<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
X EXCHANGE ACT OF 1934
------
For the quarterly period ended March 31, 1999
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
------
For the transition period from to
---- ----
Commission file number 1-14303
American Axle & Manufacturing Holdings, Inc.
--------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 36-3161171
- ------------------------------- -----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1840 Holbrook Avenue, Detroit, Michigan 48212-3488
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(313) 974-2000
-------------------------------
(Registrant's telephone number,
including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
The number of shares of the registrant's Common Stock, $.01 par value,
outstanding as of April 30, 1999, the latest practicable date, was 39,465,097
shares.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
---- ----
(UNAUDITED)
ASSETS (IN THOUSANDS)
<S> <C> <C>
Current assets:
Cash and equivalents $ 167,847 $ 4,547
Accounts receivable, net 192,560 123,787
Inventories 115,689 137,066
Prepaid expenses and other 7,249 14,524
Deferred income taxes 14,648 14,093
----------- -----------
Total current assets 497,993 294,017
Property, plant and equipment, net 806,278 829,301
Deferred income taxes 55,729 62,194
Other assets and deferred charges 51,170 40,720
----------- -----------
TOTAL ASSETS $ 1,411,170 $ 1,226,232
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 391,802 $ 362,886
Long-term debt and capital lease obligations 706,872 693,368
Postretirement benefits and other long-term liabilities 135,933 129,510
----------- -----------
TOTAL LIABILITIES 1,234,607 1,185,764
----------- -----------
Stockholders' equity:
Common stock, par value $.01 per share 395 1
Paid-in capital 199,780 92,527
Accumulated deficit (22,512) (51,467)
Cumulative translation adjustment (1,100) (593)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 176,563 40,468
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,411,170 $ 1,226,232
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 3
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AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
---------------------------
1999 1998
---- ----
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Net Sales $ 697,671 $ 583,285
Cost of goods sold 605,620 521,496
------------ ------------
Gross profit 92,051 61,789
Selling, general and administrative expenses 33,894 25,482
------------ ------------
Operating income 58,157 36,307
Net interest expense (12,014) (9,749)
Other (expense) income, net (183) 333
------------ ------------
Income before income taxes 45,960 26,891
Income taxes 17,005 9,968
------------ ------------
Net income $ 28,955 $ 16,923
============ ============
Basic earnings per share $ 0.78 $ 0.52
============ ============
Diluted earnings per share $ 0.61 $ 0.39
============ ============
Average shares outstanding:
Basic earnings per share 36,891,039 32,391,409
============ ============
Diluted earnings per share 47,438,870 43,204,158
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 4
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AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1999 1998
---- ----
(IN THOUSANDS)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 28,955 $ 16,923
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 21,693 14,703
Deferred income taxes 5,910 8,769
Pensions and other postretirement benefits, net of contributions 10,776 (7,661)
Loss on disposal of equipment 167 116
Changes in operating assets & liabilities:
Accounts receivable (69,124) 51,278
Inventories 21,050 (571)
Current liabilities 24,870 (3,596)
Other assets and liabilities 5,221 (3,499)
--------- --------
Net cash provided by operating activities 49,518 76,462
--------- --------
INVESTING ACTIVITIES
Purchases of property and equipment, net (47,754) (66,623)
Proceeds from sale-leaseback of equipment 49,000 --
--------- --------
Net cash provided (used) by investing activities 1,246 (66,623)
--------- --------
FINANCING ACTIVITIES
Payments on Revolving Credit and Receivables facilities, net (286,000) (24,000)
Proceeds from issuance of long-term debt and capital lease obligations, net 300,809 --
Payments on long-term debt (491) (80)
Debt issuance costs (9,426) --
Proceeds from issuance of common stock, net 107,647 302
--------- --------
Net cash provided (used) by financing activities 112,539 (23,778)
Effect of exchange rate changes on cash (3) --
--------- --------
Net increase(decrease) in cash and equivalents 163,300 (13,939)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 4,547 17,285
--------- --------
CASH AND EQUIVALENTS AT END OF PERIOD $ 167,847 $ 3,346
========= ========
</TABLE>
See accompanying notes to condensed consolidated financial statements
<PAGE> 5
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AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
1. ORGANIZATION AND BASIS OF PRESENTATION
Organization
American Axle & Manufacturing Holdings, Inc. ("Holdings" or the "Company")
is the survivor of a migratory merger with American Axle & Manufacturing of
Michigan, Inc. (the "predecessor company"). Pursuant to this merger, which
was effected in January 1999, each share of the predecessor company's
common stock was converted into 3,945 shares of Holdings' common stock. All
share and per share amounts have been adjusted to reflect this conversion.
In February 1999, Holdings completed an initial public offering and issued
7 million shares of its common stock. The net proceeds of the offering,
after deduction of associated expenses, approximated $108 million.
Basis of Presentation
The accompanying unaudited interim condensed consolidated financial
statements contain all adjustments, consisting of normal recurring
adjustments, which are, in the opinion of Holdings' management, necessary
to present fairly the condensed consolidated financial position of the
Company as of March 31, 1999, and its condensed consolidated results of
operations and cash flows for the three months ended March 31, 1999 and
1998, respectively. Results of operations for the periods presented are not
necessarily indicative of the results for the full fiscal year.
The balance sheet at December 31, 1998 has been derived from the audited
consolidated financial statements at that date but does not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. For further information,
refer to the audited consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1998.
The Company operates in one reportable segment, the design, engineering and
manufacture of driveline systems and chassis systems (including forged
products) for trucks, buses, sport utility vehicles, and passenger cars.
