American Axle & Manufacturing Announces Third Quarter Earnings of $0.52 Per Share

Net income nearly doubles on strong third quarter sales growth

Oct 29, 2010, 07:30 ET from American Axle & Manufacturing Holdings, Inc.

DETROIT, Oct. 29 /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 2010.  

Third Quarter 2010 Results

  • Third quarter 2010 sales of $618.2 million, AAM's highest quarterly sales total in 2010
  • Gross profit of $113.9 million, or 18.4% of sales
  • Operating income of $60.7 million, or 9.8% of sales
  • Net income of $38.8 million, or $0.52 per share
  • EBITDA (earnings before interest, taxes, depreciation and amortization) of $95.4 million, or 15.4% of sales

AAM's results in the third quarter of 2010 were net earnings of $38.8 million or $0.52 per share, nearly double AAM's net earnings of $19.6 million or $0.35 per share in the third quarter of 2009.

In the third quarter of 2009, AAM recorded pension and postretirement benefit curtailment gains of $42.3 million (or $0.76 per share).  These gains were partially offset by special charges and restructuring costs of $13.0 million (or $0.23 per share), primarily relating to salaried attrition programs, capacity rationalization activities and the successful closing of a settlement and commercial agreement with General Motors Company (GM) and amendment of AAM's Revolving Credit Facility and Term Loan agreements.

AAM's results in the third quarter of 2009 were also adversely impacted by the extended summer production shutdowns of GM and Chrysler Group LLC (Chrysler).  AAM estimates the reduction in sales and operating income resulting from these shutdowns in the third quarter of 2009 was approximately $100.6 million and approximately $29.3 million (or $0.52 per share), respectively.  

"AAM continued to achieve improved financial results in the third quarter of 2010, with strong sales growth driving higher earnings and positive free cash flow," said AAM's Co-Founder, Chairman of the Board and Chief Executive Officer, Richard E. Dauch.  "We are outperforming AAM's business plan for 2010 due to a recovery in market demand for full-size pickups and SUVs, as well as the impact of our ongoing actions to control operating expenses and sustain reductions in AAM's fixed cost structure.  For the full year 2010, AAM is on track to report sales growth of approximately 45% - 50% and profit margins that rank among the best in our company's history."

Net sales in the third quarter of 2010 increased approximately 50% to $618.2 million as compared to $409.6 million in the third quarter of 2009.  On a sequential basis, net sales in the quarter increased approximately 10% as compared to the second quarter of 2010.  

Non-GM sales in the third quarter of 2010 nearly doubled on a year-over-year basis to $147.1 million.  On a sequential basis, non-GM sales in the quarter increased approximately 9% in the third quarter of 2010 as compared to the second quarter of 2010.

AAM's content-per-vehicle is measured by the dollar value of its product sales supporting GM's North American light truck and SUV programs and Chrysler's heavy duty Dodge Ram pickup trucks.  In the third quarter of 2010, AAM's content-per-vehicle of $1,458 was approximately 4% higher as compared to $1,396 in the third quarter of 2009.  On a sequential basis, AAM's content-per-vehicle of $1,458 in the quarter was also up approximately 4% versus the second quarter of 2010.

AAM's net sales of $1.7 billion in the first three quarters of 2010 increased by $642.1 million, or approximately 61%, as compared to $1.1 billion in the first three quarters of 2009.  

AAM's gross profit in the third quarter of 2010 was $113.9 million or 18.4% of sales.

In the first three quarters of 2010, AAM's gross profit was $300.1 million, or 17.7% of sales, as compared to a gross loss of $99.5 million for the first three quarters of 2009.  

AAM's SG&A spending in the third quarter of 2010 was $53.2 million as compared to $44.0 million in the third quarter of 2009.   AAM's R&D spending in the third quarter of 2010 was approximately $21.2 million as compared to $15.1 million in the third quarter of 2009.  

On a year-to-date basis, AAM's SG&A spending in the first three quarters of 2010 was $147.0 million as compared to $133.3 million in the first three quarters of 2009.  AAM's R&D spending in the first three quarters of 2010 was approximately $58.9 million as compared to $50.7 million in the first three quarters of 2009.  

AAM's operating income in the third quarter of 2010 was $60.7 million or 9.8% of sales.  

In the first three quarters of 2010, AAM's operating income was $153.1 million, or 9.0% of sales, as compared to an operating loss of $232.8 million for the first three quarters of 2009.  

AAM defines EBITDA to be earnings before interest, taxes, depreciation and amortization.  AAM's EBITDA in the third quarter of 2010 was $95.4 million, or 15.4% of sales.  In the first three quarters of 2010, AAM's EBITDA was $251.2 million, or 14.8% of sales.

