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Published on November 3, 2016

AAM Reports Third Quarter 2016 Financial Results

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DETROIT, November 3, 2016 -- American Axle & Manufacturing Holdings, Inc. (AAM), (NYSE: AXL) today reported its financial results for the third quarter 2016.

Third Quarter 2016 Results

  • Sales of $1.007 billion
  • Gross profit of $181.2 million, or 18.0% of sales
  • Net income of $61.7 million, or 6.1% of sales
  • Diluted earnings of $0.78 per share
  • Adjusted EBITDA (earnings before interest expense, income taxes, depreciation and amortization, excluding the impact of special charges and other non-recurring items) of $156.7 million, or 15.6% of sales
  • Net cash provided by operating activities of $107.5 million
  • Free cash flow (net cash provided by operating activities less capital expenditures net of proceeds from the sale of property, plant and equipment and government grants) of $54.6 million

AAM's net income in the third quarter of 2016 was $61.7 million, or $0.78 per share. This compares to net income of $60.9 million, or $0.78 per share in the third quarter of 2015. In the third quarter of 2016, AAM's results reflect the impact of a $3.4 million asset impairment charge and $0.7 million of acquisition related expenses.

AAM’s net income in the first nine months of 2016 was $193.8 million, or $2.47 per share as compared to $172.7 million, or $2.21 per share in the first nine months of 2015.

“AAM's third quarter financial results continued to reflect strong production volumes and solid performance in our global manufacturing operations,“ said AAM’s Chairman & Chief Executive Officer, David C. Dauch. "Our year-to-date financial performance positions AAM to achieve record sales and profit in 2016."

Net sales in the third quarter of 2016 increased to $1.007 billion as compared to $971.6 million in the third quarter of 2015. Non-GM sales were $307.7 million in the quarter as compared to $321.6 million in the third quarter of 2015.

AAM's net sales in the first nine months of 2016 increased to $3.002 billion as compared to $2.945 billion in the first nine months of 2015. Non-GM sales in the first nine months of 2016 were $964.8 million, as compared to $993.6 million in the first nine months of 2015.

AAM's content-per-vehicle is measured by the dollar value of its product sales supporting our customers' North American light truck and SUV programs. In the third quarter of 2016, AAM's content-per-vehicle was $1,612 as compared to $1,622 in the third quarter of 2015 and $1,609 in the second quarter of 2016.

AAM's gross profit in the third quarter of 2016 increased to $181.2 million as compared to $158.3 million in the third quarter of 2015. Gross profit in the third quarter of 2016 includes the impact of the $3.4 million asset impairment charge. Gross margin was 18.0% in the third quarter of 2016 as compared to 16.3% in the third quarter of 2015.

AAM's gross profit for the first nine months of 2016 increased to $546.6 million as compared to $475.6 million in the first nine months of 2015. Gross margin was 18.2% in the first nine months of 2016 as compared to 16.1% in the first nine months of 2015.

AAM's selling, general, and administrative (SG&A) expense in the third quarter of 2016 was $79.9 million, or 7.9% of sales, as compared to $65.5 million, or 6.7% of sales, in the third quarter of 2015. SG&A expense in the third quarter of 2016 includes the impact of $0.7 million of acquisition related expenses.

In the first nine months of 2016, AAM's SG&A expense was $235.4 million, or 7.8% of sales, as compared to $204.6 million, or 6.9% of sales, for the first nine months of 2015. 

AAM's research and development (R&D) expense in the third quarter of 2016 was $36.2 million as compared to $25.8 million in the third quarter of 2015. AAM's R&D expense in the first nine months of 2016 was $102.3 million compared to $82.6 million in the first nine months of 2015. 

AAM defines EBITDA to be earnings before interest expense, income taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA excluding the impact of special charges and other non-recurring items.

In the third quarter of 2016, AAM's Adjusted EBITDA increased to $156.7 million, or 15.6% of sales, as compared to $149.2 million, or 15.4% of sales, in the third quarter of 2015.