<PAGE> 6
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AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999
2. AMERICAN AXLE & MANUFACTURING, INC.
Holdings has no material assets, liabilities or operations other than those
that result from its ownership of 100% of the outstanding common stock of
American Axle & Manufacturing, Inc. ("AAM Inc."). The following is a
summary of the consolidated assets and liabilities of AAM Inc. and its
subsidiaries and their consolidated results of operations:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
---------------------------------------------
(In thousands)
<S> <C> <C>
Assets:
Current assets $ 497,993 $ 294,017
Noncurrent assets 913,177 932,215
---------------------------------------------
Total assets 1,411,170 1,226,232
Liabilities:
Current liabilities 391,802 362,886
Noncurrent liabilities 842,805 822,878
---------------------------------------------
Total liabilities 1,234,607 1,185,764
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
---------------------------------------------
1999 1998
---------------------------------------------
(In thousands)
<S> <C> <C>
Net sales $ 697,671 $ 583,285
Gross profit 92,051 61,789
Net income 28,955 16,923
</TABLE>
3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
-------------------------------------
(In thousands)
<S> <C> <C>
Raw materials and work-in-process $ 76,256 $ 87,540
Finished goods 33,306 42,233
-------------------------------------
Gross inventories at average cost 109,562 129,773
Excess of average cost over LIFO cost (7,450) (7,030)
-------------------------------------
Net inventories at LIFO 102,112 122,743
Supplies and repair parts 13,577 14,323
-------------------------------------
$ 115,689 $ 137,066
=====================================
</TABLE>
<PAGE> 7
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AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999
4. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share (in thousands, except share and per share data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1999 1998
------------------------------------
<S> <C> <C>
Numerators for Basic and Diluted earnings per share:
Net Income available for common stockholders.............. $ 28,955 $ 16,923
Denominators:
Denominator for Basic earnings per share -
weighted-average shares outstanding..................... 36,891,039 32,391,409
Effect of dilutive securities:
Dilutive stock options outstanding........................ 10,547,831 10,812,749
---------- ----------
Denominator for Diluted earnings per share -
adjusted weighted-average shares and
assumed conversion ....................................... 47,438,870 43,204,158
========== ==========
Basic earnings per share.................................. $0.78 $0.52
===== =====
Diluted earnings per share................................ $0.61 $0.39
===== =====
</TABLE>
5. COMPREHENSIVE INCOME
Comprehensive income was $28,448 and $16,923 for the three months ended
March 31, 1999 and March 31, 1998, respectively. Foreign currency
translation is the only reconciling difference between comprehensive income
and net income for the three months ended March 31, 1999.
<PAGE> 8
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AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999
6. LONG-TERM DEBT
Long-term debt and capital lease obligations consists of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
-------------------------------------
1999 1998
-------------------------------------
(In thousands)
<S> <C> <C>
Credit Facilities:
Revolver $ 0 $ 223,000
Tranche A Term Loan 0 0
Tranche B Term Loan 375,000 375,000
-------------------------------------
Total Credit Facilities 375,000 598,000
Receivables Facility 0 63,000
9.75% Senior Subordinated Notes Due 2009,
net of discount 297,679 0
Albion Capital Lease Obligations 28,525 26,102
Other 5,668 6,266
-------------------------------------
$ 706,872 $ 693,368
=====================================
</TABLE>
Issuance of 9.75% Senior Subordinated Notes Due 2009
In March 1999, American Axle & Manufacturing, Inc., the Company's
wholly-owned subsidiary, issued $300,000,000 of 9.75% Senior Subordinated
Notes Due 2009 (the "Notes"). The net proceeds from the sale of the notes
was approximately $289 million after deduction of discounts to the initial
purchasers and other fees and expenses.
Resyndication of Revolving Receivables Facility
In March 1999, the Company resyndicated its revolving receivables facility
through its subsidiary, AAM Receivables Corp. In addition, this facility
has been expanded from $125 million to $153 million. The terms of the
resyndicated receivables facility remain substantially the same as the
Company's previous receivables facility.
<PAGE> 9
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AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999
7. SALE-LEASEBACK
In March 1999, the Company closed a sale-leaseback transaction involving
approximately $49 million of existing machinery and equipment. This
sale-leaseback transaction was financed under an operating lease and
resulted in an immaterial loss on the sale of the machinery and equipment.
Payments under this operating lease will approximate $6 million per annum
over its 10 year term.
8. SUBSEQUENT EVENTS
On April 1, 1999, the Company purchased two forging companies, Colfor
Manufacturing, Inc. ("Colfor") and MSP Industries Corporation ("MSP"), for
aggregate purchase consideration of approximately $225 million. Colfor
specializes in precision cold, warm and hot forgings and operates three
manufacturing facilities in Ohio. Giving effect as of January 1, 1998 to
Colfor's October 1998 acquisition of Valley Forge, Inc., Colfor's pro forma
1998 sales would have been approximately $126 million. MSP manufactures
precision forged powertrain, driveline, chassis and other components for
the automotive industry using cold and warm forging processes at three
manufacturing facilities in Michigan. MSP's 1998 sales were $56 million.
<PAGE> 10
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Item. 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion and analysis presents the factors that had a material effect on
our results of operations and cash flows during the three months ended March 31,
1999, and our financial position at March 31, 1999. Trends of a material nature
are discussed to the extent known and considered relevant. The analysis of
results compares the three months ended March 31, 1999 with the corresponding
period of 1998.
This discussion and analysis should be read in conjunction with the Unaudited
Condensed Consolidated Financial Statements and notes thereto appearing
elsewhere in this Quarterly Report on Form 10-Q ("Quarterly Report") and the
Company's Annual Report on Form 10-K for the year end December 31, 1998. As used
in this Quarterly Report, unless the context otherwise requires, references to
"we", "us" or "American Axle" shall mean collectively (i) American Axle &
Manufacturing, Inc. ("AAM Inc."), a Delaware corporation, and its direct and
indirect subsidiaries, and (ii) American Axle & Manufacturing Holdings, Inc. and
its predecessor ("Holdings"), a Delaware corporation and the direct parent
corporation of AAM, Inc.
