ArvinMeritor Reports Fiscal Year 2003 Third-Quarter Results
TROY, Mich., July 21 -- ArvinMeritor, Inc. today reported sales of $2.1 billion and net income of $47 million, or $0.69 per diluted share, for its third fiscal quarter ended June 30, 2003. Sales increased $226 million, or 12 percent, as compared to last year's third quarter. Foreign currency translation, driven by the stronger euro, favorably impacted sales by approximately $125 million, and the company's acquisition of Zeuna Starker added sales of $176 million in the third fiscal quarter. Sales would have been down without these items, as compared to the third quarter of fiscal year 2002. Net income declined $15 million, as compared to last year's third-quarter net income of $62 million, or $0.91 per diluted share. Results for the third quarter of fiscal year 2002 included a one-time gain on sale of business of $4 million after-tax, or $0.06 per diluted share.
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ArvinMeritor Chairman and Chief Executive Officer Larry Yost said, "Our results for the third fiscal quarter were negatively impacted by lower light vehicle production volumes in both North America and Western Europe, continued soft demand in our Light Vehicle Aftermarket business and reduced build rates in certain of our Commercial Vehicle Systems markets. We continue to identify aggressive actions in response to the current market conditions, including further rationalization of our engineering and manufacturing facilities, as well as other workforce consolidation and reduction activities."
Operating income for the third quarter of fiscal year 2003 was $97 million, compared to $122 million for the same period last year. Included in operating income in the third quarter of fiscal year 2002 was a $6-million gain on sale of business. Operating margin declined to 4.6 percent, from 6.5 percent in the third quarter of fiscal year 2002.
Equity in earnings of affiliates increased $4 million, primarily due to improved earnings from commercial vehicle affiliates. Net interest expense of $26 million was flat, compared to the same period last year. The effective tax rate was 32 percent in the third quarter of fiscal years 2003 and 2002. The company expects the full-year effective tax rate to approximate the third- quarter rate of 32 percent.
Specific business segment financial results include:
-- Light Vehicle Systems (LVS) sales were $1,195 million, up $211 million, or 21 percent, from the third quarter of fiscal year 2002. Foreign currency translation favorably impacted sales by approximately $85 million, as compared to the prior year's quarter, and the acquisition of Zeuna Starker added sales of $176 million. Operating margin was 3.8 percent, down from 6.0 percent in last year's third quarter. Lower volumes contributed to the operating margin decline, as did higher steel prices of $5 million in the third quarter of fiscal year 2003. LVS recorded restructuring costs in this year's third fiscal quarter of $3 million associated with previously announced programs. Savings of $4 million were realized from these restructuring actions.
-- Commercial Vehicle Systems (CVS) sales were $645 million, up $23 million, or four percent, from the third quarter of fiscal year 2002. Foreign currency translation increased sales by approximately $30 million, as compared to last year's third quarter. During the second quarter of fiscal year 2003, CVS sold net assets related to its off-highway planetary axle products. Sales of off-highway planetary axle products were approximately $30 million in the third quarter of fiscal year 2002. Excluding these items, sales were up in the third quarter of fiscal year 2003, despite a decline in North American Class 8 truck production. Higher trailer volumes in North America offset declines in North American and Western European truck volumes. Operating margin improved to 5.9 percent, up from 5.6 percent in last year's third quarter.
-- Light Vehicle Aftermarket (LVA) sales were $225 million, down $9 million, or four percent, from last year's third quarter. Foreign currency translation favorably impacted sales by roughly $10 million in the third quarter of fiscal year 2003. Operating income in the third quarter of fiscal year 2002 included a $6-million gain on the sale of the exhaust accessories manufacturing business. Operating margin was 4.4 percent, as compared to 11.1 percent (8.5 percent, excluding the one-time gain of $6 million) in the prior year's third quarter. During the third quarter of fiscal year 2003, LVA recorded restructuring costs of $2 million associated with previously announced restructuring actions. Lower volumes also contributed to the operating margin decline.
Nine-Month Summary
For the first nine months of fiscal year 2003, sales were $5.8 billion, up $675 million, or 13 percent, compared to the same period last year. The sales increase includes incremental Zeuna Starker revenues of $374 million and favorable currency translation of approximately $275 million. Operating income for the first nine months of fiscal year 2003 was $233 million, a decline of $19 million, compared to the same period last year, reflecting an operating margin of 4.0 percent, down from 4.9 percent last year.
Net income for the first nine months of fiscal year 2003 was $103 million, or $1.52 per diluted share, down from $108 million, or $1.61 per diluted share, before the cumulative effect of accounting change, in the same period last year. Net income in the first nine months of fiscal year 2002 included the cumulative effect of the goodwill accounting change of $42 million, or $0.62 per diluted share.
Outlook
"Our fiscal year 2003 outlook for light vehicle production is 15.9 million vehicles in North America and 16.4 million vehicles in Western Europe. Our outlook for Class 8 truck production in North America remains unchanged at 166,000 units for fiscal year 2003," Yost said. "Our outlook for diluted earnings per share for the fourth quarter of fiscal year 2003 is in the range of $0.43 to $0.48, before an expected gain on the sale of our exhaust tubing operations and further planned restructuring actions in our Light Vehicle Systems business.
"We recently announced that we had signed a definitive agreement to sell our Light Vehicle Systems Columbus, Ind., exhaust tube manufacturing operation to AK Tube LLC, a subsidiary of AK Steel Corporation. Although the sale is subject to regulatory approval, we expect to close the transaction in the fourth fiscal quarter and record a pre-tax gain."
