ArvinMeritor Reports Fiscal Year 2005 Second-Quarter Results and Provides Update on New Restructuring Program
TROY, Mich. (May 3, 2005) —
ArvinMeritor, Inc. (NYSE: ARM) today reported financial results
for its second fiscal quarter ended March 31, 2005.
- Sales of $2.3 billion, up 14 percent from the same
period last year.
- Record Commercial Vehicle Systems (CVS) sales of
$1,032 million, up 34 percent from the same period last year.
- Net loss, including new restructuring and other
special items, was $33 million, or $0.48 per diluted share, compared to net
income of $41 million, or $0.59 per diluted share last year.
- Loss from continuing operations, including new
restructuring and other special items, was $35 million, or $0.51 per diluted
share, compared to income from continuing operations of $40 million, or $0.58
per diluted share last year.
- Income from continuing operations before new
restructuring and other special items was $21 million, or $0.30 per diluted
share, compared to $31 million, or $0.45 per diluted share last year.
- New restructuring and other special items include
$62 million, or $0.65 per diluted share, of new restructuring costs resulting
from the actions announced in January — the total estimated cost of these new
restructuring programs is approximately $135 million, of which approximately
$110 million will be cash costs; a $9 million, or $0.10 per diluted share,
charge resulting from the MG Rover Group bankruptcy in Europe; and $6 million,
or $0.06 per diluted share, of environmental remediation charges associated
with a former Rockwell facility.
“Despite tough conditions and many challenging
issues within the industry as a whole, we are making good progress in growing
our sales and managing our costs,” said Chairman, CEO and President Charles G.
“Chip” McClure. “ArvinMeritor has some unique strengths – among them, a balanced
and diversified portfolio of core businesses across global markets – that
continue to support our efforts to overcome many of the industry-wide challenges
we face.”
For the second quarter of fiscal year 2005, the company posted
sales of $2.3 billion, a 14-percent increase when compared to the same period
last year. Factors that contributed to the increase in sales included
strong CVS worldwide markets, which added approximately $150 million in sales.
Currency translation additionally increased sales by approximately $75 million,
primarily due to the stronger euro in relation to the U.S. dollar. In
addition, the formation of two joint ventures with the Volvo Group added
approximately $60 million to CVS sales, but this increase was offset by the loss
of sales attributable to previously announced divestitures of certain Light
Vehicle Systems (LVS) businesses.
Operating loss in the second
quarter of fiscal year 2005 was $23 million, compared to operating income of $78
million from the prior year’s second quarter. Contributing to the
operating loss were $64 million of restructuring costs, of which $62 million
were related to new restructuring actions we announced today and in January; a
$9 million charge resulting from the MG Rover Group bankruptcy in Europe; and a
$6 million environmental remediation charge associated with a former Rockwell
facility. Included in operating income in the second quarter of fiscal
year 2004 was a gain of $20 million on the sale of the company’s ride control
joint venture, an $8 million environmental remediation charge associated with a
different Rockwell facility and $6 million of restructuring costs. The
benefits to operating income from the higher CVS volumes in the second quarter
of fiscal year 2005 were offset by lower LVS volumes as compared to the same
period last year and higher net steel costs of approximately $30
million.
Income from continuing operations before special items was $21
million, or $0.30 per diluted share, compared to $31 million, or $0.45 per
diluted share a year ago. These results are in line with the guidance the
company provided in January 2005.
Income from discontinued operations was
$2 million, or $0.03 per diluted share, compared to $1 million, or $0.01 per
diluted share last year. Net loss, including discontinued operations, was
$33 million, or $0.48 per diluted share, compared to
net income of $41
million, or $0.59 per diluted share last year.
“During the
second quarter, we continued to make progress with the aggressive cost-cutting
and restructuring initiatives we announced earlier this year,” said
McClure. “These initiatives support our efforts to make ArvinMeritor a
more lean, flexible, efficient and competitive company.”
Specific
business segment financial results include:
- LVS sales were $1,244 million, up $17 million from
the same period last year. Foreign currency translation, primarily as a
result of the stronger euro, increased sales by approximately $55 million when
compared to the same period last year. This was offset by lower North
American and Western European production volumes and the loss of approximately
$70 million of sales associated with
divestitures. Operating loss was $54 million, compared to
operating income of $50 million in the same period last year. Included
in operating income in the second quarter of fiscal year 2005 was $51 million
of restructuring costs, of which $49 million related to new restructuring
actions, and a $9 million charge associated with the MG Rover Group
bankruptcy. Included in operating income in the second quarter of fiscal
year 2004 was a $20 million gain on the sale of our ride control joint venture
and $3 million of restructuring costs. LVS results in the second quarter
of fiscal year 2005 were also unfavorably impacted by lower light vehicle
production volumes and higher net steel costs of approximately $10
million.
- CVS sales were $1,032 million, up $263 million, or
34 percent from last year’s second quarter, primarily as a result of stronger
commercial vehicle truck and trailer volumes; the formation of two joint
ventures with the Volvo Group, which added sales of approximately $60 million;
and foreign currency translation, which increased sales by approximately $20
million. North American heavy-duty truck volumes improved by
approximately 50 percent when compared to the same period last year, while
trailer volumes improved 23 percent over that same period. Operating
income was $37 million, compared to $36 million in the same period last
year. Included in operating income in the second quarter of fiscal year
2005 was $13 million of new restructuring costs. The benefits of the
higher North American truck and trailer volumes were partially offset by
higher net steel costs of approximately $20 million and the restructuring
charges. Excluding the restructuring charges, operating income would
have been $50 million, 39 percent higher than the prior year.
