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American Axle & Manufacturing Reports Fourth Quarter and Full Year 2008 Financial Results

January 30, 2009 | About:

Press Release: American Axle & Manufacturing Reports Fourth Quarter and Full Year 2008 Financial Results

DETROIT, Jan. 30 /PRNewswire-FirstCall/ -- American Axle & ManufacturingHoldings, Inc. (AAM), which is traded as AXL on the NYSE, today reported itsfinancial results for the fourth quarter and full year 2008.

Full Year 2008 Results    -- Full year sales of $2.1 billion    -- Net loss of $1.2 billion, or $23.73 per share    -- AAM's full year results reflect the adverse impact of approximately       $1.0 billion of special charges, asset impairments and other non-       recurring operating costs; approximately three-quarters of these       charges and costs were non-cash in the period and relate to the       implementation of new labor agreements, hourly and salaried attrition       program activity, plant closures and other actions to rationalize       capacity, redeploy underutilized assets and align AAM's business to       current and projected market requirements    -- 43% year-over-year decline in total light truck production volumes as       compared to the full year 2007    -- Content-per-vehicle of $1,391, approximately 8% higher than the       previous year    -- Non-GM sales of $544.6 million, or 26% of total net sales
AAM's results in the fourth quarter of 2008 were a net loss of $112.1million or $2.17 per share. This compares to a net loss of $26.8 million, or$0.52 per share, in the fourth quarter of 2007. AAM's results in the fourthquarter of 2008 includes a tax expense provision of $69.5 million, primaryrelating to non-cash charges to establish and adjust valuation allowances onAAM's U.S. and U.K. deferred tax assets. This compares to a tax benefit of$34.5 million in the fourth quarter of 2007. AAM's net loss for the full year 2008 was $1.2 billion, or $23.73 pershare. This compares to net earnings of $37.0 million, or $0.70 per share, in2007. "The year 2008 was a turbulent and transformational year for AAM," saidAAM Co-Founder, Chairman of the Board & Chief Executive Officer Richard E.Dauch. "The U.S. automotive industry has been pushed to the verge of collapsedue to numerous adverse market, economic and competitive forces. As a result,2008 proved to be a brutally difficult and demanding year for the entiredomestic automotive industry. AAM accepted these challenges head-on and ismaking the hard, necessary and structural changes to return to profitability. "In 2008, we achieved historic gains in the market cost competitivenessand operating flexibility of AAM's U.S. manufacturing base. We developed andimplemented a comprehensive restructuring, resizing and profit recovery plandesigned to increase capacity utilization and rebuild AAM's balance sheetstrength. We continued to invest in AAM's advanced product, process andsystems technology and expanded AAM's global manufacturing and sourcingfootprint. We provided exceptional value to our customers through AAM'soutstanding daily performance on product development, quality, reliability,warranty, delivery and launch support. We grew AAM's new business backlog to$1.4 billion by enhancing customer relationships around the world. Theseactions position AAM to successfully manage through this difficult period andemerge as stronger and more balanced company for the future." In 2008, AAM recorded approximately $1 billion of special charges, assetimpairments and other non-recurring operating costs. Of this total,approximately three-quarters of these charges and costs were non-cash in theperiod.

