Investor Presentation
September 2020
Forward Looking Statements
This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward- looking statements involve certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied by these statements. These risks and uncertainties include uncertainty around the duration and effects of the COVID-19 pandemic, and include factors detailed in the reports we file with the SEC, including those described under "Risk Factors" in our most recent Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q. These forward-looking statements speak only as of the date of this communication. We expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.
It should also be noted that this presentation contains certain financial measures, including Adjusted EBITDA, Adjusted Earnings per Share, Adjusted Free Cash Flow, Net Leverage Ratio and Liquidity that are not required by, or presented in accordance with, accounting principles generally accepted in the United States, or GAAP. These measures are presented here to provide additional useful measurements to review our operations, provide transparency to investors and enable period-to-period comparability of financial performance. A description of non-GAAP financial measures that we use to evaluate our operations and financial performance, and reconciliation of these non-GAAP financial measures to the most directly comparable financial measures calculated and reported in accordance with GAAP, can be found in the appendix under "Reconciliation of Non-GAAP Measures".
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About AAM
2019 SALES
$6.5B
20,000
ASSOCIATES
As a leading, global tier 1 automotive supplier, AAM designs, engineers and manufactures driveline and metal forming technologies that are making the next generation of vehicles smarter, lighter, safer and more efficient
AAM delivers POWER that moves the world
through world-class quality, technology leadership
and operational excellence
Nearly
17 80
COUNTRIESLOCATIONS
Over
60
MANUFACTURING
FACILITIES
16
ENGINEERING CENTERS
3
Business Units and Market Leadership
DRIVELINE
- 2019 Sales - $4.6B
- A Global Leader in
- Full-sizepickup truck and SUV driveline systems
- AWD systems for crossover vehicles
- Damped gears, viscous dampers and rubber isolation pulleys
- Pioneer of disconnecting AWD Systems
- One of the leaders in hybrid and electric driveline solutions
METAL FORMING
- 2019 Sales - $1.8B
- Largest automotive forger in the world
- A Global Leader in
- Powdered metal connecting rods
- Differential gears
- Axle shafts
- Hypoid pinions
- Ring gears
- Transmission gears
- CVT pulleys
- Aluminum valve bodies
*Note: Market leadership based on company estimates as compared to other independent supplier., business unit sales before eliminations of intercompany sales of approximately $0.5 billion.
Growth Opportunities in Electrification
Building a Diverse and Scalable eDrive Business
Several new business
wins for eDrive
components
- Winning business across multiple regions and vehicle segments
- New program awards include electric commercial vehicle with a new customer and an electric pickup truck
- Launching several programs during 2020 - 2022
High performance eDrive
systems for Premium
European OEMs
- AWD Jaguar I-Pace Crossover launched in 2018
- Multiple variants of high- performance hybrid to launch in 2021-2022 with second premium European OEM
- Both programs generating larger content-per-vehicle (CPV) than traditional ICE drive units
Cost-competitive
value-oriented eDrives
for China market
- Launches in our Liuzhou AAM JV and Changshu Manufacturing facilities in 2020 / 2021
-
Serving FWD passenger cars - previously an under- represented market in
AAM's portfolio - Gaining momentum in the growing new energy vehicle market in China
Expect lifetime revenues for booked eDrive related business to be over $1 billion | 6 |
Electrification Growth Drivers for AAM
Successful | Partnerships |
providing new | |
products in market | |
business prospects | |
Scalable design
and product
portfolio
Active new and | Significant electric |
emerging business | powertrain |
opportunities | component offerings |
Expanding served
market and
increasing CPV
Developing
advanced next-
generation product
Participating in
electric truck
market
CPV - content per vehicle | 7 |
2Q 2020 Highlights and COVID-19 Update
2Q 2020 AAM Highlights
$515M
Quarterly
Sales
Launched First
China eDrive
Program at our
Liuzhou AAM JV
($52M)
Quarterly
Adj. EBITDA
Issued
$400 Million
of Unsecured
Senior Notes
> $1.6B
Quarter-end
Liquidity
Awarded GM
Supplier of the
Year for Fourth
Year in a Row
