American Axle & Manufacturing Reports Third Quarter 2008 Financial Results
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DETROIT, October 31, 2008: American Axle & Manufacturing Holdings, Inc. (AAM), which is traded as AXL on the NYSE, today reported its financial results for the third quarter of 2008.
Third Quarter 2008 results
Third quarter sales of $528.1 million
Net loss of $440.9 million, or $8.54 per share
AAM's quarterly results reflect the adverse impact of special charges, asset impairments and other non-recurring operating costs of $398.0 million, or $7.71 per share; these charges, the majority of which were non-cash in the period, relate to hourly and salaried attrition program activity, plant closures and other actions to rationalize underutilized capacity and align AAM's business to current and projected market requirements
44% year-over-year decline in total light truck production volumes as compared to the third quarter of 2007
Content-per-vehicle of $1,453, approximately 12% higher than the previous year
AAM's results in the third quarter of 2008 were a net loss of $440.9 million or $8.54 per share. This compares to net earnings of $13.5 million, or $0.25 per share, in the third quarter of 2007.
In the third quarter of 2008, AAM recorded special charges and non-recurring operating costs of $398.0 million, or $7.71 per share. The majority of these charges and costs were non-cash in the period.
Special charges of $85.2 million, or $1.65 per share relating to U.S. hourly and salaried attrition programs and benefit reductions, including pension and other postretirement benefit curtailments and special and contractual termination benefits. Included in this activity are charges relating to voluntary elections under the Special Separation Program (SSP) offered to UAW-represented associates at AAM's original U.S. locations and salaried workforce reductions.
Special charges of $51.9 million, or $1.01 per share relating to the total estimated Buydown Program (BDP) payments to those associates who are expected to be permanently idled throughout the new labor agreement. The BDP was initiated for associates that did not elect to participate in the SSP. Under the BDP, AAM will make three annual lump-sum payments to associates in connection with, among other things, a base wage decrease.
Asset impairment charges and indirect inventory write-downs, of $255.9 million, or $4.95 per share. Most of these charges result from the impact of recent customer decisions adversely affecting AAM's future production requirements at AAM's Colfor Manufacturing subsidiary and further structural changes in the level of market demand and accelerated reductions in customer production volumes anticipated for the major North American light truck and SUV product programs AAM currently supports for GM in the Detroit, Michigan driveline assembly facility.
Other special charges and non-operating costs of $5.0 million, or $0.10 per share primarily relating to costs incurred in relation to plant closings, including costs to redeploy machinery and equipment.
"AAM's results in the third quarter of 2008 were adversely impacted by customer decisions to restrict production and reduce inventories of unsold vehicles. This created a significant imbalance between our production schedules in the quarter and the selling rates of the major product programs AAM currently supports for GM and Chrysler in North America," said AAM Co-Founder, Chairman of the Board & Chief Executive Officer Richard E. Dauch. "Rapid deterioration in the domestic economy, pervasive weakness in the credit markets and historically low consumer confidence compounded these challenges for the entire domestic automotive industry.
"As we adapt to these new and challenging market conditions, AAM remains focused on the execution of its comprehensive restructuring plan to align AAM's global production capacity with current and projected market requirements. The actions AAM is taking to improve the operating flexibility and market cost competitiveness of its U.S. operations position AAM to sustain its leadership position in the North American driveline market segment. At the same time, the recent groundbreaking for AAM's new Rayong, Thailand manufacturing facility demonstrates our commitment to the continued diversification and expansion of AAM's global manufacturing and sourcing footprint. These initiatives position AAM for a return to profitability."
Net sales in the third quarter of 2008 were $528.1 million as compared to $774.3 million in the third quarter of 2007. Customer production volumes for the major light truck and SUV product programs AAM currently supports for GM and Chrysler were down approximately 44% in the third quarter of 2008 as compared to the prior year. Non-GM sales represented 26% of total sales in the third quarter of 2008 as compared to 24% in the third quarter of 2007.
AAM's content-per-vehicle is measured by the dollar value of its product sales supporting GM's North American truck and SUV platforms and Chrysler's heavy duty Dodge Ram pickup trucks. In the third quarter 2008, AAM's content-per-vehicle increased approximately 12% to $1,453 as compared to $1,303 in the third quarter of 2007.
Net sales in the first three quarters of 2008 were $1.6 billion as compared to $2.5 billion in the first three quarters of 2007. The company's operating loss in the first three quarters of 2008 was $1.0 billion as compared to operating income of $125.1 million or 5.0% of sales for the first three quarters of 2007.
AAM's SG&A spending for the third quarter of 2008 was $43.0 million as compared to $52.0 million in the third quarter of 2007. In the first three quarters of 2008, AAM's SG&A spending was $137.3 million as compared to $155.1 million in the first three quarters of 2007. AAM's R&D spending for the first three quarters of 2008 was approximately $63.4 million as compared to $61.9 million in the first three quarters of 2007.
AAM defines free cash flow to be net cash provided by (or used in) operating activities less capital expenditures net of proceeds from the sales of equipment and dividends paid. Net cash used in operating activities in the first three quarters of 2008 was $97.3 million as compared to net cash provided by operating activities of $331.6 million in the first three quarters of 2007. Capital spending net of proceeds from the sales of equipment for the first three quarters of 2008 was $100.5 million as compared to $132.9 million in the first three quarters of 2007. Reflecting the impact of this activity and dividend payments of $17.3 million, AAM's free cash flow use of $215.1 million in the first three quarters of 2008 compared to $174.9 million of positive free cash flow in the first three quarters of 2007.
A conference call to review AAM's third quarter of 2008 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 AAM 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. ET on October 31, 2008 until 5:00 p.m. ET November 7, 2008 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 65769084.