ArvinMeritor Reports Fiscal Year 2001 Second-Quarter
Results
TROY, Mich., April 25 ArvinMeritor, Inc. today
reported sales of $1.8 billion and net income before special items of $27
million, or $0.41 per share, for its second fiscal quarter, ended March 31,
2001. Sales declined $274 million, or 13 percent, and net income before
special items decreased $49 million, or 64 percent, from the same period last
year. Special items in the second quarter of fiscal year 2001 included net
charges of $9 million ($6 million after-tax, or $0.09 per share), related to
the company's restructuring actions.
"Reduced build rates for North American Class 8 trucks and light vehicles,
softness in demand in our replacement markets, coupled with weaker European
currencies, continue to have a negative impact on our revenues and earnings,"
said Larry Yost, ArvinMeritor's chairman and chief executive officer. "We
believe by continuing to implement aggressive cost reductions, as well as
initiating several other strategic actions, we will be well-positioned to grow
and return value to our shareowners in the future. The integration of Arvin
and Meritor is proceeding on target and we expect to continue to reap
financial benefits from synergies and shared services."
Operating income, before special items, declined 48 percent from last
year's second quarter to $77 million, reflecting operating margins of 4.3
percent, down from 7.2 percent a year ago. The decline in operating income
and margin continues to be driven primarily by the Commercial Vehicle Systems
(CVS) operations, as a result of revenue declines in that segment of 27
percent from the same period a year ago.
The second quarter of fiscal 2001 operating margin, before special items,
of 4.3 percent improved 0.4 percentage points, compared with first quarter
fiscal 2001 of 3.9 percent. This increase is a sign of lower fixed costs as a
result of restructuring actions and the growing impact of recent cost-saving
initiatives. Affiliate income for the quarter continued to reflect the drop
in North American CVS production, declining to $4 million versus $11 million
for the prior year's comparable quarter. Interest expense increased modestly
to $38 million from the prior year's comparable quarter, due primarily to
higher debt levels and increased borrowing rates resulting from a change in
the company's debt rating.
The second-quarter effective tax rate, before special items, of 32.5
percent was down as expected, reflecting a year-to-date effective rate of 33.5
percent. The company expects the tax rate for the full year to approximate
the six-month rate of 33.5 percent.
The company continues to make progress in implementing restructuring
plans, which were announced in November 2000. These charges will be recorded
throughout the full fiscal year as the related actions are implemented. In
the second quarter, special charges related to restructuring actions were $9
million ($6 million after-tax, or $0.09 per share). It is expected that
approximately $14 million in restructuring-related charges will occur in the
next two quarters of the current fiscal year. A restructuring charge of $46
million ($30 million after-tax, or $0.45 per share) was recorded in the first
quarter, which ended December 31, 2000.
Bill Hunt, ArvinMeritor's president and vice chairman, said, "We are
continuing to take the necessary steps to improve our businesses and
strengthen our financials. We are consolidating our facilities around the
world, improving our inventory levels, reducing working capital and
aggressively implementing a performance management process that will help take
costs out of the system throughout all of our operations."
Specific business segment financial results include:
* ArvinMeritor Light Vehicle Systems (LVS) sales decreased slightly in
the second quarter to $951 million, as compared to $978 million in the second
quarter of last year. LVS operating margin fell to 6.5 percent from 6.9
percent a year ago. However, margins improved 0.5 percentage points over the
6.0 percent margin reported in the first quarter of this fiscal year.
Continuing margin pressures from the vehicle producers will make it difficult
to improve margin levels throughout the full fiscal year, notwithstanding
efforts to lower fixed costs through synergy savings and restructuring
actions.
* ArvinMeritor Commercial Vehicle Systems (CVS) sales were $583 million,
down 27 percent from $794 million for the comparable period last year. CVS
operating margin was 1.7 percent, down from 8.8 percent in the second quarter
of last year. Volume decline outpaced the company's ability to lower its
fixed costs in the North American Class 8 commercial truck market and was the
major factor in the deteriorating margin for this segment in the year over
year comparison. Margins declined 0.5 percentage points from the 2.2 percent
margin reported in the first quarter of this fiscal year. Contributing to
this margin decline were start-up related costs associated with a CVS
Aftermarket distribution center in Europe. The distribution center issues are
not expected to continue into the remainder of the fiscal year.
* ArvinMeritor Light Vehicle Aftermarket (LVA) sales were $216 million,
down 11 percent from $244 million, as compared to last year's second quarter.
LVA operating margin was 3.7 percent, down from 4.1 percent in last year's
second quarter. The light vehicle aftermarket continues to be plagued with
depressed volumes generated by lower customer demand in all our product lines.
However, operating margin benefited from cost reduction actions and increased
2.2 percent in the second quarter from 1.5 percent reported in the first
quarter of this fiscal year. Actions continue to be implemented to restore
operating margins to their prior levels.
"Operating cash flow, excluding the impact of our $100 million accounts
receivable securitization program, for the first six months of this fiscal
year of $165 million, up $93 million from the prior year comparable period,
reflects our strong commitment to this key financial measure," Hunt said.
