form10-q.htm
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
þ
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
|
|
|
For
the quarterly period ended March 31, 2008
|
|
|
or
|
|
|
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
|
|
|
For
the transition period from _____________ to _____________
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|
|
Commission
File Number: 1-14303
_______________________________________________________________________________
AMERICAN
AXLE & MANUFACTURING HOLDINGS, INC.
(Exact
Name of Registrant as Specified in Its Charter)
Delaware
|
36-3161171
|
(State
or Other Jurisdiction of Incorporation or Organization)
|
(I.R.S.
Employer Identification No.)
|
|
|
One
Dauch Drive, Detroit, Michigan
|
48211-1198
|
(Address
of Principal Executive Offices)
|
(Zip
Code)
|
(313)
758-2000
(Registrant's
Telephone Number, Including Area Code)
_______________________________________________________________________________
Indicate
by check mark whether the registrant: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes þ No o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See definition of “accelerated filer," "large accelerated
filer” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act. (Check one):
Large
accelerated filer þ Accelerated
filer o Non-accelerated
filer o
Smaller reporting company o
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes o No þ
As of
April 22, 2008, the
latest practicable date, the number of shares of the registrant's Common Stock,
par value $0.01 per share, outstanding was 54,185,000
shares.
Internet
Website Access to Reports
The
website for American Axle & Manufacturing Holdings, Inc. is www.aam.com. Our annual
reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form
8-K and amendments to those reports filed or furnished pursuant to Section 13 or
15(d) of the Exchange Act are available free of charge through our website as
soon as reasonably practicable after they are electronically filed with, or
furnished to, the Securities and Exchange Commission. The Securities
and Exchange Commission also maintains a website at www.sec.gov that
contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC.
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31,
2008
TABLE OF CONTENTS
In this
Quarterly Report on Form 10-Q, we make statements concerning our expectations,
beliefs, plans, objectives, goals, strategies, and future events or
performance. Such statements are “forward-looking” statements within
the meaning of the Private Securities Litigation Reform Act of 1995 and relate
to trends and events that may affect our future financial position and operating
results. The terms such as “will,” “may,” “could,” “would,” “plan,”
“believe,” “expect,” “anticipate,” “intend,” “project,” and similar words of
expressions, as well as statements in future tense, are intended to identify
forward-looking statements.
Forward-looking
statements should not be read as a guarantee of future performance or results,
and will not necessarily be accurate indications of the times at, or by, which
such performance or results will be achieved. Forward-looking
statements are based on information available at the time those statements are
made and/or management’s good faith belief as of that time with respect to
future events and are subject to risks and differ materially from those
expressed in or suggested by the forward-looking
statements. Important factors that could cause such differences
include, but are not limited to:
·
|
the
effects of the strike called by the International United Automobile,
Aerospace and Agricultural Implement Workers of America on February 25,
2008;
|
·
|
our
ability to restore and maintain satisfactory labor relations and avoid
future work stoppages;
|
·
|
our
suppliers’ ability to maintain satisfactory labor relations and avoid work
stoppages;
|
·
|
our
customers’ and their suppliers’ ability to maintain satisfactory labor
relations and avoid work stoppages;
|
·
|
our
ability to improve our U.S. labor cost
structure;
|
·
|
reduced
purchases 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);
|
·
|
our
ability to achieve cost reductions through ongoing restructuring
actions;
|
·
|
additional
restructuring actions that may
occur;
|
·
|
our
ability to achieve the level of cost reductions required to sustain global
cost competitiveness;
|
·
|
our
ability to consummate and integrate
acquisitions;
|
·
|
supply
shortages or price increases in raw materials, utilities or other
operating supplies;
|
·
|
our
ability or our customers’ and suppliers’ ability to successfully launch
new product programs on a timely
basis;
|
·
|
our
ability to realize the expected revenues from our new and incremental
business backlog;
|
·
|
our
ability to attract new customers and programs for new
products;
|
·
|
our
ability to develop and produce new products that reflect market
demand;
|
·
|
our
ability to respond to changes in technology, increased competition or
pricing pressures;
|
·
|
adverse
changes in laws, government regulations or market conditions including
increases in fuel prices affecting our products or our customers’ products
(such as the Corporate Average Fuel Economy
regulations);
|
·
|
adverse
changes in the economic conditions or political stability of our principal
markets (particularly North America, Europe, South America and
Asia);
|
·
|
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 benefit
obligations;
|
·
|
risks
of noncompliance with environmental regulations or risks of environmental
issues that could result in unforeseen costs at our
facilities;
|
·
|
availability
of financing for working capital, capital expenditures, R&D or other
general corporate purposes, including our ability to comply with financial
covenants;
|
·
|
our
ability to attract and retain key
associates;
|
·
|
other
unanticipated events and conditions that may hinder our ability to
compete.
|
It is not
possible to foresee or identify all such factors and we make no commitment to
update any forward-looking statement or to disclose any facts, events or
circumstances after the date hereof that may affect the accuracy of any
forward-looking statement.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
Three
months ended
|
|
|
|
March
31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(in
millions, except per share data)
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$ |
587.6 |
|
|
$ |
802.2 |
|
|
|
|
|
|
|
|
|
|
Cost
of goods sold
|
|
|
574.9 |
|
|
|
716.9 |
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
12.7 |
|
|
|
85.3 |
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative expenses
|
|
|
49.4 |
|
|
|
48.9 |
|
|
|
|
|
|
|
|
|
|
Operating
income (loss)
|
|
|
(36.7 |
) |
|
|
36.4 |
|
|
|
|
|
|
|
|
|
|
Net
interest expense
|
|
|
(12.7 |
) |
|
|
(14.0 |
) |
|
|
|
|
|
|
|
|
|
Other
income, net
|
|
|
0.5 |
|
|
|
0.1 |
|
|
|
|
|
|
|
|
|
|
Income
(loss) before income taxes
|
|
|
(48.9 |
) |
|
|
22.5 |
|
|
|
|
|
|
|
|
|
|
Income
tax expense (benefit)
|
|
|
(21.9 |
) |
|
|
6.8 |
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$ |
(27.0 |
) |
|
$ |
15.7 |
|
|
|
|
|
|
|
|
|
|
Basic
earnings (loss) per share
|
|
$ |
(0.52 |
) |
|
$ |
0.31 |
|
|
|
|
|
|
|
|
|
|
Diluted
earnings (loss) per share
|
|
$ |
(0.52 |
) |
|
$ |
0.30 |
|
|
|
|
|
|
|
|
|
|
Dividends
declared per share
|
|
$ |
0.15 |
|
|
$ |
0.15 |
|
See
accompanying notes to condensed consolidated financial
statements.
AMERICAN
AXLE & MANUFACTURING HOLDINGS, INC.
|
|
March
31,
|
|
|
December
31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
(in
millions)
|
|
Assets
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
315.5 |
|
|
$ |
343.6 |
|
Accounts
receivable, net
|
|
|
187.3 |
|
|
|
264.0 |
|
Inventories,
net
|
|
|
248.3 |
|
|
|
242.8 |
|
Prepaid
expenses and other
|
|
|
74.4 |
|
|
|
73.4 |
|
Deferred
income taxes
|
|
|
17.7 |
|
|
|
19.5 |
|
Total
current assets
|
|
|
843.2 |
|
|
|
943.3 |
|
|
|
|
|
|
|
|
|
|
Property,
plant and equipment, net
|
|
|
1,678.8 |
|
|
|
1,696.2 |
|
Deferred
income taxes
|
|
|
104.5 |
|
|
|
78.7 |
|
Goodwill
|
|
|
147.8 |
|
|
|
147.8 |
|
Other
assets and deferred charges
|
|
|
55.3 |
|
|
|
57.4 |
|
Total
assets
|
|
$ |
2,829.6 |
|
|
$ |
2,923.4 |
|
|
|
|
|
|
|
|
|
|
Liabilities
and Stockholders’ Equity
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$ |
266.6 |
|
|
$ |
313.8 |
|
Accrued
compensation and benefits
|
|
|
102.3 |
|
|
|
126.6 |
|
Other accrued expenses
|
|
|
66.3 |
|
|
|
71.2 |
|
Total
current liabilities
|
|
|
435.2 |
|
|
|
511.6 |
|
|
|
|
|
|
|
|
|
|
Long-term
debt
|
|
|
864.1 |
|
|
|
858.1 |
|
Deferred
income taxes
|
|
|
6.4 |
|
|
|
6.6 |
|
Postretirement
benefits and other long-term liabilities
|
|
|
646.7 |
|
|
|
647.7 |
|
Total
liabilities
|
|
|
1,952.4 |
|
|
|
2,024.0 |
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity
|
|
|
|
|
|
|
|
|
Common
stock, par value $0.01 per share
|
|
|
0.6 |
|
|
|
0.6 |
|
Paid-in
capital
|
|
|
419.7 |
|
|
|
416.3 |
|
Retained
earnings
|
|
|
556.9 |
|
|
|
591.9 |
|
Treasury
stock at cost, 5.2 million shares in 2008 and 2007
|
|
|
(173.9 |
) |
|
|
(173.8 |
) |
Accumulated
other comprehensive income (loss), net of tax
|
|
|
|
|
|
|
|
|
Defined benefit plans
|
|
|
40.9 |
|
|
|
33.5 |
|
Foreign currency translation adjustments
|
|
|
37.7 |
|
|
|
34.2 |
|
Unrecognized loss on derivatives
|
|
|
(4.7 |
) |
|
|
(3.3 |
) |
Total
stockholders' equity
|
|
|
877.2 |
|
|
|
899.4 |
|
Total
liabilities and stockholders' equity
|
|
$ |
2,829.6 |
|
|
$ |
2,923.4 |
|
See
accompanying notes to condensed consolidated financial
statements.
|
AMERICAN
AXLE & MANUFACTURING HOLDINGS, INC.
