Non-GM sales increase 18% to $207.2 million, or 24% of sales
DETROIT, Oct. 27 /PRNewswire-FirstCall/ -- American Axle & Manufacturing
Holdings, Inc. (AAM), which is traded as AXL on the NYSE, today reported sales
and earnings for the third quarter of 2005.
Third Quarter 2005 highlights
* Third quarter sales of $848.1 million
* Overall 4% year-over-year decline in production volumes
* Non-GM sales increase 18% to $207.2 million, or 24% of total sales
* Net earnings of $19.3 million or $0.38 per share
Third quarter earnings were $19.3 million or $0.38 per share. This
compares to earnings of $36.4 million or $0.68 per share in the third quarter
of 2004. AAM's earnings in the third quarter of 2005 reflect the impact of a
retroactive metal market cost recovery agreement under which AAM was
reimbursed for costs incurred in the first half of 2005. This retroactive
benefit was partly offset by costs related to other provisions of the metal
market recovery agreement and other retroactive purchased material cost
adjustments we incurred in the quarter. The net favorable impact of these
agreements was $6.2 million in the quarter or $0.08 per share.
"AAM continues to be profitable in a challenging operating environment for
the domestic automotive industry and the Tier I supply chain," said AAM's Co-
Founder, Chairman of the Board & CEO Richard E. Dauch. "Although lower
production levels and increased steel and metallic material prices continue to
pressure sales and inflate costs, we are encouraged by the progress we have
made this year to increase the diversity of our sales mix."
Net sales in the third quarter of 2005 were $848.1 million as compared to
$841.6 million in the third quarter of 2004. Sales to non-GM customers
increased 18% to $207.2 million, representing 24% of AAM's total sales in the
quarter.
AAM sales for the quarter reflect approximately a 4% year-over-year
decline in customer production volumes for the major North American light
truck programs it currently supports. AAM's content per vehicle in the
quarter grew to $1,240 as compared to $1,163 in the third quarter of 2004.
Mix shifts favoring four-wheel drive and all-wheel drive (4WD/AWD)
versions of our full-size and mid-size light truck programs continue to
favorably impact content-per-vehicle in 2005. For the quarter, AAM's 4WD/AWD
penetration rate was 65.9% as compared to 61.4% in the third quarter of 2004.
AAM defines its 4WD/AWD penetration rate as the total number of front axles
produced divided by the number of rear axles produced for the vehicle programs
on which it sells product.
Gross margin in the third quarter of 2005 was 9.8% as compared to 12.8% in
the third quarter of 2004. Operating income was $34.9 million or 4.1% of
sales in the third quarter as compared to $60.9 million or 7.2% of sales in
the third quarter of 2004.
Net sales in the first three quarters of 2005 were approximately $2.5
billion as compared to $2.7 billion in the first three quarters of 2004.
Gross margin was 9.5% in the first three quarters of 2005 as compared to 13.9%
in first three quarters of 2004. Operating income for the first three
quarters of 2005 was $97.0 million or 3.8% of sales versus $237.0 million or
8.7% of sales for the same period in 2004.
For the nine months ended September 30, 2005, AAM's earnings were $51.5
million or $1.01 per share. AAM's earnings for the nine months ended
September 30, 2004 were $128.2 million, or $2.37 per share, and reflect a one-
time charge of $23.5 million or $0.28 per share related to debt refinancing
and redemption activities in the first quarter of 2004.
AAM defines free cash flow to be net cash provided by (or used in)
operating activities less capital expenditures and dividends paid. Capital
spending to support new product programs and other safety, quality and
productivity initiatives for the nine months ended September 30, 2005 was
$243.6 million as compared to $158.8 million for the nine months ended
September 30, 2004. Pursuant to its quarterly cash dividend program, AAM paid
$22.7 million in dividends in the first three quarters of 2005. Reflecting
the impact of AAM's capital investment and dividend payout, AAM's free cash
flow for the nine months ended September 30, 2005 was a use of $122.9 million.
AAM's research and development spending (R&D) for the nine months ended
September 30, 2005 increased to $54.7 million as compared to $51.5 million for
the same period in 2004. AAM continues to invest heavily in the development
and validation of products targeted for growth segments of the global
driveline market, especially rear-wheel drive and all-wheel drive driveline
systems for passenger cars and crossover vehicles. AAM's long-term commitment
to applied R&D and product line diversification is the primary catalyst for
growth in AAM's new business backlog, which has grown to approximately $1.3
billion in future annual sales.
2005 Outlook
AAM also confirmed its earnings guidance for 2005.
AAM expects its full-year 2005 earnings to be in a range of $1.40 - $1.45
per share. This outlook includes a charge of $8.9 million, or $0.12 per
share, related to voluntary lump-sum separation payments accepted by 162
hourly associates in the second quarter of 2005. AAM previously issued full-
year 2005 guidance of $1.40 - $1.55 per share during its quarterly conference
call on April 29, 2005.
