Casting
	Grede	Biscoe, NC	Iron Casting & Machining
	Grede	Browntown, WI	Iron Casting
	Grede	Menomonee Falls, WI	Machining
	Grede	Reedsburg, WI	Iron Casting
	Grede	Wauwatosa, WI	Iron Casting
	Grede	El Carmen, Mexico	Iron Casting
	HHI	Fort Smith, AR	Assembly & Distribution
	HHI	Fort Smith, AR	Assembly & Distribution
	HHI	Paris, AR	Machining & Assembly
	HHI	Subiaco, AR	Powder Metal & Machining
	HHI	Bolingbrook, IL	Machining & Assembly
	HHI	Chicago, IL	Forging
	HHI	Chicago, IL	Forging
	HHI	Naperville, IL	Assembly
	HHI	Columbus, IN	Forging
	HHI	Columbus, IN	Forging
	HHI	Remington, IN	Forging
	HHI	Coldwater, MI	Forging
	HHI	Fraser, MI	Forging & Machining
	HHI	Royal Oak, MI	Forging / Administrative / Finance
	HHI	Troy, MI	Forging
	HHI	Sandusky, OH	Machining & Assembly
	HHI	Aguascalientes, Mexico	Warehouse
	Metaldyne	Bluffton, IN	Machining & Assembly
	Metaldyne	Fremont, IN	Machining & Assembly
	Metaldyne	North Vernon, IN	Powder Metal & Machining
	Metaldyne	Litchfield, MI	Machining & Assembly
	Metaldyne	Plymouth, MI	Administrative / Sales / Finance / Engineering
	Metaldyne	Warren, MI	Tooling
	Metaldyne	Twinsburg, OH	Aluminum Die Casting
	Metaldyne	Ridgway, PA	Powder Metal & Machining
	Metaldyne	St. Marys, PA	Powder Metal & Machining
	Metaldyne	Ramos Arizpe, Mexico	Powder Metal & Machining
	Metaldyne	Ramos Arizpe, Mexico	Machining & Assembly

South America	Metaldyne	Indaiatuba, Brazil	Powder Metal & Machining

Europe	Metaldyne	Oslavany, Czech Republic	Machining & Assembly
	Metaldyne	Zbysov, Czech Republic	Machining & Assembly
	Metaldyne	Halifax, England	Machining & Assembly
	Metaldyne	Decines, France (Lyon #2)	Machining & Assembly
	Metaldyne	Lyon, France	Machining & Assembly
	Metaldyne	Dieburg, Germany	Sales / Engineering
	Metaldyne	Nurnberg, Germany	Machining & Assembly
	Metaldyne	Zell, Germany	Forging & Machining
	Metaldyne	Kopstal, Luxembourg	Administrative / Finance

The Company’s subsidiary, Grede Wisconsin Subsidiaries LLC (“Grede Wisconsin”), is currently under investigation by the U.S. Department of Justice and the Environmental Protection Agency for alleged Clean Air Act violations and alleged obstruction of justice relating to the January 2012 removal of debris from the roof of a heat treat oven that was purported to contain asbestos at Grede Wisconsin’s now closed facility in Berlin, Wisconsin. The United States Attorney, Eastern District of Wisconsin, indicated to our attorneys handling this matter that the government intends to imminently seek an indictment relating to this matter. If an indictment is brought, the Company intends to defend against this matter.

On February 16, 2017, a purported class action complaint was filed in the United States District Court for the Eastern District of Michigan, captioned Stephen Bushansky v. Metaldyne Performance Group Inc., et al., Case No. 2:17-cv-10508-MAG-DRG. The complaint asserts claims for alleged violations of Sections 14(a) and 20(a) of the Exchange Act and Rule 14a-9 promulgated thereunder, and names the Company and the members of the Company’s board of directors as defendants. The complaint alleges, among other things, that the defendants issued materially incomplete and misleading disclosures in the preliminary registration statement on Form S-4 relating to the AAM Merger. The complaint seeks, among other things, injunctive relief and an award of attorneys’ fees. The Company and the members of the Company’s board of directors believe that the claims asserted in this lawsuit are without merit.

In addition, from time to time we are subject to various legal actions and claims incidental to our business, including those arising out of breach of contracts, product warranties, regulatory matters, and employment-related matters. It is our opinion that the outcome of such matters will not have a material adverse impact on our consolidated financial position, results of operations, or cash flows. However, the final amounts required to resolve these matters could differ materially from our recorded estimates. See Note 20 of the notes to the consolidated financial statements contained within “Item 8. Financial Statements and Supplementary Data.”

The Company’s common stock is listed on the NYSE and trades under the symbol MPG. As of March 2, 2017, there were 22 holders of record of our common stock.

For the period from December 12, 2014 (the date the Company’s common stock began trading on the NYSE) to December 31, 2014, the high and low prices per share of our common stock were $17.59 and $14.57, respectively. The high and low sale prices per share of the Company’s common stock for each quarter of fiscal years 2016 and 2015 were as follows:

The following sets forth all dividends declared and paid by us since our formation on June 9, 2014:

On February 24, 2017, our board of directors declared a dividend of $0.0925 per share, payable March 24, 2017 to stockholders of record as of March 10, 2017.

Our ability to pay dividends is restricted under our indenture agreements. The indenture agreements restrict the payment of dividends except (i) to pay reasonable estimated amount of taxes as long as not prohibited by applicable laws, (ii) to pay legal, accounting, and reporting expenses, (iii) to pay general and administrative costs and expenses, and reasonable directors fees, and expenses, (iv) to repurchase stock owned by employees, (v) for management or similar fees, (vi) to pay franchise or similar taxes to maintain corporate existence, and (vii) to pay dividends up to $30.0 million or 6% of the net cash proceeds from an underwritten public offering of our common stock. For additional information regarding the indenture agreements, see Note 11 of the notes to the consolidated financial statements contained within “Item 8. Financial Statements and Supplementary Data.”

On February 24, 2016, our board of directors authorized a share repurchase program (the “Share Repurchase Program”). The Share Repurchase Program, as amended on August 3, 2016, authorized the Company to purchase shares of its common stock for an aggregate repurchase price not to exceed $35.0 million. Subject to applicable rules and regulations, shares could be repurchased through open market purchases, privately negotiated transactions, or otherwise. On November 3, 2016, the Company suspended the Share Repurchase Program due to the pending AAM Merger. During the fourth quarter ended December 31, 2016, and prior to suspending the Share Repurchase Program, the Company repurchased 238,457 shares of common stock at an average price per share of $15.67. As of December 31, 2016, cumulative shares repurchased totaled 1,898,261 at an average purchase price per share of $15.56. The repurchased shares are presented as common stock held in treasury, at cost, on the consolidated balance sheets.

The line graph below compares the cumulative total stockholder return on the S&P Mid Cap 400 Index, Metaldyne Performance Group Inc., and a peer group of companies for the period from December 12, 2014 (the date the Company’s common stock began trading on the NYSE) to December 31, 2016, assuming a fixed investment of $100 made at the respective closing prices on December 12, 2014 and the reinvestment of cash dividends.

Our historical results are not necessarily indicative of future operating results. You should read the information set forth below in conjunction with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and included “Item 8. Financial Statements and Supplemental Data.”

	Year Ended December 31,														Successor Period (a)			Predecessor Period (a)
	2016			2015				2014				2013			2012			2012
	(In millions, except per share data)
Statement of Operations Data:
Net sales	$	2,790.7			3,047.3				2,717.0				2,017.3			205.3			680.5
Cost of sales		2,321.5			2,531.3				2,294.1				1,708.7			199.5			559.0
Gross profit		469.2			516.0				422.9				308.6			5.8			121.5
Selling, general and administrative expenses		242.3			249.6		(c)		194.6				123.2			14.4			116.6
Acquisition costs		—			—				13.0				—			25.9			13.4
Goodwill impairment		—			—				11.8				—			—			—
Operating profit (loss)		226.9			266.4				203.5				185.4			(34.5	)		(8.5	)
Interest expense, net		103.5			107.5				99.9				74.7			11.1			25.8
Loss on debt extinguishment		—			0.4				60.7				—			—			—
Other, net		(11.9	)		(15.4	)			(11.3	)			17.8			1.5			2.4
Other expense. net		91.6			92.5				149.3				92.5			12.6			28.2
Income (loss) before tax		135.3			173.9				54.2				92.9			(47.1	)		(36.7	)
Income tax expense (benefit)		38.4			48.1				(19.1	)	(b)		35.0			(15.2	)		(11.1	)
Net income (loss)		96.9			125.8				73.3				57.9			(31.9	)		(25.6	)
Income attributable to noncontrolling interest		0.6			0.4				0.4				0.3			—			0.2
Net income (loss) attributable to stockholders	$	96.3			125.4				72.9				57.6			(31.9	)		(25.8	)
Net income (loss) per share attributable to stockholders:
Basic	$	1.43			1.86				1.09				0.86			(0.48	)		(1.46	)
Diluted		1.39			1.80				1.06				0.86			(0.48	)		(1.46	)
Basic weighted average shares outstanding		67.5			67.3				67.1				67.1			67.1			17.7
Diluted weighted average shares outstanding		69.3			69.7				68.5				67.1			67.1			17.7
Statement of Cash Flows Data:
Cash flows from operating activities	$	318.6			330.0				305.4				234.3			(1.8	)		64.7
Cash flows from investing activities		(208.2	)		(222.7	)			(984.9	)			(116.7	)		(1,515.0	)		(31.3	)
Cash flows from financing activities		(62.2	)		(86.2	)			776.7				(91.1	)		1,557.1			(27.3	)
Effect of exchange rates		(6.7	)		(9.4	)			(8.9	)			1.4			—			0.3
Net increase in cash and cash equivalents	$	41.5			11.7				88.3				27.9			40.3			6.4
Balance Sheet Data:
Cash and cash equivalents	$	209.7			168.2				156.5				68.2			40.3		Not applicable
Property and equipment, net		831.6			786.0				750.2				539.5			546.2		Not applicable
Total assets (d)		3,190.5			3,157.6				3,203.4				2,178.5			2,217.0		Not applicable
Long-term debt, including capital lease obligations (d)		1,845.1			1,864.1				1,939.0				1,221.4			1,042.5		Not applicable
Total debt (d)		1,846.1			1,864.8				1,940.6				1,241.7			1,049.8		Not applicable
Total liabilities (d)		2,511.3			2,518.6				2,678.5				1,853.3			1,696.5		Not applicable
Total stockholders’ equity		679.2			639.0				524.9				325.0			520.5		Not applicable

The following discussion and analysis of our historical combined financial statements covers periods before the Combination. Accordingly, the discussion and analysis of such periods does not reflect the significant impact the Combination will have on our results of operations. See “Item 1A. Risk Factors,” and “—Liquidity and Capital Resources.” In addition, the statements in the discussion and analysis regarding industry outlook, our expectations regarding the performance of our business, our liquidity and capital resources, and the other non-historical statements in the discussion and analysis are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including but not limited to the risks and uncertainties described in “Item 1A. Risk Factors” and “Forward-Looking Statements.” Our actual results may differ materially from those contained in or implied by the forward-looking statements. You should read the following discussion together with the sections entitled “Item 1A. Risk Factors,” and “Item 6. Selected Historical Financial Data” and the notes to the consolidated financial statements contained within “Item 8. Financial Statements and Supplementary Data.”

We are a leading provider of highly-engineered components for use in Powertrain and Safety-Critical Platforms for the global light, commercial, and industrial vehicle markets. We produce these components using complex metal-forming manufacturing technologies and processes for a global customer base of vehicle OEMs and Tier I suppliers. We are headquartered in Southfield, Michigan, and our manufacturing is conducted in 55 production facilities located throughout North and South America, Europe, and Asia.

Our business represents the reorganization of the businesses of HHI, Metaldyne, and Grede.

HHI manufactures highly-engineered components for the North American light vehicle market. These components include transmission components, driveline components, wheel hubs, axle ring and pinion gears, sprockets, balance shaft gears, timing drive systems, variable valve timing (“VVT”) components, transfer case components, and wheel bearings. HHI was formed in 2005, completed the strategic acquisitions of Impact Forge Group, LLC and Cloyes Gear and Products, Inc. and, following a §363 U.S. Bankruptcy Court supervised sale process, acquired certain assets and assumed specified liabilities from FormTech LLC, Jernberg Holdings, LLC, and Delphi Automotive PLC’s wheel bearing operations. HHI was acquired by American Securities and certain members of HHI management on October 5, 2012 (the “HHI Transaction”). The purchase price for the HHI Transaction, net of cash and cash equivalents acquired, was $722.2 million. The purchase price was funded by cash from capital contributions of $254.7 million and $505.0 million in term loan debt.

Metaldyne manufactures highly-engineered Powertrain components for the global light vehicle markets. These components include connecting rods, VVT components, balance shaft systems, engine crankshaft dampers, net formed differential gears and pinions and assemblies, differential assemblies, valve bodies, hollow and solid shafts, clutch modules, and assembled end covers. Metaldyne was formed in 2009 as a new entity to acquire certain assets and assume specified liabilities from Oldco M Corporation following a §363 U.S. Bankruptcy Court supervised sale process. Oldco M Corporation was previously formed in 2000 when MascoTech, Inc., a then-publicly traded company, was taken private and acquired Simpson Industries, Inc., another then-public company. Metaldyne was acquired by American Securities and certain members of Metaldyne management on December 18, 2012 (the “Metaldyne Transaction”). The purchase price for the Metaldyne Transaction, including contingent consideration, was $796.6 million net of cash and cash equivalents acquired. The Metaldyne Transaction was financed through a $620.0 million senior secured credit facility, which included a $75.0 million revolving credit facility (of which $6.0 million was outstanding at December 18, 2012), by cash from capital contributions of $295.0 million and $175.0 million of Metaldyne’s existing cash at December 18, 2012.

Grede manufactures highly-engineered components for the light, commercial, and industrial (agriculture, construction, mining, rail, wind energy and oil field) vehicle and equipment end-markets. These components include turbocharger housings, differential carriers and cases, scrolls and covers, brake calipers and housings, knuckles, control arms, and axle components. Grede was formed in 2010 through a combination of the assets of the former Grede Foundries, Inc. and Citation Corporation, following a §363 U.S. Bankruptcy Court supervised sale process. Subsequently, Grede acquired Foseco-Morval Inc., GTL Precision Patterns Inc., Paxton-Mitchell Corporation, Virginia Castings Industries LLC, Teknik S.A. de C.V., and Novocast S.A. de C.V., and established an alliance with Georg Fischer Automotive AG (Europe / China). Grede was acquired by American Securities and certain members of Grede management on June 2, 2014 (the “Grede Transaction”). The purchase price for the Grede Transaction was $829.7 million, net of cash and cash equivalents acquired. The purchase price was funded by $258.6 million in cash from capital contributions $600.0 million in borrowings under Grede’s term loan credit facility and $75.0 million in borrowings under Grede’s revolving credit facility (of which $1.0 million was outstanding at June 2, 2014).

HHI, Metaldyne, and Grede were reorganized on August 4, 2014 through the mergers of three separate wholly-owned merger subsidiaries of MPG. As a result, HHI, Metaldyne, and Grede became wholly owned subsidiaries of MPG. These transactions are referred to as the Combination. The Combination has been accounted for as a reorganization of entities under common control in a manner similar to a pooling of interests, that is, the bases of accounting of HHI, Metaldyne, and Grede were carried over to MPG. See Note 2 of the notes to the consolidated financial statements contained within “Item 8. Financial Statements and Supplementary Data.”

On October 20, 2014, MPG Holdco, our wholly owned subsidiary, entered into senior credit facilities in the aggregate amount of $1,600.0 million (the “Senior Credit Facilities”). The Senior Credit Facilities provide for (i) the seven-year $1,350.0 million Term Loan Facility and (ii) the five-year $250.0 million revolving credit facility (the “Revolving Credit Facility”). The Senior Credit Facilities rank guaranteed by MPG and substantially all of our existing and future domestic restricted subsidiaries and are secured by substantially all of our and the guarantors’ assets on a first lien basis, subject, in each case, to certain limitations. On May 8, 2015, the Term Loan Facility was refinanced pursuant to an amendment (the “First Amendment”) with a $1,072.6 million U.S. Dollar denominated term loan (the “USD Term Loan”) and a €225.0 million term loan (the “Euro Term Loan” and together, the “Refinanced Term Loan Facility”). The Refinanced Term Loan Facility has substantially the same terms as the Term Loan Facility, except that the Refinanced Term Loan Facility has reduced interest rate margins. On October 20, 2014, MPG Holdco also entered into an indenture pursuant to which it issued $600.0 million aggregate principal amount of its 7.375% senior notes due 2022 (the “Senior Notes”). The Senior Notes are pari passu in right of payment with the Senior Credit Facilities, but are effectively subordinated to the Senior Credit Facilities to the extent of the value of the assets securing such indebtedness. For further information on the Senior Credit Facilities, see “—Liquidity and Capital Resources.”

The net proceeds of the Senior Notes and the borrowings under the Senior Credit Facilities, together with cash on hand, were used to prepay all amounts outstanding under each of HHI, Metaldyne, and Grede’s existing senior secured credit facilities as described below:

Collectively, we refer to these refinancing transactions and the payment of fees and expenses related to the foregoing as the “Refinancing.”

On December 12, 2014 a portion of the Company’s common stock was offered for sale by affiliates of American Securities. As of December 31, 2016, American Securities owned 76% of our outstanding common stock. As a result, American Securities is able to exert significant voting influence over fundamental and significant corporate matters and transactions. “Item 1A. Risk Factors—Risks Related Our Capital Structure and Our Organizational Structure.”

As a result of the Grede Transaction and the Combination, our results of operations include:

We operate on a 13 week fiscal quarter which ends on the Sunday nearest to March 31, June 30, or September 30, as applicable. Our fiscal year ends on December 31.

As a result of a number of factors, our results of operations for 2016, 2015, and 2014 are not comparable. Also, our historical results of operations may not be comparable to our results of operations in future periods and our results of operations may vary from period to period. The following is a brief discussion of the key factors impacting the comparability of our results of operations.

As a result of each of the Grede Transaction and the Combination, our revenue and expenses have increased significantly and periods prior to the Grede Transaction or the Combination are not comparable to periods after each of them. The main aspects of the Grede Transaction and the Combination affecting comparability include:

As a result of several factors, including our assessment of plant performance, facilities and equipment operating condition, availability of labor, and related operating costs, we may close or consolidate production lines or entire plants. These changes can result in the transfer or reduction of business, impairment losses, costs to transfer operations to a new plant, and other expenses. In 2015, Grede closed its Berlin, Wisconsin facility, which resulted in a $4.0 million impairment charge within cost of sales for the year ended December 31, 2015. In 2016, the Company announced plans to close Grede’s Bessemer, Alabama facility and HHI’s Sandusky, Ohio facility. The closure of the Bessemer facility, which was primarily due to declines in heavy truck and industrial equipment markets, resulted in a $2.3 million asset impairment charge within cost of sales for the year ended December 31, 2016. There was no impairment charge associated with the planned closure of the Sandusky facility as its asset carrying values were substantially depreciated and recoverable from the facility’s remaining operation and wind-down activities.