(Unaudited)
|
|
Three
months ended
|
|
|
|
March
31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(in
millions)
|
|
Operating
activities
|
|
|
|
|
|
|
Net
income (loss)
|
|
$ |
(27.0 |
) |
|
$ |
15.7 |
|
Adjustments
to reconcile net income (loss) to net cash
|
|
|
|
|
|
|
|
|
provided by operating activities |
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
56.6 |
|
|
|
56.4 |
|
Deferred
income taxes
|
|
|
(27.2 |
) |
|
|
3.9 |
|
Stock-based
compensation
|
|
|
3.6 |
|
|
|
4.8 |
|
Pensions
and other postretirement benefits,
net of
contributions
|
|
|
12.4 |
|
|
|
14.8 |
|
Loss
on retirement of equipment
|
|
|
0.3 |
|
|
|
1.1 |
|
Changes
in operating assets and liabilities
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
78.1 |
|
|
|
(94.3 |
) |
Inventories
|
|
|
(5.1 |
) |
|
|
(18.1 |
) |
Accounts
payable and accrued expenses
|
|
|
(84.0 |
) |
|
|
21.3 |
|
Other
assets and liabilities
|
|
|
0.5 |
|
|
|
4.2 |
|
Net
cash provided by operating activities
|
|
|
8.2 |
|
|
|
9.8 |
|
|
|
|
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
|
|
|
|
Purchases
of property, plant and equipment
|
|
|
(33.3 |
) |
|
|
(42.5 |
) |
Net
cash used in investing activities
|
|
|
(33.3 |
) |
|
|
(42.5 |
) |
|
|
|
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
|
|
|
|
Net
borrowings (repayments) under revolving credit facilities
|
|
|
1.9 |
|
|
|
(130.3 |
) |
Payments
of long-term debt and capital lease obligations
|
|
|
(0.4 |
) |
|
|
(0.3 |
) |
Proceeds
from issuance of long-term debt
|
|
|
3.3 |
|
|
|
300.0 |
|
Debt
issuance costs
|
|
|
- |
|
|
|
(5.2 |
) |
Repurchase
of treasury stock
|
|
|
(0.1 |
) |
|
|
- |
|
Employee
stock option exercises
|
|
|
0.1 |
|
|
|
3.7 |
|
Tax
benefit on stock option exercises
|
|
|
0.2 |
|
|
|
0.7 |
|
Dividends
paid
|
|
|
(8.0 |
) |
|
|
(7.8 |
) |
Net
cash provided by (used in) financing activities
|
|
|
(3.0 |
) |
|
|
160.8 |
|
|
|
|
|
|
|
|
|
|
Effect
of exchange rate changes on cash
|
|
|
- |
|
|
|
0.3 |
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
(28.1 |
) |
|
|
128.4 |
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at beginning of period
|
|
|
343.6 |
|
|
|
13.5 |
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at end of period
|
|
$ |
315.5 |
|
|
$ |
141.9 |
|
|
|
|
|
|
|
|
|
|
Supplemental
cash flow information
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
$ |
25.2 |
|
|
$ |
17.4 |
|
Income
taxes paid, net of refunds
|
|
$ |
0.7 |
|
|
$ |
6.7 |
|
See
accompanying notes to condensed consolidated financial
statements.
AMERICAN
AXLE & MANUFACTURING HOLDINGS, INC.
March
31, 2008
(Unaudited)
1. ORGANIZATION
AND BASIS OF PRESENTATION
Organization American Axle &
Manufacturing Holdings, Inc. (Holdings) and its subsidiaries (collectively, we,
our, us or AAM) is a Tier I supplier to the automotive industry. We
manufacture, engineer, design and validate driveline and drivetrain systems and
related components and chassis modules for trucks, sport utility vehicles
(SUVs), passenger cars and crossover utility vehicles. Driveline and
drivetrain systems include components that transfer power from the transmission
and deliver it to the drive wheels. Our driveline, drivetrain and
related products include axles, chassis modules, driveshafts, power transfer
units, transfer cases, chassis and steering components, driving heads,
crankshafts, transmission parts and metal-formed products. In
addition to locations in the United States (U.S.) (Michigan, New York, Ohio and
Indiana), we have offices or facilities in Brazil, China, England, Germany,
India, Japan, Luxembourg, Mexico, Poland, Scotland, South Korea and
Thailand.
Basis of Presentation We have prepared the
accompanying interim condensed consolidated financial statements in accordance
with the instructions to Form 10-Q under the Securities Exchange Act of
1934. These condensed consolidated financial statements are unaudited
but include all normal recurring adjustments, which we consider necessary for a
fair presentation of the information set forth herein. Results of
operations for the periods presented are not necessarily indicative of the
results for the full fiscal year.
The
balance sheet at December 31, 2007 presented herein has been derived from the
audited consolidated financial statements at that date but does not include all
of the information and footnotes required by accounting principles generally
accepted in the United States of America (GAAP) for complete consolidated
financial statements.
In order
to prepare the accompanying interim condensed consolidated financial statements,
we are required to make estimates and assumptions that affect the reported
amounts and disclosures in our interim condensed consolidated financial
statements. Actual results could differ from those
estimates.
For
further information, refer to the audited consolidated financial statements and
notes included in our Annual Report on Form 10-K for the year ended December 31,
2007.
Change in Accounting
Principle On January 1, 2008, we changed the method for
costing our U.S. inventories from the last-in, first-out (LIFO) method to the
first-in, first-out (FIFO) method. As of December 31, 2007, the U.S.
inventories for which the LIFO method of costing inventory was applied
represented approximately 25% of total gross inventories. This change
enhances the matching of inventory costs with revenues and better reflects the
current cost of inventory on our consolidated balance
sheet. Additionally, this change conforms all of our worldwide
inventories to a consistent inventory costing method and provides better
comparability to our industry peers, most of whom use the FIFO method of costing
for inventory. In accordance with Statement of Financial Accounting
Standards No. 154, “Accounting Changes and Error
Corrections,” the change in accounting principle has been retrospectively
applied to all prior periods presented herein.
AMERICAN
AXLE & MANUFACTURING HOLDINGS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
We have presented the effects of the change in accounting for inventory costing
to the Consolidated Balance Sheets as of March 31, 2008 and December 31, 2007
and the Consolidated Statement of Operations and Cash Flows for the three
months ended March 31, 2007. The impact of this change on the
Consolidated Statement of Operations and Cash Flows for the three
months ended March 31, 2008 was not material. We have condensed
the comparative financial statements for financial statement line items that
were not affected by the change in accounting principle.