AAM expects to increase its capital spending in 2005 to $300 million, a
significant portion of which will support the accelerated launch of the GMT
900 program in the 2007 model year and increased capacity for the Chrysler
Group's heavy duty Dodge Ram program and derivatives. AAM is also incurring
capital expenditures in 2005 to expand its international footprint with new
manufacturing capacity outside of the U.S. in support of its $1.3 billion new
business backlog.
Reflecting the increase in capital expenditures, as well as higher working
capital investments in accounts receivable and inventories than were
previously anticipated due to significantly higher production requirements in
the fourth quarter of 2005 and a stronger mix of non-GM sales, AAM expects its
free cash flow for 2005 to approximate a use of $60 million. Based on this
earnings and cash flow guidance, AAM expects its net debt to capital ratio to
approximate 33% at December 31, 2005.
"Our task for the remainder of 2005 and 2006 is to stay focused on world-
class quality, warranty and delivery standards while flawlessly executing the
accelerated product launch of GM's new full-size truck products," said Mr.
Dauch. "At the same time, we will continue to diligently pursue our long-term
strategic goals of further developing our product offerings, customer
diversification, served market, and global manufacturing presence to prepare
for future profitable growth."
A conference call to review AAM's third quarter 2005 results is scheduled
today at 10:00 a.m. EDT. Interested participants may listen to the live
conference call by logging onto AAM's investor web site at
http://investor.aam.com or calling (877) 278-1452 from the United States or
(706) 643-3736 from outside the United States. A replay will be available
from Noon EDT on October 27, 2005 until 5:00 p.m. EST November 3, 2005 by
dialing (800) 642-1687 from the United States or (706) 645-9291 from outside
the United States. When prompted, callers should enter conference reservation
number 9905977.
Non-GAAP Financial Information
In addition to the results reported in accordance with accounting
principles generally accepted in the United States of America (GAAP) included
within this press release, AAM has provided certain information, which
includes non-GAAP financial measures. Such information is reconciled to its
closest GAAP measure in accordance with the Securities and Exchange Commission
(SEC) rules and is included in the attached supplemental data.
Management believes that these non-GAAP financial measures are useful to
both management and its stockholders in their analysis of the Company's
business and operating performance. Management also uses this information for
operational planning and decision-making purposes.
Non-GAAP financial measures are not and should not be considered a
substitute for any GAAP measure. Additionally, non-GAAP financial measures as
presented by AAM may not be comparable to similarly titled measures reported
by other companies.
AAM is a world leader in the manufacture, engineering, design and
validation of driveline systems and related components and modules, chassis
systems and metal-formed products for light trucks, sport utility vehicles and
passenger cars. In addition to locations in the United States (in Michigan,
New York and Ohio), AAM also has offices or facilities in Brazil, China,
England, Germany, India, Japan, Mexico, Scotland and South Korea.
Certain statements in this press release are forward-looking in nature and
relate to trends and events that may affect our future financial position and
operating results. Such statements are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. The terms
"will," "expect," "anticipate," "intend," "project," and similar words or
expressions are intended to identify forward-looking statements. These
statements speak only as of the date of this press release. The statements
are based on our current expectations, are inherently uncertain, are subject
to risks and should be viewed with caution. Actual results and experience may
differ materially from the forward-looking statements as a result of many
factors, including but not limited to: reduced demand of our customers'
products (particularly light trucks and SUVs produced by GM and
DaimlerChrysler); reduced purchases of our products by GM, DaimlerChrysler or
other customers; supply shortages or price fluctuations in raw materials,
utilities or other operating supplies; our ability to maintain satisfactory
labor relations and avoid work stoppages; our customers' and their suppliers'
ability to maintain satisfactory labor relations and avoid work stoppages; our
ability to attract and retain key associates; our ability and our customers'
and their suppliers' ability to successfully launch new product programs; our
ability to respond to changes in technology or increased competition; adverse
changes in laws, government regulations or market conditions affecting our
products or our customers' products (including the Corporate Average Fuel
Economy regulations and fuel costs); adverse changes in the economic
conditions or political stability of our principal markets (particularly North
America, Europe, South America and Asia); liabilities arising from legal
proceedings to which we are or may become a party or claims against us or our
products; risks of noncompliance with environmental regulations or risks of
environmental issues that could result in unforeseen costs at our facilities;
availability of financing for working capital, capital expenditures, R&D or
other general corporate purposes; other unanticipated events and conditions
that may hinder our ability to compete. It is not possible to foresee or
identify all such factors and we make no commitment to update any forward-
looking statement or to disclose any facts, events or circumstances after the
date hereof that may affect the accuracy of any forward-looking statements.
For more information...
