American Axle & Manufacturing Holdings, Inc. (AAM), (NYSE: AXL) today reported its financial results for the third quarter 2016.
Third Quarter 2016 Results
- Sales of $1.007 billion
- Gross profit of $181.2 million, or 18.0% of sales
- Net income of $61.7 million, or 6.1% of sales
- Diluted earnings of $0.78 per share
- Adjusted EBITDA (earnings before interest expense, income taxes, depreciation and amortization, excluding the impact of special charges and other non-recurring items) of $156.7 million, or 15.6% of sales
- Net cash provided by operating activities of $107.5 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 $54.6 million
AAM’s net income in the third quarter of 2016 was $61.7 million, or $0.78 per share. This compares to net income of $60.9 million, or $0.78 per share in the third quarter of 2015. In the third quarter of 2016, AAM’s results reflect the impact of a $3.4 million asset impairment charge and $0.7 million of acquisition related expenses.
AAM’s net income in the first nine months of 2016 was $193.8 million, or $2.47 per share as compared to $172.7 million, or $2.21 per share in the first nine months of 2015.
“AAM’s third quarter financial results continued to reflect strong production volumes and solid performance in our global manufacturing operations,” said AAM’s Chairman & Chief Executive Officer, David C. Dauch. “Our year-to-date financial performance positions AAM to achieve record sales and profit in 2016.”
Net sales in the third quarter of 2016 increased to $1.007 billion as compared to $971.6 million in the third quarter of 2015. Non-GM sales were $307.7 million in the quarter as compared to $321.6 million in the third quarter of 2015.
AAM’s net sales in the first nine months of 2016 increased to $3.002 billion as compared to $2.945 billion in the first nine months of 2015. Non-GM sales in the first nine months of 2016 were $964.8 million, as compared to $993.6 million in the first nine months 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 third quarter of 2016, AAM’s content-per-vehicle was $1,612 as compared to $1,622 in the third quarter of 2015 and $1,609 in the second quarter of 2016.
AAM’s gross profit in the third quarter of 2016 increased to $181.2 million as compared to $158.3 million in the third quarter of 2015. Gross profit in the third quarter of 2016 includes the impact of the $3.4 million asset impairment charge. Gross margin was 18.0% in the third quarter of 2016 as compared to 16.3% in the third quarter of 2015.
AAM’s gross profit for the first nine months of 2016 increased to $546.6 million as compared to $475.6 million in the first nine months of 2015. Gross margin was 18.2% in the first nine months of 2016 as compared to 16.1% in the first nine months of 2015.
AAM’s selling, general, and administrative (SG&A) expense in the third quarter of 2016 was $79.9 million, or 7.9% of sales, as compared to $65.5 million, or 6.7% of sales, in the third quarter of 2015. SG&A expense in the third quarter of 2016 includes the impact of $0.7 million of acquisition related expenses.
In the first nine months of 2016, AAM’s SG&A expense was $235.4 million, or 7.8% of sales, as compared to $204.6 million, or 6.9% of sales, for the first nine months of 2015.
AAM’s research and development (R&D) expense in the third quarter of 2016 was $36.2 million as compared to $25.8 million in the third quarter of 2015. AAM’s R&D expense in the first nine months of 2016 was $102.3 million compared to $82.6 million in the first nine months 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 special charges and other non-recurring items.
In the third quarter of 2016, AAM’s Adjusted EBITDA increased to $156.7 million, or 15.6% of sales, as compared to $149.2 million, or 15.4% of sales, in the third quarter of 2015.
In the first nine months of 2016, AAM’s Adjusted EBITDA was $471.3 million, or 15.7% of sales, as compared to $433.6 million, or 14.7% of sales, in the first nine months 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 third quarter of 2016 was $107.5 million. Capital spending, net of proceeds from the sale of property, plant and equipment and government grants for the third quarter of 2016 was $52.9 million. Reflecting the impact of this activity, AAM generated free cash flow of $54.6 million for the third quarter of 2016.
Net cash provided by operating activities for the first nine months of 2016 was $291.0 million. Capital spending, net of proceeds from the sale of property, plant and equipment and government grants for the first nine months of 2016 was $155.2 million. Reflecting the impact of this activity, AAM generated free cash flow of $135.8 million in the first nine months of 2016.
Update on GM’s Next Generation Full-Size Truck Program
As an update to the press release issued on July 31, 2015 related to our selection by GM as the target supplier to provide axles and driveshafts for GM’s next generation full-size truck program – AAM now estimates, based on current design and program direction, to retain approximately 65% of the sales content provided to GM for the current full-size truck program. AAM estimates to have covered approximately 90% of the expected sales impact of this sourcing transition with new and incremental business wins that will launch in the 2018 to 2020 timeframe.
AAM’s Full Year 2016 Outlook
AAM has updated its full year 2016 outlook:
- AAM is targeting sales of $3.95 billion in 2016.
- AAM is targeting an Adjusted EBITDA margin in the range of 15.25% to 15.5% of sales in 2016.
- AAM is targeting free cash flow of approximately $160 million in 2016.
- AAM is targeting full year capital spending of approximately 6% of sales in 2016.
Third Quarter 2016 Conference Call Information
A conference call to review AAM’s third quarter 2016 results and other business developments is scheduled today at 8:00 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 (213) 358-0831 from outside the United States. A replay will be available from 1:00 p.m. ET on November 3, 2016 until 11:59 p.m. ET November 10, 2016 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 12791647.
In light of today’s conference call, AAM’s previously scheduled earnings conference call on November 4, 2016 will no longer occur.
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.