Condensed
Consolidated Statement of Operations
Three
months ended March 31, 2007
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
As
originally reported
|
|
|
Adjustments
to change from LIFO to FIFO
|
|
|
As
adjusted and reported under FIFO
|
|
|
|
Net
sales
|
|
$ |
802.2 |
|
|
$ |
- |
|
|
$ |
802.2 |
|
Cost
of goods sold
|
|
|
717.4 |
|
|
|
(0.5 |
) |
|
|
716.9 |
|
Gross
profit
|
|
|
84.8 |
|
|
|
0.5 |
|
|
|
85.3 |
|
Selling
general and administrative expenses
|
|
|
48.9 |
|
|
|
- |
|
|
|
48.9 |
|
Operating
income
|
|
|
35.9 |
|
|
|
0.5 |
|
|
|
36.4 |
|
Other
income (expense), net
|
|
|
(13.9 |
|
|
|
- |
|
|
|
(13.9 |
) |
Income
before income taxes
|
|
|
22.0 |
|
|
|
0.5 |
|
|
|
22.5 |
|
Income
tax expense
|
|
|
6.6 |
|
|
|
0.2 |
|
|
|
6.8 |
|
Net
income
|
|
|
15.4 |
|
|
|
0.3 |
|
|
|
15.7 |
|
Basic
earnings per share
|
|
$ |
0.30 |
|
|
$ |
0.01 |
|
|
$ |
0.31 |
|
Diluted
earnings per share
|
|
$ |
0.30 |
|
|
$ |
- |
|
|
$ |
0.30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed
Consolidated Balance Sheet
December
31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
As
originally reported
|
|
|
Adjustments
to change from LIFO to FIFO
|
|
|
As
adjusted and reported under FIFO
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
|
|
|
Inventories
|
|
$ |
229.0 |
|
|
$ |
13.8 |
|
|
$ |
242.8 |
|
Deferred
income taxes
|
|
|
24.6 |
|
|
|
(5.1 |
) |
|
|
19.5 |
|
Other
current assets
|
|
|
681.0 |
|
|
|
- |
|
|
|
681.0 |
|
Total
current assets
|
|
|
934.6 |
|
|
|
8.7 |
|
|
|
943.3 |
|
Other
assets
|
|
|
1,980.1 |
|
|
|
- |
|
|
|
1,980.1 |
|
Total
assets
|
|
$ |
2,914.7 |
|
|
$ |
8.7 |
|
|
$ |
2,923.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
$ |
2,024.0 |
|
|
$ |
- |
|
|
$ |
2,024.0 |
|
Stockholders’
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained
earnings
|
|
|
583.2 |
|
|
|
8.7 |
|
|
|
591.9 |
|
Other
stockholders’ equity
|
|
|
307.5 |
|
|
|
- |
|
|
|
307.5 |
|
Total
stockholders’ equity
|
|
|
890.7 |
|
|
|
8.7 |
|
|
|
899.4 |
|
Total
liabilities and stockholders’ equity
|
|
$ |
2,914.7 |
|
|
$ |
8.7 |
|
|
$ |
2,923.4 |
|
AMERICAN
AXLE & MANUFACTURING HOLDINGS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Condensed
Consolidated Statement of Cash Flows
Three
months ended March 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
As
originally reported
|
|
|
Adjustments
to change from LIFO to FIFO
|
|
|
As
adjusted and reported under FIFO
|
|
|
|
|
|
Operating
Activities
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
15.4 |
|
|
$ |
0.3 |
|
|
$ |
15.7 |
|
Adjustments
to reconcile net income to net cash
|
|
|
|
|
|
|
|
|
|
|
|
|
provided by operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes
|
|
|
3.7 |
|
|
|
0.2 |
|
|
|
3.9 |
|
Changes in operating assets and liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories
|
|
|
(17.6 |
) |
|
|
(0.5 |
) |
|
|
(18.1 |
) |
Other changes in operating assets and liabilities
|
|
|
(68.8 |
) |
|
|
- |
|
|
|
(68.8 |
) |
Other
adjustments
|
|
|
77.1 |
|
|
|
- |
|
|
|
77.1 |
|
Net
cash provided by operating activities
|
|
|
9.8 |
|
|
|
- |
|
|
|
9.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing
Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in investing activities
|
|
|
(42.5 |
) |
|
|
- |
|
|
|
(42.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing
Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
|
160.8 |
|
|
|
- |
|
|
|
160.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of exchange rate changes on cash
|
|
|
0.3 |
|
|
|
- |
|
|
|
0.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase in cash and cash equivalents
|
|
$ |
128.4 |
|
|
$ |
- |
|
|
$ |
128.4 |
|
Condensed
Consolidated Balance Sheet
March
31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
As
calculated using LIFO for U.S. inventories
|
|
|
Difference
between LIFO and FIFO
|
|
|
As
reported using FIFO
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
|
|
|
|
Inventories
|
|
$ |
234.5 |
|
|
$ |
13.8 |
|
|
$ |
248.3 |
|
Deferred
income taxes
|
|
|
22.8 |
|
|
|
(5.1 |
) |
|
|
17.7 |
|
Other
current assets
|
|
|
577.2 |
|
|
|
- |
|
|
|
577.2 |
|
Total
current assets
|
|
|
834.5 |
|
|
|
8.7 |
|
|
|
843.2 |
|
Other
assets
|
|
|
1,986.4 |
|
|
|
- |
|
|
|
1,986.4 |
|
Total
assets
|
|
$ |
2,820.9 |
|
|
$ |
8.7 |
|
|
$ |
2,829.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
$ |
1,952.4 |
|
|
$ |
- |
|
|
$ |
1,952.4 |
|
Stockholders’
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained
earnings
|
|
|
548.2 |
|
|
|
8.7 |
|
|
|
556.9 |
|
Other
stockholders’ equity
|
|
|
320.3 |
|
|
|
- |
|
|
|
320.3 |
|
Total
stockholders’ equity
|
|
|
868.5 |
|
|
|
8.7 |
|
|
|
877.2 |
|
Total
liabilities and stockholders’ equity
|
|
$ |
2,820.9 |
|
|
$ |
8.7 |
|
|
$ |
2,829.6 |
|
The application of this change in
accounting increased retained earnings by $8.7 million as of January 1,
2007.
AMERICAN
AXLE & MANUFACTURING HOLDINGS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Effect of New Accounting Standards In September 2006, the
FASB issued Statement No. 157 (SFAS 157), “Fair Value Measurements.” This statement
clarifies the definition of fair value and establishes a fair value
hierarchy. SFAS 157, as originally issued, was effective for us on
January 1, 2008. In February 2008, the FASB issued FASB Staff
Position (FSP) FAS 157-b, which defers the effective date of SFAS 157 for
nonfinancial assets and nonfinancial liabilities, except for items that are
recognized or disclosed at fair value in an entity’s financial statements on a
recurring basis. The effective date for us under this FSP is January
1, 2009. As allowed by FSP FAS 157-b, we partially adopted SFAS 157
on January 1, 2008 and the impact of adoption was not significant. We
do not expect the impact of applying SFAS 157 to the remaining assets and
liabilities on January 1, 2009 to be material.
On a recurring basis, we measure our
derivatives at fair value, which was a net liability of $7.5 million as of March
31, 2008. The fair value of these derivatives was determined
using Level 2 inputs, as described in SFAS 157.
In February 2007, the FASB issued
Statement No. 159 (SFAS 159), “The Fair Value Option for Financial
Assets and Financial Liabilities.” This statement permits entities to
measure many financial instruments and certain other items at fair value that
are not currently required to be measured at fair value. SFAS 159 was
effective for us on January 1, 2008 and we did not elect to measure any
additional assets or liabilities at fair value.
In
December 2007, the FASB issued Statement No. 160 (SFAS 160), “Noncontrolling Interests in
Consolidated Financial Statements — An Amendment of ARB
No. 51.” SFAS 160
establishes new accounting and reporting standards for the noncontrolling
interest in a subsidiary. SFAS 160 is effective for us on January 1, 2009.
We are currently assessing the impact of adopting this statement.
On February 25, 2008, the four-year
master labor agreement between AAM and the International United Automobile,
Aerospace and Agricultural Implement Workers of America (UAW) covering
approximately 3,650 associates at five facilities in Michigan and New York
expired. The International UAW called a strike at these facilities
upon expiration of this agreement. As of March 31, 2008, the strike
remained in effect. Although it is not possible to predict the nature
and timing of a resolution between AAM and the International UAW, a resolution
could have a significant impact on our future results of operations, financial
position and liquidity.
In 2008, we incurred charges in cost of
sales for ongoing restructuring actions. In addition, we continued to
make payments related to the charges incurred in 2007 and 2006. At
December 31, 2007, our liability related to these restructuring actions was
$22.5 million.
A summary of the restructuring related
activity for the three months ended March 31, 2008 is shown below (in
millions):
|
|
One-time
Termination Benefits
|
|
|
Redeployment of
Assets
|
|
|
Environmental
Obligations
|
|
|
Total
|
|
Accrual
as of December 31, 2007
|
|
$ |
20.3 |
|
|
$ |
- |
|
|
$ |
2.2 |
|
|
$ |
22.5 |
|
Charges
|
|
|
- |
|
|
|
3.9 |
|
|
|
- |
|
|
|
3.9 |
|
Cash
utilization
|
|
|
(9.2 |
) |
|
|
(3.9 |
) |
|
|
(0.1 |
) |
|
|
(13.2 |
) |
Non-cash
utilization and accrual adjustments
|
|
|
(0.4 |
) |
|
|
- |
|
|
|
- |
|
|
|
(0.4 |
) |
Accrual
as of March 31, 2008
|
|
$ |
10.7 |
|
|
$ |
- |
|
|
$ |
2.1 |
|
|
$ |
12.8 |
|
In the first quarter of 2008, we
incurred $3.9 million of charges related to the redeployment of assets to
support capacity utilization initiatives.
We expect a majority of the remaining
restructuring accrual to be paid in 2008 and the remainder to be paid through
2012.
AMERICAN
AXLE & MANUFACTURING HOLDINGS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
We state
our inventories at the lower of cost or market. In the first quarter
of 2008, we changed the method of accounting for our U.S. inventories from the
LIFO method to the FIFO method as discussed in Note 1. The cost of
worldwide inventories is determined using the FIFO method. We
classify indirect inventories, which include perishable tooling, machine repair
parts and other materials consumed in the manufacturing process but not
incorporated into our finished products, as raw materials. When we
determine that our gross inventories exceed usage requirements, or if
inventories become obsolete or otherwise not saleable, we record a provision for
such loss as a component of our inventory accounts.