COMPANY OVERVIEW
We are a Tier I supplier to the automotive industry and a world leader in the
design, engineering and manufacture of driveline systems, chassis systems and
forged products for trucks, buses, sport utility vehicles ("SUVs") and passenger
cars. The driveline system includes all of the components that transfer power
from the transmission and deliver it to the drive wheels. The driveline products
produced by us include axles, propeller shafts, chassis components and forged
products. We are General Motors Corporation's ("GM") principal supplier of
driveline components for light trucks, SUVs and rear-wheel drive ("RWD")
passenger cars. Sales to GM were approximately 93%, 96% and 96% of our net sales
in 1998, 1997 and 1996, respectively.
In March 1994, we purchased the assets of the Final Drive and Forge Business
Unit (the "Business Unit") of the Saginaw Division of GM. In connection with our
acquisition of the Business Unit, we entered into the Component Supply Agreement
(the "CSA") with GM under which we became the sole-source supplier to GM of all
the products and components previously supplied to GM by the Business Unit. In
October 1997, we entered into a Recapitalization Agreement pursuant to which
Blackstone Capital Partners II Merchant Banking Fund LP and certain of its
affiliates (collectively "Blackstone") acquired control of us. In connection
with the Recapitalization, we entered into an additional binding agreement with
GM, the Amended and Restated Memorandum of Understanding (the "MOU"). Under the
MOU, we have agreed with GM to commit to transition the CSA into a number of
separate Lifetime Program Contracts ("LPCs") applicable for the life of each GM
vehicle program covered by an LPC. These LPCs will ultimately replace the CSA.
LPCs have been entered into for substantially all GM vehicle programs supplied
by us, including the GMT-800 and the M-SUV Programs.
<PAGE> 11
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In order to induce GM to enter into the MOU and commit to enter into the LPCs,
in 1997, we agreed to temporary reductions of certain payments previously agreed
to be made by GM to us as part of the commercial arrangements between us,
including certain payments pursuant to the CSA. Such reductions amounted to
approximately $11.4 million in 1997 and approximately $51.5 million in 1998.
Such reductions terminated at December 31, 1998.
We sell most of our products to GM under long-term contracts at fixed prices,
some of which are subject to annual price reductions in subsequent years, and
all of which are subject to negotiated price increases for engineering changes.
With respect to GM, pricing has been established for products sold under the CSA
and the LPCs; however, we must remain competitive with respect to technology,
design and quality. We currently purchase through GM's purchasing network
certain materials for use in the manufacture of products sold under the CSA and
the LPCs. Under the CSA and currently under the LPCs, we pay current market
prices for certain materials used in the manufacture of products sold to GM, but
increases or decreases in such prices from levels established under the CSA or
LPCs currently result in corresponding increases or decreases in the aggregate
amount paid to us by GM for our products, thereby protecting us from increases
in the costs of such materials while such purchasing arrangement is in effect.
We have agreed with GM to develop a mutually satisfactory plan to terminate this
purchasing arrangement no later than December 2002. Thus, while the prices at
which we sell our products under the CSA and the LPCs have been established,
under the LPCs, upon termination of the purchasing arrangement described above,
we will no longer have a contractual right to pass on any future increases in
the cost of such materials. Increases in material costs beyond the established
prices are the only costs passed on to GM under the CSA and under the LPCs.
There can be no assurance that we will be able to pass on any increased labor,
materials or other costs to GM in the future as we have from time to time in the
past pursuant to the above-described terms of the CSA or by certain additional
payments agreed to as part of the commercial arrangements between GM and
ourselves. LPCs have terms equal to the lives of the relevant vehicle programs,
which typically run 6 to 12 years. We will have to compete for future GM
business upon the termination of the LPCs.
In October 1998, we completed the acquisition of Albion Automotive (Holdings)
Limited ("Albion"). Albion manufactures front steerable and rear axles, driving
heads, crankshafts, chassis components and transmission parts used primarily in
medium-duty trucks and buses for customers located in the United Kingdom and
elsewhere in Europe. Albion's sales for the year ended December 31, 1998 were
approximately $130 million and its major customers include Caterpillar
(Perkins), LDV, PACCAR (Leyland and DAF), Renault, Rolls-Royce, Rover and
Volvo. The acquisition has been accounted for under the purchase method of
accounting, and Albion's results since the acquisition date have been included
in our consolidated financial results.
<PAGE> 12
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ACQUISITION OF COLFOR AND MSP
On April 1, 1999, we purchased two forging companies, Colfor Manufacturing, Inc.
("Colfor") and MSP Industries Corporation ("MSP") for aggregate purchase
consideration of approximately $225 million. Colfor specializes in precision
cold, warm and hot forgings and operates three manufacturing facilities in Ohio.
Giving effect as of January 1, 1998 to Colfor's October 1998 acquisition of
Valley Forge, Inc., Colfor's pro forma 1998 sales would have been approximately
$126 million. MSP manufactures precision forged powertrain, driveline, chassis
and other components for the automotive industry using cold and warm forging
processes at three manufacturing facilities in Michigan. MSP's 1998 sales were
$56 million. These acquisitions have been accounted for under the purchase
method of accounting, and Colfor's and MSP's results since the acquisition date
will be included in our consolidated financial results beginning April 1, 1999.
