AAM Reports Second Quarter 2019 Financial Results
DETROIT, Aug. 2, 2019 /PRNewswire/ -- American Axle & Manufacturing Holdings, Inc. (AAM), (NYSE: AXL) today reported its financial results for the second quarter 2019 and updated its full year financial outlook.
Second Quarter 2019 Results
-- Sales of $1.70 billion
-- Net income attributable to AAM of $52.5 million, or 3.1% of sales
-- Adjusted EBITDA of $266.0 million, or 15.6% of sales
-- Diluted earnings per share of $0.45; Adjusted earnings per share of
$0.55
-- Net cash provided by operating activities of $217.1 million; Adjusted
free cash flow of $119.3 million
"In the second quarter of 2019, AAM continued to improve its operational performance with sequential quarterly margin increases and strong free cash flow generation. However, we exited the second quarter with softer sales than anticipated and we expect this to continue to impact us in the second half of 2019," said AAM's Chairman and Chief Executive Officer, David C. Dauch. "As we look towards the second half of 2019, we are focused on efficiently operating our business and adapting to the changing market demand."
AAM's sales in the second quarter of 2019 were $1.70 billion as compared to $1.90 billion in the second quarter of 2018.
AAM's net income in the second quarter of 2019 was $52.5 million, or $0.45 per share, as compared to $151.1 million, or $1.30 per share in the second quarter of 2018.
AAM defines Adjusted earnings per share to be diluted earnings per share excluding the impact of restructuring and acquisition-related costs, debt refinancing and redemption costs, gain on sale of business, goodwill impairments and non-recurring items, including the tax effect thereon. Adjusted earnings per share in the second quarter of 2019 were $0.55 compared to $1.23 in the second quarter of 2018.
AAM defines EBITDA to be earnings before interest expense, income taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA excluding the impact of restructuring and acquisition-related costs, debt refinancing and redemption costs, gain on sale of business, goodwill impairments and non-recurring items. In the second quarter of 2019, Adjusted EBITDA was $266.0 million, or 15.6% of sales, as compared to $347.9 million, or 18.3% of sales, in the second quarter of 2018.
AAM's net cash provided by operating activities for the second quarter of 2019 was $217.1 million.
AAM defines free cash flow to be net cash provided by operating activities less capital expenditures net of proceeds from the sale of property, plant and equipment. Adjusted free cash flow is defined as free cash flow excluding the impact of cash payments for restructuring and acquisition-related costs. AAM's Adjusted free cash flow for the second quarter of 2019 was $119.3 million.
AAM's 2019 Financial Outlook
AAM is experiencing lower metal market pass throughs and lower than projected global production volumes for certain programs we support including in Asia, primarily China, and global engine and transmission products. As a result, AAM has revised its full year 2019 financial targets as follows:
-- AAM is targeting sales in the range of $6.9 - $7.0 billion in 2019.
-- AAM is targeting Adjusted EBITDA in the range of $1.05 - $1.10 billion
in 2019.
-- AAM is targeting Adjusted free cash flow of approximately $250 million
in 2019, including the reduction of estimated capital expenditures from
approximately $515 million to approximately $485 million.
AAM's revised full year 2019 financial targets reflect:
-- An estimate of production volumes for the remainder of 2019 based on
internal and external sources and the current metal market environment
-- A reduction in profitability primarily associated with lower sales and
an increase in engineering, research and development expenditures to
support our future e-AAM hybrid and electric driveline growth and
-- Continued operational improvements in-line with previous commentary.
Second Quarter 2019 Conference Call Information
A conference call to review AAM's second quarter 2019 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) 883-0383 from the United States or (412) 902-6506 from outside the United States with access code 7793867. A replay will be available one hour after the call is complete until August 9, 2019 by dialing (877) 344-7529 from the United States or (412) 317-0088 from outside the United States. When prompted, callers should enter replay access code 10132907.