AAM defines free cash flow to be net cash provided by (or used in) operating activities and proceeds from the issuance of warrants to GM, less capital expenditures net of proceeds from the sale of equipment.  Net cash provided by operating activities in the first three quarters of 2010 was $193.5 million.  Capital spending, net of proceeds from the sale of equipment for the first three quarters of 2010 was $60.5 million.  Reflecting the impact of this activity, AAM generated $133.0 million of positive free cash flow in the first three quarters of 2010.  In the first three quarters of 2009, AAM's free cash flow was a use of $104.4 million.

Included in AAM's 2010 year-to-date free cash flow is a $48.8 million U.S. income tax refund AAM received in connection with a special five-year net operating loss carryback election included in the Worker, Home Ownership and Business Act of 2009.  

AAM's free cash flow in the first three quarters of 2010 also reflects the impact of cash payments for restructuring costs of $42.6 million.  These payments relate primarily to AAM's remaining obligations under hourly and salaried attrition programs and the buydown program (BDP) for UAW represented associates at AAM's Detroit, Michigan; Three Rivers, Michigan; and Cheektowaga, New York manufacturing facilities.

A conference call to review AAM's third quarter 2010 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 (973) 200-3383 from outside the United States.  A replay will be available from Noon. ET on October 29, 2010 until 5:00 p.m. ET November 5, 2010 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 16648077.

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 (Indiana, Michigan, New York, Ohio, and Pennsylvania), AAM also has offices or facilities in Brazil, China, Germany, India, Japan, Luxembourg, Mexico, Poland, South Korea, Sweden, Thailand and the United Kingdom.

Cautionary Statement Concerning Forward-Looking Statements

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, made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, are based on our current expectations, are inherently uncertain, are subject to risks and should be viewed with caution.  Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time those statements are made and/or management's good faith belief as of that time with respect to future events and are subject to risks and may differ materially from those expressed in or suggested by the forward-looking statements.  Important factors that could cause such differences include, but are not limited to: global economic conditions; our ability to comply with the definitive terms and conditions of various commercial and financing arrangements with GM; reduced purchases of our products by GM, 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; the impact on us and our customers of requirements imposed on, or actions taken by, our customers in response to the U.S. government's ownership interest, the Troubled Asset Relief Program or similar programs; our ability to achieve cost reductions through ongoing restructuring actions; additional restructuring actions that may occur; our ability to achieve the level of cost reductions required to sustain global cost competitiveness; our ability to maintain satisfactory labor relations and avoid future work stoppages; our suppliers', our customers' and their suppliers' ability to maintain satisfactory labor relations and avoid work stoppages; our ability to continue to implement improvements in our U.S. labor cost structure; supply shortages or price increases in raw materials, utilities or other operating supplies; currency rate fluctuations; 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; price volatility in, 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 ("CAFE") regulations); adverse changes in the political stability of our principal markets (particularly North America, Europe, South America and Asia); 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.  For additional discussion, see "Risk factors" in our most recent 10K filing.  

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...




Christopher M. Son

David Tworek

Director, Investor Relations and

Manager, Communications

Corporate Communications

(313) 758-4883

(313) 758-4814

david.tworek@aam.com

chris.son@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,


2010


2009


2010


2009


(In millions, except per share data)


(In millions, except per share data)

















Net sales

$   618.2


$ 409.6


$ 1,699.7


$ 1,057.6









Cost of goods sold

504.3


321.1


1,399.6


1,157.1









Gross profit (loss)

113.9


88.5


300.1


(99.5)









Selling, general and administrative expenses

53.2


44.0


147.0


133.3









Operating income (loss)

60.7


44.5


153.1


(232.8)









Interest expense

(22.1)


(20.3)


(67.4)


(60.4)

Investment income

0.4


0.8


1.4


2.8

Other income (expense), net

0.5


0.1


(1.7)


(3.6)









Income (loss) before income taxes

39.5


25.1


85.4


(294.0)









Income tax expense

0.8


5.5


5.2


7.8









Net income (loss)

38.7


19.6


80.2


(301.8)









Net loss attributable to noncontrolling interest

0.1


-


0.3


0.1









Net income (loss) attributable to AAM

$   38.8


$   19.6


$      80.5


$  (301.7)









Diluted earnings (loss) per share

$   0.52


$   0.35


$      1.08


$    (5.83)









Diluted shares outstanding

74.3


55.8


74.5


51.8



AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)










September 30,


December 31,


2010


2009


(In millions)