"The company continually reviews alternative uses of cash. In the past, these
actions have included new product and strategic investment, debt reduction,
share repurchase programs and dividend payments to shareowners. This quarter,
we added an accounts receivable securitization program to further enhance our
financial flexibility and lower our financing costs. In light of the severe
difficulties currently facing our industry, we will continue to proactively
evaluate conditions and implement appropriate actions to enhance shareowner
value while maintaining financial strength and flexibility."
Outlook
"Recently, we revised our vehicle production outlook for North American
Class 8 production down to 135,000 units from 160,000 units, reflecting the
continued backlog of new and used vehicles in the market," Yost said. "Our
North American and European light vehicle production estimates remain
unchanged at 15.9 million and 16.5 million, respectively. We continue to
adjust our cost structures to improve our operating efficiencies and expect
earnings in the third fiscal quarter, ending June 30, 2001, to be in the range
of $0.40 to $0.45 per share. We also reiterate our outlook for earnings of
$1.35 to $1.45 per share for the full fiscal year."
ARVINMERITOR, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited, in millions, except per share amounts)
Quarter Ended Six Months Ended
March 31, March 31,
Pro Forma Pro Forma
2001 2000 2001 2000
Sales $1,787 $2,061 $3,446 $3,985
Cost of Sales 1,598 1,766 3,085 3,429
Gross Margin 189 295 361 556
Selling, General and
Administrative 104 141 206 271
Amortization Expense 8 5 14 11
(Gain) on Sale of Business and
Other (1) - - - (83)
Restructuring Costs and Other
Charges (2) 9 - 55 4
Operating Income 68 149 86 353
Equity in Earnings of Affiliates 4 11 9 23
Non-Operating One-Time Items (3) - (3) - 2
Interest Expense, Net (38) (35) (73) (69)
Income Before Income Taxes 34 122 22 309
Provision for Income Taxes (11) (45) (7) (117)
Minority Interests, Net of Taxes (2) (3) (4) (2)
Net Income $21 $74 $11 $190
Diluted Earnings Per Share $0.32 $1.04 $0.17 $2.61
Average Diluted Shares
Outstanding 65.9 71.3 66.4 72.8
Before Special Items (4):
Income Before Income Taxes $43 $125 $77 $228
Net Income $27 $76 $47 $141
Diluted Earnings Per Share $0.41 $1.07 $0.71 $1.94
(1) Represents the one-time gain of $0.70 per share recorded in the first
quarter of fiscal 2000 to reflect the sale of the seat adjusting systems
business.
(2) Represents restructuring costs and other charges of $0.45 per share
and $0.09 per share recorded in the first and second quarters, respectively,
of fiscal 2001 and a $0.04 per share charge for an accounting method change
recorded in the first quarter of fiscal 2000 for pre-production costs.
(3) Represents the one-time gain of $0.04 per share recorded in the first
quarter of fiscal 2000 and the one-time loss of $0.03 per share recorded in
the second quarter of fiscal 2000.
(4) Excludes the items discussed in Notes 1, 2 and 3 above.
ARVINMERITOR, INC.
CONSOLIDATED BUSINESS SEGMENT INFORMATION
(Unaudited, in millions)
Quarter Ended Six Months Ended
March 31, March 31,
Pro Forma Pro Forma
2001 2000 2001 2000
Sales:
Light Vehicle Systems $951 $978 $1,821 $1,883
Commercial Vehicle Systems 583 794 1,135 1,541
Light Vehicle Aftermarket 216 244 413 473
Other 37 45 77 88
Total Sales $1,787 $2,061 $3,446 $3,985
Operating Income:
Light Vehicle Systems $62 $67 $114 $117
Commercial Vehicle Systems 10 70 22 129
Light Vehicle Aftermarket 8 10 11 22
Other (3) 2 (6) 6
Segment Operating Income 77 149 141 274
Gain on Sale of Business and Other - - - 83
Restructuring Costs and Other
Charges (9) - (55) (4)
Total Operating Income $68 $149 $86 $353
ARVINMERITOR, INC.
STATEMENT OF CONSOLIDATED CASH FLOWS
EXCLUDING SPECIAL ITEMS
(Unaudited, in millions)
Six Months Ended
March 31,
Pro Forma
2001 2000
OPERATING ACTIVITIES
Net Income $47 $141
Adjustments to Net Income:
Depreciation and Amortization 109 128
Change in Working Capital (6) (140)
Accounts Receivable Securitization 100 -
Other 15 (57)
CASH PROVIDED BY OPERATING ACTIVITIES 265 72
INVESTING ACTIVITIES
Capital Expenditures (103) (157)
Other Investing Activities (27) 154
CASH (USED FOR) INVESTING ACTIVITIES (130) (3)
FINANCING ACTIVITIES
Net Change in Debt (99) 144
Purchase of Preferred Capital Securities (10) -
Cash Dividends (29) (32)
Purchase of Treasury Stock (31) (123)
CASH (USED FOR) FINANCING ACTIVITIES (169) (11)
EFFECT OF EXCHANGE RATE CHANGES ON CASH (6) (9)
(DECREASE ) INCREASE IN CASH (40) 49
CASH AT BEGINNING OF PERIOD 116 68
CASH AT END OF PERIOD $76 $117
ARVINMERITOR, INC.