These charges and costs are summarized in the following table:    Asset impairments, lease accruals and           (in millions)  EPS Impact     indirect inventory write-downs                    $603.7        $11.70    Attrition programs and benefit reductions     for U.S. hourly and salary associates              206.9          4.01    Accelerated Buydown Program (BDP) expense            51.9          1.01    Lump-sum signing bonus paid to UAW and IAM     associates at original U.S. locations               19.5          0.38    Accrual for Supplemental Unemployment     Benefits (SUB)                                      18.0          0.35    Valuation allowance for deferred tax assets          62.7          1.21    Other (primarily plant closure accruals     and asset redeployment costs)                       22.7          0.44    Total special charges and non-recurring     operating costs recurring operating costs         $985.4        $19.10
-- Asset impairment charges, operating lease accruals and indirectinventory write-downs of $603.7 million. Approximately half of these chargesrelate to the closure of three of AAM's original U.S. locations (including thepreviously idled driveline assembly facility in Buffalo, New York and twoforging facilities: one in Tonawanda, New York and the other in Detroit,Michigan) and the idling of portions of AAM's driveline assembly facility inDetroit, Michigan. The remaining portion of the asset impairment chargesprimarily results from the impact of structural changes in the level of marketdemand and accelerated reductions in customer production volumes anticipatedfor the major North American light truck and SUV product programs AAMcurrently supports for GM in the Detroit and Three Rivers, Michigan drivelineassembly facilities. -- Special charges of $206.9 million relating to U.S. hourly and salariedattrition programs and benefit reductions, including pension and otherpostretirement benefit curtailments and special and contractual terminationbenefits. Included in this activity are charges relating to plant closingagreements, voluntary elections under the Special Separation Program (SSP)offered to UAW-represented associates at AAM's original U.S. locations andsalaried workforce reductions. -- Special charge of $51.9 million relating to the total estimated BuydownProgram (BDP) payments to those associates that are expected to be permanentlyidled throughout the new labor agreements. The BDP was applicable forassociates that did not elect to participate in the SSP. Under the BDP, AAMwill make three annual lump-sum payments to associates in exchange for, amongother things, a base wage decrease. -- Special charges of $19.5 million related to lump-sum signing bonusespaid to AAM's UAW and IAM - represented associates upon ratification of thenew labor agreements at the original U.S. locations. -- Special charge of $18.0 million for Supplemental Unemployment Benefits(SUB) estimated to be payable to UAW-represented associates during the term ofthe new labor agreements at AAM's original U.S. locations. -- Special charges of $62.7 million to establish valuation allowances onAAM's U.S. and U.K. deferred tax assets as required under SFAS No. 109,Accounting for Income Taxes. -- Other special charges and non-operating costs of $22.7 million,primarily relating to costs incurred in connection with plant closings,including costs to redeploy machinery and equipment to support the launch ofAAM's $1.4 billion new business backlog and reduce future capital spending. In 2007, AAM recorded special charges and non-recurring operating costsrelated to a voluntary separation program at the Buffalo Gear, Axle & Linkagefacility in Buffalo, New York. Production at this facility was idled inDecember 2007. Also in 2007, AAM incurred additional special charges andnon-recurring operating costs relating to other hourly and salaried attritionprograms, asset impairments, debt refinancing costs and the redeployment ofmachinery and equipment and other actions to rationalize underutilizedcapacity. In total, AAM's 2007 results reflect the impact of chargesamounting to $93.9 million, or $1.18 per share, relating to these items,including pension and other postretirement benefit curtailments and specialtermination benefits. In the fourth quarter of 2007, AAM recorded $70.6 million, or $0.92 pershare, of these total special charges and non-recurring operating costs. Net sales for the full year 2008 were $2.1 billion as compared to $3.2billion in 2007. Customer production volumes for the full-size truck and SUVprograms AAM currently supports for GM and Chrysler were down approximately41% in 2008 as compared to the prior year. AAM estimates that customerproduction volumes for its mid-sized truck and SUV programs were downapproximately 53% in 2008 on a year-over-year basis. Non-GM sales represented26% of total sales in 2008. Net sales in the fourth quarter of 2008 were $503.0 million as compared to$755.2 million in the fourth quarter of 2007. Customer production volumes forthe full-size truck and SUV programs AAM currently supports for GM andChrysler were down approximately 37% in the fourth quarter of 2008 as comparedto the prior year. AAM estimates that customer production volumes for itsmid-sized truck and SUV programs were down approximately 71% in the fourthquarter of 2008 on