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 as Adjusted EBITDA, Adjusted earnings per share and Adjusted free cash flow. Such information is reconciled to its closest GAAP measure in accordance with Securities and Exchange Commission rules and is included in the attached supplemental data.
Certain of the forward-looking financial measures included in this earnings release are provided on a non-GAAP basis. A reconciliation of non-GAAP forward-looking financial measures to the most directly comparable forward-looking financial measures calculated and presented in accordance with GAAP has been provided. The amounts in these reconciliations are based on our current estimates and actual results may differ materially from these forward-looking estimates for many reasons, including potential event driven transactional and other non-core operating items and their related effects in any future period, the magnitude of which may be significant.
Management believes that these non-GAAP financial measures are useful to management, investors, and banking institutions 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.
Company Description
AAM (NYSE:AXL) delivers POWER that moves the world. As a leading global tier 1 automotive supplier, AAM designs, engineers and manufactures driveline, metal forming and casting technologies that are making the next generation of vehicles smarter, lighter, safer and more efficient. Headquartered in Detroit, AAM has over 25,000 associates operating at nearly 90 facilities in 17 countries to support our customers on global and regional platforms with a focus on quality, operational excellence and technology leadership. To learn more, visit aam.com.
Forward-Looking Statements
In this earnings release, we make statements concerning our expectations, beliefs, plans, objectives, goals, strategies, and future events or performance. Such statements are "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995 and relate to trends and events that may affect our future financial position and operating results. The terms such as "will," "may," "could," "would," "plan," "believe," "expect," "anticipate," "intend," "project," "target," and similar words or expressions, as well as statements in future tense, are intended to identify forward-looking statements. 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: reduced purchases of our products by General Motors Company (GM), FCA US LLC (FCA), or other customers; our ability to respond to changes in technology, increased competition or pricing pressures; our ability to develop and produce new products that reflect market demand; our ability or our customers' and suppliers' ability to successfully launch new product programs on a timely and cost efficient basis; lower-than-anticipated market acceptance of new or existing products; our ability to attract new customers and programs for new products; an impairment of our goodwill, other intangible assets, or long-lived assets if our business or market conditions indicate that the carrying values of those assets exceed their fair values; reduced demand for our customers' products (particularly light trucks and sport utility vehicles (SUVs) produced by GM and FCA); risks inherent in our global operations (including tariffs and the potential consequences thereof to us, our suppliers, and our customers and their suppliers, adverse changes in trade agreements, such as NAFTA, or proposed trade agreements such as the USMCA, immigration policies, political stability, taxes and other law changes, potential disruptions of production and supply, and currency rate fluctuations); a significant disruption in operations at one or more of our key manufacturing facilities; global economic conditions; liabilities arising from warranty claims, product recall or field actions, product liability and legal proceedings to which we are or may become a party, or the impact of product recall or field actions on our customers; risks related to a failure of our information technology systems and networks, and risks associated with current and emerging technology threats and damage from computer viruses, unauthorized access, cyber attack and other similar disruptions; supply shortages or price increases in raw material and/or freight, utilities or other operating supplies for us or our customers as a result of natural disasters or otherwise; our ability to successfully integrate the business and information systems of MPG and to realize the anticipated benefits of the merger; negative or unexpected tax consequences; our ability to achieve the level of cost reductions required to sustain global cost competitiveness; our ability to realize the expected revenues from our new and incremental business backlog; our suppliers', our customers' and their suppliers' ability to maintain satisfactory labor relations and avoid work stoppages; our ability to maintain satisfactory labor relations and avoid work stoppages; price volatility in, or reduced availability of, fuel; potential liabilities or litigation relating to, or assumed in, the MPG merger; potential adverse reactions or changes to business relationships resulting from the completion of the merger with MPG; our ability to protect our intellectual property and successfully defend against assertions made against us; our ability to attract and retain key associates; availability of financing for working capital, capital expenditures, research and development (R&D) or other general corporate purposes including acquisitions, as well as 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; changes in liabilities arising from pension and other postretirement benefit obligations; risks of noncompliance with environmental laws and regulations or risks of environmental issues that could result in unforeseen costs at our current and former facilities, or reputational damage; adverse changes in laws, government regulations or market conditions affecting our products or our customers' products; our ability or our customers' and suppliers' ability to comply with regulatory requirements and the potential costs of such compliance; 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 statement.