Inventories
consist of the following:
|
|
March
31,
|
|
|
December
31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(in
millions)
|
|
|
|
|
|
|
|
|
Raw
materials and work-in-progress
|
|
$ |
230.9 |
|
|
$ |
230.5 |
|
Finished
goods
|
|
|
58.3 |
|
|
|
52.6 |
|
Gross
inventories
|
|
|
289.2 |
|
|
|
283.1 |
|
Other
inventory valuation reserves
|
|
|
(40.9 |
) |
|
|
(40.3 |
) |
Inventories,
net
|
|
$ |
248.3 |
|
|
$ |
242.8 |
|
5. LONG-TERM
DEBT
Long-term
debt consists of the following:
|
|
March
31,
|
|
|
December
31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(in
millions)
|
|
|
|
|
|
|
|
|
Revolving
Credit Facility
|
|
$ |
- |
|
|
$ |
- |
|
7.875%
Notes
|
|
|
300.0 |
|
|
|
300.0 |
|
5.25%
Notes, net of discount
|
|
|
249.8 |
|
|
|
249.8 |
|
2.00%
Convertible Notes
|
|
|
2.7 |
|
|
|
2.7 |
|
Term
Loan due 2012
|
|
|
250.0 |
|
|
|
250.0 |
|
Uncommitted
lines of credit
|
|
|
- |
|
|
|
- |
|
Foreign
credit facilities
|
|
|
52.9 |
|
|
|
46.7 |
|
Capital
lease obligations
|
|
|
8.7 |
|
|
|
8.9 |
|
Long-term
debt
|
|
$ |
864.1 |
|
|
$ |
858.1 |
|
|
|
|
|
|
|
|
|
|
The
Revolving Credit Facility provides up to $600.0 million of revolving bank
financing commitments through April 2010 and bears interest at rates based on
LIBOR or an alternate base rate, plus an applicable margin. At March
31, 2008, we had $572.3 million available under the
Revolving Credit Facility. This availability reflects a reduction of
$27.7 million for standby letters of credit issued against the
facility.
The
Revolving Credit Facility provides back-up liquidity for our foreign credit
facilities and uncommitted lines of credit. We intend to use the
availability of long-term financing under the Revolving Credit Facility to
refinance any current maturities related to such debt agreements that are
not otherwise refinanced on a long-term basis in their respective
markets. Accordingly, we have classified $42.6 million of such
amounts as long-term debt.
In the
first quarter of 2008, we had access to $60.0 million of uncommitted bank lines
of credit, all of which was available at March 31, 2008.
We
utilize local currency credit facilities to finance the operations of certain
foreign subsidiaries. At March 31, 2008, $52.9 million was
outstanding under these facilities and an additional $101.7 million was
available.
The
weighted-average interest rate of our long-term debt outstanding at March 31,
2008 was 7.6% and 7.8% as of December 31, 2007.
AMERICAN
AXLE & MANUFACTURING HOLDINGS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. EMPLOYEE
BENEFIT PLANS
The components of net periodic benefit
cost are as follows:
|
|
Pension
Benefits
|
|
|
Other Postretirement
Benefits
|
|
|
|
Three
months ended
|
|
|
Three
months ended
|
|
|
|
March
31,
|
|
|
March
31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
(in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service
cost
|
|
$ |
4.2 |
|
|
$ |
6.1 |
|
|
$ |
4.5 |
|
|
$ |
6.4 |
|
Interest
cost
|
|
|
9.4 |
|
|
|
8.6 |
|
|
|
7.4 |
|
|
|
6.8 |
|
Expected
asset return
|
|
|
(10.2 |
) |
|
|
(9.5 |
) |
|
|
- |
|
|
|
- |
|
Amortized
loss
|
|
|
0.2 |
|
|
|
0.4 |
|
|
|
- |
|
|
|
- |
|
Amortized
prior service cost
|
|
|
0.5 |
|
|
|
0.6 |
|
|
|
(0.8 |
) |
|
|
(0.8 |
) |
Special
termination benefits
|
|
|
- |
|
|
|
0.2 |
|
|
|
- |
|
|
|
- |
|
Net
periodic benefit cost
|
|
$ |
4.1 |
|
|
$ |
6.4 |
|
|
$ |
11.1 |
|
|
$ |
12.4 |
|
In the first quarter of 2008, we
recorded an adjustment related to the completion of our valuation for pension
and other postretirement benefit assets and obligations as of January 1,
2008. This adjustment resulted in a decrease in postretirement
benefits and other long-term liabilities of $11.8 million, an increase in
accumulated other comprehensive income of $7.4 million and a decrease in
deferred income taxes of $4.4 million.
We
adopted the measurement date provisions of FASB Statement No. 158, “Employers Accounting for Defined
Benefit Pension and Other Postretirement Plans,” as of January 1, 2007,
which requires companies to measure a plan’s assets and obligations that
determine its funded status as of the end of the fiscal year. As a
result of this adoption, we recorded a net transition adjustment of $12.0
million to the opening retained earnings balance related to the net periodic
benefit cost for the period between September 30, 2006 and January 1,
2007.
Our regulatory pension funding
requirements in 2008 are less than $5 million. We expect our cash
outlay for other postretirement benefit obligations in 2008 to be between $5
million and $10 million.
7.
PRODUCT WARRANTIES
The
following table provides a reconciliation of changes in the product warranty
liability as of March 31, 2008 (in millions):
Beginning
balance as of January 1, 2008
|
|
$
|
6.8
|
|
Accruals
|
|
0.1
|
|
Settlements
|
|
(0.2
|
)
|
Adjustment
to prior period accruals
|
|
(0.3
|
)
|
Ending
balance as of March 31, 2008
|
|
$
|
6.4
|
|
Income
tax expense (benefit) was a benefit of $21.9 million in the first quarter of
2008 as compared to an expense of $6.8 million in the first quarter of
2007. Our effective income tax rate was a benefit of 44.8% in the
first quarter of 2008 as compared to an expense of 30.0% in the first
quarter of 2007. The change in the tax rate in the first quarter of
2008 as compared to the first quarter of 2007 is primarily the result of
recognizing the deferred income tax benefit of current quarter losses in the
U.S. in the first quarter of 2008. The tax rate in the first quarter
of 2008 also reflects an increase in foreign source income, which carries a
lower overall effective tax rate than U.S. income. In addition, we incurred
$3.5 million of unfavorable tax adjustments in the first quarter of 2008 related
to a reduction of deferred tax assets as a result of change in the Mexican tax
laws and agreed upon IRS adjustments for the 2004 and 2005 tax year
audits.
In the first quarter of 2008, our liability for unrecognized tax benefits and
related interest and penalties increased by $0.6 million, from $33.0 million at
December 31, 2007 to $33.6 million at March 31, 2008. This reflects
an increase in unrecognized tax benefits related to current year tax
positions of $0.4
million and an increase in this liability related to prior year tax positions of
$1.4 million. This increase is partially offset by a $1.2 million decrease in
our liability for unrecognized tax benefits related to the reclassification from
this liability to income tax payable as a result of agreed upon IRS adjustments
for the 2004 and 2005 tax year audits.
9. STOCK-BASED
COMPENSATION
On March
14, 2008, we granted 0.7 million shares of restricted stock with a grant-date
fair value of $21.37. The unearned compensation related to this grant
will be expensed over the vesting period of three years.
In the
first quarter of 2008, we made cash payments of $2.0 million related to vested
restricted stock units.
AMERICAN
AXLE & MANUFACTURING HOLDINGS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. COMPREHENSIVE
INCOME (LOSS)
Comprehensive
income (loss) consists of the following:
|
|
Three
months ended
|
|
|
|
March
31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(in
millions)
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$ |
(27.0 |
) |
|
$ |
15.7 |
|
Defined
benefit plans, net of tax
|
|
|
7.4 |
|
|
|
0.3 |
|
Foreign
currency translation adjustments, net of tax
|
|
|
3.5 |
|
|
|
3.7 |
|
Loss
on derivatives, net of tax
|
|
|
(1.4 |
) |
|
|
(0.6 |
) |
Comprehensive
income (loss)
|
|
$ |
(17.5 |
) |
|
$ |
19.1 |
|
11. EARNINGS
(LOSS) PER SHARE (EPS)
The
following table sets forth the computation of our basic and diluted
EPS:
|
|
Three
months ended
|
|
|
|
March
31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(in
millions, except per share data)
|
|
Numerator
|
|
|
|
|
|
|
Net
income (loss)
|
|
$ |
(27.0 |
) |
|
$ |
15.7 |
|
|
|
|
|
|
|
|
|
|
Denominators
|
|
|
|
|
|
|
|
|
Basic
shares outstanding -
|
|
|
|
|
|
|
|
|
Weighted-average
shares outstanding
|
|
|
51.6 |
|
|
|
50.7 |
|
|
|
|
|
|
|
|
|
|
Effect
of dilutive securities
|
|
|
|
|
|
|
|
|
Dilutive
stock-based compensation
|
|
|
- |
|
|
|
1.4 |
|
|
|
|
|
|
|
|
|
|
Diluted
shares outstanding -
|
|
|
|
|
|
|
|
|
Adjusted
weighted-average shares after assumed conversions
|
|
|
51.6 |
|
|
|
52.1 |
|
Basic
EPS
|
|
$ |
(0.52 |
) |
|
$ |
0.31 |
|
Diluted
EPS
|
|
$ |
(0.52 |
) |
|
$ |
0.30 |
|
Basic and
diluted loss per share as of March 31, 2008 are the same because the effect of
1.5 million potentially dilutive shares would have been
antidilutive.