As a result of our global operations, we generate a significant portion of our net sales and incur a substantial portion of our expenses in currencies other than the U.S. dollar. As a result, our net sales, cost of sales, operating expenses, and certain assets and liabilities fluctuate as the value of such currencies fluctuate in relation to the U.S. dollar. In addition, the results of operations of some of our operating entities are reported in currencies other than the U.S. dollar and then translated into U.S. dollars at the applicable exchange rate for inclusion in our financial statements. As a result, appreciation of the U.S. dollar against these other currencies generally will have a negative impact on our reported sales and profits while depreciation of the U.S. dollar against these other currencies will generally have a positive effect on reported sales and profits. Our primary currency exposure is to the Euro in addition to exposure to Mexican Peso, Korean Won and Chinese Renminbi. We have not entered into any significant foreign currency exchange contracts to mitigate this risk.

We maintain raw material price pass-through arrangements with our customers on substantially all of our products to reduce exposure to raw material price fluctuations. In instances where the risk is not covered contractually, we have generally been able to adjust customer prices to recover commodity cost increases. As a result, our net sales and cost of sales may increase or decrease based on fluctuations in prevailing commodity prices during the period.

Additionally, we sell scrap generated from our manufacturing processes; our cost of sales will increase or decrease based on fluctuations in scrap prices.

In 2014, we completed several debt refinancing transactions to fund the return of capital to our stockholders and to consolidate our debt after our Combination. These transactions increased our indebtedness, increased our interest expense and resulted in debt refinancing costs. In May 2015, we completed a debt refinancing transaction to reduce interest expense and to refinance a portion of our existing term loan with a Euro denominated term loan.

Our indebtedness contains variable interest rate provisions. As a result, our interest expense may vary from period to period due to variations in prevailing interest rates.

In conjunction with the Combination and the IPO and in subsequent periods, we issued and expect to issue long-term equity incentive awards in the form of restricted shares or stock options to our officers, key employees, and non-employees. The result is an increase in our selling, general, and administrative expenses in future periods as the grant-date value of the awards are recognized in expense over the vesting term of the awards. The following grants and modifications of stock-based compensation awards impact the year to year comparability of our results of operations:

We are organized in, operate and report our results of operations for three segments:

We allocate the corporate costs of MPG equally among the three segments due to their similar size and nature of the costs, unless the costs are directly associated with one or more segments.

We primarily serve the global light vehicle and the North American commercial and industrial vehicle and equipment end-markets with a focus on Powertrain and Safety-Critical applications. Our net sales are impacted by demand in these end-markets. Demand in these end-markets is driven by consumer preferences and regulatory requirements (particularly related to fuel economy and safety standards), and macro-economic factors.

Our net sales are driven by the strength of the global light vehicle industry, particularly in North America, as well as the North American commercial and industrial vehicle industry, each of which tends to be highly correlated to macro-economic conditions. The level of demand for our products depends primarily upon the level of consumer demand for new vehicles, as well as the demand for commercial and industrial vehicles, that are manufactured with our products. Variations in global macro-economic conditions, particularly in North America and Europe that result in changes in vehicle sales and production by our customers, have impacted and will continue to impact our net sales.

Demand for our component parts is a function of the number of vehicles produced and trends in content per vehicle for specific component categories. These variables are driven by consumer preferences and regulatory requirements, particularly related to fuel economy and safety standards. OEMs continue to source vehicle component parts that improve fuel economy and safety in order to meet increasingly strict regulatory requirements around the world. These trends have impacted and will continue to impact our net sales.

During 2008 and 2009 a significant amount of the automotive forging and casting capacity was removed from the North American market. In addition, the number of light vehicle Powertrain and Safety-Critical component suppliers declined significantly. Capacity has not rebounded to historical levels due to the magnitude of the investment and the length of time required in opening new facilities, acquiring equipment, and navigating environmental permitting processes. These trends have impacted and will continue to impact our net sales and gross profit.

In recent years, light vehicle OEMs have increasingly consolidated their vehicle engine and transmission Platforms with localized sourcing to improve supply chain efficiency, reduce unit cost, and increase profitability. As a result of our global manufacturing footprint, these trends have impacted and may continue to impact our net sales and gross profit.

Cost-cutting initiatives by vehicle OEMs, as well as ongoing value analysis/value engineering (“VA/VE”) activity, result in changes to the pricing of our products. Many of our long-term contracts with our customers require us to reduce our prices in subsequent years, and all of these contracts provide for pricing adjustments for engineering changes and other changes to specifications. We have historically mitigated the impact of pricing on our margins through working with our customers on VA/VE activities, which generally result in reduced prices in conjunction with reduced costs. We also focus on ongoing cost reductions and increases in manufacturing efficiencies throughout our operations. Our profitability in future periods depends, in part, on our ability to generate sufficient production cost savings as well as VA/VE projects and other efficiency improvements to offset any future price reductions.

We generate net sales primarily from the sale of Powertrain and Safety-Critical products for the global light, commercial and industrial vehicle markets. Our net sales reflect the impact of customer pricing allowances. Net sales are also impacted by volume, customer prices, product mix, material surcharges, and foreign currency fluctuations. These factors all have an impact on future sales as fluctuations in volume, pricing, foreign currency, and material prices directly impact our net sales.

Cost of sales consists of raw material costs, direct labor associated with the manufacture and assembly of our products, and the overhead expense related to our manufacturing operations. For the years ended December 31, 2016, 2015 and 2014, raw material costs, labor costs, and manufacturing overhead expenses were approximately 47%, 23%, and 30%; 49%, 22%, and 29%; and 51%, 20%, and 29%, respectively, of our total cost of sales.

Our direct material costs are comprised primarily of raw materials and sub-component parts used in the production or our components. We maintain raw material price pass-through arrangements with our customers on substantially all of our products whereby increases and decreases in the cost of our raw materials are adjusted in our selling prices either through a change in selling price or a surcharge mechanism. These costs have generally followed the related markets for the underlying commodities that we utilize, including special bar quality steel, scrap steel, powder metal, pig iron, and molten aluminum. The cost changes and the related changes in prices or surcharges are reflected in our cost of sales and our net sales.

Our direct labor costs are comprised of the wages of our workforce that is directly associated with the production of our products. Where we have union agreements (see “Item 1. Business—Employees”), wage increases follow the negotiated requirements of the related contract. Wages for non-union employees follow local market conditions for merit increases and employment. Benefit costs are subject to changes in healthcare cost trends, payroll and unemployment tax rates, and changes in benefit plan structure.

Our overhead costs are comprised of variable and fixed costs related to the operation of our manufacturing facilities. These costs include depreciation, rent expense, maintenance, perishable tooling, indirect labor costs, including benefits, and utilities. Costs related to overhead are impacted by inflation, changes in production volumes, and the requirements of products produced at each location.

Gross profit (net sales less cost of sales) and gross margin (gross profit as a percentage of net sales) are impacted by a number of factors including, product mix, percentage of net sales from raw material price fluctuations, foreign currency fluctuations, overhead cost fluctuations and depreciation and amortization cost fluctuations due to changes in capital expenditures and purchase accounting adjustments. Gross margins on our products vary based on their composition, the complexity of the production process, the length of time that the products have been in production, and other factors.

Selling, general, and administrative (“SG&A”) expenses consist of salaries and benefits for our sales, marketing, management, and administrative personnel, professional fees, expenses relating to certain IT systems, and amortization of certain of our intangibles. As a result of the IPO, we have incurred significant additional legal, accounting, and other expenses in connection with being a public company including compliance with the Sarbanes-Oxley Act. We have also incurred increased stock-based compensation expense with the establishment of our new equity incentive plan associated with the Combination and related grants of equity either in the form of restricted stock or options.

Goodwill impairment reflects an $11.8 million impairment charge recognized in the fourth quarter of 2014 to fully impair the goodwill assigned to a reportable unit with the HHI segment.

Interest expense, net consists primarily of interest on borrowings, and the amortization of costs incurred to obtain long-term financing, partially offset by interest income on short-term cash and cash equivalents.

Other, net primarily consists of foreign currency gains and losses, and debt transaction expenses.

Income tax expense (benefit) consists of federal, state, and local taxes based on income in multiple jurisdictions. Our income tax expense is impacted by the pre-tax earnings in jurisdictions with varying tax rates and any related foreign tax credits that may be available to us. Our current and future provision for income taxes will vary from statutory rates due to the impact of valuation allowances in certain countries, income tax incentives and holidays, certain non-deductible expenses, withholding taxes, and other discrete items.

We evaluate the performance of our business using a variety of operating and performance metrics. Set forth below is a description of our key operating metrics.

We define Adjusted EBITDA as net income (loss) before interest expense, provision for (benefit from) income taxes, and depreciation and amortization, with further adjustments to reflect the additions and eliminations of certain income statement items, including (i) gains and losses on foreign currency and fixed assets and debt transaction expenses, (ii) stock-based compensation and other non-cash charges, (iii) sponsor management fees and other income and expense items that we consider to be not indicative of our ongoing operations, (iv) specified non-recurring items, and (v) other adjustments.

We believe Adjusted EBITDA is used by investors as a supplemental measure to evaluate the overall operating performance of companies in our industry. Management uses Adjusted EBITDA (i) as a measurement used in comparing our operating performance on a consistent basis, (ii) to calculate incentive compensation for our employees, (iii) for planning purposes, including the preparation of our internal annual operating budget, (iv) to evaluate the performance and effectiveness of our operational strategies, and (v) to assess compliance with various metrics associated with our agreements governing our indebtedness. Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating performance in the same manner as our management. For a reconciliation of Adjusted EBITDA to income before tax, the most directly comparable measure determined under U.S. generally accepted accounting principles (“GAAP”), see “—Year ended December 31, 2016 compared to year ended December 31, 2015—Adjusted EBITDA” and “—Year ended December 31, 2015 compared to year ended December 31, 2014—Adjusted EBITDA.”

Incremental business backlog, which we measure as anticipated net product sales from incremental business for the next four years, net of Programs being phased out and any contractual pricing changes, was approximately $443 million as of December 31, 2016. We are typically awarded Programs one to three years prior to the start of production on new and replacement business. Due to the timing of the OEM sourcing cycle, our anticipated net product sales were measured based on contracts to be fulfilled during 2017 through 2020. Our estimate of anticipated net product sales includes formally awarded new Programs, Programs which we believe are highly probable of being awarded to us, and expected volume and pricing changes on existing Programs. Our estimate may be impacted by various assumptions including vehicle production levels on new and replacement Programs, customer price reductions, scrap prices, material price indices, currency exchange rates and the timing of Program launches. Therefore, this anticipated net product sales information could differ significantly from actual firm orders or firm commitments, and awards of business do not represent guarantees of production volumes or revenues.

Net sales were $2,790.7 million for the year ended December 31, 2016, as compared to $3,047.3 million for the year ended December 31, 2015, a decrease of $256.6 million. The decrease was primarily driven by a decrease in industrial and commercial sales of approximately $93 million, approximately $80 million of attrition in wheel bearing programs which reduced total wheel bearing program sales to $109.7 million for the year ended December 31, 2016, the impact of lower raw material surcharge pass-through of approximately $58 million, net price decreases of approximately $23 million, a decrease of approximately $14 million from light vehicle volumes and unfavorable foreign currency movements of approximately $7 million. These decreases were partially offset by approximately $19 million of additional sales due to the acquisition of Brillion Iron Works, Inc. on September 2, 2016 (the “Brillion Acquisition”).

The decrease in HHI net sales was primarily attributable to the scheduled attrition of wheel bearing programs of approximately $80 million, lower light vehicle volumes on certain platforms of approximately $30 million, lower raw material surcharge pass-through of approximately $26 million and net price decreases of approximately $13 million.

The increase in Metaldyne net sales was primarily attributable to increased light vehicle volumes of approximately $35 million, partially offset by lower raw material surcharge pass-through of approximately $9 million, foreign currency movements of approximately $7 million, and net price decreases of approximately $5 million.

The decrease in Grede net sales was primarily attributable to the decrease in industrial and commercial volumes of approximately $93 million, lower raw material surcharge pass-through of approximately $22 million, lower light vehicle volumes of approximately $19 million and net price reductions of approximately $5 million, partially offset by approximately $19 million of additional sales from the Brillion Acquisition in September 2016.

Cost of sales was $2,321.5 million for the year ended December 31, 2016, as compared to $2,531.3 million for the year ended December 31, 2015, a decrease of $209.8 million. This decrease was primarily driven by lower raw material surcharge costs of approximately $66 million, lower industrial and commercial sales volume impact of approximately $65 million, lower manufacturing costs from the scheduled attrition of wheel bearing programs of approximately $50 million, lower costs due to foreign currency exchange of approximately $10 million, net manufacturing cost reductions, lower depreciation, and lower light vehicle volumes.

The decrease in HHI cost of sales was primarily due to lower raw material surcharge costs of approximately $37 million and the scheduled attrition of wheel bearing programs of approximately $46 million, partially offset by higher net manufacturing costs due to unfavorable product mix.

The decrease in Metaldyne cost of sales was primarily attributable to foreign currency movements of approximately $10 million, lower raw material surcharge costs of approximately $8 million, and net manufacturing cost reductions, partially offset by increased volumes of approximately $18 million.

The decrease in Grede cost of sales was primarily attributable to lower volumes of approximately $61 million, mainly driven by industrial and commercial volume reductions, lower raw material surcharge costs of approximately $22 million and net manufacturing cost reductions.

Gross profit was $469.2 million for the year ended December 31, 2016, as compared to $516.0 million for the year ended December 31, 2015, a decrease of $46.8 million. The decrease was primarily driven by the factors discussed above.

Operating income was $226.9 million for the year ended December 31, 2016, as compared to $266.4 million for the year ended December 31, 2015, a decrease of $39.5 million. This decrease was primarily driven by the impact of lower gross profit of $46.8 million described above, partially offset by a $7.3 million net decrease in selling, general, and administrative expenses. The net decrease in selling, general and administrative expenses was primarily due to a reduction of expenses of approximately $13 million, offset by higher professional fees of approximately $6 million related to the pending AAM Merger.

The decrease in HHI operating income was primarily attributable to the decrease in gross profit, partially offset by a slight decrease in selling, general and administrative expenses.

The increase in Metaldyne operating income was primarily attributable to the increase in gross profit, partially offset by higher wages and benefits in selling, general, and administrative expenses which were driven by added engineering and management positions associated with new product launches and plant expansions.

The decrease in Grede operating income was primarily attributable to the decrease in gross profit, partially offset by lower selling, general and administrative expenses.

Interest expense, net was $103.5 million for the year ended December 31, 2016, as compared to $107.5 million for the year ended December 31, 2015, a decrease of $4.0 million. The decrease in interest expense, net reflected lower average outstanding borrowings due to the pay down of long-term debt and lower average interest rates due to the re-pricing of our term loan debt in May 2015.

Other, net reflected income of $11.9 million for the year ended December 31, 2016, as compared to income of $15.4 million for the year ended December 31, 2015, an unfavorable change of $3.5 million. The change in other, net compared to the prior period was primarily due to a $5.5 million unfavorable change in gain or loss on foreign currency transactions. Approximately $1.5 million of the $5.5 million unfavorable change was attributable to the remeasurement of our Euro denominated Term Loan.

Income tax expense was $38.4 million and $48.1 million for the years ended December 31, 2016 and 2015 respectively. This reduction is primarily the result of a decrease in income before tax due to the factors described above. Our effective tax rate was 28.4% and 27.7% for the years ended December 31, 2016 and 2015 respectively. The effective tax rate increased primarily due to an increase in deferred income taxes on the foreign earnings for those wholly owned foreign subsidiaries where basis differentials are not indefinitely reinvested and an increase in non-deductible transaction expenses. These unfavorable impacts were partially offset by a net benefit of $2.6 million resulting from a change in estimate about the Company’s ability to utilize foreign tax credits, by the impact of a favorable court ruling in Spain in connection with an ongoing audit, and by a year over year increase in the Company’s research and experimentation credit.

Net income attributable to stockholders was $96.3 million, or 3.4% of net sales for the year ended December 31, 2016, as compared to $125.4 million, or 4.1% of net sales for the year ended December 31, 2015, a decrease of $29.1 million. The decrease was primarily attributable to the factors discussed above.

Management’s assessment of performance includes an evaluation of Adjusted EBITDA. The following table sets forth Adjusted EBITDA by segment.

The following table sets forth a reconciliation of Adjusted EBITDA to income before tax, the most directly comparable GAAP measure:

EBITDA is calculated as net income before interest expense, income tax expense (benefit) and depreciation and amortization. Adjusted EBITDA is calculated as EBITDA adjusted for:

Adjusted EBITDA eliminates the effects of items that we do not consider indicative of our core operating performance. Adjusted EBITDA is a supplemental measure of operating performance that does not represent and should not be considered as an alternative to net income, as determined under GAAP, and our calculation of Adjusted EBITDA may not be comparable to those reported by other companies.

Management believes the inclusion of the adjustments to Adjusted EBITDA are appropriate to provide additional information to investors about certain material non-cash items and about unusual items that we do not expect to continue at the same level in the future. By providing this non-GAAP financial measure, together with reconciliation to GAAP results, we believe we are enhancing investors’ understanding of our business and our results of operations, as well as assisting investors in evaluating how well we are executing strategic initiatives. We believe Adjusted EBITDA is used by investors as a supplemental measure to evaluate the overall operating performance of companies in our industry.

Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of the limitations are:

To address these limitations, we reconcile Adjusted EBITDA to the most directly comparable GAAP measure, income before tax. Further, we also review GAAP measures and evaluate individual measures that are not included in Adjusted EBITDA.

Net sales were $3,047.3 million for the year ended December 31, 2015 as compared to $2,717.0 million for the year ended December 31, 2014, an increase of $330.3 million. This increase was primarily driven by the impact of the Grede acquisition of approximately $409 million and increased volumes, mainly due to light vehicle production volumes, partially offset by foreign currency movements of approximately $70 million, lower raw material surcharge pass-through of approximately $81 million and net price decreases of approximately $18 million.

The increase in HHI net sales was primarily attributable to increased volumes due to higher North American light vehicle production levels partially offset by lower raw material surcharge pass-through and price decreases.

The decrease in Metaldyne net sales was primarily attributable to foreign currency movements, net price decreases, and lower raw material pass-through, partially offset by increased volumes due to higher North American and European light vehicle production levels.

The increase in Grede net sales was primarily attributable to the additional five months of results included in the year ended December 31, 2015, partially offset by lower raw material pass-through surcharges and volume reduction in the industrial market.

Cost of sales was $2,531.3 million for the year ended December 31, 2015 as compared to $2,294.1 million for the year ended December 31, 2014, an increase of $237.2 million. This increase was primarily driven by the impact of the Grede acquisition of approximately $338 million, lower scrap sales and higher wages, benefits, and utilities. These increases were partially offset by foreign currency movements of approximately $63 million, lower raw material surcharge costs of approximately $80 million, net manufacturing cost reductions, and lower depreciation.

The increase in HHI cost of sales was primarily due to increased volumes, lower scrap sales and higher wages, benefits, and utilities, mostly offset by lower raw material surcharge costs and net manufacturing cost savings.

The decrease in Metaldyne cost of sales was primarily attributable to foreign currency movements, lower depreciation, and raw material surcharge costs, partially offset by increased volumes and higher wages, benefits and utilities.

The increase in Grede cost of sales was primarily attributable to the additional five months of results included in the year ended December 31, 2015, partially offset by raw material surcharge costs.

Gross profit was $516.0 million for the year ended December 31, 2015 as compared to $422.9 million for the year ended December 31, 2014, an increase of $93.1 million. This increase was primarily driven by the impact of the Grede acquisition of approximately $71 million, increased volumes, net manufacturing cost reductions, and lower depreciation. These increases were partially offset by lower scrap sales of approximately $11 million driven by the decline in the scrap metal market, in addition to the factors discussed above.