For more information:
Investor Contact
Jason P. Parsons
Director, Investor Relations
(313) 758-2404
jason.parsons@aam.com
Media Contact
Christopher M. Son
Vice President, Marketing & Communications
(313) 758-4814
chris.son@aam.com
Or visit the AAM website at www.aam.com.
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
2019 2018 2019 2018
---
(in millions, except per share data)
Net sales $
1,704.3 $
1,900.9 $
3,423.5 $
3,759.3
Cost of goods sold 1,456.0 1,569.5 2,953.0 3,111.6
Gross profit 248.3 331.4 470.5 647.7
Selling, general and administrative expenses 91.3 95.0 182.0 192.3
Amortization of intangible assets 24.9 24.8 49.9 49.7
Restructuring and acquisition-related costs 12.2 36.8 24.3 55.1
Gain on sale of business - (15.5) (15.5)
Operating income 119.9 190.3 214.3 366.1
Interest expense (56.2) (54.4) (109.6) (107.6)
Investment income 0.5 0.5 1.2 1.0
Other income (expense)
Debt refinancing and redemption costs (2.4) (4.3) (2.4) (14.6)
Gain on settlement of capital lease - 15.6 15.6
Other income (expense), net (3.1) 5.6 (6.1) 0.2
Income before income taxes 58.7 153.3 97.4 260.7
Income tax expense 6.0 2.0 3.0 19.9
Net income 52.7 151.3 94.4 240.8
Net income attributable to noncontrolling interests (0.2) (0.2) (0.3) (0.3)
Net income attributable to AAM $
52.5 $
151.1 $
94.1 $
240.5
Diluted earnings per share $
0.45 $
1.30 $
0.81 $
2.08
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, 2019 December 31,
2018
---
(in millions)
ASSETS
---
Current assets
Cash and cash equivalents $
248.8 $
476.4
Accounts receivable, net 1,138.0 966.5
Inventories, net 459.9 459.7
Prepaid expenses and other 130.0 127.2
Total current assets 1,976.7 2,029.8
Property, plant and equipment, net 2,544.4 2,514.4
Deferred income taxes 51.9 45.5
Goodwill 1,140.9 1,141.8
Other intangible assets, net 1,063.1 1,111.1
GM postretirement cost sharing asset 224.1 219.4
Other assets and deferred charges 546.8 448.7
Total assets $
7,547.9 $
7,510.7
LIABILITIES AND STOCKHOLDERS' EQUITY
---
Current liabilities
Current portion of long-term debt $
26.0 $
121.6
Accounts payable 853.4 840.2
Accrued compensation and benefits 159.6 179.0
Deferred revenue 33.6 44.3
Accrued expenses and other 194.5 171.7
Total current liabilities 1,267.1 1,356.8
Long-term debt, net 3,674.2 3,686.8
Deferred revenue 87.5 77.6
Deferred income taxes 67.4 92.6
Postretirement benefits and other long-term liabilities 879.5 810.6
Total liabilities 5,975.7 6,024.4
Total AAM stockholders' equity 1,569.5 1,483.9
Noncontrolling interests in subsidiaries 2.7 2.4
Total stockholders' equity 1,572.2 1,486.3
Total liabilities and stockholders' equity $
7,547.9 $
7,510.7
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended Six Months Ended
June 30,
June 30,
2019 2018 2019 2018
(in millions)
Operating activities
Net income $
52.7 $
151.3 $
94.4 $
240.8
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation and amortization 136.5 130.2 277.3 258.0
Other 27.9 (59.0) (234.8) (209.4)
Net cash provided by operating activities 217.1 222.5 136.9 289.4
Investing activities
Purchases of property, plant and equipment (113.3) (142.2) (237.5) (273.0)
Proceeds from sale of property, plant and equipment 1.4 0.5 1.7 0.9
Acquisition of business, net of cash acquired (1.3)
Proceeds from sale of business, net 47.1 47.1