Certain
exercisable stock options were excluded in the computations of diluted EPS
because the exercise price of these options was greater than the average period
market prices. The number of stock options outstanding, which were
not included in the calculation of diluted EPS, was 4.4 million at March 31,
2008 and 4.6 million at March 31, 2007. The ranges of exercise prices
related to the excluded exercisable stock options were $23.73 - $40.83 at March
31, 2008 and 2007.
AMERICAN
AXLE & MANUFACTURING HOLDINGS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. SUPPLEMENTAL
GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
Holdings
has no significant assets other than its 100% ownership in AAM, Inc. and no
direct subsidiaries other than AAM, Inc. Holdings fully and
unconditionally guarantees the 5.25% Notes and 7.875% Notes, which are senior
unsecured obligations of AAM, Inc. The 2.00% Convertible Notes are
senior unsecured obligations of Holdings and are fully and unconditionally
guaranteed by AAM, Inc.
The
following Condensed Consolidating Financial Statements are included in lieu of
providing separate financial statements for Holdings and AAM, Inc. These
Condensed Consolidating Financial Statements are prepared under the equity
method of accounting whereby the investments in subsidiaries are recorded at
cost and adjusted for the parent’s share of the subsidiaries’ cumulative results
of operations, capital contributions and distributions, and other equity
changes.
Condensed
Consolidating Statements of Operations
Three
months ended March 31,
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
- |
|
|
$ |
289.7 |
|
|
$ |
297.9 |
|
|
$ |
- |
|
|
$ |
587.6 |
|
|
|
|
- |
|
|
|
14.0 |
|
|
|
16.0 |
|
|
|
(30.0 |
) |
|
|
- |
|
|
|
|
- |
|
|
|
303.7 |
|
|
|
313.9 |
|
|
|
(30.0 |
) |
|
|
587.6 |
|
|
|
|
- |
|
|
|
331.9 |
|
|
|
273.0 |
|
|
|
(30.0 |
) |
|
|
574.9 |
|
|
|
|
- |
|
|
|
(28.2 |
) |
|
|
40.9 |
|
|
|
- |
|
|
|
12.7 |
|
Selling,
general and administrative expenses
|
|
|
- |
|
|
|
49.0 |
|
|
|
0.4 |
|
|
|
- |
|
|
|
49.4 |
|
|
|
|
- |
|
|
|
(77.2 |
) |
|
|
40.5 |
|
|
|
- |
|
|
|
(36.7 |
) |
|
|
|
- |
|
|
|
(12.4 |
) |
|
|
(0.3 |
) |
|
|
- |
|
|
|
(12.7 |
) |
Other
income (expense), net
|
|
|
- |
|
|
|
(0.1 |
) |
|
|
0.6 |
|
|
|
- |
|
|
|
0.5 |
|
Income
(loss) before income taxes
|
|
|
- |
|
|
|
(89.7 |
) |
|
|
40.8 |
|
|
|
- |
|
|
|
(48.9 |
) |
Income
tax expense (benefit)
|
|
|
- |
|
|
|
(24.5 |
) |
|
|
2.6 |
|
|
|
- |
|
|
|
(21.9 |
) |
Earnings
(loss) from equity in subsidiaries
|
|
|
(27.0 |
) |
|
|
25.4 |
|
|
|
- |
|
|
|
1.6 |
|
|
|
- |
|
Net
income (loss) before royalties and dividends
|
|
|
(27.0 |
) |
|
|
(39.8 |
) |
|
|
38.2 |
|
|
|
1.6 |
|
|
|
(27.0 |
) |
|
|
|
- |
|
|
|
12.8 |
|
|
|
(12.8 |
) |
|
|
- |
|
|
|
- |
|
Net
income (loss) after royalties and dividends
|
|
$ |
(27.0 |
) |
|
$ |
(27.0 |
) |
|
$ |
25.4 |
|
|
$ |
1.6 |
|
|
$ |
(27.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
- |
|
|
$ |
565.1 |
|
|
$ |
237.1 |
|
|
$ |
- |
|
|
$ |
802.2 |
|
|
|
|
- |
|
|
|
9.8 |
|
|
|
28.0 |
|
|
|
(37.8 |
) |
|
|
- |
|
|
|
|
- |
|
|
|
574.9 |
|
|
|
265.1 |
|
|
|
(37.8 |
) |
|
|
802.2 |
|
|
|
|
- |
|
|
|
521.1 |
|
|
|
232.0 |
|
|
|
(36.2 |
) |
|
|
716.9 |
|
|
|
|
- |
|
|
|
53.8 |
|
|
|
33.1 |
|
|
|
(1.6 |
) |
|
|
85.3 |
|
Selling,
general and administrative expenses
|
|
|
- |
|
|
|
47.1 |
|
|
|
3.4 |
|
|
|
(1.6 |
) |
|
|
48.9 |
|
|
|
|
- |
|
|
|
6.7 |
|
|
|
29.7 |
|
|
|
- |
|
|
|
36.4 |
|
|
|
|
- |
|
|
|
(12.3 |
) |
|
|
(1.7 |
) |
|
|
- |
|
|
|
(14.0 |
) |
|
|
|
- |
|
|
|
0.1 |
|
|
|
- |
|
|
|
- |
|
|
|
0.1 |
|
Income
(loss) before income taxes
|
|
|
- |
|
|
|
(5.5 |
) |
|
|
28.0 |
|
|
|
- |
|
|
|
22.5 |
|
|
|
|
- |
|
|
|
5.0 |
|
|
|
1.8 |
|
|
|
- |
|
|
|
6.8 |
|
Earnings
from equity in subsidiaries
|
|
|
15.7 |
|
|
|
17.0 |
|
|
|
- |
|
|
|
(32.7 |
) |
|
|
- |
|
Net
income before royalties and dividends
|
|
|
15.7 |
|
|
|
6.5 |
|
|
|
26.2 |
|
|
|
(32.7 |
) |
|
|
15.7 |
|
|
|
|
- |
|
|
|
9.2 |
|
|
|
(9.2 |
) |
|
|
- |
|
|
|
- |
|
Net
income after royalties and dividends
|
|
$ |
15.7 |
|
|
$ |
15.7 |
|
|
$ |
17.0 |
|
|
$ |
(32.7 |
) |
|
$ |
15.7 |
|
AMERICAN
AXLE & MANUFACTURING HOLDINGS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Condensed
Consolidating Balance Sheets
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
- |
|
|
$ |
195.5 |
|
|
$ |
120.0 |
|
|
$ |
- |
|
|
$ |
315.5 |
|
|
|
|
- |
|
|
|
24.9 |
|
|
|
162.4 |
|
|
|
- |
|
|
|
187.3 |
|
|
|
|
- |
|
|
|
109.0 |
|
|
|
139.3 |
|
|
|
- |
|
|
|
248.3 |
|
|
|
|
- |
|
|
|
38.6 |
|
|
|
53.5 |
|
|
|
- |
|
|
|
92.1 |
|
|
|
|
- |
|
|
|
368.0 |
|
|
|
475.2 |
|
|
|
- |
|
|
|
843.2 |
|
Property,
plant and equipment, net
|
|
|
- |
|
|
|
938.4 |
|
|
|
740.4 |
|
|
|
- |
|
|
|
1,678.8 |
|
|
|
|
- |
|
|
|
- |
|
|
|
147.8 |
|
|
|
- |
|
|
|
147.8 |
|
Other
assets and deferred charges
|
|
|
- |
|
|
|
145.6 |
|
|
|
14.2 |
|
|
|
- |
|
|
|
159.8 |
|
Investment
in subsidiaries
|
|
|
1,176.9 |
|
|
|
792.5 |
|
|
|
- |
|
|
|
(1,969.4 |
) |
|
|
- |
|
|
|
$ |
1,176.9 |
|
|
$ |
2,244.5 |
|
|
$ |
1,377.6 |
|
|
$ |
(1,969.4 |
) |
|
$ |
2,829.6 |
|
Liabilities
and stockholders’ equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
- |
|
|
$ |
106.4 |
|
|
$ |
160.2 |
|
|
$ |
- |
|
|
$ |
266.6 |
|
|
|
|
- |
|
|
|
110.4 |
|
|
|
58.2 |
|
|
|
- |
|
|
|
168.6 |
|
Total
current liabilities
|
|
|
- |
|
|
|
216.8 |
|
|
|
218.4 |
|
|
|
- |
|
|
|
435.2 |
|
Intercompany
payable (receivable)
|
|
|
299.7 |
|
|
|
(517.8 |
) |
|
|
218.1 |
|
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
802.5 |
|
|
|
61.6 |
|
|
|
- |
|
|
|
864.1 |
|
Other
long-term liabilities
|
|
|
- |
|
|
|
566.1 |
|
|
|
87.0 |
|
|
|
- |
|
|
|
653.1 |
|
|
|
|
299.7 |
|
|
|
1,067.6 |
|
|
|
585.1 |
|
|
|
- |
|
|
|
1,952.4 |
|
|
|
|
877.2 |
|
|
|
1,176.9 |
|
|
|
792.5 |
|
|
|
(1,969.4 |
) |
|
|
877.2 |
|
Total
liabilities and stockholders’ equity
|
|
$ |
1,176.9 |
|
|
$ |
2,244.5 |
|
|
$ |
1,377.6 |
|
|
$ |
(1,969.4 |
) |
|
$ |
2,829.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
- |
|
|
$ |
223.5 |
|
|
$ |
120.1 |
|
|
$ |
- |
|
|
$ |
343.6 |
|
|
|
|
- |
|
|
|
141.3 |
|
|
|
122.7 |
|
|
|
- |
|
|
|
264.0 |
|
|
|
|
- |
|
|
|
123.4 |
|
|
|
119.4 |
|
|
|
- |
|
|
|
242.8 |
|
|
|
|
- |
|
|
|
23.3 |
|
|
|
69.6 |
|
|
|
- |
|
|
|
92.9 |
|
|
|
|
- |
|
|
|
511.5 |
|
|
|
431.8 |
|
|
|
- |
|
|
|
943.3 |
|
Property,
plant and equipment, net
|
|
|
- |
|
|
|
959.8 |
|
|
|
736.4 |
|
|
|
- |
|
|
|
1,696.2 |
|
|
|
|
- |
|
|
|
- |
|
|
|
147.8 |
|
|
