AAM Reports Third Quarter 2019 Financial Results
DETROIT, Nov. 1, 2019 /PRNewswire/ -- American Axle & Manufacturing Holdings, Inc. (AAM), (NYSE: AXL) today reported its financial results for the third quarter 2019 and updated its full year financial outlook.
Third Quarter 2019 Results
-- Sales of $1.68 billion
-- Net loss attributable to AAM of $124.2 million, or (7.4)% of sales,
which includes the impact of a pre-tax impairment charge related the
announced sale of our U.S. iron casting operations of $225.0 million
-- Adjusted EBITDA of $265.8 million, or 15.8% of sales
-- Diluted loss per share of $1.10; Adjusted earnings per share of $0.58
-- Net cash provided by operating activities of $241.7 million; Adjusted
free cash flow of $160.5 million
-- AAM's third quarter financial results were unfavorably impacted by a
work stoppage at our largest customer (GM work stoppage) that began on
September 15, 2019.
"AAM's financial results in the third quarter of 2019 reflect solid operating performance despite lower than expected production volumes resulting from the GM work stoppage," said AAM's Chairman and Chief Executive Officer, David C. Dauch. "The strong free cash flow generated during the quarter, along with the announced sale of our U.S. iron casting operations, position us to continue to deliver on our commitment to reduce debt and strengthen our financial profile."
AAM's sales in the third quarter of 2019 were $1.68 billion as compared to $1.82 billion in the third quarter of 2018. AAM estimates that our sales in the third quarter of 2019 were unfavorably impacted by the GM work stoppage by approximately $57 million.
AAM's net loss in the third quarter of 2019 was $124.2 million, or $1.10 per share, as compared to net income of $63.8 million, or $0.55 per share in the third 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, impairment charges and non-recurring items, including the tax effect thereon. Adjusted earnings per share in the third quarter of 2019 were $0.58 compared to $0.63 in the third quarter of 2018.
AAM estimates that our net loss in the third quarter of 2019 was unfavorably impacted by the GM work stoppage by approximately $14 million, or $0.12 per share.
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, impairment charges and non-recurring items. In the third quarter of 2019, Adjusted EBITDA was $265.8 million, or 15.8% of sales, as compared to $275.0 million, or 15.1% of sales, in the third quarter of 2018. AAM estimates that our Adjusted EBITDA in the third quarter of 2019 was unfavorably impacted by the GM work stoppage by approximately $18 million.
AAM's net cash provided by operating activities for the third quarter of 2019 was $241.7 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 third quarter of 2019 was $160.5 million.
AAM's 2019 Financial Outlook
AAM has revised its 2019 financial targets to reflect the expected impact of the GM work stoppage on our full year sales, which we estimate to be approximately $250 million. These targets also reflect the impact of lower metal market passthroughs and foreign currency translation of approximately $50 million and assume a full year of financial results from our U.S. iron casting operations.
AAM's revised full year 2019 financial targets are as follows:
-- AAM is targeting sales of approximately $6.6 billion.
-- AAM is targeting Adjusted EBITDA in the range of $950 - $975 million.
-- AAM is targeting Adjusted free cash flow of approximately $175 million.
Third Quarter 2019 Conference Call Information
A conference call to review AAM's third 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 0766066. A replay will be available one hour after the call is complete until November 8, 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 10135307.