a year-over-year basis. Non-GM sales represented 22% oftotal sales in the fourth quarter of 2008. AAM's content-per-vehicle is measured by the dollar value of its productsales supporting GM's North American truck and SUV platforms and Chrysler'sheavy duty Dodge Ram pickup trucks. For the full year 2008, AAM's content-per-vehicle increased approximately 8% to $1,391 as compared to $1,293 in 2007. AAM's SG&A spending for the full year 2008 was $185.4 million as comparedto $202.8 million in 2007. AAM's R&D spending for the full year 2008 wasapproximately $85.0 million as compared to $80.4 million in 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 salesof equipment and dividends paid. Net cash used by operating activities forthe full year 2008 was $163.1 million as compared to net cash provided byoperating activities of $367.9 in 2007. Capital spending and deposits foracquisition of property and equipment, net of proceeds from the sales ofequipment for the full year 2008 was $143.9 million as compared to $186.5million in 2007. Reflecting the impact of this activity and dividend paymentsof $18.3 million, AAM's free cash flow use of $325.3 million in 2008 comparedto an inflow of $149.6 million in 2007. A conference call to review AAM's fourth quarter and full year 2008results is scheduled today at 10:00 a.m. ET. Interested participants maylisten to the live conference call by logging onto AAM's investor web site athttp://investor.aam.com or calling (877) 278-1452 from the United States or(973) 200-3383 from outside the United States. A replay will be availablefrom 5:00 p.m. ET on January 30, 2009 until 5:00 p.m. ETFebruary 6, 2009 bydialing (800) 642-1687 from the United States or (706) 645-9291 from outsidethe United States. When prompted, callers should enter conference reservationnumber 77289567. Non-GAAP Financial Information In addition to the results reported in accordance with accountingprinciples generally accepted in the United States of America (GAAP) includedwithin this press release, AAM has provided certain information, whichincludes non-GAAP financial measures. Such information is reconciled to itsclosest GAAP measure in accordance with the Securities and Exchange Commissionrules and is included in the attached supplemental data. Management believes that these non-GAAP financial measures are useful toboth management and its stockholders in their analysis of the Company'sbusiness and operating performance. Management also uses this information foroperational planning and decision-making purposes. Non-GAAP financial measures are not and should not be considered asubstitute for any GAAP measure. Additionally, non-GAAP financial measures aspresented by AAM may not be comparable to similarly titled measures reportedby other companies. AAM is a world leader in the manufacture, engineering, design andvalidation of driveline and drivetrain systems and related components andmodules, chassis systems and metal-formed products for trucks, sport utilityvehicles, passenger cars and crossover utility vehicles. In addition tolocations in the United States (Michigan, New York, Ohio and Indiana), AAMalso has offices or facilities in Brazil, China, Germany, India, Japan,Luxembourg, Mexico, Poland, South Korea, Thailand and the United Kingdom. Certain statements contained in this press release are forward-lookingstatements related to the Company's plans, projections, strategies or futureperformance. Such statements, made pursuant to the safe harbor provisions ofthe Private Securities Litigation Reform Act of 1995, are based on our currentexpectations, are inherently uncertain, are subject to risks and should beviewed with caution. Actual results and experience may differ materially as aresult of many factors, including but not limited to: GM and Chrysler LLC'sability to comply with the terms of the Secured Term Loan Facility provided bythe U. S. Treasury as well as any additional requirements of the TroubledAsset Relief Program (TARP) applicable to our customers, the impact on ourbusiness of requirements imposed on, or actions taken by, any of our customersin response to TARP or similar programs, global economic conditions, reducedpurchases of our products by General Motors Corporation (GM), Chrysler LLC(Chrysler) or other customers; reduced demand for our customers' products(particularly light trucks and SUVs produced by GM and Chrysler); availabilityof financing for working capital, capital expenditures, R&D or other generalcorporate purposes, including our ability to comply with financial covenants;our customers' and suppliers' availability of financing for working capital,capital expenditures, R&D and other general corporate purposes; our ability toachieve cost reductions through ongoing restructuring actions; our ability toachieve the level of cost reductions required to sustain global costcompetitiveness; adverse changes in the economic conditions or politicalstability of our principal markets (particularly North America, Europe, SouthAmerica and Asia); additional restructuring actions that may occur; ourability to maintain satisfactory labor relations and avoid future workstoppages; our suppliers' ability to maintain satisfactory labor relations andavoid work stoppages; our customers' and their suppliers' ability to maintainsatisfactory labor relations and avoid