Meritor Automotive Reports Fiscal Q2 Earnings
21 April 1998
Meritor Automotive Reports Fiscal Second Quarter Earnings Per Share Increase 33 Percent; Sales up 18 Percent
TROY, Mich., April 21 -- Meritor Automotive, Inc.
, today reported a fiscal 1998 second quarter EPS gain of 33
percent with related sales growth of 18 percent for its second quarter as a
public company, as compared to 1997 pro forma second quarter results. Sales
of $968 million, an increase of $146 million over the same period last year,
generated operating earnings of $81 million compared to $61 million last year,
an increase of $20 million or 33 percent. Net income was $45 million, or 64
cents per share, compared to $33 million, or 48 cents per share last year.
"Our solid performance for Meritor's second quarter as a public company
demonstrates the continued successful implementation of our productivity, cost
improvement and new business growth programs, as well as the continued
strength of our markets," said Meritor Chairman and Chief Executive Officer,
Larry D. Yost. "For the quarter, our sales growth was primarily driven by
ongoing strong demand in our major markets and penetration gains across most
of our businesses. The North American heavy truck market was up about 20
percent compared to last year's quarter, while light vehicle markets in North
America and Europe were up slightly over last year's period. We are also very
pleased with our higher penetration rates across most of our Heavy Vehicle
Systems businesses in North America and Light Vehicle Systems businesses in
both North America and Europe."
Second quarter operating margins improved to 8.4 percent from last year's
7.4 percent, with gross margins improving to 15.0 percent from 13.9 percent in
last year's quarter, driven by the ongoing impact of productivity and cost
improvement programs and higher incremental sales. Selling, general and
administrative expenses, as a percentage of sales, increased slightly,
primarily due to investments in information technology planned for fiscal
1998. Other income for the second quarter was up $4 million over the second
quarter last year primarily due to higher equity income from joint ventures
pertaining to the heavy truck and trailer markets.
Heavy Vehicle Systems
Heavy Vehicle Systems sales were $592 million in the second quarter of
fiscal 1998, an increase of $111 million, or 23 percent, compared to the
second quarter of fiscal 1997. Sales increased across all of the company's
heavy truck and trailer products, including axles, transmissions, clutches,
drivelines and brake systems, primarily as a result of the strong North
American heavy truck market, greater market penetration in North America and
improved volumes in the aftermarket. Sales also increased in Heavy Vehicle
Systems off-highway, specialty and military product lines.
Light Vehicle Systems
Light Vehicle Systems sales improved by 10 percent in the second quarter
to $376 million, an increase of $35 million over the second quarter of fiscal
1997. The sales growth was driven by penetration gains in the door,
suspension, access control and seat adjusting systems and wheel product lines
and somewhat higher industry volumes. This growth was partially offset by the
negative impact on European sales of currency translation and lower European
sunroof demand.
Six-Month Summary
For the first six months of fiscal 1998, sales were $1,879 million, up 19
percent over the same period a year ago with operating earnings improving by
40 percent from 1997 pro forma results. Operating margins increased to 7.7
percent for the first six months, from 6.5 percent in last year's period on a
pro forma basis, reflecting higher sales and savings generated from cost and
productivity improvement programs. Other income was lower for the first half
of fiscal 1998, as compared to 1997, primarily as a result of a one-time
insurance recovery of $5 million recorded in the first quarter of fiscal 1997.
Net income for 1998's first six months was $77 million, or $1.11 per
share, up $19 million over last year's pro forma net income of $58 million, or
84 cents per share. This was an improvement of 32 percent in earnings per
share.
"If current market conditions continue, we anticipate a growth rate of
about 20 percent in the North American heavy truck market for fiscal 1998. We
estimate that the heavy truck market was up in excess of 30 percent for the
first six months of fiscal 1998 over last year. However, we expect to see a
more moderate growth rate going forward -- in the 10 percent range -- for the
second half of 1998 in contrast to last year's environment," Yost said. "Our
performance for the first six months provides continued momentum for the
achievement of our stated long-term financial goals to grow, on an average
annual basis, sales by 8 percent and earnings per share by 15 percent." Yost
added, "At the same time, we continue to assess the economic situation in the
Asia/Pacific region and its potential effect on our businesses and served
markets."
