ArvinMeritor Reports Fiscal Year 2001 First-Quarter Results
17 January 2001
ArvinMeritor Reports Fiscal Year 2001 First-Quarter Results
TROY, Mich., Jan. 17 ArvinMeritor, Inc. today
reported sales of $1.7 billion and net income, before special items, of $20
million, or $0.30 per share, for its first fiscal quarter, ended Dec. 31,
2000. Sales declined $265 million, or 14 percent, and net income, before
special items, decreased $45 million, or 69 percent, as compared to the same
period last year. Special items in the first quarter of fiscal year 2001
included charges of $46 million ($30 million after-tax, or $0.45 per share),
related to the company's restructuring actions announced in November 2000.
Special items in the prior year's first quarter included a net gain of $84
million ($51 million after-tax or $0.69 cents per share).
ArvinMeritor Chairman and Chief Executive Officer, Larry Yost said: "Our
North American Commercial Vehicle Systems and Light Vehicle Aftermarket
businesses have been affected by a continued weak market. The easing in North
American light vehicle production also has contributed significantly to our
company's weaker quarter. We are continuing to implement a number of
aggressive actions in response to the current market conditions. These
include vigorous cost-reduction initiatives, limitations on capital spending,
workforce reductions and a reduction in the number of our facilities around
the world. In addition to the weakness in our automotive segments, we were
negatively impacted by $0.03 per share, due to the bankruptcy filing of one of
the major steel customers for our Coil Coating business."
Operating income for the quarter, before special charges, was $64 million,
down 49 percent from last year's first quarter, reflecting operating margins
of 3.9 percent, down from 6.5 percent. The operating income and margins
decline was driven primarily by Commercial Vehicle Systems (CVS) and Light
Vehicle Aftermarket (LVA) operations. Affiliate income for the quarter,
weakened primarily by CVS North American affiliates, declined to $5 million,
versus $12 million for the year's prior comparable period. Interest expense
was up slightly to $35 million, primarily due to higher debt levels associated
with the share repurchase program.
The first-quarter effective tax rate, before special items, of 35.5
percent, was down from 37.5 percent, as expected, and is a direct result of
the company's ongoing commitment to identifying and implementing strategic
tax-planning initiatives. The company expects the full year's effective tax
rate to approximate the first-quarter rate.
ArvinMeritor continued its share repurchase program, pursuant to which it
is authorized to repurchase up to $100 million in company stock. As of
Jan. 17, 2001, the company has purchased 5.4 million shares, for a total cost
of $84 million, or an average cost of $15.39 per share.
In November 2000, the company announced a $90-million restructuring plan
to realign operations to reflect the decline in the company's major markets.
To comply with existing accounting rules, these charges are expected to be
recorded throughout the fiscal year. Special charges related to restructuring
actions were $46 million for the first quarter ($30 million after-tax or $0.45
per share). Approximately $11 million in charges related to restructuring
actions are expected in the second fiscal quarter, ending March 31, 2001.
Anticipated restructuring-related charges of approximately $10 million and $8
million in the third and fourth fiscal quarters, respectively, will bring the
total to $75 million. A further $15 million in costs related to the former
Arvin businesses will be recorded under purchase accounting rules and will be
charged against the balance sheet. That amount will be incremental to the
goodwill resulting from the combination of Arvin and Meritor.
Bill Hunt, vice chairman and president, said: "We expect to see benefits
from our restructuring actions starting in January 2001. Although our
restructuring plan and merger synergy actions continue at a vigorous pace, and
we are making progress in improving our company's cost structure, our top
priorities remain keeping service at a high level and exceeding our customers'
expectations. We also will continue to focus on providing best-in-class
engineering and technology support."
Specific business segment financial results include:
* Light Vehicle Systems sales were $870 million, down slightly from $905
million, as compared to last year's quarter. Operating margin was 6.0
percent, up from 5.5 percent from last year's first quarter. First-quarter
margin growth primarily reflects significant realignment in the ride and
motion control businesses. Continuing margin pressures and expected volume
declines by the original equipment producers will make it difficult to
maintain the first-quarter margins throughout the full fiscal year.
* Commercial Vehicle Systems sales were $552 million, down from $747
million, or 26 percent lower, compared to last year's first quarter.
