Arvin Reports Record Fourth Quarter and Full Year Earnings
3 February 1999
Arvin Reports Record Fourth Quarter and Full Year Earnings; Earnings for the Year from Continuing Operations Increased 21%
COLUMBUS, Ind.--Feb. 3, 1999--Arvin Industries, Inc. , today reported that 1998 fourth quarter net earnings increased 18 percent to $20.4 million or $0.83 per share. This compares to last year's fourth quarter earnings of $17.3 million or $0.72 per share. Net sales for the fourth quarter increased 15 percent to $688.2 million compared to $598.5 million in 1997.For the year, earnings from continuing operations increased 21 percent to $78.4 million compared to $65.0 million in 1997. Earnings from continuing operations increased to a record $3.23 per share in 1998 compared to $2.78 per share in 1997. Total earnings for 1997 were $2.85 per share, which included a deferred gain on the sale of a discontinued operation of $0.07 per share. Net sales for 1998 increased over 6 percent to $2.5 billion compared to the prior year's net sales of $2.3 billion.
V. William Hunt, President and Chief Executive Officer, said, "1998 was another record year for Arvin. Record sales, record profit, and record dividends helped deliver a record stock price. It was an excellent year.
"Our commitment to world class quality, continuous improvement and customer service has helped make Arvin a preferred supplier to automakers and replacement customers worldwide. Arvin is committed to having the best quality and technology in today's competitive environment," Hunt added.
"In our Original Equipment (O.E.) segment, sales benefited from strong end-of-year car and light truck build rates in the United States and Europe and continued improvement in our O.E. ride control business. In 1998, Arvin supplied 9 out of the top 10 selling vehicles in the U.S. Arvin also benefited from several key platform start-ups by each of its largest global customers -- among them General Motors' GMT800 truck, Ford's F-series truck and new Focus passenger car, DaimlerChrysler's Neon and Grand Cherokee, and Toyota's Indiana-made Tundra truck.
"In our replacement segment, sales increased 7 percent for the year and 11 percent in the quarter as a result of high levels of service and increased sales of higher value added product. Our manufacturing processes continue to improve as a result of Arvin's Total Quality programs being implemented. These improvements have helped offset the negative impact of some soft spots in the replacement market," Hunt explained.
"In 1999," Hunt said, "we expect another record year. Our financial performance should continue to improve as Arvin assumes more full system work and provides even higher value added products to our customers. Based on present economic forecasts calling for a continued healthy economy in our major markets, we are comfortable with the current analysts' 1999 estimated earnings range of $3.45 to $3.55 per share.
"Arvin will continue to pursue a global automotive strategy based on total customer satisfaction and operational excellence. We will leverage our operational excellence over a higher sales volume resulting from increased market penetration through full system and corner assembly sales, increased demand for more sophisticated exhaust systems due to tighter emissions standards, new business won as a result of OEM customer outsourcing, and acquisitions. Our new global exhaust joint venture with Zeuna Starker will firmly establish our technical leadership in the global automotive market. Arvin should benefit from the growth of our key retail and wholesale customers in a consolidating replacement market. Additionally, Roll Coater, Arvin's pre-painted coil coating business, will benefit from the acquisition of WorldSource, which will significantly expand our geographic coverage and customer service capability. Arvin is well positioned to reach our goal of over $5 billion in annualized sales by the end of 2002," Hunt concluded.
All per share amounts are reported on a diluted common share basis. Certain information and statements included or implied are forward looking and involve certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied by these statements. These forward-looking statements are identified by their use of terms and phrases such as "expected," "expect," "should," "estimated earnings," "anticipate," and "believe." Information about potential factors identified by the Company which would affect the actual financial results is included in the Company's Form 8-K, filed January 3, 1997, with the SEC.
Arvin Industries, Inc., is a global manufacturer of automotive components with over 50 manufacturing facilities and eight technical centers located in 19 countries. Arvin is a leading manufacturer of automotive exhaust systems and ride control products. Our replacement products are sold under various trademarks including Arvin, Maremont, Timax, ANSA and ROSI for exhaust systems; Gabriel shock absorbers; and StrongArm gas charged lift supports.
For more information on Arvin Industries via the Internet, visit our Corporate Home Page at http://www.arvin.com or our Corporate News on the Net site at http://www.businesswire.com/cnn/arv.htm. For information via fax, please call our News On Demand service at 888-622-1161.
Arvin Industries, Inc.
