DETROIT, Oct. 31 /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 2008.
Third Quarter 2008 results
-- Third quarter sales of $528.1 million
-- Net loss of $440.9 million, or $8.54 per share
-- AAM's quarterly results reflect the adverse impact of special charges,
asset impairments and other non-recurring operating costs of $398.0
million, or $7.71 per share; these charges, the majority of which were
non-cash in the period, relate to hourly and salaried attrition program
activity, plant closures and other actions to rationalize underutilized
capacity and align AAM's business to current and projected market
requirements
-- 44% year-over-year decline in total light truck production volumes as
compared to the third quarter of 2007
-- Content-per-vehicle of $1,453, approximately 12% higher than the
previous year
AAM's results in the third quarter of 2008 were a net loss of $440.9
million or $8.54 per share. This compares to net earnings of $13.5 million,
or $0.25 per share, in the third quarter of 2007.
In the third quarter of 2008, AAM recorded special charges and
non-recurring operating costs of $398.0 million, or $7.71 per share. The
majority of these charges and costs were non-cash in the period.
These charges and costs are summarized in the following table:
in millions EPS Impact
Attrition programs and benefit reductions
for U.S. hourly and salaried associates $ 85.2 $ 1.65
Buydown Program payments 51.9 1.01
Asset impairments, lease accruals and
indirect inventory write-downs 255.9 4.95
Other (primarily plant closure accruals
and asset redeployment costs) 5.0 0.10
Total special charges and non-recurring
operating costs $ 398.0 $ 7.71
-- Special charges of $85.2 million, or $1.65 per share relating to U.S.
hourly and salaried attrition programs and benefit reductions, including
pension and other postretirement benefit curtailments and special and
contractual termination benefits. Included in this activity are charges
relating to voluntary elections under the Special Separation Program (SSP)
offered to UAW-represented associates at AAM's original U.S. locations and
salaried workforce reductions.
-- Special charges of $51.9 million, or $1.01 per share relating to the
total estimated Buydown Program (BDP) payments to those associates who are
expected to be permanently idled throughout the new labor agreement. The BDP
was initiated for associates that did not elect to participate in the SSP.
Under the BDP, AAM will make three annual lump-sum payments to associates in
connection with, among other things, a base wage decrease.
-- Asset impairment charges and indirect inventory write-downs, of $255.9
million, or $4.95 per share. Most of these charges result from the impact of
recent customer decisions adversely affecting AAM's future production
requirements at AAM's Colfor Manufacturing subsidiary and further structural
changes in the level of market demand and accelerated reductions in customer
production volumes anticipated for the major North American light truck and
SUV product programs AAM currently supports for GM in the Detroit, Michigan
driveline assembly facility.
-- Other special charges and non-operating costs of $5.0 million, or $0.10
per share primarily relating to costs incurred in relation to plant closings,
including costs to redeploy machinery and equipment.
"AAM's results in the third quarter of 2008 were adversely impacted by
customer decisions to restrict production and reduce inventories of unsold
vehicles. This created a significant imbalance between our production
schedules in the quarter and the selling rates of the major product programs
AAM currently supports for GM and Chrysler in North America," said AAM
Co-Founder, Chairman of the Board & Chief Executive Officer Richard E. Dauch.
"Rapid deterioration in the domestic economy, pervasive weakness in the credit
markets and historically low consumer confidence compounded these challenges
for the entire domestic automotive industry.
"As we adapt to these new and challenging market conditions, AAM remains
focused on the execution of its comprehensive restructuring plan to align
AAM's global production capacity with current and projected market
requirements. The actions AAM is taking to improve the operating flexibility
and market cost competitiveness of its U.S. operations position AAM to sustain
its leadership position in the North American driveline market segment. At
the same time, the recent groundbreaking for AAM's new Rayong, Thailand
manufacturing facility demonstrates our commitment to the continued
diversification and expansion of AAM's global manufacturing and sourcing
footprint. These initiatives position AAM for a return to profitability."
Net sales in the third quarter of 2008 were $528.1 million as compared to
$774.3 million in the third quarter of 2007. Customer production volumes for
the major light truck and SUV product programs AAM currently supports for GM
and Chrysler were down approximately 44% in the third quarter of 2008 as
compared to the prior year. Non-GM sales represented 26% of total sales in
the third quarter of 2008 as compared to 24% in the third quarter of 2007.
AAM's content-per-vehicle is measured by the dollar value of its product
sales supporting GM's North American truck and SUV platforms and Chrysler's
heavy duty Dodge Ram pickup trucks. In the third quarter 2008, AAM's
content-per-vehicle increased approximately 12% to $1,453 as compared to
$1,303 in the third quarter of 2007.
Net sales in the first three quarters of 2008 were $1.6 billion as
compared to $2.5 billion in the first three quarters of 2007. The company's
operating loss in the first three quarters of 2008 was $1.0 billion as
compared to operating income of $125.1 million or 5.0% of sales for the first
three quarters of 2007.