* For definitions and reconciliations of non-GAAP financial measures, please see the attached appendix. | 9 |
2Q 2020 Year-Over-Year Sales Walk
(in millions)
$1,704 | ||
$1,533 | ||
($171) | ||
$515 | ||
($947) | ($40) | ($31) |
2Q 2019 Sales | Sale of U.S. Casting | 2Q 2019 Sales Pro | COVID-19 related | Other Volume & Mix | Metal Market & Fx | 2Q 2020 Sales |
forma for Casting Sale |
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2Q 2020 Year-over-Year Adjusted EBITDA Walk
(in millions)
$266
$249
($17)
($299) | $22 | $6 |
($52) | ||
$2 | ||
($19) | ||
($7) | ($6) |
2Q 2019 | 2Q 2019 U.S. | 2Q 2019 Adj. | Lower sales | Other Volume & | Pricing | Metal Market & | COVID-19 start | Cost reduction | Lower Launch | 2Q 2020 |
Adjusted | Casting EBITDA | EBITDA Pro | related to | Mix | Fx | up costs | actions | Costs & | Adjusted | |
EBITDA | forma for U.S. | COVID-19 | Performance | EBITDA | ||||||
Casting Sale |
* For definitions and reconciliations of non-GAAP financial measures, please see the attached appendix. | 11 |
Adjusted Free Cash Flow and Credit Profile
Cash Flow and Debt Metrics | 2Q 2020 |
Adjusted Free Cash Flow | ($161.8) million |
Net Debt | $3.24 billion |
Net Leverage Ratio | 5.2x |
Liquidity | $1.66 billion |
* For definitions and reconciliations of non-GAAP financial measures, please see the attached appendix. | 12 |
2020 Breakeven Scenario & Capital Structure
Adjusted Free Cash Flow Breakeven Scenario
(in millions)
Adj. EBITDA to Adj. FCF Breakeven
Initial 2020 Adj. EBITDA Target (midpoint) | $ | 945 |
Impact of 25% to 30% lower sales (midpoint) | ≈ (500) | |
COVID-19start-up & supplier inefficiency costs | ≈ (40) | |
Cost reduction actions | ≈ 60 | |
$ | 465 | |
Capital Expenditures | ≈ (250) | |
Interest Payments | ≈ (205) | |
Tax Payments | ≈ (50) | |
Inventory and other working capital | ≈ 40 | |
Adjusted Free Cash Flow | ≈ BREAKEVEN | |
Initial Adj. FCF Target to Adj. FCF Breakeven
$300
Cash Preservation Actions
≈$65 | ≈ Breakeven | |||||||||||||||
≈$40 | ||||||||||||||||
≈$60 | ≈$75 | |||||||||||||||
≈($540) | ||||||||||||||||
2020 Initial | Impact of | Cost | Lower | Lower Tax | Working | |||||||||||
Adjusted | Lower Sales | Reduction | Capital | Payments | Capital | |||||||||||
Free Cash | & COVID-19 | Actions | Spending | and other | ||||||||||||
Flow Target | expenses |
* For definitions and reconciliations of non-GAAP financial measures, please see the attached appendix. As disclosed on May 8, 2020 | 14 |
Downside Protection Playbook
Sales Decline | 0% | |
Potential Actions | Duration Expected | AND / OR |
Short | ||
Reduce Variable Costs
- Direct Material (≈60% of COGS)
- Hourly Headcount
- Variable Overhead
Reduce Semi-fixed Costs
- Salaried headcount, merit and incentive compensation adjustments/deferrals
• Formal spending reduction programs (ex. travel)
- Align future R&D, project and capital expenses to lower sales levels
Select Recapacitating of Facilities
• Align capacity with customers
- Plant loading adjustments to optimize capacity
Structural Capacity and Overhead Reduction
- Global footprint consolidations
- Significant Salaried Reduction in Force programs
Note: This list includes examples for illustrative purposes and does not include all potential actions
25%+ | ||
Restructuring Costs | ||
Longer | Required? | |
No |
Limited
Moderate
Higher
AAM is analyzing its full playbook and in process with many actions across its global operations
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Debt Maturity Profile
(in millions)
Revolver
No significant debt maturities until 2024
16
Supplemental Data
Reconciliation of Non-GAAP Measures
In addition to the results reported in accordance with accounting principles generally accepted in the United States of America (GAAP) included within this presentation, AAM has provided certain information, which includes non-GAAP financial measures such as Adjusted EBITDA, Adjusted earnings per share and Adjusted free cash flow. Such information is reconciled to its closest GAAP measure in accordance with Securities and Exchange Commission rules and is included in the attached supplemental data.
Management believes that these non-GAAP financial measures are useful to management, investors, and banking institutions in their analysis of the Company's business and operating performance. Management also uses this information for operational planning and decision-making purposes.
Non-GAAP financial measures are not and should not be considered a substitute for any GAAP measure. Additionally, non-GAAP financial measures as presented by AAM may not be comparable to similarly titled measures reported by other companies.
