American Axle Releases Record Earnings for the First Quarter of 1999
22 April 1999
American Axle Releases Record Earnings for the First Quarter of 1999
Net Sales, Net Income and EPS at Record Highs
DETROIT, April 22 -- American Axle & Manufacturing Holdings,
Inc. today reported first quarter 1999 net income of $29.0
million, up 71% from the $16.9 million earned in the first quarter of 1998.
Earnings per share were 61 cents on a diluted basis, up 56% from the 39 cents
earned in the first quarter of 1998.
Sales increased 20% to $697.7 million for the first quarter of 1999 as
compared to $583.3 million in the first quarter of 1998. This increase is due
primarily to: (1) higher volumes resulting from strong customer demand for the
Company's products; (2) increased sales related to General Motors' new full-
size truck program (GMT-800), on which the Company receives a higher average
dollar content per vehicle than its predecessor (GMT-400); (3) the impact of
Albion Automotive, which was acquired in the fourth quarter of 1998 and (4)
expiration of the 1998 temporary payment reductions made in connection with
the Lifetime Program Contracts with General Motors Corporation.
Gross profit increased to 13.2% of sales in the first quarter of 1999 as
compared to 10.6% in the first quarter of 1998. This increase is primarily
due to the impact of: (1) strong volumes; (2) increased sales of products
which carry higher average selling prices; (3) productivity improvements; and
(4) the expiration of the temporary payment reductions which adversely
impacted 1998 results.
Richard E. Dauch, American Axle's Chairman, CEO & President, said "Our
record performance during the first quarter of 1999 validates the decision we
made over five years ago to rebuild AAM's plants from the inside out. These
financial results prove we not only have the capability to deliver products in
very high volumes at world-class quality levels, but that we can do so
flexibly, productively, consistently and efficiently."
Selling, general and administrative expenses increased 33% to $33.9
million in the first quarter of 1999 as compared to $25.5 million in the first
quarter of 1998. This increase reflects the Company's continued investment in
research and development, the support required for its expanding operations
and the impact of the Albion acquisition, referred to above.
The Company completed its initial public offering of common stock in the
first quarter of 1999 receiving net proceeds of $107.6 million. On March 5,
1999, American Axle & Manufacturing, Inc., the Company's wholly owned
subsidiary, issued $300 million of 9.75% Senior Subordinated Notes Due 2009 in
a private placement. Additionally, in March 1999, the Company resyndicated
its revolving receivables facility through its subsidiary, AAM Receivables
Corp. In addition, this facility has been expanded from $125 million to $153
million. The company also completed a $49 million sales-leaseback transaction
during March 1999.
The Company's cash balance of $167.8 million at March 31, 1999 resulted
primarily from the net proceeds of the Senior Subordinated Notes, offset by
payments to reduce outstanding debt. This cash was utilized on April 1, 1999
to fund the acquisitions discussed further below.
OTHER SIGNIFICANT ACCOMPLISHMENTS
The Company also made significant progress on its strategies of
diversifying and strengthening its customer base and expanding its product
offerings. On April 1, 1999, it closed transactions to purchase two forging
companies, Colfor Manufacturing, Inc. ("Colfor") and MSP Industries
Corporation ("MSP"), for an aggregate purchase price of approximately $223
million. Colfor specializes in precision cold, warm and hot forgings
primarily used in the automotive industry and operates three manufacturing
facilities in Ohio. Giving effect as of January 1, 1998 to Colfor's October
1998 acquisition of Valley Forge, Inc., Colfor's pro forma 1998 sales would
have been approximately $126 million. MSP manufactures precision forged
powertrain, driveline, chassis and other components for the automotive
industry using cold and warm forging processes at three manufacturing
facilities in Michigan. MSP's 1998 sales were $56 million. These
acquisitions will be included in the Company's consolidated results beginning
with the second quarter 1999.
From a strategic standpoint, these acquisitions make the Company a
stronger competitor in the North American automotive forging market, where it
has a leading market share. These acquisitions also help to further diversify
the Company's customer base. After taking into account the Company's recent
acquisitions, and its ability to secure non-GM customers, GM revenues comprise
approximately 85% of the Company's total revenues on a pro forma basis. For
the year ended 1998, GM business accounted for approximately 93% of Company
revenues.
Another recent development from an operational and strategic standpoint is
the Company's acquisition of a facility in the town of Cheektowaga, located in
Western New York. This facility is located near the Company's Tonawanda Forge
Plant and will be used to machine forgings. This operation will add
approximately 120 UAW jobs at wage levels competitive with other machining
operations. Plant operations are expected to begin in late 1999. This move
will allow the Company to add greater value to its forged products and will
allow it to bring in-house operations which are currently performed by outside
suppliers.