In the first nine months of 2016, AAM's Adjusted EBITDA was $471.3 million, or 15.7% of sales, as compared to $433.6 million, or 14.7% of sales, in the first nine months of 2015.

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 and government grants.

Net cash provided by operating activities for the third quarter of 2016 was $107.5 million. Capital spending, net of proceeds from the sale of property, plant and equipment and government grants for the third quarter of 2016 was $52.9 million.  Reflecting the impact of this activity, AAM generated free cash flow of $54.6 million for the third quarter of 2016.

Net cash provided by operating activities for the first nine months of 2016 was $291.0 million.  Capital spending, net of proceeds from the sale of property, plant and equipment and government grants for the first nine months of 2016 was $155.2 million.  Reflecting the impact of this activity, AAM generated free cash flow of $135.8 million in the first nine months of 2016.

Update on GM's Next Generation Full Size Truck Program

As an update to the press release issued on July 31, 2015 related to our selection by GM as the target supplier to provide axles and driveshafts for GM’s next generation full size truck program - AAM now estimates, based on current design and program direction, to retain approximately 65% of the sales content provided to GM for the current full size truck program.  AAM estimates to have covered approximately 90% of the expected sales impact of this sourcing transition with new and incremental business wins that will launch in the 2018 to 2020 timeframe.

AAM's Full Year 2016 Outlook

AAM has updated its full year 2016 outlook:

  • AAM is targeting sales of $3.95 billion in 2016.
  • AAM is targeting an Adjusted EBITDA margin in the range of 15.25% to 15.5% of sales in 2016.
  • AAM is targeting free cash flow of approximately $160 million in 2016.
  • AAM is targeting full year capital spending of approximately 6% of sales in 2016.

Third Quarter 2016 Conference Call Information

A conference call to review AAM's third quarter 2016 results and other business developments is scheduled today at 8:00 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 (855) 681-2072 from the United States or (213) 358-0831 from outside the United States. A replay will be available from 1:00 p.m. ET on November 3, 2016 until 11:59 p.m. ET November 10, 2016 by dialing (855) 859-2056 from the United States or (404) 537-3406 from outside the United States.  When prompted, callers should enter conference reservation number 12791647.

In light of today’s conference call, AAM’s previously scheduled earnings conference call on November 4, 2016 will no longer occur.

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 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.

Company Description

AAM is a world leader in the manufacturing, engineering, design and validation of driveline and drivetrain systems and related components and modules, chassis systems, electric drive systems and metal-formed products for light trucks, sport utility vehicles, passenger cars, crossover vehicles and commercial vehicles. In addition to locations in the United States (Michigan, Ohio, and Indiana), AAM also has offices or facilities in Brazil, China, Germany, India, Japan, Luxembourg, Mexico, Poland, Scotland, South Korea, Sweden and Thailand.

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; reduced demand for our customers' products (particularly light trucks and sport utility vehicles (SUVs) produced by GM and FCA); 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; our ability to attract new customers and programs for new products; our ability to consummate and integrate acquisitions and joint ventures; 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; our ability to achieve the level of cost reductions required to sustain global cost competitiveness; supply shortages or price increases in raw materials, utilities or other operating supplies for us or our customers as a result of natural disasters or otherwise; 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; risks inherent in our international operations (including adverse changes in political stability, taxes and other law changes, potential disruptions of production and supply, and currency rate fluctuations, including those resulting from the United Kingdom's vote to exit the European Union); negative or unexpected tax consequences; 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; global economic conditions; our ability to maintain satisfactory labor relations and avoid work stoppages; our suppliers', our customers' and their suppliers' ability to maintain satisfactory labor relations and avoid work stoppages; price volatility in, or reduced availability of, fuel; 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 facilities; 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); our ability or our customers' and suppliers' ability to comply with the Dodd-Frank Act and other 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.

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For more information:

MEDIA

Christopher Son

Vice President, Marketing & Corporate Communications

+1 (313) 758-4814

CorporateCommunications@aam.com

INVESTOR RELATIONS

Jason Parsons

Director, Investor Relations

+1 (313) 758-2404

InvestorRelations@aam.com
Forward-Looking Statement