In addition to the results reported in accordance with accounting principles generally accepted in the United States (“GAAP”) included throughout this
presentation, the Company has provided information regarding “income before interest, other expense and income taxes,” “income before interest, other
expense, income taxes, restructuring costs and other special items, excluding the divested Interior business” (core operating earnings), “pretax income
before restructuring costs and other special items” and “free cash flow” (each, a non-GAAP financial measure). Other expense includes, among other
things, non-income related taxes, foreign exchange gains and losses, discounts and expenses associated with the Company’s asset-backed securitization
and factoring facilities, minority interests in consolidated subsidiaries, equity in net income of affiliates and gains and losses on the sale of assets. Free
cash flow represents net cash provided by operating activities before the net change in sold accounts receivable, less capital expenditures. The Company
believes it is appropriate to exclude the net change in sold accounts receivable in the calculation of free cash flow since the sale of receivables may be
viewed as a substitute for borrowing activity.
Management believes the non-GAAP financial measures used in this presentation are useful to both management and investors in their analysis of the
Company’s financial position and results of operations. In particular, management believes that income before interest, other expense and income taxes,
core operating earnings and pretax income before restructuring costs and other special items are useful measures in assessing the Company’s financial
performance by excluding certain items (including those items that are included in other expense) that are not indicative of the Company's core operating
earnings or that may obscure trends useful in evaluating the Company’s continuing operating activities. Management also believes that these measures
are useful to both management and investors in their analysis of the Company's results of operations and provide improved comparability between fiscal
periods. Management believes that free cash flow is useful to both management and investors in their analysis of the Company’s ability to service and
repay its debt. Further, management uses these non-GAAP financial measures for planning and forecasting in future periods.
Income before interest, other expense and income taxes, core operating earnings, pretax income before restructuring costs and other special items and
free cash flow should not be considered in isolation or as a substitute for pretax income, net income, cash provided by operating activities or other income
statement or cash flow statement data prepared in accordance with GAAP or as a measure of profitability or liquidity. In addition, the calculation of free
cash flow does not reflect cash used to service debt and therefore, does not reflect funds available for investment or other discretionary uses. Also, these
non-GAAP financial measures, as determined and presented by the Company, may not be comparable to related or similarly titled measures reported by
other companies.
Set forth on the following slides are reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated
and presented in accordance with GAAP. Given the inherent uncertainty regarding special items, other expense and the net change in sold accounts
receivable in any future period, a reconciliation of forward-looking financial measures to the most directly comparable financial measures calculated and
presented in accordance with GAAP is not feasible. The magnitude of these items, however, may be significant.
Non-GAAP Financial Information
28
Non-GAAP Financial Information
Core Operating Earnings
Three Months
(in millions)
Q1 2008
Q1 2007
Pretax income
$ 109.5
$ 82.3
Divestiture of Interior business
-
25.6
Interest expense
47.4
51.5
Other expense, net *
6.0
25.0
Income before interest, other expense and income taxes
$ 162.9
$ 184.4
Restructuring costs and other special items -
Costs related to restructuring actions
23.6
15.8
Additional costs related to Interior divestiture (COS and SG&A)
-
8.2
Costs related to merger transaction
-
9.4
U.S. salaried pension plan curtailment gain
-
(36.4)
Less: Interior business
-
(11.2)
Income before interest, other expense, income taxes,
restructuring costs and other special items, excluding the
divested Interior business
$ 186.5
$ 170.2
(core operating earnings)
* Includes minority interests in consolidated subsidiaries and equity in net income of affiliates.
29
Non-GAAP Financial Information
Segment Earnings Reconciliation
Three Months
(in millions)
Q1 2008
Q1 2007
Seating
$ 183.3
$ 197.1
Electrical and electronic
35.3
17.5
Interior
-
8.8
Segment earnings
218.6
223.4
Corporate and geographic headquarters and elimination of
intercompany activity
(55.7)
(39.0)
Income before interest, other expense and
income taxes
$ 162.9
$ 184.4
Divestiture of Interior business
-
25.6
Interest expense
47.4
51.5
Other expense, net
6.0
25.0
Pretax income
$ 109.5
$ 82.3
30
Non-GAAP Financial Information
Adjusted Segment Earnings
Three Months Q1 2008
Three Months Q1 2007
Electrical and
Electrical and
(in millions)
Seating
Electronic
Seating
Electronic
Sales
3,036.1
$
821.5
$
2,994.2
$
788.7
$
Segment earnings
183.3
$
35.3
$
197.1
$
17.5
$
Costs related to restructuring actions
13.6
9.5
(4.6)
20.0
Adjusted segment earnings
196.9
$
44.8
$
192.5
$
37.5
$
31
Non-GAAP Financial Information
Cash from Operations and Free Cash Flow
Three Months
(in millions)
Q1 2008
Net cash provided by operating activities
125.8
$
Net change in sold accounts receivable
(111.7)
Net cash provided by operating activities before net
change in sold accounts receivable
(cash from operations)
14.1
Capital expenditures
(45.5)
Free cash flow
(31.4)
$
32
Forward-Looking Statements
This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of
1995, including statements regarding anticipated financial results and liquidity. Actual results may differ materially from
anticipated results as a result of certain risks and uncertainties, including but not limited to, general economic conditions in
the markets in which the Company operates, including changes in interest rates or currency exchange rates, the financial
condition of the Company’s customers or suppliers, fluctuations in the production of vehicles for which the Company is a
supplier, changes in the Company’s current vehicle production estimates, the loss of business with respect to, or the lack
of commercial success of, a vehicle model for which the Company is a significant supplier, disruptions in the relationships
with the Company’s suppliers, labor disputes involving the Company or its significant customers or suppliers or that
otherwise affect the Company, the outcome and duration of the American Axle strike, the Company's ability to achieve
cost reductions that offset or exceed customer-mandated selling price reductions, the outcome of customer productivity
negotiations, the impact and timing of program launch costs, the costs, timing and success of restructuring actions,
increases in the Company's warranty or product liability costs, risks associated with conducting business in foreign
countries, competitive conditions impacting the Company's key customers and suppliers, the cost and availability of raw
materials and energy, the Company's ability to mitigate any increases in raw material, energy and commodity costs, the
outcome of legal or regulatory proceedings to which the Company is or may become a party, unanticipated changes in
cash flow, including the Company’s ability to align its vendor payment terms with those of its customers and other risks
described from time to time in the Company's Securities and Exchange Commission filings. In particular, the Company’s
financial outlook for 2008 is based on several factors, including the Company’s current vehicle production and raw material
pricing assumptions. The Company’s actual financial results could differ materially as a result of significant changes
in these factors.
The forward-looking statements in this presentation are made as of the date hereof, and the Company does not assume
any obligation to update, amend or clarify them to reflect events, new information or circumstances occurring after the
date hereof.
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