DETROIT, Oct. 27 /PRNewswire-FirstCall/ -- American Axle &
Manufacturing Holdings, Inc. (AAM), which is traded as AXL on the NYSE,
today reported its financial results for the third quarter of 2006.
Third Quarter 2006 highlights
* Third quarter sales of $701.2 million
* Overall 19% year-over-year decline in production volumes
* Non-GM sales of $153.2 million, totaling 22% of net sales
* Special charges of $93.1 million, or $1.17 per share, for
postemployment benefits
* Net loss of $62.9 million or $1.25 per share
AAM's results in the third quarter of 2006 were a net loss of $62.9
million or $1.25 per share. This compares to earnings of $19.3 million or
$0.38 per share in the third quarter of 2005.
In the third quarter of 2006, AAM recorded a special charge relating to
supplemental unemployment benefits estimated to be payable to UAW
associates who are expected to be permanently idled through the end of the
current contract period in February 2008. This special charge increased
AAM's operating costs in the third quarter of 2006 by $91.2 million. In
addition to this special charge, AAM incurred $22.7 million of supplemental
unemployment benefits and other related benefit costs for associates on
layoff in the third quarter of 2006. AAM also recorded a $1.9 million
special charge in the quarter related to future severance payments to
associates in our European operations.
AAM's results in the third quarter of 2006 reflect an overall 19% year-
over-year decline in production volumes. This includes an estimated 5.4%
decrease in customer production volumes for the major full-size truck and
SUV programs it currently supports for GM and The Chrysler Group as
compared to the third quarter of 2005. AAM estimates that customer
production volumes for its mid-sized pick-up truck and SUV programs were
down approximately 54% in the quarter on a year-over-year basis.
"As the domestic automotive industry continues its unprecedented
structural transformation, we are taking the necessary actions to improve
AAM's global cost competitiveness," said American Axle & Manufacturing Co-
Founder, Chairman of the Board & CEO, Richard E. Dauch. "AAM remains
focused on managing the things that we control. This includes supporting
the introduction of GM's new full-size pick-ups in the fourth quarter of
2006, while at the same time successfully launching our new regional
manufacturing facilities in China and Poland."
Net sales in the third quarter of 2006 were $701.2 million as compared
to $848.1 million in the third quarter of 2005. Non-GM sales in the quarter
were $153.2 million representing 22% of AAM's total sales. On a
year-to-date basis, AAM's non-GM sales were $561.4 million, or 23% of AAM's
sales through the third quarter of 2006.
AAM's content per vehicle was $1,204 in the third quarter of 2006 as
compared to $1,240 in the third quarter of 2005. Production mix shifts
related to the four-wheel drive and all-wheel drive (4WD/AWD) versions of
its full-size and mid-size light truck programs continued to negatively
impact content-per-vehicle in the third quarter of 2006. For the quarter,
AAM's 4WD/AWD penetration rate was 58.0% as compared to 65.9% in the third
quarter of 2005. 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 2006 was negative 8.8% as compared
to 9.8% in the third quarter of 2005. Operating income was a loss of $110.0
million or negative 15.7% of sales in the quarter as compared to $34.9
million or 4.1% of sales in the third quarter of 2005.
AAM's results in the third quarter of 2006 include a favorable outcome
of $9.1 million, or $0.12 per share, associated with the resolution of
various legal proceedings and claims during the quarter, net of costs
incurred to resolve these matters. Including costs incurred earlier in the
year related to these proceedings, the net favorable impact of these items
for the first three quarters of the year was $7.6 million, or $0.10 per
share.
AAM's results in the third quarter of 2005 included a net benefit of
$6.2 million, or $0.08 per share, related to a retroactive metal market
recovery agreement under which AAM was reimbursed for costs incurred in the
first half of 2005, net of other retroactive purchased material cost
adjustments.
Net sales in the first three quarters of 2006 were $2.4 billion, as
compared to $2.5 billion in the first three quarters of 2005. Gross margin
was 3.8% in the first three quarters of 2006 as compared to 9.5% for the
first three quarters of 2005. Operating income for the first three quarters
of 2006 was a loss of $54.5 million or negative 2.3% of sales as compared
to $97.0 million or 3.8% of sales for the first three quarters of 2005.
AAM's gross margin and operating margin performance in the first three
quarters of 2006 reflect the impact of the special charges recorded in the
third quarter of 2006 relating to postemployment benefits. In addition to
these special charges, AAM also incurred $58.6 million of supplemental
unemployment benefits and other related benefit costs for associates on
layoff in the first three quarters of 2006. Higher non-cash expenses
related to depreciation, amortization, pension and other postretirement
benefits and stock-based compensation as well as higher fringe benefit
costs also pressured margins in the first three quarters of 2006.
In the first three quarters of 2006, AAM's SG&A spending was $145.9
million or 6.1% of sales as compared to $144.0 million or 5.7% of sales in
the first three quarters of 2005. AAM continues to increase SG&A spending
in 2006 to support its R&D initiatives and its expanded foreign business
and technical offices.