work stoppages; our ability to improveour U.S. labor cost structure; our ability to consummate and integrateacquisitions; supply shortages or price increases in raw materials, utilitiesor other operating supplies; our ability or our customers' and suppliers'ability to successfully launch new product programs on a timely basis; ourability to realize the expected revenues from our new and incremental businessbacklog; our ability to attract new customers and programs for new products;our ability to develop and produce new products that reflect market demand;lower-than-anticipated market acceptance of new or existing products; ourability to respond to changes in technology, increased competition or pricingpressures; continued or increased high prices for or reduced availability offuel; adverse changes in laws, government regulations or market conditionsaffecting our products or our customers' products (such as the CorporateAverage Fuel Economy regulations; liabilities arising from warranty claims,product liability and legal proceedings to which we are or may become a party;changes in liabilities arising from pension and other postretirement benefitobligations; risks of noncompliance with environmental regulations or risks ofenvironmental issues that could result in unforeseen costs at our facilities;our ability to attract and retain key associates; other unanticipated eventsand conditions that may hinder our ability to compete. It is not possible to foresee or identify all such factors and we make nocommitment to update any forward-looking statement or to disclose any facts,events or circumstances after the date hereof that may affect the accuracy ofany forward-looking statement.

For additional information:    Media relations contact:    Renee B. Rogers    Manager, Corporate Communications and Media Relations    (313) 758-4882    renee.rogers@aam.com    Investor relations contact:    Christopher M. Son    Director, Investor Relations and Corporate Communications    (313) 758-4814    chris.son@aam.com    Or visit the AAM website athttp://www.aam.com                  AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS                                   (Unaudited)                                      Three months ended  Twelve months ended                                         December 31,         December 31,                                     -------------------- --------------------                                        2008      2007      2008      2007                                     ---------- --------- --------- ----------                                     (In millions, except (In millions, except                                        per share data)      per share data)    Net sales                          $503.0   $755.2    $2,109.2  $3,248.2    Cost of goods sold                  474.6    757.0     2,974.4   2,969.8                                     -------- --------    --------  --------    Gross profit (loss)                  28.4     (1.8)     (865.2)    278.4    Selling, general and     administrative expenses             48.1     47.7       185.4     202.8                                     -------- --------    --------  --------    Operating income (loss)             (19.7)   (49.5)   (1,050.6)     75.6    Interest expense                    (22.0)   (14.8)      (70.4)    (61.6)    Investment income (loss)              2.0      3.3         2.5       9.3    Other income (expense), net         Debt refinancing cost            -        -           -        (5.5)         Other, net                      (3.0)    (0.3)       (2.8)     (0.2)                                     -------- --------    --------  --------    Income (loss) before income taxes   (42.7)   (61.3)   (1,121.3)     17.6    Income tax expense (benefit)         69.5    (34.5)      103.3     (19.4)    Minority interest                     0.1      -           0.3       -                                     -------- --------    --------  --------    Net income (loss)                 $(112.1)  $(26.8)  $(1,224.3)    $37.0                                     ======== ========    ========  ========    Diluted earnings (loss) per share  $(2.17)  $(0.52)   $(23.73)     $0.70                                     ======== ========   ========   ========    Diluted shares outstanding           51.6     51.5       51.6       52.7                                     ======== ========   ========   ========                  AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.                      CONDENSED CONSOLIDATED BALANCE SHEETS                                   (Unaudited)                                                  December 31,  December 31,                                                     2008          2007                                                  ------------  ------------                                                        (In millions)                   ASSETS    Current assets         Cash and cash equivalents                  $198.8         $343.6         Short-term investments                       77.1            -         Accounts receivable, net                    186.9          264.0         AAM/GM agreement receivable                  60.0            -         Inventories, net                            111.4          242.8         Prepaid expenses