CONSOLIDATED STATEMENT OF OPERATIONS - AS REPORTED
(Unaudited, in millions, except per share amounts)
Quarter Ended Six Months Ended
March 31, March 31,
2001 2000 2001 2000
Sales $1,787 $1,196 $3,446 $2,332
Cost of Sales 1,598 1,000 3,085 1,966
Gross Margin 189 196 361 366
Selling, General and
Administrative 104 84 206 163
Amortization Expense 8 4 14 8
(Gain) on Sale of Business
and Other (1) - - - (83)
Restructuring Costs (2) 9 - 55 -
Operating Income 68 108 86 278
Equity in Earnings of Affiliates 4 8 9 17
Interest Expense, Net (38) (18) (73) (35)
Income Before Income Taxes 34 98 22 260
Provision for Income Taxes (11) (37) (7) (100)
Minority Interests, Net of Taxes (2) (4) (4) (6)
Net Income $21 $57 $11 $154
Diluted Earnings Per Share $0.32 $1.22 $0.17 $3.18
Average Shares Outstanding 65.9 46.9 66.4 48.4
Before Special Items (3):
Income Before Income Taxes $43 $98 $77 $177
Net Income $27 $57 $47 $103
Diluted Earnings Per Share $0.41 $1.22 $0.71 $2.13
(1) Represents the one-time gain of $1.05 per share recorded in the first
quarter of fiscal 2000 to reflect the sale of the seat adjusting systems
business.
(2) Represents restructuring costs and other charges of $0.45 per share
and $0.09 per share recorded in the first and second quarters, respectively,
of fiscal 2001.
(3) Excludes the items discussed in Notes 1 and 2 above.
ARVINMERITOR, INC.
CONSOLIDATED BUSINESS SEGMENT INFORMATION - AS REPORTED
(Unaudited, in millions)
Quarter Ended Six Months Ended
March 31, March 31,
2001 2000 2001 2000
Sales:
Light Vehicle Systems $951 $420 $1,821 $826
Commercial Vehicle Systems 583 776 1,135 1,506
Light Vehicle Aftermarket 216 - 413 -
Other 37 - 77 -
Total Sales $1,787 $1,196 $3,446 $2,332
Operating Income:
Light Vehicle Systems $62 $40 $114 $71
Commercial Vehicle Systems 10 68 22 124
Light Vehicle Aftermarket 8 - 11 -
Other (3) - (6) -
Segment Operating Income 77 108 141 195
Gain on Sale of Business and Other - - - 83
Restructuring Costs and Other
Charges (9) - (55) -
Total Operating Income $68 $108 $86 $278
ARVINMERITOR, INC.
SUMMARY CONSOLIDATED BALANCE SHEET
(in millions)
March 31, September 30,
2001 2000
(unaudited)
ASSETS
Cash $76 $116
Receivables 1,199 1,278
Inventories 520 583
Other Current Assets 216 212
Property, Net 1,232 1,348
Goodwill, Net 791 756
Other Assets 498 427
Total $4,532 $4,720
LIABILITIES AND SHAREOWNERS' EQUITY
Short-term Debt $79 $183
Accounts Payable 1,069 1,058
Accrued and Other Current Liabilities 495 484
Other Liabilities 507 495
Long-term Debt 1,534 1,537
Preferred Capital Securities 64 74
Minority Interests 73 96
Equity 711 793
Total $4,532 $4,720
ARVINMERITOR, INC.
SUMMARY STATEMENT OF CONSOLIDATED CASH FLOWS - AS REPORTED
(Unaudited, in millions)
Six Months Ended March 31,
2001 2000
OPERATING ACTIVITIES
Net Income $11 $154
Adjustments to Net Income:
Depreciation 96 63
Amortization 13 8
Restructuring, Net of Expenditures 50 -
Gain on Sale of Business - (83)
Other (6) (9)
Changes in Assets and Liabilities:
Accounts Receivable Securitization 100 -
Receivables, Net of Securitization Program (15) (101)
Inventories 48 (3)
Accounts Payable 10 (23)
Change in Other Working Capital (63) 16
Other 21 4
CASH PROVIDED BY OPERATING ACTIVITIES 265 26
INVESTING ACTIVITIES
Capital Expenditures (103) (74)
Other Investing Activities (27) (28)
Proceeds from Disposition of Property and
Businesses - 140
CASH (USED FOR) PROVIDED BY INVESTING
ACTIVITIES (130) 38
FINANCING ACTIVITIES
Net Change in Debt (99) 101
Purchase of Preferred Capital Securities (10) -
Cash Dividends (29) (14)
Purchase of Treasury Stock (31) (119)
CASH (USED FOR) FINANCING ACTIVITIES (169) (32)
EFFECT OF EXCHANGE RATE CHANGES ON CASH (6) (9)
(DECREASE) INCREASE IN CASH (40) 23
CASH AT BEGINNING OF PERIOD 116 68
CASH AT END OF PERIOD $76 $91
