DETROIT — American Axle & Manufacturing Holdings’ (AAM) earnings in the second quarter of 2006 were $20.4 million or 40 cents per share, compared to earnings of $18.9 million or 37 cents per share in the second quarter of 2005.
AAM’s second quarter earnings reflect the impact of a one-time non-cash charge of $2.4 million, or approximately 3 cents per share, to write off unamortized debt issuance costs related to the cash conversion of approximately $128.4 million of AAM’s Senior Convertible Notes due 2024. An additional $21.6 million of these Notes remain outstanding as of June 30. AAM’s second quarter earnings also reflect the impact of an unfavorable tax adjustment of $2.6 million, or 5 cents per share, related to the settlement of prior year foreign jurisdiction tax liabilities.
AAM’s earnings in the second quarter of 2005 included a charge of $8.9 million, or 12 cents per share, related to voluntary lump-sum separation payments accepted by 162 hourly associates.
Net sales in the second quarter of 2006 were $874.6 million as compared to $867.7 million in the second quarter of 2005. Non-GM sales in the quarter were $204.5 million and now represent 23 percent of AAM’s total sales. On a year-to-date basis through the second quarter of 2006, AAM’s non-GM sales have increased $53.9 million or 15 percent over the prior year.
AAM sales in the quarter reflect an estimated 5 percent increase in customer production volumes for the major full-size truck and SUV programs it currently supports for GM and The Chrysler Group as compared to the second quarter of 2005. AAM estimates that customer production volumes for its mid-sized pick-up truck and SUV programs were down approximately 23 percent in the quarter on a year-over-year basis.
AAM’s content per vehicle increased by approximately 3 percent to $1,216 in the second quarter of 2006 as compared to $1,185 in the second quarter of 2005. The company said this increase is due primarily to the impact of new AAM content appearing on GM’s full-size utility vehicles, as well as production mix shifts favoring AAM’s axles and driveline systems for the Dodge Ram heavy-duty series pick-ups and the four-wheel-drive HUMMER H3 in the mid-size SUV segment.
Gross margin in the second quarter of 2006 was 10.3 percent as compared to 9.8 percent in the second quarter of 2005. Operating income was $40.5 million or 4.6 percent of sales in the quarter as compared to $36.4 million or 4.2 percent of sales in the second quarter of 2005.
Net sales in the first half of 2006 were $1.7 billion, approximately the same as the first half of 2005. Gross margin was 9 percent in the first half of 2006 as compared to 9.4 percent for the first half of 2005. Operating income for the first half of 2006 was $55.5 million or 3.2 percent of sales as compared to $62.1 million or 3.7 percent of sales for the first half of 2005.
AAM’s gross margin and operating margin performance in the first half of 2006 reflects the impact of higher non-cash expenses related to depreciation, amortization, pension and postretirement benefits and stock-based compensation. Higher fringe benefit costs, including supplemental unemployment benefits paid to certain of AAM’s hourly associates, also pressured margins in the first half of 2006.
AAM’s SG&A spending in the second quarter was $49.4 million as compared to $49 million in the second quarter of 2005. In the first half of 2006, AAM’s SG&A spending was $97.9 million or 5.7 percent of sales as compared to $95.6 million or 5.7 percent of sales in the first half of 2005. AAM increased its R&D spending in the first half of 2006 by $3.6 million on a year-over-year basis. AAM has also increased SG&A spending in 2006 to support its expanded foreign business and technical offices.
AAM defines free cash flow to be net cash provided by (or used in) operating activities less capital expenditures and dividends paid. Net cash provided by operating activities in the first half of 2006 was $99.7 million as compared to $52.4 million in the first half of 2005. Capital spending in the first half of 2006 was down $5.2 million on a year-over-year basis to $156 million. Reflecting the impact of this activity and dividend payments of $15.5 million, AAM’s free cash flow in the first half of 2006 improved by $52 million as compared to the first half of 2005.
For more information about AAM, go to: www.aam.com .
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