The increase in HHI gross profit was primarily attributable to increase in light vehicle sales volume and net manufacturing cost savings, partially offset by lower scrap sales and increased wages and benefits.

The increase in Metaldyne gross profit was primarily attributable to lower depreciation and increased sales volumes, partially offset by net price decreases and foreign currency movements.

The increase in Grede gross profit was primarily attributable to the additional five months of results included in the year ended December 31, 2015.

Operating income was $266.4 million for the year ended December 31, 2015 as compared to $203.5 million for the year ended December 31, 2014, an increase of $62.9 million. This increase was primarily driven by the impact of the additional five months of Grede segment results of approximately $30 million, $13 million of acquisition related costs incurred in June 2014 resulting from the Grede acquisition, $11.8 million of goodwill impairment recognized in 2014, and the increase in gross profit due to the factors discussed above. These increases were partially offset by a $10.4 million increase in stock-based compensation expense and additional costs associated with being a public company, including higher professional fees.

The increase in HHI operating income was primarily attributable to the increase in gross profit and $11.8 million of goodwill impairment recorded in 2014, partially offset by higher professional fees.

The increase in Metaldyne operating income was primarily attributable to the increase in gross profit, partially offset by increased stock-based compensation and higher professional fees.

The increase in Grede operating income was primarily attributable to the additional five months of results included in the year ended December 31, 2015.

Interest expense, net was $107.5 million for the year ended December 31, 2015 as compared to $99.9 million for the year ended December 31, 2014, an increase of $7.6 million. The increase in interest expense, net reflected higher average outstanding borrowings including the additional debt associated with the Grede Transaction in June 2014 and higher overall interest rates due to the issuance of our Senior Notes in the fourth quarter of 2014, partially offset by lower debt fee amortization and the pay down of long-term debt in 2015.

The Company recognized losses on debt extinguishment of $0.4 million and $60.7 million in fiscal years 2015 and 2014, respectively. The loss recognized in 2015 relates to the amendment and refinancing of the Company’s Term Loan Facility in May, 2015. The loss on debt extinguishment recognized in 2014 primarily relates to the full repayment of the outstanding term debts of each segment as part of the Refinancing in October, 2014. Included in the 2014 loss on debt extinguishment are $60.4 million in write-offs of unamortized debt fees, expenses, and original issuance discounts associated with the previous term debts.

Other, net was $15.4 million of income for the year ended December 31, 2015 as compared to income of $11.3 million for the year ended December 31, 2014, a favorable change of $4.1 million. The change in other, net from 2014 was primarily due to a $2.6 million increase in foreign currency transactions gains and a $1.2 million decrease in debt transaction expenses.

Income taxes were an expense of $48.1 million for the year ended December 31, 2015 and a benefit of $19.1 million for the year ended December 31, 2014. Our effective tax rate was 27.7% for the year ended December 31, 2015 and (35.2)% for the year ended December 31, 2014. The increase in our effective tax rate was primarily attributable to a change in the assertion that the earnings of certain foreign subsidiaries within the Metaldyne segment are indefinitely reinvested, resulting in a $31.6 million deferred tax benefit for the year ended December 31, 2014. In addition, during the year ended December 31, 2014, the Company recognized a net reduction in its unrecognized tax benefits of $2.2 million, primarily resulting from the settlement of a tax audit at one of the Company’s German subsidiaries and from foreign exchange rate fluctuations. The research and experimentation credit recorded by the Company decreased from $3.0 million in the year ended December 31, 2014 to $1.3 million in the year ended December 31, 2015 because the amount recorded in 2014 included retroactive credits for the year ended December 31, 2013. These unfavorable impacts were partially offset by effective tax rate decreases resulting from a goodwill impairment charge in our HHI segment during the year ended December 31, 2014, the effect of changes in prior year estimates and the impact of changes in certain state tax rates.

Net income attributable to stockholders was $125.4 million, or 4.1% of net sales for the year ended December 31, 2015, as compared to $72.9 million, or 2.7% of net sales for the year ended December 31, 2014, an increase of $52.5 million, or 72.0%. The increase was primarily attributable to the factors discussed above.

Management’s assessment of performance includes an evaluation of Adjusted EBITDA. The following table sets forth Adjusted EBITDA by segment.

The following table sets forth a reconciliation of Adjusted EBITDA to income before tax, the most directly comparable GAAP measure.

See “—Year ended December 31, 2016 compared to year ended December 31, 2015—Adjusted EBITDA” for a description of the calculation of Adjusted EBITDA and a discussion of the use of this measure.

Our primary cash requirements include the payment of our suppliers and operating expenses, interest and principal payments on our debt and capital expenditures. We have also used cash to return capital to our stockholders through the payment of dividends primarily through cash provided by operations. As of December 31, 2016, we had cash and cash equivalents of $209.7 million and total indebtedness, inclusive of capitalized lease obligations, of $1,846.1 million. We also have access to additional liquidity pursuant to the terms of the Revolving Credit Facility.

Our capital expenditures have been related to the acquisition of machinery and equipment to support our overall business growth as well as increase the efficiency of our manufacturing processes. Our capital expenditures were $194.5 million, $226.3 million, and $156.4 million for the years ended December 31, 2016, 2015, and 2014, respectively.

We believe that our cash flow from operations, available cash and cash equivalents and available borrowings under the Senior Credit Facilities will be sufficient to meet our liquidity needs for the next twelve months and beyond. We anticipate that to the extent that we require additional liquidity, it will be funded through the incurrence of other indebtedness, equity financings or a combination thereof. We cannot assure you that we will be able to obtain this additional liquidity on reasonable terms, or at all. Additionally, our liquidity and our ability to meet our obligations and fund our capital requirements are also dependent on our future financial performance, which is subject to general economic, financial and other factors that are beyond our control. Accordingly, we cannot assure you that our business will generate sufficient cash flow from operations or that future borrowings will be available under our credit facilities or otherwise to meet our liquidity needs. Although we have no specific current plans to do so, if we decide to pursue one or more significant acquisitions, we may incur additional debt or sell additional equity to finance such acquisitions.

The Company has been assigned the following credit ratings and outlook by Moody’s Investors Service (“Moody’s”) and Standard & Poor’s Rating Services (“S&P”):

On October 20, 2014, MPG Holdco I Inc., the Company’s wholly owned subsidiary (“MPG Holdco”) entered into the $250.0 million Revolving Credit Facility. Interest accrues at a rate equal to the London Interbank Offered Rate (“LIBOR’) rate plus an applicable margin of 3.25% or a base rate that is the higher of the Federal Funds Rate (plus 0.50%), the U.S. prime rate as published in The Wall Street Journal, or LIBOR (plus 1.00%), plus an applicable margin of 2.25%, at MPG Holdco’s option. The applicable margin is based on a leverage ratio grid and was .25% higher prior to the IPO. The Revolving Credit Facility is a five-year facility that matures in 2019. As of December 31, 2016, there was no balance outstanding on the Revolving Credit Facility. Total available under this facility was $236.8 million after giving effect to letters of credit of $13.2 million.

MPG Holdco pays fees with respect to the Revolving Credit Facility, including (i) an unused commitment fee of 0.50% or 0.375% based on a leverage ratio and (ii) fixed fees with respect to letters of credit of 3.25% per annum on the stated amount of each letter of credit outstanding during each month and customary administrative fees.

On October 20, 2014, MPG Holdco entered into the $1,350.0 million a term loan facility (the “Term Loan Facility”). Interest accrued at a rate equal to the LIBOR rate (bearing a LIBOR floor of 1.00%) plus an applicable margin of 3.25% or a base rate that is the higher of the Federal Funds Rate (plus 0.50%), the U.S. prime rate as published in The Wall Street Journal, or LIBOR (plus 1.00%), plus an applicable margin of 2.25%, at MPG Holdco’s option. Prior to the IPO, the applicable margin was 3.50% for LIBOR rate loans and 2.50% for base rate loans. On May 8, 2015, the Company amended its Senior Credit Facilities to reduce the applicable interest rates on the Term Loan Facility and to convert a portion of the liability from U.S. Dollar denominated debt to Euro denominated debt. The outstanding balance of Term Loan Facility was repaid and refinanced with the Refinanced Term Loan Facility consisting of a $1,072.6 million U.S. Dollar Term Loan and a €225.0 million Euro Term Loan. The USD Term Loan was issued at par and accrues interest at LIBOR, bearing a 1% floor, plus an applicable margin of 2.75%. The Euro Term Loan was issued at an original issuance discount of 0.5%, or $1.3 million, and accrues interest at EURIBOR, bearing a 1% floor, plus an applicable margin of 2.75%. The USD Term Loan and Euro Term Loan mature in 2021 and are payable in quarterly installments equal to 0.25% of the original loan balances.

The USD Term Loan and Euro Term Loan are subject to customary mandatory prepayments, including an excess cash flow sweep based on leverage ratio step downs and a mandatory prepayment for certain asset sales. At the beginning of a fiscal year, we may be required to prepay a portion of our USD Term Loan and Euro Term Loan in an amount equal to a percentage of the preceding fiscal year’s excess cash flow, as defined, with such percentage based on our leverage ratio, as defined. As of December 31, 2016, there are no mandatory prepayments due.

The Senior Credit Facilities, subject to certain exceptions, are guaranteed by the Company and all of MPG Holdco’s direct and indirect existing and future domestic subsidiaries.

The agreement governing the Senior Credit Facilities contains certain covenants that, among other things, require MPG Holdco to maintain a leverage ratio once revolver borrowings and letters of credit exceed 35% of aggregate revolving credit commitments as defined under the terms of the Senior Credit Facilities and to comply with customary affirmative and negative covenants. The Senior Credit Facilities also restrict the payment of dividends subject to certain customary exceptions including the ability (i) to pay taxes attributable to MPG Holdco and its subsidiaries, (ii) to pay legal, accounting, and reporting expenses, (iii) to pay general and administrative costs and expenses, and reasonable directors fees and expenses, (iv) to repurchase stock owned by employees subject to certain limitations, (v) to pay management or similar fees subject to certain limitations, (vi) to pay franchise or similar taxes and fees to maintain organizational existence, and (vii) to pay dividends up to $30 million.

On October 20, 2014, MPG Holdco issued $600.0 million of aggregate principal amount notes. The Senior Notes mature on October 15, 2022 and bear interest at a rate of 7.375%, payable semiannually on April 15th and October 15th of each year. The Senior Notes are guaranteed by the Company and all of MPG Holdco’s direct and indirect domestic subsidiaries that guarantee the Senior Credit Facilities. On May 8, 2015, the Company launched an offer to exchange notes registered with the SEC (the “Registered Notes”) for its existing Senior Notes that were not registered with the SEC. The Registered Notes have substantially identical terms as the senior notes. The exchange offer was made pursuant to a prospectus included in a Registration Statement on Form S-4 that was filed with the SEC on May 1, 2015, and declared effective by the SEC on May 8, 2015. The exchange offer was completed on June 8, 2015, and all outstanding original senior notes were tendered and exchanged for the Registered Notes.

The indenture governing the Senior Notes contains certain covenants, including a covenant that restricts the payment of dividends, subject to certain customary exceptions including the ability (i) to pay taxes attributable to MPG Holdco and its subsidiaries, (ii) to pay legal, accounting, and reporting expenses, (iii) to pay general and administrative costs and expenses, and reasonable directors fees and expenses, (iv) to repurchase stock owned by employees subject to certain limitations, (v) to pay management or similar fees subject to certain limitations, (vi) to pay franchise or similar taxes and fees to maintain organizational existence, and (vii) to pay dividends up to $30 million per year.

The proceeds from the Term Loan Facility and Senior Notes were used to prepay the existing debt of Metaldyne, HHI, and Grede, as well as, fees and expenses associated with the Refinancing. Prepayment of the existing debt of Metaldyne, HHI and Grede resulted in the elimination of the restrictions on the ability of each to pay dividends to MPG.

During fiscal year 2016, the Company declared and paid the following cash dividends on its common stock:

On February 24, 2017, our board of directors declared a dividend of $0.0925 per share, payable March 24, 2017 to stockholders of record as of March 10, 2017.

As of December 31, 2016, $121.9 million of cash and cash equivalents were held by certain foreign subsidiaries whose earnings are reinvested indefinitely. We make this assertion based on the operational and investing needs of the foreign locations and our ability to fund our U.S. operations and obligations from domestic cash flow and capital resources. Based on this assertion, no provision has been made for U.S. income taxes, which would be assessed upon repatriation of the foreign earnings.

On February 24, 2016, our board of directors authorized a share repurchase program (the “Share Repurchase Program”). The Share Repurchase Program, as amended on August 3, 2016, authorized the Company to purchase shares of its common stock for an aggregate repurchase price not to exceed $35.0 million. Subject to applicable rules and regulations, shares could be repurchased through open market purchases, privately negotiated transactions, or otherwise. On November 3, 2016, the Company suspended the Share Repurchase Program due to the pending AAM Merger. As of December 31, 2016, cumulative shares repurchased totaled 1,898,261 shares at an average purchase price per share of $15.56. The repurchased shares are presented as common stock held in treasury, at cost, on the consolidated balance sheets.

The following table summarizes our contractual obligations and commitments as of December 31, 2016:

Cash flows from operating activities were a net inflow of $318.6 million for the year ended December 31, 2016, $330.0 million for the year ended December 31, 2015, and $305.4 million for the year ended December 31, 2014. For the year ended December 31, 2016, cash flows from operating activities reflected results of operations exclusive of non-cash income and expenses, primarily depreciation and amortization, deferred income taxes, and stock-based compensation, less gains on foreign currency transactions, offset by a decrease in working capital. For the year ended December 31, 2015, cash flows from operating activities reflected results of operations exclusive of non-cash income and expenses, primarily depreciation and amortization, deferred income taxes, and stock-based compensation, less gains on foreign currency transactions and an increase in working capital. For the year ended December 31, 2014, cash flows from operating activities reflected results of operations exclusive of non-cash income and expenses, primarily depreciation and amortization, deferred income taxes, losses on debt extinguishments, stock-based compensation, and goodwill impairment, less gains on foreign currency transactions and an increase in working capital.

Cash flows from investing activities were net outflows of $208.2 million, $222.7 million, and $984.9 million for the years ended December 31, 2016, 2015, 2014, respectively. For the year ended December 31, 2016, cash flows from investing activities primarily reflected capital expenditures and the consideration paid for the Brillion Acquisition. For the year ended December 31, 2015, cash flows from investing activities primarily reflected capital expenditures. For the year ended December 31, 2014, cash flows from investing activities primarily reflected consideration paid for the Grede Transaction, $829.7 million, and capital expenditures.

Cash flows from financing activities were a net outflow of $62.2 million for the year ended December 31, 2016, $86.2 million for the year ended December 31, 2015, and a net inflow of $776.7 million for the year ended December 31, 2014. For the year ended December 31, 2016, cash flows from financing activities primarily reflected purchases of treasury stock of $29.5 million, cash dividend payments of $25.1 million, and $14.6 million of net debt repayments, partially offset by net cash inflows from stock-based compensation activity. For the year ended December 31, 2015, cash flows from financing activities primarily reflected the issuance of long-term debt totaling $1,326.6 million, long-term debt repayments totaling $1,391.8 million, and dividends paid to common stockholders totaling $18.2 million. Total proceeds from long-term debt include $1,072.6 million from the USD Term Loan and $254.1 million from the Euro Term Loan, both used to fund the repayment and refinancing of the Term Loan Facility. Total long-term debt repayments include $1,326.6 million to fully repay the Term Loan Facility, $45.0 million in voluntary prepayments on the USD Term Loan, and $10.0 million in voluntary prepayments on the previous Term Loan Facility, in addition to $10.2 million in scheduled term loan repayments. For the year ended December 31, 2014, cash flows from financing activities primarily reflected the issuance of long-term debt totaling $2,658.3 million and $260.5 million in capital contributions, partially offset by repayments of long-term debt totaling $1,952.0 million, dividend payments to the stockholders of HHI totaling $111.3 million, payments of debt issuance costs totaling $45.4 million, and net repayments of short-term debt totaling $18.6 million. Total long term debt proceeds included a $115.0 million term loan, primarily used to fund dividends to the stockholders of HHI, a $600 million term loan, primarily used to fund the Grede Transaction, and $1,943.3 million from the Term Loan Facility and Senior Notes primarily used to repay the existing debts of Metaldyne, HHI, and Grede. In addition to The Refinancing, total long-term debt repayments also reflected a $10 million prepayment of principal on the Term Loan Facility. The capital contributions of $260.5 million were primarily used to fund the Grede Transaction.

Our discussion and analysis of our financial condition and results of operations is based upon our financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. Certain of our accounting policies require the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. These judgments are based on our historical experience, terms of existing contracts, our evaluation of trends in the industry, information provided by our customers and information available from other outside sources, as appropriate. Our actual results may differ from these estimates. The accounting policies that we believe to be the most critical to an understanding of our financial condition and results of operations and that require the most complex and subjective management judgments are discussed below.

Goodwill is evaluated for impairment annually or more often if a triggering even occurs between annual tests. The annual tests are performed in the fourth quarter.

For each reporting unit to which goodwill has been assigned, the evaluation for impairment entails a quantitative analysis of the fair value of the reporting unit compared to the carrying value of the reporting unit or the Company may opt to perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount prior to performing the quantitative assessment.

Determination of our reporting units, impairment indicators and fair value requires us to make significant judgments and estimates, including the extent and timing of future cash flows. As part of the determination of future cash flows, we need to make assumptions on future general economic conditions, business projections, growth rates and discount rates. These assumptions are subject to a considerable degree of uncertainty and different assumptions could materially affect our conclusions on this matter. During 2016, we performed our annual evaluations as of the fourth quarter. See Note 9 of the notes to the consolidated financial statements contained within “Item 8. Financial Statements and Supplementary Data.”

Long-lived assets other than goodwill are evaluated for impairment if adverse events or changes in circumstances indicate the assets are potentially impaired. For each asset group affected by such impairment indicators, the recoverability of the carrying value of that asset group is determined by comparing the forecasted undiscounted cash flows related to that asset group to the asset group’s carrying value.

Determination of our asset groups, impairment indicators and future cash flows requires us to make significant judgments and estimates. As part of the determination of future cash flows, we need to make assumptions on future general economic conditions, business projections, growth rates and discount rates. These assumptions are subject to a considerable degree of uncertainty. In June 2015, the Company announced plans to close its Berlin, Wisconsin facility included within the Grede segment. The closure, which is primarily a result of the industrial market slowdown, was completed in fiscal 2015. The Company recorded a $4.0 million asset impairment charge within cost of sales in conjunction with this announcement. In May 2016, the Company announced plans to close its Bessemer, Alabama facility included within the Grede segment. The closure, which is primarily due to declines in heavy truck and industrial equipment markets, was completed in fiscal 2016. The Company recorded a $2.3 million asset impairment charge within cost of sales in conjunction with this announcement.

Stock-based compensation awards to employees and members of our board of directors are accounted for based upon their grant date fair value and recognized as expense over the requisite service period..

The following table sets forth the weighted average inputs used to value the MPG stock options converted and granted in 2016 using the Black-Scholes Pricing Model:

In determining the provision for income taxes for financial statement purposes, we make estimates and judgments which affect our evaluation of the carrying value of our deferred tax assets as well as our calculation of certain tax liabilities. We evaluate the carrying value of our deferred tax assets considering all available positive and negative evidence. Such evidence includes historical operating results, the existence of cumulative losses in the most recent fiscal years, expectations for future pretax operating income, the time period over which our temporary differences will reverse and the implementation of feasible and prudent tax planning strategies. Deferred tax assets are reduced by a valuation allowance if, based on the weight of this evidence, it is more likely than not that all or a portion of the recorded deferred tax assets will not be realized in future periods.