Other (2.2) (2.2) (0.5)
Net cash used in investing activities (114.1) (94.6) (238.0) (226.8)
Financing activities
Net debt activity (106.1) (101.3) (120.2) (73.6)
Other (0.2) (1.4) (7.5) (5.8)
Net cash used in financing activities (106.3) (102.7) (127.7) (79.4)
Effect of exchange rate changes on cash (10.2) 1.2 (4.3)
Net decrease in cash, cash equivalents and restricted cash (3.3) 15.0 (227.6) (21.1)
Cash, cash equivalents and restricted cash at beginning of period 254.6 340.7 478.9 376.8
Cash, cash equivalents and restricted cash at end of period $
251.3 $
355.7 $
251.3 $
355.7
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) and Adjusted EBITDA
(a)
Three Months Ended Six Months Ended
June 30,
June 30,
2019 2018 2019 2018
---
(in millions)
Net income $
52.7 $
151.3 $
94.4 $
240.8
Interest expense 56.2 54.4 109.6 107.6
Income tax expense 6.0 2.0 3.0 19.9
Depreciation and amortization 136.5 130.2 277.3 258.0
EBITDA 251.4 337.9 484.3 626.3
Restructuring and acquisition-related costs 12.2 36.8 24.3 55.1
Debt refinancing and redemption costs 2.4 4.3 2.4 14.6
Gain on sale of business - (15.5) (15.5)
Non-recurring items:
Gain on settlement of capital lease - (15.6) (15.6)
Adjusted EBITDA $
266.0 $
347.9 $
511.0 $
664.9
Adjusted earnings per share
(b)
Three Months Ended Six Months Ended
June 30,
June 30,
2019 2018 2019 2018
Diluted earnings per share $
0.45 $
1.30 $
0.81 $
2.08
Restructuring and acquisition-related costs 0.11 0.32 0.21 0.48
Debt refinancing and redemption costs 0.02 0.04 0.02 0.13
Gain on sale of business - (0.14) (0.14)
Non-recurring items:
Gain on settlement of capital lease - (0.14) (0.14)
Tax Cuts and Jobs Act Transition Tax adjustment - (0.08)
Adjustments to liability for unrecognized tax benefits - (0.17) (0.17)
Tax effect of adjustments (0.03) 0.02 (0.05) (0.03)
Adjusted earnings per share $
0.55 $
1.23 $
0.91 $
2.21
Adjusted earnings per share are based on weighted average diluted shares outstanding of 116.1 million and 116.0 million for the three months ended on June 30, 2019 and 2018, respectively, and 116.0 million and 115.4 million for the six months ended on June 30, 2019 and 2018,
respectively.
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.
Free cash flow and Adjusted free cash flow
(c)
Three Months Ended Six Months Ended
June 30,
June 30,
2019 2018 2019 2018
---
(in millions)
Net cash provided by operating activities $
217.1 $
222.5 $
136.9 $
289.4
Capital expenditures net of proceeds from the sale of property, (111.9) (141.7) (235.8) (272.1)
plant and equipment
Free cash flow 105.2 80.8 (98.9) 17.3
Cash payments for restructuring and acquisition-related costs 14.1 19.5 29.7 41.3
Adjusted free cash flow $
119.3 $
100.3 $
(69.2) $
58.6
Segment Financial Information
In the first quarter of 2019, we reorganized our business to disaggregate our former Powertrain segment, with a portion moving to our Driveline segment and a portion moving to our Metal Forming segment. As a result, our business is now organized into Driveline,
Metal Forming and Casting segments. The Powertrain Sales and Segment Adjusted EBITDA amounts previously reported for the three and six months ended on June 30, 2018 have been reclassified to Driveline and Metal Forming in the tables below.
