Announces 2007 Earnings and Cash Flow Guidance DETROIT, Feb. 2
/PRNewswire-FirstCall/ -- American Axle & Manufacturing
Holdings, Inc. (AAM), which is traded as AXL on the NYSE, today
reported its financial results for the fourth quarter and full year
2006. Full Year 2006 Results - Full year sales of $3.2 billion,
reflecting a 9% year-over-year decline in AAM production volumes -
Non-GM sales of $758.5 million, or 24% of total net sales - Special
charges of $181.4 million for a special attrition program (SAP)
accepted by approximately 1,500 UAW represented associates at AAM's
master agreement facilities and other related restructuring actions
- Asset impairment charges of $196.5 million primarily associated
with plans to idle AAM production capacity in the U.S. dedicated to
the mid- size light truck product range - Net loss of $222.5
million, or $4.42 per share AAM's results in the fourth quarter of
2006 were a net loss of $188.6 million or $3.74 per share. This
compares to earnings of $4.5 million or $0.09 per share in the
fourth quarter of 2005. Full year 2006 results were a net loss of
$4.42 per share as compared to earnings of $1.10 per share in 2005.
AAM's results in 2006 reflect an overall 9% year-over-year decline
in production volumes for the major North American light truck
programs AAM currently supports. This includes an estimated 30%
decrease in customer production volumes for AAM's mid-sized light
truck product range as compared to 2005. Production volumes for the
major full-size pickup truck and SUV programs AAM currently
supports for General Motors and the Chrysler Group were relatively
unchanged in 2006 as compared to 2005. In the fourth quarter of
2006, AAM recorded special charges relating to a special attrition
program (SAP) accepted by approximately 1,500 UAW represented
associates at AAM's master agreement facilities. AAM also recorded
a special charge in 2006 for supplemental unemployment benefits
(SUB) estimated to be payable to UAW associates who are expected to
be permanently idled through the end of the current collective
bargaining agreement that expires in February 2008. AAM recorded
additional special charges associated with salaried workforce
reductions and other attrition programs offered to its associates.
In total, these special charges increased AAM's operating costs in
2006 by $181.4 million. AAM estimates that the future structural
cost benefit resulting from the SAP and other related restructuring
actions will exceed $100 million annually. In addition to these
special charges, AAM also recorded asset impairment charges of
$196.5 million in the fourth quarter of 2006 associated with plans
to idle a portion of AAM's production capacity in the U.S.
dedicated to its mid-size light truck product range and other
capacity reduction initiatives. "As the domestic automotive
industry continues its rapid and unprecedented structural
transformation, AAM took difficult, but necessary actions in 2006
to adjust our workforce and production capacity in the U.S. to meet
the realities of the new global automotive market," said American
Axle & Manufacturing Co-Founder, Chairman of the Board &
CEO, Richard E. Dauch. "In 2006, we made significant progress on
AAM's long-term strategic goals with the expansion of our product
portfolio and new business backlog to support the growing
all-wheel-drive passenger car and crossover vehicle market segment.
We also launched important new products for General Motors, the
Chrysler Group, SsangYong Motors, Hino, Jatco, Koyo and
Harley-Davidson, while expanding our served markets and global
manufacturing footprint into mainland Europe and Asia." 2007
Outlook - AAM expects full year 2007 sales to increase to
approximately $3.3 billion - AAM expects production volumes for the
major North American light truck programs AAM currently supports to
be approximately 2% lower as compared to 2006 - AAM expects
earnings to range from approximately $1.25 to $1.50 per share in
2007 - AAM expects capital spending to range from $240 million to
$250 million in 2007 - AAM expects free positive cash flow to
exceed $100 million in 2007 AAM's 2007 earnings outlook is based on
the assumption that its customers' production volumes for the major
North American light truck programs it currently supports will be
approximately 2% lower as compared to 2006. Based on this
production assumption, the anticipated timing of new program
launches and higher content on GM's all-new, award winning
full-size SUV and pickup truck program, AAM expects 2007 sales to
increase to approximately $3.3 billion. AAM expects content per
vehicle to increase approximately 5% in 2007, off a base of $1,225
in 2006. AAM's 2007 earnings outlook also reflects its plans to
incur an additional $25 million of additional special charges and
other non-recurring operating costs related to incremental
attrition program activity, the redeployment of machinery and
equipment and other steps to rationalize underutilized capacity.