INDUSTRY AND COMPETITION
Our operations are cyclical because they are directly related to domestic
automotive production, which is itself cyclical and dependent on general
economic conditions and other factors. The axle and related driveline systems
segment of the automotive industry is highly competitive. The current trend in
the automotive industry is for original equipment manufacturers "(OEMs)" to
shift research and development ("R&D"), design and testing responsibility to
suppliers to take advantage of certain efficiencies. The OEMs have also been
reducing the number of their suppliers, preferring stronger relationships with
fewer suppliers. As a result, the Tier I supplier market has been undergoing
consolidation over the past three to four years. This trend is expected to
continue, leaving the industry with only a small number of dominant, worldwide
suppliers.
RESULTS OF OPERATIONS
The following table sets forth certain statement of operations data expressed as
a percentage of net sales:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1999 1998
----------------------------------------
Statement of income data:
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of goods sold 86.8 89.4
------- -------
Gross profit 13.2 10.6
Selling, general and administrative expenses 4.9 4.4
------- -------
Operating income 8.3 6.2
Net interest (expense) (1.7) (1.7)
Other (expense) income (0.1) 0.1
-------- -------
Income before income taxes 6.5 4.6
Income tax expense 2.4 1.7
------- -------
Net income 4.1% 2.9%
======= =======
</TABLE>
<PAGE> 13
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RESULTS OF OPERATIONS--THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE
MONTHS ENDED MARCH 31, 1998
Net Sales. Net sales increased approximately 20% to $697.7 million for the three
months ended March 31, 1999 compared with $583.3 million for the three months
ended March 31, 1998. This increase was due primarily to:
- - higher volumes resulting from strong customer demand for the Company's
products;
- - increased sales related to GM's new full-size truck program (GMT-800), on
which the Company receives a higher average dollar content per vehicle than
its predecessor (GMT-400);
- - the impact of Albion Automotive, which was acquired in the fourth quarter
of 1998; and
- - expiration of the 1998 temporary payment reductions made in connection with
the LPCs which adversely affected 1998 results by approximately $12.7
million in the three months ended March 31, 1998.
Sales to customers other than GM increased $31.8 million to $57.7 million for
the three months ended March 31, 1999, versus $25.9 million for the three months
ended March 31, 1998. The increase in sales to customers other than GM is
principally due to the inclusion of Albion's sales in 1999 and additional
business we have obtained.
Gross Profit. Gross profit increased 49% to $92.1 million for the three months
ended March 31, 1999 compared with $61.8 million for the three months ended
March 31, 1998. Gross margin increased to 13.2% in the three months ended March
31, 1999 compared to 10.6% for the three months ended March 31, 1998. The
increases in gross profit and gross margin in the three months ended March 31,
1999 were due primarily to the impact of:
- - strong volumes;
- - increased sales of products which carry higher average selling prices;
- - productivity improvements; and
- - expiration of the temporary payment reductions which adversely affected
1998 results by approximately $12.7 million in the three months ended March
31, 1998.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses (including R&D) increased 33% to $33.9 million for the
three months ended March 31, 1999 compared with $25.5 million for the three
months ended March 31, 1998. Selling, general and administrative expenses as a
percentage of sales increased to 4.9% for the three months ended March 31, 1999
compared to 4.4% for the three months ended March 31, 1998. The increase in
spending was principally due to the Company's continued investment in research
and development, increases in support required for our expanding operations, and
the inclusion of Albion in 1999. R&D expenses were $8.4 million for the three
months ended March 31, 1999 compared to $6.4 million for the three months ended
March 31, 1998. The increase in R&D expenses in the three months ended March 31,
1999 compared to the three months ended March 31, 1998 was primarily due to the
inclusion of Albion in 1999 and other costs and expenses incurred to support new
product programs.
<PAGE> 14
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Operating Income. Operating income was $58.2 million for the three months ended
March 31, 1999 compared to $36.3 million for the three months ended March 31,
1998. Operating margin increased to 8.3% for the three months ended March 31,
1999 compared to 6.2% for the three months ended March 31, 1998. The increase in
operating income was primarily due to the factors discussed above relating to
the increase in Gross Profit partially offset by the impact increased selling,
general and administrative expenses also discussed above.
Net Interest. Net interest expense was $12.0 million for the three months ended
March 31, 1999 compared to net interest expense of $9.7 million for the three
months ended March 31, 1998. The increase in net interest expense was primarily
due to higher average outstanding debt levels in 1999 and higher average
interest rates primarily associated with the 9.75% Senior Subordinated Notes we
issued in 1999.
Income Tax Expense. There was an income tax expense of $17.0 million for the
three months ended March 31, 1999 compared to $10.0 million for the three months
ended March 31, 1998. Our effective income tax rate was approximately 37.0% for
the three months ended March 31, 1999 and the three months ended March 31, 1998.
Net Income. There was net income of $29.0 million for the three months ended
March 31, 1999 compared to $16.9 million for the three months ended March 31,
1998, primarily due to the factors discussed above.
LIQUIDITY AND CAPITAL RESOURCES
Management assesses our liquidity in terms of our overall ability to mobilize
cash to support business needs and to fund growth. We rely primarily upon cash
flow from operations and borrowings under our Credit Facilities and a $153
million receivables purchase facility (the "Receivables Facility") to finance
operations and capital expenditures.
The Credit Facilities consist of:
- - a Senior Secured Term Loan Facility (the "Tranche A Term Loan Facility")
providing for delayed draw term loans in an aggregate principal amount of
$125 million;
- - a Senior Secured Term Loan Facility (the "Tranche B Term Loan Facility"
and, together with the Tranche A Term Loan Facility, the "Term Loan
Facility") providing for term loans in an aggregate principal amount of
$375 million; and
- - a Senior Secured Revolving Credit Facility (the "Revolving Credit
Facility") providing for revolving loans and the issuance of letters of
credit in an aggregate principal and stated amount not to exceed $250
million (of which not more than $30 million may be represented by letters
of credit).
