Meritor Reports Ninth Consecutive Quarter Of Double-Digit Earnings Growth
19 January 2000
Meritor Automotive Reports Ninth Consecutive Quarter Of Double-Digit Earnings Growth
TROY, Mich., Jan. 19 -- Meritor Automotive, Inc.
today reported sales of $1.1 billion and net income of $97 million, or
$1.45 per share, for its first fiscal quarter ended December 31, 1999. Sales
for the quarter increased by $192 million, or 20 percent, over the same period
last year. Net income, before special items, improved by $6 million to
$46 million, or $0.69 per share, an earnings per share increase of 19 percent
over the same period last year. Special items in the first quarter included a
one-time gain of $83 million ($51 million after-tax, or $0.76 per share),
resulting from the sale of the company's seat adjusting systems business.
Meritor Chairman and Chief Executive Officer, Larry D. Yost, said: "We
continued our strong earnings momentum in the first quarter, reporting our
ninth consecutive quarter of double-digit earnings growth before special
items. Our sales growth for the quarter reflects the contributions from our
three acquisitions completed in fiscal year 1999, continued strong demand in
our primary North American Heavy Vehicle Systems markets and market
penetration gains from Light Vehicle Systems new product introductions.
Higher sales, combined with our ongoing efforts to enhance operational
excellence, are driving the growth in earnings and operating margins."
First quarter operating margins improved to 7.7 percent, up from
7.3 percent for the same period last year. This improvement was driven by the
company's continued focus on cost reduction and process improvement programs
and the impact of restructuring actions initiated in late fiscal 1999, offset
somewhat by premium costs associated with the high level of demand in the
North American heavy truck market. Affiliate income was $9 million for the
quarter, up $2 million from the prior year's quarter, primarily as a result of
higher North American sales of anti-lock braking systems by the company's
joint venture with WABCO. Other income was $4 million lower than the first
quarter of fiscal 1999 when a $2.5 million non-recurring asset gain was
recorded. The company's first quarter effective tax rate improved to
38.5 percent, down from 40.0 percent for last year's first quarter, primarily
as a result of certain legal entity re-alignment actions.
As of December 31, 1999, the company had acquired 5,312,500 shares of its
outstanding common stock, at an aggregate cost of $97.5 million, pursuant to
its $125 million share repurchase program. To date, the company has
repurchased 6,465,000 shares at an aggregate cost of $119.3 million, or an
average of $18.45 per share. The program's first quarter impact was a
reduction of average shares outstanding from 69.1 million last year to
66.7 million this year, thereby benefiting earnings per share by $0.02.
Heavy Vehicle Systems
Heavy Vehicle Systems (HVS) sales were $730 million for the first quarter
of fiscal 2000, an increase of $172 million, or 31 percent, as compared to the
first quarter last year. The three acquisitions completed in fiscal 1999
contributed sales of $145 million, which more than offset a $42 million sales
decline resulting from the formation of the ZF Meritor joint venture on
September 1, 1999, which is accounted for under the equity method. Excluding
the effects of the acquisitions and the joint venture formation, sales of our
base HVS business increased $69 million, or 13 percent. This sales growth
reflects the continuing strength of the North American HVS Original Equipment
and Aftermarket markets, partially offset by a decline in the European trailer
market and the negative impact of currency translation. HVS sales in North
America, excluding acquisitions and transmission and clutch sales now reported
by the ZF Meritor joint venture, increased $69 million, or 18 percent.
European sales were down about $7 million, or 8 percent, and South American
sales were down $2 million, or 12 percent, while Asia/Pacific sales were up
about $9 million, or 75 percent.
HVS operating earnings for the first quarter of fiscal year 2000 were
$56 million, 24 percent higher than the same period a year ago. Operating
margins in the first quarter were 7.7 percent, down from 8.1 percent in last
year's first quarter due principally to higher premium and other
volume-related expenses incurred in connection with the strong demand in the
North American heavy truck market.
