Meritor Automotive Reports Record Quarterly Sales and Profits
20 April 1999
Meritor Automotive Reports Record Quarterly Sales and Profits
TROY, Mich., April 20 -- Meritor Automotive, Inc.
today reported record sales of $1.2 billion and record net income of
$50 million, or $.72 per share, for its second fiscal quarter ended March 31,
1999. Sales for the quarter, which include $122 million from recent
acquisitions, increased by $195 million, or 20 percent, over the same period
last year. Excluding acquisition sales and the related neutral earnings per
share impact, sales increased by $73 million, or 8 percent, and earnings per
share increased by $.08, or 13 percent.
Meritor Chairman and Chief Executive Officer, Larry D. Yost said: "Since
becoming a public company on October 1, 1997, Meritor has achieved
six consecutive quarters of double-digit earnings growth, improved operating
margins and recorded strong sales growth. Our sales growth for the second
quarter includes the results of our three recent acquisitions, as well as
market penetration gains from new Light Vehicle Systems product introductions
and continued strong demand in our primary Heavy Vehicle Systems markets."
Second quarter operating margins improved to 8.5 percent, up from 8.4
percent last year. This improvement reflects the ongoing impact of the
company's process improvement and cost reduction programs, which more than
offset the impact of Meritor's three recent acquisitions. Excluding the
impact of acquisitions, Meritor's second quarter operating margins improved by
40 basis points to 8.8 percent.
In late December 1998, Meritor completed the acquisitions of Euclid
Industries, a leading supplier of aftermarket replacement parts for
medium- and heavy-duty vehicles, and Volvo Truck Corporation's European heavy
truck axle manufacturing operations. Additionally, on January 29, 1999,
Meritor completed the acquisition of LucasVarity's Heavy Vehicle Braking
Systems business. As a result of these three acquisitions, the company's
long-term debt to capitalization ratio increased to 74 percent at March 31,
1999, from 51 percent at September 30, 1998. However, after considering the
acquisitions, Standard & Poor's and Moody's reaffirmed their respective
"BBB/Baa2" credit ratings of Meritor's debt.
Heavy Vehicle Systems
Heavy Vehicle Systems (HVS) sales were $752 million for the second quarter
of fiscal 1999, an increase of $160 million, or 27 percent, as compared to
the second quarter of fiscal 1998. Excluding the impact of acquisitions, base
HVS sales increased by $38 million or 6 percent. This sales growth reflects
the continued strength of the North American heavy truck market, partially
offset by anticipated government program changeovers and weaker sales in
Brazil. Base HVS sales in North America increased by $55 million, or 12
percent, while European sales were flat and South American sales were down
about $10 million. The company's North American sales increase is net of a
$25 million sales decline related to planned government program changeovers.
Light Vehicle Systems
Light Vehicle Systems (LVS) sales improved by 9 percent during the second
fiscal quarter to $411 million, an increase of $35 million over the same
period in 1998. Market penetration gains, principally fueled by Meritor's new
door module and seat adjusting system products, drove the sales growth.
LVS sales in North America increased by about $35 million, or 23 percent,
while Asia Pacific sales were up around $5 million. European LVS sales were
generally flat and South American sales were down roughly $5 million.
Six Month Summary
For the first six months of fiscal 1999, Meritor's sales were
$2.1 billion, up 12 percent over the same period last year, generating
operating earnings of $168 million, an increase of 17 percent over 1998
results. Operating margins increased to 8.0 percent for the first six months
of 1999, from 7.7 percent for the same period last year, reflecting higher
sales and savings generated from cost and productivity improvement programs,
offset somewhat by the impact of the company's three acquisitions.
Net income for fiscal 1999's first six months was $90 million, or $1.30
per share, up 17 percent from last year's net income of $77 million, or $1.11
per share.
Outlook
Yost stated: "We continue to evaluate the overall global economic
environment and the current outlook for our major served markets remains
strong. In North America, we forecast light vehicle production to be up in
fiscal 1999 by about 6 percent. We expect the North American heavy- and
medium-duty truck markets, which accounted for 24 percent of the company's
1998 sales, will achieve all-time record production levels exceeding
280,000 and 165,000 units, respectively. During fiscal 1999, we estimate
European light vehicle production to be about even with the prior year, and
heavy truck production levels to be down moderately. As a result of the
strength, diversity and balance of our products and served markets, we expect
to perform well in this environment, with earnings growth in the mid-teens for
the second half of the fiscal year, including the modestly accretive impact of
our three acquisitions."
