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Detroit, Michigan, April 28, 2006 -- American Axle & Manufacturing Holdings, Inc. (AAM), which is traded as AXL on the NYSE, today reported sales and earnings for the first quarter of 2006.
First Quarter 2006 highlights
AAM's earnings in the first quarter of 2006 were $8.6 million or $0.17 per share. This compares to earnings of $13.3 million or $0.26 per share in the first quarter of 2005. AAM's earnings in the first quarter of 2006 include a favorable tax adjustment of $3.1 million, or $0.06 per share, related to the settlement of federal and state tax liabilities from prior years. AAM's first quarter results also reflect a $10.4 million increase in non-cash expenses related to depreciation and amortization, pension and postretirement benefits and stock-based compensation.
Net sales in the first quarter of 2006 were $834.8 million as compared to $818.9 million in the first quarter of 2005. Non-GM sales increased by more than 20% to $203.6 million in the first quarter of 2006 as compared to the first quarter of 2005. Non-GM sales represented 24% of AAM's total sales in the first quarter of 2006.
"AAM is on track to deliver significant cash flow gains in 2006,"said AAM's Co-Founder, Chairman of the Board & CEO Richard E. Dauch. "AAM's new product launches in 2006 are progressing very well. We are encouraged by the initial market acceptance of GM's new full-size SUVs and look forward to supporting the launch of GM's new full-size pick-ups later this year. AAM is also supporting the launch of new products for The Chrysler Group, Ssangyong Motors, Hino, Jatco, Koyo and Harley Davidson in 2006. These important new relationships are quickly expanding AAM's customer base and product diversification."
AAM sales in the quarter reflect an estimated 8% increase in customer production volumes for the major full-size truck and SUV programs it currently supports for GM and The Chrysler Group. AAM estimates that customer production volumes for its mid-sized light truck and SUV programs were down 11% in the quarter on a year-over-year basis.
AAM's content per vehicle increased by nearly 2% to $1,205 in the first quarter of 2006 as compared to $1,183 in the first quarter of 2005. Production mix shifts favoring AAM's axles and driveline systems for the full-size light truck and SUV market and the four-wheel-drive HUMMER H3 in the mid-size SUV segment were the primary drivers of content growth in the quarter.
Gross margin in the first quarter of 2006 was 7.6% as compared to 8.8% in the first quarter of 2005. Operating income was $15.1 million or 1.8% of sales in the quarter as compared to $25.7 million or 3.1% of sales in the first quarter of 2005.
AAM's lower gross margin and operating income performance in the first quarter of 2006 primarily reflects the impact of higher non-cash expenses related to depreciation and amortization, pension and postretirement benefits and stock-based compensation. Higher fringe benefit costs, including supplemental unemployment benefits paid to certain of AAM's hourly associates, also pressured margins in the quarter.
AAM's SG&A spending was up $1.8 million in the first quarter of 2006 to $48.4 million as compared to $46.6 million in the first quarter of 2005. AAM increased its R&D spending in the quarter by 9.7% on a year-over-year basis. Increased spending to support its expanded foreign business and technical offices, as well as higher non-cash expenses related to pension and postretirement benefits and stock-based compensation also increased AAM's SG&A costs in the quarter.
AAM defines free cash flow to be net cash provided by (or used in) operating activities less capital expenditures and dividends paid. Net cash provided by operating activities in the first quarter of 2006 was $7.0 million as compared to a use of $34.1 million in the first quarter of 2005. Capital spending was up $6.0 million in the first quarter of 2006 on a year-over-year basis to $80.8 million. Reflecting the impact of this activity and dividend payments of $7.7 million, AAM's free cash flow in the first quarter of 2006 improved by nearly $35 million as compared to the first quarter of 2005.
A conference call to review AAM's first quarter 2006 results is scheduled today at 10:00 a.m. EDT. 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) 278-1452 from the United States or (706) 643-3736 from outside the United States. A replay will be available from 5:00 p.m. EDT on April 28, 2006 until 5:00 p.m. EDT May 5, 2006 by dialing (800) 642-1687 from the United States or (706) 645-9291 from outside the United States. When prompted, callers should enter conference reservation number 7348620.
Recent Developments
On April 11, 2006, AAM reconfirmed that it expects its earnings for the full year 2006 to be in the range of $1.20 to $1.30 per share.
On March 28, 2006, AAM announced that it broke ground for Changshu Gear & Axle, a regional manufacturing facility in the Jiangsu Province of China.
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 and drivetrain systems and related components and modules, chassis systems and metal-formed products for light trucks, sport utility vehicles and passenger cars. In addition to locations in the United States (in Michigan, New York and Ohio), AAM also has offices or facilities in Brazil, China, England, Germany, India, Japan, Mexico, Scotland and South Korea.
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; work stoppages at GM or DaimlerChrysler or a key supplier to GM or DaimlerChrysler; reduced purchases of our products by GM, DaimlerChrysler or other customers; our ability and our customers' ability to successfully launch new product programs; 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 maintain satisfactory labor relations and avoid work stoppages; risks of noncompliance with environmental regulations or risks of environmental issues that could result in unforeseen costs at our facilities; 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); our ability to attract and retain key associates; 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.
Media relations contact:
Carrie L.P. Gray
Director, Corporate Relations
(313) 758-4880
grayc@aam.com
Investor relations contact:
Christopher M. Son
Director, Investor Relations
(313) 758-4814
chris.son@aam.com