and other                   59.2           73.4         Deferred income taxes                         5.5           19.5                                                  ------------  -----------    Total current assets                             698.9          943.3    Property, plant and equipment, net             1,064.2        1,696.2    Deferred income taxes                             20.7           78.7    Goodwill                                         147.8          147.8    Other assets and deferred charges                 98.6           57.4                                                  ------------  -----------    Total assets                                  $2,030.2       $2,923.4                                                  ============  ===========    LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)    Current liabilities         Accounts payable                           $250.9         $313.8         Accrued expenses and other                  288.1          197.8                                                  ------------  -----------    Total current liabilities                        539.0          511.6    Long-term debt                                 1,139.9          858.1    Deferred income taxes                              4.8            6.6    Deferred revenue                                 178.2           66.0    Postretirement benefits and other     long-term liabilities                           600.4          581.7                                                  ------------  -----------    Total liabilities                              2,462.3        2,024.0    Stockholders' equity (deficit)                  (432.1)         899.4                                                  ------------  -----------    Total liabilities and stockholders'     equity (deficit)                             $2,030.2       $2,923.4                                                  ============  ===========                   AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                                   (Unaudited)                                    Three months ended    Twelve months ended                                       December 31,            December 31,                                   -------------------      ------------------                                     2008      2007           2008      2007                                   --------- ---------     --------- ---------                                      (In millions)           (In millions)    Operating activities         Net income (loss)         $(112.1)  $(26.8)       $(1,224.3)   $37.0         Depreciation and          amortization                34.3     58.4            199.5    229.4         Other                        12.0      4.7            861.7    101.5                                   --------- ---------     --------- ---------    Net cash flow provided by    (used in) operating     activities                      (65.8)    36.3           (163.1)   367.9    Purchases of property,     plant & equipment               (37.4)   (53.5)          (140.2)  (186.5)    Payment of deposits for     acquisition of property     and equipment                    (7.1)     -               (7.1)     -    Acquisition, net                 (10.7)     -              (10.7)    Proceeds from sales of assets      1.1      -                3.4      -    Reclass of short-term investments 40.1      -              (77.1)     -                                   --------- ---------     --------- ---------    Net cash flow provided by     (used in) operations            (79.8)   (17.2)          (394.8)   181.4    Net increase (decrease) in     long-term debt                 (157.5)     4.8            285.4    172.3    Debt issuance costs              (13.4)     -              (13.4)    (7.5)    Repurchase of treasury stock       -       (0.1)            (0.1)    (2.0)    Employee stock option exercises,     including tax benefit             -        2.1              0.9     17.3    Dividends paid                    (1.0)    (8.0)           (18.3)   (31.8)                                   --------- ---------     --------- ---------    Net cash flow provided by    (used in) financing activities  (171.9)    (1.2)           254.5    148.3    Effect of exchange rate changes     on cash                          (3.7)    (0.1)            (4.5)     0.4                                   --------- ---------     --------- ---------    Net increase (decrease) in cash     and cash equivalents           (255.4)   (18.5)          (144.8)   330.1    Cash and cash equivalents at     beginning of period             454.2    362.1            343.6     13.5                                   --------- ---------     --------- ---------    Cash and cash equivalents at     end of period                  $198.8   $343.6           $198.8   $343.6                                   ========= =========     ========= =========                   AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.                                SUPPLEMENTAL DATA                                   (Unaudited)
The supplemental data presented below is a reconciliation ofcertain financial measures which is intended to facilitate analysis ofAmerican Axle & Manufacturing Holdings, Inc. business and operatingperformance.

