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Text: You can access this announcement on the Investor Relations page of our website, www.
aam.com, and through the PR Newswire services.
You can also find supplemental slides for this conference call on the Investor page of our website as well.
For additional information, we ask that you refer to our filings with the Securities and Exchange Commission.
Information regarding these non-GAAP measures as well as a reconciliation of these non-GAAP measures to GAAP financial information is available on our website.
With that, let me turn things over to AAM's chairman and CEO, David Dauch.
Joining me on the call today are Mike Simonte, AAM's president; and Chris May, AAM's vice president and chief financial officer.
Begin my comments today, I'll review the highlights of our fourth quarter and full year 2021 financial performance.
Next, I'll cover how we are pivoting to electrification while securing our core business.
Lastly, I'll discuss our 2022 financial outlook and our three-year new business backlog before turning things over to Chris.
After Chris covered the details of our financial results, we will open up the call for any questions that you may have.
AAM delivered solid operating results and cash flow performance in the fourth quarter and full year 2021 despite market dynamics and continuing challenges with the global supply chain.
Fortunately, our team did an outstanding job managing the areas under their control.
AAM's fourth quarter 2021 sales were $1.24 billion, and for the full year 2021, AAM's sales were approximately $5.2 billion.
In 2021, we experienced volume recovery from the impact of the 2020 global pandemic, but semiconductor supply chip shortages impacted AAM by over $600 million.
From a profitability perspective, AAM's adjusted EBITDA in the fourth quarter of 2021 was $164.6 million, or 13.3% of sales.
For the full year 2021, AAM's adjusted EBITDA was $833.3 million, or 16.2% of sales.
In 2021, we were negatively impacted by supply chain disruptions, namely semiconductors, and we received very little forewarning to changes in production schedules, which disrupted our operations and cost structure.
However, I'm proud to say the AAM team managed through these obstacles and delivered strong EBITDA margins and conversion for the full year.
AAM's adjusted earnings per share in the fourth quarter 2021 was a loss of $0.09 per share.
For the full year 2021, AAM's adjusted earnings per share was $0.93 per share, compared to $0.14 per share in 2020.
AAM continued to deliver strong free cash flow generation in 2021.
AAM's adjusted free cash for the fourth quarter of 2021 was $43.6 million.
And for the full year of 2021, AAM's adjusted free cash flow was $423 million.
This is a record adjusted free cash flow performance for AAM and I'm extremely proud of my team.
Our goal has been to strengthen the balance sheet, and last year we delivered.
We reduced our gross debt by approximately $350 million and a turn of leverage.
We will continue to work to improve our balance sheet strength going forward.
Chris will provide additional information regarding the details of our financial results in just a few minutes.
Let me talk about some key highlights for 2021 and the start of 2022, which you can see on Slides 4 and 5 of our slide deck.
We secured an agreement with REE on electric drive units.
We were named the sole supplier front and rear pickup axles for GM's Oshawa truck plant.
We won two new pace awards for our partnership and innovation for our electric drive line technology.
We secured Neo differential business for their electric vehicles.
We were selected to supply track rate differentials for the new GM Hummer EV program.
We were supplying PTUs for the all-new Ford Bronco Sport and Maverick programs.
We secured a traditional core axle business to fund our electrification future.
And we were selected as a GM Overdrive award winner and received multiple other customer awards for our performance, and we advanced our environmental sustainability and DEI initiatives.
And just most recently here in the beginning of the year, AAM was recognized as one of America's best large employers and top five in the automotive category.
Now let's talk about the first pillar of our two-pronged strategy, which is securing the core, which is fundamental to the transformation -- to our transformation to electrocution.
And earlier today, we announced that AAM has secured multiple next-generation full-sized truck axle programs with global OEM customers with lifetime sales valued at greater than $10 billion.
These replacement business awards are key developments as we leverage the cash flow generation to bring the future faster with our electrification technologies.
And on the electrification front, we continue to make significant progress with our three-in-one electric drive technology.
Recently, we displayed electric drive technology at CES.
The power, density, and compactness of our proprietary design was very well received.
The technology platform can accommodate the electric propulsion needs across all light-vehicle segments, from small cars to light commercial applications.
The flexibility and modularity provide legacy and start-up OEMs with many options from components, gearboxes, motors, power electronics to full systems, and EBM axles.
Our design was recently given the Altair Enlighten Award, the automotive industry's only award dedicated to lightweighting and sustainability.
Again, something we're very proud of.
That said, 2022 is an exciting year with multiple expectation launches on top of us, including our high performance e-Drive system for a premium luxury European OEM.
