ArvinMeritor Begins Operation Today
10 July 2000
ArvinMeritor, Inc., Merger Completed; New Company Begins Operation Today as a $7.5-Billion Premier Tier-One Global Automotive Supplier -- ArvinMeritor begins trading on the New York Stock Exchange
today
-- There are immediate opportunities for considerable sales, operating
and cost synergies
-- Business integration is well under way
-- Face-to-face communication is building employee understanding, support
and involvement
-- First-year cost savings is estimated at $50 million
TROY, Mich., July 10 ArvinMeritor, Inc., , the
$7.5-billion global automotive supplier newly created by the merger of Arvin
Industries, Inc., and Meritor Automotive, Inc., today marked the historic
launch of its operations. The merger, effective late Friday, July 7, 2000,
follows the shareholders' approval of the merger. ArvinMeritor's stock begins
trading on the New York Stock Exchange (NYSE) today under the ticker symbol
"ARM."
"This is a significant day for the automotive industry and an exciting day
for ArvinMeritor's employees, customers, shareholders and business partners
around the world," said ArvinMeritor Chairman and CEO Larry Yost. "We are
well-positioned to benefit from immediate opportunities that include
considerable sales, operating and cost synergies that, as separate companies,
would not have been possible. Overnight, we have substantially extended our
market reach to one another's established customer bases and forged new paths
to market. At the same time, our new organization has the capability to
accelerate growth; make strategic investments; enlarge our diversified
product, service and market portfolio; and enable the development of complete
undercarriage and drivetrain system technologies to serve both the light and
commercial vehicle industries. We intend to capitalize on our enhanced
financial strength and flexibility to take advantage of industry trends that
favor companies such as ArvinMeritor.
"We are committed to deliver annual average top-line growth of 10 percent
and earnings per share growth of between 15 and 18 percent to increase
shareholder value. The new ArvinMeritor has the scale and scope that forms a
strong foundation for additional strategic growth. As a result, we expect to
double the size of our new enterprise during the next five years," Yost said.
Yost continued to say that, as the world's eleventh largest automotive
supplier, ArvinMeritor begins operations with not only strong financials, but
also a solid leadership team. He said ArvinMeritor's experienced leadership
is focused on the timely achievement of the company's primary strategic goals.
Those goals are to:
-- Build upon its full-systems initiatives to become the premier global,
single-source provider of undercarriage systems and complete
drivetrains across the light and commercial vehicle industries
respectively;
-- Capitalize on expanded global capabilities in the areas of sales and
marketing, distribution, technical expertise, service networks, new
geographic markets and the company's most valuable asset, its talented
and diverse workforce;
-- Focus on continuously improved sales and service performance;
-- Pursue an aggressive e-commerce strategy; and
-- Leverage and expand the company's global footprint.
ArvinMeritor's management expects the merger to be accretive, contributing
positively to net earnings in the first year. It has identified cost
synergies, including process improvements, shared services, implementation and
combined companywide purchasing strength, which management estimates will
produce pre-tax cost savings of approximately $50 million in fiscal 2001 and
$100 million by fiscal 2003.
Product Fit Creates Engine for Growth
Bill Hunt, ArvinMeritor's vice chairman and president, expects revenue
growth opportunities from the company's strategic product fit: "Our
complementary product lines and technological expertise move us closer to
becoming a full undercarriage and drivetrain system integrator and corner
module provider, and position us to better support our customers' global
needs. These capabilities give us considerable strategic and competitive
advantages and a more powerful platform for growth. We want to emphasize that
the real excitement lies not in the merger itself, but in where we're going
from here."
Hunt cited several opportunities among the company's eleven major product
areas that demonstrate immediate customer benefits of the merger. They are:
-- Full corner module capability -- ArvinMeritor will design and engineer
ride control and motion control products as integrated systems that
are assembled and sequenced for customers, regardless of their
geographic location. As a direct result of this merger,
ArvinMeritor's Light Vehicle Systems (LVS) will be capable of
supplying more than 60 percent of the content of a front-corner module
to OEM customers. The company expects corner modules to account for
more than 50 percent of the new LVS Corner Module and Assembly Group's
business by 2005.
-- Environmental initiatives: heavy commercial truck emissions control
systems -- The U.S. Environmental Protection Agency (EPA) has
established new proposals aimed at reducing emissions from trucks and
buses equipped with diesel engines. ArvinMeritor Exhaust Systems sees
significant opportunities to provide its proven emissions control and
acoustics technologies to heavy truck OEMs looking for effective
emissions solutions in both Europe and the Americas. Arvin has been
the leading supplier of exhaust systems for passenger cars.