In addition, the calculation of our tax benefits and liabilities includes uncertainties in the application of complex tax regulations in a multitude of jurisdictions across our global operations. We recognize tax benefits and liabilities based on our estimate of whether, and the extent to which, additional taxes will be due. We adjust these liabilities based on changing facts and circumstances; however, due to the complexity of some of these uncertainties and the impact of any tax audits, the ultimate resolutions may be materially different from our estimated liabilities. For further information related to income taxes, See Note 17 of the notes to the consolidated financial statements contained within “Item 8. Financial Statements and Supplementary Data.”

We have obligations for retiree benefits for certain employees under defined benefit pension plans. For a description of these plans, See Note 18 of the notes to the consolidated financial statements contained within “Item 8. Financial Statements and Supplementary Data.”

We use actuarial estimated and related actuarial methods to calculate our obligation and expense. We are required to select certain actuarial assumptions, which are determined based on current market conditions, historical information and consultation with and input from our actuaries and asset managers. The key factors which impact our estimates are discount rates, asset return assumptions, compensation increase assumptions and actuarial assumptions such as retirement age and mortality which are determined as of the current year measurement date. We review our actuarial assumptions on an annual basis and make modifications to the assumptions based on current rates and trends when appropriate. These estimates and assumptions are subject to a considerable degree of uncertainty.

For the defined benefit pension plans, the obligation as of December 31, 2016 was determined using an assumed discount rate of 3.94% for the U.S. Plans and 2.53% for Non-U.S. plans. Pension costs for 2016 were determined using a discount rate of 4.10% for the U.S. Plans and 3.46% for the Non-U.S. plans and long-term asset return assumption of 7.25% for the U.S. Plans and 6.34% for the Non-U.S. plans. The following table presents the sensitivity of the obligation and expense to a hypothetical change in the discount rate assumptions:

A hypothetical 50 basis point decrease in the asset return assumption would increase the annual cost of benefits by $0.3 million.

See Note 4 of the notes to the consolidated financial statements contained within “Item 8. Financial Statements and Supplementary Data.”

We are exposed to fluctuations in foreign currency exchange rates, interest rates and commodity prices for products we use in our manufacturing and sellable scrap we generate from manufacturing. To reduce our exposure to these risks, we maintain risk management controls to monitor these risks and take appropriate actions to attempt to mitigate such forms of market risks. We do not hold financial instruments for trading or speculative purposes.

As a result of our global operations, we generate a significant portion of our sales and incur a substantial portion of our expenses in currencies other than the U.S. dollar. To the extent that we have significantly more costs than sales generated in a currency other than the U.S. dollar, we are subject to risk if the currency in which our costs are paid appreciates against the currency in which we generate sales because the appreciation effectively increases our cost in that country. We may selectively employ derivative instruments to reduce our foreign currency exchange risk. As of December 31, 2016, we had no material derivative instruments in place.

The financial condition, results of operations and cash flows of some of our operating entities are reported in currencies other than the U.S. dollar and then translated into U.S. dollars at the applicable exchange rate for inclusion in our financial statements. As a result, appreciation of the U.S. dollar against these other currencies generally will have a negative impact on our reported sales and profits while depreciation of the U.S. dollar against these other currencies will generally have a positive effect on reported sales and profits. Our primary exposure is to fluctuations in the Euro exchange rate, and we also have exposure to fluctuations in other currency exchange rates, including the Mexican Peso, Korean Won and Chinese Renminbi.

The following table sets forth a sensitivity analysis of the effect a hypothetical change in the Euro to U.S. dollar exchange rate would have on our net sales for the year ended December 31, 2016:

The Euro Term Loan is subject to transaction gains and losses each period. The following table sets forth a sensitivity analysis of the effect a hypothetical change in the Euro to U.S. dollar exchange rate would have on the carrying value of our Euro denominated debt as of December 31, 2016:

We are subject to interest rate market risk in connection with our USD Term Loan, Euro Term Loan and Revolving Credit Facility (together our “Credit Facilities”). As of December 31, 2016, our Credit Facilities provided for variable rate borrowings of up to $1,481.6 million including $236.8 million under our Revolving Credit Facilities, net of $13.2 million of letters of credit. The variable interest rates on our Term Loan Facility are subject to LIBOR and Euribor floors of 1.00%. Our Revolving Credit Facility bears interest at a variable rate based on LIBOR or a base rate plus an applicable margin. As of December 31, 2016, the benchmark Euribor rate was negative, and therefore an assumed 25 basis point change in interest rates would have no impact on our annual interest expense from our Euro Term Loan. As of December 31, 2016, the benchmark LIBOR rate was 1.00%. An assumed 25 basis point increase in LIBOR would increase the annual interest expense from our USD Term Loan by $2.5 million. An assumed 25 basis point change in interest rates would change interest expense on our Revolving Credit Facility by $0.6 million if fully drawn and outstanding for the entire year.

We do not use derivative contracts to manage commodity price risk. We maintain raw material price pass-through arrangements with our customers on substantially all of our products to reduce exposure to raw material price fluctuations. In instances where the risk is not covered contractually, we have generally been able to adjust customer prices to recover commodity cost increases. The salvage value of our manufacturing by-product is also subject to fluctuations in scrap metal prices, which historically have not had a material impact on our results of operations.

We have audited the accompanying consolidated balance sheet of Metaldyne Performance Group Inc. and subsidiaries (the "Company") as of December 31, 2016, and the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for the year ended December 31, 2016. Our audit also included the financial statement schedule for the year ended December 31, 2016 listed in the Index at Item 15. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Metaldyne Performance Group Inc. and subsidiaries as of December 31, 2016, and the results of their operations and their cash flows for the year ended December 31, 2016, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of December 31, 2016, based on the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 2, 2017 expressed an unqualified opinion on the Company's internal control over financial reporting.

We have audited the accompanying consolidated balance sheet of Metaldyne Performance Group Inc. and subsidiaries as of December 31, 2015 and the related consolidated statements of operations, comprehensive income, stockholders’ equity (deficit) and cash flows for each of the years in the two-year period ended December 31, 2015. In connection with our audits of the consolidated financial statements, we also have audited financial statement schedule II: Valuation and Qualifying Accounts for each of the years in the two-year period ended December 31, 2015. These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Metaldyne Performance Group, Inc. and subsidiaries as of December 31, 2015 and the results of their operations and their cash flows for each of the years in the two-year period ended December 31, 2015, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule for each of the years in the two-year period ended December 31, 2015, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

February 29, 2016, except for the effects of the retrospective application of ASU 2015-03, Interest – Imputation of Interest (Topic 835-30), as disclosed in Note 4, to which the date is March 2, 2017

	December 31,
	2016			2015
Assets
Current assets:
Cash and cash equivalents	$	209.7			168.2
Receivables, net:
Trade		314.6			309.1
Other		34.8			35.4
Total receivables, net		349.4			344.5
Inventories		168.4			186.8
Prepaid expenses		11.5			15.0
Other assets		52.7			21.5
Total current assets		791.7			736.0
Property and equipment, net		831.6			786.0
Goodwill		907.7			907.7
Amortizable intangible assets, net		639.1			708.9
Deferred income taxes		7.4			1.7
Other assets		13.0			17.3
Total assets	$	3,190.5			3,157.6
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	260.5			248.9
Accrued compensation		49.6			55.2
Accrued liabilities		77.1			66.8
Short-term debt		1.0			0.7
Current maturities, long-term debt and capital lease obligations		13.2			14.5
Total current liabilities		401.4			386.1
Long-term debt, less current maturities		1,809.2			1,827.1
Capital lease obligations, less current maturities		22.7			22.5
Deferred income taxes		223.7			231.3
Other long-term liabilities		54.3			51.6
Total liabilities		2,511.3			2,518.6
Stockholders’ equity:
Common Stock: par value of $0.001 per share, 400 authorized, and 67.6 and 67.9 issued and outstanding, respectively		0.1			0.1
Common stock held in treasury, at cost: 1.9 and zero shares, respectively		(29.5	)		—
Paid-in capital		880.7			856.2
Accumulated deficit		(92.0	)		(162.9	)
Accumulated other comprehensive loss		(83.5	)		(57.3	)
Total equity attributable to stockholders		675.8			636.1
Noncontrolling interest		3.4			2.9
Total stockholders’ equity		679.2			639.0
Total liabilities and stockholders’ equity	$	3,190.5			3,157.6

	Year Ended December 31, 2016			Year Ended December 31, 2015			Year Ended December 31, 2014
Net sales	$	2,790.7			3,047.3			2,717.0
Cost of sales		2,321.5			2,531.3			2,294.1
Gross profit		469.2			516.0			422.9
Selling, general and administrative expenses		242.3			249.6			194.6
Acquisition costs		—			—			13.0
Goodwill impairment		—			—			11.8
Operating profit		226.9			266.4			203.5
Interest expense, net		103.5			107.5			99.9
Loss on debt extinguishment		—			0.4			60.7
Other, net		(11.9	)		(15.4	)		(11.3	)
Other expense, net		91.6			92.5			149.3
Income before tax		135.3			173.9			54.2
Income tax expense (benefit)		38.4			48.1			(19.1	)
Net income		96.9			125.8			73.3
Income attributable to noncontrolling interest		0.6			0.4			0.4
Net income attributable to stockholders	$	96.3			125.4			72.9

Basic weighted average shares outstanding		67.5			67.3			67.1
Diluted weighted average shares outstanding		69.3			69.7			68.5

Net income per share attributable to stockholders
Basic	$	1.43			1.86			1.09
Diluted		1.39			1.80			1.06

	Common stock		Common stock held in treasury			Paid-in capital			Accumulated Deficit			Accumulated other comprehensive loss			Noncontrolling interest			Total stockholders’ equity
Balance, December 31, 2013	$	0.1		—			557.5			(231.4	)		(3.3	)		2.1			325.0
Recognition of the Grede Transaction							258.6												258.6
Pre-combination issuance of Grede membership interests							1.9												1.9
Dividends										(111.3	)								(111.3	)
Other							(2.4	)											(2.4	)
Stock-based compensation expense							17.3												17.3
Offering related costs							(5.6	)											(5.6	)
Net income										72.9						0.4			73.3
Other comprehensive loss													(31.9	)					(31.9	)
Balance, December 31, 2014	$	0.1		—			827.3			(269.8	)		(35.2	)		2.5			524.9
Dividends										(18.5	)								(18.5	)
Stock-based compensation expense							27.7												27.7
Cash settlement of equity awards							(3.6	)											(3.6	)
Issuance of common stock							3.0												3.0
Excess tax benefit on stock-based compensation							1.9												1.9
Offering related costs							(0.1	)											(0.1	)
Net income										125.4						0.4			125.8
Other comprehensive loss													(22.1	)					(22.1	)
Balance, December 31, 2015	$	0.1		—			856.2			(162.9	)		(57.3	)		2.9			639.0
Dividends										(25.4	)								(25.4	)
Stock-based compensation expense							17.5												17.5
Cash settlement of equity awards							(4.9	)											(4.9	)
Issuance of common stock							9.3												9.3
Purchase of treasury stock				(29.5	)														(29.5	)
Excess tax benefit on stock-based compensation							2.6												2.6
Net income										96.3						0.6			96.9
Other comprehensive loss													(26.2	)		(0.1	)		(26.3	)
Balance, December 31, 2016	$	0.1		(29.5	)		880.7			(92.0	)		(83.5	)		3.4			679.2

	Year Ended December 31, 2016			Year Ended December 31, 2015			Year Ended December 31, 2014
Cash flows from operating activities:
Net income	$	96.9			125.8			73.3
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		221.3			229.8			210.8
Debt fee amortization		3.4			3.2			6.3
Loss on debt extinguishment		—			0.4			60.7
Goodwill impairment		—			—			11.8
Loss on fixed asset dispositions		5.3			2.8			2.1
Deferred income taxes		(12.5	)		(14.8	)		(88.4	)
Recognition of deferred revenue		—			(0.8	)		(0.9	)
Noncash interest expense		1.1			1.1			0.9
Stock-based compensation expense		17.5			27.7			17.3
Foreign currency adjustment		(10.2	)		(11.2	)		(12.7	)
Other		1.7			6.3			3.8
Changes in assets and liabilities:
Receivables, net		(2.7	)		(5.8	)		20.2
Inventories		17.0			12.0			(15.6	)
Prepaid expenses and other assets		(27.1	)		(10.3	)		(1.0	)
Accounts payable, accrued liabilities and accrued compensation		7.1			(28.5	)		22.6
Long-term assets and liabilities, other		(0.2	)		(7.7	)		(5.8	)
Net cash provided by operating activities		318.6			330.0			305.4
Cash flows from investing activities:
Capital expenditures		(194.5	)		(226.3	)		(156.4	)
Proceeds from sale of fixed assets		0.5			4.0			1.4
Capitalized patent costs		(0.2	)		(0.4	)		(0.2	)
Acquisition of business, net of cash acquired		(14.0	)		—			(829.7	)
Net cash used for investing activities		(208.2	)		(222.7	)		(984.9	)
Cash flows from financing activities:
Cash dividends		(25.1	)		(18.2	)		(111.3	)
Other stock activity		—			—			(2.4	)
Purchases of treasury stock		(29.5	)		—			—
Proceeds from stock issuance		9.3			3.0			260.5
Excess tax benefit on stock-based compensation		2.6			1.9			—
Cash settlement of equity awards		(4.9	)		(3.6	)		—
Borrowings of short-term debt		—			14.3			388.8
Repayments of short-term debt		—			(14.6	)		(407.4	)
Proceeds of long-term debt		—			1,326.6			2,658.3
Principal payments of long-term debt		(13.2	)		(1,391.8	)		(1,952.0	)
Payment of debt issue costs		—			(0.1	)		(45.4	)
Proceeds of other debt		1.1			1.4			0.9
Principal payments of other debt		(2.5	)		(5.0	)		(7.7	)
Payment of offering related costs		—			(0.1	)		(5.6	)
Net cash provided by (used for) financing activities		(62.2	)		(86.2	)		776.7
Effect of exchange rates		(6.7	)		(9.4	)		(8.9	)
Net increase in cash and cash equivalents	$	41.5			11.7			88.3
Cash and cash equivalents:
Cash and cash equivalents, beginning of year	$	168.2			156.5			68.2
Net increase in cash and cash equivalents		41.5			11.7			88.3
Cash and cash equivalents, end of year	$	209.7			168.2			156.5
Supplementary cash flow information:
Cash paid for income taxes, net	$	59.4			67.6			63.9
Cash paid for interest		99.4			102.6			74.6
Noncash transactions:
Capital expenditures in accounts payables		31.8			29.5			36.2
Dividends on restricted stock awards, not yet paid		0.6			0.3			—

Metaldyne Performance Group Inc. is a leading provider of components for use in engine, transmission and driveline (“Powertrain”) and chassis, suspension, steering and brake component (“Safety-Critical”) Platforms for the global light, commercial and industrial vehicle markets. We produce these components using complex metal-forming manufacturing technologies and processes for a global customer base of vehicle original equipment manufacturers (“OEMs”) and tier I suppliers (“Tier I suppliers”). Our components help OEMs meet fuel economy, performance and safety standards. Our metal-forming manufacturing technologies and processes include aluminum casting (“Aluminum Die Casting”), cold, warm or hot forging (“Forging”), iron casting (“Iron Casting”), and powder metal forming (“Powder Metal Forming”), as well as value-added precision machining and assembly (“Advanced Machining and Assembly”). These technologies and processes are used to create a wide range of customized Powertrain and Safety-Critical components that address requirements for power density (increased component strength to weight ratio), power generation, power / torque transfer, strength and Noise, Vibration and Harshness (“NVH”). Metaldyne Performance Group Inc. is organized and operated as three operating segments: the HHI segment, the Metaldyne segment and the Grede segment.

Metaldyne Performance Group Inc. was formed through the reorganization of ASP HHI Holdings, Inc. (together with its subsidiaries, “HHI”), ASP MD Holdings, Inc. (together with its subsidiaries, “Metaldyne”) and ASP Grede Intermediate Holdings LLC (together with its subsidiaries, “Grede”) on August 4, 2014 (the “Combination”). The Combination occurred through mergers with three separate wholly owned merger subsidiaries of Metaldyne Performance Group Inc. (“MPG,” the “Company,” “we,” “our” and “us” and similar terms refer to Metaldyne Performance Group Inc. and all of its subsidiaries, including HHI, Metaldyne and Grede). In connection with the Combination, 13.4 million shares of MPG common stock were issued in exchange for the outstanding shares of HHI, Metaldyne and Grede. On November 18, 2014, the outstanding shares of MPG common stock were split at a 5-to-1 ratio (the “Stock Split”). After the Stock Split, 67.1 million shares were outstanding. The number of authorized shares was increased to 400.0 million.

The Combination has been accounted for as a reorganization of entities under common control in a manner similar to a pooling of interests, that is, the bases of accounting of HHI, Metaldyne and Grede were carried over to MPG. These financial statements reflect the retrospective application of the MPG capital structure and the Stock Split for all periods presented.

All intercompany balances and transactions have been eliminated in consolidation.

The financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) as defined by the Financial Accounting Standards Board (“FASB”) within the FASB Accounting Standards Codification.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported therein. Use of significant estimates and judgments are inherent in the accounting for acquisitions, stock-based compensation, income taxes and employee benefit plans, as well as in the testing of goodwill and long-lived assets for potential impairment. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be based upon amounts that differ from these estimates.

Revenue is recognized when there is evidence of a sale, delivery has occurred or services have been rendered, the sales price is fixed or determinable and the collectability of receivables is reasonably assured. The Company has ongoing adjustments to its pricing arrangements with customers based on the related content and cost of its products. These adjustments are accrued as products are shipped to customers. Such pricing accruals are adjusted periodically and as they are settled with the customers. The Company has agreements allowing the pass-through of changes in the prices of raw materials referred to as material surcharges. Material surcharges are recognized as revenue when an agreement is reached, delivery of the goods has occurred and the amount of the material surcharge is determinable.

All highly liquid investments with an initial maturity of three months or less are considered to be cash and cash equivalents. A cash pooling strategy is in place with certain foreign operations. Checks issued but not presented to banks may result in book overdraft balances for accounting purposes and such book overdrafts are classified within accounts payable and the change as a component of operating cash flows.

Accounts receivable are stated at amounts estimated by management to be the net realizable value. An allowance for doubtful accounts is recorded when it is probable that amounts will not be collected based on specific identification of customer circumstances, age of the receivable and other pertinent information. Account balances are charged against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. Valuation allowances for doubtful accounts, pricing accruals and anticipated customer deductions and returns are recorded based upon current information.

Agreements are in place with international factoring companies to sell customer accounts receivable from locations in France, Germany, the Czech Republic, and the United Kingdom (“U.K.”) on a nonrecourse basis. The Company collects payment and remits such collections to the factoring companies for a portion of the sold receivables. The Company has no continuing involvement with all sold receivables. A commission is paid to the factoring company plus interest calculated from the date the receivables are sold to either the customer’s due date or a specified number of days thereafter or until the receivable is deemed uncollectible.

Inventories are stated at the lower of cost or market value. Cost is determined using the first-in, first-out method and includes the cost of materials, direct labor and the applicable share of manufacturing overhead. To the extent management determines it is holding excess or obsolete inventory, the inventory is written down to its net realizable value.