Three Months Ended Six Months Ended
June 30,
June 30,
2019 2018 2019 2018
---
(in millions)
Segment Sales
Driveline $
1,141.1 $
1,274.3 $
2,275.8 $
2,490.4
Metal Forming 484.2 530.4 967.5 1,072.7
Casting 220.7 243.2 446.0 482.2
Total Sales 1,846.0 2,047.9 3,689.3 4,045.3
Intersegment Sales (141.7) (147.0) (265.8) (286.0)
Net External Sales $
1,704.3 $
1,900.9 $
3,423.5 $
3,759.3
Segment Adjusted EBITDA(a)
Driveline $
152.9 $
204.3 $
290.1 $
394.0
Metal Forming 88.0 116.7 173.3 222.4
Casting 25.1 26.9 47.6 48.5
Total Segment Adjusted EBITDA $
266.0 $
347.9 $
511.0 $
664.9
Full Year 2019 Outlook
Adjusted EBITDA
Low End High End
---
(in millions)
Net income $
190 $
230
Interest expense 220 220
Income tax expense 25 35
Depreciation and amortization 565 565
Full year 2019 targeted EBITDA 1,000 1,050
Restructuring, acquisition-related and debt refinancing and 50 50
redemption costs
Full year 2019 targeted Adjusted EBITDA $
1,050 $
1,100
Adjusted Free
Cash Flow
(in millions)
Net cash provided by operating activities $
680
Capital expenditures net of proceeds from the sale of property, (485)
plant and equipment
Full year 2019 targeted Free Cash Flow 195
Cash payments for restructuring and acquisition-related costs 55
Full year 2019 targeted Adjusted Free Cash Flow $
250
________________
(a) We define EBITDA to be earnings
before interest expense, income
taxes, depreciation and
amortization. Adjusted EBITDA is
defined as EBITDA excluding the
impact of restructuring and
acquisition-related costs, debt
refinancing and redemption costs,
gain on sale of a business, goodwill
impairments and non-recurring
items. We believe that EBITDA and
Adjusted EBITDA are meaningful
measures of performance as they are
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
and Adjusted EBITDA, together with
other measures, to measure our
operating performance relative to
other Tier 1 automotive suppliers.
We also use Segment Adjusted EBITDA
as the measure of earnings to assess
the performance of each segment and
determine the resources to be
allocated to the segments. EBITDA
and Adjusted 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 and Adjusted EBITDA
differently.
(b) We define Adjusted earnings per share
to be diluted earnings per share
excluding the impact of
restructuring and acquisition-
related costs, debt refinancing and
redemption costs, gain on sale of a
business, goodwill impairments and
non-recurring items, including the
tax effect thereon. We believe
Adjusted earnings per share is a
meaningful measure as it is commonly
utilized by management and investors
in assessing ongoing financial
performance that provides improved
comparability between periods
through the exclusion of certain
items that management believes are
not indicative of core operating
performance and which may obscure
underlying business results and
trends. Other companies may
calculate Adjusted earnings per
share differently.
(c) We define free cash flow to be net
cash provided by operating
activities less capital expenditures
net of proceeds from the sale of
property, plant and equipment.
Adjusted free cash flow is defined
as free cash flow excluding the
impact of cash payments for
restructuring and acquisition-
related costs. We believe free cash
flow and Adjusted 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. Free
cash flow and Adjusted free cash
flow are also key metrics used in
our calculation of incentive
compensation. Other companies may
calculate free cash flow and
Adjusted free cash flow differently.
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SOURCE American Axle & Manufacturing Holdings, Inc.