Richard E. Dauch added:
"I am very pleased with the initiatives we have made in the last three
months to expand our forging operations. The acquisitions we completed,
together with the recent decision to expand our own forging capabilities in
Western New York, present great opportunities for AAM. By closing the Colfor
and MSP transactions earlier than originally anticipated, we can accelerate
our pursuit of targeted synergies at both companies."
AAM is a world leader in the design, engineering and manufacture of
driveline systems, chassis systems and forged products for trucks, buses,
sport utility vehicles, and passenger cars. In addition to 12 locations in
the United States (in Michigan, Ohio and New York), AAM has offices and
facilities in Japan, England, Germany, and Scotland and it is currently
building a manufacturing facility and business office in Mexico.
Certain statements contained in this press release which are not
historical facts contain forward-looking information with respect to the
Company's plans, projections or future performance, the occurrence of which
involve risks and uncertainties that could cause the Company's actual results
or plans to differ materially from those expected by the Company which include
risk factors described in the Company's prospectuses filed with the Securities
and Exchange Commission.
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three months ended March 31, Percent
1999 1998 Increase
(In thousands, except share
and per share amounts)
Net sales $ 697,671 $ 583,285 20%
Cost of goods sold 605,620 521,496
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Gross profit 92,051 61,789 49%
Selling, general and
administrative expenses 33,894 25,482
----------- -----------
Operating income 58,157 36,307 60%
Net interest expense (12,014) (9,749)
Other (expense) income, net (183) 333
----------- ----------
Income before income taxes 45,960 26,891
Income taxes 17,005 9,968
----------- -----------
Net income $ 28,955 $ 16,923 71%
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Basic earnings per share $ 0.78 $ 0.52 50%
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Diluted earnings per share $ 0.61 $ 0.39 56%
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Average shares outstanding:
Basic 36,891,039 32,391,409
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Diluted 47,438,870 43,204,158
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AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1999 1998
(Unaudited)
(In thousands)
ASSETS
Current assets:
Cash and equivalents $ 167,847 $ 4,547
Accounts receivable, net 192,560 123,787
Inventories 115,689 137,066
Prepaid expenses and other 7,249 14,524
Deferred income taxes 14,648 14,093
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Total current assets 497,993 294,017
Property, plant and equipment, net 806,278 829,301
Deferred income taxes 55,729 62,194
Other assets and deferred charges 51,170 40,720
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Total assets $ 1,411,170 $ 1,226,232
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 391,802 $ 362,886
Long-term debt and capital lease obligations 706,872 693,368
Postretirement benefits and other long-term
liabilities 135,933 129,510
------------- -------------
Total liabilities 1,234,607 1,185,764
Stockholders' equity:
Common stock 395 1
Paid-in capital 199,780 92,527
Accumulated deficit (22,512) (51,467)
Cumulative translation adjustment (1,100) (593)
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Total stockholders' equity 176,563 40,468
------------- -------------
Total liabilities and stockholders' equity $ 1,411,170 $ 1,226,232
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AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended March 31,
1999 1998
(In thousands)
Operating activities:
Net income $ 28,955 $ 16,923
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 21,693 14,703
Deferred income taxes 5,910 8,769
Pensions and other postretirement
benefits, net of contributions 10,776 (7,661)
Loss on disposal of equipment 167 116
Changes in operating assets &
liabilities:
Accounts receivable (69,124) 51,278
Inventories 21,050 (571)
Current liabilities 24,870 (3,596)
Other assets and liabilities 5,221 (3,499)
------------- -------------
Net cash provided by operating activities 49,518 76,462
Investing activities:
Purchases of property and equipment, net (47,754) (66,623)
Proceeds from sale/leaseback of equipment 49,000 -
------------- ------------
Net cash provided/(used) by investing
activities 1,246 (66,623)
Financing activities:
Payments on Revolving Credit and
Receivables facilities, net (286,000) (24,000)
Proceeds from issuance of long-term debt
and capital lease obligations, net 300,809 -
Payments on long-term debt (491) (80)
Debt issuance costs (9,426) -
Proceeds from issuance of common
stock, net 107,647 302
------------- ------------
Net cash provided/(used) by financing
activities 112,539 (23,778)
Effect of exchange rate changes on cash (3) -
------------- ------------
Net increase/(decrease) in cash and
equivalents 163,300 (13,939)
Cash and equivalents at beginning of
period 4,547 17,285
------------- ------------
Cash and equivalents at end of period $ 167,847 $ 3,346
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