AAM defines free cash flow to be net cash provided by (or used in)
operating activities less capital expenditures and dividends paid. Net cash
provided by operating activities in the first three quarters of 2006 was
$161.7 million as compared to $143.4 million in the first three quarters of
2005. Capital spending in the first three quarters of 2006 was $243.5
million. Reflecting the impact of this activity and dividend payments of
$23.3 million, AAM's free cash flow in the first three quarters of 2006 was
a use of $105.1 million.
A conference call to review AAM's third quarter 2006 results is
scheduled today at 9:00 a.m. ET. 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 ET on October 27, 2006 until 5:00 p.m. ET November 3, 2006 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 7328819.
Recent Developments
On October 4, 2006, AAM announced that it will offer a Special
Attrition Program (SAP) to all UAW associates at AAM's master agreement
facilities in the fourth quarter of 2006. In conjunction with this special
attrition program, AAM expects to initiate additional restructuring actions
in 2006 to realign its production capacity and cost structure to current
and projected operational and market requirements. These actions are
expected to include salaried workforce reductions, the redeployment of
machinery and equipment to support new programs, and other steps to
rationalize underutilized capacity. As a result of these anticipated
special charges, AAM withdrew its 2006 earnings and cash flow guidance
provided on June 8, 2006.
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 the Company's 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 and drivetrain 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, Germany, India, Japan, Luxembourg, Mexico, Poland, South
Korea and the United Kingdom.
Certain statements contained in this press release are "forward-looking
statements" and relate to the Company's plans, projections, strategies or
future performance. Such statements are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995 and are
based on our current expectations, are inherently uncertain, are subject to
risks and should be viewed with caution. Actual results and experience may
differ materially from the forward-looking statements as a result of many
factors, including but not limited to: adverse changes in the economic
conditions or political stability of our principal markets (particularly
North America, Europe and South America); reduced demand of our customers'
products or volume reductions, particularly for light trucks and SUVs
produced by GM and DaimlerChrysler's heavy-duty Dodge Ram full-size pickup
trucks, or the Dodge Ram program; work stoppages at GM or DaimlerChrysler
or a key supplier to GM or DaimlerChrysler; our ability to achieve cost
reductions through accelerated attrition programs; reduced purchases of our
products by GM, DaimlerChrysler or other customers; our ability and our
customers' ability to successfully launch new product programs; our ability
to respond to changes in technology or increased competition; supply
shortages or price fluctuations in raw materials, utilities or other
operating supplies; our ability to maintain satisfactory labor relations
and avoid work stoppages; risks of noncompliance with environmental
regulations or risks of environmental issues that could result in
unforeseen costs at our facilities; liabilities arising from legal
proceedings to which we are or may become a party or claims against us or
our products; availability of financing for working capital, capital
expenditures, research and development or other general corporate purposes
including our ability to comply with financial covenants; adverse changes
in laws, government regulations or market conditions affecting our products
or our customers' products (including the Corporate Average Fuel Economy
regulations); our ability to attract and retain key associates; and other
unanticipated events and conditions that may hinder our ability to compete.
For additional discussion, see "Item 1A. Risk Factors" in our 2005 Annual
Report on Form 10-K. It is not possible to foresee or identify all such
factors and we assume no obligation to update any forward-looking
statements or to disclose any subsequent facts, events or circumstances
that may affect their accuracy.
For more information:
Media relations contact: Investor relations contact:
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.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
------------------ -----------------
2006 2005 2006 2005
-------- -------- -------- --------
(In millions, except per share data)
Net sales $701.2 $848.1 $2,410.6 $2,534.7
Cost of goods sold 763.2 764.8 2,319.2 2,293.7
-------- -------- -------- --------
Gross profit (loss) (62.0) 83.3 91.4 241.0
Selling, general and administrative
expenses 48.0 48.4 145.9 144.0
-------- -------- -------- --------
Operating income (loss) (110.0) 34.9 (54.5) 97.0
Net interest expense (11.7) (7.3) (27.0) (20.0)
Other income (expense)
Debt refinancing costs (0.3) - (2.7) -
Other, net 10.1 1.2 11.4 (0.2)
-------- -------- -------- --------
Income (loss) before income taxes (111.9) 28.8 (72.8) 76.8
Income tax expense (benefit) (49.0) 9.5 (38.9) 25.3
-------- -------- -------- --------
Net income (loss) $(62.9) $19.3 $(33.9) $51.5
======== ======== ======== ========
Diluted earnings per share $(1.25) $0.38 $(0.67) $1.01
