American Axle and Manufacturing Inc. ( AXL - Analyst Report ) posted a profit of $35.9 million or 47 cents per share (before special items) in the fourth quarter of 2011, which was flat compared with the year-ago level of $34.9 million or 47 cents per share. However, the company has beaten the Zacks Consensus Estimate of 39 cents per share during the quarter.

Net sales in the quarter rose 4% to $605.6 million from $583.3 million in the fourth quarter of 2010. Gross profit in the quarter was $105.7 million or 17.5% of sales.

The company progressed well in diversifying its customer base during the quarter. The company had a high exposure to customers, including General Motors Co. ( GM - Analyst Report ) and Chrysler. American Axle’s non-GM sales went up 11% on a year-over-year basis to $175.0 million in the quarter from $157.6 million in the fourth quarter of 2010.

The company’s content-per-vehicle (dollar value of its product sales supporting North American light truck and SUV programs) was $1,498 as compared to $1,508 in the fourth quarter of 2010.

Selling, general and administrative (SG&A) expenses were $57.2 million, or 9.4% of sales, in the quarter compared with $50.6 million, or 8.7% of sales, in the fourth quarter of 2010. Meanwhile, research and development (R&D) spending was $28.2 million in the quarter compared with $23.6 million in the prior-year quarter.

Operating income was $48.5 million or 8.0% of sales during the quarter. This compared with $51.0 million or 8.7% of sales in the fourth quarter of 2010.

Full Year Results

For full year 2011, American Axle reported a profit of $162.5 million or $2.15 per share (before special items) compared with $115.4 million or $1.55 per share in 2010. The profits were higher than the Zacks Consensus Estimate of $2.03 per share.

Net sales for the year grew 13% to $2.6 billion from $2.3 billion in 2010. Non-GM sales rose 25% to $710.0 million from $567.7 million in 2010.

Gross profit was $455.1 million or 17.6% of sales, while operating profit was $223.4 million or 8.6% of sales during the year.

Financial Position

American Axle had cash and cash equivalents of $169.2 million as of December 31, 2011, down from $244.6 million as of December 31, 2010. Long-term debt increased to $1.2 billion from $1.0 billion as of December 31, 2010.

In 2011, American Axle had an operating cash outflow of $56.3 million compared with an inflow of $240.3 million in 2010. Meanwhile, capital expenditures (net) increased to $154.2 million from $103.4 million a year ago.

As a result, the company had a free cash outflow of $205.3 million during the year under review in contrast to an inflow of $136.9 million in the prior year. The free cash flow reflected the impact of $34.6 million of cash payments for special charges and restructuring actions (mainly related to the planned closure of Detroit Manufacturing Complex and Cheektowaga Manufacturing Facility) and $52 million of total pension funding, $26 million of which was accounted in the fourth quarter of 2011 in excess of the company’s minimum statutory funding requirements for 2011.

Our Take

American Axle is a leading supplier of driveline systems, modules and components for the light vehicle market. The company makes axles, driveshafts and chassis components for light trucks, sport utility vehicles and passenger cars.

The company’s continued leadership in the development of advanced driveline technology has helped it to grow new business backlog to $1.1 billion in future annual sales for programs launching from 2012 through 2014. However, due to higher customer concentration, the company retains a Zacks #3 Rank on its shares, which translates to a “Hold” rating for the short-term (1-3 months) and we have reiterated our recommendation of “Neutral” for the long-term (more than 6 months).