Business context and reporting period
American Axle & Manufacturing Holdings, Inc. (NYSE: AXL) filed this unaudited Form 10-Q for the quarter ended March 31, 2021. The filing describes a global automotive supplier with Driveline and Metal Forming segments. (The filing’s registrant is American Axle & Manufacturing Holdings, Inc.)
Key financial metrics
Amounts in millions, except per-share data and percentages. Comparisons are with Q1 2020 unless otherwise noted.
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Net sales | $1,425.1 | $1,343.5 |
| Gross profit / margin | $227.1 / 15.9% | $195.3 / 14.5% |
| Operating income (loss) / margin | $95.5 / 6.7% | $(445.4) / (33.2)% |
| Net income (loss) attributable to AAM | $38.6 | $(501.3) |
| Diluted EPS | $0.33 | $(4.45) |
| Operating cash flow | $179.1 | $139.4 |
| Capital expenditures | $39.6 | $69.7 |
| Segment Adjusted EBITDA (non-GAAP) | $262.9 | $213.3 |
At March 31, 2021, cash and cash equivalents were $601.2; total debt was $3,416.6, including $13.7 current debt and $3,360.9 long-term debt net of issuance costs. AAM reported over $1.5 billion of liquidity: approximately $601 million cash, $894 million available on its revolving facility, and $59 million available under foreign facilities. Current assets were $1,982.4 and current liabilities were $1,042.1. The weighted-average interest rate on long-term debt was 5.8% at quarter-end.
Material changes versus the prior comparable period
- Sales increased 6.1%, reflecting higher production volumes and approximately $44 million from metal-market pass-throughs and foreign-exchange translation, partly offset by an estimated $64 million impact from semiconductor-related production cuts.
- Q1 2020 sales had been reduced by an estimated $169 million due to COVID-19 production declines. The prior-year quarter also included a $510 million goodwill impairment; its absence was the principal reason operating results and net income swung to profit.
- Gross margin improved to 15.9% from 14.5%. Segment Adjusted EBITDA rose to $262.9 million from $213.3 million, with improvement in both segments.
- Operating cash flow increased to $179.1 million from $139.4 million. Cash rose to $601.2 million from $557.0 million at year-end 2020.
- Debt declined from $3,500.6 million at year-end to $3,416.6 million, following voluntary Q1 prepayments of $100 million on Term Loan B and $4.3 million on Term Loan A.
Outlook, commentary, risks and unusual items
- Management said Q1 operations had returned toward more normal production levels, but the semiconductor shortage may continue to reduce customer production; its ultimate sales and earnings impact was uncertain.
- 2021 expectations disclosed: restructuring costs of approximately $50–$65 million; interest expense of approximately $195–$205 million; capital spending of approximately 4.5% of sales; pension funding below $1 million; and other postretirement benefit cash payments, net of GM cost sharing, of approximately $17 million. No full-year revenue or EPS guidance is provided in the supplied filing text.
- AAM expects approximately $5 million of 2021 integration charges. A voluntary $88.8 million Term Loan B prepayment occurred in April 2021, after quarter-end.
- Restructuring and acquisition-related costs were $17.5 million in Q1. The company recognized a $2.6 million loss on sale of a joint-venture interest and $1.2 million net pre-tax cost related to the Malvern facility fire.
- Malvern fire insurance recovery receivable was $38.8 million at quarter-end. Production is being relocated, and the claim settlement could continue into 2022; final eligible costs and recovery amounts remain uncertain.
- One major customer announced plans to cease production in Brazil during 2021. Accelerated depreciation related to affected programs was approximately $11 million in Q1; management estimated approximately $32 million for full-year 2021.
- Customer concentration remains significant: GM represented approximately 37% of Q1 sales, Stellantis 19%, and Ford 12%. AAM also cited COVID-19, semiconductor and other supply constraints, raw-material and freight costs, customer production levels, labor, foreign exchange, and financing/covenant compliance as risks.
- AAM commenced a 20-year finance lease for its European headquarters and engineering center, recognizing approximately $49 million in right-of-use assets and lease liabilities. The filing reported effective disclosure controls at March 31, 2021 and no material change in previously disclosed risk factors.
Important facts for investors to verify
- Whether semiconductor supply constraints, including their effect on customer schedules, persist and materially alter production, sales, or margins.
- Actual 2021 restructuring, capital spending, and interest costs versus management’s stated expectations.
- The timing and amount of Malvern fire insurance recoveries, remaining relocation costs, and continuity of customer supply.
- The financial and operating effect of the announced Brazil production cessation, including the expected accelerated depreciation.
- Debt paydown, liquidity, and compliance with amended credit-facility covenants; also monitor the high dependence on GM, Stellantis, and Ford.