The following significant events and financing strategies also impact our
liquidity and financial flexibility:
<PAGE> 15
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- - On February 3, 1999, we completed an initial public offering ("IPO") and
issued 7 million shares of common stock. The net proceeds of the IPO, after
deduction of associated expenses, approximated $108 million and which were
used to reduce outstanding borrowings under the Revolving Credit Facility
(but not the related commitments).
- - In March 1999, AAM Inc. issued $300,000,000 of 9.75% Senior Subordinated
Notes Due 2009 (the "Notes"). The net proceeds from the sale of the Notes
was approximately $289 million after deduction of discounts to the initial
purchasers and other fees and expenses. The net proceeds have been used to
repay existing debt under the Revolving Credit Facility and replace
financing provided by the Receivables Facility, with the remainder of such
net proceeds used for general corporate purposes, including financing
acquisitions and capital expenditures.
- - In March 1999, we closed a sale-leaseback transaction involving
approximately $49 million of existing machinery and equipment. This
sale-leaseback transaction was financed under an operating lease that will
have a negative impact on our operating income and will result in lower
depreciation and amortization, but will have no material impact on our net
income. Additional sale-leaseback transactions, which together with the
March 31, 1999 transaction would involve approximately $200 million of
machinery and equipment, would be structured in a similar manner and would
have a similar effect on operating income, depreciation and amortization
and net income. If such transactions are consummated they would provide us
with additional financial flexibility.
At March 31, 1999, we had working capital of $106.2 million versus a working
capital deficit of $68.9 million at December 31, 1998. This increase in working
capital was due primarily to the net cash proceeds held at March 31, 1999
relating to the IPO, the issuance of the Notes and the $49 million
sale-leaseback transaction, partially offset by the repayment of outstanding
borrowings on the Revolving Credit and Receivables Facilities and the funding of
capital expenditures. Working capital at March 31, 1999 also increased as a
result of the $49.5 million of net cash provided by our operating activities
during the three months ended March 31, 1999. The net cash provided by operating
activities was primarily due to net income earned by us and the following
additional factors which were partially offset by an increase in accounts
receivable with GM:
- - non-cash charges for depreciation and amortization, deferred income taxes,
pensions and other postretirement benefits;
- - a reduction in inventories; and
- - an increase in current liabilities.
<PAGE> 16
- 16 -
As part of our arrangements with GM, payment terms for products shipped to GM
will steadily lengthen during the three-year period beginning March 1, 1999,
resulting in an expected increase in accounts receivable balances and
anticipated increased interest expense related to our funding of working
capital. The increase in accounts receivable from GM at March 31, 1999 reflects
the transition from next day payment terms to net 10 days effective March 1,
1999. We anticipate that this working capital increase and future increases
associated with the further lengthening of GM payment terms, will be funded from
available sources including cash flow from operations and our Credit Facilities.
At March 31, 1999, $375.0 million of borrowings were outstanding under the Term
Loan Facility and $375.0 million was available for future borrowings under the
Term Loan and Revolving Credit Facilities. Additionally at March 31, 1999,
approximately $98.2 million was available under the variable funding
certificates of the Receivables Facility.
The weighted average interest rate of our long-term debt outstanding as of March
31, 1999 was approximately 8.6% and was approximately 8.0% at December 31, 1998.
This increase in the weighted average interest rate of our long-term debt
outstanding is primarily due to the impact of the issuance of the Notes.
Capital expenditures were $47.8 million in the three months ended March 31, 1999
and $66.6 million in the three months ended March 31, 1998. These investments in
machinery and equipment were primarily made to support the launch of new product
programs, to reduce labor-intensive operations, to support additional capacity
and for cost reduction programs including upgrades in machinery technology and
quality standards. We estimate that we will invest approximately $300 - $320
million in capital expenditures during 1999.
We intend to fund our capital expenditures by borrowing under the Credit
Facilities or the Receivables Facility and through the execution of
sale-leaseback transactions as discussed above. We believe our lines of credit
are adequate to support ongoing operational requirements. Beyond that, we
believe we have sufficient financial flexibility to attract long-term funding on
acceptable terms as may be needed to support our growth objectives.
As discussed above, on April 1, 1999 we purchased two forging companies, Colfor
Manufacturing Inc. ("Colfor") and MSP Industries Corporation ("MSP"), for
aggregate purchase consideration of $225 million. These acquisitions were
financed with approximately $160 million of cash (principally from the issuance
of the Notes) and $65 million of borrowings under the Credit Facilities and the
Receivables Facility.
We are currently in various stages of discussions with additional acquisition
candidates. It is possible that an agreement with respect to an acquisition
could be reached in the near future. We do not expect that any such acquisition,
if consummated, would have a material impact on our financial condition. We
expect that the aggregate purchase price for Colfor, MSP and these other
potential acquisition candidates would be less than the amount of permitted
acquisitions under the Credit Facilities, which, after giving effect to the
private placement of the outstanding Notes, would be approximately $400 million.
As of the date of this Quarterly Report, no definitive agreement with any such
other potential acquisition candidate has been entered into, and there can be no
assurance that any such acquisition will be successfully negotiated or
consummated.
<PAGE> 17
- 17 -
SEASONALITY
Our business is moderately seasonal as our major OEM customers historically have
a two week shutdown of operations in July and approximately a one week shutdown
in December. In addition, traditionally in the third quarter OEM customers have
incurred lower production rates as model changes enter production. Accordingly,
third and fourth quarter results may reflect these trends.