======== ======== ======== ========
Diluted shares outstanding 50.3 51.4 50.3 51.1
======== ======== ======== ========
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31,
2006 2005
------------- ------------
(Unaudited)
(In millions)
ASSETS
Current assets
Cash and cash equivalents $13.9 $3.7
Accounts receivable, net 352.5 328.0
Inventories, net 236.9 207.2
Prepaid expenses and other 81.6 45.5
Deferred income taxes 44.9 17.0
------------- ------------
Total current assets 729.8 601.4
Property, plant and equipment, net 1,916.1 1,836.0
Deferred income taxes 35.9 3.0
Goodwill 147.8 147.8
Other assets and deferred charges 76.4 78.4
------------- ------------
Total assets $2,906.0 $2,666.6
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $369.7 $381.1
Other accrued expenses 235.3 168.1
------------- ------------
Total current liabilities 605.0 549.2
Long-term debt 628.4 489.2
Deferred income taxes 96.3 116.1
Postretirement benefits and other
long-term liabilities 625.5 517.3
------------- ------------
Total liabilities 1,955.2 1,671.8
Stockholders' equity 950.8 994.8
------------- ------------
Total liabilities and stockholders'
equity $2,906.0 $2,666.6
============= ============
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
------------------ ------------------
2006 2005 2006 2005
-------- -------- -------- --------
(In millions)
Operating activities
Net income (loss) $(62.9) $19.3 $(33.9) $51.5
Depreciation and amortization 52.8 46.2 153.2 135.0
Other 72.1 25.5 42.4 (43.1)
-------- -------- -------- --------
Net cash flow provided by operating
activities 62.0 91.0 161.7 143.4
Purchases of property, plant &
equipment (87.5) (82.4) (243.5) (243.6)
-------- -------- -------- --------
Net cash flow after purchases of
property, plant & equipment (25.5) 8.6 (81.8) (100.2)
-------- -------- -------- --------
Purchase buyouts of leased equipment - - (19.5) -
-------- -------- -------- --------
Net cash flow provided by (used in)
operations (25.5) 8.6 (101.3) (100.2)
Net increase in long-term debt 36.3 (1.0) 137.5 110.7
Debt issuance costs - - (3.1) -
Employee stock option exercises 0.2 0.9 0.3 4.3
Dividends paid (7.8) (7.7) (23.3) (22.7)
-------- -------- -------- --------
Net cash flow provided by (used in)
financing activities 28.7 (7.8) 111.4 92.3
Effect of exchange rate changes on
cash (0.1) - 0.1 (0.1)
-------- -------- -------- --------
Net increase (decrease) in cash and
cash equivalents 3.1 0.8 10.2 (8.0)
Cash and cash equivalents at
beginning of period 10.8 5.6 3.7 14.4
-------- -------- -------- --------
Cash and cash equivalents at end of
period $13.9 $6.4 $13.9 $6.4
======== ======== ======== ========
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,
-------------------- ----------------
2006 2005 2006 2005
-------- -------- -------- ------
(In millions)
Net income (loss) $(62.9) $19.3 $(33.9) $51.5
Interest expense 11.8 7.6 27.2 20.5
Income taxes (49.0) 9.5 (38.9) 25.3
Depreciation and amortization 52.8 46.2 153.2 135.0
-------- -------- -------- -------
EBITDA $(47.3) $82.6 $107.6 $232.3
======== ======== ======== =======
Net debt(b) to capital
September 30, December 31,
2006 2005
-------------- --------------
(In millions, except percentages)
Total debt $628.4 $489.2
Less: cash and cash equivalents 13.9 3.7
-------------- --------------
Net debt at end of period 614.5 485.5
Stockholders' equity 950.8 994.8
-------------- --------------
Total invested capital at end of period $1,565.3 $1,480.3
============== ==============
Net debt to capital(c) 39.3% 32.8%
============== ==============
(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(loss) from operations, net income(loss) 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,
----------------- -----------------
2006 2005 2006 2005
-------- -------- -------- --------
(In millions)
Net cash provided by operating
activities $62.0 $91.0 $161.7 $143.4
Less: purchases of property, plant &
equipment (87.5) (82.4) (243.5) (243.6)
-------- -------- -------- --------
Net operating cash flow (25.5) 8.6 (81.8) (100.2)
Less: dividends paid (7.8) (7.7) (23.3) (22.7)
-------- ------- -------- --------
Free cash flow $(33.3) $0.9 $(105.1) $(122.9)
========= ======= ======== ========
After-Tax Return on Invested Capital (ROIC)(e)
Quarter Ended Trailing Twelve
------------------------------------------- Months Ended
December 31, March 31, June 30, September 30, September 30,
2005 2006 2006 2006 2006
------------ --------- -------- ------------- -------------
(In millions, except percentages)
Net income (loss) $4.5 $8.6 $20.4 $(62.9) $(29.4)
After-tax net
interest expense(f) 5.6 4.9 5.2 6.6 22.3
------------ --------- -------- ------------- -------------
After-tax return $10.1 $13.5 $25.6 $(56.3) $(7.1)
============ ========= ======== ============= =============
Net debt at end
of period $614.5
Stockholder's
equity at end of
period 950.8
------------
Invested capital
at end of period 1,565.3
Invested capital
at beginning of
period 1,560.3
------------
Average invested
capital(g) $1,562.8
============
After-Tax ROIC(h) -0.5%
============
(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
http://www.prnewswire.com/comp/033813.html/
CONTACT:
Media relations contact: Carrie L.P. Gray,
Director, Corporate Relations, +1-313-758-4880, grayc@aam.com ,
or Investor relations contact: 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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