|
- |
|
|
|
147.8 |
|
Other
assets and deferred charges
|
|
|
- |
|
|
|
121.8 |
|
|
|
14.3 |
|
|
|
- |
|
|
|
136.1 |
|
Investment
in subsidiaries
|
|
|
1,190.5 |
|
|
|
763.7 |
|
|
|
- |
|
|
|
(1,954.2 |
) |
|
|
- |
|
|
|
$ |
1,190.5 |
|
|
$ |
2,356.8 |
|
|
$ |
1,330.3 |
|
|
$ |
(1,954.2 |
) |
|
$ |
2,923.4 |
|
Liabilities
and stockholders’ equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
- |
|
|
$ |
174.9 |
|
|
$ |
138.9 |
|
|
$ |
- |
|
|
$ |
313.8 |
|
|
|
|
- |
|
|
|
144.3 |
|
|
|
53.5 |
|
|
|
- |
|
|
|
197.8 |
|
Total
current liabilities
|
|
|
- |
|
|
|
319.2 |
|
|
|
192.4 |
|
|
|
- |
|
|
|
511.6 |
|
Intercompany
payable (receivable)
|
|
|
288.4 |
|
|
|
(516.0 |
) |
|
|
227.6 |
|
|
|
- |
|
|
|
- |
|
|
|
|
2.7 |
|
|
|
799.8 |
|
|
|
55.6 |
|
|
|
- |
|
|
|
858.1 |
|
Other
long-term liabilities
|
|
|
- |
|
|
|
563.3 |
|
|
|
91.0 |
|
|
|
- |
|
|
|
654.3 |
|
|
|
|
291.1 |
|
|
|
1,166.3 |
|
|
|
566.6 |
|
|
|
- |
|
|
|
2,024.0 |
|
|
|
|
899.4 |
|
|
|
1,190.5 |
|
|
|
763.7 |
|
|
|
(1,954.2 |
) |
|
|
899.4 |
|
Total
liabilities and stockholders’ equity
|
|
$ |
1,190.5 |
|
|
$ |
2,356.8 |
|
|
$ |
1,330.3 |
|
|
$ |
(1,954.2 |
) |
|
$ |
2,923.4 |
|
AMERICAN
AXLE & MANUFACTURING HOLDINGS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Condensed
Consolidating Statements of Cash Flows
Three
months ended March 31,
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by (used in) operating
|
|
$ |
- |
|
|
$ |
(23.0 |
) |
|
$ |
31.2 |
|
|
$ |
- |
|
|
$ |
8.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases
of property, plant and equipment
|
|
|
- |
|
|
|
(15.7 |
) |
|
|
(17.6 |
) |
|
|
- |
|
|
|
(33.3 |
) |
Net
cash used in investing activities
|
|
|
- |
|
|
|
(15.7 |
) |
|
|
(17.6 |
) |
|
|
- |
|
|
|
(33.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
4.8 |
|
|
|
- |
|
|
|
4.8 |
|
|
|
|
8.1 |
|
|
|
10.4 |
|
|
|
(18.5 |
) |
|
|
- |
|
|
|
- |
|
Purchase
of treasury stock
|
|
|
(0.1 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(0.1 |
) |
Employee
stock option exercises,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
0.3 |
|
|
|
- |
|
|
|
- |
|
|
|
0.3 |
|
|
|
|
(8.0 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(8.0 |
) |
Net
cash provided by (used in) financing
|
|
|
- |
|
|
|
10.7 |
|
|
|
(13.7 |
) |
|
|
- |
|
|
|
(3.0 |
) |
Effect
of exchange rate changes on cash
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Net
decrease in cash and cash equivalents
|
|
|
- |
|
|
|
(28.0 |
) |
|
|
(0.1 |
) |
|
|
- |
|
|
|
(28.1 |
) |
Cash
and cash equivalents at beginning of period
|
|
|
- |
|
|
|
223.5 |
|
|
|
120.1 |
|
|
|
- |
|
|
|
343.6 |
|
Cash
and cash equivalents at end of period
|
|
$ |
- |
|
|
$ |
195.5 |
|
|
$ |
120.0 |
|
|
$ |
- |
|
|
$ |
315.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by (used in) operating
|
|
$ |
- |
|
|
$ |
(19.6 |
) |
|
$ |
29.4 |
|
|
$ |
- |
|
|
$ |
9.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases
of property, plant and equipment
|
|
|
- |
|
|
|
(11.1 |
) |
|
|
(31.4 |
) |
|
|
- |
|
|
|
(42.5 |
) |
Net
cash used in investing activities
|
|
|
- |
|
|
|
(11.1 |
) |
|
|
(31.4 |
) |
|
|
- |
|
|
|
(42.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
166.5 |
|
|
|
2.9 |
|
|
|
- |
|
|
|
169.4 |
|
|
|
|
7.8 |
|
|
|
0.3 |
|
|
|
(8.1 |
) |
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
(5.2 |
) |
|
|
- |
|
|
|
- |
|
|
|
(5.2 |
) |
Employee stock
option exercises,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
4.4 |
|
|
|
- |
|
|
|
- |
|
|
|
4.4 |
|
|
|
|
(7.8 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(7.8 |
) |
Net
cash provided by (used in) financing
|
|
|
- |
|
|
|
166.0 |
|
|
|
(5.2 |
) |
|
|
- |
|
|
|
160.8 |
|
Effect
of exchange rate changes on cash
|
|
|
- |
|
|
|
- |
|
|
|
0.3 |
|
|
|
- |
|
|
|
0.3 |
|
Net
increase (decrease) in cash and cash
|
|
|
- |
|
|
|
135.3 |
|
|
|
(6.9 |
) |
|
|
- |
|
|
|
128.4 |
|
Cash
and cash equivalents at beginning of period
|
|
|
- |
|
|
|
0.5 |
|
|
|
13.0 |
|
|
|
- |
|
|
|
13.5 |
|
Cash
and cash equivalents at end of period
|
|
$ |
- |
|
|
$ |
135.8 |
|
|
$ |
6.1 |
|
|
$ |
- |
|
|
$ |
141.9 |
|
This
management’s discussion and analysis (MD&A) should be read in conjunction
with the unaudited condensed consolidated financial statements and notes
appearing elsewhere in this Quarterly Report and our Annual Report on
Form 10-K for the year ended December 31, 2007.
Unless
the context otherwise requires, references to "we," "our," "us" or "AAM" shall
mean collectively (i) American Axle & Manufacturing Holdings, Inc.
(Holdings), a Delaware corporation, and (ii) American Axle & Manufacturing,
Inc. (AAM, Inc.), a Delaware corporation, and its direct and indirect
subsidiaries. Holdings has no subsidiaries other than AAM,
Inc.
COMPANY
OVERVIEW
We are a
Tier I supplier to the automotive industry. We manufacture, engineer,
design and validate driveline and drivetrain systems and related components and
chassis modules for trucks, sport utility vehicles (SUVs), passenger cars and
crossover utility vehicles. Driveline and drivetrain systems include
components that transfer power from the transmission and deliver it to the drive
wheels. Our driveline, drivetrain and related products include axles,
chassis modules, driveshafts, power transfer units, transfer cases, chassis and
steering components, driving heads, crankshafts, transmission parts and
metal-formed products.
We are
the principal supplier of driveline components to General Motors Corporation
(GM) for its rear-wheel drive (RWD) light trucks and SUVs manufactured in North
America, supplying substantially all of GM’s rear axle and front four-wheel
drive and all-wheel drive (4WD/AWD) axle requirements for these vehicle
platforms. Sales to GM were approximately 74% of our total net sales
in the first quarter of 2008 as compared to 80% for the first quarter of 2007
and 78% for the full year 2007.
We are
the sole-source supplier to GM for certain axles and other driveline products
for the life of each GM vehicle program covered by a Lifetime Program Contract
(LPC). Substantially all of our sales to GM are made pursuant to the
LPCs. The LPCs have terms equal to the lives of the relevant vehicle
programs or their respective derivatives, which typically run 6 to 10 years, and
require us to remain competitive with respect to technology, design and
quality. We have been successful in competing, and we will continue
to compete, for future GM business upon the expiration of the LPCs.