Pre-production engineering, research and development costs related to products made for customers under long-term supply agreements are expensed as incurred. Pre-production tooling costs related to products made for customers under long-term supply agreements are expensed when reimbursement is not contractually guaranteed by the customer or where the customer has not provided a noncancelable right to use the tooling.

Long-lived assets other than goodwill are evaluated for impairment if adverse events or changes in circumstances indicate it is more likely than not that the assets are impaired. For each asset group affected by such impairment indicators, the recoverability of the carrying value of that asset group is determined by comparing the forecasted undiscounted cash flows related to that asset group to the asset group’s carrying value.

Property and equipment, net: Property and equipment additions, including significant improvements, are recorded at cost, less accumulated depreciation. Upon retirement or disposal of property and equipment, the cost and accumulated depreciation are removed from the accounts and any gain or loss is included in cost of sales. Repair and maintenance costs are charged to expense as incurred.

Depreciation is provided for using the straight-line method over the estimated useful lives of the related assets. Assets held under capital lease are included in property and equipment, net and the depreciation of these assets is included in accumulated depreciation. Capital lease assets are depreciated over the lesser of the lease term or their useful lives.

Amortizable intangible assets, net: The useful lives of intangible assets are determined based on consideration of multiple factors including the Company’s expected use of the assets, the expected useful life of related assets and other external factors that may limit the useful life. Amortization is provided for using the straight-line method over the estimated useful lives for intangible assets with definite useful lives.

Goodwill is evaluated for impairment annually or more often if a triggering event occurs between annual tests. The annual tests are performed in the fourth quarter.

For each reporting unit to which goodwill has been assigned, the evaluation for impairment entails a quantitative analysis of the fair value of the reporting unit compared to the carrying value of the reporting unit. The Company may opt to perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount prior to performing the quantitative assessment.

The financial statements of foreign subsidiaries are translated to U.S. dollars at end-of-period exchange rates for assets and liabilities and an average monthly exchange rate for revenues and expenses. Translation adjustments are recorded as a component of accumulated other comprehensive loss within equity. Transaction gains and losses arising from fluctuations in foreign currency exchange rates on transactions denominated in currencies other than a subsidiary’s functional currency are recognized in other expense, net.

Stock-based compensation is measured based on the grant-date fair value of the award, and is recognized as expense over the requisite service period. To measure compensation cost of stock options, we determined fair value using a Black-Scholes pricing model. To measure compensation cost of restricted stock awards, we use the market value of the Company’s common stock as of the grant date.

Annual net periodic benefit expense and benefit liabilities under defined benefit pension plans and statutory retirement benefits are determined on an actuarial basis. Assumptions used in the actuarial calculations have a significant impact on plan obligations and expense. Pensions and other postretirement employee benefit costs and related liabilities and assets are dependent upon assumptions used in calculating such amounts. These assumptions include discount rates, expected returns on plan assets, health care cost trends, compensation and other factors. Each year end, actual experience is compared to the more significant assumptions used and the assumptions are adjusted, if warranted. Discount rates are based upon an expected benefit payments duration analysis and the equivalent average yield rate for high quality fixed income investments. Certain pension benefits are funded through investments held with trustees and the expected long-term rate of return on fund assets is based on actual historical returns modified for known changes in the market and any expected change in investment policy. Actual results that differ from the assumptions used are accumulated and amortized over future periods and, accordingly, generally affect recognized expense in future periods.

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The effect of income tax positions are recognized only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. Interest and penalties related to unrecognized tax benefits are recorded in income tax expense.

The accumulated amount of noncontrolling interests is classified in the consolidated balance sheets as a component of total stockholders’ equity and noncontrolling interests are reflected in the consolidated statements of comprehensive income and stockholders’ equity.

The fair values of assets and liabilities disclosed are categorized based on a fair value hierarchy giving the highest priority to the quoted prices in active markets for identical assets and liabilities and lowest priority to unobservable inputs. The various levels of the fair value hierarchy are described as follows:

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606). This guidance will supersede most current revenue recognition guidance, including industry-specific guidance. The underlying principle is that an entity will recognize revenue to depict the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services. The guidance provides a five-step analysis of transactions to determine when and how revenue is recognized. Other major provisions include capitalization of certain contract costs, consideration of time value of money in the transaction price, and allowing estimates of variable consideration to be recognized before contingencies are resolved in certain circumstances. The guidance also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. The guidance, as agreed to by the FASB, is effective for the interim and annual periods beginning on or after December 15, 2017. Early adoption is permitted on January 1, 2017. The guidance permits the use of either a retrospective or cumulative effect transition method. We have not yet selected a transition method and are currently evaluating the impact of the guidance on the consolidated financial statements.

In April 2015, the FASB issued ASU 2015-03, Interest—Imputation of Interest (Topic 835-30). This guidance requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. This guidance is effective for fiscal years and interim periods beginning after December 15, 2015, and requires retrospective application. We adopted this guidance as of April 3, 2016, using retrospective application. Upon adoption of this guidance, the debt and total assets presented on our consolidated balance sheet were reduced by net debt issuance costs, which totaled $19.6 million as of December 31, 2015.

In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes (Subtopic 740-10). ASU 2015-17 simplifies the presentation of deferred income taxes by eliminating the requirement for companies to present deferred tax liabilities and assets as current and non-current on the Consolidated Balance Sheets. Instead, companies will be required to classify all deferred tax assets and liabilities as non-current. This guidance is effective for annual and interim periods beginning after December 15, 2016 and early adoption is permitted. We elected to early adopt ASU 2015-17 prospectively, on December 31, 2015. The adoption of ASU 2015-17 did not have a material impact on our consolidated financial position, and had no impact on our results of operations or cash flows. No prior periods were retrospectively adjusted.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The primary focus of the standard addresses the accounting of lessees. It requires all lessees to recognize a right-of-use asset and a lease liability for virtually all leases (other than leases that meet the definition of a short-term lease) on the balance sheet. The recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from previous GAAP. Operating leases will result in straight-line expense while finance leases will result in depreciation expense recorded on the right-of-use asset and interest expense recorded on the lease liability. Quantitative and qualitative disclosures are required to provide insight into the extent of revenue and expense recognized and expected to be recognized from leasing arrangements. This guidance becomes effective January 1, 2019. Early adoption is permitted. We are currently evaluating the impact this guidance will have on our consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting (Topic 718). This guidance updates several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Specific changes include that all excess tax benefits and tax deficiencies (including tax benefits of dividends on share-based payment awards) should be recognized as income tax expense or benefit in the income statement. The tax effects of exercised or vested awards should be treated as discrete items in the reporting period in which they occur. An entity would also recognize excess tax benefits regardless of whether the benefit reduces taxes payable in the current period. Excess tax benefits would be classified along with other income tax cash flows as an operating activity in the consolidated statement of cash flows. Also, an entity can make an accounting policy election to either estimate the number of awards that are expected to vest (current GAAP) or account for forfeitures when they occur. This ASU also amends guidance for the calculation of earnings per share under the treasury stock method by removing excess tax benefits as an assumed proceed from the exercise of options. This guidance is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted in any interim or annual period. We did not early adopt this guidance and are currently evaluating the impact on the consolidated financial statements.

On September 2, 2016, the Grede segment acquired 100% of the equity of Brillion Iron Works, Inc. (“Brillion”) from its parent company Accuride Corporation (NYSE: ACW). Brillion was a reportable segment for Accuride Corporation and consists of a foundry located in Brillion, Wisconsin, (the “Brillion Facility”) which supplies castings to the industrial machinery, construction, agricultural equipment and oil and gas markets, including flywheels, pump housings, valve body housings, small engine components, and other industrial components.

The purchase price for the acquisition was $14.0 million of cash consideration. Under the acquisition method of accounting, all assets acquired and liabilities assumed were recorded in the consolidated financial statements at estimated fair value. The allocation of purchase price paid resulted in receivables of $8.1 million, inventory of $3.8 million, property, plant, and equipment of $15.9 million, assumed liabilities of $12.8 million, and a gain on bargain purchase of $1.0 million. The $1.0 million gain on bargain purchase is recorded within other, net on the consolidated statement of operations for the year ended December 31, 2016.

On September 12, 2016, the Company announced its plan to close the Brillion Facility and to consolidate substantially all of Brillion’s business into Grede’s existing locations. As of December 31, 2016, the Brillion Facility had ceased operations.

On June 2, 2014 (the “Acquisition Date”), a subsidiary of American Securities, ASP Grede Intermediate Holdings LLC (together with its subsidiaries, “Grede”), purchased 97.1% of the membership interests in Grede Holdings LLC (the “Grede Transaction”). Management and outside investors purchased the remaining membership interests. Upon completion of the Combination, 100% of Grede was owned by the Company.

The Grede Transaction was a cash purchase and was accounted for under the acquisition method. The accounting for the acquisition has been pushed-down to the financial statements of the Company. All assets acquired and liabilities assumed were recorded in the consolidated financial statements at estimated fair value.

The purchase price for the acquisition, net of cash and cash equivalents, was $829.7 million. The acquisition was funded by cash from capital contributions ($251.1 million from affiliates of American Securities, $6.5 million from certain members of the Grede management team and $1.0 million from outside investors) and the issuance of term loan debt.

The Grede Transaction was recorded, as revised for updated valuation information, in the accounts of the Company as follows:

The valuation method used to estimate the fair value of assets acquired and liabilities assumed entailed a cost approach, a market approach, an income approach or a combination of those approaches based on the nature of the asset or liability being valued. The estimated value of property and equipment was determined using a cost approach, relying on estimated replacement costs. Within amortizable intangible assets, customer relationships and platforms were valued using an income approach, relying on estimated multi-period excess earnings attributable to the relationship or platform.

Goodwill recognized was primarily attributable to potential operational synergies related to overhead cost reductions and the assembled workforce. None of the goodwill recognized is expected to be deductible for tax purposes.

The estimated fair value of inventories was $4.4 million higher than the carrying value at the time of the acquisition. The entire amount of this step-up in value was expensed in cost of sales during 2014 based on an analysis of Grede’s inventory turns.

Grede has estimated a remaining useful life of 10 years for the customer relationships and platforms due to the strong and longstanding relationships with our customers, which include many of the leading global OEMs and Tier 1 Suppliers. Grede has estimated a remaining useful life of 15 years for the trade names based on the nature of the industry, the length of time it has been in business and the relative strength of the name in the marketplace.

Included within other long-term liabilities are obligations for noncontributory defined benefit plans maintained by Grede for certain employees covered by collective bargaining agreements. The obligations for these plans were measured as of the acquisition date.

A weighted average discount rate of 4.04% was used to determine the projected benefit obligation. The rate of compensation increase is not applicable due to the fact that the plans’ benefits are based on credited years of service. The plans’ assets are composed primarily of pooled separate accounts in which the underlying securities are primarily publicly traded domestic equities and government debt securities. The amount of Grede revenues and earnings included in the consolidated statements of operations subsequent to the Grede Transaction was as follows:

Grede Transaction-related expenses incurred in 2014 were $13.0 million, which were recorded within acquisition costs, of which $8.3 million was paid to related parties.

The following table presents the revenues and earnings of MPG on a pro forma basis as if the Grede Transaction had occurred on January 1, 2013:

These results do not purport to be indicative of the results of operations which actually would have resulted had the Grede Transaction occurred on January 1, 2013, or of the future results of operations of the Company.

Receivables available for sale and sold under agreements with international factoring companies as of December 31 were as follows:

The carrying amount, accumulated depreciation and useful lives of property and equipment as of December 31 were as follows:

Property and equipment are depreciated on a straight-line basis. Depreciation expense was $151.4 million for 2016 $159.4 million for 2015, and $155.0 million for 2014.

Included in property and equipment are gross carrying values for assets under capital lease of $2.7 million and $13.8 mllion as of December 31, 2016 and 2015, respectively; related accumulated depreciation was $0.6 million and $9.0 million as of December 31, 2016 and 2015, respectively.

In June 2015, the Company announced plans to close its Berlin, Wisconsin facility included within the Grede segment. In conjunction with this announcement, the Company recorded a $4.0 million asset impairment charge within cost of sales to reduce the carrying value of Berlin’s assets to their estimated fair value based on level 3 valuation inputs. The closure, which is primarily a result of the industrial market slowdown, was completed in fiscal 2015.

In May 2016, the Company announced plans to close its Bessemer, Alabama facility included within the Grede segment. The closure, which is primarily due to declines in heavy truck and industrial equipment markets, was completed in fiscal 2016. In conjunction with this announcement, the Company recorded a $2.3 million asset impairment charge within cost of sales to reduce the carrying value of Bessemer’s assets to their estimated fair value based on level 3 valuation inputs.

The carrying values of goodwill by segment throughout fiscal years ended December 31, 2016 and 2015 were as follows:

In conjunction with our 2014 annual impairment test, the Company concluded that the goodwill assigned to a reportable unit within the HHI segment (the “Unit”) was no longer recoverable. The Unit manufactures wheel bearings for a large OEM customer at our facility in Sandusky, Ohio (the “Sandusky facility”). In our assessment of the recoverability of the Unit’s goodwill, the Company estimated the fair value of the Unit using an income method based on discounted cash flows, which resulted in a fair value below the carrying value. Key factors impacting a lower fair value included the scheduled attrition of programs for the OEM customer and the expiration of labor subsidies in September 2015. An impairment loss of $11.8 million was recognized in the fourth quarter of 2014, representing the full amount of goodwill assigned to the Unit.

The carrying amount and accumulated amortization of intangible assets as of December 31 were as follows:

Amortization expense was $69.9 million for 2016, $69.9 million for 2015, and $54.8 million for 2014. As of December 31, 2016, the weighted-average amortization period of customer relationships and platforms was 12 years. Other intangible assets primarily consist of patented and unpatented technology, and trade names and trademarks, which have weighted-average amortization periods of 13 and 15 years, respectively.

Estimated amortization expense for the next five years is $69.9 million for 2017, $68.4 million for 2018 and 2019, $68.3 million for 2020, and $68.2 for 2021.

In October 2014, MPG Holdco I Inc., the Company’s wholly owned subsidiary (“Holdco”) entered into a senior secured credit facility (the “Senior Credit Facilities”) consisting of a $1,350.0 million term loan (“Term Loan Facility”), maturing in 2021, and a $250.0 million revolving credit facility (“Revolving Credit Facility”), maturing in 2019.

Interest on the Term Loan Facility accrued at a rate equal to the London Interbank Offered Rate (“LIBOR”) rate (bearing a LIBOR floor of 1.00%) plus an applicable margin of 3.25% or a base rate that is the higher of the Federal Funds Rate (plus 0.50%), the U.S. prime rate as published in The Wall Street Journal, or LIBOR (plus 1.00%), plus an applicable margin of 2.25%, at Holdco’s option. Prior to the Company’s initial public offering on December 12, 2014, the applicable margin was 3.50% for LIBOR rate loans and 2.50% for base rate loans. The interest rate in effect as of December 31, 2014 was 4.25%. The Term Loan Facility was payable in quarterly installments of $3.375 million beginning in March 2015.

On May 8, 2015, the Company amended its Senior Credit Facilities to reduce the applicable interest rate on the Term Loan Facility and to refinance the outstanding balance of the Term Loan Facility with new term loans (the “Refinanced Term Loan Facility”). The Refinanced Term Loan consists of a $1,072.6 million U.S. Dollar denominated term loan (the “USD Term Loan”) and a €225.0 million Euro denominated term loan (the “Euro Term Loan”). The USD Term Loan was issued at par and accrues interest at LIBOR, bearing a 1.00% floor, plus an applicable margin of 2.75%. The Euro Term Loan was issued at an original issuance discount of 0.50%, or $1.3 million, and accrues interest at the Euro Interbank Offer Rate (“EURIBOR”), bearing a 1.00% floor, plus an applicable margin of 2.75%. At December 31, 2016, the effective interest rate on both the USD Term Loan and Euro Term Loan was 3.75%. Principal repayments on the USD Term Loan and Euro Term Loan are payable in quarterly installments equal to 0.25% of the original loan balances. All other terms of the amended Senior Credit Facilities remain substantially unchanged. In connection with amending the Senior Credit Facilities, the Company paid fees to third parties totaling $1.8 million, of which $1.6 million was expensed.

During 2015, the Company made $10.0 million in voluntary prepayments on the previous Term Loan Facility and $45.0 million in voluntary prepayments on the Refinanced Term Loan Facility.

Interest on the Revolving Credit Facility is accrued at a rate equal to the LIBOR rate plus an applicable margin of 3.25% or a base rate that is the higher of the Federal Funds Rate (plus 0.50%), the U.S. prime rate as published in The Wall Street Journal, or LIBOR (plus 1.00%), plus an applicable margin of 2.25%, at Holdco’s option. The applicable margin is based on a leverage ratio grid. As of December 31, 2016, zero was outstanding under the Revolving Credit Facility and $236.8 million was available after giving effect to outstanding letters of credit.

Holdco pays fees with respect to the Revolving Credit Facility, including (i) an unused commitment fee of 0.50% or 0.375% based on a leverage ratio, (ii) fixed fees with respect to letters of credit of 3.25% per annum on the stated amount of each letter of credit outstanding during each month and (iii) customary administrative fees.

The agreement governing the Senior Credit Facilities contains certain covenants that, among other things, require MPG Holdco to maintain a leverage ratio once revolver borrowings and letters of credit exceed 35% of aggregate revolving credit commitments as defined under the terms of the Senior Credit Facilities and to comply with customary affirmative and negative covenants. In addition to scheduled maturities, the Refinanced Term Loan Facility is subject to customary mandatory prepayments, including an excess cash flow sweep based on leverage ratio step downs and a mandatory prepayment for certain asset sales. The Company is required to prepay a portion of the Term Loan Facility in an amount equal to a percentage of the preceding fiscal year’s excess cash flow, as defined, with such percentage based on our leverage ratio, as defined. No mandatory prepayments are due as of December 31, 2016.

The agreements governing the Senior Credit Facilities and the Registered Notes restrict the payment of dividends except (i) to pay reasonable estimated amount of taxes as long as not prohibited by applicable laws, (ii) to pay legal, accounting, and reporting expenses, (iii) to pay general administrative costs and expenses, and reasonable directors fees, and expenses; (iv) to repurchase stock owned by employees, (v) for management or similar fees, (vi) to pay franchise or similar taxes to maintain corporate existence, (vii) permitted tax distributions, and (viii) to pay dividends up to $30.0 million or 6% of the net cash proceeds from an underwritten public offering of our common stock.

The Senior Credit Facilities are guaranteed by MPG and certain of its direct and indirect existing and future domestic subsidiaries and are secured on a first priority basis by all or substantially all of our assets, the assets of Holdco and each guarantor’s assets, including a pledge of capital stock of our U.S. subsidiaries that hold domestic assets and a portion of the capital stock of the first tier foreign subsidiaries of MPG and each guarantor. The Registered Notes are guaranteed by MPG and certain of its direct and indirect existing and future domestic subsidiaries. The Registered Notes are pari passu in right of payment with the Senior Credit Facilities, but are effectively subordinated to the Senior Credit Facilities to the extent of the value of the assets securing such indebtedness.

In October 2014, Holdco issued $600.0 million of senior notes (“Senior Notes”). The Senior Notes mature in 2022, and bear interest at a rate of 7.375%, payable semi-annually on April 15 and October 15 per the terms of the indenture governing the Senior Notes. In May, 2015, the Company launched an offer to exchange notes registered with the SEC (the “Registered Notes”) for its existing Senior Notes that were not registered with the SEC. The Registered Notes have substantially identical terms as the Senior Notes. The exchange offer was made pursuant to a prospectus included in a Registration Statement on Form S-4 filed with the SEC on May 1, 2015, and declared effected by the SEC on May 8, 2015. The exchange offer was completed on June 8, 2015, and all outstanding original Senior Notes were tendered and exchanged for Registered Notes.

