Arvin Reports Record First Quarter; Earnings per Share Increase 27%
21 April 1999
Arvin Reports Record First Quarter; Earnings per Share Increase 27%
COLUMBUS, Ind.--April 21, 1999--Arvin Industries, Inc. today reported record sales and earnings, before one-time items, for its fiscal first quarter of 1999. Sales were $738 million versus $593 million in the same quarter of 1998, an increase of 24 percent. Earnings were $17.3 million, or $0.71 per share, versus $13.5 million, or $0.56 per share, in the same quarter of 1998.One-time items included an after-tax gain on the sale of an investment in a Mexican shock absorber affiliate of $5.4 million, or $0.22 per share; the after-tax cost of a voluntary early retirement program for certain North American employees of $4.3 million, or $0.18 per share; and the after-tax effect of adopting SOP 98-5, which requires the write-off of previously deferred start-up costs of $0.5 million, or $0.02 per share. Including the effect of these three items, first quarter earnings after taxes were $17.9 million or $0.73 per share.
Bill Hunt, Arvin's Chairman, President and CEO, said, "Our O.E. segment sales benefited from strong North American vehicle production and an increased share of our customers' requirements. Although these effects were partially offset by slow start-ups of certain key new vehicle programs and weakness in the Brazilian and European markets, on balance we enjoyed a very good and profitable first quarter. I expect to expand margins going forward as the consolidation of our joint venture with Kayaba is fully integrated. Fundamentally, Arvin is very strong and should benefit from our customers' requirements for full systems on global platforms developed by a consolidating customer base.
"In the Replacement segment, Arvin enjoyed real growth before acquisitions despite softness in some market segments. Furthermore, our cost reduction efforts enabled us to report a margin rate modestly better than the rate in the same period of 1998. The integration of our recent acquisition of Purolator filter products is happening faster than we forecast, and we expect the payback on this first quarter transaction to come sooner as well.
"Our integration of the former WorldSource coil coating line is also proceeding well. Our Roll Coater management team has done an exemplary job of identifying ways to serve our appliance, construction and automotive customers even better with this new facility.
"Going forward, Arvin expects to see higher growth rates. 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. 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," Hunt continued.
"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.
"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.
"At our recent annual meeting of shareholders," Hunt concluded, "I indicated we intend to make 1999 the third consecutive record year for Arvin. We are off to a very good start."
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," "plans," "estimated earnings," "anticipate," "believe," and "intend." Information about potential factors identified by the Company, which would affect the actual financial results, are included in Exhibit 99 to the Company's Form 10-K for the year ended January 3, 1999.
Arvin Industries, Inc., is a global manufacturer of automotive components with over 60 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.
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.shtml. 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
------------------------------------
Apr. 4, 1999
--------------------------
As One-time Pro- Mar. 29
Reported Items (1) forma 1998 (2)
-------- --------- ----- --------
Net Sales:
Automotive Original Equipment $495.7 $ - $ 495.7 $ 407.0
Automotive Replacement 202.8 - 202.8 160.2
Other 39.9 - 39.9 26.2
---- ----- ---- ----
Net Sales $738.4 $ - $ 738.4 $ 593.4
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------ ------- ------- -------
Operating Income:
Automotive Original Equipment $ 30.0 $(4.1) $ 25.9 $ 22.2
Automotive Replacement 14.0 3.2 17.2 13.5
Other 1.9 .4 2.3 (2.3)
--- -- --- ----
Operating Income $ 45.9 $ (.5) $ 45.4 $ 33.4
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Net Sales $738.4 $ - $ 738.4 $ 593.4
Costs and Expenses:
Cost of goods sold 641.6 - 641.6 512.5
Selling, operating general
and administrative 53.4 - 53.4 44.3
Corporate general and
administrative 8.3 - 8.3 4.3
Interest expense 10.5 - 10.5 8.7
Other expense, net 2.7 .2 2.9 2.7
--- -- --- ---
716.5 .2 716.7 572.5
----- -- ----- -----
Earnings Before Income Taxes 21.9 (.2) 21.7 20.9
Income taxes (6.8) (.9) (7.7) (7.6)
Minority share of income .4 - .4 (.3)
Equity income of affiliates 2.9 - 2.9 .5
--- ----- --- --
Earnings before Cumulative Effect of
Accounting Change $ 18.4 $(1.1) $ 17.3 $ 13.5
Cumulative effect of accounting
change, net of income tax
benefits of $.3 (.5) .5 - -
----- --- ------ -----
Net Earnings $ 17.9 (.6) 17.3 $ 13.5
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Earnings Per Common Share
Basic:
Before cumulative effect
of accounting change $ .76 $(.05) $ .71 $ .57
Cumulative effect of
accounting change (.02) .02 - -
---- --- ----- -----
Total Basic $ .74 $(.03) $ .71 $ .57
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Diluted:
Before cumulative effect
of accounting change $ .75 $(.04) $ .71 $ .56
Cumulative effect of
accounting change (.02) .02 - -
---- --- ----- -----
Total Diluted $ .73 $ (.02) $ .71 $ .56
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------ ------- ------- -------
Average Common Shares Outstanding (000's)
Basic 24,151 24,151 23,530
Diluted 24,464 24,464 24,089
Dividends Declared per Common Share $ .21 $ .21 $ .20
(1) One-time items: early retirement expense, gain on sale of Gabriel
Mexico, & accounting change for start-up costs.