AAM's SG&A spending for the third quarter of 2008 was $43.0 million as
compared to $52.0 million in the third quarter of 2007. In the first three
quarters of 2008, AAM's SG&A spending was $137.3 million as compared to $155.1
million in the first three quarters of 2007. AAM's R&D spending for the first
three quarters of 2008 was approximately $63.4 million as compared to $61.9
million in the first three quarters of 2007.
AAM defines free cash flow to be net cash provided by (or used in)
operating activities less capital expenditures net of proceeds from the sales
of equipment and dividends paid. Net cash used in operating activities in the
first three quarters of 2008 was $97.3 million as compared to net cash
provided by operating activities of $331.6 million in the first three quarters
of 2007. Capital spending net of proceeds from the sales of equipment for the
first three quarters of 2008 was $100.5 million as compared to $132.9 million
in the first three quarters of 2007. Reflecting the impact of this activity
and dividend payments of $17.3 million, AAM's free cash flow use of $215.1
million in the first three quarters of 2008 compared to $174.9 million of
positive free cash flow in the first three quarters of 2007.
A conference call to review AAM's third quarter of 2008 results is
scheduled today at 10:00 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 5:00 p.m. ET on October 31, 2008 until 5:00 p.m. ETNovember 7, 2008 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 65769084.
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
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 and drivetrain systems and related components and
modules, chassis systems and metal-formed products for trucks, sport utility
vehicles, passenger cars and crossover utility vehicles. In addition to
locations in the United States (Michigan, New York, Ohio and Indiana), AAM
also has offices or facilities in Brazil, China, Germany, India, Japan,
Luxembourg, Mexico, Poland, South Korea, Thailand 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: global economic conditions, reduced
purchases of our products by General Motors Corporation (GM), Chrysler LLC
(Chrysler) or other customers; reduced demand for our customers' products
(particularly light trucks and SUVs produced by GM and Chrysler); availability
of financing for working capital, capital expenditures, R&D or other general
corporate purposes, including our ability to comply with financial covenants;
our customers' and suppliers' availability of financing for working capital,
capital expenditures, R&D or other general corporate purposes; our ability to
achieve cost reductions through ongoing restructuring actions; additional
restructuring items that may occur; our ability to achieve the level of cost
reductions required to sustain global cost competitiveness; adverse changes in
the economic conditions or political stability of our principal markets
(particularly North America, Europe, South America and Asia); additional
restructuring actions that may occur; our ability to maintain satisfactory
labor relations and avoid future work stoppages; our suppliers' 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 improve our U.S. labor cost structure;
our ability to consummate and integrate acquisitions; supply shortages or
price increases in raw materials, utilities or other operating supplies; our
ability or our customers' and suppliers' ability to successfully launch new
product programs on a timely basis; our ability to realize the expected
revenues from our new and incremental business backlog; our ability to attract
new customers and programs for new products; our ability to develop and
produce new products that reflect market demand; lower-than-anticipated market
acceptance of new or existing products; our ability to respond to changes in
technology, increased competition or pricing pressures; continued or increased
high prices for or reduced availability of fuel; adverse changes in laws,
government regulations or market conditions affecting our products or our
customers' products (such as the Corporate Average Fuel Economy regulations);
liabilities arising from warranty claims, product liability and legal
proceedings to which we are or may become a party; changes in liabilities
arising from pension and other postretirement benefit obligations; risks of
noncompliance with environmental regulations or risks of environmental issues
that could result in unforeseen costs at our facilities; our ability to
attract and retain key associates; 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 statement.
For additional information
Media relations contact:
Renee B. Rogers
Manager, Corporate Communications and Media Relations
(313) 758-4882
renee.rogers@aam.com
Investor relations contact:
Jamie M. Little
Director, Investor Relations
(313) 758-4831
jamie.little@aam.com
Or visit the AAM website at www.aam.com
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
-------------------- --------------------
2008 2007 2008 2007
---------- --------- --------- ----------
(In millions, except (In millions, except
per share data) per share data)
Net sales $528.1 $774.3 $1,606.2 $2,493.0
Cost of goods sold 906.5 693.1 2,499.8 2,212.8
-------- -------- --------- ---------
Gross profit (loss) (378.4) 81.2 (893.6) 280.2
Selling, general and administrative