The indenture governing the Senior Notes contains certain covenants, including a covenant that restricts the payment of dividends except (i) to pay reasonable estimated amount of taxes as long as not prohibited by applicable laws, (ii) to pay legal, accounting, and reporting expenses, (iii) to pay general and administrative costs and expenses, and reasonable directors fees, and expenses, (iv) to repurchase stock owned by employees, (v) for management or similar fees, (vi) to pay franchise or similar taxes to maintain corporate existence and (vii) to pay dividends up to $30.0 million or 6% of the net cash proceeds from an underwritten public offering of our common stock.

As of December 31, 2016, the Company’s scheduled principal payments of long-term debt for the five succeeding years were $13.1 million for 2017, $13.1 million for 2018, $13.1 million for 2019, $13.1 million for 2020 and $1,192.4 million for 2021, and $600.0 million thereafter. The scheduled principal payments are exclusive of potential required prepayments.

The Company leases certain property and equipment under capital and operating lease arrangements that expire at various dates through 2036. Most of the operating leases provide the option, after the initial lease term, either to purchase the property or renew its lease at the then fair value.

Future minimum lease payments by the Company under capital and operating leases that have initial or remaining noncancelable terms in excess of one year as of December 31, 2016 are as follows:

Rental expense for operating leases was $14.5 million for 2016, $12.9 million for 2015, and $12.4 million for 2014.

On August 4, 2014, in connection with the Combination, the issued and outstanding shares of HHI, Metaldyne and Grede were converted to shares of MPG. The number of MPG shares issued upon conversion was determined based on the relative fair value of each entity to the overall fair value of MPG at the time of the Combination. Upon completion of the Combination, 13.4 million shares of MPG common stock were issued and outstanding.

On November 18, 2014, MPG common stock was split at a 5-to-1 ratio, with each stockholder receiving four additional shares for each share held. Upon completion of the Stock Split, 67.1 million shares were outstanding. The number of authorized shares was increased to 400 million.

The Combination and the Stock Split have been retrospectively applied to the Successor Period financial statements.

On December 12, 2014, American Securities sold 10,000,000 shares of the Company’s common stock under an IPO, for which no proceeds were received by the Company. The Company recognized costs directly attributable to the IPO of $5.6 million within paid-in capital. On January 15, 2015, the underwriters of the IPO exercised their option to purchase additional shares of our common stock from American Securities. After selling these additional shares, American Securities owned 78.5% of our common stock.

In 2016 and 2015, the Company declared the following cash dividends on its common stock, totaling $25.4 million and $18.5 million, respectively.

As of December 31, 2016, the Company had accrued dividends of $0.6 million on unvested Restricted Shares, which are to be paid upon vesting.

In 2014, prior to the Combination, HHI paid dividends to its stockholders totaling $111.3 million, which was primarily funded by an incremental term loan.

On February 24, 2016, our board of directors authorized a share repurchase program (the “Share Repurchase Program”). The Share Repurchase Program, as amended on August 3, 2016, authorized the Company to purchase shares of its common stock for an aggregate repurchase price not to exceed $35.0 million. Subject to applicable rules and regulations, shares could be repurchased through open market purchases, privately negotiated transactions, or otherwise. On November 3, 2016, the Company suspended the Share Repurchase Program due to the pending merger with American Axle & Manufacturing Holdings, Inc. As of December 31, 2016, cumulative shares repurchased totaled 1,898,261 shares at an average purchase price per share of $15.56. The repurchased shares are presented as common stock held in treasury, at cost, on the consolidated balance sheets.

Changes in Accumulated Other Comprehensive Loss Attributable to Stockholders, Net of Tax

For 2014, the weighted average shares outstanding were retrospectively adjusted to reflect MPG common stock outstanding upon completion of the Combination and the Stock Split; the equivalent shares for outstanding stock-based compensation awards were retrospectively adjusted to reflect the conversion of those awards into options to purchase shares of Common Stock of MPG and the Stock Split.

The number of equivalent shares excluded from the calculation as they were anti-dilutive was 0.1 million for 2016, de minimis for 2015, and 0.8 million for 2014.

In August 2014, the Board of Directors of MPG approved an equity incentive plan (the “MPG Plan”) for officers, key employees and non-employees. The MPG Plan permits the grant of equity awards to purchase up to 5.9 million shares of MPG common stock. All awards granted on or after August 4, 2014 were issued under the MPG Plan.

The Company has granted restricted stock awards and restricted stock unit awards to certain employees and nonemployee directors (collectively the “Restricted Shares”).

The Restricted Shares are being expensed based on their grant-date fair values on a straight-line basis over the requisite service period for the entire award. The grant-date fair values were determined using the fair value of the Company’s common stock as of the grant date.

Changes in the number of Restricted Shares outstanding for the years ended December 31, 2016 and 2015 were as follows:

The Company has granted options to certain employees to purchase shares of its common stock with the following terms:

All options are being expensed on their grant-date fair values on a straight-line basis over the requisite service period for the entire award. The grant-date fair values of the options were determined using a Black-Scholes valuation model based on the following weighted average assumptions:

The risk-free rate was determined based on U.S. Treasury yield curves of securities matching the expected term of the awards or a blend of securities with similar terms. The expected term was determined using the simplified method as the Company did not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. Expected volatility was estimated based on historical volatility of comparable companies within our industry. The expected dividend yield was determined based on the expected annual dividend amount divided by the common stock price as of the grant date.

Changes in the number of Options outstanding for the years ended December 31, 2016 and 2015 were as follows:

Proceeds and tax benefit realized from the exercise of stock options during the years ended December 31, 2016, 2015 and 2014 were as follows:

Compensation expense associated with the outstanding stock-based awards was recognized within selling, general and administrative expenses. Total unrecognized compensation cost related to non-vested awards as of December 31, 2016 was approximately $31.0 million, which is expected to be recognized ratably over the remaining vesting terms.

In 2015, the Company modified 297,378 restricted shares and 1,387,087 options in connection with employee separation agreements. In accordance with these agreements, all non-vested awards vested immediately at the date of separation. In addition, the terms of the options were modified from the original term to exercise of 30 days after separation to a term of three or five years based on the respective separation agreement. The modification, which affected five participants, resulted in additional compensation expense related to restricted shares and options of approximately $4.1 million and $7.6 million, respectively, for the year ended December 31, 2015.

In August 2014, in conjunction with the Combination, all outstanding stock-based compensation awards were converted (the “Conversion”) to options to acquire MPG common stock. The Conversion was accounted for as a modification resulting from an equity restructuring. The terms of the original awards were modified to eliminate and replace performance-based vesting with time-based vesting over the remaining vesting periods as set forth in the original option agreements. The modification, which affected fifty-nine option holders, resulted in no incremental compensation cost to the Company. The number of options issued upon conversion and the exercise price of those options were determined based on the relative fair values of the underlying stock of HHI, Metaldyne, or Grede to the overall fair value of MPG common stock at the time of the Combination. Prior to the Combination and Conversion, Grede had issued 970,395 equity awards in 2014, HHI and Metaldyne had issued 39,885 and 1,991,305 equity awards in 2013, respectively, and, as of the beginning of 2013, HHI had 1,888,450 equity awards issued and outstanding.

The following is a reconciliation of tax computed at the U.S. federal statutory rate to the provision for income taxes allocated to income from continuing operations:

As of December 31, 2016, the Company has not made a provision for U.S. or additional foreign withholding taxes on approximately $265 million of the excess of the amount for financial reporting over the tax basis of investments in foreign subsidiaries that is indefinitely reinvested. Such amounts could become taxable upon the sale or liquidation of these foreign subsidiaries or upon dividend repatriation. If a U.S. deferred tax liability were to be recorded on those basis differentials, the estimated tax liability would approximate $24.8 million. For those wholly owned foreign subsidiaries where basis differentials are not indefinitely reinvested, the Company provides deferred income taxes on the basis differentials. As of December 31, 2016 and 2015, this deferred income tax liability totaled $3.9 million and $2.2 million, respectively.

The Protecting Americans from Tax Hikes Act of 2015 extended the “look-through” rule under subpart F of the U.S. Internal Revenue Code through 2019. The “look-through rule” provides an exception to the U.S. taxation of certain income generated by foreign subsidiaries. As a result of this change in law, the Company recorded a $3.2 million income tax benefit in 2015, to derecognize a portion of the deferred tax liabilities previously recorded.

In the fourth quarter of 2014, MPG made the assertion that the earnings of certain foreign subsidiaries within the Metaldyne segment are indefinitely reinvested. This determination resulted from the Refinancing in October 2014 and the IPO in December 2014, which added significant flexibility to the Company’s capital structure. The assertion is also supported by the operational and investing needs of the Company’s foreign locations. As a result of this change, the Company recorded a $31.6 million deferred tax benefit for the year ended December 31, 2014 to derecognize a portion of the deferred tax liabilities previously recorded.

As of December 31, 2016 and 2015, certain foreign subsidiaries have NOL carryforward balances totaling $57.6 million and $40.2 million, respectively. Of the December 31, 2016 balance, foreign NOL carryforwards totaling $5.4 million will expire in various years ranging from 2018 through 2025, while the remaining balance of $52.3 million has no expiration date.

The Company continues to maintain a valuation allowance related to its net deferred tax assets in multiple jurisdictions. As of December 31, 2016 and 2015, the Company had valuation allowances of $15.3 million and $11.8 million, respectively, primarily related to tax loss and credit carryforwards.

For its U.S. federal income tax provision, the Company has recorded a research and experimentation tax credit of $2.4 million and $1.3 million for the year ended December 31, 2016 and 2015, respectively.

A reconciliation of the total amounts of unrecognized tax benefits for the years ended December 31 follows:

The reserve for unrecognized tax benefits totaled $4.1 million and $4.5 million as of December 31, 2016 and 2015, respectively. This reserve primarily consists of foreign tax contingencies related to ongoing tax audits. Additionally, as of December 31, 2015, deferred tax assets related to net operating losses were reduced by $2.7 million. The deferred tax assets were re-established during the year ended December 31, 2016 due to a favorable resolution of an audit issue for one of the Company’s foreign subsidiaries. All of the Company’s unrecognized tax benefits would, if recognized, reduce its effective tax rate. In connection with the Metaldyne Transaction, the former owner’s stockholders have indemnified Metaldyne for certain pre-closing taxes. An indemnification asset of $4.7 million and $7.6 million related to the foreign tax contingencies, including interest and penalties, is recorded in receivables, net as of December 31, 2016 and 2015, respectively.

The Company recognizes both interest and penalties accrued with respect to an underpayment of income taxes as income tax expense. Related to the unrecognized tax benefits noted above, the amount of interest and penalty expense was $0.1 million, $0.2 million, and $0.2 million for the years ended December 31, 2016, 2015, and 2014, respectively. The accrued liability for penalties and interest as of December 31, 2016, 2015 and 2014 was $1.4 million, $1.3 million and $1.1 million, respectively.

The Company has open tax years from 2004 to 2016 with varying taxing jurisdictions where taxes remain subject to examination including, but not limited to, the United States of America, Spain, France, Germany, and India. All necessary adjustments for the anticipated outcomes of ongoing examinations have been properly addressed or accrued. As of December 31, 2016 and 2015, since existing examinations remain pending, it is not possible to reasonably estimate the expected change to the total amount of unrecognized tax benefits over the next twelve months.

The Company sponsors defined benefit pension plans, including certain unfunded supplemental retirement plans, covering certain active and retired employees for its operations in the U.S., U.K., Germany, Mexico, France and Korea (the “Defined Benefit Pension Plans”).

The straight-line method is used to amortize prior service amounts and unrecognized net actuarial (gains) losses.

Changes in projected benefit obligations and plan assets for the years ended December 31 were as follows:

	2016						2015
	U.S.			Non-U.S.			U.S.			Non-U.S.
	(In millions)
Accumulated benefit obligation at the end of the year	$	32.1			52.9			32.8			49.6
Change in projected benefit obligation:
Beginning projected benefit obligation	$	32.8			52.1			36.6			56.8
Service cost		—			1.2			—			1.2
Interest cost		1.3			1.7			1.3			1.7
Actuarial (gain) loss		0.3			8.3			(1.3	)		(2.9	)
Benefits paid		(1.4	)		(1.7	)		(1.2	)		(2.0	)
Effect of settlements		(0.9	)		—			(2.6	)		—
Other adjustments		—			—			—			1.7
Exchange rate changes		—			(6.5	)		—			(4.4	)
Ending projected benefit obligation		32.1			55.1			32.8			52.1
Change in plan assets:
Beginning fair value of plan assets	$	23.9			27.6			27.3			29.2
Actual return on plan assets		1.1			3.4			(0.3	)		0.1
Employer contributions		—			1.5			0.7			1.8
Benefits paid		(1.4	)		(1.7	)		(1.2	)		(2.0	)
Effect of settlements		(0.9	)		—			(2.6	)		—
Exchange rate changes		—			(4.6	)		—			(1.5	)
Ending fair value of plan assets	$	22.7			26.2			23.9			27.6

Amounts recognized on the consolidated balance sheets as of December 31 were as follows:

The current portion of the above retirement benefit liabilities is recognized in accrued liabilities and the noncurrent portion is recognized in other long-term liabilities.

Changes in accumulated other comprehensive income for the years ended December 31 were as follows:

The amounts in accumulated other comprehensive income that are expected to be recognized as components of net periodic benefit cost in 2017 are de minimis for the U.S. plans and $0.3 million for the non-U.S. plans.

Weighted average assumptions used to determine the benefit obligations as of December 31 were as follows:

Weighted average assumptions used to determine net periodic benefit cost for the periods ended of December 31 were as follows:

The discount rate used was determined based upon available yields for high quality corporate and government bonds of the plan countries, utilizing similar durations/terms and currencies of the plan liabilities. The non-U.S. country specific rates are weighted by projected benefit obligation to arrive at a single weighted average rate.

The expected long-term rate of return for the plans’ total assets is based on the expected return of each of the below asset categories, weighted based on the target allocation for each class. Equity securities and growth assets are expected to return 6% to 8% over the long-term, while debt securities and liability matching assets are expected to return between 2% and 4%.

The rate of compensation increase for the U.S. plans is not applicable as the plans’ benefits are based upon credited years of service.

Certain policies are established to provide for growth of capital with a moderate level of volatility by investing assets per the target allocations. The plans’ asset allocation percentages at December 31, 2016 and 2015 approximated the target asset allocation ranges. The targeted asset allocations and the investment policies are reviewed periodically to determine if the policies should be changed.

Fair value measurements for plan assets as of December 31, 2016 were as follows:

Fair value measurements for plan assets as of December 31, 2015 were as follows:

Level 1 assets include cash and cash equivalents and are valued at cost. Level 2 assets include investments in mutual funds and are valued using observable market inputs. Level 3 assets include investments in real estate and are valued using unobservable inputs that are significant to the overall fair value measurement.

Contributions to the U.S. plans and the non-U.S. plans in 2017 are estimated to be $0.3 and $0.8 million, respectively. Contributions are expected to meet or exceed the minimum funding requirements of the relevant governmental authorities. Contributions may be made in excess of the minimum funding requirements in response to the plans’ investment performance, to achieve funding levels required by defined benefit plan arrangements or when deemed to be financially advantageous to do so based on their other cash requirements.

The following payments, which reflect expected future service, as appropriate, are expected to be paid by the plans:

The Company sponsors a number of qualified defined contribution personal savings plans for U.S. hourly and salaried employees. These plans allow eligible employees to contribute a portion of their compensation into the plans and generally provide employer matching contributions. In addition to the employer match, for certain of the plans, a contribution is made for each participant based on a dollar amount per hour worked. Contributions were $6.4 million for 2016, $7.6 million for 2015, and $6.7 million for 2014 .

The carrying value and fair value of the notes and term loans as of December 31 were as follows:

The fair values of the Registered Notes and term loans were estimated using quoted market prices. As the markets for this debt are not active, the debt is categorized as Level 2 within the fair value hierarchy.

The fair value of the Company’s other financial instruments, cash and cash equivalents, revolving lines of credit and other long-term debt, are estimated to equal their carrying values due to their short-term nature.

Various claims, lawsuits and administrative proceedings are pending or threatened against the Company or its subsidiaries, covering a wide range of matters that arise in the ordinary course of the Company’s business activities, primarily with respect to commercial, environmental and occupational and employment matters. Commercial disputes vary in nature and have historically been resolved by negotiations between the parties. Although the outcome of any of these matters cannot be predicted with certainty, the Company does not believe that any of these proceedings or matters in which the Company is currently involved will have a material adverse effect on the Company’s results of operations, financial position or cash flows.

In addition, the Company is conducting remedial actions at certain of its facilities. A reserve estimate for each environmental matter is established using standard engineering cost estimating techniques on an undiscounted basis. In determining such costs, consideration is given to the professional judgment of Company environmental engineers. The Company believes any liability that may result from the resolution of environmental matters for which sufficient information is available to support these cost estimates will not have a material adverse effect on the Company’s results of operations, financial position or cash flows. The Company cannot predict the effect of compliance with environmental laws and regulations with respect to unknown environmental matters on the Company’s results of operations, financial position or cash flows or the possible effect of compliance with environmental requirements imposed in the future.

On November 3, 2016, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”), by and among the Company, American Axle & Manufacturing Holdings, Inc. (“American Axle”) and Alpha SPV I, Inc. (“Merger Sub”), a wholly owned subsidiary of American Axle, pursuant to which American Axle will acquire all of the outstanding equity of the Company.

In accordance with and subject to the terms and conditions of the Merger Agreement, Merger Sub will merge with and into the Company (the “Merger”), with the Company surviving the Merger and continuing as a wholly-owned subsidiary of American Axle. Upon consummation of the transactions contemplated by the Merger Agreement, each outstanding share of common stock, par value $0.001 per share, of the Company will automatically be converted into the right to receive (i) $13.50 per share in cash (without interest) and (ii) 0.5 shares of common stock, par value $0.01 per share, of American Axle.

The consummation of the Merger and the transactions contemplated by the Merger Agreement are subject to the satisfaction of customary closing conditions, including the receipt of Mexican antitrust approval, the approval of the Merger Agreement by the requisite vote of the Company’s stockholders and approval of the issuance of shares of common stock of American Axle to the Company’s stockholders in the Merger by the requisite vote of American Axle’s stockholders.

HHI, Metaldyne and Grede were parties to management services agreement with American Securities. Advisory and management fees and expenses totaling $14.7 million for 2014 were paid to American Securities under the agreements. These agreements were terminated upon completion of the initial public offering of the Company’s common stock on December 12, 2014. As of December 31, 2016 there were no amounts due to American Securities.

As of December 31, 2016, affiliates of American Securities held 76.0% of the outstanding common stock of the Company.

The Company is organized and operated as three operating segments: the HHI segment, the Metaldyne segment and the Grede segment.

The HHI segment manufactures highly-engineered metal-based products for the North American light vehicle market. These components are used in Powertrain and Safety-Critical applications, including transmission components, drive line components, wheel hubs, axle ring and pinion gears, sprockets, balance shaft gears, timing drive systems, VVT components, transfer case components and wheel bearings.

The Metaldyne segment manufactures highly-engineered metal-based Powertrain products for the global light vehicle markets. These components include connecting rods, VVT components, balance shaft systems, and crankshaft dampers, differential gears, pinions and assemblies, valve bodies, hollow and solid shafts, clutch modules and assembled end covers.