EFFECTS OF INFLATION
Inflation generally affects us by increasing the cost of labor, equipment and
raw materials. We believe that the relatively moderate rate of inflation over
the past few years has not had a significant impact on our operations as we
offset the increases by realizing improvements in operating efficiency or by
passing through certain increases in the cost of raw materials to GM under the
terms of the CSA.
FINANCIAL INSTRUMENTS MARKET RISK
Our business and financial results are affected by fluctuations in world
financial markets, including interest rates and currency exchange rates. Our
hedging policy attempts to manage these risks to an acceptable level based on
management's judgment of the appropriate trade-off between risk, opportunity and
costs. We hedge our interest rate risks by utilizing swaps and collars. We do
not currently have significant exposures relating to currency risks and did not
have any financial instruments to reduce currency risks at March 31, 1999 or at
December 31, 1998. We do not hold financial instruments for trading or
speculative purposes.
The Credit Facilities required us to enter into interest rate hedging
arrangements with a notional value of $112.5 million. The arrangements entered
into by us, which terminate in December 2000, require us to pay a floating rate
of interest based on three-month LIBOR with a cap rate of 6.5% and a floor rate
of 5.5%.
Interest Rate Risk. As part of our risk-management program, we perform
sensitivity analyses to assess potential gains and losses in earnings and
changes in fair value relating to hypothetical movements in interest rates. A
100 basis-point increase in interest rates (approximately 12.5% of our weighted
average interest rate) affecting our debt obligations, related interest rate
swaps and collars (based on balances existing at December 31, 1998), would
impact our 1998 pretax earnings by approximately $5.9 million.
Currency Risk. We do not currently have material exposures to currency
exchange-rate risk as most of our business is denominated in U.S. dollars.
Future business operations and opportunities, including the construction of a
new manufacturing facility in Guanajuato, Mexico and our recently acquired
Albion operations in Europe, may expose us to the risk that the eventual net
dollar cash inflows resulting from these activities may be adversely affected by
changes in currency exchange rates. We intend to manage these risks by utilizing
various types of foreign exchange contracts where appropriate.
<PAGE> 18
- 18 -
YEAR 2000 COMPLIANCE
We have implemented a program to identify Year 2000 compliance issues and
develop detailed project plans so that our computer information systems will be
able to interpret the calendar year term "2000". Systems that process
transactions based on storing two digits for the year rather than the full four
digits may encounter significant process inaccuracies and even inoperability in
attempting to process Year 2000 transactions.
The Year 2000 compliance program implemented by us addresses all plant
equipment, computer hardware and software, and business support equipment. The
Year 2000 compliance program also includes modifications and conversions
necessary to address our systems and process interfaces with third-party
suppliers and customers. To date, we have named a Year 2000 compliance program
team leader, established a project team covering all locations worldwide,
completed our assessment of all systems which we believe could be significantly
affected by the Year 2000 issue, defined plans for remediation and issued
communications to all our departments regarding Year 2000 issues and strategies.
Management presently believes that, with planned modifications to existing
systems and processes scheduled to be completed in December 1999, Year 2000
compliance will not pose significant operational problems.
Our design, engineering, manufacturing and administrative functions are reliant
upon a variety of third parties who could also be affected by the Year 2000
issue. As a part of our Year 2000 compliance program, we have initiated
communications with key suppliers, customers and other such third parties to
evaluate their Year 2000 readiness and to determine whether a Year 2000-related
event could impede the ability of such suppliers, customers or other third
parties to interact with and support our operations effectively. Issues
identified as a result of these communications have been addressed in our Year
2000 compliance program remediation and contingency planning actions.
Costs incurred by us to address Year 2000 compliance include the acquisition of
computer hardware and software to replace existing Year 2000 non-compliant
systems. These costs have been capitalized and amortized over the assets'
estimated useful lives. There are no significant systems replacement initiatives
that have been accelerated as a result of our Year 2000 compliance assessments.
Costs associated with modifying existing Year 2000 non-compliant systems are
expensed as incurred. The amounts expensed to date have been immaterial and we
do not expect amounts required to be expensed in the future to have a material
effect on our financial position or results of operations.
If the modifications and conversions planned by us to address Year 2000
compliance are not completed on a timely basis, or if our key suppliers,
customers or other third parties have significant unresolved systems problems,
there is a risk that Year 2000 compliance could have a material impact on our
operations. Potential sources of risk include:
- - the inability of key suppliers (or their suppliers) to be Year 2000 ready,
which could result in delays in product or service deliveries from such
suppliers;
<PAGE> 19
- 19 -
- - the inability of key customers (or their other suppliers) to be Year 2000
ready, which could result in the cancellation or postponement of orders
from such customers;
- - systems incompatabilities with key suppliers or customers resulting from
software conversions or other modifications; and
- - our inability to modify or replace systems on a timely basis, which could
result in manufacturing process delays that interrupt product shipments.
We are presently developing contingency plans for all significant components of
our computer information systems, including all plant equipment and business
support equipment, and expect to complete such contingency arrangements by June
1999. These contingency plans involve, among other things, manual work-arounds,
alternative sourcing strategies and flexible staffing arrangements.
LITIGATION AND ENVIRONMENTAL REGULATIONS
We are involved in various legal proceedings incidental to our business.
Although the outcome of these matters can not be predicted with certainty,
management believes that none of these matters, individually or in the
aggregate, will have a material adverse effect on the financial condition,
results of operations or cash flows.
GM has agreed to indemnify and hold harmless AAM, Inc. from certain
environmental issues identified as potential areas of environmental concern at
the time of the 1994 Acquisition. GM has also agreed to indemnify AAM, Inc.,
under certain circumstances, for up to ten years from the date of closing of the
1994 acquisition with respect to certain pre-closing environmental conditions.