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Supplemental Data
EBITDA and Adjusted EBITDA Reconciliation
($ in millions)
Three Months Ended | Six Months Ended | ||||||||||
June 30, | June 30, | ||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||
Net income (loss) | |||||||||||
$ | (213.2) | $ | 52.7 | $ | (714.4) | $ | 94.4 | ||||
Interest expense | 54.6 | 56.2 | 106.1 | 109.6 | |||||||
Income tax expense (benefit) | (43.9) | 6.0 | (40.6) | 3.0 | |||||||
Depreciation and amortization | 139.1 | 136.5 | 268.7 | 277.3 | |||||||
EBITDA | |||||||||||
(63.4) | 251.4 | (380.2) | 484.3 | ||||||||
Restructuring and acquisition-related costs | 11.3 | 12.2 | 28.9 | 24.3 | |||||||
Debt refinancing and redemption costs | - | 2.4 | 1.5 | 2.4 | |||||||
Impairment charge | - | - | 510.0 | - | |||||||
Loss on sale of business | - | - | 1.0 | - | |||||||
Adjusted EBITDA | |||||||||||
$ | (52.1) | $ | 266.0 | $ | 161.2 | $ | 511.0 | ||||
Sales | 515.3 | 1,704.3 | 1,858.8 | 3,423.5 | |||||||
as % of net sales | -10.1% | 15.6% | 8.7% | 14.9% |
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Supplemental Data
EBITDA and Adjusted EBITDA for the Trailing Twelve Months Ended June 30, 2020
($ in millions)
Trailing | ||||
Twelve | ||||
Quarter Ended | Months Ended | |||
September 30, | December 31, | March 31, | June 30, | June 30, |
2019 | 2019 | 2020 | 2020 | 2020 |
Net income (loss) | $ | (124.1) | $ |
Interest expense | 54.3 | ||
Income tax expense (benefit) | (40.4) | ||
Depreciation and amortization | 134.2 | ||
EBITDA | 24.0 | ||
Restructuring and acquisition-related costs | 11.7 | ||
Debt refinancing and redemption costs | 5.1 | ||
Impairment charges | 225.0 | ||
Pension settlement | - | ||
Loss on sale of business | - | ||
Non-recurring items: | |||
Gain on bargain purchase of business | - | ||
Other | - | ||
Adjusted EBITDA | $ | 265.8 | $ |
as % of net sales | 15.8% |
(454.4) | $ | (501.2) | $ | (213.2) | $ | (1,292.9) | ||
53.4 | 51.5 | 54.6 | 213.8 | |||||
(11.5) | 3.3 | (43.9) | (92.5) | |||||
125.4 | 129.6 | 139.1 | 528.3 | |||||
(287.1) | (316.8) | (63.4) | (643.3) | |||||
21.8 | 17.6 | 11.3 | 62.4 | |||||
0.9 | 1.5 | - | 7.5 | |||||
440.0 | 510.0 | - | 1,175.0 | |||||
9.8 | - | - | 9.8 | |||||
21.3 | 1.0 | - | 22.3 | |||||
(10.8) | - | - | (10.8) | |||||
(2.4) | - | - | (2.4) | |||||
193.5 | $ | 213.3 | $ | (52.1) | $ | 620.5 | ||
13.5% | 15.9% | -10.1% | 12.5% |
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Supplemental Data
Adjusted Earnings (Loss) Per Share Reconciliation
Three Months Ended | Six Months Ended | ||||||||||
June 30, | June 30, | ||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||
Diluted earnings (loss) per share | $ | (1.88) | $ | 0.45 | $ | (6.33) | $ | 0.81 | |||
Restructuring and acquisition-related costs | 0.10 | 0.11 | 0.26 | 0.21 | |||||||
Debt refinancing and redemption costs | - | 0.02 | 0.01 | 0.02 | |||||||
Impairment charge | - | - | 4.52 | - | |||||||
Loss on sale of business | - | - | 0.01 | - | |||||||
Non-recurring items: | |||||||||||
Adjustment to liability for unrecognized tax benefits | (0.06) | - | (0.06) | - | |||||||
Tax adjustments related to the CARES Act and Tax Cuts and Jobs Act | - | - | (0.07) | (0.08) | |||||||
Other | 0.08 | - | 0.14 | - | |||||||
Tax effect of adjustments | (0.03) | (0.03) | (0.07) | (0.05) | |||||||
Adjusted earnings (loss) per share | $ | (1.79) | $ | 0.55 | $ | (1.59) | $ | 0.91 |
Adjusted earnings (loss) per share are based on weighted average diluted shares outstanding of 113.1 million and 116.1 million for the three months ended on June 30, 2020 and 2019, respectively, and 112.9 million and 116.0 million for the six months ended on June 30, 2020 and 2019, respectively.