Yost continued, "We continue to integrate Zeuna Starker into the ArvinMeritor organization and further consolidate our Light Vehicle Systems businesses to proactively address competitive challenges in the automotive supplier industry.
Planned restructuring actions include additional facility closures, business consolidations and workforce downsizing. We estimate total pre-tax costs of $20 million to $25 million and annualized pre-tax savings of approximately $20 million related to these actions. The fourth fiscal quarter impact of these actions has not been finalized."
ArvinMeritor, Inc. is a premier $7-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. The company is headquartered in Troy, Mich., and employs 32,000 people at more than 150 manufacturing facilities in 27 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: www.arvinmeritor.com .
All earnings per share amounts are on a diluted basis. The company's fiscal year ends on the Sunday nearest Sept. 30, and its fiscal quarters end on the Sundays nearest Dec. 31, March 31 and June 30. All year and quarter references relate to the company's fiscal year and fiscal quarters, unless otherwise stated.
ARVINMERITOR, INC.
STATEMENT OF CONSOLIDATED INCOME
(Unaudited, in millions, except per share amounts)
Quarter Ended Nine Months Ended
June 30, June 30,
2003 2002 2003 2002
Sales $2,109 $1,883 $5,811 $5,136
Cost of Sales (1,896) (1,667) (5,236) (4,590)
Gross Margin 213 216 575 546
Selling, General and Administrative (111) (100) (326) (285)
Restructuring Costs (5) - (16) (15)
Gain on Sale of Business - 6 - 6
Operating Income 97 122 233 252
Equity in Earnings (Losses) of
Affiliates 4 - 6 (1)
Interest Expense, Net and Other (26) (26) (78) (79)
Income Before Income Taxes 75 96 161 172
Provision for Income Taxes (24) (31) (52) (55)
Minority Interests (4) (3) (6) (9)
Income Before Cumulative Effect of
Accounting Change 47 62 103 108
Cumulative Effect of Accounting
Change - - - (42)
Net Income $47 $62 $103 $66
Diluted Earnings Per Share Before
Cumulative Effect of Accounting
Change $0.69 $0.91 $1.52 $1.61
Cumulative Effect of Accounting
Change - - - (0.62)
Diluted Earnings Per Share $0.69 $0.91 $1.52 $0.99
Diluted Average Shares Outstanding 67.8 68.0 67.6 67.0
ARVINMERITOR, INC.
CONSOLIDATED BUSINESS SEGMENT INFORMATION
(Unaudited, in millions)
Quarter Ended Nine Months Ended
June 30, June 30,
2003 2002 2003 2002
Sales:
Light Vehicle Systems $1,195 $984 $3,262 $2,734
Commercial Vehicle Systems 645 622 1,806 1,637
Light Vehicle Aftermarket 225 234 626 648
Other 44 43 117 117
Total Sales $2,109 $1,883 $5,811 $5,136
Operating Income:
Light Vehicle Systems $46 $59 $117 $148
Commercial Vehicle Systems 38 35 91 56
Light Vehicle Aftermarket 10 26 22 47
Other 3 2 3 1
Total Operating Income $97 $122 $233 $252
ARVINMERITOR, INC.
SUMMARY CONSOLIDATED BALANCE SHEET
(In millions)
June 30, September 30,
2003 2002
(Unaudited)
ASSETS
Cash $103 $56
Receivables 1,325 1,251
Inventories 549 458
Other Current Assets 259 211
Property, Net 1,343 1,179
Goodwill 915 808
Other Assets 670 688
Total $5,164 $4,651
LIABILITIES AND SHAREOWNERS' EQUITY
Short-term Debt $12 $15
Accounts Payable 1,308 1,123
Accrued and Other Current Liabilities 555 605
Other Liabilities 614 635
Long-term Debt 1,523 1,435
Preferred Capital Securities 39 39
Minority Interests 73 58
Equity 1,040 741
Total $5,164 $4,651
ARVINMERITOR, INC.
SUMMARY STATEMENT OF CONSOLIDATED CASH FLOWS
(Unaudited, in millions)
Nine Months Ended June 30,
2003 2002
OPERATING ACTIVITIES
Income Before Cumulative Effect of
Accounting Change $103 $108
Adjustments to Income:
Depreciation and Amortization 161 144
Restructuring costs, Net of Expenditures 3 7
Gain on Sale of business - (6)
Pension and Retiree Medical Expense 73 58
Pension and Retiree Medical Contributions (141) (103)
Change in Receivable Securitization 120 3
Changes in Assets and Liabilities (113) 40
CASH PROVIDED BY OPERATING ACTIVITIES 206 251
INVESTING ACTIVITIES
Capital Expenditures (119) (94)
Proceeds from Asset Dispositions 42 11
Other Investing Activities (104) (23)
CASH USED FOR INVESTING ACTIVITIES (181) (106)
FINANCING ACTIVITIES
Net Change in Debt 22 (494)
Proceeds from Issuance of Notes - 394
Purchase of Preferred Capital Securities - (18)
Proceeds from Stock Option Exercises - 20
Cash Dividends (20) (20)
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES 2 (118)
IMPACT OF CURRENCY ON CASH 20 6
CHANGE IN CASH 47 33
CASH AT BEGINNING OF PERIOD 56 101
CASH AT END OF PERIOD $103 $134