We are
also the principal supplier of driveline system products for the Chrysler
Group’s heavy-duty Dodge Ram full-size pickup trucks (Dodge Ram program) and its
derivatives. Sales to Chrysler LLC (Chrysler) were
approximately 12% of our total net sales in the first quarter of 2008 as
compared to 10% for the first quarter of 2007 and 12% for the full year
2007.
In
addition to GM and Chrysler, we supply driveline systems and other related
components to PACCAR Inc., Ford Motor Company (Ford), SsangYong Motor Company,
Harley-Davidson and other original equipment manufacturers (OEMs) and Tier I
supplier companies such as The Timken Company, Jatco Ltd., Koyo Machine
Industries Co., Ltd. and Hino Motors, Ltd. Our net sales to customers
other than GM were $152.2 million in the first quarter of 2008 as compared to
$160.0 million for the first quarter of 2007.
IMPACT
OF INTERNATIONAL UAW STRIKE
On February 25, 2008, the four-year
master labor agreement between AAM and the International United Automobile,
Aerospace and Agricultural Implement Workers of America (UAW) covering
approximately 3,650 associates at five facilities in Michigan and New York
expired. The International UAW called a strike at these facilities
upon expiration of this agreement. As of the date of this filing, the
strike remained in effect. The strike had a significant adverse
impact on the results of operations for the three months ended March 31, 2008,
as shown below (in millions):
|
|
|
|
Net
sales
|
|
$ |
132.6 |
|
Gross
profit
|
|
|
45.8 |
|
Net
loss
|
|
|
29.1 |
|
Although
it is not possible to predict the nature and timing of a resolution to
negotiations between AAM and the International UAW, it is likely that the
resolution will have a significant impact on our future results of operations,
financial position and liquidity. The impact of a resolution could
include payments related to the ratification of a new collective bargaining
agreement, incentives to accept reductions in base wages for associates
(buydowns), one-time termination benefits (buyouts and retirement incentives)
and future asset redeployments. The impact could also include
non-cash charges related to changes in pension and other postretirement
benefits, special termination benefits and asset impairments. Based
on the uncertainty of the nature and timing of a resolution, we are unable to
estimate the potential impact at this time.
RESULTS
OF OPERATIONS –– THREE MONTHS ENDED MARCH 31, 2008 AS COMPARED TO THREE MONTHS
ENDED MARCH 31, 2007
Net Sales Net sales were
$587.6 million in the first quarter of 2008 as compared to $802.2 million in the
first quarter of 2007. We estimate the adverse impact of the
International UAW strike on net sales in the first quarter of 2008 was $132.6
million.
As
compared to the first quarter of 2007, our sales in the first quarter of 2008
reflect a decrease of approximately 31% in production volumes for the major
full-size truck and SUV programs we currently support for GM and Chrysler and a
decrease of approximately 43% in products supporting GM’s mid-size light truck
and SUV programs. These decreases reflect the result of the strike as
well as a reduction in consumer demand for these programs.
Our
content-per-vehicle (as measured by the dollar value of our products supporting
GM’s North American light truck platforms and the Dodge Ram program) increased
5.9% to $1,326 in the first quarter of 2008 as compared to $1,252 in the first
quarter of 2007. The increase is due primarily to mix shifts favoring
full-size trucks and SUV programs. Our 4WD/AWD penetration rate was
65.9% in the first quarter of 2008 as compared to 63.9% in the first quarter of
2007.
Gross Profit Gross
profit was $12.7 million in the first quarter of 2008 as compared to $85.3
million in the first quarter of 2007. Gross margin was 2.2% in the
first quarter of 2008 as compared to 10.6% in the first quarter of
2007. The decrease in gross profit and gross margin in the first
quarter of 2008 reflects the impact of the International UAW strike, which is
estimated at $45.8 million. In addition, the decrease in gross profit
and gross margin also reflects the impact of lower sales.
In
the first quarter of 2008, we expensed $3.7 million of supplemental unemployment
benefits and other related benefit costs for associates on layoff as compared to
$5.4 million in the first quarter of 2007.
Gross
profit in the first quarter of 2008 includes $3.5 million in special charges and
other non-recurring operating costs, primarily related to the redeployment of
assets to support capacity utilization initiatives. Gross
profit in the first quarter of 2007 includes $2.9 million in special charges and
other non-recurring operating costs, primarily related to one-time termination
benefits for attrition programs.
Selling, General and Administrative
Expenses (SG&A) SG&A (including research and
development (R&D)) was $49.4 million or 8.5% of net sales in the first
quarter of 2008 as compared to $48.9 million or 6.1% of net sales in the first
quarter of 2007. R&D was $20.2
million in the first quarter of 2008 as compared to $20.1 million in the first
quarter of 2007.
Operating Income (Loss) Operating income
(loss) was a loss of $36.7 million in the first quarter of 2008 as compared to
income of $36.4 million in the first quarter of 2007. Operating
margin was negative 6.2% in the first quarter of 2008 as compared to 4.5% in the
first quarter of 2007. The decreases in operating income and
operating margin were due to the factors discussed in Gross Profit.
Net Interest Expense Net
interest expense was $12.7 million in the first quarter of 2008 as compared to
$14.0 million in the first quarter of 2007. The decrease in net
interest expense reflects lower average interest rates and higher average cash
balances in the first quarter of 2008 as compared to the first quarter of
2007. Partially offsetting the impact of these items on net interest
expense was higher average outstanding borrowings in the first quarter of 2008
compared to the first quarter of 2007.
Income Tax Expense (Benefit) Income tax
expense (benefit) was a benefit of $21.9 million in the first quarter of 2008 as
compared to an expense of $6.8 million in the first quarter of
2007. Our effective income tax rate was a benefit of 44.8% in the
first quarter of 2008 as compared to an expense of 30.0% in the first
quarter of 2007. The change in the tax rate in the first quarter of
2008 as compared to the first quarter of 2007 is primarily the result of
recognizing the deferred income tax benefit of current quarter losses in the
U.S. in the first quarter of 2008. The tax rate in the first quarter
of 2008 also reflects an increase in foreign source income, which carries a
lower overall effective tax rate than U.S. income. In
addition, we incurred $3.5 million of unfavorable tax adjustments in the first
quarter of 2008 related to a reduction of deferred tax assets as a result of
change in the Mexican tax laws and agreed upon IRS adjustments for the 2004 and
2005 tax year audits.
Net Income (Loss) and Earnings (Loss) Per Share (EPS) Net income
(loss) was a loss of $27.0 million in the first quarter of 2008 as compared to
income of $15.7 million in the first quarter of 2007. Diluted
earnings (loss) per share was a loss of $0.52 in the first quarter of 2008 as
compared to earnings of $0.30 in the first quarter of 2007. Net
income (loss) and EPS for the first quarters of 2008 and 2007 were primarily
impacted by the factors discussed in Gross Profit.
LIQUIDITY
AND CAPITAL RESOURCES
Our
primary liquidity needs are to fund capital expenditures, debt service
obligations, working capital investments and our quarterly cash dividend
program. We also need to fund ongoing attrition programs and may need
to fund additional restructuring actions, including potential events related to
a future collective bargaining agreement with the International
UAW. We believe that operating cash flow, available cash balances and
borrowings under our Revolving Credit Facility will be sufficient to meet these
needs.
Operating Activities Net cash
provided by operating activities was $8.2 million in the first quarter of 2008
as compared to $9.8 million in the first quarter of 2007.
In the
first quarter of 2008, we made cash payments of $13.2 million related to
restructuring actions as compared to $19.5 million in the first quarter of
2007.
Although
the impact of the International UAW strike did result in the reduction of our
accounts receivable and accounts payable balances, it did not have a significant
impact on the cash provided from operating activities in the first quarter of
2008. We expect the impact of the strike will adversely affect our
cash flow provided by operating activities in the second quarter of
2008.
Investing Activities Capital
expenditures were $33.3 million in the first quarter of 2008 as compared to
$42.5 million in the first quarter of 2007. We expect our capital
spending in 2008 to be in the range of $180 million to $200
million. These expenditures continue to support the future launch of
new vehicle programs within our business backlog and the expansion of our global
manufacturing footprint.
Financing Activities Net cash
used in financing activities was $3.0 million in the first quarter of 2008 as
compared to net cash provided by financing activities of $160.8 million in the
first quarter of 2007. Total long-term debt outstanding increased $6.0 million
in the first quarter of 2008 to $864.1 million as compared to $858.1 million at
year-end 2007.
In the first quarter of 2007, we
issued $300.0 million of 7.875% senior unsecured notes due 2017. Net
proceeds from these notes were used for general corporate purposes, including
payment of amounts outstanding under our Revolving Credit
Facility. We paid debt issuance costs of $5.2 million related to the
7.875% Notes in 2007.
At March
31, 2008, we had $572.3 million available under the Revolving Credit
Facility. This availability reflects a reduction of $27.7 million for
standby letters of credit issued against the facility. We also
utilize foreign credit facilities and uncommitted lines of credit to finance
working capital needs. At March 31, 2008, $52.9 million was
outstanding and $161.7 million was available under such agreements.