Carrie L.P. Gray Christopher M. Son
Director, Corporate Relations Director, Investor Relations
(313) 758-4880 (313) 758-4814
grayc@aam.com chris.son@aam.com
Or visit the AAM website at http://www.aam.com
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
------------------ ------------------
2005 2004 2005 2004
-------- ------- -------- -------
(In millions, except per share data)
Net sales $848.1 $841.6 $2,534.7 $2,724.0
Cost of goods sold 764.8 733.7 2,293.7 2,346.3
------- ------- --------- ---------
Gross profit 83.3 107.9 241.0 377.7
Selling, general and
administrative expenses 48.4 47.0 144.0 140.7
------- ------- --------- ---------
Operating income 34.9 60.9 97.0 237.0
Net interest expense (7.3) (5.9) (20.0) (20.2)
Other income (expense)
Debt refinancing and
redemption costs - - - (23.5)
Other income (expense), net 1.2 (0.9) (0.2) 1.0
------- ------- --------- ---------
Income before income taxes 28.8 54.1 76.8 194.3
Income taxes 9.5 17.7 25.3 66.1
------- ------- --------- ---------
Net income $19.3 $36.4 $51.5 $128.2
======= ======= ========= =========
Diluted earnings per share $0.38 $0.68 $1.01 $2.37
======= ======= ========= =========
Diluted shares outstanding 51.4 53.4 51.1 54.2
======= ======= ========= =========
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31,
2005 2004
-------------- -------------
(Unaudited)
(In millions)
ASSETS
Current assets
Cash and cash equivalents $6.4 $14.4
Accounts receivable, net 452.9 334.9
Inventories, net 214.0 196.8
Prepaid expenses and other 43.4 39.1
Deferred income taxes 15.3 7.4
-------- --------
Total current assets 732.0 592.6
Property, plant and equipment, net 1,813.0 1,713.0
Deferred income taxes 7.8 6.8
Goodwill 147.8 147.8
Other assets and deferred charges 72.3 78.6
-------- --------
Total assets $2,772.9 $2,538.8
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $430.4 $398.6
Other accrued expenses 166.2 181.9
-------- --------
Total current liabilities 596.6 580.5
Long-term debt 560.0 448.0
Deferred income taxes 117.8 114.5
Postretirement benefits and other
long-term liabilities 491.8 440.3
-------- --------
Total liabilities 1,766.2 1,583.3
Stockholders' equity 1,006.7 955.5
-------- --------
Total liabilities and
stockholders' equity $2,772.9 $2,538.8
======== ========
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
------------------ ------------------
2005 2004 2005 2004
-------- -------- -------- --------
(In millions)
Operating activities
Net income $19.3 $36.4 $51.5 $128.2
Depreciation and amortization 46.2 43.4 135.0 125.4
Other 25.5 24.2 (43.1) (25.5)
-------- -------- -------- --------
Net cash flow provided by operating
activities 91.0 104.0 143.4 228.1
Purchases of property, plant &
equipment (82.4) (63.1) (243.6) (158.8)
-------- -------- -------- --------
Net cash flow after purchases of
property, plant & equipment 8.6 40.9 (100.2) 69.3
-------- -------- -------- --------
Net cash flow provided by (used in)
operations 8.6 40.9 (100.2) 69.3
Net increase in long-term debt (1.0) 10.6 110.7 381.5
Redemption of 9.75% Notes - - - (314.6)
Debt issuance costs - - - (9.7)
Employee stock option exercises 0.9 1.7 4.3 12.0
Dividends paid (7.7) (7.7) (22.7) (15.5)
Purchase of treasury stock - (47.3) - (131.0)
-------- -------- -------- --------
Net cash flow provided by (used in)
financing activities (7.8) (42.7) 92.3 (77.3)
Effect of exchange rate changes on
cash - (0.3) (0.1) 0.1
-------- -------- -------- --------
Net increase (decrease) in cash and
cash equivalents 0.8 (2.1) (8.0) (7.9)
Cash and cash equivalents at
beginning of period 5.6 6.6 14.4 12.4
-------- -------- -------- --------
Cash and cash equivalents at end of
period $6.4 $4.5 $6.4 $4.5
======== ======== ======== ========
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
SUPPLEMENTAL DATA
(Unaudited)
The supplemental data presented below is a reconciliation of certain
financial measures which is intended to facilitate analysis of American Axle &
Manufacturing Holdings, Inc. business and operating performance.