Operating margin was 2.2 percent, down from 7.9 percent compared to last
year's first quarter. The steep decline experienced in the last two fiscal
quarters in the Class 8 North American truck volumes has resulted in a higher
fixed-cost ratio, which affects operating margins negatively. CVS operating
margins are expected to benefit significantly in the second fiscal quarter, as
a result of restructuring and other cost-reduction activities.
* Light Vehicle Aftermarket sales were $197 million, down from $229
million, or down 14 percent, as compared to last year's first quarter. LVA
operating margin was 1.5 percent, down from 5.2 percent as compared to last
year's first quarter. The North American market continued its downward trend,
and softer European volumes during the first quarter were major contributors
to the decline in the year-over-year comparison of both sales and operating
margin.
Outlook
"We continue to maintain our vehicle production outlook for fiscal 2001,
which shows anticipated North American Class 8 production at 160,000 units and
North American and European light vehicle production at 15.9 million and 16.5
million vehicles, respectively. We expect earnings in the second fiscal
quarter, ending March 31, 2001, to be in the range of $0.65 to $0.70 per
share. We also continue to maintain our previous outlook for earnings of
$2.00 to $2.30 per share for the full fiscal year," said Yost.
ARVINMERITOR, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
(Unaudited, $ in millions, except per share amounts)
Quarter Ended
December 31,
2000 1999
Sales $1,659 $1,924
Cost of Sales 1,487 1,663
Gross Margin 172 261
Selling, General and Administrative 102 130
Amortization Expense 6 6
(Gain) on Sale of Business (1) - (83)
Restructuring Costs and Other Charges (2) 46 4
Operating Income 18 204
Equity in Earnings of Affiliates 5 12
Non-Operating One Time Items (3) - 5
Interest Expense, Net (35) (34)
Income Before Income Taxes (12) 187
Provision for Income Taxes 4 (72)
Minority Interests (2) 1
Net (Loss) Income $(10) $116
Diluted (Loss) Earnings Per Share $(0.15) $1.56
Average Shares Outstanding (in millions) 67.0 74.4
Before Special Items (4):
Income Before Income Taxes $34 $103
Net Income $20 $65
Diluted Earnings Per Share $0.30 $0.87
(1) Represents the one-time gain of $0.69 per share recorded in the first
quarter of fiscal 2000 to reflect the sale of the seat adjusting systems
business.
(2) Represents restructuring costs and other charges of $0.45 per share
recorded in the first quarter of fiscal 2001, and a $0.04 per share charge for
an accounting method change recorded in the first quarter of fiscal 2000 for
pre-production costs.
(3) Represents the one-time gain of $0.04 per share recorded in the first
quarter of fiscal 2000.
(4) Excludes the items discussed in Notes 1, 2 and 3 above.
ARVINMERITOR, INC.
PRO FORMA COMBINED BUSINESS SEGMENT INFORMATION
(Unaudited, $ in millions)
Quarter Ended
December 31,
2000 1999
Sales:
Light Vehicle Systems $870 $905
Commercial Vehicle Systems 552 747
Light Vehicle Aftermarket 197 229
Other 40 43
Total Sales $1,659 $1,924
Operating Income:
Light Vehicle Systems $52 $50
Commercial Vehicle Systems 12 59
Light Vehicle Aftermarket 3 12
Other (3) 4
Segment Operating Income 64 125
Gain on Sale of Business - 83
Restructuring Costs and Other Charges (46) (4)
Total Operating Income $18 $204
ARVINMERITOR, INC.
