Meritor Automotive Reports EPS Up 26 Percent, Sales Up 3 Percent
19 April 2000
Meritor Automotive Reports EPS Up 26 Percent, Sales Up 3 Percent; Reflecting Tenth Consecutive Quarter of Double-Digit Earnings Growth
TROY, Mich., April 19 Meritor Automotive, Inc. (NYSE: MRA)
today reported fiscal 2000 second quarter earnings per share of $0.91, up 26
percent over last year's second quarter of $0.72 per share. Sales for the
second quarter were $1.2 billion, an increase of $33 million, or 3 percent,
over the same period last year, with record operating margins of 9.0 percent,
50 basis points better than a year ago. Net income for the second quarter was
$57 million, an increase of 14 percent.
Meritor Chairman and Chief Executive Officer, Larry D. Yost said, "Our
second quarter performance highlights ten consecutive quarters of double-digit
EPS growth. Our track record demonstrates that the strength, balance and
diversity of our business drives the delivery of consistent earnings growth.
We saw strong demand in most of our Light-and Heavy Vehicle Systems markets
and we benefited from market penetration gains. We remain committed to
delivering profitable growth in all our businesses with continuing emphasis on
operational excellence."
Operating margins improved to a record 9.0 percent in the second quarter,
up from 8.5 percent for the same period last year. Several initiatives drove
this improvement, including the company's ongoing focus on cost reduction and
process improvement programs and the impact of restructuring actions initiated
in late fiscal 1999, which more than offset higher information technology
expenditures related to enterprise resource planning systems. The company's
second quarter effective tax rate improved to 38.5 percent, down from
40.0 percent for last year's second quarter, primarily as a result of legal
entity realignment actions.
As of March 31, 2000, the company had acquired 6,827,200 shares of its
outstanding common stock, at an aggregate cost of $125.5 million, pursuant to
its share repurchase programs. The programs' second quarter impact was a
reduction of average shares outstanding from 69.1 million last year to
62.5 million this year, thereby benefiting earnings per share by $0.07.
Heavy Vehicle Systems
Heavy Vehicle Systems (HVS) sales were $776 million for the second quarter
of fiscal 2000, an increase of $24 million, or 3 percent, as compared to the
second quarter last year. This sales growth reflects strong demand in the
North American and European heavy-duty truck markets and higher aftermarket
sales, partially offset by declines in the North American off-highway and
specialty vehicle sectors. HVS sales in North America were down $7 million,
or 1 percent, reflecting an increase in ongoing sales of $35 million, or
7 percent, which was more than offset by a $42 million decline in transmission
and clutch sales now reported by the ZF Meritor joint venture under the equity
basis of accounting. The increase in ongoing North American sales was driven
by higher sales of truck and trailer axles, offset somewhat by lower
off-highway and specialty vehicle sales. European sales were up $18 million,
or 11 percent, and reflect an increase in sales volumes of $33 million, offset
by the negative impact of currency exchange of $15 million. The higher
European sales were primarily acquisition related. Asia-Pacific sales were up
$10 million, or 91 percent, and South American sales were up $3 million, or
20 percent.
HVS operating earnings for the second quarter of fiscal year 2000 were
$68 million, compared to $67 million for the same period a year ago.
Operating margins in the second quarter declined slightly to 8.8 percent, from
8.9 percent in the last year's second quarter, principally due to higher
information technology expenditures for enterprise resource planning systems.
Light Vehicle Systems
Light Vehicle Systems (LVS) sales increased by $9 million, or 2 percent,
in the second quarter to $420 million, as compared to the same quarter last
year. Strong worldwide production volumes and increasing content on cars and
light trucks, principally in door systems and undercarriage products, drove
the sales growth. LVS second quarter sales in North America increased by
$3 million, or 2 percent, reflecting an increase of ongoing business sales of
$37 million, or 25 percent, offset by the elimination of $34 million of sales
resulting from the November 1999 divestiture of the seat adjusting systems
business. LVS sales in Europe were up $1 million, or 1 percent, reflecting
strong volumes and penetration improvements of $21 million, or 12 percent,
offset by the negative impact of currency exchange of $20 million. Sales in
the rest of the world were up $5 million, or 11 percent.