-- First-of-its-kind exhaust system -- The first-ever, mass-market
Titanium Exhaust System was recently unveiled on the 2001 Corvette
Z06. Using Arvin T-3(TM) (for Titanium, Technology and Testing)
proprietary technology, the company can now provide race-quality
performance to street applications. Specifically, the titanium system
is more than 40 percent lighter than stainless steel. The corrosion-
immune and cosmetically attractive system can also improve fuel
economy and delivers the superior performance goals set for the 2001
Corvette Z06.
-- New products for heavy vehicle OEMs, aftermarket -- Additional revenue
sources are expected to open up by leveraging Meritor's long-standing
relationships with heavy truck and trailer OEM dealers and parts
distributors. These established relationships will enable the new
company to cross-sell Arvin's well-established exhaust, ride control
and filter products, including Gabriel(R) shock absorbers and
Purolator(R) filters, to Meritor customers around the world.
-- Aftermarket e-commerce -- Later this year, ArvinMeritor expects to
launch a new online parts catalog and ordering system that will
significantly speed service for the company's commercial vehicle
aftermarket distributor and OEM customers. Later, it will handle
replacement parts ordering for the company's light vehicle aftermarket
customers, as well.
-- Business-to-business (B2B) real-time, Web-enabled customer data makes
it easier to do business with ArvinMeritor -- Aftermarket customers,
through the company's online, secure Web portal, now have the ability
to "click" to instantly access order status. This new service
includes invoicing detail, accounts receivable information,
application data and competitive product interchange capabilities.
The Web-enabled system represents another element of the company's
overarching e-business strategy.
-- Added, innovative applications for Roll Coater products --
ArvinMeritor's Roll Coater business is actively pursuing new
opportunities in the light vehicle aperture (roofs and doors),
commercial trailer products, and bus and coach markets. As a result,
the business sees an immediate opportunity to capture new sales for
this innovative process that is now available for vehicle body
applications. This natural path to market for the new company did not
exist to this extent, prior to the merger.
Employees Commemorate Historic First Day of Business
Today, ArvinMeritor is observing Day One for the new company with
ceremonies and employee celebrations at facilities around the world.
Employees at the company's world headquarters in Troy, Mich., will gather in a
virtual global celebration, via live satellite broadcast link-up with more
than 100 ArvinMeritor locations worldwide. In the evening, Chairman and CEO
Larry Yost and Vice Chairman and President Bill Hunt will host ArvinMeritor
customers, suppliers, financial analysts, news media and government
representatives at an informal reception.
Following Day One, Yost, Hunt and other senior executives will go on a
worldwide tour, visiting plant cities to meet with employees, customers and
community leaders. The tour, named "You Have a Part in It," recognizes the
essential contribution all ArvinMeritor employees can make to the future
success of ArvinMeritor. It also salutes employees in their efforts to
develop superior products and solutions for customers, and to provide
components and systems for nearly every vehicle on the road. According to
Yost, "Road Tour 2000 is a good chance to remind our people of how important
they are in our ability to deliver to our customers."
Integrating the Combined Corporation
The process of integrating the two companies is well under way. Nineteen
teams of ArvinMeritor managers, representing all major business disciplines,
have met weekly since April. Their mission is to proactively develop
strategies and action plans to smoothly integrate the former Arvin and Meritor
businesses with little or no disruption in the company's operation. These
teams continue to identify efficiencies, and implement best practices that
will increase sales, leverage capabilities and deliver cost savings.
The senior integration team meets weekly with the Office of the Chairman to
report on the progress of the company's integration. With the merger's
closing, Yost noted that the comprehensive integration plans are moving
forward on an aggressive timetable, with completion expected within one year.
ArvinMeritor, Inc. is a premier $7.5-billion global transportation
industry supplier of a broad range of integrated systems, modules and
components, serving light vehicle, commercial truck, trailer and specialty
original equipment manufacturers and related aftermarkets. In addition, the
company is the leader in coil coating applications, including those for the
transportation, appliance, construction and furniture industries. The company
is headquartered in Troy, Mich., and employs 36,500 people at more than
120 facilities in 25 countries. ArvinMeritor is traded on the New York Stock
Exchange under the ticker symbol ARM. For more information on ArvinMeritor,
visit the company's worldwide Web site at: http://www.arvinmeritorinc.com .
