ArvinMeritor Reports Fiscal Year 2001 Third-Quarter Results
TROY, Mich., July 19 ArvinMeritor, Inc. today
reported sales of $1.8 billion and net income before special items of $29
million, or $0.44 per share, for its third fiscal quarter, ended June 30,
2001. Sales declined $263 million, or 13 percent, and net income before
special items decreased $55 million, or 65 percent, from the same period last
year. Special items in the third quarter of fiscal year 2001 include a net
favorable adjustment of $1 million related to the company's restructuring
actions. Special items in the third quarter of fiscal 2000 include charges of
$26 million related to the company's restructuring actions and a gain of $6
million on the sale of land.
"The weakened economy -- most notably the ongoing soft North American
Class 8 truck market and weak light vehicle replacement markets -- continues
to have a significant impact on our sales," said Larry Yost, ArvinMeritor's
chairman and CEO. "I'm pleased to report, however, that, as we mark our first
year as a new company, we see a slowing of the decline in these markets.
Moreover, the successful results of our recent integration efforts have fully
positioned us to take advantage of growth opportunities in every one of our
businesses."
Operating income before special items declined 52 percent from last year's
third quarter to $80 million, reflecting operating margin of 4.5 percent, down
from 8.0 percent a year ago. The decline in operating income and margin
continues to be driven primarily by Commercial Vehicle Systems (CVS)
operations, as a result of revenue declines in that segment of 26 percent from
the same period a year ago. Light Vehicle Systems (LVS) also contributed to
the decline in income and margin, as a result of pricing pressures, product
mix and the effect of a weak euro.
Affiliate income for the quarter continued to reflect the drop in North
American CVS markets, declining $12 million versus the prior year's comparable
quarter. Interest expense decreased $5 million from the third quarter of
fiscal 2000, reflecting lower debt levels and interest rates.
The third-quarter effective tax rate before special items of 33.5 percent
was down, as expected, from the third-quarter fiscal 2000 rate of 37.5
percent. This decrease was due to the ongoing legal entity restructuring,
which more closely aligns the company's organizational structure with the
underlying operations of the businesses. The company expects the tax rate for
the full year to approximate the nine-month rate of 33.5 percent.
ArvinMeritor continues to make progress in implementing existing
restructuring plans and has identified further restructuring plans,
aggregating $30 million, in addition to the $90 million announced in November
2000. These additional restructuring plans are the result of continuing
efforts to identify cost savings, and these amounts will be recorded as the
related actions are implemented. Restructuring actions in the third quarter
resulted in an increase in operating earnings of $1 million, due to the net
effect of approximately $9 million in restructuring charges, more than offset
by reversals of restructuring charges taken in previous quarters of fiscal
2001 of $10 million.
These reversals were primarily due to actions taken to
minimize severance costs related to cost-reduction programs in Europe.
Bill Hunt, ArvinMeritor's president and vice chairman, said, "By aligning
our strategic restructuring plans with our merger synergies, we have driven
down fixed costs and leveraged resources across the new organization. This
has allowed us to remain on track for achieving our fiscal year 2001
restructuring and merger synergy savings, which are expected to aggregate $80
million. As we move forward, we will continue to identify opportunities to
implement organizational excellence and enhance our ability to serve our
global customers' needs for advanced integrated solutions."
The company generated $295 million in operating cash flow for the first
nine months of fiscal 2001, excluding the impact of the $100-million accounts
receivable securitization program. This is a $13-million increase over the
operating cash flow of $282 million generated during the first nine months of
fiscal 2000 and reflects ArvinMeritor's strong and continuing emphasis on this
key financial measure. As a result of this strong cash generation from
operations, the company has reduced debt from the beginning of the year by
$180 million.
On July 11, the company announced a reduction in the quarterly dividend
from $0.22 to $0.10 per share. This action brings the company in line with
industry averages and provides the organization with additional financial
flexibility. Yost stated, "The cash that is conserved through this action
allows the company to increase investments in innovation, take advantage of
strategic growth opportunities, reduce debt and return value to our
shareowners through more tax-efficient means."
Specific business segment financial results include:
* ArvinMeritor LVS sales were down slightly in the third quarter to $961
million, as compared to $986 million in the third quarter of last year. LVS
operating margin fell to 6.3 percent, from 7.6 percent a year ago. Pricing
pressures from the vehicle producers will continue to make it difficult to
improve margin levels during the fourth quarter of fiscal 2001. The company
continues to work at offsetting these challenges with efforts to lower fixed
costs through synergy savings and restructuring actions.