LVS operating margins improved in the second quarter of fiscal 2000 to
9.5 percent, from 7.8 percent, in the same period last year. The improvement
stems from the higher sales, as well as savings from material and cost
reduction programs and restructuring actions initiated in late fiscal 1999,
which more than offset higher expenditures on new product development and
information technology programs.
Six Month Summary
For the first six months of fiscal 2000, Meritor's sales were
$2.3 billion, up 11 percent over the same period last year. Operating
earnings were $195 million before the one-time gain on the sale of seat
adjusting systems, an increase of 16 percent over 1999's first six months'
results. Operating margins increased to 8.4 percent for the first six months
of 2000, from 8.0 percent for the same period last year, reflecting savings
generated from restructuring actions and cost and productivity improvement
programs.
Net income for fiscal 2000's first six months was $103 million, or $1.60
per share, before the one-time gain of $51 million, or $0.79 per share,
recorded in the first quarter on the sale of the company's seat adjusting
systems business. This represents an increase of 23 percent from last year's
net income for the first six months of $1.30 per share.
HVS sales for the first six months of fiscal 2000 were $1.5 billion, up
$196 million, or 15 percent, over the same period last year. Strong market
demand, except in the European trailer and North American off-highway and
specialty vehicle sectors, was a significant contributor to the sales
increase. In addition, the three acquisitions completed in fiscal 1999
contributed incremental sales of $185 million in the first six months of
fiscal 2000, which more than offset an $84 million decline in transmission and
clutch sales now reported by the ZF Meritor joint venture and lower sales of
$29 million related to the negative impact of currency translation. HVS
operating margins were 8.2 percent in the first six months of fiscal 2000,
down from 8.5 percent last year. Higher premium and other volume-related
expenses incurred in connection with the strong heavy truck demand in North
America and higher information technology expenditures all adversely impacted
operating margins.
For the first six months of fiscal 2000, LVS sales were $826 million, an
increase of $29 million, or 4 percent, over the same period last year. Market
penetration gains, principally in door and undercarriage systems, and strong
worldwide light vehicle markets drove the sales growth for this business. LVS
sales in North and South America increased by $43 million, or 11 percent,
reflecting strong vehicle production volumes and penetration gains in all
product lines other than access control systems. European sales were down
$14 million, or 4 percent, principally due to the negative impact of currency
translation of $36 million. LVS operating margins improved to 8.6 percent
from 7.0 percent for the first half of fiscal 1999. This operating margin
improvement reflects savings from material and other cost reduction programs,
as well as the restructuring actions initiated in late fiscal 1999. The
operating margin improvement also reflects the contribution from the higher
sales.
Outlook
"For fiscal 2000, we expect to benefit from slightly higher North American
and European light vehicle production levels and moderately higher medium- and
heavy-duty truck volumes in Europe as compared to fiscal 1999," said Yost.
"We anticipate the North American heavy truck and trailer markets will soften
about 15 percent in the second half of fiscal 2000, as compared to the same
period last year, and we expect to see continued lower European trailer
volumes in the 5 to 10 percent range. Looking ahead, we will continue to
drive our ongoing process improvement and rigorous cost reduction efforts and
take full advantage of what we expect to be overall favorable global market
and economic conditions. For the second half of fiscal 2000, we anticipate
strong financial performance and double-digit earnings per share growth."
"Meritor's recently announced agreement to merge with Arvin Industries,
Inc., is very exciting for all of us. Combining the scale and strength of
both Arvin and Meritor to create a world leader in the automotive supply
industry solidly positions us to deliver superior value to our shareholders,
customers, employees and the communities in which we operate," 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.
Meritor worldwide web site address: http://www.meritorauto.com
Meritor will host a conference call to discuss its second-quarter results.
The call will take place today, April 19, 2000 at 10:30 a.m. (Eastern time).
Investors and interested parties can listen to the call real-time by dialing
800-207-3351, or by visiting the following Internet website --
http://www.vcall.com . The call will also be available for 7 days by dialing
800-633-8284 (858-812-6440 outside U.S.) and using reservation #14942313, and
for 90 days on vcall.com.
MERITOR AUTOMOTIVE, INC.