ASSETS








Current assets




    Cash and cash equivalents

$              240.2


$            178.1

    Short-term investments

2.8


4.2

    Accounts receivable, net

188.9


129.7

    Inventories, net

124.9


90.6

    Prepaid expenses and other

77.2


114.0

Total current assets

634.0


516.6





Property, plant and equipment, net

922.6


946.7

GM postretirement cost sharing asset

214.4


219.9

Goodwill

147.8


147.8

Other assets and deferred charges

152.6


155.8

Total assets

$           2,071.4


$         1,986.8













LIABILITIES AND STOCKHOLDERS' DEFICIT








Current liabilities




    Accounts payable

$              311.6


$            200.9

    Accrued expenses and other

260.5


244.6

Total current liabilities

572.1


445.5





Long-term debt

1,011.0


1,071.4

Deferred revenue

136.4


189.7

Postretirement benefits and other long-term liabilities

821.0


840.1

Total liabilities

2,540.5


2,546.7





Stockholders' deficit

(469.1)


(559.9)

Total liabilities and stockholders' deficit

$           2,071.4


$         1,986.8



AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)















Three months ended


Nine months ended


September 30,


September 30,


2010


2009


2010


2009


(In millions)


(In millions)

Operating activities








    Net income (loss)

$   38.7


$   19.6


$   80.2


$ (301.8)

    Depreciation and amortization

33.7


30.3


98.1


102.8

    Other

(43.8)


(43.2)


15.2


179.3









Net cash flow provided by (used in) operating activities

28.6


6.7


193.5


(19.7)









Purchases of property, plant & equipment

(24.8)


(34.5)


(61.7)


(115.5)

Purchase buyouts of leased equipment

(0.4)


-


(7.8)


-

Investment in joint venture

-


-


-


(10.2)

Proceeds from sales of equipment

-


-


1.2


0.5

Redemption of short-term investments

-


2.0


1.6


68.0









Net cash flow used in investing activities

(25.2)


(32.5)


(66.7)


(57.2)









Net increase (decrease) in long-term debt

(3.3)


(90.8)


(60.8)


32.8

Debt issuance costs

-


(15.5)


(2.2)


(18.2)

Repurchase of treasury stock

-


(0.2)


(1.3)


(0.3)

Employee stock option exercises

-


1.0


-


1.0

Proceeds from the issuance of warrants to GM

-


30.3


-


30.3









Net cash flow provided by (used in) financing activities

(3.3)


(75.2)


(64.3)


45.6









Effect of exchange rate changes on cash

1.4


1.7


(0.4)


5.6









Net increase (decrease) in cash and cash equivalents

1.5


(99.3)


62.1


(25.7)









Cash and cash equivalents at beginning of period

238.7


272.4


178.1


198.8









Cash and cash equivalents at end of period

$ 240.2


$ 173.1


$ 240.2


$  173.1



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 (loss) before interest expense, income taxes and depreciation and amortization (EBITDA)(a)










Three months ended


Nine months ended


September 30,


September 30,


2010


2009


2010


2009


(In millions)


(In millions)









Net income (loss) attributable to AAM

$ 38.8


$ 19.6


$ 80.5


$ (301.7)

Interest expense

22.1


20.3


67.4


60.4

Income taxes

0.8


5.5


5.2


7.8

Depreciation and amortization

33.7


30.3


98.1


102.8









EBITDA

$ 95.4


$ 75.7


$ 251.2


$ (130.7)



















Net debt(b) to capital






















September 30,


December 31,






2010


2009






(In millions, except percentages)









Total debt





$ 1,011.0


$ 1,071.4

Less: cash and cash equivalents





240.2


178.1









Net debt at end of period





770.8


893.3









Stockholders' deficit





(469.1)


(559.9)









Total invested capital at end of period





$ 301.7


$ 333.4









Net debt to capital(c)





255.5%


267.9%



Net Operating Cash Flow and Free Cash Flow(d)


Three months ended


Nine months ended


September 30,


September 30,


2010


2009


2010


2009


(In millions)


(In millions)









Net cash provided by (used in) operating activities

$ 28.6


$   6.7


$   193.5


$   (19.7)

Add:   Proceeds from the issuance of warrants to GM

-


30.3


-


30.3

Less: Purchases of property, plant & equipment, net of proceeds from sale of equipment

(24.8)


(34.5)


(60.5)


(115.0)









Net operating cash flow

3.8


2.5


133.0


(104.4)









Less: dividends paid

-


-


-


-









Free cash flow

$   3.8


$   2.5


$   133.0


$   (104.4)

















(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' 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 and proceeds from the issuance of warrants to GM, 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.



SOURCE American Axle & Manufacturing Holdings, Inc.



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