This system will be applied across multiple vehicle variants, proof that our technology is not only state-of-the-art but meet the high standards of this iconic manufacturer.
We will also be launching multiple electric propulsion components with several globally -- global OEMs this year.
In addition, we recently announced our investment in Autotech Ventures, which is an early stage venture capital firm.
This firm invests globally in mobility start-ups, and AAM is leveraging the relationship with Autotech to identify new opportunities with companies aimed at electrification and mobility.
The pivot to electrification is well underway, and we embrace this change to make the environment more sustainable.
Our engineering teams continue to develop game-changing electric mobility solutions and AAM is well positioned to support our customers with cutting-edge technology and a strong value proposition.
And on the ESG front, I'm also very happy to share that AAM was named to Newsweek's list of America's Most Responsible Companies.
We look forward to building on the positive momentum in 2022 as we advance our environmental sustainability and DEI initiatives.
Be on the lookout for our new sustainability report in April of this year.
At AAM, we believe in a strong ESG foundation and commitment are critical to running the business for long-term success.
AAM expects our gross new business backlog covering three-year period of 2022 through 2024 to be approximately $700 million.
We expect the launch case of this backlog to be $175 million in 2022, $325 million in 2023, and $200 million in 2024.
And as usual, our backlog factors in the impact of updated customer launch timing and our latest customer volume expectations and does not include the replacement business, only new and incremental business.
You can also see the backlog breakdown on Slide 6, with about 55% of this new business backlog related to global light trucks, including crossover vehicles, and most importantly, 35% stems from electrification.
This is more than double the 15% last year that we had.
Our approach to electrification from selling components and subsystems to full electric drive units is gaining traction in our book of business.
Currently, AAM is quoted on approximately $1.5 billion of revenue, but two-thirds of the quotes coming from electrification-based programs.
Now, let me turn to our financial outlook, which you can see on Slide 7.
And AAM is targeting sales in the range of $5.6 billion to $5.9 billion, adjusted EBITDA of approximately $800 million to $875 million, adjusted free cash flow approximately $300 million to $375 million.
And that assumes our capital spending in the range of 3.5% to 4% of sales.
And from a launch standpoint, we have 25 launches here in 2022, which should drive growth over the next several years.
And from an end market perspective, we forecast production at approximately 14.8 million to 15.2 million units for our primary North American market.
This represents about a 14% to 17% increase over last year's performance.
Going forward, an improving production environment stemming from strong demand and inventory replenishment will set up AAM nicely for the future.
In summary, 2021 was an unprecedented year filled with numerous challenges, but AAM delivered solid financial results.
In 2022 and beyond, we will continue to focus on securing our core business, generating strong free cash flow, strengthening our balance sheet, advancing our electrification portfolio, and position AAM for profitable growth.
I'm very excited about what lies ahead for AAM.
That concludes my remarks.
I will cover the financial details of our fourth quarter and full year 2021 results with you today.
I will also refer to the earnings slide deck as part of my prepared comments.
Before I begin to discuss the specific details, let me provide a macro overview of our fourth quarter.
On the surface, you will note our sales were down nearly $200 million on a year over year basis.
However, understanding the factors driving this change is crucial.
AAM's product sales were down more than $300 million on a year over year basis due to semiconductor shortages and overall market dynamics.
Partially offsetting the drop in product sales is a $100 million increase in an index-related metal market costs that we passed through to our customers at no margin.
As we talk through the details today, keep in mind that metal market pass-through has a significant adverse impact on the calculation of our margins.
However, when it's all said and done, you'll take away three key points about our fourth quarter results.
First, AAM sales and profits were impacted by lower industry volumes.
Two, AAM's margins were impacted not just by lower sales, but also by rising metal market pass-through recoveries.
And three, and most importantly, we continue to perform and optimize our business despite macro level headwinds.
So let's go ahead and get started with sales.
On Slide 10, it shows a walkdown of the fourth quarter 2020 sales to the fourth quarter of 2021 sales.
In the fourth quarter of 2021, AAM sales were $1.24 billion, compared to $1.44 billion in the fourth quarter of 2020.
We estimate that AAM was unfavorably impacted by the industrywide semiconductor shortage by approximately $137 million in the fourth quarter of 2021.
We note that high production volatility experienced in the third quarter continued well into October.
Although volatility improved some in November and December on a month-over-month basis, we still experienced shortly time production changes from our customers and reduced output.
Other volume and mix in pricing was negative by $200 million.
