Meritor Automotive Reports Fiscal Year Sales
12 November 1997
Meritor Automotive Reports Record Fiscal Year Sales With Operating Earnings Up 15%
TROY, Mich., Nov. 12 -- Meritor Automotive, Inc. ,
formerly the Automotive business unit of Rockwell International Corporation
, today reported record sales of $3.3 billion and net income of
$109 million for its fiscal year ended September 30, 1997. Sales for 1997
were up by $165 million, or 5 percent above fiscal 1996, while operating
earnings, before restructuring and spin-off related costs, grew by $28
million, or 15 percent.
"Meritor's 1997 financial results represent a strong start toward the
achievement of our long-term financial goals to grow, on an average annual
basis, sales by 8 percent and earnings per share by 15 percent," said Meritor
Chairman and Chief Executive Officer Larry D. Yost. "The accelerated growth
in our operating income, before restructuring and spin-off related costs, is
due principally to the fiscal 1996 restructuring program as well as other
productivity and cost improvement programs resulting in operating margins of
6.3 percent for fiscal 1997, an improvement over 1996 margins of 5.8 percent.
We expect that our ongoing cost reduction and productivity improvement
programs, together with our global plans to launch new products, will further
strengthen our ability to achieve our sales growth and profitability goals."
In 1997, Meritor recorded a $21 million pre-tax restructuring charge, or
$16 million after taxes. Yost stated: "Our 1997 restructuring program
reflects further efforts to improve productivity, realize added cost
reductions and increase efficiencies in our global manufacturing processes.
These actions, which are already in progress, are expected to reduce ongoing
operating costs by an estimated $10 million per year, beginning in fiscal
1998." Meritor also recorded an $8 million charge, or $5 million after taxes,
in 1997 related to costs associated with its spin-off from Rockwell on
September 30, 1997. During fiscal 1996, the Company recorded a $36 million
pre-tax restructuring charge, or $24 million after taxes, related to costs
associated with plant consolidations, staff reductions and outsourcing
actions.
"Going into our first year as a public company," Yost said, "we see
opportunities for greater market penetration for both our Heavy Vehicle
Systems and Light Vehicle Systems businesses. Assuming generally favorable
economic conditions and the anticipated benefits of our restructuring
programs, our long-term average annual sales and EPS growth objectives should
be achievable in fiscal 1998; and we also anticipate an improvement of about
10 percentage points in our fiscal 1997 year end debt to total capitalization
ratio of 71 percent."
Net income for 1997 of $109 million was down 4 percent, or $5 million,
from 1996 net income of $114 million. The decline in 1997 net income resulted
primarily from a $31 million decline in other income, largely the result of
one-time gains in 1996, and a higher effective tax rate in 1997. One-time
gains in 1996 amounted to $29 million on a pre-tax basis, or $19 million after
taxes, and were related to an environmental insurance settlement, a sale of
real estate and a sale of a business. The effective tax rate in 1997 was 41.3
percent, up from the 37.6 percent rate in 1996, primarily due to a lower level
of foreign net operating loss utilization in 1997 and a refund of certain
foreign income taxes in 1996.
Fourth quarter sales for fiscal 1997 were $842 million, up 12.7 percent
from fourth quarter 1996 sales of $747 million. Fourth quarter operating
earnings, before restructuring and spin-off related costs, amounted to $46
million, a 12 percent increase over 1996. Other income declined by $20
million in the fourth quarter of fiscal 1997, chiefly as a result of the one-
time environmental insurance settlement gain in the fourth quarter of 1996.
Net income for the fourth quarters of both 1997 and 1996 was reduced by
restructuring charges, and the fourth quarter 1997 also included spin-off
related costs. Net income for the fourth quarter of 1997 of $9 million was
down $11 million compared to the same period in 1996, primarily due to the
decline in other income and a higher effective tax rate in 1997.
Pro forma earnings per share for 1997, before $.30 per share of
restructuring charges and spin-off related costs, were $1.74. Pro forma
earnings per share are calculated as though the 68.9 million Meritor shares
distributed by Rockwell in the September 30, 1997 spin-off, the $445 million
debt incurred to fund the pre-distribution payment made to Rockwell and an
estimated $11 million reduction in corporate costs, as compared to those
allocated by Rockwell, all occurred as of the beginning of fiscal 1997.
Heavy Vehicle Systems
Heavy Vehicle Systems sales grew to $2.0 billion in fiscal 1997, an
increase of $130 million, or 7 percent, over 1996. "The notable increase in
1997 sales of our Heavy Vehicle Systems business represents an all-time high,
even though industry volumes are generally below those of the previous three
years," Yost said. "Heavy Vehicle Systems sales growth was driven largely by
higher sales in North America which benefited from higher sales into the
aftermarket as well as greater market penetration by our truck drivetrain
products and trailer axle and brake products. Sales also increased in
emerging markets including Brazil and China, while sales declined in Europe,
where industry volumes were lower."
