American Axle & Manufacturing Reports Strong First Quarter
Operating Results 13% increase in non-GM sales and new business
awards further diversifies customer base DETROIT, April 30
/PRNewswire-FirstCall/ -- American Axle & Manufacturing
Holdings, Inc. (AAM), which is traded as AXL on the NYSE, today
reported sales and earnings for the first quarter of 2004. First
Quarter 2004 highlights -- Sales to customers other than GM
increased 13% to $191 million, or 20% of total sales -- Net
earnings were $36.5 million, or $0.66 per share. Excluding a
one-time charge of $23.5 million or $0.28 per share related to debt
refinancing and redemption activities, earnings were $51.9 million
or $0.94 per share -- Successfully established investment grade
debt capital structure with $1 billion of new financing -- Awarded
$140 million of incremental new business -- Secured a long-term
agreement for a major future replacement program -- Secured a new
four-year Tier One automotive supplier agreement with the UAW "We
had another productive and successful quarter at AAM. Most
importantly, we secured a new long-term agreement with the UAW that
recognizes the structural changes occurring in the automotive
industry and we completed the refinancing of our debt capital
structure at attractive investment grade levels," said American
Axle & Manufacturing Co-Founder, Chairman of the Board &
CEO Richard E. Dauch. "We are pleased with our solid operating
performance in the quarter and encouraged by the progress we made
to further diversify our customer base." First quarter earnings
were $36.5 million or $0.66 per share. Excluding a one-time charge
of $23.5 million or $0.28 per share related to debt refinancing and
redemption activities, earnings were $51.9 million or $0.94 per
share. Earnings in the first quarter of 2003 were $54.0 million or
$1.02 per share. The charge incurred in the first quarter of 2004
was required to expense a call premium and unamortized debt
issuance costs and discounts related to the redemption of AAM's
9.75% Senior Subordinated Notes on March 1, 2004 and the
refinancing of AAM's revolving bank credit facility completed
earlier in the quarter. Together with the issuance of $400 million
of new senior notes and senior convertible notes in February 2004,
AAM has now successfully established a more flexible, lower cost
debt capital structure. Net sales were $952.8 million as compared
to the reported $975.3 million in sales from the first quarter of
2003. Sales to non-GM customers continue to increase, growing 13%
versus last year's first quarter to $190.8 million in the first
quarter of 2004. Sales to non-GM customers now represent 20% of
total sales versus 17% in the first quarter of 2003. AAM sales were
positively affected by the continued strong demand for the Chrysler
Group's heavy-duty Dodge Ram. AAM sales were negatively affected by
an estimated 5% decrease in General Motors light truck production
for the quarter compared to the same period in 2003. The combined
effect of these factors resulted in nearly a 2% increase in AAM
content per vehicle to $1,182 and growth in AAM's non-GM business
for the first quarter of 2004. Gross margin was 14.3% as compared
to the 14.8% margin reported in the first quarter of 2003.
Operating income was $86.9 million or 9.1% of sales in the first
quarter of 2004 as compared to $95.8 million or 9.8% of sales for
the first quarter of 2003. The results of the quarter include
approximately $5.2 million of costs, or $0.06 per share, related to
the temporary work stoppage in February 2004 at six of AAM's North
American manufacturing facilities. Research and development
spending (R&D) rose nearly 10% to $16.9 million in the first
quarter of 2004 versus $15.4 million in the same period of 2003.