Earnings (loss) before interest expense, income taxes and depreciation and                             amortization (EBITDA)(a)                                     Three months ended   Twelve months ended                                        December 31,         December 31,                                    -------------------   -------------------                                       2008       2007     2008       2007                                    --------- ---------   --------- ---------                                        (In millions)       (In millions)    Net income (loss)                 $(112.1)  $(26.8)  $(1,224.3)    $37.0    Interest expense                     22.0     14.8        70.4      61.6    Income taxes                         69.5    (34.5)       103.3     (19.4)    Depreciation and amortization        34.3     58.4       199.5     229.4                                     --------- ---------  --------- ---------    EBITDA                              $13.7    $11.9     $(851.1)   $308.6                                     ========= =========  ========= =========                            Net debt(b) to capital                                              December 31,   December 31,                                                 2008           2007                                          (In millions, except percentages)    Total debt                                 $1,139.9        $858.1    Less: cash and cash equivalents               198.8         343.6    Net debt at end of period                     941.1         514.5    Stockholders' equity (deficit)               (432.1)        899.4    Total invested capital at end of period      $509.0      $1,413.9    Net debt to capital(c)                        184.9%         36.4%                Net Operating Cash Flow and Free Cash Flow(d)                                      Three months ended   Twelve months ended                                         December 31,          December 31,                                      -------------------  -------------------                                        2008     2007        2008      2007                                      --------- ---------  --------- ---------                                       (In millions)         (In millions)    Net cash provided by operating     activities                        $(65.8)  $36.3      $(163.1)   $367.9    Less: Purchases of property, plant     & equipment and proceeds from sale     of equipment                       (36.3)  (53.5)      (136.8)   (186.5)          Payment of deposits for           acquisition of property           and equipment                 (7.1)    -           (7.1)      -                                      --------- --------- --------- ---------    Net operating cash flow            (109.2)  (17.2)      (307.0)    181.4    Less: dividends paid                 (1.0)   (8.0)       (18.3)    (31.8)                                      --------- --------- --------- ---------    Free cash flow                    $(110.2) $(25.2)     $(325.3)   $149.6                                      ========= ========= ========= =========    (a)  We believe that EBITDA is a meaningful measure of performance as it    is commonly utilized by management and investors to analyze operating    performance and entity valuation.  Our management, the investment    community and the banking institutions routinely use EBITDA, together with    other measures, to measure our operating performance relative to other    Tier 1 automotive suppliers.  EBITDA should not be construed as income    from operations, net income or cash flow from operating activities as    determined under GAAP.  Other companies may calculate  EBITDA differently.    (b)  Net debt is equal to total debt less cash and cash equivalents.    (c)  Net debt to capital is equal to net debt divided by the sum of    stockholders' equity (deficit) and net debt.  We believe that net debt to    capital is a meaningful measure of financial condition as it is commonly    utilized by management, investors and creditors to assess relative capital    structure risk.  Other companies may calculate net debt to capital    differently.    (d)  We define net operating cash flow as net cash provided by operating    activities less purchases of property and equipment net of proceeds from    sales of assets.  Free cash flow is defined as net operating cash flow    less dividends paid.  We believe net operating cash flow and free cash    flow are meaningful measures as they are commonly utilized by management    and investors to assess our ability to generate cash flow from business    operations to repay debt and return capital to our stockholders.  Net    operating cash flow is also a key metric used in our calculation of    incentive compensation.  Other companies may calculate net operating cash    flow and free cash flow differently.
The supplemental data presented below is a reconciliation ofcertain financial measures which is intended to facilitate analysis ofAmerican Axle & Manufacturing Holdings, Inc. business and operatingperformance.

Source: PRNewsWire

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