American Axle & Manufacturing Holdings, Inc. (AAM), (NYSE: AXL) today reported its financial results for the second quarter of 2016 and updated its full year 2016 outlook.
Second Quarter 2016 Results
- Sales of $1.025 billion
- Gross profit of $191.4 million, or 18.7% of sales
- Net income of $71.0 million, or $0.90 per share
- Adjusted EBITDA (earnings before interest expense, income taxes, depreciation and amortization, excluding the impact of a $1.0 million investment gain related to the final distribution of the Reserve Yield Plus Fund) of $164.8 million, or 16.1% of sales
- Net cash provided by operating activities of $157.3 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 $105.0 million
AAM’s net income in the second quarter of 2016 was $71.0 million, or $0.90 per share, as compared to net income of $58.6 million, or $0.75 per share, in the second quarter of 2015. In the second quarter of 2016, AAM’s results reflect the impact of a $1.0 million investment gain related to the final distribution of the Reserve Yield Plus Fund.
AAM’s net income in the first half of 2016 increased to $132.1 million, or $1.68 per share, as compared to net income of$111.8 million, or $1.43 per share, in the first half of 2015.
“AAM’s second quarter results were highlighted by record quarterly sales and gross profit. As a result of our strong operational and financial performance in the first half of 2016, we are increasing our full year profitability and free cash flow targets for 2016,” said AAM’s Chairman & Chief Executive Officer, David C. Dauch. “AAM continues to earn new business featuring our latest innovative driveline solutions and expects customer demand for our advanced technologies to fuel greater business diversification and profitable growth.”
AAM’s sales in the second quarter of 2016 increased to $1.025 billion as compared to $1.004 billion in the second quarter of 2015. Non-GM sales were $333.9 million in the second quarter of 2016 as compared to $343.1 million in the second quarter of 2015.
AAM’s net sales in the first half of 2016 were $1.995 billion as compared to $1.973 billion in the first half of 2015. Non-GM sales in the first half of 2016 were $657.1 million as compared to $672.0 million in the first half 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 second quarter of 2016, AAM’s content-per-vehicle was $1,609 as compared to$1,637 in the second quarter of 2015.
AAM’s gross profit in the second quarter of 2016 increased to $191.4 million, or 18.7% of sales, as compared to $164.5 million, or 16.4% of sales, in the second quarter of 2015.
AAM’s gross profit for the first half of 2016 was $365.4 million as compared to $317.3 million in the first half of 2015. Gross margin was 18.3% in the first half of 2016 as compared to 16.1% in the first half of 2015.
AAM’s SG&A spending in the second quarter of 2016 was $79.9 million, or 7.8% of sales, as compared to $70.6 million, or 7.0% of sales, in the second quarter of 2015. AAM’s R&D spending in the second quarter of 2016 was $35.1 million as compared to $29.5 million in the second quarter of 2015.
In the first half of 2016, AAM’s SG&A spending was $155.5 million, or 7.8%, of sales as compared to $139.1 million, or 7.1%, in the first half of 2015. AAM’s R&D spending in the first half of 2016 was $66.0 million as compared to $56.8 millionin the first half 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 an investment gain related to the final distribution of the Reserve Yield Plus Fund. In the second quarter of 2016, AAM’s Adjusted EBITDA increased to $164.8 million, or 16.1% of sales, as compared to $146.9 million, or 14.6% of sales, in the second quarter of 2015. In the first half of 2016, AAM’s Adjusted EBITDA increased to $314.6 million, or 15.8% of sales, as compared to $284.4 million, or 14.4% of sales, in the first half 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 second quarter of 2016 was $157.3 million. Capital spending, net of proceeds from the sale of property, plant and equipment and government grants, for the second quarter of 2016 was $52.3 million. Reflecting the impact of this activity, AAM generated free cash flow of $105.0 million for the second quarter of 2016.
Share Repurchase Program
AAM began its share repurchase program in the second quarter of 2016, in which we repurchased 100,000 shares at an average price of $15.02. As of June 30, 2016, there was approximately $98.5 million remaining for future repurchases under the program, which expires on December 31, 2018.
AAM’s Full Year 2016 Outlook
AAM has updated its full year 2016 outlook:
- AAM is targeting sales of $4.0 billion in 2016. This sales projection is based on the anticipated launch schedule of programs in AAM’s new and incremental business backlog and the assumption that the U.S. Seasonally Adjusted Annual Rate of sales (“SAAR”) is approximately 17.5 million light vehicle units in 2016.
- AAM is targeting an Adjusted EBITDA margin in the range of 15.0% to 15.5% in 2016.
- AAM is targeting free cash flow in the range of $140 million to $160 million in 2016.
- AAM is targeting full year capital spending of approximately 6% of sales in 2016.
Second Quarter 2016 Conference Call
A conference call to review AAM’s second quarter 2016 results is scheduled today at 10:00 AM ET. Interested participants may listen to the live conference call by logging onto AAM’s investor web site at 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 onJuly 29 until 11:59 p.m. ET August 5 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 87956019.
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.
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.