The increase is a continuation of AAM's commitment to the ongoing
development and advanced testing of future products targeted at
growth segments of the market. As a result of this R&D
commitment, AAM generated 88% of its first quarter 2004 sales from
new products introduced to the market since mid-1998. The company
used $42.3 million of cash flow in operations in the first quarter
of 2004 as compared to a use of $26.1 million in the first quarter
of 2003. This increased use of cash was primarily a result of a
one-time lump- sum ratification bonus payment of $36.3 million to
its hourly associates represented by the UAW under the recently
ratified four-year master agreement. It is normal for the company
to use cash in the first quarter due to seasonal differences in
sales activity at the end of the first quarter versus the fourth
quarter of the prior year. Recent developments On February 3, 2004,
AAM announced that its Board of Directors approved a share
repurchase program under which AAM may repurchase up to 2.5 million
shares of common stock in open market or privately negotiated
transactions from time to time in 2004 and 2005. On February 6,
2004, AAM announced that it sold $250.0 million of 5.25% Senior
Notes Due February 2014 and $150.0 million of 2.00% Senior
Convertible Notes Due February 2024 (including a subsequently
exercised $20.0 million option granted to the initial purchasers of
the Convertible Senior Notes) in private offerings pursuant to Rule
144A of the Securities Act of 1933, as amended. Concurrently with
these offerings, AAM purchased approximately $63.0 million of its
common stock, or approximately 1.59 million shares, in privately
negotiated transactions. On February 12, 2004, AAM announced it has
been awarded a lifetime production contract for new business with
Korean automaker Ssangyong Motors. This contract is expected to
provide AAM with revenues of approximately $40 million annually
when fully launched beginning in 2005. Under the new contract, AAM
will supply independent front and independent rear-drive axles for
multiple new Ssangyong vehicle programs. This award represents
AAM's first penetration into the Asian market as well as the first
phase of a General Cooperation Plan between AAM and Ssangyong that
is intended to provide Ssangyong Motors with world-class driveline
technology, products and support. On April 5, 2004, AAM announced
that it had been selected as the driveline system and module
supplier for a major future GM replacement product program. In
addition, AAM will be the systems integrator for this program, with
responsibility for driveline system, module and component design.
On April 7, 2004, AAM announced that it has been selected as the
driveline system and module supplier for a 2008 model year North
American vehicle program. AAM will be the sole source, exclusive
supplier and systems integrator for all of the driveline
components, systems, modules and forged products for the new
off-road adventure sport enthusiast vehicle. When fully launched,
this program will add $100 million per year in incremental sales
revenue to AAM. On April 29, 2004, AAM announced that its Board of
Directors declared a quarterly cash dividend of $0.15 per share
payable on June 28, 2004 to stockholders of record on all of the
company's issued and outstanding common stock as of June 7, 2004
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 forged products for light trucks,
sport utility vehicles and passenger cars. In addition to its 14
locations in the United States (in Michigan, New York and Ohio),
AAM also has offices and facilities in Brazil, England, Germany,
Japan, Mexico and Scotland. Certain statements contained in this
press release are "forward-looking statements" and relate to the
Company's plans, projections 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, particularly light trucks and SUVs produced by GM and
DaimlerChrysler's heavy-duty Dodge Ram full-size pickup trucks, or
the Dodge Ram program; reduced purchases of our products by GM,
DaimlerChrysler or other customers; 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 attract and retain key associates; our
ability to maintain satisfactory labor relations and avoid work
stoppages; risks of noncompliance with environmental regulations;
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; adverse
changes in laws, government regulations or market conditions
affecting our products or our customers' products (including the
Corporate Average Fuel Economy regulations); and 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: Media relations contact: Investor
relations contact: Carrie L.P. Gray Christopher M. Son Director,
Corporate Relations Manager, Investor Relations (313) 758-4880
(313) 758-4814 Or visit the AAM website at http://www.aam.com/
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC. CONDENSED
CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three months ended
March 31, -------------------- 2004 2003 --------- --------- (In
millions, except per share data) Net sales $952.8 $975.3 Cost of
goods sold 816.4 830.6 --------- --------- Gross profit 136.4 144.7
Selling, general and administrative expenses 49.5 48.9 ---------
--------- Operating income 86.9 95.8 Net interest expense (8.4)
(12.5) Debt refinancing and redemption costs (23.5) - Other income
(expense), net 0.7 (0.3) --------- --------- Income before income
taxes 55.7 83.0 Income taxes 19.2 29.0 --------- --------- Net