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.
ArvinMeritor, Inc.
Unaudited Pro Forma Combined Balance Sheet
As of March 31, 2000
(in millions)
ASSETS
Current assets:
Cash $117
Net receivables 1,333
Inventories 603
Other current 255
Total current 2,308
Net property 1,410
Net goodwill 699
Other assets 483
Total $4,900
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $373
Accounts payable 1,089
Other current 536
Total current 1,998
Long-term debt 1,266
Other liabilities 599
Minority interests 98
Capital securities 89
Stockholders' equity 850
Total $4,900
ArvinMeritor, Inc.
Unaudited Pro Forma Combined Statements of Operations
Fiscal Year 1998
(dollars in millions, except per share amounts)
Quarter Ended Fiscal Year
12/31/97 3/31/98 6/30/98 9/30/98 1998
Sales $1,516 $1,566 $1,652 $1,534 $6,268
Operating earnings 99 109 133 98 439
percent to sales 6.5% 7.0% 8.1% 6.4% 7.0%
Equity in earnings
of affiliates 4 7 11 10 32
Interest expense (19) (19) (20) (19) (77)
Income before taxes 84 97 124 89 394
Provision for
income taxes (33) (38) (47) (31) (149)
Minority interests (3) (2) (4) -- (9)
Net income $48 $57 $73 $58 $236
Earnings per share (1)
Basic $0.64 $0.76 $0.97 $0.77 $3.13
Diluted $0.63 $0.75 $0.96 $0.76 $3.11
Average common
shares
outstanding
(millions)
Basic 75.1 75.3 75.5 75.7 75.4
Diluted 75.7 75.8 76.0 76.1 75.9
Memo items:
Deprec./amort.
exp. $44 $49 $49 $48 $190
Capital
expenditures $54 $43 $58 $81 $236
Note: excludes special items.
(1) May not add due to rounding.
ArvinMeritor, Inc.
Unaudited Pro Forma Combined Statements of Operations
Fiscal Year 1999
(dollars in millions, except per share amounts)
Quarter Ended Fiscal Year
12/31/98 3/31/99 6/30/99 9/30/99 1999
Sales $1,638 $1,909 $2,064 $1,880 $7,491
Operating
earnings 109 131 168 120 528
percent to sales 6.7% 6.9% 8.1% 6.4% 7.0%
Equity in earnings
of affiliates 9 10 11 15 45
Interest expense (20) (29) (33) (30) (112)
Income before
taxes 98 112 146 105 461
Provision for
income taxes (37) (43) (56) (39) (175)
Minority interests (2) (3) (2) -- (7)
Net income $59 $66 $88 $66 $279
Earnings per share (1)
Basic $0.78 $0.87 $1.16 $0.87 $3.67
Diluted $0.77 $0.87 $1.15 $0.86 $3.66
Average common shares outstanding (millions)
Basic 75.9 76.0 76.1 76.1 76.0
Diluted 76.3 76.3 76.4 76.4 76.3
Memo items:
Deprec./amort.
exp. $50 $59 $65 $65 $239
Capital
expenditures $76 $55 $74 $101 $306
Note: excludes special items.
(1) May not add due to rounding.
ArvinMeritor, Inc.
Unaudited Pro Forma Combined Statements of Operations
Fiscal Year 2000
(dollars in millions, except per share amounts)
Quarter Ended Fiscal YTD
12/31/99 3/31/00 6/30/00 9/30/00 2000
Sales $1,924 $2,061 $-- $-- $3,985
Operating
earnings 123 148 -- -- 271
percent to
sales 6.4% 7.2% -- -- 6.8%
Equity in
earnings of
affiliates 12 10 -- -- 22
Interest expense (32) (34) -- -- (66)
Income before
taxes 103 124 -- -- 227
Provision for
income taxes (37) (46) -- -- (83)
Minority interests 1 (3) -- -- (2)
Net income $67 $75 $-- $-- $142
Earnings per share (1)
Basic $0.90 $1.05 $-- $-- $1.95
Diluted $0.90 $1.05 $-- $-- $1.95
Average common shares outstanding (millions)
Basic 74.3 71.1 -- -- 72.7
Diluted 74.4 71.3 -- -- 72.8
Memo items:
Deprec./amort.
exp. $63 $65 $-- $-- $128
Capital
expenditures $91 $66 $-- $-- $157
Note: excludes special items.
(1) May not add due to rounding.