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Supplemental Data
Free Cash Flow and Adjusted Free Cash Flow Reconciliation
($ in millions)
Three Months Ended | Six Months Ended | ||||||||||
June 30, | June 30, | ||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||
Net cash provided by (used in) operating activities | $ | (142.5) | $ | 217.1 | $ | (3.1) | $ | 136.9 | |||
Less: Capital expenditures net of proceeds from sale of property, | |||||||||||
plant and equipment | (35.0) | (111.9) | (104.2) | (235.8) | |||||||
Free cash flow | (177.5) | 105.2 | (107.3) | (98.9) | |||||||
Cash payments for restructuring and acquisition-related costs | 15.7 | 14.1 | 28.8 | 29.7 | |||||||
Adjusted Free Cash Flow | $ | (161.8) | $ | 119.3 | $ | (78.5) | $ | (69.2) | |||
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Supplemental Data
Net Debt and Net Leverage Ratio | ||
($ in millions) | ||
June 30, | ||
2020 | ||
Current portion of long-term debt | $ | 573.7 |
Long-term debt, net | 3,561.4 | |
Total debt, net | 4,135.1 | |
Less: Cash and cash equivalents | 893.3 | |
Net debt at end of period | 3,241.8 | |
Adjusted LTM EBITDA | $ | 620.5 |
Net Leverage Ratio | 5.2 |
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Supplemental Data
Segment Financial Information | ||||||||
($ in millions) | ||||||||
Three Months Ended | Six Months Ended | |||||||
June 30, | June 30, | |||||||
2020 | 2019 | 2020 | 2019 | |||||
Segment Sales | ||||||||
Driveline | $ | 403.7 | $ | 1,181.5 | $ | 1,435.4 | $ | 2,347.8 |
Metal Forming | 150.3 | 484.2 | 572.6 | 967.5 | ||||
Casting | - | 179.7 | - | 373.4 | ||||
Total Sales | 554.0 | 1,845.4 | 2,008.0 | 3,688.7 | ||||
Intersegment Sales | (38.7) | (141.1) | (149.2) | (265.2) | ||||
Net External Sales | $ | 515.3 | $ | 1,704.3 | $ | 1,858.8 | $ | 3,423.5 |
Segment Adjusted EBITDA | ||||||||
Driveline | $ | (31.2) | $ | 162.1 | $ | 108.1 | $ | 304.9 |
Metal Forming | (20.9) | 86.5 | 53.1 | 170.9 | ||||
Casting | - | 17.4 | - | 35.2 | ||||
Total Segment Adjusted EBITDA | $ | (52.1) | $ | 266.0 | $ | 161.2 | $ | 511.0 |
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Definition of Non-GAAP Measures
EBITDA and Adjusted EBITDA
We define EBITDA to be earnings (loss) before interest expense, income taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA excluding the impact of restructuring and acquisition-related costs, debt refinancing and redemption costs, loss on sale of a business, impairment charges and non-recurring items. We believe that EBITDA and Adjusted EBITDA are meaningful measures of performance as they are 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 and Adjusted EBITDA, together with other measures, to measure our operating performance relative to other Tier 1 automotive suppliers. We also use Segment Adjusted EBITDA as the measure of earnings to assess the performance of each segment and determine the resources to be allocated to the segments. EBITDA and Adjusted 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 and Adjusted EBITDA differently.
Adjusted Earnings (Loss) Per Share
We define Adjusted earnings (loss) per share to be diluted earnings per share excluding the impact of restructuring and acquisition related costs, debt refinancing and redemption costs, loss on sale of a business, impairment charges, and non-recurring items, including the tax effect thereon. We believe Adjusted earnings (loss) per share is a meaningful measure as it is commonly utilized by management and investors in assessing ongoing financial performance that provides improved comparability between periods through the exclusion of certain items that management believes are not indicative of core operating performance and which may obscure underlying business results and trends. Other companies may calculate Adjusted earnings (loss) per share differently.
Free Cash Flow and Adjusted Free Cash Flow
We define free cash flow to be net cash provided by (used in) operating activities less capital expenditures net of proceeds from the sale of property, plant and equipment. Adjusted free cash flow is defined as free cash flow excluding the impact of cash payments for restructuring and acquisition-related costs. We believe free cash flow and Adjusted 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. Free cash flow and Adjusted free cash flow are also key metrics used in our calculation of incentive compensation. Other companies may calculate free cash flow and Adjusted free cash flow differently.
Net Debt and Net Leverage Ratio
We define net debt to be total debt, net less cash and cash equivalents. We define Net Leverage Ratio to be net debt divided by the trailing 12 months of Adjusted EBITDA. We believe that Net Leverage Ratio is a meaningful measure of financial condition as it is commonly used by management, investors and creditors to assess capital structure risk. Other companies may calculate Net Leverage Ratio differently.
Liquidity
We define Liquidity as cash on hand plus amounts available on our revolving credit facility and foreign credit facilities.
US SAAR
We define US SAAR as the seasonally adjusted annual rate of light vehicle sales in the United States.
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Disclaimer
AAM - American Axle & Manufacturing Holdings Inc. published this content on 15 September 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 15 September 2020 13:09:03 UTC