Consolidated Results of Operations
(Dollars in millions, except per share amounts)
Unaudited
Three Months Ended Year Ended
-------------------- --------------------
1/3/99 12/28/97 1/3/99 12/28/97
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Net Sales:
Automotive Original
Equipment $ 488.9 $ 418.9 $ 1,693.0 $ 1,590.4
Automotive Replacement 166.3 149.3 685.7 643.4
Other 33.0 30.3 120.0 115.2
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Net Sales $ 688.2 $ 598.5 $ 2,498.7 $ 2,349.0
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Operating Income:
Automotive Original
Equipment $ 28.6 $ 28.5 $ 93.8 $ 89.7
Automotive Replacement 15.6 14.2 72.3 66.0
Other 2.6 2.4 4.6 15.6
--------- --------- --------- ---------
Operating Income $ 46.8 $ 45.1 $ 170.7 $ 171.3
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Net Sales $ 688.2 $ 598.5 $ 2,498.7 $ 2,349.0
Costs and Expenses:
Cost of goods sold 587.1 510.7 2,128.5 2,014.9
Selling, operating general
and administrative 54.2 43.2 191.5 165.6
Corporate general 8.3 4.0 24.3 19.0
and administrative
Interest expense 8.5 9.3 35.8 39.5
Other expense, net .4 4.6 5.9 12.1
--------- --------- --------- ---------
658.5 571.8 2,386.0 2,251.1
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Earnings Before Income
Taxes 29.7 26.7 112.7 97.9
Income taxes (10.7) (9.6) (38.3) (34.2)
Minority share of income (.3) (.9) (1.1) (3.8)
Equity income of
affiliates 1.7 1.1 5.1 5.1
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Earnings from Continuing
Operations 20.4 17.3 78.4 65.0
Income from disposal
of discontinued operations - - - 1.6
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Net Earnings $ 20.4 $ 17.3 $ 78.4 $ 66.6
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Earnings Per Common Share
Basic:
Continuing Operations $ .85 $ .74 $ 3.29 $ 2.83
Discontinued Operations - - - .07
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Total Basic $ .85 $ .74 $ 3.29 $ 2.90
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Diluted:
Continuing Operations $ .83 $ .72 $ 3.23 $ 2.78
Discontinued Operations - - - .07
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Total Diluted $ .83 $ .72 $ 3.23 $ 2.85
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Average Common Shares Outstanding (000's)
Basic 24,081 23,387 23,835 22,970
Diluted 24,464 23,960 24,249 23,382
Dividends Declared per Common Share
$ .21 $ .20 $ .81 $ .77
Arvin Industries, Inc.
Consolidated Statement of Financial Condition
(Dollars in millions, except per share amounts)
Unaudited
As of As of
Assets 1/3/99 12/28/97
------ --------- ---------
Current Assets:
Cash and cash equivalents $ 107.0 $ 108.9
Receivables, net of allowances 319.0 354.6
Inventories 151.3 124.5
Other current assets 103.7 81.4
--------- ---------
Total current assets 681.0 669.4
--------- ---------
Non-Current Assets:
Property, plant and equipment 1,289.8 1,133.5
Less: Accumulated depreciation 704.0 632.1
--------- ---------
585.8 501.4
Goodwill, net 170.2 165.9
Investment in affiliates 148.2 53.9
Other assets 61.3 56.5
--------- ---------
Total non-current assets 965.5 777.7
--------- ---------
$ 1,646.5 $ 1,447.1
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Liabilities and Shareholders' Equity
-------------------------------------
Current Liabilities:
Short-term debt $ 10.9 $ 55.6
Accounts payable 337.1 303.3
Employee related costs 63.3 57.6
Accrued expenses 105.6 104.7
--------- ---------
Total current liabilities 516.9 521.2
--------- ---------
Long-term debt 307.7 222.3
Long-term employee benefits 70.4 66.7
Other long-term liabilities 41.6 40.4
Minority interest 57.1 12.4
Capital securities 89.1 98.9
Shareholders' Equity:
Common shares ($2.50 par value) 68.8 65.6
Capital in excess of par value 305.2 248.8
Retained earnings 334.3 275.1
Cumulative translation adjustment (41.3) (41.8)
Employee stock benefit trust (64.7) (25.6)
Common shares held in treasury (at cost) (38.6) (36.9)
--------- ---------
Total shareholders' equity 563.7 485.2
--------- ---------
$ 1,646.5 $ 1,447.1
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Arvin Industries, Inc.
Consolidated Statement of Cash Flows
(Dollars in millions)
Unaudited
Year Ended
------------------------
January 3, December 28,
1999 1997 (1)
--------- -----------
Operating Activities:
Net earnings $ 78.4 $ 66.6
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation 84.8 79.1
Amortization 6.1 6.5
Minority interest 1.1 3.8
Gain on investment (5.5) -
Other (1.3) 5.9
Changes in operating assets and liabilities:
Receivables (3.7) (16.3)
Inventories and other current assets (37.0) (.7)
Accounts payable and other accrued expenses 37.3 51.8
Income taxes payable and deferred taxes 4.2 (1.8)
--------- ---------
Net Cash Provided by Operating
Activities 164.4 194.9
--------- ---------
Investing Activities:
Purchase of property, plant and equipment (123.2) (96.9)
Proceeds from sale of property, plant
and equipment 5.3 3.1
Proceeds from redemption of investment 9.6 -
Investments in affiliates (85.6) (11.1)
Business acquisitions, net of cash acquired (29.3) (19.5)
Cash proceeds from sale of business, net
of cash balance of business sold 6.9 3.7
Other (.4) 4.1
--------- ---------
Net Cash Used for Investing Activities (216.7) (116.6)
--------- ---------
Financing Activities:
Change in short-term debt, net 6.5 (45.7)
Proceeds from long-term financings 101.2 101.8
Principal payments on long-term financings (78.2) (38.0)
Change in discounted receivables 33.9 (17.3)
Dividends paid (24.1) (17.3)
Exercise of stock options 13.4 14.2
Other (.9) (4.9)
--------- ---------
Net Cash Provided by (Used for)
Financing Activities 51.8 (7.2)
--------- ---------
Cash and Cash Equivalents:
Effect of exchange rate changes on cash (1.4) (1.6)
--------- ---------
Net (decrease)/increase (1.9) 69.5
Beginning of the year 108.9 39.4
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End of the period 107.0 $ 108.9
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(1) Certain amounts have been reclassified to conform with current
year presentation