Including capital expenditures related to this activity and
payments due to associates pursuant to the SAP and other attrition
programs expensed in 2006, AAM expects to incur a net use of cash
approximating $100 million in 2007 in support of these attrition
obligations and restructuring activities. Reflecting the impact of
AAM's 2007 earnings outlook, a reduction in AAM's capital spending
to a range of $240 million to $250 million and the continuation of
its quarterly cash dividend program, AAM expects its free positive
cash flow to exceed $100 million in 2007. AAM defines free cash
flow to be net cash provided by (or used in) operating activities
less capital expenditures and dividends paid. AAM expects
depreciation and amortization expense to increase approximately $20
million in 2007 as compared to 2006. Although the asset impairments
recorded in 2006 reduce the annual rate of depreciation and
amortization expense for certain of these assets in 2007, the
impact of depreciation on new machinery and equipment almost
entirely offsets that reduction. AAM also accelerated useful life
estimates for various assets as a result of its asset impairment
assessment in 2006. These changes in useful life estimates increase
the annual rate of depreciation for these assets beginning in 2007.
Taking all of these factors into account, AAM expects its earnings
to range from $1.25 to $1.50 per share in 2007. "In 2007, we expect
to strengthen AAM's position in terms of sales growth, margin
expansion and free cash flow generation," said Mr. Dauch. "AAM's
plan to generate more than $100 million of free cash flow in 2007
will enhance our ability to invest in the continuing
diversification of our product portfolio, customer base and global
manufacturing footprint. We will remain focused on these long-term
strategic goals in 2007, while at the same time reducing debt
levels, improving our balance sheet strength and enhancing
stockholder value." A conference call to review AAM's fourth
quarter and full year 2006 results is scheduled today at 10:00 a.m.
EST. 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
12:00 p.m. EST on February 2, 2007 until 5:00 p.m. EST February 9,
2007 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 5211203. 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 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: reduced purchases of our products by GM, DaimlerChrysler or
other customers; 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; our ability and our suppliers'
ability to maintain satisfactory labor relations and avoid work
stoppages; our ability to achieve cost reductions through
accelerated attrition programs; our ability to achieve sufficient
cost reductions to remain globally competitive; our customers' and
their suppliers' ability to maintain satisfactory labor relations
and avoid work stoppages; additional restructuring actions that may
occur; supply shortages or price fluctuations in raw materials,
utilities or other operating supplies; our ability to attract new
customers and programs for new products; our ability to develop and
produce new products that reflect market demand; 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); adverse changes in the
economic conditions or political stability of our principal markets
(particularly North America, Europe and South America); 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, research and development or other general corporate
purposes, including our ability to comply with financial covenants;
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 most recent annual report on Form 10-K and quarterly reports on
Form 10-Q. 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: Renee B.
Rogers Christopher M. Son Manager, Corporate Communications &
Director, Investor Relations Media Relations (313) 758-4814 (313)
758-4882 Or visit the AAM website at http://www.aam.com/ AMERICAN
AXLE & MANUFACTURING HOLDINGS, INC. CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS Three months ended Twelve months ended
December 31, December 31, ------------------- -------------------
2006 2005 2006 2005 --------- --------- --------- --------- (In
millions, except per share data) Net sales $781.1 $852.6 $3,191.7
$3,387.3 Cost of goods sold 1,001.1 788.9 3,320.3 3,082.6 ---------
--------- --------- --------- Gross profit (loss) (220.0) 63.7
(128.6) 304.7 Selling, general and administrative expenses 51.6
55.6 197.4 199.6 --------- --------- --------- --------- Operating
income (loss) (271.6) 8.1 (326.0) 105.1 Net interest expense (11.8)
(7.2) (38.8) (27.2) Other income (expense) Debt refinancing costs -
- (2.7) - Other, net 0.6 2.3 12.0 2.1 --------- --------- ---------
--------- Income (loss) before income taxes (282.8) 3.2 (355.5)
80.0 Income tax expense (benefit) (94.2) (1.3) (133.0) 24.0
--------- --------- --------- --------- Net income (loss) $(188.6)
$4.5 $(222.5) $56.0 ========= ========= ========= ========= Diluted
earnings (loss) per share $(3.74) $0.09 $(4.42) $1.10 =========
========= ========= ========= Diluted shares outstanding 50.5 51.1
50.4 51.1 ========= ========= ========= ========= AMERICAN AXLE
