ArvinMeritor Reports First-Quarter Fiscal Year 2009 Results
TROY, Mich., February 4, 2009: ArvinMeritor, Inc. today reported financial results for its first fiscal quarter ended Dec. 28, 2008.
Sales from continuing operations of $1.4 billion, down $293 million, or 18 percent, from the same period last year (down 11 percent on a constant currency basis).
On a GAAP basis, net loss from continuing operations was $991 million or $13.71 per diluted share, compared to a net loss from continuing operations of $1 million or $0.01 per diluted share in the same period last year.
GAAP results reflect non-cash charges of $944 million, including valuation reserves for certain deferred tax assets, and other asset impairments primarily for Light Vehicle Systems (LVS) goodwill and fixed assets.
Loss from continuing operations, before special items, of $56 million, or $0.77 per diluted share, compared to income from continuing operations, before special items, of $6 million, or $0.08 per diluted share in the same period last year.
Free cash outflow (cash outflow from operations, net of capital expenditures) of $386 million compared to an outflow of $305 million in the first quarter of fiscal year 2008.
"Although significant volume declines and charges associated with the LVS business negatively affected our results this quarter, we are aggressively executing a series of actions to help mitigate the effects of the ongoing economic crisis," said Chip McClure, chairman, CEO and president.
"Through continued focus on reducing costs, strengthening the aftermarket business and gaining new military contracts, the Commercial Vehicle Systems (CVS) business performed well. Despite the severe downturn in heavy truck markets in most regions of the world, the CVS team was able to offset the negative volumes with minimal impact on performance. These results clearly underscore the validity of our aggressive Performance Plus cost savings and growth initiatives."
First-Quarter Fiscal Year 2009 Results
For the first quarter of fiscal year 2009, ArvinMeritor posted sales from continuing operations of $1.4 billion, a decrease of approximately 18 percent from the same period last year.
EBITDA, before special items, was $10 million, down $72 million from the same period last year. This decrease is primarily due to lower production volumes in most original equipment manufacturer market segments globally.
Loss from continuing operations, before special items, was $56 million, or $0.77 per diluted share, compared to income of $6 million, or $0.08 per diluted share, a year ago. Special items for the quarter reflect non-cash charges including valuation reserves for certain deferred tax assets, other asset impairments primarily related to LVS, restructuring charges and certain costs incurred in anticipation of the previously planned spin-off or sale of the LVS business.
Free cash outflow was $386 million in the first quarter of fiscal year 2009 compared with free cash outflow of $305 million in the same period last year. The decrease in free cash flow reflects lower cash earnings, higher inventories due to the dramatic rate of unplanned production declines, and previously announced settlement payments to resolve claims with certain unions and customers.
ArvinMeritor has implemented a number of initiatives to help manage cash, and is prepared to take additional actions if needed. Initiatives in process include:
-- Implemented workforce reductions of more than 1,500 employees. -- Extended shutdowns and reduced work weeks at all plants. -- Reduced and rebalanced capital spending. -- Initiated a 10-percent salary reduction for all U.S. executive-level employees; and a 5-percent reduction in salary for all other U.S. salaried employees, in addition to similar actions in other parts of the world. -- Eliminated matching contribution to the U.S. 401-K. -- Suspended merit increases for fiscal year 2009. -- Reduced discretionary spending by approximately 30 percent year-over- year. -- Reduced Board of Directors annual compensation by 10 percent. -- Suspended quarterly dividend.LVS Transaction
As previously announced, economic conditions do not support the company's strategy to divest the entire LVS business at this time. "Due to continued deterioration in the global markets, it is now our priority to complete the divestiture of these businesses separately at acceptable returns to shareowners," said McClure.
In January, the company executed multiple actions to reduce fixed costs within the LVS business, which are expected to result in $57 million in annual savings. These actions included the elimination of the LVS divisional organization, resulting in a headcount reduction of more than 100 positions. The Body and Chassis businesses are now being managed to realize maximum cost efficiencies, with additional actions currently under consideration.
The Wheels business, located in Brazil and Mexico, will be retained by ArvinMeritor.
ArvinMeritor's strong product position on a variety of military platforms continues to be a significant contributor to the company's results. These products clearly demonstrate the company's unique technology and advanced engineering competencies. ArvinMeritor anticipates additional business as its customers are awarded new contracts:
BAE awarded 8,400 additional Family of Medium Tactical Vehicles (FMTVs).
Navistar Defense awarded 400 more MaxxPro Dash vehicles, in addition to more than 800 previously awarded and delivered in January.
Navistar Defense awarded up to 1,300 medium support vehicles for the Canadian Department of National Defense.
Navistar Defense awarded 600 WorkStar variants for U.S. forces in Iraq.
Cash and Liquidity
At the end of the first quarter, the company had $158 million in cash and cash equivalents. The company is in compliance with the financial covenants in its material borrowing arrangements, including its $664 million revolving credit facility, of which $141 million (including $38 million in letters of credit) was utilized at the end of the quarter. ArvinMeritor maintains full access to committed securitization lines.
"ArvinMeritor is operating with the expectation that global markets will remain weak for an extended period of time," said McClure. "Given the deterioration of the market environment and the current global constraints on credit, the management team remains intensely focused on maintaining the liquidity necessary to operate our business. We expect to be in compliance with the financial covenants in our material borrowing arrangements for the remainder of the year and believe that the actions we are taking today will help position the company well when economics and volumes improve."