Overall, we experienced some lowered global light-truck volumes and lower overall component sales in several markets as customer schedules fluctuated and they rebalanced inventories versus a very different environment than we experienced in the prior year.
This brings us to the fourth quarter 2021 sales subtotal, which excludes recoveries for index-related metal market costs and foreign currency impacts.
We hedged this risk with our customers by passing through the majority, but not all of these index-related changes.
The middle portion of this column reflects these elevated pass-throughs on a year over year basis.
Metal markets and foreign currency accounted for an increase of approximately $94 million to our total sales in the quarter.
For the full year of 2021, AAM sales were $5.16 billion as compared to the $4.71 billion for the full year of 2020.
The primary drivers of the increase was a return of COVID-related volumes, an increase of over $300 million in index-related metal pass-throughs and foreign currency, partially offset by volumes lost due to semiconductor chip shortages that exceeded $600 million for 2021.
Now, let's move on to profitability.
Gross profit was $140 million, or 11.3% of sales in the fourth quarter of 2021, compared to $237 million, or 16.4% of sales in the fourth quarter of 2020.
Adjusted EBIDTA was $165 million in the fourth quarter of 2021 or 13.3% of sales.
This compares to $262 million in the fourth quarter of 2020, or 18.2% of sales.
You can see a year-over-year walkdown of adjusted EBITDA on Slide 11.
During the quarter, semiconductor sales disruptions and other volumes and mix had a negative impact of $39 million and $59 dollars, respectively.
This was partially offset by the benefits of AAM's continued productivity and restructuring programs and successful recoveries of some of the D&D costs.
As I just mentioned earlier in our sales discussion, we're facing year-over-year increases in index-related metal market costs.
The retained portion impacting this quarter plus FX was approximately $30 million.
You can see on our EBITDA walk the dynamic this has on our EBITDA margin calculations.
If you exclude this impact, our margins would have been meaningfully higher as noted on our walk.
For the full year of 2021, AAM's adjusted EBITDA was $833 million and adjusted EBITDA margin of 16.2% of sales.
Not I'll cover SG&A.
SG&A expense, including R&D in the fourth quarter of 2021, was $78 million, or 16.3% of sales.
This compares to $83 million in the fourth quarter of 2020, or 5.8% of sales.
AAM's R&D spending in the fourth quarter of 2021 was approximately $20 million, compared to $31 million in the fourth quarter of 2020.
The fourth quarter of 2021 includes higher ED&D recoveries as we prepare to launch multiple key new programs.
This activity drove a significant portion of the net year-over-year reduction in R&D.
As we head into 2022, we will continue to focus on controlling our SG&A costs while also capitalizing on the growing number of electrification opportunities that are before us.
And we would expect R&D to increase in 2022 by approximately $45 million to support these new multiple new opportunities.
This is in line with our previous R&D spend trajectory commentary.
Let's move on to interest, taxes, and pension.
Net interest expense was $42 million in the quarter of 2021, compared to $50 million in the fourth quarter of 2020.
We expect this favorable trend to continue in 2022 as we benefit from our debt reduction and refinancing actions.
In the fourth quarter of 2021, we recorded an income tax benefit of $2.3 million, compared to an expense of $13.9 million in the fourth quarter of 2020.
As we head into 2022, we expect our adjusted effective tax rate to be approximately 15% to 20%.
And lastly, during the fourth quarter, AAM completed the transfer of nearly $100 million of pension obligations to an insurance company.
This transaction was paid entirely through pension plan assets and continues our journey to strengthen AMM's balance sheet in this area.
As a result of this transaction, AAM recorded a non-cash pre-tax pension settlement charge of $42 million.
Taking all these aforementioned items into account, including the pension settlement charge, our GAAP net loss was $46 million or $0.41 per share in the fourth quarter of 2021, compared to an income of $36 million or $0.30 per share in the fourth quarter of 2020.
Adjusted lost per share for the fourth quarter of 2021 was $0.09, compared to $0.51 earnings per share in the fourth quarter of 2020.
For the full year of 2021, AAM earned adjusted earnings per share of $0.93 versus $0.14 in 2020.
Let's now move on to cash flow and the balance sheet.
Net cash provided by operating activities for the fourth quarter of 2021 was $102 million.
Capital expenditures, net of proceeds from the sale of property plant equipment in the fourth quarter, was $65 million.
And cash payments for restructuring and acquisition-related activity for the fourth quarter of 2021 were $9.8 million.
Reflecting the impact of these activities, AAM generated adjusted free cash flow of $44 million in the fourth quarter of 2021.