Approximately one-acre of a parking lot at our Buffalo facility has been
designated by the New York Department of Environmental Conservation ("NYDEC") as
a Class 3 Inactive Hazardous Waste Disposal Site due to the presence of
polychlorinated byphenyls in subsurface soil and groundwater below existing
pavement, and an elevated level of lead in the soil. A Class 3 designation is
given to a site which does not present a significant threat to the public health
or environment and at which action may be deferred. The area is the subject of
an Order of Consent between GM and NYDEC effective February 2, 1995. Remediation
required thereunder is being performed by GM in the ordinary course of business.
In addition, GM is conducting remediation at our Tonawanda facility as a result
of the presence of polychlorinated biphenyls in the soil. The contamination of
both sites took place prior to our acquiring the properties and is the
responsibility of GM.
Based on our assessment of costs associated with our environmental
responsibilities, including recurring administrative costs, capital expenditures
and other compliance costs, such costs have not had, and in management's
opinion, will not have in the foreseeable future, a material effect on our
financial condition, results of operations, cash flows or competitive position.
<PAGE> 20
- 20 -
EFFECT OF NEW ACCOUNTING STANDARDS
SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities was
issued in June 1998. SFAS No. 133 establishes standards for the recognition and
measurement of derivatives and hedging activities. This statement is effective
for fiscal years beginning after June 15, 1999. We are currently analyzing the
impact SFAS No. 133 will have on our financial statements.
Statement of Position ("SOP") 98-1, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use, was issued in March 1998. SOP
98-1, among other things, requires that certain costs of internal use software,
whether purchased or developed internally, be capitalized and amortized over the
estimated useful life of the software. Adoption of SOP 98-1 is required as of
January 1, 1999. The adoption of SOP 98-1 has not resulted in a material effect
on our financial condition or results of operations because we have historically
followed the guidelines specified in SOP 98-1.
SOP 98-5, Reporting on the Costs of Start-Up Activities, was issued in April,
1998. SOP 98-5 establishes standards for the financial reporting of start-up
costs and organization costs and requires such costs to be expensed as incurred.
SOP 98-5 is effective for fiscal years beginning after December 15, 1998. The
adoption of SOP 98-5 as of January 1, 1999 has not resulted in a material effect
on our financial condition or results of operations.
FORWARD-LOOKING INFORMATION
Certain statements in this Section and elsewhere in the Quarterly Report are
forward-looking in nature and relate to trends and events that may affect the
Company's future financial position and operating results. Such statements are
made pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. The terms "expect", "anticipate", "intend", and "project"
and similar words or expressions are intended to identify forward-looking
statements. These statements speak only as of the date of this Quarterly Report.
The statements are based on current expectations, are inherently uncertain, are
subject to risks, and should be viewed with caution. Actual results and
experience may differ materially from the forward-looking statements as a result
of many factors, including reduced sales by the Company's customers, changes in
economic conditions in the markets served by the Company, increasing
competition, fluctuations in raw materials and energy prices, and other
unanticipated events and conditions. It is not possible to foresee or identify
all such factors. The Company makes no commitment to update any forward-looking
statement or to disclose any facts, events, or circumstances after the date
hereof that may affect the accuracy of any forward-looking statement.
<PAGE> 21
- 21 -
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibits required by Item 601 of Regulation S-K are listed in the Exhibit
Index hereto.
(b) Report on Form 8-K
On February 12, 1999, the Company filed a Current Report on Form 8-K to:
- report the signing of a definitive agreement to acquire Colfor
Manufacturing, Inc.
- to file (i) Selected Consolidated Financial and Other Data, (ii)
Management's Discussion and Analysis of Financial Condition and
Results of Operations, and (iii) the Company's audited consolidated
financial statements and the notes related thereto as of December 31,
1997 and 1998 and for each of the years ended December 31, 1996, 1997
and 1998.
<PAGE> 22
- 22 -
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
(Registrant)
Date: May 14, 1999 By: /s/ Robert A. Krause
--------------------
Robert A. Krause
Treasurer and in the capacity of
Chief Financial Officer
<PAGE> 23
- 23 -
EXHIBIT INDEX
The following exhibits were previously filed unless otherwise indicated:
<TABLE>
<CAPTION>
Number Description of Exhibit Page Number
- ------ ---------------------- -----------
<S> <C> <C>
4.01(a) Specimen Stock Certificate
(Incorporated by reference to Exhibit 4.01
filed with American Axle & Manufacturing
Holdings, Inc. Registration Statement on Form
S-1 (Registration No. 333-53491))
4.01(b) Indenture, dated as of March 5, 1999, among American
Axle & Manufacturing, Inc., as issuer, American Axle &
Manufacturing Holdings, Inc., as guarantor, and IBJ
Whitehall Bank & Trust Company, as trustee
(Incorporated by reference to Exhibit 4.01
filed with American Axle & Manufacturing
Holdings, Inc. Registration Statement on Form
S-4 (Registration No. 333-76605))
4.02 Form of 9.75% Senior Subordinated Note due 2009 (the "Exchange
Note")
(Incorporated by reference to Exhibit 4.02
filed with American Axle & Manufacturing
Holdings, Inc. Registration Statement on Form
S-4 (Registration No. 333-76605))
4.03 Exchange and Registration Rights Agreement, dated March 5, 1999,
among AAM Inc., Chase Securities, Inc., Donaldson Lufkin &
Jenrette Securities Corporation and Morgan Stanley & Co.