* ArvinMeritor CVS sales were $559 million, down 26 percent from $754
million for the comparable period last year. CVS operating margin was 0.7
percent, down from 9.5 percent in the third quarter of last year. The decline
in the North American Class 8 commercial truck market was the major factor in
this margin decline. Current quarter margins declined 1.0 percentage point
from the 1.7 percent margin reported in the second quarter of this fiscal
year. This margin deterioration was a result of a decline in volume and
additional reserves of $7 million related to warranty and a CVS Aftermarket
customer's bankruptcy filing.
* ArvinMeritor Light Vehicle Aftermarket (LVA) sales were $235 million,
down 12 percent from $268 million, as compared to last year's third quarter.
Lower customer demand continues to result in depressed volumes in two of our
three product lines. LVA increased its operating margin during the third
quarter of fiscal 2001, to 7.2 percent, up from 5.6 percent in last year's
third quarter. This margin increase is primarily the result of improved
pricing and the impact of ongoing cost reductions.
Outlook
Yost said, "We're maintaining our previously published vehicle production
outlook for fiscal 2001, with North American Class 8 production at 135,000
units. In addition, we continue to see North American and European light
vehicle production at 15.9 million vehicles and 16.5 million vehicles,
respectively. We expect earnings in the fourth fiscal quarter ending
September 30, 2001, to be in the range of $0.25 to $0.30 per share. This
would result in earnings of $1.40 to $1.45 per share for the full fiscal
year."
ArvinMeritor, Inc. is a premier $7.0-billion global supplier of a broad
range of integrated systems, modules and components to the motor vehicle
industry. The company serves light vehicle, commercial truck, trailer and
specialty original equipment manufacturers and related aftermarkets. In
addition, ArvinMeritor is a leader in coil coating applications, including
those for the transportation, appliance, construction and furniture
industries. The company is headquartered in Troy, Mich., and employs 36,000
people at more than 150 manufacturing facilities in 26 countries.
ArvinMeritor common stock is traded on the New York Stock Exchange under the
ticker symbol ARM. For more information, visit the company's Web site at:
http://www.arvinmeritor.com .
The attached statements and comparisons to the prior period results
reflect ArvinMeritor financial performance on a pro forma basis, as if the
July 7, 2000 merger of Arvin Industries, Inc. and Meritor Automotive, Inc. had
been effected at the beginning of the comparable periods. All earnings per
share amounts are on a diluted basis. The pro forma data included in this
release is based upon historical information and management's current
estimates of the purchase price allocation, which may differ from the final
allocation, due to appraisals of fixed assets, other fair value adjustments
and the finalization of plans for restructuring. Prior periods' earnings per
share amounts, as reported, have been restated to conform to the .75-to-1
exchange of Meritor shares associated with the merger. Effective Oct. 1,
2000, the Company changed the date for the end of its fiscal year to the
Sunday nearest September 30. The Company's fiscal quarters end on the Sundays
nearest December 31, March 31 and June 30. All year and quarter references
relate to the Company's fiscal year and fiscal quarters, unless otherwise
stated.
This press release contains statements relating to future results of the
company (including certain projections and business trends) that are "forward-
looking statements" as defined in the Private Securities Litigation Reform Act
of 1995. Actual results may differ materially from those projected as a
result of certain risks and uncertainties, including, but not limited to,
global economic and market conditions; the demand for commercial, specialty
and light vehicles for which the company supplies projects; risks inherent in
operating abroad; OEM program delays; demand for and market acceptance of new
and existing products; successful development of new products; reliance on
major OEM customers; labor relations of the company, its customers and
suppliers; successful integration of acquired or merged business; competitive
product and pricing pressures; the amount of the company's debt; as well as
other risks and uncertainties, including, but not limited to, those detailed
from time to time in the filings of the company with the Securities and
Exchange Commission.
ArvinMeritor will host a conference call to discuss its fiscal year 2001
third-quarter results. The call will take place today, July 19, 2001, at
11:00 a.m. (ET). Investors and interested parties can listen to the call in
real-time by visiting http://www.arvinmeritor.com (audio and PowerPoint slides). The
call will also be available for seven days by dialing 1-800-633-8284
(858-587-5842 outside the U.S.) and using reservation #19180201, as well as
for 30 days at http://www.arvinmeritor.com .
