Arvin Shareholders Told1999 to be the Third Consecutive Record Year
16 April 1999
Arvin Shareholders At Annual Meeting Told 1999 to be the Third Consecutive Record Year
COLUMBUS, Ind.--April 15, 1999--Arvin Industries, Inc. . Arvin shareholders were told today at the company's 61st annual meeting that 1998 was a record year for the company and 1999 would be the third consecutive year for record earnings.Byron O. Pond, Arvin's Chairman of the Board, who did not seek re-election to the Arvin Board of Directors, will retire today. He told approximately 300 attendees, "Arvin expects to see higher growth rates going forward. Recent events create tangible evidence that we are moving forward. The acquisition of WorldSource and Purolator, our investment in Zeuna Starker, and an expanded relationship with Kayaba have all been strong indications that we are building on what we know best."
Pond added, "The company is now prepared to assimilate and integrate expansion into the organization faster and better than ever before. This coupled with the company's new and higher standards for operating performance should create attractive returns as Arvin grows."
V. William Hunt, Arvin's President and Chief Executive Officer, told those gathered at the company's annual meeting that Arvin is committed to operational excellence.
"We have achieved operational excellence and we are enjoying the improved financial results that excellence drives. Arvin's commitment to operational excellence is embodied in the Arvin Total Quality Production System (ATQPS) and the many programs that support it. Since the adoption of ATQPS in 1992, our labor cost as a percent of sales has decreased by 14 percent (after wage, salary and benefit increases); our cost of quality, which includes the full cost of training, prevention and quality failure, has been reduced by 43 percent; our selling, general and administrative expense has been reduced by 29 percent largely through the application of the Arvin Total Quality Administrative Systems; and our inventory turnover has improved 64 percent.
"ATQPS does not stop at our factory gates," Hunt continued. "We have extended our quality programs throughout our supply chain. Arvin buys nearly $1.5 billion worth of components and raw materials annually. It is imperative that we manage our value chain as aggressively as we do our own operations. The proper management of our value chain represents our largest opportunity for cost reduction and quality improvement.
"Beyond value chain management, the next great opportunity for cost and quality improvement lies in implementing ATQPS principles in the engineering process and various stages of product launch processes," Mr. Hunt said.
"Leanness also applies to our organization structure. Today we have four business groups, each with its own President. These four Arvin executives have primary responsibilities for operational excellence and ever-improving financial results. Over the past three years our earnings per share have increased from $2.03 to $3.23 or 59 percent; our return on equity has increased from 11.6 percent to 15.1 percent; and our annual dividend rate has increased over 10 percent.
Our balance sheet has been strengthened and is conservatively managed. I have a high level of confidence that we will execute our growth plan successfully.
"Our criteria for growth are that each acquisition or joint venture must support our strategy, provide synergy with existing operations, fit the Arvin culture and meet Arvin's financial standards. Arvin financial standards are that each acquisition is earnings accretive in year one, supports achieving our return on equity target of over 15 percent and delivers returns in excess of our cost of capital. In addition to meeting these financial standards, each acquisition is subject to a rigorous strategic assessment of which key considerations are:
-- Can we achieve or maintain no. 1 or no. 2 market position? -- Can we leverage our core competencies? -- Can we enhance our technical capabilities? -- Can we penetrate growing markets? -- Can we deepen our existing customer relationships? -- And, can we broaden our customer base?
"Arvin is committed to grow to $5 billion in sales by the end of 2002," Mr. Hunt said.
Mr. Hunt also welcomed the newest members of the Arvin family to the annual shareholders meeting. They include, in Arvin's Original Equipment Exhaust, the 49 percent investment in the shares in Zeuna Starker. In Original Equipment Ride Control, the completion of the North American joint venture with Kayaba of Japan. Also included were Arvin Roll Coater's acquisition of WorldSource, and the acquisition of Purolator Products. Mr. Hunt concluded, "The addition of these four new businesses coupled with the continued excellent performance in our existing businesses makes us highly confident that 1999 will be yet another record year for Arvin."
Richard A. Smith, Vice President-Finance and Chief Financial Officer, highlighted Arvin's record 1998 financial performance. He reviewed recent trends in Arvin's relative stock performance, and some of the 1999 major financial objectives. "We are pleased to note that 1998 results were better than expected. During the last five years the price of Arvin stock has done well, and we think that operational excellence is the primary reason. Since the first of the year, however, the market has taken some of our stock performance back as the auto parts sector lags behind other indexes," Mr. Smith said.
"We have a number of high priority 1999 objectives. The ones the investment community has focused on include our ability to progress in the areas of operational excellence to world-class levels, and demonstrate that we can get a high return on capital from acquisitions and internal investments. In addition, we are expected to exceed expectations," Smith concluded.
In the business agenda of the Annual Meeting, shareholders voted to ratify the appointment of Price Waterhouse Coopers LLP as Arvin's certified public accountant for the current year, and elected four directors to serve three-year terms.
Elected to the Board of Directors for three-year terms were: Robert E. Fowler, Chairman and Chief Executive Officer of IMC Global Inc.; William D. George, Jr., Retired President and Chief Executive Officer of S.C. Johnson & Son Inc.; Arthur R. Velasquez, Chairman, President and Chief Executive Officer of Azteca Foods, Inc.; and Carolyn Y. Woo, Dean of the College of Business Administration and Professor of Management, University of Notre Dame.
Continuing Directors are: Joseph P. Allen, Chairman, Veridian Corporation (successor to Calspan SRL Corporation); Steven C. Beering, President of Purdue University; Joseph P. Flannery, Chairman, President and Chief Executive Officer of Uniroyal Holding, Inc.; Ivan W. Gorr, Former Chairman of the Board and Chief Executive Officer of Cooper Tire & Rubber Company; Richard W. Hanselman, Former Chairman and Chief Executive Officer of Genesco, Inc.; V. William Hunt, President and Chief Executive Officer of Arvin; Don J. Kacek, Chairman, President and Chief Executive Officer of Advanced Automation Technologies, Inc.; and Richard A. Smith, Vice President-Finance and Chief Financial Officer of Arvin.
Arvin Industries, Inc., is a global manufacturer of automotive components with over 50 manufacturing facilities and eight technical centers located in 21 countries. Arvin is a leading manufacturer of automotive exhaust systems; ride control products; air, oil and fuel filters; and gas charged lift supports. Our replacement products are sold under various trademarks including Arvin, Maremont, Timax, ANSA and ROSI exhaust systems; Gabriel shock absorbers; Purolator filters; and StrongArm gas charged lift supports.
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