Meritor, with 1997 sales of more than $3.3 billion, is a global supplier
of a broad range of components and systems for commercial, specialty and light
vehicles. Meritor consists of two businesses: Heavy Vehicle Systems, a
leading supplier of drivetrain systems and components for medium-and heavy-
duty trucks, trailers and off-highway equipment and specialty vehicles,
including military, bus and coach, and fire and rescue; and Light Vehicle
Systems, a major supplier of roof, door, access control and seat adjusting
systems, electric motors and electronic controls, suspension systems and
wheels for passenger cars, light trucks and sport utility vehicles.
This news release contains statements relating to future results that are
"forward-looking statements" as defined in the Private Securities Litigation
Reform Act of 1995. Actual results may differ materially from those projected
as a result of certain risks and uncertainties, including but not limited to
those detailed from time to time in the Company's Securities and Exchange
Commission filings.
MERITOR AUTOMOTIVE, INC.
SALES AND EARNINGS INFORMATION
($ in millions, except per share amounts)
Quarter Ended Six Months Ended
March 31, March 31,
1998 1997 (a) 1998 1997 (a)
Sales
Heavy Vehicle Systems $592 $481 $1,149 $894
Light Vehicle Systems 376 341 730 684
Total Sales $968 $822 $1,879 $1,578
Gross Margin $145 $114 $265 $207
Selling, General and
Administrative 64 53 121 104
Operating Earnings $81 $61 $144 $103
Other Income-Net 6 2 7 9
Interest Expense (11) (10) (21) (17)
Income Before Income
Taxes 76 53 130 95
Provision for Income
Taxes (31) (20) (53) (37)
Net Income $45 $33 $77 $58
Basic and Diluted
Earnings Per Share $0.64 $0.48 $1.11 $0.84
Average Shares Outstanding
(in millions) 69.0 68.9 69.0 68.9
(a) The quarter and six months ended March 31, 1997 are presented on a pro
forma basis, see following reconciliation from historical to pro forma.
MERITOR AUTOMOTIVE, INC.
PRO FORMA SALES AND EARNINGS INFORMATION
($ in millions, except per share amounts)
Quarter Ended March 31, 1997
Pro Forma (a)
Historical Adjustments Pro Forma
Sales
Heavy Vehicle Systems $481 $- $481
Light Vehicle Systems 341 - 341
Total Sales $822 - $822
Gross Margin $114 $- $114
Selling, General and
Administrative 57 (4) 53
Operating Earnings $57 $4 $61
Other Income-Net 2 - 2
Interest Expense (3) (7) (10)
Income Before Income Taxes 56 (3) 53
Provision for Income Taxes (22) 2 (20)
Net Income $34 $(1) $33
Pro Forma Earnings Per Share $0.48
Shares Outstanding (in millions) 68.9
Six Months Ended March 31, 1997
Pro Forma (a)
Historical Adjustments Pro Forma
Sales
Heavy Vehicle Systems $894 $- $894
Light Vehicle Systems 684 - 684
Total Sales $1,578 $- $1,578
Gross Margin $207 $- $207
Selling, General and
Administrative 110 (6) 104
Operating Earnings $97 $6 $103
Other Income-Net 9 - 9
Interest Expense (4) (13) (17)
Income Before Income Taxes 102 (7) 95
Provision for Income Taxes (40) 3 (37)
Net Income $62 $(4) $58
Pro Forma Earnings Per Share $0.84
Shares Outstanding (in millions) 68.9
(a) Pro forma information reflects (a) the 68.9 million shares of common
stock issued at the date of the spin-off from Rockwell International, (b)
management's estimate that corporate costs would have been $4 million and $6
million lower on a stand-alone basis for the quarter and six months ended
March 31, 1997 than those allocated to the Automotive Business by Rockwell and
(c) $7 million and $13 million of interest expense at 6.0% for the quarter and
six months ended March 31, 1997 related to the debt incurred by the Company in
connection with the $445 million pre-distribution payment to Rockwell.
MERITOR AUTOMOTIVE, INC.
SUMMARY BALANCE SHEET
($ in millions)
March 31, September 30,
1998 1997
ASSETS
Cash $67 $133
Other Current Assets 1,100 1,018
Property, Net 626 635
Goodwill 42 42
Other Assets 178 174
Total $2,013 $2,002
LIABILITIES & SHAREOWNERS' EQUITY
Short-term Debt $54 $21
Current Liabilities 880 895
Accrued Retirement Benefits 381 387
Other Liabilities 45 46
Long-term Debt 428 465
Equity & Minority Interest 225 188
Total $2,013 $2,002
SOURCE Meritor Automotive, Inc.