Earnings before interest expense, income taxes and depreciation
and amortization (EBITDA)(a)
Three months ended Nine months ended
September 30, September 30,
------------------ ------------------
2005 2004 2005 2004
-------- -------- -------- --------
(In millions)
Net income $19.3 $36.4 $51.5 $128.2
Interest expense 7.6 5.9 20.5 20.5
Income taxes 9.5 17.7 25.3 66.1
Depreciation and amortization 46.2 43.4 135.0 125.4
-------- -------- -------- --------
EBITDA $82.6 $103.4 $232.3 $340.2
======== ======== ======== ========
Net debt(b) to capital
September 30, December 31,
2005 2004
------------- ------------
(In millions, except percentages)
Total debt $560.0 $448.0
Less: cash and cash equivalents 6.4 14.4
------------- ------------
Net debt at end of period 553.6 433.6
Stockholders' equity 1,006.7 955.5
------------- ------------
Total invested capital at end of period $1,560.3 $1,389.1
============= ============
Net debt to capital(c) 35.5% 31.2%
============= ============
(a) We believe that EBITDA is a meaningful measure of performance as it
is commonly utilized by management and investors to analyze operating
performance and entity valuation. Our management, the investment community
and the banking institutions routinely use EBITDA, together with other
measures, to measure our operating performance relative to other Tier 1
automotive suppliers. EBITDA should not be construed as income from
operations, net income or cash flow from operating activities as determined
under GAAP. Other companies may calculate EBITDA differently.
(b) Net debt is equal to total debt less cash and cash equivalents.
(c) Net debt to capital is equal to net debt divided by the sum of
stockholders' equity and net debt. We believe that net debt to capital is a
meaningful measure of financial condition as it is commonly utilized by
management, investors and creditors to assess relative capital structure risk.
Other companies may calculate net debt to capital differently.
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
SUPPLEMENTAL DATA (CONTINUED)
(Unaudited)
The supplemental data presented below is a reconciliation of certain
financial measures which is intended to facilitate analysis of American Axle &
Manufacturing Holdings, Inc. business and operating performance.
Net Operating Cash Flow and Free Cash Flow(d)
Three months ended Nine months ended
September 30, September 30,
------------------ ------------------
2005 2004 2005 2004
-------- -------- -------- --------
(In millions)
Net cash provided by operating
activities $91.0 $104.0 $143.4 $228.1
Less: purchases of property, plant &
equipment (82.4) (63.1) (243.6) (158.8)
-------- -------- -------- --------
Net operating cash flow 8.6 40.9 (100.2) 69.3
Less: dividends paid (7.7) (7.7) (22.7) (15.5)
-------- -------- -------- --------
Free cash flow $0.9 $33.2 $(122.9) $53.8
======== ======== ======== ========
After-Tax Return on Invested Capital (ROIC)(e)
Quarter Ended Trailing Twelve
-------------------------------------------- Months Ended
December 31, March 31, June 30, September 30, September 30,
2004 2005 2005 2005 2005
----------- ---------- ---------- ---------- ----------
(In millions, except percentages)
Net income $31.3 $13.3 $18.9 $19.3 $82.8
After-tax net
interest
expense (f) 3.8 4.1 4.4 4.9 17.2
----------- ---------- ---------- ---------- ----------
After-tax
return $35.1 $17.4 $23.3 $24.2 $100.0
=========== ========== ========== ========== ==========
Net debt at
end of period $553.6
Stockholder's
equity at end
of period 1,006.7
----------
Invested capital
at end of
period 1,560.3
Invested capital
at beginning
of period 1,484.5
----------
Average
invested
capital(g) $1,522.4
==========
After-Tax
ROIC(h) 6.6%
==========
(d) We define net operating cash flow as net cash provided by operating
activities less purchases of property and equipment. Free cash flow is
defined as net operating cash flow less dividends paid. We believe net
operating cash flow and free cash flow are meaningful measures as they are
commonly utilized by management and investors to assess our ability to
generate cash flow from business operations to repay debt and return capital
to our stockholders. Net operating cash flow is also a key metric used in our
calculation of incentive compensation. Other companies may calculate net
operating cash flow and free cash flow differently.
(e) We believe that ROIC is a meaningful overall measure of business
performance because it reflects the company's earnings performance relative to
its investment level. ROIC is also a key metric used in our calculation of
incentive compensation. Other companies may calculate ROIC differently.
(f) After-tax net interest expense is equal to multiplying net interest
expense by the applicable effective income tax rate for each presented
quarter.
(g) Average invested capital is equal to the average of invested capital
at the beginning of the year and end of the year.
(h) After-tax ROIC is equal to after-tax return divided by average
invested capital.
SOURCE American Axle & Manufacturing Holdings, Inc.
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Related links:
http://www.aam.com
http://investor.aam.com
Company News On-Call:
http://www.prnewswire.com/comp/033813.html
CONTACT:
Carrie L.P. Gray, Director, Corporate
Relations, +1-313-758-4880, grayc@aam.com , or Christopher M.
Son, Director, Investor Relations, +1-313-758-4814,
chris.son@aam.com , both of American Axle & Manufacturing
Holdings, Inc.
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