Yost continued: "To enhance our long-term shareowner value, Meritor is
pursuing several strategies. These include balanced global growth, strategic
business development through selective acquisitions, divestitures and
alliances, and improved operating performance through our continuous process
improvement and cost reduction programs. We remain confident about, and
committed to, achieving our stated long-term financial goals to grow
internally, on an average annual basis, sales by 8 percent and earnings per
share by 15 percent."
Meritor, with 1998 sales of more than $3.8 billion, is a global supplier
of a broad range of components and systems for commercial, specialty and light
vehicle OEMs and the aftermarket. 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,
suspension and seat adjusting systems, and wheel products 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.
Consolidated Sales and Earnings Information
(Unaudited, $ in millions, except per share amounts)
Quarter Ended Six Months Ended
March 31, March 31,
1999 1998 1999 1998
Sales
Heavy Vehicle Systems $ 752 $ 592 $ 1,310 $ 1,149
Light Vehicle Systems 411 376 797 730
Total Sales $ 1,163 $ 968 $ 2,107 $ 1,879
Gross Margin $ 171 (a) $ 145 $ 298 (a) $ 265
Selling, General and
Administrative 72 64 130 121
Operating Earnings $ 99 $ 81 $ 168 $ 144
Other Income-Net 4 6 12 7
Interest Expense (19) (11) (30) (21)
Income Before Income Taxes 84 76 150 130
Provision for Income Taxes (34) (31) (60) (53)
Net Income $ 50 $ 45 $ 90 $ 77
Basic and Diluted
Earnings Per Share $ 0.72 $ 0.64 $ 1.30 $ 1.11
Average Shares Outstanding
(in millions) 69.1 69.0 69.1 69.0
(a) Includes $2.1 million of goodwill amortization related to the
acquisitions of Volvo's heavy truck axle manufacturing operations,
LucasVarity's Heavy Vehicle Braking Systems business and Euclid
Industries.
MERITOR AUTOMOTIVE, INC.
Summary Consolidated Balance Sheet
(Unaudited, $ in millions)
March 31, September 30,
1999 1998
ASSETS
Cash $ 49 $ 65
Other Current Assets 1,315 1,151
Property, Net 780 666
Goodwill, Net 470 39
Other Assets 188 165
Total $ 2,802 $ 2,086
LIABILITIES & SHAREOWNERS' EQUITY
Short-term Debt $ 42 $ 34
Current Liabilities 1,067 1,020
Accrued Retirement
Benefits 388 378
Other Liabilities 84 44
Long-term Debt 909 313
Equity & Minority
Interests 312 297
Total $ 2,802 $ 2,086
MERITOR AUTOMOTIVE, INC.
Summary Statement of Consolidated Cash Flows
(Unaudited, $ in millions)
Six Months Ended
March 31,
1999 1998
OPERATING ACTIVITIES
Net Income $ 90 $ 77
Adjustments to Net Income
Depreciation and Amortization 58 51
Pension Contributions (10) (10)
Other 22 14
Changes in Assets and Liabilities (122) (70)
CASH PROVIDED BY OPERATING
ACTIVITIES 38 62
INVESTING ACTIVITIES
Capital Expenditures (50) (49)
Acquisition of Businesses
and Other (577) (5)
CASH USED FOR INVESTING
ACTIVITIES (627) (54)
FINANCING ACTIVITIES
Net Increase (Decrease) in Debt 618 (1)
Cash Dividends (14) (15)
Payment of Interest Rate
Settlement Cost (a) (31) --
Payment of Distribution
Tax Obligation, net -- (58)
CASH PROVIDED BY (USED FOR)
FINANCING ACTIVITIES 573 (74)
DECREASE IN CASH (16) (66)
CASH AT BEGINNING OF PERIOD 65 133
CASH AT END OF PERIOD $ 49 $ 67
(a) Represents payment of the one-time charge of $31 million ($19 million
after-tax or $.27 per share) relating to the settlement of interest
rate agreements which was accrued in the fourth quarter of fiscal
1998.