(2) There were no one-time items reported for the first quarter
of 1998.
Arvin Industries, Inc.
Consolidated Statement of Financial Condition
(Dollars in millions, except per share amounts)
Unaudited
As of As of As of
Assets 4/4/99 1/3/99 3/29/98
------ ------ ------ -------
Current Assets:
Cash and cash equivalents $ 28.8 $ 107.0 $ 108.1
Receivables, net of allowances 459.4 319.0 457.2
Inventories 200.1 151.3 124.9
Other current assets 118.1 103.7 85.2
----- ----- ----
Total current assets 806.4 681.0 775.4
----- ----- -----
Non-Current Assets:
Property, plant and equipment:
Land, buildings, machinery &
equipment 362.4 1,289.8 1,137.0
Less: Allowance for depreciation 699.5 704.0 644.5
----- ----- -----
662.9 585.8 492.5
Goodwill, net 281.3 170.2 165.1
Investment in affiliates 160.6 148.2 53.0
Other assets 61.8 61.3 55.6
---- ---- ----
Total non-current assets 1,166.6 965.5 766.2
------- ----- -----
$ 1,973.0 $ 1,646.5 $ 1,541.6
--------- --------- ---------
--------- --------- ---------
Liabilities and Shareholders' Equity
------------------------------------
Current Liabilities:
Short-term debt $ 153.3 $ 10.9 $ 35.3
Accounts payable 366.1 337.1 317.3
Employee related costs 57.4 63.3 52.8
Accrued expenses 109.8 105.6 108.9
----- ----- -----
Total current liabilities 686.6 516.9 514.3
----- ----- -----
Long-term debt 453.8 307.7 320.6
Long-term employee benefits 80.2 70.4 67.2
Other long-term liabilities 62.2 41.6 40.5
Minority interest 56.5 57.1 5.8
Capital securities 89.1 89.1 98.9
Shareholders' Equity:
Common shares ($2.50 par value) 68.8 68.8 65.6
Capital in excess of par value 306.3 305.2 249.5
Retained earnings 347.1 334.3 283.9
Cumulative translation adjustment (76.6) (41.3) (46.1)
Employee stock benefit trust (62.6) (64.7) (21.5)
Common shares held in
treasury (at cost) (38.4) (38.6) (37.1)
----- ----- -----
Total shareholders' equity 544.6 563.7 494.3
----- ----- -----
$ 1,973.0 $ 1,646.5 $ 1,541.6
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Arvin Industries, Inc.
Consolidated Statement of Cash Flows
(Dollars in millions)
Unaudited
Three Months Ended
------------------
April 4, March 29,
1999 1998 (1)
---- --------
Operating Activities:
Net earnings $ 17.9 $ 13.5
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation 25.8 20.9
Amortization 1.7 1.5
Minority interest (.4) .3
Gain on sale of investment (7.3) -
Change in deferred income tax benefit, net (.6) .6
Other 1.3 5.2
Changes in operating assets and liabilities:
Receivables (89.2) (67.2)
Inventories and other current assets (17.0) (6.3)
Accounts payable and other accrued expenses (14.4) 13.2
Income taxes payable and deferred taxes .9 5.6
-- ---
Net Cash Used for Operating Activities (81.3) (12.7)
----- -----
Investing Activities:
Purchase of property, plant and equipment, net (23.4) (16.1)
Proceeds from sale of investment 12.4 -
Investments in affiliates (2.1) (.3)
Business acquisitions, net of cash acquired (267.0) (8.7)
Other 4.8 1.3
--- ---
Net Cash Used for Investing Activities (275.3) (23.8)
------ -----
Financing Activities:
Change in short-term debt, net 134.7 (.9)
Proceeds from long-term financings 152.5 99.9
Principal payments on long-term financings (2.0) (20.4)
Change in discounted receivables (.7) (40.0)
Dividends paid (5.1) (4.7)
Other .1 2.7
-- ---
Net Cash Provided by Financing Activities 279.5 36.6
----- ----
Cash and Cash Equivalents:
Effect of exchange rate changes on cash (1.1) (.9)
---- ---
Net decrease (78.2) (.8)
Beginning of the year 107.0 108.9
----- -----
End of the period $ 28.8 $ 108.1
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(1) Certain amounts have been reclassified to conform with current
year presentation.