income $36.5 $54.0 ========= ========= Diluted earnings per share
$0.66 $1.02 ========= ========= Diluted shares outstanding 55.3
52.9 ========= ========= AMERICAN AXLE & MANUFACTURING
HOLDINGS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
March 31, December 31, 2004 2003 --------- --------- (Unaudited)
(In millions) ASSETS -------- Current assets: Cash and cash
equivalents $6.0 $12.4 Accounts receivable, net 449.3 339.2
Inventories, net 170.0 171.8 Prepaid expenses and other 39.3 24.0
Deferred income taxes 16.0 16.3 --------- --------- Total current
assets 680.6 563.7 Property, plant and equipment, net 1,637.2
1,629.5 Deferred income taxes 6.9 6.9 Goodwill 147.8 147.8 Other
assets and deferred charges 71.0 49.9 --------- --------- Total
assets $2,543.5 $2,397.8 ========= ========= LIABILITIES AND
STOCKHOLDERS' EQUITY -------------------------------------- Current
liabilities: Accounts payable $383.4 $335.7 Other accrued expenses
195.5 218.5 --------- --------- Total current liabilities 578.9
554.2 Long-term debt 571.3 449.7 Deferred income taxes 79.4 73.0
Postretirement benefits and other long-term liabilities 380.8 366.2
--------- --------- Total liabilities 1,610.4 1,443.1 Stockholders'
equity 933.1 954.7 --------- --------- Total liabilities and
stockholders' equity $2,543.5 $2,397.8 ========= ========= AMERICAN
AXLE & MANUFACTURING HOLDINGS, INC. CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (Unaudited) Three months ended March 31,
-------------------- 2004 2003 --------- --------- (In millions)
Operating activities Net income $36.5 $54.0 Depreciation and
amortization 41.3 40.0 Other (73.4) (57.7) --------- --------- Net
cash flow provided by operating activities 4.4 36.3 Purchases of
property, plant & equipment (46.7) (59.4) --------- ---------
Net cash flow used after purchases of property, plant &
equipment (42.3) (23.1) Purchase buyouts of leased equipment -
(3.0) --------- --------- Net cash flow used in operations (42.3)
(26.1) Net increase in long-term debt 419.9 21.1 Redemption of
9.75% Notes (314.6) - Debt issuance costs (9.7) - Employee stock
option exercises 3.1 0.2 Purchase of treasury stock (63.0) -
--------- --------- Net cash flow provided by financing activities
35.7 21.3 Effect of exchange rate changes on cash 0.2 - ---------
--------- Net decrease in cash and cash equivalents (6.4) (4.8)
Cash and cash equivalents at beginning of period 12.4 9.4 ---------
--------- Cash and cash equivalents at end of period $6.0 $4.6
========= ========= 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 March 31,
------------------------- 2004 2003 -------- -------- (In millions)
Net income $36.5 $54.0 Interest expense 8.6 12.7 Income taxes 19.2
29.0 Depreciation and amortization 41.3 40.0 -------- --------
EBITDA $105.6 $135.7 ======== ======== Net debt(b) to capital March
31, December 31, 2004 2003 -------- -------- (In millions, except
percentages) Total debt $571.3 $449.7 Less: cash and cash
equivalents 6.0 12.4 -------- -------- Net debt at end of period
565.3 437.3 Stockholders' equity 933.1 954.7 -------- --------
Total invested capital at end of period $1,498.4 $1,392.0 ========
======== Net debt to capital(c) 37.7% 31.4% ======== ======== (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'
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. Free Cash Flow(d) Three months ended March 31,
------------------------- 2004 2003 -------- -------- (In millions)
Net cash flow provided by operating activities $4.4 $36.3 Less:
purchases of property, plant & equipment (46.7) (59.4) --------
-------- Free Cash Flow $(42.3) $(23.1) ======== ======== After-Tax
Return on Invested Capital (ROIC)(e) Trailing Twelve Quarter Ended
Months --------------------------------------------------- Ended
June 30, September 30, December 31, March 31, March 31, 2003 2003
2003 2004 2004 -------- -------- -------- -------- ---------- (In
millions, except percentages) Net income $51.0 $38.7 $53.4 $36.5
$179.6 After-tax net interest expense (f) 7.8 7.3 7.2 5.5 27.8
-------- -------- -------- -------- ---------- After-tax return
$58.8 $46.0 $60.6 $42.0 $207.4 ======== ======== ======== ========
========== Net debt at end of period $565.3 Stockholder's equity at
end of period 933.1 ---------- Invested capital at end of period
1,498.4 Invested capital at beginning of period 1,510.8 ----------
Average invested capital(g) $1,504.6 ========== After-Tax ROIC(h)
13.8% ========== (d) We define free cash flow as net cash flow
provided by operating activities less purchases of property and
equipment. We believe that free cash flow is a meaningful measure
as it is 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. Free cash flow is also
a key metric used in our calculation of executive incentive
compensation. Other companies may calculate 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 executive incentive
compensation. Other companies may calculate ROIC differently. (f)
After-tax net interest expense is calculated by tax effecting net
interest expense by the 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 relations contact:
Carrie L.P. Gray, Director, Corporate Relations, +1-313-758-4880, ,
or Investor relations contact: Christopher M. Son, Manager,
Investor Relations, +1-313-758-4814, , both of American Axle &
Manufacturing Holdings, Inc. Web site: http://www.aam.com/ Company
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