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, 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 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.
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 (loss), net income (loss), 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
29
Non-GAAP Financial Information
Core Operating Earnings
(in millions)
2007
2006
2005
Pretax income (loss)
$ 331.4
$ (655.5)
$ (1,187.2)
Divestiture of Interior business
10.7
636.0
-
Interest expense
199.2
209.8
183.2
Other expense, net *
32.5
87.8
96.6
Income (loss) before interest, other
expense and income taxes
$ 573.8
$ 278.1
$ (907.4)
Restructuring costs and other special items -
Costs related to interior divestiture (COS and SG&A)
10.0
-
-
Costs related to restructuring actions
181.8
105.6
106.3
Costs related to merger transaction
34.9
-
-
U.S. salaried pension plan curtailment gain
(36.4)
-
-
Goodwill and fixed asset impairment charges
-
12.9
1,095.1
Litigation charges
-
-
30.5
Less: Interior business
(15.6)
161.2
76.5
Income before interest, other expense,
income taxes, restructuring costs and other
special items, excluding the divested
Interior business
$ 748.5
$ 557.8
$ 401.0
(core operating earnings)
* Includes minority interests in consolidated subsidiaries and equity in net income of affiliates.
30
Non-GAAP Financial Information
Segment Earnings Reconciliation
(in millions)
2007
2006
2005
Seating
$ 758.7
$ 604.0
$ 323.3
Electrical and electronic
40.8
102.5
180.0
Interior
8.2
(183.8)
(191.1)
Segment earnings
807.7
522.7
312.2
Corporate and geographic
headquarters and elimination of
intercompany activity
(233.9)
(241.7)
(206.8)
Income before goodwill impairment
charges, divestiture of Interior
business, interest, other expense
and income taxes
$ 573.8
$ 281.0
$ 105.4
Goodwill impairment charges
-
2.9
1,012.8
Divestiture of Interior business
10.7
636.0
-
Interest expense
199.2
209.8
183.2
Other expense, net
32.5
87.8
96.6
Pretax income (loss)
$ 331.4
$ (655.5)
$ (1,187.2)
31
Non-GAAP Financial Information
Adjusted Segment Earnings
2007
2006
2005
Electrical and
Electrical and
Electrical and
Seating
Electronic
Seating
Electronic
Seating
Electronic
Sales
12,206.1
$
3,100.0
$
11,624.8
$
2,996.9
$
11,035.0
$
2,956.6
$
Segment earnings
758.7
$
40.8
$
604.0
$
102.5
$
323.3
$
180.0
$
Costs related to restructuring actions
91.6
70.2
41.7
44.8
33.0
39.0
Litigation charges
-
-
-
-
30.5
-
Adjusted segment earnings
850.3
$
111.0
$
645.7
$
147.3
$
386.8
$
219.0
$
32
Non-GAAP Financial Information
Cash from Operations and Free Cash Flow
(in millions)
2007
2006
2005
2004
2003
2002
2001
Net cash provided by operating activities
466.9
$
285.3
$
560.8
$
675.9
$
586.3
$
545.1
$
829.8
$
Net change in sold accounts receivable
168.9
178.0
(411.1)
70.4
298.1
122.2
(245.0)
Net cash provided by operating
activities before net change in
sold accounts receivable
(cash from operations)
635.8
463.3
149.7
746.3
884.4
667.3
584.8
Capital expenditures
(202.2)
(347.6)
(568.4)
(429.0)
(375.6)
(272.6)
(267.0)
Free cash flow
433.6
$
115.7
$
(418.7)
$
317.3
$
508.8
$
394.7
$
317.8
$
33
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, changes in the Company’s current vehicle production estimates,
fluctuations in the production of vehicles for which the Company is a supplier, 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, the Company’s ability to
access capital markets on commercially reasonable terms 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.
34