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; our suppliers', our customers' and their suppliers' ability to maintain satisfactory labor relations and avoid work stoppages; 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
Nine Months Ended
September 30,
September 30,
2019 2018 2019 2018
---
(in millions, except per share data)
Net sales $
1,677.4 $
1,817.0 $
5,100.9 $
5,576.3
Cost of goods sold 1,428.7 1,549.6 4,381.7 4,661.2
Gross profit 248.7 267.4 719.2 915.1
Selling, general and administrative expenses 92.7 96.3 274.7 288.6
Amortization of intangible assets 23.7 24.8 73.6 74.5
Impairment charge 225.0 225.0
Restructuring and acquisition-related costs 11.7 11.7 36.0 66.8
Gain on sale of business - (15.5)
Operating income (loss) (104.4) 134.6 109.9 500.7
Interest expense (54.3) (54.9) (163.9) (162.5)
Investment income 2.2 0.6 3.4 1.6
Other income (expense)
Debt refinancing and redemption costs (5.1) (7.5) (14.6)
Gain on settlement of capital lease - 15.6
Other expense, net (2.9) (4.8) (9.0) (4.6)
Income (loss) before income taxes (164.5) 75.5 (67.1) 336.2
Income tax expense (benefit) (40.4) 11.5 (37.4) 31.4
Net income (loss) (124.1) 64.0 (29.7) 304.8
Net income attributable to noncontrolling interests (0.1) (0.2) (0.4) (0.5)
Net income (loss) attributable to AAM $
(124.2) $
63.8 $
(30.1) $
304.3
Diluted earnings (loss) per share $
(1.10) $
0.55 $
(0.27) $
2.63
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, December 31,
2019 2018
---
(in millions)
ASSETS
---
Current assets
Cash and cash equivalents $
375.1 $
476.4
Accounts receivable, net 976.9 966.5
Inventories, net 403.1 459.7
Prepaid expenses and other 130.9 127.2
Current assets held-for-sale 312.2
Total current assets 2,198.2 2,029.8
Property, plant and equipment,
net 2,326.4 2,514.4
Deferred income taxes 61.9 45.5
Goodwill 1,127.5 1,141.8
Other intangible assets, net 881.5 1,111.1
GM postretirement cost sharing
asset 223.1 219.4
Other assets and deferred
charges 497.7 448.7
Total assets $
7,316.3 $
7,510.7
LIABILITIES AND STOCKHOLDERS' EQUITY
---
Current liabilities
Current portion of long-term
debt $
23.8 $
121.6
Accounts payable 703.7 840.2
Accrued compensation and
benefits 165.1 179.0
Deferred revenue 22.6 44.3
Accrued expenses and other 220.2 171.7
Current liabilities held-for-
sale 101.7
Total current liabilities 1,237.1 1,356.8
Long-term debt, net 3,673.3 3,686.8
Deferred revenue 83.1 77.6
Deferred income taxes 21.6 92.6
Postretirement benefits and
other long-term liabilities 891.6 810.6
Total liabilities 5,906.7 6,024.4
Total AAM stockholders' equity 1,406.8 1,483.9
Noncontrolling interests in
subsidiaries 2.8 2.4
Total stockholders' equity 1,409.6 1,486.3
Total liabilities and
stockholders' equity $
7,316.3 $
7,510.7
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2019 2018 2019 2018
(in millions)
Operating activities
Net income (loss) $
(124.1) $
64.0 $
(29.7) $
304.8
Adjustments to reconcile net income (loss) to net cash provided
by operating activities
Depreciation and amortization 134.2 132.9 411.5 390.9
Other 231.6 26.9 (3.2) (182.5)
Net cash provided by operating activities 241.7 223.8 378.6 513.2
Investing activities
Purchases of property, plant and equipment (97.8) (118.8) (335.3) (391.8)
Proceeds from sale of property, plant and equipment 0.3 2.3 2.0 3.2
Proceeds from sale of business, net 47.1
Other (2.2) (1.8)
Net cash used in investing activities (97.5) (116.5) (335.5) (343.3)
Financing activities
Net debt activity (12.4) (20.0) (132.6) (93.6)
Other (0.1) (7.5) (5.9)
Net cash used in financing activities (12.4) (20.1) (140.1) (99.5)
Effect of exchange rate changes on cash (5.5) (1.0) (4.3) (5.3)
Net increase (decrease) in cash, cash equivalents and 126.3 86.2 (101.3) 65.1
restricted cash
Cash, cash equivalents and restricted cash at beginning of period 251.3 355.7 478.9 376.8
Cash, cash equivalents and restricted cash at end of period $
377.6 $
441.9 $
377.6 $
441.9
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 Nine Months Ended