Light Vehicle Systems
Light Vehicle Systems (LVS) sales increased by $20 million, or 5 percent,
in the first quarter to $406 million, as compared to the same quarter last
year. Market penetration gains, principally in North American roof and
undercarriage systems, are driving the sales growth. LVS sales in North
America increased about $37 million, or 24 percent. LVS sales in Europe were
down $15 million, or 8 percent, primarily due to the negative impact of
currency translation, while sales in the rest of the world were down
$2 million.
LVS operating margins improved in the first quarter of fiscal 2000
to 7.6 percent from 6.2 percent in the same period last year. The improvement
reflects savings from material and cost reduction programs, as well as higher
sales.
Outlook
"Demand in our core markets continues at a rapid pace and we believe that
vehicle production levels will remain strong in our second fiscal quarter,"
said Yost. "In the second half of fiscal 2000, we anticipate the North
American heavy truck market will soften about 15 to 20 percent as compared to
the prior year. Our overall fiscal 2000 outlook is for moderately lower
volumes in the North American heavy truck and trailer markets and the European
trailer market. We also expect that North American and Western European light
vehicle markets for fiscal year 2000 will be down slightly from the prior
year.
"We expect continued strong financial performance by Meritor in fiscal
year 2000 with double-digit earnings growth. Our performance will reflect the
overall favorable global market and economic conditions, the benefits we'll
receive from the restructuring actions we initiated last year and our ongoing
process improvement efforts and rigorous 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," Yost said.
Meritor, with 1999 sales of $4.5 billion, is a global supplier of a broad
range of systems and components for commercial, specialty and light vehicle
OEMs and the aftermarket. Meritor consists of two businesses: Heavy Vehicle
Systems, a leading supplier of complete 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
suspension 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 will host a conference call to discuss its first-quarter results.
The call will take place today, January 19, 2000 at 10:00 a.m. (Eastern time).
Investors and interested parties can listen to the call real-time, or by
recording for 90 days. Visit the following Internet website:
http://www.vcall.com or link to it from Meritor's website shown above.
Meritor Automotive, Inc.
CONSOLIDATED STATEMENT OF INCOME
(Unaudited, $ in millions, except per share amounts)
Quarter Ended December 31,
1999 1998
Sales $ 1,136 $ 944
Cost of Sales 970 817
Gross Margin 166 127
Selling, General and Administrative 79 58
Operating Earnings 87 69
Equity in Earnings of Affiliates 9 7
Other Income-Net -- 4
Minority Interests (4) (3)
Gain on Sale of Business (a) 83 --
Interest Expense (17) (11)
Income Before Income Taxes 158 66
Provision for Income Taxes (61) (26)
Net Income $ 97 $ 40
Earnings Per Share
Basic $ 1.46 $ 0.58
Diluted $ 1.45 $ 0.58
Average Shares Outstanding (in millions)
Basic 66.6 69.1
Diluted 66.7 69.1
Before Special Items (a):
Income Before Income Taxes $ 75 $ 66
Net Income $ 46 $ 40
Earnings Per Share
Basic $ 0.69 $ 0.58
Diluted $ 0.69 $ 0.58
(a) Special items include the one-time gain of $83 million ($51 million
after-tax, or $0.77 and $0.76 basic and diluted earnings per share,
respectively) recorded in the first quarter of fiscal 2000 to reflect
the sale of the company's seat adjusting systems business.
Meritor Automotive, Inc.
CONSOLIDATED BUSINESS SEGMENT INFORMATION
(Unaudited, $ in millions)
Quarter Ended
December 31,
1999 1998
Sales:
Heavy Vehicle Systems:
Original Equipment $ 627 $ 493
Aftermarket 103 65
Total Heavy Vehicle Systems 730 558
Light Vehicle Systems 406 386
Total Sales $ 1,136 $ 944
Operating Earnings:
Heavy Vehicle Systems (a) $ 56 $ 45
Light Vehicle Systems 31 24
Total Operating Earnings $ 87 $ 69
(a) Includes goodwill amortization of $3 million for the quarter ended
December 31, 1999, related to the acquisitions of Volvo's heavy truck
axle manufacturing operations, LucasVarity's Heavy Vehicle Braking
Systems business and Euclid Industries.