& MANUFACTURING HOLDINGS, INC. CONDENSED CONSOLIDATED BALANCE
SHEETS December 31, December 31, 2006 2005 ----------- -----------
(In millions) ASSETS Current assets Cash and cash equivalents $13.5
$3.7 Accounts receivable, net 327.6 328.0 Inventories, net 198.4
207.2 Other current assets 99.9 62.5 --------- --------- Total
current assets 639.4 601.4 Property, plant and equipment, net
1,731.7 1,836.0 Goodwill 147.8 147.8 Other assets and deferred
charges 78.6 81.4 --------- --------- Total assets $2,597.5
$2,666.6 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities Accounts payable $329.0 $381.1 Other accrued
expenses 212.3 168.1 --------- --------- Total current liabilities
541.3 549.2 Long-term debt 672.2 489.2 Deferred income taxes 6.8
116.1 Postretirement benefits and other long-term liabilities 563.5
517.3 --------- --------- Total liabilities 1,783.8 1,671.8
Stockholders' equity 813.7 994.8 --------- --------- Total
liabilities and stockholders' equity $2,597.5 $2,666.6 =========
========= AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Three months ended
Twelve months ended December 31, December 31, ------------------
------------------- 2006 2005 2006 2005 ---- ---- ---- ---- (In
millions) Operating activities Net income (loss) $(188.6) $4.5
$(222.5) $56.0 Depreciation and amortization 52.7 50.1 206.0 185.1
Other 159.9 82.4 202.2 39.3 ------ ------ ------ ------ Net cash
flow provided by operating activities 24.0 137.0 185.7 280.4
Purchases of property, plant & equipment (43.1) (62.1) (286.6)
(305.7) ------ ------ ------ ------ Net cash flow after purchases
of property, plant & equipment (19.1) 74.9 (100.9) (25.3)
------ ------ ------ ------ Purchase buyouts of leased equipment
(17.5) - (37.0) - ------ ------ ------ ------ Net cash flow
provided by (used in) operations (36.6) 74.9 (137.9) (25.3) Net
increase in long-term debt 43.0 (70.1) 180.4 40.6 Debt issuance
costs (1.3) - (4.4) - Employee stock option exercises 0.9 0.3 1.3
4.6 Dividends paid (7.7) (7.7) (31.0) (30.4) Windfall tax benefits
1.0 - 1.0 - ------ ------ ------ ------ Net cash flow provided by
(used in) financing activities 35.9 (77.5) 147.3 14.8 Effect of
exchange rate changes on cash 0.3 (0.1) 0.4 (0.2) ------ ------
------ ------ Net increase (decrease) in cash and cash equivalents
(0.4) (2.7) 9.8 (10.7) Cash and cash equivalents at beginning of
period 13.9 6.4 3.7 14.4 ------ ------ ------ ------ Cash and cash
equivalents at end of period $13.5 $3.7 $13.5 $3.7 ====== ======
====== ====== 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 Twelve months ended December 31,
December 31, ------------------ ------------------ 2006 2005 2006
2005 ---- ---- ---- ---- (In millions) Net income (loss) $(188.6)
$4.5 $(222.5) $56.0 Interest expense 11.9 7.4 39.0 27.9 Income
taxes (94.2) (1.3) (133.0) 24.0 Depreciation and amortization 52.7
50.1 206.0 185.1 ------- ------- ------- ------- EBITDA $(218.2)
$60.7 $(110.5) $293.0 ======= ======= ======= ======= Net debt(b)
to capital December 31, December 31, 2006 2005 -----------
----------- (In millions, except percentages) Total debt $672.2
$489.2 Less: cash and cash equivalents 13.5 3.7 -------- --------
Net debt at end of period 658.7 485.5 Stockholders' equity 813.7
994.8 -------- -------- Total invested capital at end of period
$1,472.4 $1,480.3 ======== ======== Net debt to capital(c) 44.7%
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 Twelve months ended
December 31, December 31, ------------------ ------------------
2006 2005 2006 2005 ---- ---- ---- ---- (In millions) Net cash
provided by operating activities $24.0 $137.0 $185.7 $280.4 Less:
purchases of property, plant & equipment (43.1) (62.1) (286.6)
(305.7) ------- ------- ------- ------- Net operating cash flow
(19.1) 74.9 (100.9) (25.3) Less: dividends paid (7.7) (7.7) (31.0)
(30.4) ------- ------- ------- ------- Free cash flow $(26.8) $67.2
$(131.9) $(55.7) ======= ======= ======= ======= After-Tax Return
on Invested Capital (ROIC)(e) Trailing Quarter Ended Twelve
------------- Months Ended March 31, June 30, Sept. 30, Dec. 31,
Dec. 31, 2006 2006 2006 2006 2006 -------- ------- -------- -------
------- (In millions, except percentages) Net income (loss) $8.6
$20.4 $(62.9) $(188.6) $(222.5) After-tax net interest expense (f)
4.9 5.2 6.6 7.8 24.5 -------- ------- -------- ------- -------
After-tax return $13.5 $25.6 $(56.3) $(180.8) $(198.0) ========
======= ======== ======= ======= Net debt at end of period $658.7
Stockholder's equity at end of period 813.7 ------ Invested capital
at end of period 1,472.4 Invested capital at beginning of period
1,480.4 ------- Average invested capital(g) $1,476.4 =======
After-Tax ROIC(h) -13.4% ======= (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. DATASOURCE: American Axle & Manufacturing
Holdings, Inc. CONTACT: media, Renee B. Rogers, Manager, Corporate
Communications & Media Relations, +1-313-758-4882, or , or
investors, Christopher M. Son, Director, Investor Relations,
+1-313-758-4814, or , both of American Axle & Manufacturing
Holdings, Inc. Web site: http://www.aam.com/
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