ARVINMERITOR, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited, in millions, except per share amounts)
Quarter Ended Nine Months Ended
June 30, June 30,
Pro Forma Pro Forma
2001 2000 2001 2000
Sales $1,794 $2,057 $5,240 $6,042
Cost of Sales 1,597 1,755 4,682 5,184
Gross Margin 197 302 558 858
Selling, General and
Administrative 111 129 317 400
Amortization Expense 6 8 20 19
(Gain) on Sale of Business and
Other (1) - (6) - (89)
Restructuring Costs and Other
Charges (2) (1) 26 54 30
Operating Income 81 145 167 498
Equity in Earnings of Affiliates - 12 9 35
Non-Operating One-Time Items (3) - (5) - (3)
Interest Expense, Net and Other (33) (38) (106) (107)
Income Before Income Taxes 48 114 70 423
Provision for Income Taxes (16) (43) (23) (160)
Minority Interests, Net of Taxes (2) (3) (6) (5)
Net Income $30 $68 $41 $258
Diluted Earnings Per Share $0.46 $.96 $0.62 $3.57
Average Diluted Shares
Outstanding 65.9 71.0 66.3 72.2
Before Special Items (4):
Income Before Income Taxes $47 $139 $124 $367
Net Income $29 $84 $76 $225
Diluted Earnings Per
Share $0.44 $1.18 $1.15 $3.12
(1) Represents the one-time gain of $0.71 per share recorded in the first
quarter of fiscal 2000 to reflect the sale of the seat adjusting systems
business, and the one time gain of $0.04 per share recorded in the third
quarter of fiscal 2000 to reflect the sale of land.
(2) Represents restructuring costs and other charges of $0.45 per share,
$0.09 and $(0.02) per share recorded in the first, second and third 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 and restructuring costs of $0.23 per share recorded in the third quarter
of fiscal 2000.
(3) Represents the one-time gain of $0.04 per share recorded in the first
quarter of fiscal 2000, a one-time loss of $0.03 per share recorded in the
second quarter of fiscal 2000 and a one-time loss of $0.04 recorded in the
third quarter of fiscal 2000.
(4) Excludes the items discussed in Notes 1, 2 and 3 above. Pro Forma
information excludes merger expenses of $0.73 per share recorded in the third
quarter of fiscal 2000.
ARVINMERITOR, INC.
CONSOLIDATED BUSINESS SEGMENT INFORMATION
(Unaudited, in millions)
Quarter Ended Nine Months Ended
June 30, June 30,
Pro Forma Pro Forma
2001 2000 2001 2000
Sales:
Light Vehicle Systems $961 $986 $2,782 $2,869
Commercial Vehicle Systems 559 754 1,694 2,295
Light Vehicle Aftermarket 235 268 648 741
Other 39 49 116 137
Total Sales $1,794 $2,057 $5,240 $6,042
Operating Income:
Light Vehicle Systems $61 $75 $175 $192
Commercial Vehicle Systems 4 72 26 201
Light Vehicle Aftermarket 17 15 28 37
Other (2) 3 (8) 9
Segment Operating Income 80 165 221 439
Gain on Sale of Business
and Other - 6 - 89
Restructuring Costs and
Other Charges 1 (26) (54) (30)
Total Operating Income $81 $145 $167 $498
ARVINMERITOR, INC.
STATEMENT OF CONSOLIDATED CASH FLOWS
EXCLUDING SPECIAL ITEMS
(Unaudited, in millions)
Nine Months Ended
June 30,
Pro Forma
2001 2000
OPERATING ACTIVITIES
Net Income $76 $225
Adjustments to Net Income:
Depreciation and Amortization 162 195
Change in Working Capital 88 (112)
Sale of Receivables 100 -
Other (31) (26)
CASH PROVIDED BY OPERATING ACTIVITIES 395 282
INVESTING ACTIVITIES
Capital Expenditures (154) (229)
Other Investing Activities (9) 161
CASH (USED FOR) INVESTING ACTIVITIES (163) (68)
FINANCING ACTIVITIES
Net Change in Debt (170) (8)
Purchase of Preferred Capital Securities (10) -
Cash Dividends (44) (48)
Purchase of Treasury Stock (31) (123)
CASH (USED FOR) FINANCING ACTIVITIES (255) (179)
EFFECT OF EXCHANGE RATE CHANGES ON CASH (9) (14)
(DECREASE ) INCREASE IN CASH (32) 21
CASH AT BEGINNING OF PERIOD 116 68
CASH AT END OF PERIOD $84 $89
ARVINMERITOR, INC.