Meritor Automotive, Inc.
SUMMARY CONSOLIDATED BALANCE SHEET
($ in millions)
December 31, September 30,
1999 1999
(Unaudited)
ASSETS
Cash $ 69 $ 68
Other Current Assets 1,239 1,264
Property, Net 724 766
Goodwill, Net 449 454
Other Assets 243 244
Total $ 2,724 $ 2,796
LIABILITIES AND SHAREOWNERS' EQUITY
Short-term Debt $ 28 $ 44
Other Current Liabilities 1,034 1,080
Accrued Retirement Benefits 364 371
Other Liabilities 101 116
Long-term Debt 820 802
Equity and Minority Interests 377 383
Total $ 2,724 $ 2,796
Meritor Automotive, Inc.
SUMMARY STATEMENT OF CONSOLIDATED CASH FLOWS
(Unaudited, $ in millions)
Quarter Ended December 31,
1999 1998
OPERATING ACTIVITIES
Net Income $ 97 $ 40
Adjustments to Net Income:
Depreciation 32 26
Amortization 4 1
Gain on Sale of Business (83) --
Other (1) 6
Changes in Assets and Liabilities:
Receivables (1) 51
Inventories (25) (2)
Accounts Payable (44) (80)
Other 19 (24)
CASH (USED FOR) PROVIDED BY
OPERATING ACTIVITIES (2) 18
INVESTING ACTIVITIES
Capital Expenditures (31) (19)
Acquisition of Businesses and Investments (10) (180)
Proceeds from Disposition of Property
and Businesses 135 --
CASH PROVIDED BY (USED FOR)
INVESTING ACTIVITIES 94 (199)
FINANCING ACTIVITIES
Net Increase in Debt 7 242
Cash Dividends (7) (7)
Purchase of Treasury Stock (91) --
Payment of Interest Rate Settlement Cost -- (31)
CASH (USED FOR) PROVIDED BY
FINANCING ACTIVITIES (91) 204
INCREASE IN CASH 1 23
CASH AT BEGINNING OF PERIOD 68 65
CASH AT END OF PERIOD $ 69 $ 88
Meritor Automotive, Inc.
HISTORICAL CONSOLIDATED BUSINESS SEGMENT INFORMATION
($ in millions)
Quarter Ended Year
(Unaudited) Ended
12/31/98 3/31/99 6/30/99 9/30/99 9/30/99
Sales:
Heavy Vehicle Systems:
Original Equipment $ 493 $ 637 $ 691 $ 639 $ 2,460
Aftermarket 65 115 116 119 415
Total Heavy
Vehicle Systems 558 752 807 758 2,875
Light Vehicle Systems 386 411 410 368 1,575
Total Sales $ 944 $ 1,163 $ 1,217 $ 1,126 $ 4,450
Operating Earnings (a):
Heavy Vehicle Systems $ 45 $ 67 $ 69 $ 52 $ 233
Light Vehicle Systems 24 32 39 38 133
Total Operating Earnings $ 69 $ 99 $ 108 $ 90 $ 366
(a) Excludes restructuring costs of $28 million ($17 million after-tax, or
$0.25 per share) recorded in the third quarter of fiscal 1999.
Quarter Ended Year
(Unaudited) Ended
12/31/97 3/31/98 6/30/98 9/30/98 9/30/98
Sales:
Heavy Vehicle Systems:
Original Equipment $ 490 $ 509 $ 529 $ 520 $ 2,048
Aftermarket 67 83 81 82 313
Total Heavy
Vehicle Systems 557 592 610 602 2,361
Light Vehicle Systems 354 376 393 352 1,475
Total Sales $ 911 $ 968 $ 1,003 $ 954 $ 3,836
Operating Earnings:
Heavy Vehicle Systems $ 46 $ 59 $ 56 $ 50 $ 211
Light Vehicle Systems 17 22 32 17 88
Total Operating Earnings $ 63 $ 81 $ 88 $ 67 $ 299