Meritor Automotive Reports Fiscal Q3 Earnings
21 July 1998
Meritor Automotive Reports Fiscal Third Quarter Earnings Per Share Increase 33 Percent; Sales up 13 Percent Quarterly Sales Top $1 Billion For First Time
TROY, Mich., July 21 -- Meritor Automotive, Inc.
, today reported a fiscal 1998 third quarter EPS gain of 33 percent
with related sales growth of 13 percent for its third quarter as a public
company, as compared to 1997 pro forma third quarter results. Quarterly sales
topped the billion-dollar mark for the first time at $1,003 million, an
increase of $114 million over the same period last year. This generated
operating earnings of $88 million, compared to $69 million last year, an
increase of $19 million or 28 percent. Net income was $47 million, or 68
cents per share, compared to $35 million, or 51 cents per share last year.
"Meritor's excellent third quarter results again demonstrate the continued
strength of our businesses and the ongoing strong demand in our markets," said
Meritor Chairman and Chief Executive Officer, Larry D. Yost. "Our sales
growth for the quarter was primarily driven by the continued strength of our
major markets and penetration gains across most of our products. We continue
to increase our penetration rates across most of our Heavy Vehicle Systems
products in North America and Light Vehicle Systems products in both North
America and Europe." Yost added, "Given the diversity of our customer base and
our moderate exposure to GM in North America, the GM strike had a negligible
effect on Meritor's third quarter results."
Third quarter operating margins improved to 8.8 percent from last year's
7.8 percent driven by the continued successful implementation of productivity
and cost improvement programs and higher incremental sales. Selling, general
and administrative expenses, as a percent of sales, held constant, despite
planned increased investments in information technology during fiscal 1998.
Other income for the third quarter was up $2 million over the third 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 $610 million for the third quarter of
fiscal 1998, an increase of $85 million, or 16 percent, compared to the third
quarter of fiscal 1997. The North American heavy truck market was up about 13
percent compared to last year's third quarter. Sales increased across most of
the company's heavy truck and trailer products, including axles,
transmissions, clutches 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 8 percent in the third quarter to
$393 million, an increase of $29 million over the third 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.
This growth was partially offset by the negative impact on European sales of
currency translation and lower European sunroof demand.
Nine-Month Summary
For the first nine months of fiscal 1998, sales were $2,882 million, up 17
percent over the same period a year ago with operating earnings improving by
35 percent from 1997 pro forma results. Operating margins increased to 8.0
percent for the first nine months, from 7.0 percent in last year's period on a
pro forma basis, reflecting savings generated from cost and productivity
improvement programs and higher sales.
Net income for 1998's first nine months was $124 million, or $1.79 per
share, up $31 million above last year's pro forma net income of $93 million,
or $1.35 per share. This was an improvement of 33 percent in earnings per
share.
"Our solid performance for Meritor's first nine months as a public company
is an excellent reflection of our focus on building shareowner value and
provides strong 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 said. "We anticipate a growth rate of more than 20
percent in the North American heavy truck market for fiscal 1998 over last
year. We estimate that the heavy truck market was up about 25 percent for the
first nine months of fiscal 1998 over last year.
However, we expect to see a more moderate growth rate -- in the 10 percent
range -- over last year's fourth quarter. Our fourth quarter is also
seasonably lower due to annual OEM model changeovers and plant shutdowns."
Yost added, "Although our sales in the Asia/Pacific region represent only 3
percent of our total annual sales volumes, 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 $3.3 billion, is a global supplier
of a broad range of components and systems for commercial, specialty and light
vehicles. Meritor consists of two businesses: Heavy Vehicle Systems, a
leading supplier of drivetrain systems and components for medium-and heavy-
duty trucks, trailers and off-highway equipment and specialty vehicles,
including military, bus and coach, and fire and rescue; and Light Vehicle
Systems, a major supplier of roof, door, access control and seat adjusting
systems, electric motors and electronic controls, suspension systems and
wheels for passenger cars, light trucks and sport utility vehicles.
This news release contains statements relating to future results that are
"forward-looking statements" as defined in the Private Securities Litigation
Reform Act of 1995. Actual results may differ materially from those projected
as a result of certain risks and uncertainties, including but not limited to
those detailed from time to time in the Company's Securities and Exchange
Commission filings.
For more information, visit the Meritor website at
http://www.meritorauto.com
MERITOR AUTOMOTIVE, INC.
SALES AND EARNINGS INFORMATION
($'s in millions, except per share amounts)
Quarter Ended Nine Months Ended
June 30, June 30,
1998 1997 (1) 1998 1997 (1)
Sales
Heavy Vehicle Systems $ 610 $ 525 $1,759 $1,419
Light Vehicle Systems 393 364 1,123 1,048
Total Sales $1,003 $ 889 $2,882 $2,467
Gross Margin $ 151 $ 125 $ 416 $ 332
Selling, General
and Administrative 63 56 184 160
Operating Earnings $88 $69 $ 232 $ 172
Other Income-Net 3 1 10 10
Interest Expense (11) (9) (32) (26)
Income Before Income Taxes 80 61 210 156
Provision for Income Taxes (33) (26) (86) (63)
Net Income $47 $35 $ 124 $93
Basic and Diluted
Earnings Per Share $0.68 $0.51 $1.79 $1.35
Average Shares Outstanding
(in millions) 69.0 68.9 69.0 68.9
(1) The quarter and nine months ended June 30, 1997 are presented on a pro
forma basis, see attached reconciliation from historical to pro forma.
MERITOR AUTOMOTIVE, INC.
PRO FORMA SALES AND EARNINGS INFORMATION
($ in millions, except per share amounts)
Quarter Ended Nine Months Ended
June 30, 1997 June 30, 1997
Pro Forma (1) Pro Forma (1)
Histor- Adjust Pro Histor- Adjust Pro
ical -ments Forma ical -ments Forma
Sales
Heavy Vehicle Systems$525 $-- $525 $1,419 $-- $ 1,419
Light Vehicle Systems 364 -- 364 1,048 -- 1,048
Total Sales $889 $-- $889 $2,467 $-- $ 2,467
Gross Margin $125 $-- $125 $332 $-- $332
Selling, General
and Administrative 58 (2) 56 168 (8) 160
Operating Earnings $ 67 $2 $69 $164 $8 $172
Other Income-Net 1 - 1 10 - 10
Interest Expense (2) (7) (9) (6) (20) (26)
Income Before
Income Taxes 66 (5) 61 168 (12) 156
Provision for
Income Taxes (28) 2 (26) (68) 5 (63)
Net Income $ 38 $(3) $35 $100 $(7) $93
Pro Forma Earnings
Per Share -- -- $0.51 -- -- $1.35
Shares Outstanding
(in millions) -- -- 68.9 -- -- 68.9
(1) 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 $2
million and $8 million lower on a stand-alone basis for the quarter
and nine months ended June 30, 1997 than those allocated to the
Automotive Business by Rockwell and (c) $7 million and $20 million of
interest expense at 6.0% for the quarter and nine months ended June
30, 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)
June 30, September 30,
1998 1997
ASSETS
Cash $68 $133
Other Current Assets 1,150 1,018
Property, Net 626 635
Goodwill 40 42
Other Assets 182 174
Total $2,066 $2,002
LIABILITIES & SHAREOWNERS' EQUITY
Short-term Debt $51 $ 21
Current Liabilities 896 895
Accrued Retirement Benefits 377 387
Other Liabilities 45 46
Long-term Debt 440 465
Equity & Minority Interest 257 188
Total $2,066 $2,002