The
weighted-average interest rate of our long-term debt outstanding in the first
quarter of 2008 was 7.7% as compared to 8.2% for the year ended December 31,
2007.
CYCLICALITY
AND SEASONALITY
Our
operations are cyclical because they are directly related to worldwide
automotive production, which is itself cyclical and dependent on general
economic conditions and other factors. Our business is also
moderately seasonal as our major OEM customers historically have a two-week
shutdown of operations in July and an approximate one-week shutdown in
December. In addition, our OEM customers have historically incurred
lower production rates in the third quarter as model changes enter
production. Accordingly, our quarterly results may reflect these
trends.
LITIGATION
AND ENVIRONMENTAL MATTERS
We are
involved in various legal proceedings incidental to our
business. Although the outcome of these matters cannot be predicted
with certainty, we do not believe that any of these matters, individually or in
the aggregate, will have a material adverse effect on our financial condition,
results of operations or cash flows.
We are
subject to various federal, state, local and foreign environmental and
occupational safety and health laws, regulations and ordinances, including those
regulating air emissions, water discharge, waste management and environmental
cleanup. We will continue to closely monitor our environmental conditions to
ensure that we are in compliance with all laws, regulations and
ordinances. GM has agreed to indemnify and hold us harmless against
certain environmental conditions existing prior to our purchase of the assets
from GM on March 1, 1994. GM’s indemnification obligations terminated
on March 1, 2004 with respect to any new claims that we may have against
GM. We have made, and will continue to make, capital and other
expenditures (including recurring administrative costs) to comply with
environmental requirements. Such expenditures were not significant in
the first quarter of 2008, and we do not expect such expenditures to be
significant for the remainder of 2008.
EFFECT
OF NEW ACCOUNTING STANDARDS
On January 1, 2007, we adopted the
provisions of FASB Interpretation No. 48 (FIN 48), “Accounting for Uncertainty in
Income Taxes.” FIN 48 clarifies the accounting for uncertainty
in income taxes recognized in an enterprise’s financial statements in accordance
with FASB Statement No. 109, “Accounting for Income
Taxes.” This interpretation prescribes a “more likely than
not” recognition threshold and measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a
tax return. This interpretation also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure, and transition. We adopted FIN 48 on January 1,
2007 and the impact of adoption was not significant.
In September 2006, the FASB issued
Statement No. 158 (SFAS 158), “Employers Accounting for Defined
Benefit Pension and Other Postretirement Plans.” This
statement amended FASB Statement Nos. 87, 88, 106 and 132R. We
adopted the balance sheet recognition provisions of SFAS 158 on December 31,
2006. The effective date for plan assets and benefit obligations to
be measured as of the date of the fiscal year-end statement of financial
position is January 1, 2008. We elected to early adopt the
measurement date provisions on January 1, 2007. As a result, we
recorded a transition adjustment of $12.0 million in the first quarter of 2007
to the opening retained earnings balance related to the net periodic benefit
cost for the period between September 30, 2006 and January 1, 2007.
In September 2006, the FASB issued
Statement No. 157 (SFAS 157), “Fair Value Measurements.” This statement
clarifies the definition of fair value and establishes a fair value
hierarchy. SFAS 157, as originally issued, was effective for us on
January 1, 2008. In February 2008, the FASB issued FASB Staff
Position (FSP) FAS 157-b, which defers the effective date of SFAS 157 for
nonfinancial assets and nonfinancial liabilities, except for items that are
recognized or disclosed at fair value in an entity’s financial statements on a
recurring basis. The effective date for us under this FSP is January
1, 2009. As allowed by FSP FAS 157-b, we partially adopted SFAS 157
on January 1, 2008 and the impact of adoption was not significant. We
do not expect the impact of applying SFAS 157 to the remaining assets and
liabilities on January 1, 2009 to be material.
In February 2007, the FASB issued
Statement No. 159 (SFAS 159), “The Fair Value Option for Financial
Assets and Financial Liabilities.” This statement permits entities to
measure many financial instruments and certain other items at fair value that
are not currently required to be measured at fair value. SFAS 159 was
effective for us on January 1, 2008 and we did not elect to measure any
additional assets or liabilities at fair value.
In
December 2007, the FASB issued Statement No. 160 (SFAS 160), “Noncontrolling Interests in
Consolidated Financial Statements — An Amendment of ARB
No. 51.” SFAS 160 establishes new accounting
and reporting standards for the noncontrolling interest in a subsidiary and for
the deconsolidation of a subsidiary. SFAS 160 is effective for us on
January 1, 2009. We are currently assessing the impact of adopting this
statement.
MARKET
RISK
Our
business and financial results are affected by fluctuations in world financial
markets, including interest rates and currency exchange rates. Our
hedging policy has been developed to manage these risks to an acceptable level
based on management’s judgment of the appropriate trade-off between risk,
opportunity and cost. We do not hold financial instruments for
trading or speculative purposes.
Currency Exchange Risk From
time to time, we use foreign currency forward contracts to reduce the effects of
fluctuations in exchange rates, primarily relating to the Mexican Peso, Euro,
Pound Sterling, Brazilian Real and Canadian Dollar. At March 31,
2008, we had currency forward contracts with a notional amount of $38.5 million
outstanding.
Future
business operations and opportunities, including the expansion of our business
outside North America, may further increase the risk that cash flows resulting
from these activities may be adversely affected by changes in currency exchange
rates. If and when appropriate, we intend to manage these risks by
utilizing local currency funding of these expansions and various types of
foreign exchange contracts.
Interest Rate
Risk We are exposed to variable interest rates on certain
credit facilities. From time to time, we use interest rate hedging to
reduce the effects of fluctuations in market interest
rates. Generally, we designate interest rate swaps as effective cash
flow hedges of the related debt and reflect the net cost of such agreement as an
adjustment to interest expense over the lives of the debt
agreements. We have hedged a portion of our interest rate risk by
entering into an interest rate swap with a notional amount of $200.0
million. This notional amount reduces to $100.0 million in December
2008 and expires in April 2010. The interest rate swap converts
variable rate financing based on 3-month LIBOR into fixed U.S. dollar rates. The
pre-tax earnings and cash flow impact of a one-percentage-point increase in
interest rates (approximately 13% of our weighted-average interest rate at March
31, 2008) on our long-term debt outstanding at March 31, 2008 would be
approximately $1.0 million on an annualized basis.
Under the
direction of our Chief Executive Officer and Chief Financial Officer, we
evaluated our disclosure controls and procedures and internal control over
financial reporting and concluded that (1) our disclosure controls and
procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities
Exchange Act of 1934 (the “Exchange Act”)) were effective as of March 31, 2008,
and (2) no change in internal control over financial reporting occurred during
the quarter ended March 31, 2008 that has materially affected, or is reasonably
likely to materially affect, our internal control over financial
reporting.
In the
first quarter of 2008, we withheld and repurchased shares to pay taxes due upon
the vesting of certain individuals’ restricted stock. The
following table provides information about our equity security purchases during
the quarter ended March 31, 2008:
ISSUER
PURCHASES OF EQUITY SECURITIES
Period
|
|
Total
Number of Shares (Or Units) Purchased
|
|
|
Average
Price Paid per Share (or Unit)
|
|
|
Total
Number of Shares (or Units) Purchased as Part of Publicly Announced Plans
or Programs
|
|
|
Maximum
Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be
Purchased Under the Plans or Programs
|
|
January
2008
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
February
2008
|
|
|
314 |
|
|
$ |
20.51 |
|
|
|
- |
|
|
|
- |
|
March
2008
|
|
|
2,277 |
|
|
|
20.39 |
|
|
|
- |
|
|
|
- |
|
Total
|
|
|
2,591 |
|
|
$ |
20.39 |
|
|
|
- |
|
|
|
- |
|
|
Exhibits
required by Item 601 of Regulation S-K are listed in the Exhibit
Index.
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
AMERICAN
AXLE & MANUFACTURING HOLDINGS, INC.
(Registrant)
|
Date:
April 25, 2008
|
|
|
|
|
|
/s/ Michael
K. Simonte |
|
|
Michael
K. Simonte |
|
|
Group
Vice President - Finance & Chief Financial Officer |
|
|
(also
in the capacity of Chief Accounting Officer) |
|
|
|
|
Number
|
Description of
Exhibit_______________________
|
|
|
|
|
*18 |
Preferability
Letter from Independent Registered Public Accounting Firm |
|
|
|
|
*31.1
|
Certification
of Richard E. Dauch, Co-Founder, Chairman of the Board & Chief
Executive Officer Pursuant to Rule 13a-14(a) of the Securities Exchange
Act
|
|
|
|
|
|
|
|
|
*31.2
|
Certification
of Michael K. Simonte, Group Vice President – Finance &
Chief
Financial Officer Pursuant to Rule 13a-14(a) of the Securities Exchange
Act
|
|
|
|
|
|
|
|
*32
|
Certifications
of Richard E. Dauch, Co-Founder, Chairman of the Board & Chief
Executive Officer and Michael K. Simonte, Group Vice President – Finance
& Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
|
|
|
|
|
(All
other exhibits are not applicable.)