For the full year of 2021, AAM generated adjusted free cash flow of $423 million, compared to $311 million in the full year of 2020.
As David mentioned, this is a record for AAM.
As a team, we've been focused on free cash flow conversion, including tightly managing capex, and reducing restructuring charges.
Our results demonstrate success in these areas.
From a debt lover's perspective, we ended the year with net debt of $2.6 billion and LTM adjusted EBITDA of $833 million, calculating a net leverage ratio 3.1 times on December 31st.
This is a reduction in nearly a full term loan in 2021.
In 2021, we prepaid over $350 million of gross debt.
We utilized the free cash flow generating power of AAM, strengthened the balance sheet by reducing our debt and lowering our future interest payments.
AAM ended 2021 with total available liquidity of approximately $1.5 billion, consisting of available cash and borrowing capacity on AAM's global credit facilities.
And we continue to maintain a strong liquidity position and debt maturity profile.
Before we move into the Q&A, let me close my comments with some thoughts on our 2022 financial outlook.
In our earnings slide desk, we have included walks from 2021 actual results to our 2022 financial targets.
You can see those starting on Slide 13.
As for sales, we are targeting the range of $5.6 billion to $5.9 billion for 2022.
This sales target is based upon North American production estimates of 14.8 million to 15.2 million units, new business backlog launches of $175 million and attrition of approximately $100 million.
Given the market volatility, our sales guidance assumes a range of semiconductor recovery of approximately one-third at the low end and two-thirds at the high end versus what we experienced in 2021.
We continue to experience this issue in January and February of this year.
However, we do expect improvements throughout the year.
In addition, on a year over year basis, we expect a continued increase in index-related metal markets pass-throughs and foreign currency.
As noted on our fourth quarter walks, the 2021 exit rate on a year over year basis is the highest for the year.
From an EBITDA perspective, we're expecting adjusted EBITDA in the range of $800 million to $875 million.
As I would expect, you may have some questions in this area.
Let me provide some very direct comments on the key elements of our year-over-year EBITDA walk.
First, yes, we expect to convert our year-over-year product sales increases and expected contribution margins of approximately 25% to 30%, as shown on our year-over-year walk.
Two, yes, we intend to invest in our future through more in R&D as we continue to have growth opportunities with a variety of customers and products.
And yes, we are experiencing inflation.
By way of perspective, this net amount reflected on our walk represents only slightly more than 1% of our annual purchase component buy.
And yes, lastly, we expect AAM to continue to deliver operational productivity to mitigate some of these costs, as well as offset core cost pressures we are experiencing inside of our own operations.
You can see continued year-over-year performance on our walk of nearly $35 million.
From an adjusted free cash flow perspective, we are targeting approximately $300 million to $375 million in 2022.
And the main factors driving our cash flow change are as follows: we have slightly higher capital expenditures as we are coming upon some key launches.
However, our capex to sales ratio is still very low by our historical measures as we are targeting capex as a percent of sales of approximately 3.5% to 4%.
We also expect higher taxes and we would expect working capital outflows as our sales and related activity are increasing year over year.
And lastly, we estimate our restructuring payments to be in the range of $20 million to $30 million for 2022.
This is a year-over-year reduction by nearly half of our cash restructuring payments from the prior year.
We expect to use free cash flow generated in 2022 to continue to reduce leverage and further solidify our positional expectation and take advantage of select market opportunities to support growth.
So in conclusion, the tenets of our business approach are already yielding results.
As David mentioned, we've secured significant new awards with our legacy business with strong free cash flow potential.
Our new three-in-one electric drive platform and components are driving global interest, and as such, our backlog of electrification is now at 35%.
And we generated strong free cash flow, a company best in 2021.
And we look to generate solid free cash flow in 2022 while ramping up new business launches to drive growth.
We're looking forward to a great year for AAM and building value for all our stakeholders.

user
compname reports q4 adjusted loss per share $0.09.
q4 adjusted loss per share $0.09.
q4 loss per share $0.41.
q4 sales $1.24 billion.
for 2022 targeting adjusted ebitda in range of $800 - $875 million.
for 2022 targeting sales in range of $5.6 - $5.9 billion.
for 2022 north american light vehicle production of approximately 14.8 - 15.2 million units.
targeting adjusted ebitda in range of $800 million - $875 million for 2022.
american axle & manufacturing - gross new & incremental business backlog launching from 2022 - 2024 estimated at about $700 million in future annual sales.
expects launch cadence of three-year backlog to be approximately $175 million in 2022.

assistant