Consolidated Statement Of Income
(Unaudited, $ In Millions, Except Per Share Amounts)
Quarter Ended Six Months Ended
March 31, March 31,
2000 1999 2000 1999
Sales $ 1,196 $ 1,163 $ 2,332 $ 2,107
Cost of Sales (1,004) (992) (1,974) (1,809)
Gross Margin 192 171 358 298
Selling, General and
Administrative (84) (72) (163) (130)
Gain on Sale of Business(a) -- -- 83 --
Operating Earnings 108 99 278 168
Equity in Earnings of
Affiliates 8 7 17 14
Other Income-Net 1 2 1 6
Minority Interests (6) (5) (10) (8)
Interest Expense (19) (19) (36) (30)
Income Before Income Taxes 92 84 250 150
Provision for Income Taxes (35) (34) (96) (60)
Net Income $ 57 $ 50 $ 154 $ 90
Basic and Diluted
Earnings Per Share $ 0.91 $ 0.72 $ 2.39 $1.30
Average Shares Outstanding (in millions)
Basic 62.4 69.1 64.5 69.1
Diluted 62.5 69.1 64.5 69.1
Before Special Items (a):
Income Before
Income Taxes $ 92 $ 84 $ 167 $ 150
Net Income $ 57 $ 50 $ 103 $ 90
Basic and Diluted
Earnings Per Share $ 0.91 $ 0.72 $ 1.60 $ 1.30
(a) Special items include the one-time gain of $83 million
($51 million after-tax, or $0.79 per share) 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 Six Months Ended
March 31, March 31,
2000 1999 2000 1999
Sales:
Heavy Vehicle Systems:
Original Equipment $ 652 $ 637 $1,279 $1,130
Aftermarket 124 115 227 180
Total Heavy Vehicle
Systems 776 752 1,506 1,310
Light Vehicle Systems 420 411 826 797
Total Sales $1,196 $1,163 $2,332 $2,107
Operating Earnings: (a)
Heavy Vehicle
Systems (b) $ 68 $ 67 $ 124 $ 112
Light Vehicle
Systems 40 32 71 56
Total Operating
Earnings $ 108 $ 99 $ 195 $ 168
(a) Before Special Items (See Consolidated Statement of Income).
(b) Includes goodwill amortization of $3 million and $2 million for the
quarters ended March 31, 2000 and 1999 and $6 million and $2 million
for the six months ended March 31, 2000 and 1999, related to the
acquisitions of Volvo's heavy truck axle manufacturing operations,
LucasVarity's Heavy Vehicle Braking Systems business and Euclid
Industries.
MERITOR AUTOMOTIVE, INC.
Summary Consolidated Balance Sheet
($ In Millions)
March 31, September 30,
2000 1999
(Unaudited)
ASSETS
Cash $ 91 $ 68
Other Current Assets 1,311 1,264
Property, Net 729 766
Goodwill, Net 449 454
Other Assets 246 244
Total $ 2,826 $ 2,796
LIABILITIES AND SHAREOWNERS' EQUITY
Short-term Debt $ 72 $ 44
Other Current Liabilities 1,041 1,080
Accrued Retirement Benefits 357 371
Other Liabilities 97 116
Long-term Debt 865 802
Equity and Minority Interests 394 383
Total $ 2,826 $ 2,796
MERITOR AUTOMOTIVE, INC.
Summary Statement Of Consolidated Cash Flows
(Unaudited, $ In Millions)
Six Months Ended March 31,
2000 1999
OPERATING ACTIVITIES
Net Income $ 154 $ 90
Adjustments to Net Income:
Depreciation 63 56
Amortization 8 2
Gain on Sale of Business (83) --
Other (8) 12
Changes in Assets and Liabilities:
Receivables (101) (105)
Inventories (3) 10
Accounts Payable (23) (21)
Other 10 (6)
CASH PROVIDED BY OPERATING ACTIVITIES 17 38
INVESTING ACTIVITIES
Capital Expenditures (74) (57)
Acquisition of Businesses and Investments (28) (570)
Proceeds from Disposition of Property and
Businesses 140 --
CASH PROVIDED BY (USED FOR) INVESTING
ACTIVITIES 38 (627)
FINANCING ACTIVITIES
Net Increase in Debt 101 618
Cash Dividends (14) (14)
Purchase of Treasury Stock (119) --
Payment of Interest Rate Settlement Cost -- (31)
CASH (USED FOR) PROVIDED BY FINANCING
ACTIVITIES (32) 573
INCREASE (DECREASE) IN CASH 23 (16)
CASH AT BEGINNING OF PERIOD 68 65
CASH AT END OF PERIOD $ 91 $ 49