PRO FORMA SUMMARY STATEMENT OF CONSOLIDATED CASH FLOWS
EXCLUDING SPECIAL ITEMS
(Unaudited, $ in millions)
Quarter Ended December 31,
2000 1999
OPERATING ACTIVITIES
Net Income $20 $65
Adjustments to Net Income:
Depreciation and Amortization 49 63
Change in Working Capital 9 21
Other (9) (59)
CASH PROVIDED BY OPERATING ACTIVITIES 69 90
INVESTING ACTIVITIES
Capital Expenditures (50) (91)
Other Investing Activities (14) 175
CASH (USED FOR) PROVIDED BY
INVESTING ACTIVITIES (64) 84
FINANCING ACTIVITIES
Net Change in Debt 41 (42)
Purchase of Preferred Capital Securities (10) -
Cash Dividends (15) (16)
Purchase of Treasury Stock (22) (91)
CASH (USED FOR) FINANCING ACTIVITIES (6) (149)
EFFECT OF EXCHANGE RATE CHANGES ON CASH - (4)
(DECREASE) INCREASE IN CASH (1) 21
CASH AT BEGINNING OF PERIOD 116 68
CASH AT END OF PERIOD $115 $89
ARVINMERITOR, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited, $ in millions, except per share amounts)
Quarter Ended
December 31,
2000 1999
Sales $1,659 $1,136
Cost of Sales 1,487 966
Gross Margin 172 170
Selling, General and Administrative 102 79
Amortization Expense 6 4
(Gain) on Sale of Business (1) - (83)
Restructuring Costs and Other Charges (2) 46 (26)
Operating Income 18 170
Equity in Earnings of Affiliates 5 9
Interest Expense, Net (35) (17)
Income Before Income Taxes (12) 162
Provision for Income Taxes 4 (63)
Minority Interests (2) (2)
Net (Loss) Income $(10) $97
Diluted (Loss) Earnings Per Share $(0.15) $1.94
Average Shares Outstanding (in millions) 67.0 50.0
Before Special Items (3):
Income Before Income Taxes $34 $79
Net Income $20 $46
Diluted Earnings Per Share $0.30 $0.92
(1) Represents the one-time gain of $1.02 per share recorded in the first
quarter of fiscal 2000 to reflect the sale of the seat adjusting systems
business.
(2) Represents restructuring costs and other charges of $0.45 per share
recorded in the first quarter of fiscal 2001.
(3) Excludes the items discussed in Notes 1 and 2 above.
ARVINMERITOR, INC.
CONSOLIDATED BUSINESS SEGMENT INFORMATION
(Unaudited, $ in millions)
Quarter Ended
December 31,
2000 1999
Sales:
Light Vehicle Systems $870 $406
Commercial Vehicle Systems 552 730
Light Vehicle Aftermarket 197 -
Other 40 -
Total Sales $1,659 $1,136
Operating Income:
Light Vehicle Systems $52 $31
Commercial Vehicle Systems 12 56
Light Vehicle Aftermarket 3 -
Other (3) -
Segment Operating Income 64 87
Gain on Sale of Business - 83
Restructuring Costs and Other Charges (46) -
Total Operating Income $18 $170
ARVINMERITOR, INC.
SUMMARY CONSOLIDATED BALANCE SHEET
($ in millions)
December 31, September 30,
2000 2000
(unaudited)
ASSETS
Cash $115 $116
Receivables 1,186 1,278
Inventories 603 583
Other Current Assets 208 212
Property, Net 1,285 1,348
Goodwill, Net 797 756
Other Assets 451 427
Total $4,645 $4,720
LIABILITIES AND SHAREOWNERS' EQUITY
Short-term Debt $183 $183
Accounts Payable 1,002 1,058
Accrued and Other Current Liabilities 495 484
Other Liabilities 476 495
Long-term Debt 1,578 1,537
Preferred Capital Securities 64 74
Minority Interests 96 96
Equity 751 793
Total $4,645 $4,720
ARVINMERITOR, INC.
SUMMARY STATEMENT OF CONSOLIDATED CASH FLOWS
($ in millions)
Quarter Ended December 31,
2000 1999
OPERATING ACTIVITIES
Net Income $(10) $97
Adjustments to Net Income:
Depreciation 43 32
Amortization 6 4
Restructuring, Net of Expenditures 45 -
Gain on Sale of Business - (83)
Other (4) (1)
Changes in Assets and Liabilities:
Receivables 101 (1)
Inventories (23) (25)
Accounts Payable (57) (44)
Change in Other Working Capital (27) 26
Other (5) (3)
CASH PROVIDED BY OPERATING ACTIVITIES 69 2
INVESTING ACTIVITIES
Capital Expenditures (50) (31)
Acquisition of Businesses and Investments (14) (10)
Proceeds from Disposition of Property
and Businesses - 135
CASH (USED FOR) PROVIDED BY
INVESTING ACTIVITIES (64) 94
FINANCING ACTIVITIES
Net Increase in Debt 41 7
Purchase of Preferred Capital Securities (10) -
Cash Dividends (15) (7)
Purchase of Treasury Stock (22) (91)
CASH USED FOR FINANCING ACTIVITIES (6) (91)
EFFECT OF EXCHANGE RATE CHANGES ON CASH - (4)
(DECREASE) INCREASE IN CASH (1) 1
CASH AT BEGINNING OF PERIOD 116 68
CASH AT END OF PERIOD $115 $69