CONSOLIDATED STATEMENT OF OPERATIONS - AS REPORTED
(Unaudited, in millions, except per share amounts)
Quarter Ended Nine Months Ended
June 30, June 30,
2001 2000 2001 2000
Sales $1,794 $1,141 $5,240 $3,473
Cost of Sales 1,597 956 4,682 2,922
Gross Margin 197 185 558 551
Selling, General and
Administrative 111 75 317 238
Amortization Expense 6 5 20 13
(Gain) on Sale of Business and
Other (1) - (6) - (89)
Restructuring Costs (2) (1) 26 54 26
Merger Expense (3) - 2 - 2
Operating Income 81 83 167 361
Equity in Earnings of Affiliates - 7 9 24
Interest Expense, Net and Other (33) (19) (106) (54)
Income Before Income Taxes 48 71 70 331
Provision for Income Taxes (16) (27) (23) (127)
Minority Interests, Net of Taxes (2) (4) (6) (10)
Net Income $30 $40 $41 $194
Diluted Earnings Per Share $0.46 $.86 $0.62 $4.05
Average Shares Outstanding 65.9 46.7 66.3 47.9
Before Special Items (4):
Income Before Income Taxes $47 $93 $124 $270
Net Income $29 $54 $76 $157
Diluted Earnings Per Share $0.44 $1.16 $1.15 $3.28
(1) Represents the one-time gain of $1.06 per share recorded in the first
quarter of fiscal 2000 to reflect the sale of the seat adjusting systems
business, and the one time gain of $0.06 per share recorded in the third
quarter of fiscal 2000 to reflect the sale of land.
(2) Represents restructuring costs and other charges of $0.45 per share,
$0.09 and $(0.02) per share recorded in the first, second and third quarters,
respectively, of fiscal 2001 and $0.34 per share recorded in the third quarter
of fiscal 2000.
(3) Represents merger expenses of $0.01 per share recorded in the third
quarter of fiscal 2000.
(4) Excludes the items discussed in Notes 1, 2 and 3 above.
ARVINMERITOR, INC.
CONSOLIDATED BUSINESS SEGMENT INFORMATION - AS REPORTED
(Unaudited, in millions)
Quarter Ended Nine Months Ended
June 30, June 30,
2001 2000 2001 2000
Sales:
Light Vehicle Systems $961 $406 $2,782 $1,232
Commercial Vehicle Systems 559 735 1,694 2,241
Light Vehicle Aftermarket 235 - 648 -
Other 39 - 116 -
Total Sales $1,794 $1,141 $5,240 $3,473
Operating Income:
Light Vehicle Systems $61 $38 $175 $109
Commercial Vehicle Systems 4 67 26 191
Light Vehicle Aftermarket 17 - 28 -
Other (2) - (8) -
Segment Operating Income 80 105 221 300
Gain on Sale of Business
and Other - 6 - 89
Restructuring Costs and
Other Charges 1 (26) (54) (26)
Merger Expense - (2) - (2)
Total Operating Income $81 $83 $167 $361
ARVINMERITOR, INC.
SUMMARY CONSOLIDATED BALANCE SHEET
(in millions)
June 30, September 30,
2001 2000
(unaudited)
ASSETS
Cash $84 $116
Receivables 1,205 1,278
Inventories 480 583
Other Current Assets 206 212
Property, Net 1,210 1,348
Goodwill, Net 820 756
Other Assets 469 427
Total $4,474 $4,720
LIABILITIES AND SHAREOWNERS' EQUITY
Short-term Debt $86 $183
Accounts Payable 1,057 1,058
Accrued and Other Current
Liabilities 541 484
Other Liabilities 488 495
Long-term Debt 1,470 1,537
Preferred Capital Securities 64 74
Minority Interests 70 96
Equity 698 793
Total $4,474 $4,720
ARVINMERITOR, INC.
SUMMARY STATEMENT OF CONSOLIDATED CASH FLOWS - AS REPORTED
(Unaudited, in millions)
Nine Months Ended June 30,
2001 2000
OPERATING ACTIVITIES
Net Income $41 $194
Adjustments to Net Income:
Depreciation 142 95
Amortization 20 13
Restructuring,
Net of Expenditures 45 25
Gain on Sale of Business - (89)
Other (18) (14)
Changes in Assets
and Liabilities:
Accounts Receivable
Securitization 100 -
Receivables, Net of
Securitization Program (35) (84)
Inventories 85 4
Accounts Payable 23 (7)
Change in Other
Working Capital 5 23
Other (13) 3
CASH PROVIDED BY
OPERATING ACTIVITIES 395 163
INVESTING ACTIVITIES
Capital Expenditures (154) (116)
Other Investing Activities (9) (28)
Proceeds from Disposition of
Property and Businesses - 148
CASH (USED FOR) PROVIDED BY
INVESTING ACTIVITIES (163) 4
FINANCING ACTIVITIES
Net Change in Debt (170) (9)
Purchase of Preferred
Capital Securities (10) -
Cash Dividends (44) (20)
Purchase of Treasury Stock (31) (119)
CASH (USED FOR)
FINANCING ACTIVITIES (255) (148)
EFFECT OF EXCHANGE RATE
CHANGES ON CASH (9) (12)
(DECREASE) INCREASE IN CASH (32) 7
CASH AT BEGINNING OF PERIOD 116 68
CASH AT END OF PERIOD $84 $75