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Published on November 2, 2018

AAM Reports Third Quarter 2018 Financial Results

DETROIT, November 2, 2018 -- American Axle & Manufacturing Holdings, Inc. (AAM), (NYSE: AXL) today reported its financial results for the third quarter 2018 and updated AAM's full year 2018 financial outlook and other forward-looking information.

Third Quarter 2018 Results

  • Sales of $1.82 billion
  • Net income attributable to AAM of $63.8 million, or 3.5% of sales
  • Diluted earnings per share of $0.55
  • Adjusted earnings per share of $0.63
  • Adjusted EBITDA of $275.0 million, or 15.1% of sales
  • Net cash provided by operating activities of $223.8 million
  • Adjusted free cash flow of $121.3 million

“AAM's third quarter of 2018 results reflect an increase in launch-related expenses and certain manufacturing costs.  As a result, our third quarter financial performance did not meet our expectations,” said AAM's Chairman and Chief Executive Officer, David C. Dauch.  "Our results this quarter do not change our confidence in meeting AAM's long-term objectives."

“We are focused on delivering value to our customers while launching several key programs across the globe.  At the same time, we are taking the necessary actions to improve our performance, generate significant free cash flow and further strengthen our balance sheet," Dauch said.

AAM's sales in the third quarter of 2018 increased to $1.82 billion as compared to $1.72 billion in the third quarter of 2017. AAM's net sales in the first nine months of 2018 were $5.58 billion as compared to $4.53 billion in the first nine months of 2017.

AAM's net income in the third quarter of 2018 was $63.8 million, or $0.55 per share as compared to net income of $86.2 million, or $0.75 per share in the third quarter of 2017.  AAM's net income in the first nine months of 2018 was $304.3 million, or $2.63 per share, as compared to net income of $230.8 million, or $2.27 per share, in the first nine months of 2017.

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, and non-recurring items, including the tax effect thereon.  Adjusted earnings per share in the third quarter of 2018 were $0.63 compared to $0.86 in the third quarter of 2017. Adjusted earnings per share in the first nine months of 2018 were $2.83 as compared to $2.89 in the first nine months of 2017.

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, and non-recurring items.  In the third quarter of 2018, Adjusted EBITDA was $275.0 million, or 15.1% of sales, as compared to $297.8 million, or 17.3% of sales, in the third quarter of 2017. In the first nine months of 2018, AAM's Adjusted EBITDA was $939.9 million, or 16.9% of sales, as compared to $807.2 million, or 17.8% of sales, in the first nine months of 2017.

AAM's net cash provided by operating activities for the third quarter of 2018 was $223.8 million. AAM's net cash provided by operating activities for the first nine months of 2018 was $513.2 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, settlements of pre-existing accounts payable balances with acquired entities and interest payments upon the settlement of acquired company debt. AAM's Adjusted free cash flow for the third quarter of 2018 was $121.3 million. AAM's Adjusted free cash flow for the first nine months of 2018 was $179.9 million.

AAM to Redeem $100 million of its 7.75% Notes

AAM has issued a notice of redemption for $100 million of its $200 million 7.75% senior unsecured notes due 2019 (7.75% Notes), plus accrued and unpaid interest to the redemption date of November 15, 2018.  AAM will use cash on hand to settle the redemption of the 7.75% Notes.

AAM's Full Year 2018 Outlook

AAM is updating its full year 2018 financial outlook:

  • AAM is now targeting full year 2018 sales of approximately $7.25 billion.
  • Due to higher launch-related expenses and manufacturing costs in the second half of 2018, AAM is now targeting full year Adjusted EBITDA margin for 2018 in the range of 16.25% to 16.5%.
  • As a result of a lower than expected full year Adjusted EBITDA, AAM is now targeting Adjusted free cash flow of approximately 4% of sales in 2018.

Other Forward-Looking Information

AAM is also updating other previously disclosed, forward-looking information:

  • AAM is targeting full year 2019 sales to be in the range of flat to 2% growth compared to full year 2018.This sales projection is based on the anticipated launch schedule of programs in AAM’s new and incremental business backlog, current metal market levels and the assumption that the U.S. Seasonally Adjusted Annual Rate of sales (“SAAR”) will be in the range of 16.5 million to 17 million light vehicle units in 2019.
  • AAM is targeting full year Adjusted EBITDA margin for 2019 to be approximately 17% of sales.
  • AAM is targeting cumulative Adjusted free cash flow for the four-year period from 2017 - 2020 to be approximately $1.5 billion.

Third Quarter 2018 Conference Call Information

A conference call to review AAM's third quarter 2018 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 (855) 681-2072 from the United States or (973) 200-3383 from outside the United States. A replay will be available from 1:00 p.m. ET on November 2, 2018 until 10:59 p.m. ET November 9, 2018 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 3086665.

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 financial measures calculated and presented in accordance with GAAP is not practical given the difficulty of projecting event driven transactional and other non-core operating items and their related effects in any future period. The magnitude of these items, however, 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 is a premier, global leader in design, engineering, validation and manufacturing of driveline, metal forming, powertrain, and casting products for automotive, commercial and industrial markets.

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 www.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; reduced demand for our customers' products (particularly light trucks, sport utility vehicles (SUVs) and crossover vehicles produced by GM and FCA); 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; lower-than-anticipated market acceptance of new or existing products; our ability to attract new customers and programs for new products; 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 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; 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 or our customers' and suppliers' ability to successfully launch new product programs on a timely basis; our ability to successfully integrate the business and information systems of Metaldyne Performance Group, Inc. (MPG) and to realize the anticipated benefits of the merger; 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; negative or unexpected tax consequences; 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; our ability to realize the expected revenues from our new and incremental business backlog; 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; 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 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 RELATIONS

David Lim

Head of Investor Relations

+1 (313) 758 2006

InvestorRelations@aam.com

MEDIA

Christopher Son

Vice President, Marketing & Corporate Communications

+1 (313) 758-4814

Contact
AMERICAN AXLE & MANUFACTURING

One Dauch Drive
Detroit, MI 48211-1198

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Forward-Looking Statement

On this website and elsewhere in attached materials, 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;
  • risks inherent in our international operations (including adverse changes in trade agreements, tariffs, immigration policies, political stability, taxes and other law changes, potential disruptions of production and supply, and currency rate fluctuations, including those resulting from the recent United States presidential election and the United Kingdom's vote to exit the European Union);
  • negative or unexpected tax consequences;
  • 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 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.