The Grede segment manufactures cast, machined and assembled components for the light, commercial and industrial (agriculture, construction, mining, rail, wind energy and oil field) vehicle and equipment end-markets. These components are used in Powertrain and Safety-Critical applications, including turbocharger housings, differential carriers and cases, scrolls and covers, brake calipers and housings, knuckles, control arms and axle components.

The Company evaluates the performance of its operating segments based on external sales and Adjusted EBITDA. Adjusted EBITDA is calculated as net income (loss) before tax adjusted to exclude depreciation and amortization expense, interest expense, net and other income and expenses that are either non-recurring or non-cash by nature, as well as management fees paid to American Securities (“sponsor management fees”). Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies.

Elimination and other above reflects the elimination of intercompany sales, payables and receivables and assets held by the parent company. Assets held by the parent company primarily consist of cash and cash equivalents, and deferred tax assets.

The following table presents total assets, long-lived assets and net assets by geographic area, attributed to each subsidiary’s continent of domicile as of December 31, 2016 and 2015.

The following table presents the net sales by geographic area, attributed to each subsidiary’s continent of domicile:

During 2016, direct sales to two customers accounted for 25% and 21% of net sales, respectively.

The outstanding balances of the Senior Credit Facilities and Registered Notes, entered into and issued on October 20, 2014, are guaranteed by all of the Company’s existing and future domestic subsidiaries (“Guarantor Subsidiaries”). All of the Guarantor Subsidiaries are 100% owned by Metaldyne Performance Group Inc. (“Parent”) and Holdco (“Issuer”). The guarantee is full, unconditional, joint and several. The Company’s non-domestic subsidiaries have not guaranteed the Senior Credit Facilities or the Registered Notes (“Non-Guarantor Subsidiaries”).

The accompanying supplemental condensed, consolidating financial information is presented using the equity method of accounting for all periods presented. Under this method, investments in subsidiaries are recorded at cost and adjusted for the Company’s share in the subsidiaries’ cumulative results of operations, capital contributions and distributions and other changes in equity. Elimination entries relate primarily to the elimination of investments in subsidiaries and associated intercompany balances and transactions.

	Parent		Issuer		Guarantor		Non-Guarantor		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	—		83.8		0.9		125.0		—			209.7
Receivables, net:
Trade		—		—		231.5		83.6		(0.5	)		314.6
Other		—		—		92.7		20.6		(78.5	)		34.8
Total receivables, net		—		—		324.2		104.2		(79.0	)		349.4
Inventories		—		—		118.1		50.3		—			168.4
Prepaid expenses		—		1.7		7.8		2.0		—			11.5
Other assets		20.8		—		15.3		16.6		—			52.7
Total current assets		20.8		85.5		466.3		298.1		(79.0	)		791.7
Property and equipment, net		—		3.1		567.2		261.3		—			831.6
Goodwill		—		—		673.2		234.5		—			907.7
Amortizable intangible assets, net		—		—		506.8		132.3		—			639.1
Deferred income taxes		14.2		—		—		7.4		(14.2	)		7.4
Other assets		—		2.0		10.3		0.7		—			13.0
Intercompany receivables		93.4		1,618.2		—		8.3		(1,719.9	)		—
Investment in subsidiaries		685.6		826.9		696.7		—		(2,209.2	)		—
Total assets	$	814.0		2,535.7		2,920.5		942.6		(4,022.3	)		3,190.5
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	—		1.2		169.4		127.8		(37.9	)		260.5
Accrued compensation		—		3.2		34.3		12.1		—			49.6
Accrued liabilities		0.8		20.7		32.1		63.5		(40.0	)		77.1
Short-term debt		—		—		—		2.1		(1.1	)		1.0
Current maturities, long-term debt and capital lease obligations		—		13.1		—		0.1		—			13.2
Total current liabilities		0.8		38.2		235.8		205.6		(79.0	)		401.4
Long-term debt, less current maturities		—		1,809.2		—		—		—			1,809.2
Capital lease obligations		—		—		22.7		—		—			22.7
Deferred income taxes		—		2.0		228.2		7.7		(14.2	)		223.7
Other long-term liabilities		—		0.7		24.4		29.2		—			54.3
Intercompany payables		137.4		—		1,582.5		—		(1,719.9	)		—
Total liabilities		138.2		1,850.1		2,093.6		242.5		(1,813.1	)		2,511.3
Stockholders’ equity:
Total equity attributable to stockholders		675.8		685.6		826.9		696.7		(2,209.2	)		675.8
Noncontrolling interest		—		—		—		3.4		—			3.4
Total stockholders’ equity		675.8		685.6		826.9		700.1		(2,209.2	)		679.2
Total liabilities and stockholders’ equity	$	814.0		2,535.7		2,920.5		942.6		(4,022.3	)		3,190.5

	Parent		Issuer		Guarantor		Non- Guarantor		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	—		50.5		10.8		106.9		—			168.2
Receivables, net:
Trade		—		—		242.4		67.7		(1.0	)		309.1
Other		0.1		—		70.9		19.8		(55.4	)		35.4
Total receivables, net		0.1		—		313.3		87.5		(56.4	)		344.5
Inventories		—		—		139.1		47.7		—			186.8
Prepaid expenses		—		3.2		7.4		4.4		—			15.0
Other assets		5.3		—		8.6		7.6		—			21.5
Total current assets		5.4		53.7		479.2		254.1		(56.4	)		736.0
Property and equipment, net		—		2.0		546.3		237.7		—			786.0
Goodwill		—		—		673.2		234.5		—			907.7
Amortizable intangible assets, net		—		—		561.7		147.2		—			708.9
Deferred income taxes		14.2		—		—		1.7		(14.2	)		1.7
Other assets		—		2.8		14.2		0.3		—			17.3
Intercompany receivables		56.2		1,734.6		—		5.0		(1,795.8	)		—
Investment in subsidiaries		619.0		695.9		673.8		—		(1,988.7	)		—
Total assets	$	694.8		2,489.0		2,948.4		880.5		(3,855.1	)		3,157.6
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	—		1.0		165.7		105.0		(22.8	)		248.9
Accrued compensation		—		4.4		38.5		12.3		—			55.2
Accrued liabilities		0.5		19.1		27.2		53.6		(33.6	)		66.8
Short-term debt		—		—		—		0.7		—			0.7
Current maturities, long-term debt and capital lease obligations		—		13.2		1.1		0.2		—			14.5
Total current liabilities		0.5		37.7		232.5		171.8		(56.4	)		386.1
Long-term debt, less current maturities		—		1,826.9		—		0.2		—			1,827.1
Capital lease obligations		—		—		22.5		—		—			22.5
Deferred income taxes		—		5.0		233.4		7.1		(14.2	)		231.3
Other long-term liabilities		—		0.4		26.5		24.7		—			51.6
Intercompany payables		58.2		—		1,737.6		—		(1,795.8	)		—
Total liabilities		58.7		1,870.0		2,252.5		203.8		(1,866.4	)		2,518.6
Stockholders’ equity:
Total equity attributable to stockholders		636.1		619.0		695.9		673.8		(1,988.7	)		636.1
Noncontrolling interest		—		—		—		2.9		—			2.9
Total stockholders’ equity		636.1		619.0		695.9		676.7		(1,988.7	)		639.0
Total liabilities and stockholders’ equity	$	694.8		2,489.0		2,948.4		880.5		(3,855.1	)		3,157.6

For the Year Ended December 31, 2016	Parent			Issuer			Guarantor			Non-Guarantor		Eliminations			Consolidated
Net sales	$	—			—			2,182.5			752.4		(144.2	)		2,790.7
Cost of sales		—			—			1,838.6			627.1		(144.2	)		2,321.5
Gross profit		—			—			343.9			125.3		—			469.2
Selling, general and administrative expenses		—			—			197.5			44.8		—			242.3
Operating profit		—			—			146.4			80.5		—			226.9
Interest expense, net		—			98.7			(3.6	)		8.4		—			103.5
Other, net		(4.3	)		(8.3	)		(4.3	)		5.0		—			(11.9	)
Other expense, net		(4.3	)		90.4			(7.9	)		13.4		—			91.6
Income (loss) before tax		4.3			(90.4	)		154.3			67.1		—			135.3
Income tax expense (benefit)		1.1			(26.1	)		44.5			18.9		—			38.4
Income (loss) before from equity in subsidiaries		3.2			(64.3	)		109.8			48.2		—			96.9
Earnings from equity in subsidiaries		93.1			157.4			47.6			—		(298.1	)		—
Net income		96.3			93.1			157.4			48.2		(298.1	)		96.9
Income attributable to noncontrolling interest		—			—			—			0.6		—			0.6
Net income attributable to stockholders	$	96.3			93.1			157.4			47.6		(298.1	)		96.3

For the Year Ended December 31, 2015	Parent			Issuer			Guarantor			Non-Guarantor		Eliminations			Consolidated
Net sales	$	—			—			2,432.3			739.7		(124.7	)		3,047.3
Cost of sales		—			—			2,034.4			621.6		(124.7	)		2,531.3
Gross profit		—			—			397.9			118.1		—			516.0
Selling, general and administrative expenses		—			—			205.5			44.1		—			249.6
Operating profit		—			—			192.4			74.0		—			266.4
Interest expense, net		—			102.2			(4.2	)		9.5		—			107.5
Loss on debt extinguishment		—			0.4			—			—		—			0.4
Other, net		—			(8.2	)		(10.6	)		3.4		—			(15.4	)
Other expense, net		—			94.4			(14.8	)		12.9		—			92.5
Income (loss) before tax		—			(94.4	)		207.2			61.1		—			173.9
Income tax expense (benefit)		—			(30.9	)		56.2			22.8		—			48.1
Income (loss) before from equity in subsidiaries		—			(63.5	)		151.0			38.3		—			125.8
Earnings from equity in subsidiaries		125.4			188.9			37.9			—		(352.2	)		—
Net income		125.4			125.4			188.9			38.3		(352.2	)		125.8
Income attributable to noncontrolling interest		—			—			—			0.4		—			0.4
Net income attributable to stockholders	$	125.4			125.4			188.9			37.9		(352.2	)		125.4

For the Year Ended December 31, 2014	Parent		Issuer			Guarantor			Non-Guarantor		Eliminations			Consolidated
Net sales	$	—		—			2,109.6			723.7		(116.3	)		2,717.0
Cost of sales		—		—			1,793.4			617.0		(116.3	)		2,294.1
Gross profit		—		—			316.2			106.7		—			422.9
Selling, general and administrative expenses		—		—			157.2			37.4		—			194.6
Goodwill impairment		—		—			11.8			—		—			11.8
Acquisition costs		—		—			13.0			—		—			13.0
Operating profit		—		—			134.2			69.3		—			203.5
Interest expense, net		—		22.3			67.4			10.2		—			99.9
Loss on debt extinguishment		—		—			60.7			—		—			60.7
Other, net		—		—			(16.3	)		5.0		—			(11.3	)
Other expense, net		—		22.3			111.8			15.2		—			149.3
Income (loss) before tax		—		(22.3	)		22.4			54.1		—			54.2
Income tax expense (benefit)		—		(8.8	)		(26.8	)		16.5		—			(19.1	)
Income (loss) before from equity in subsidiaries		—		(13.5	)		49.2			37.6		—			73.3
Earnings from equity in subsidiaries		72.9		86.4			37.2			—		(196.5	)		—
Net income		72.9		72.9			86.4			37.6		(196.5	)		73.3
Income attributable to noncontrolling interest		—		—			—			0.4		—			0.4
Net income attributable to stockholders		72.9		72.9			86.4			37.2		(196.5	)		72.9

	Parent			Issuer			Guarantor			Non-Guarantor			Eliminations			Consolidated
For the year ended December 31, 2016
Net income	$	96.3			93.1			157.4			48.2			(298.1	)		96.9
Other comprehensive loss, net of tax:
Foreign currency translation		(21.7	)		(22.0	)		(22.0	)		(20.3	)		64.3			(21.7	)
Net actuarial gain on defined benefit plans		(4.8	)		(4.8	)		(4.8	)		(4.3	)		13.9			(4.8	)
Losses on defined benefit plans recognized in net income		0.2			0.2			0.2			—			(0.4	)		0.2
Other comprehensive loss, net of tax		(26.3	)		(26.6	)		(26.6	)		(24.6	)		77.8			(26.3	)
Comprehensive income		70.0			66.5			130.8			23.6			(220.3	)		70.6
Less comprehensive income attributable to noncontrolling interest		—			—			—			0.5			—			0.5
Comprehensive income attributable to stockholders	$	70.0			66.5			130.8			23.1			(220.3	)		70.1
For the year ended December 31, 2015
Net income	$	125.4			125.4			188.9			38.3			(352.2	)		125.8
Other comprehensive loss, net of tax:
Foreign currency translation		(24.3	)		(25.0	)		(25.0	)		(21.8	)		71.8			(24.3	)
Net actuarial gain on defined benefit plans		1.8			1.8			1.8			1.1			(4.7	)		1.8
Losses on defined benefit plans recognized in net income		0.4			0.4			0.4			—			(0.8	)		0.4
Other comprehensive loss, net of tax		(22.1	)		(22.8	)		(22.8	)		(20.7	)		66.3			(22.1	)
Comprehensive income		103.3			102.6			166.1			17.6			(285.9	)		103.7
Less comprehensive income attributable to noncontrolling interest		—			—			—			0.4			—			0.4
Comprehensive income attributable to stockholders	$	103.3			102.6			166.1			17.2			(285.9	)		103.3
For the year ended December 31, 2014
Net income	$	72.9			72.9			86.4			37.6			(196.5	)		73.3
Other comprehensive loss, net of tax:
Foreign currency translation		(23.9	)		(23.5	)		(23.5	)		(22.2	)		69.2			(23.9	)
Net actuarial loss on defined benefit plans		(8.0	)		(8.0	)		(8.0	)		(4.7	)		20.7			(8.0	)
Other comprehensive loss, net of tax		(31.9	)		(31.5	)		(31.5	)		(26.9	)		89.9			(31.9	)
Comprehensive income		41.0			41.4			54.9			10.7			(106.6	)		41.4
Less comprehensive income attributable to noncontrolling interest		—			—			—			0.4			—			0.4
Comprehensive income attributable to stockholders		41.0			41.4			54.9			10.3			(106.6	)		41.0

	Parent			Issuer			Guarantor			Non-Guarantor			Eliminations			Consolidated
For the year ended December 31, 2016
Cash flows from operating activities:
Net cash provided by (used for) operating activities	$	5.6			(68.4	)		295.1			86.3			—			318.6
Cash flows from investing activities:
Capital expenditures		—			(1.6	)		(134.5	)		(58.4	)		—			(194.5	)
Proceeds from sale of fixed assets		—			—			0.1			0.4			—			0.5
Capitalized patent costs		—			—			(0.2	)		—			—			(0.2	)
Acquisition of business, net of cash acquired		—			—			(14.0	)		—			—			(14.0	)
Intercompany activity		42.0			116.5			—			—			(158.5	)		-
Net cash provided by (used for) investing activities		42.0			114.9			(148.6	)		(58.0	)		(158.5	)		(208.2	)
Cash flows from financing activities:
Dividends		(25.1	)		—			—			—			—			(25.1	)
Stock-based compensation activity, net		7.0			—			—			—			—			7.0
Purchases of treasury stock		(29.5	)		—			—			—			—			(29.5	)
Payments on long-term debt		—			(13.2	)		—			—			—			(13.2	)
Other debt, net		—			—			(1.3	)		(0.1	)		—			(1.4	)
Intercompany activity		—			—			(155.1	)		(3.4	)		158.5			—
Net cash provided by (used for) financing activities		(47.6	)		(13.2	)		(156.4	)		(3.5	)		158.5			(62.2	)
Effect of exchange rates		—			—			—			(6.7	)		—			(6.7	)
Net increase (decrease) in cash and cash equivalents	$	—			33.3			(9.9	)		18.1			—			41.5
Cash and cash equivalents:
Cash and cash equivalents, beginning of year		—			50.5			10.8			106.9			—			168.2
Net increase (decrease) in cash and cash equivalents		—			33.3			(9.9	)		18.1			—			41.5
Cash and cash equivalents, end of year	$	—			83.8			0.9			125.0			—			209.7
For the year ended December 31, 2015
Cash flows from operating activities:
Net cash provided by (used for) operating activities	$	8.6			(58.6	)		319.5			60.5			—			330.0
Cash flows from investing activities:
Capital expenditures		—			(2.0	)		(171.7	)		(52.6	)		—			(226.3	)
Proceeds from sale of fixed assets		—			—			3.8			0.2			—			4.0
Capitalized patent costs		—			—			(0.4	)		—			—			(0.4	)
Intercompany activity		8.3			134.2			—			—			(142.5	)		—
Net cash provided by (used for) investing activities		8.3			132.2			(168.3	)		(52.4	)		(142.5	)		(222.7	)
Cash flows from financing activities:
Dividends		(18.2	)		—			—			—			—			(18.2	)
Stock-based compensation activity, net		1.4			—			—			—			—			1.4
Borrowings of revolving lines of credit		—			14.3			—			—			—			14.3
Repayments of revolving lines of credit		—			(14.3	)		(0.3	)		—			—			(14.6	)
Proceeds from long-term debt		—			1,326.6			—			—			—			1,326.6
Payments on long-term debt		—			(1,391.6	)		(0.2	)		—			—			(1,391.8	)
Other debt, net		—			—			(3.0	)		(0.7	)		—			(3.7	)
Payment of debt issue costs		—			(0.1	)		—			—			—			(0.1	)
Payment of offering related costs		(0.1	)		—			—			—			—			(0.1	)
Intercompany activity		—			(10.2	)		(140.2	)		7.9			142.5			—
Net cash provided by (used for) financing activities		(16.9	)		(75.3	)		(143.7	)		7.2			142.5			(86.2	)
Effect of exchange rates		—			—			—			(9.4	)		—			(9.4	)
Net increase (decrease) in cash and cash equivalents	$	—			(1.7	)		7.5			5.9			—			11.7
Cash and cash equivalents:
Cash and cash equivalents, beginning of year	$	—			52.2			3.3			101.0			—			156.5
Net increase (decrease) in cash and cash equivalents		—			(1.7	)		7.5			5.9			—			11.7
Cash and cash equivalents, end of year	$	—			50.5			10.8			106.9			—			168.2

	Parent			Issuer			Guarantor			Non-Guarantor			Eliminations			Consolidated
For the year ended December 31, 2014
Cash flows from operating activities:
Net cash provided by (used for) operating activities	$	12.0			2.7			205.5			85.2			—			305.4
Cash flows from investing activities:
Capital expenditures		—			—			(116.8	)		(39.6	)		—			(156.4	)
Proceeds from sale of fixed assets		—			—			0.5			0.9			—			1.4
Capitalized patent costs		—			—			(0.2	)		—			—			(0.2	)
Grede Transaction, net of cash acquired		—			—			(812.6	)		(17.1	)		—			(829.7	)
Intercompany activity		(6.4	)		(1,858.6	)		—			—			1,865.0			—
Net cash used for investing activities		(6.4	)		(1,858.6	)		(929.1	)		(55.8	)		1,865.0			(984.9	)
Cash flows from financing activities:
Cash dividends		—			—			(111.3	)		—			—			(111.3	)
Other stock activity		—			—			(2.4	)		—			—			(2.4	)
Proceeds from stock issuance		—			—			244.8			15.7			—			260.5
Borrowings of short-term debt		—			—			388.8			—			—			388.8
Repayments of short-term debt		—			—			(405.1	)		(2.3	)		—			(407.4	)
Proceeds of long-term debt		—			1,943.3			715.0			—			—			2,658.3
Principal payments of long-term debt		—			(10.0	)		(1,942.0	)		—			—			(1,952.0	)
Intercompany activity		—			—			1,865.0			—			(1,865.0	)		—
Payment of debt issue costs		—			(25.2	)		(20.2	)		—			—			(45.4	)
Other debt, net		—			—			(6.4	)		(0.4	)		—			(6.8	)
Payment of offering related costs		(5.6	)		—			—			—			—			(5.6	)
Net cash provided by (used for) financing activities		(5.6	)		1,908.1			726.2			13.0			(1,865.0	)		776.7
Effect of exchange rates		—			—			—			(8.9	)		—			(8.9	)
Net increase in cash and cash equivalents	$	—			52.2			2.6			33.5			—			88.3
Cash and cash equivalents:
Cash and cash equivalents, beginning of year	$	—			—			0.7			67.5			—			68.2
Net increase in cash and cash equivalents		—			52.2			2.6			33.5			—			88.3
Cash and cash equivalents, end of year	$	—			52.2			3.3			101.0			—			156.5

On February 24, 2017, our board of directors declared a dividend of $0.0925 per share, payable March 24, 2017 to stockholders of record as of March 10, 2017.