expenses 43.0 52.0 137.3 155.1
-------- -------- --------- ---------
Operating income (loss) (421.4) 29.2 (1,030.9) 125.1
Interest expense (18.0) (14.6) (48.4) (46.8)
Investment income (loss) (3.7) 3.1 0.5 6.0
Other income (expense), net
Debt refinancing cost - - - (5.5)
Other, net (1.2) (1.2) 0.4 0.1
-------- -------- --------- ---------
Income (loss) before income taxes (444.3) 16.5 (1,078.4) 78.9
Income tax expense (benefit) (3.4) 3.0 33.8 15.1
-------- -------- --------- ---------
Net income (loss) $(440.9) $13.5 $(1,112.2) $63.8
======== ======== ========= =========
Diluted earnings (loss) per share $(8.54) $0.25 $(21.55) $1.21
======== ======== ========= =========
Diluted shares outstanding 51.6 53.0 51.6 52.6
======== ======== ========= =========
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, December 31,
2008 2007
-------------- --------------
(In millions)
ASSETS
Current assets
Cash and cash equivalents $454.2 $343.6
Short-term investments 117.2 -
Accounts receivable, net 256.2 264.0
AAM/GM agreement receivable 60.0 -
Inventories, net 183.8 242.8
Prepaid expenses and other 70.8 73.4
Deferred income taxes 5.3 19.5
-------------- --------------
Total current assets 1,147.5 943.3
Property, plant and equipment, net 1,093.0 1,696.2
Deferred income taxes 16.0 78.7
Goodwill 147.8 147.8
Other assets and deferred charges 51.5 57.4
-------------- --------------
Total assets $2,455.8 $2,923.4
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts payable $287.2 $313.8
Other accrued expenses 374.3 197.8
-------------- --------------
Total current liabilities 661.5 511.6
Long-term debt 1,300.8 858.1
Deferred income taxes 5.4 6.6
Deferred revenue 195.8 66.0
Postretirement benefits and other
long-term liabilities 429.6 581.7
-------------- --------------
Total liabilities 2,593.1 2,024.0
Stockholders' equity (deficit) (137.3) 899.4
-------------- --------------
Total liabilities and stockholders'
equity (deficit) $2,455.8 $2,923.4
============== ==============
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
------------------- ------------------
2008 2007 2008 2007
--------- --------- --------- --------
(In millions) (In millions)
Operating activities
Net income
(loss) $(440.9) $13.5 $(1,112.2) $63.8
Depreciation and
amortization 52.6 57.6 165.2 171.0
Other 366.9 25.9 849.7 96.8
--------- --------- --------- --------
Net cash flow provided by
operating activities (21.4) 97.0 (97.3) 331.6
Purchases of property,
plant & equipment (35.9) (57.4) (102.8) (132.9)
Proceeds from sales
of assets - - 2.3 -
Reclass of short-term
investments (117.2) - (117.2) -
--------- --------- --------- --------
Net cash flow provided by
(used in) operations (174.5) 39.6 (315.0) 198.7
Net increase (decrease) in
long-term debt 435.0 (2.1) 442.9 167.3
Debt issuance costs - - - (7.5)
Repurchase of
treasury stock - (1.9) (0.1) (1.9)
Employee stock option
exercises - 3.9 0.9 15.2
Dividends paid (1.1) (8.0) (17.3) (23.8)
--------- --------- --------- --------
Net cash flow
provided by (used
in) financing
activities 433.9 (8.1) 426.4 149.3
Effect of exchange
rate changes on cash (1.3) (0.7) (0.8) 0.6
--------- --------- --------- --------
Net increase in cash
and cash equivalents 258.1 30.8 110.6 348.6
Cash and cash
equivalents at
beginning of period 196.1 331.3 343.6 13.5
--------- --------- --------- --------
Cash and cash
equivalents at end
of period $454.2 $362.1 $454.2 $362.1
========= ========= ========= ========
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,
------------------ ------------------
2008 2007 2008 2007
-------- -------- ------- ---------
(In millions) (In millions)
Net income (loss) $(440.9) $13.5 $(1,112.2) $63.8
Interest expense 18.0 14.6 48.4 46.8
Income taxes (3.4) 3.0 33.8 15.1
Depreciation and amortization 52.6 57.6 165.2 171.0
-------- -------- ------- ---------
EBITDA $(373.7) $88.7 $(864.8) $296.7
======== ======== ======== =========
Net debt(b) to capital
September 30, December 31,
2008 2007
---------------------------------
(In millions, except percentages)
Total debt $1,300.8 $858.1
Less: cash and cash equivalents 454.2 343.6
-------- --------
Net debt at end of period 846.6 514.5
Stockholders' equity (deficit) (137.3) 899.4
-------- --------
Total invested capital at end of
period $709.3 $1,413.9
======== ========
Net debt to capital(c) 119.4% 36.4%
======== ========
Net Operating Cash Flow and Free Cash Flow(d)
Three months ended Nine months ended
September 30, September 30,
------------------ ------------------
2008 2007 2008 2007
------------------ ------------------
(In millions) (In millions)
Net cash provided by operating
activities $(21.4) $97.0 $(97.3) $331.6
Less: purchases of property, plant &
equipment and proceeds from sale of
equipment (35.9) (57.4) (100.5) (132.9)
-------- ------- -------- -------
Net operating cash flow (57.3) 39.6 (197.8) 198.7
Less: dividends paid (1.1) (8.0) (17.3) (23.8)
-------- ------- -------- -------
Free cash flow $(58.4) $31.6 $(215.1) $174.9
======== ======= ======== =======
(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 (deficit) 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.
(d) We define net operating cash flow as net cash provided by operating
activities less purchases of property and equipment net of proceeds from sales
of assets. 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.