September 30, September 30,
2019 2018 2019 2018
---
(in millions)
Net income (loss) $
(124.1) $
64.0 $
(29.7) $
304.8
Interest expense 54.3 54.9 163.9 162.5
Income tax expense (benefit) (40.4) 11.5 (37.4) 31.4
Depreciation and amortization 134.2 132.9 411.5 390.9
EBITDA 24.0 263.3 508.3 889.6
Restructuring and acquisition-related costs 11.7 11.7 36.0 66.8
Debt refinancing and redemption costs 5.1 7.5 14.6
Impairment charge 225.0 225.0
Gain on sale of business - (15.5)
Non-recurring items:
Gain on settlement of capital lease - (15.6)
Adjusted EBITDA $
265.8 $
275.0 $
776.8 $
939.9
Adjusted earnings per share
(b)
Three Months Ended Nine Months Ended
September 30, September 30,
2019 2018 2019 2018
---
Diluted earnings (loss) per share $
(1.10) $
0.55 $
(0.27) $
2.63
Restructuring and acquisition-related costs 0.10 0.10 0.32 0.58
Debt refinancing and redemption costs 0.05 0.07 0.13
Impairment charge 2.00 2.00
Gain on sale of business - (0.14)
Non-recurring items:
Tax Cuts and Jobs Act Transition Tax adjustment - (0.08)
Gain on settlement of capital lease - (0.14)
Adjustments to liability for unrecognized tax benefits - (0.17)
Tax effect of adjustments (0.45) (0.02) (0.50) (0.06)
Adjustment for anti-dilutive effect (0.02) (0.05)
Adjusted earnings per share $
0.58 $
0.63 $
1.49 $
2.83
Adjusted earnings per share are based on weighted average diluted shares outstanding of 115.8 million and 116.3 million for the three months ended on September 30, 2019 and 2018, respectively, and 115.6 million and 115.7 million for the nine months ended on
September 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 Nine Months Ended
September 30, September 30,
2019 2018 2019 2018
---
(in millions)
Net cash provided by operating activities $
241.7 $
223.8 $
378.6 $
513.2
Capital expenditures net of proceeds from the sale of property, (97.5) (116.5) (333.3) (388.6)
plant and equipment
Free cash flow 144.2 107.3 45.3 124.6
Cash payments for restructuring and acquisition-related costs 16.3 14.0 46.0 55.3
Adjusted free cash flow $
160.5 $
121.3 $
91.3 $
179.9
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 nine months ended on September 30, 2018 have been reclassified to Driveline and Metal Forming in the tables below.
Three Months Ended Nine Months Ended
September 30,
September 30,
2019 2018 2019 2018
---
(in millions)
Segment Sales
Driveline $
1,146.7 $
1,228.2 $
3,422.5 $
3,718.6
Metal Forming 476.6 509.0 1,444.1 1,581.7
Casting 209.0 219.1 655.0 701.3
Total Sales 1,832.3 1,956.3 5,521.6 6,001.6
Intersegment Sales (154.9) (139.3) (420.7) (425.3)
Net External Sales $
1,677.4 $
1,817.0 $
5,100.9 $
5,576.3
Segment Adjusted EBITDA(a)
Driveline $
171.6 $
176.9 $
461.7 $
570.9
Metal Forming 80.4 83.6 253.7 306.0
Casting 13.8 14.5 61.4 63.0
Total Segment Adjusted EBITDA $
265.8 $
275.0 $
776.8 $
939.9
Full Year 2019 Outlook
Adjusted EBITDA
Low End High End
---
(in millions)
Net loss $
(50) $
(30)
Interest expense 220 220
Income tax benefit (45) (40)
Depreciation and
amortization 550 550
Full year 2019
targeted EBITDA 675 700
Restructuring,
acquisition-
related and debt
refinancing and 50 50
redemption costs
Impairment charge 225 225
Full year 2019
targeted Adjusted
EBITDA $
950 $
975
Adjusted
Free
Cash Flow
(in
millions)
Net cash
provided by
operating
activities $
565
Capital
expenditures
net of
proceeds
from the
sale of
property, (455)
plant and equipment
Full year
2019
targeted
Free Cash
Flow 110
Cash payments
for
restructuring
and
acquisition-
related
costs 65
Full year
2019
targeted
Adjusted
Free Cash
Flow $
175
===
The increase in estimated cash payments for
restructuring and acquisition-related costs in 2019
is a result of expected transactions costs related
to our announced sale of the U.S. iron casting
operations.
__________
(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,
impairment charges 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, impairment charges 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.