Light Vehicle Systems
Light Vehicle Systems also reported record sales of $1.3 billion, an
increase of $35 million, or 3 percent, over 1996. "Our strong Light Vehicle
Systems sales performance during fiscal 1997," Yost noted, "is tied to ongoing
growth in North America, although offset somewhat by a decline in European
sales, due principally to the currency translation impact of a stronger U.S.
dollar in 1997 and decreased sunroof demand. North American sales growth of
13 percent in generally flat light vehicle markets was chiefly the result of
stronger market penetration in steel wheels and door, access control, and seat
adjusting systems products."
Meritor, with 1997 sales of more than $3.3 billion, is a global supplier
of a broad range of components and systems for commercial, specialty and light
vehicles. Meritor consists of two businesses: Heavy Vehicle Systems, a
leading supplier of drivetrain systems and components for medium- and heavy-
duty trucks, trailers and off-highway equipment and specialty vehicles
including military, bus and coach, and fire and rescue; and Light Vehicle
Systems, a major supplier of roof, door, access control and seat adjusting
systems, electric motors and electronic controls, suspension systems and
wheels for passenger cars, light trucks and sport utility vehicles.
MERITOR AUTOMOTIVE, INC.
SALES AND EARNINGS INFORMATION
($ in millions)
Quarter Ended Year Ended
September 30 September 30
1997 1996 1997 1996
Sales
Heavy Vehicle Systems $538 $437 $1,957 $1,827
Light Vehicle Systems 304 310 1,352 1,317
Total Sales $842 $747 $3,309 $3,144
Gross Margin $106 $98 $438 $397
Selling, General and Administrative 60 57 228 215
Restructuring and Spin-Off Costs 29 30 29 36
Operating Earnings $17 $11 $181 $146
Other Income-net 5 25 15 46
Interest Expense (4) (2) (10) (10)
Income Before Income Taxes 18 34 186 182
Provision for Income Taxes (9) (14) (77) (68)
Net Income $9 $20 $109 $114
MERITOR AUTOMOTIVE, INC.
SUMMARY BALANCE SHEET
($ in millions)
September 30, September 30,
1997 1996
Assets:
Cash $133 $74
Other Current Assets 1,018 908
Property, net 635 643
Goodwill 42 45
Other Assets 174 160
Total $2,002 $1,830
Liabilities & Shareowners' Equity:
Current Liabilities $916 $742
Accrued Retirement Benefits 387 391
Other Liabilities 46 45
Long-term Debt 465 24
Equity & Minority Interest 188 628
Total $2,002 $1,830
MERITOR AUTOMOTIVE, INC.
PRO FORMA SALES AND EARNINGS INFORMATION
($ in millions, except per share)
Year Ended September 30, 1997
Pro Forma
Historical Adjustments (1) Pro Forma
Sales
Heavy Vehicle Systems $1,957 $ - $1,957
Light Vehicle Systems 1,352 - 1,352
Total Sales $3,309 $ - $3,309
Gross Margin $438 $ - $438
Selling, General and
Administrative 228 (11) 217
Restructuring and Spin-Off Costs 29 - 29
Operating Earnings $181 $11 $192
Other Income-net 15 - 15
Interest Expense (10) (28) (38)
Income Before Income Taxes 186 (17) 169
Provision for Income Taxes (77) 7 (70)
Net Income $109 $(10) $99
Pro Forma Earnings Per Share $1.44
Pro Forma Earnings Per Share
Before Restructuring and Spin-Off Costs $1.74
Shares Outstanding (in millions) 68.9
Pro Forma Quarterly Financial Information (1):
1997 Quarters
First Second Third Fourth Total
Sales $756 $822 $889 $842 $3,309
Pro Forma Net Income 25 33 35 6 99
Pro Forma Earnings Per Share $.36 $.48 $.51 $.09 $1.44
Pro Forma Earnings Per Share Before
Restructuring and Spin-Off Costs $.36 $.48 $.51 $.39 $1.74
(1) Pro Forma information reflects (a) the 68.9 million shares of common
stock issued at the date of the spin-off, (b) management's estimate that
corporate costs would have been $11 million lower on a stand-alone basis than
those allocated to the Automotive Business by Rockwell, and (c) $28 million of
interest expense at 6.0% for the year ended September 30, 1997 related to the
debt incurred by the Company in connection with the $445 million pre-
distribution payment to Rockwell.
SOURCE Meritor Automotive, Inc.