Incorporated
(Incorporated by reference to Exhibit 4.03
filed with American Axle & Manufacturing
Holdings, Inc. Registration Statement on Form
S-4 (Registration No. 333-76605))
</TABLE>
<PAGE> 24
- 24 -
<TABLE>
<CAPTION>
Number Description of Exhibit Page Number
- ------ ---------------------- -----------
<S> <C> <C>
10.15 Amendment No. 2, Waiver and Agreement, dated as of
January 11, 1999, to the Credit Agreement, dated as of
October 27, 1997 among the Company, American Axle &
Manufacturing, Inc., the lenders named therein, The
Chase Manhattan Bank, as administrative agent and
collateral agent, and Chase Manhattan Bank Delaware, as
fronting bank
(Incorporated by reference to Exhibit 10.15(a)
filed with American Axle & Manufacturing
Holdings, Inc. Registration Statement on Form
S-1 (Registration No. 333-53491))
10.16 AAM Master Trust Pooling Agreement, dated as of October
29, 1997, as Amended and Restated as of March 25, 1999,
among AAM Receivables Corp. ("AAM Receivables"), the
Company, as Servicer, and The Chase Manhattan Bank, as
Trustee
(Incorporated by reference to Exhibit 10.16
filed with American Axle & Manufacturing
Holdings, Inc. Registration Statement on Form
S-4 (Registration No. 333-76605))
10.16(a) AAM Master Trust Series 1999-A Supplement to Pooling
Agreement, dated as of March 25, 1999, among AAM
Receivables, the Company, as Servicer, and The Chase
Manhattan Bank, as Trustee
(Incorporated by reference to Exhibit 10.16(a)
filed with American Axle & Manufacturing
Holdings, Inc. Registration Statement on Form
S-4 (Registration No. 333-76605))
10.17 Receivables Sale Agreement, dated as of October 29,
1997, as Amended and Restated as of March 25, 1999,
among AAM Receivables, the Company, as Servicer, and
The Chase Manhattan Bank, as Trustee
(Incorporated by reference to Exhibit 10.17
filed with American Axle & Manufacturing
Holdings, Inc. Registration Statement on Form
S-4 (Registration No. 333-76605))
</TABLE>
<PAGE> 25
- 25 -
<TABLE>
<CAPTION>
Number Description of Exhibit Page Number
- ------ ---------------------- -----------
<S> <C> <C>
10.18 Servicing Agreement, dated as of October 27, 1997, as
Amended and Restated as of March 25, 1999, among AAM
Receivables, the Company, as Servicer, and The Chase
Manhattan Bank, as Trustee
(Incorporated by reference to Exhibit 10.18
filed with American Axle & Manufacturing
Holdings, Inc. Registration Statement on Form
S-4 (Registration No. 333-76605))
*12.01 Statement of Computation of Ratio of Earnings to Fixed
Charges 26
*27 Financial Data Schedule **
(All other exhibits are not applicable.)
</TABLE>
- ---------------------------------------------------------------------------
* Filed herewith
** Shown only in the original filed with the Securities and Exchange
Commission
<PAGE> 1
- 26 -
American Axle & Manufacturing Holdings, Inc.
Exhibit 12.01 - Computation of Ratio of Earnings to Fixed Charges
<TABLE>
<CAPTION>
(unaudited)
(in thousands except for ratios)
Year Ended December 31 1998 1997 1996 1995
<S> <C> <C> <C> <C>
Fixed charges:
Interest expense, including amortization of debt issuance costs $ 44,784 $ 8,956 $ 340 $ 1,566
Estimated interest portion of rents 4,667 3,233 1,467 60
Capitalized interest 3,788 217 0 0
Preferred stock dividend 0 12,000 17,915 13,642
Gross-up of preferred stock dividend as if it were pre-tax 0 6,750 10,077 7,674
- ----- ------ -----
Total fixed charges as defined 53,239 31,156 29,799 22,942
Earnings:
Income from continuing operations before income tax expense 5,602 94,197 98,324 117,971
Total fixed charges as defined 53,239 31,156 29,799 22,942
Fixed charges not deducted in the determination of income from
continuing operations before income tax expense (3,788) (18,967) (27,992) (21,316)
------- -------- -------- --------
Total earnings as defined $ 55,053 $ 106,386 $ 100,131 $ 119,597
Ratio of earnings to fixed charges 1.03 3.41 3.36 5.21
==== ==== ==== ====
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
Three Months Ended March 31 1999
Fixed charges:
<S> <C>
Interest expense, including amortization of debt issuance costs $ 12,758
Estimated interest portion of rents 1,244
Capitalized interest 1,196
-------
Total fixed charges as defined 15,198
Earnings:
Income from continuing operations before income tax expense 45,960
Total fixed charges as defined 15,198
Fixed charges not deducted in the determination of income from
continuing operations before income tax expense (1,196)
-------
Total earnings as defined $ 59,962
Ratio of earnings to fixed charges 3.95
====
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements and is qualified in its entirety by reference
to such consolidated statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 167,847
<SECURITIES> 0
<RECEIVABLES> 196,954
<ALLOWANCES> 4,394
<INVENTORY> 115,689
<CURRENT-ASSETS> 497,993
<PP&E> 1,039,152
<DEPRECIATION> 232,874
<TOTAL-ASSETS> 1,411,170
<CURRENT-LIABILITIES> 391,802
<BONDS> 706,872
0
0
<COMMON> 395
<OTHER-SE> 176,168
<TOTAL-LIABILITY-AND-EQUITY> 1,411,170
<SALES> 697,671
<TOTAL-REVENUES> 697,671
<CGS> 605,620
<TOTAL-COSTS> 605,620
<OTHER-EXPENSES> 33,894
<LOSS-PROVISION> 1,408
<INTEREST-EXPENSE> 12,758
<INCOME-PRETAX> 45,960
<INCOME-TAX> 17,005
<INCOME-CONTINUING> 28,955
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,955
<EPS-PRIMARY> .78
<EPS-DILUTED> .61
</TABLE>