The Company’s management, including its Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act") as of December 31, 2016. Based on such evaluations, the Chief Executive Officer and Chief Financial Officer have concluded the Company’s disclosure controls and procedures are effective in recording, processing, summarizing, and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act, and that information is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s internal control over financial reporting based on the framework in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, the Company’s management has concluded that, as of December 31, 2016, the Company’s internal control over financial reporting was effective.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Deloitte & Touche LLP, an independent registered public accounting firm, has audited the effectiveness of the Company’s internal control over financial reporting as of December 31, 2016 as stated in its report which is included in “Item 9A. Controls and Procedures” of this 10-K.

There has been no change in the Company’s internal control over financial reporting during the quarter ended December 31, 2016, that has materially affected, or is reasonably likely to materially affect, the internal control over financial reporting.

To the Board of Directors and Stockholders of
Metaldyne Performance Group Inc.
Southfield, MI

We have audited the internal control over financial reporting of Metaldyne Performance Group Inc. and subsidiaries (the “Company”) as of December 31, 2016, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended December 31, 2016 of the Company and our report dated March 2, 2017 expressed an unqualified opinion on those financial statements and financial statement schedule.

The information required by Item 10 will be provided in accordance with Instruction G(3) to Form 10-K no later than May 1, 2017.

The information required by Item 11 will be provided in accordance with Instruction G(3) to Form 10-K no later than May 1, 2017.

The information required by Item 12 will be provided in accordance with Instruction G(3) to Form 10-K no later than May 1, 2017.

The information regarding the Company's equity compensation plans in Item 5 “Market for Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities” of this Annual Report on Form 10-K is incorporated herein by reference.

The information required by Item 13 will be provided in accordance with Instruction G(3) to Form 10-K no later than May 1, 2017.

The information required by Item 14 will be provided in accordance with Instruction G(3) to Form 10-K no later than May 1, 2017.

Financial statements filed as part of this Form 10-K are listed under “Item 8. Financial Statements and Supplemental Data.”

Schedules other than Schedule II are omitted because they are not required or applicable under instructions contained in Regulation S-X or because the information called for is shown in the financial statements and notes thereto.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 6, 2017.

Pursuant to the requirements of the Securities exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Large accelerated filer	☐	Accelerated filer	☒

Non-accelerated filer	☐ (Do not check if a smaller reporting company)	Smaller reporting company	☐

		Page
PART I
ITEM 1.	BUSINESS	4
ITEM 1A.	RISK FACTORS	8
ITEM 1B.	UNRESOLVED STAFF COMMENTS	22
ITEM 2.	PROPERTIES	22
ITEM 3.	LEGAL PROCEEDINGS	24
ITEM 4.	MINE SAFETY DISCLOSURE	24

PART II
ITEM 5.	MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES	25
ITEM 6.	SELECTED FINANCIAL DATA	28
ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	29
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	50
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	52
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	93
ITEM 9A.	CONTROLS AND PROCEDURES	93
ITEM 9B.	OTHER INFORMATION	95

PART III
ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	96
ITEM 11.	EXECUTIVE COMPENSATION	96
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	96
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	96
ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES	96

PART IV
ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	97
ITEM 16.	FORM 10-K SUMMARY	97
EXHIBIT INDEX		99

Portfolio of Manufacturing Technologies and Value-Added Processes		Primary Competitors
Advanced Machining and Assembly		BorgWarner, GKN, Linamar, and Magna
Aluminum Die Casting		Aisin, Dongnam Precision, and Ryobi
Cold and Warm Forging		American Axle, Hirshvogel, Linamar, and Sona BLW
Hot Forging		American Axle, Amtek, Linamar, and Hirshvogel
Iron Casting		Metal Technologies, Inc., Neenah Enterprises, and Waupaca
Powder Metal Forming		GKN, Mahle, and Miba
Rubber and Viscous Dampening Assemblies		Knorr Bremse, Vibracoustic, and Winkelmann

Quarter Ended	High		Low
December 31, 2016	$	23.00		13.90
October 2, 2016		16.52		13.12
July 3, 2016		16.91		12.55
April 3, 2016		18.49		10.87
December 31, 2015		24.62		17.64
September 27, 2015		22.50		17.51
June 28, 2015		20.06		17.27
March 29, 2015		20.72		16.02

Date Declared	Date Paid	Dividend Per Share
November 2, 2016	December 9, 2016	$	0.0925
August 3, 2016	September 20, 2016		0.0925
May 4, 2016	June 21, 2016		0.0925
February 24, 2016	April 26, 2016		0.0900
October 28, 2015	December 3, 2015		0.0900
July 29, 2015	August 31, 2015		0.0900
March 10, 2015	May 26, 2015		0.0900

	Year Ended December 31, 2016	Year Ended December 31, 2015	Year Ended December 31, 2014
Driveline	21%	21%	19%
Engine	27	25	28
Transmission	24	22	23
Safety-Critical	14	17	17
Other Specialty Products	14	15	13
	100%	100%	100%

	December 12, 2014		December 31, 2014		December 31, 2015		December 31, 2016
MPG	$	100.00		114.89		121.63		152.71
S&P MID CAP 400 Index		100.00		103.57		99.73		118.41
Peer Group (1)		100.00		105.54		96.13		89.10

	Year Ended December 31, 2016		Year Ended December 31, 2015		Increase (Decrease)			Percent Change
	(In millions)
HHI segment	$	834.9		984.8		(149.9	)		(15.2	%)
Metaldyne segment		1,168.5		1,155.7		12.8			1.1	%
Grede segment		787.3		906.8		(119.5	)		(13.2	%)
Total	$	2,790.7		3,047.3

	Year Ended December 31, 2016		Year Ended December 31, 2015		Increase			Percent Change
	(In millions)
HHI segment	$	137.8		175.6		(37.8	)		(21.5	%)
Metaldyne segment		210.7		191.4		19.3			10.1	%
Grede segment		120.7		149.0		(28.3	)		(19.0	%)
Total	$	469.2		516.0

	Moody’s	S&P
Corporate	B1	BB-
Revolving Credit Facility	Ba3	BB+
U.S. Dollar Term Loan	Ba3	BB+
Euro Term Loan	Ba3	BB+
Registered Notes	B3	B+
Outlook	Stable	Stable

Date Declared	Date Paid	Dividend Per Share
February 24, 2016	April 26, 2016	$	0.0900
May 4, 2016	June 21, 2016		0.0925
August 3, 2016	September 20, 2016		0.0925
November 2, 2016	December 9, 2016		0.0925

	Payments Due by Period
	Total		2017		2018-2019		2020-2021		Thereafter
	(In millions)
Long-term debt	$	1,844.8		13.1		26.2		1,205.5		600.0
Interest on long-term debt (1)		494.1		91.4		181.5		176.9		44.3
Capital lease obligations (2)		78.8		3.9		8.1		8.5		58.3
Operating lease obligations		67.6		11.3		17.2		12.4		26.7
Capital expenditure purchase obligations		90.4		88.5		1.9		—		—
Other purchase obligations		30.9		30.7		0.2				—
Other long-term liabilities		11.1		9.7		0.7		0.3		0.4
Total (3)	$	2,617.7		248.6		235.8		1,403.6		729.7

	Granted Options
Weighted-average per share fair market value of the underlying stock (1)	$	15.46
Weighted-average exercise price		15.46
Expected term of the option (2)	6 years
Annual risk-free interest rate over the option’s expected term (3)		1.4	%
Expected annual dividend yield on the underlying stock over the option’s expected term (4)		2.3	%
Expected stock price volatility over the option’s expected term (5)		47.0	%
Grant-date fair value	$	5.59

	25 Basis Point Increase						25 Basis Point Decrease
	U.S. Plans			Non-U.S. Plans			U.S. Plans		Non-U.S. Plans
	(In millions)
Resulting change in obligation	$	(1.1	)		(2.2	)		1.1		2.3
Resulting change in 2017 cost	*				(0.1	)	*			0.1


		Page
REGISTRANT FINANCIAL STATEMENTS:

CONSOLIDATED FINANCIAL STATEMENTS OF METALDYNE PERFORMANCE GROUP INC.

Reports of Independent Registered Public Accounting Firms		53

Balance Sheets as of December 31, 2016 and December 31, 2015		55

Statements of Operations for the Years Ended December 31, 2016, 2015, and 2014		56

Statements of Comprehensive Income for the Years Ended December 31, 2016, 2015, and 2014		57

Statements of Stockholders’ Equity for the Years Ended December 31, 2016, 2015, and 2014		58

Statements of Cash Flows for the Years Ended December 31, 2016, 2015, and 2014		59

Notes to the Consolidated Financial Statements		60

	June 2, 2014
	(In millions)
Fair value of consideration	$	829.7
Assets acquired:
Receivables		120.2
Inventories		40.1
Prepaid expenses and other current assets		11.4
Property and equipment		208.5
Amortizable intangible assets		369.1
Other assets		9.1
Total assets acquired		758.4
Liabilities assumed:
Accounts payable		94.7
Accrued liabilities		25.7
Deferred tax liabilities		47.5
Short-term debt		1.7
Other long-term liabilities		20.7
Total liabilities assumed		190.3
Net identifiable assets acquired, net of cash and cash equivalents		568.1
Goodwill	$	261.6

	June 2, 2014		Estimated Useful Lives
	(In millions)		(In years)
Property and equipment
Land	$	12.2		—
Buildings		31.8	5 – 29
Machinery and equipment		148.8	1 – 20
Assets not yet placed in service		15.7		—
Total property and equipment	$	208.5

	June 2, 2014		Amortization Period
	(In millions)		(In years)
Amortizable intangible assets
Customer relationships and platforms	$	338.7		10
Other: trade names		30.4		15
Total amortizable intangible assets	$	369.1

	June 2, 2014
	(In millions)
Projected benefit obligation	$	33.9
Fair value of plan assets		27.6
Funded Status	$	(6.3	)

	Pro Forma
		2014	2013
	(In millions)
Revenues: Net sales	$	3,144.0	3,052.9
Earnings: Income before tax		93.3	103.4

	HHI Segment			Metaldyne Segment		Grede Segment		Total
	(In millions)
Balance December 31, 2013	$	309.4			348.5		—		657.9
Goodwill resulting from Grede Transaction		—			—		261.6		261.6
Impairment		(11.8	)		—		—		(11.8	)
Balance December 31, 2014		297.6			348.5		261.6		907.7
Balance December 31, 2015		297.6			348.5		261.6		907.7
Balance December 31, 2016	$	297.6			348.5		261.6		907.7

	2016
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
	(In millions)
Customer relationships and platforms	$	745.2		(197.5	)		547.7
Other		126.9		(35.5	)		91.4
Total	$	872.1		(233.0	)		639.1

	Capital Leases			Operating Leases
	(In millions)
Company minimum lease payments:
2017	$	3.9			11.3
2018		4.0			9.6
2019		4.1			7.6
2020		4.2			6.9
2021		4.3			5.5
Thereafter		58.3			26.7
Total minimum payments		78.8		$	67.6
Amount representing interest		(56.0	)
Obligations under capital leases		22.8
Obligations due within one year		(0.1	)
Long-term obligations under capital leases	$	22.7

	Foreign Currency Items			Defined Benefit Items			Total			Total Attributable to Noncontrolling Interest			Total Attributable to Stockholders
	(In millions)
Balance, December 31, 2013	$	(3.8	)		0.4			(3.4	)		(0.1	)		(3.3	)
Other comprehensive income before reclassifications		(23.9	)		(8.2	)		(32.1	)		—			(32.1	)
Reclassifications		—			0.2			0.2			—			0.2
Balance, December 31, 2014		(27.7	)		(7.6	)		(35.3	)		(0.1	)		(35.2	)
Other comprehensive income before reclassifications		(24.3	)		1.8			(22.5	)		—			(22.5	)
Reclassifications		—			0.4			0.4			—			0.4
Balance, December 31, 2015		(52.0	)		(5.4	)		(57.4	)		(0.1	)		(57.3	)
Other comprehensive income before reclassifications		(21.7	)		(4.8	)		(26.5	)		(0.1	)		(26.4	)
Reclassifications		—			0.2			0.2			—			0.2
Balance, December 31, 2016	$	(73.7	)		(10.0	)		(83.7	)		(0.2	)		(83.5	)

Vesting Terms	Number of Shares		Grant-date Fair Value
	(In thousands)
1/3^rd per year on grant-date anniversary		433	$	15.81
1/3^rd per year on grant-date anniversary		22		15.95
1/3^rd per year on grant-date anniversary		445		15.08
1/3^rd per year on grant-date anniversary		465		20.02
1/3^rd per year on grant-date anniversary		305		18.90
1/4^th on the 1^st grant-date anniversary and 3/4^th on the 2^nd grant-date anniversary		567		15.00
1/3^rd per year on grant-date anniversary		280		15.00
		2,517

	Number of Shares			Weighted Average Grant-date Fair Value		Fair Value of Shares Vested
	(In thousands)					(In millions)
Balance, December 31, 2014		847		$	15.00
Granted		770			19.58
Vested		(424	)		16.20	$	7.8
Forfeited		(28	)		16.30
Balance, December 31, 2015		1,165			17.47
Granted		900			15.45
Vested		(571	)		16.65	$	10.9
Forfeited		(24	)		16.42
Balance, December 31, 2016		1,470		$	16.56

Vesting Terms	Number of Options		Weighted Average Exercise Price		Contractual Terms
	(In thousands)				(In years)
1/3^rd per year on grant-date anniversary		389	$	15.81		10
1/3^rd per year on grant-date anniversary		352	$	15.08		10
1/3^rd per year on grant-date anniversary		438	$	18.90		10
100% upon grant		635		20.00		10
1/3^rd per year on grant-date anniversary		560		20.00		10
1/5^th upon grant and 1/5^th on December 6^th of following 4 years		357		20.00		10
1/5^th per year on the anniversary of the original grant date		4,405		6.32		10
100% on the seventh anniversary of the original grant date		485		18.66		10
		7,621

	Original Grant Year
	2016			2015			2014
Grant-date fair value (per share)	$	5.59			9.03			12.66
Exercise price	$	15.46			18.90			18.66
Expected term	6 years			6 years			7 years
Risk-free rate		1.4	%		1.8	%		2.0	%
Expected volatility		47.0	%		60.0	%		65.0	%
Expected dividend yield		2.3	%		1.9	%		0.0	%

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
	(In thousands)					(In years)		(In millions)
Balance, December 31, 2014		6,442		$	10.54		8.5	$	49.2
Options exercisable, December 31, 2014		1,938		$	10.60		8.2	$	15.2
Granted		438			18.90
Exercised		(566	)		5.50				8.6
Forfeited		(45	)		10.12
Balance, December 31, 2015		6,269		$	11.58		7.6	$	45.5
Options exercisable, December 31, 2015		3,400		$	10.82		7.4	$	27.6
Granted		741			15.46
Exercised		(1,333	)		6.97				14.3
Forfeited		(87	)		14.58
Balance, December 31, 2016		5,590		$	13.15		6.9	$	54.8
Options exercisable, December 31, 2016		2,998		$	12.46		6.2	$	31.5

	Total		Level 1		Level 2		Level 3
	(In millions)
Asset category:
U.S. Plans
Mutual funds:
Equity securities	$	11.8		—		11.8		—
Fixed income securities		9.1		—		9.1		—
Real estate		1.8		—		0.4		1.4
Total	$	22.7		—		21.3		1.4
Non-U.S. Plans
Cash and cash equivalents	$	0.5		0.5		—		—
Mutual funds (non-U.S.):
Equity securities		18.5		—		18.5		—
Fixed income securities		5.9		—		5.9		—
Mixed asset mutual funds (equity/fixed income)		1.3		—		1.3		—
Total	$	26.2		0.5		25.7		—

	(In millions)
Balance as of December 31, 2015	$	1.3
Return on plan assets		0.1
Purchases		0.1
Sales		(0.1	)
Balance as of December 31, 2016	$	1.4

	2016
	Outstanding Principal		Unamortized Debt Issuance Costs			Unamortized Discount			Carrying Value		Fair Value
	(In millions)
Registered Notes	$	600.0		(9.2	)		—			590.8		625.5
USD Term Loan		1,011.5		(7.6	)		(4.7	)		999.2		1,017.8
Euro Term Loan		233.3		(0.1	)		(0.9	)		232.3		234.8

	2015
	Outstanding Principal		Unamortized Debt Issuance Costs			Unamortized Discount			Carrying Value		Fair Value
	(In millions)
Registered Notes	$	600.0		(10.4	)		—			589.6		605.9
USD Term Loan		1,022.2		(9.1	)		(5.6	)		1,007.5		1,000.5
Euro Term Loan		244.1		(0.1	)		(1.1	)		242.9		243.2

	2016											December 31, 2016
	External Sales		Intersegment Sales			Adjusted EBITDA		Capital Expenditures		Depreciation/ Amortization		Total Assets
	(In millions)
HHI	$	834.9		8.1			161.2		55.9		77.0	$	850.8
Metaldyne		1,168.5		1.3			220.5		100.2		74.6		1,286.2
Grede		787.3		0.4			111.3		36.8		69.2		945.5
Elimination and other		—		(9.8	)		—		1.6		0.5		108.0
Total	$	2,790.7		—			493.0		194.5		221.3	$	3,190.5

	2016 Quarter Ended
	April 3		July 3		October 2		December 31		Full Year
	(In millions, except EPS amounts)
Net sales	$	739.5		728.4		676.2		646.6	$	2,790.7
Gross profit		136.5		130.3		106.4		96.0		469.2
Net income attributable to stockholders		24.9		35.5		19.3		16.6		96.3
Basic EPS		0.37		0.52		0.29		0.25		1.43
Diluted EPS		0.36		0.51		0.28		0.24		1.39

	2015 Quarter Ended
	March 29		June 28		September 27		December 31		Full Year
	(In millions, except EPS amounts)
Net sales	$	765.2		800.2		746.6		735.3	$	3,047.3
Gross profit		128.5		142.1		126.2		119.2		516.0
Net income attributable to stockholders		32.4		44.1		28.2		20.7		125.4
Basic EPS		0.48		0.66		0.42		0.30		1.86
Diluted EPS		0.47		0.64		0.41		0.29		1.80