Commenting on CVS’s performance, McClure said, “CVS
sales continue to be strong and all of our global regional markets are robust.
Excluding the impact of restructuring costs,
margins in CVS improved to 4.8 percent this quarter, compared with
4.1
percent in our previous quarter. And we expect further margin expansion in the
third quarter.”
Update on
Restructuring
The company is
on schedule with its previously announced workforce reductions of 400-500
positions worldwide. All corporate headcount reductions, and the majority
of Light Vehicle and Commercial Vehicle headcount reductions in North and South
America, have been completed. In Europe, reductions in salaried employees
will continue over the next couple of months, as legal requirements are
addressed.
In addition to the five closures or sales that were announced and
completed over the last couple of years, ArvinMeritor has targeted 11 other
global facilities for consolidation or closure. These actions, for the most
part, will affect the LVS business.
“These restructuring actions will
help us offset and better position our company for the industry cycles we
primarily experience in our Commercial Vehicle business,” said McClure.
“Restructuring will help us right-size our company, enabling us to take out
excess capacity, reduce fixed costs, increase operational efficiencies and
improve our manufacturing footprint.”
Six-Month Summary
For the first six months
of fiscal year 2005, sales were $4.4 billion, up $446 million, or 11 percent,
compared to the same period last year. Factors increasing sales during the
first six months of fiscal year 2005 included higher CVS market volumes, which
added approximately $250 million in sales, and currency translation, which
increased sales by approximately $190 million — primarily due to the stronger
euro in relation to the U.S. dollar. The formation of two joint ventures with
the Volvo Group added approximately $115 million to CVS sales, but this increase
was offset by sales lost as a result of previously announced divestitures of
certain LVS businesses.
Operating income for the first
six months of fiscal year 2005 was $13 million, compared to $120 million in the
same period last year.
Operating income in fiscal year 2005
includes $74 million of restructuring costs, of which $62 million relate to new
restructuring actions; $14 million of charges resulting from various customer
bankruptcies; and the $6 million environmental remediation charge.
Included in operating income in the first six months of fiscal year 2004 were
the costs associated with the withdrawn tender offer for Dana Corporation of $16
million (before a non-operating gain of $7 million on the sale of Dana stock
owned by the company); an environmental remediation charge of $8 million; $7
million of restructuring costs; and the gain on the sale of the company’s ride
control joint venture of $20 million.
Loss from continuing operations was
$23 million, or $0.33 per diluted share, compared to income from continuing
operations of $55 million, or $0.80 per diluted share a year ago. Income from
discontinued operations was $8 million, or $0.11 per diluted share, compared to
$5 million, or $0.08 per diluted share, last year. Net loss, including
discontinued operations, was $15 million, or $0.22 per diluted share, compared
to net income of $60 million, or $0.88 per diluted share last
year.
Outlook
“The company’s fiscal year
2005 outlook for light vehicle production is 15.6 million vehicles in North
America and 16.9 million vehicles in Western Europe, down from 15.8 million
units in North America and 17.0 million units in Western Europe as cited in our
previous outlook,” said McClure. “The forecast for North American Class 8 truck
production is 307,000 units in fiscal year 2005, which is approximately the same
as our previous outlook. Our outlook for Western European Heavy and Medium
Truck volumes is 421,000 in fiscal year 2005.
“Our sales outlook for
fiscal year 2005 remains strong and is expected to be approximately $8.8
billion, up $800 million from fiscal year 2004. This compares to our previous
outlook of $8.9 billion. The decrease is principally related to a decline
in light vehicle production volumes, offset partially by higher North American
truck volumes.
“Steel continues to be a challenge for us going
forward. We expect steel costs, net of recovery, to be approximately $10
million lower than our previous outlook. We are now forecasting net steel
costs in fiscal year 2005 to be $100 million higher than the prior
year.
“There continue to be a number of factors that make our ability to
forecast the second half of the year challenging, including the volatility of
light vehicle production volumes, and the unpredictability in the price and
recovery of steel costs. Although we expect steel costs to be lower than
our previous estimate, we have lowered our full-year continuing operations
outlook to $1.40 to $1.60, as a result of lower light vehicle sales
volumes.
“This outlook is before special items, including any new
restructuring costs, the MG Rover bankruptcy charges and the environmental
remediation costs, all of which were recorded in the second quarter of fiscal
year 2005. Additionally, the remaining costs associated with these new
restructuring actions will be recorded over the next 18 months — this has not
been factored into our outlook.
“For the third quarter of fiscal year
2005, our sales forecast is $2.4 billion, and our continuing operations outlook
for diluted earnings per share is in the range of $0.60 to $0.70 per diluted
share, compared to $0.61 per diluted share a year ago,” said
McClure.
ArvinMeritor, Inc. is a premier $8 billion global supplier of a
broad range of integrated systems, modules and components to the motor vehicle
industry. The company serves light vehicle, commercial truck, trailer and
specialty original equipment manufacturers and related aftermarkets.
Headquartered in Troy, Mich., ArvinMeritor employs approximately 31,000 people
at more than 120 manufacturing facilities in 25 countries. ArvinMeritor
common stock is traded on the New York Stock Exchange under the ticker symbol
ARM. For more information, visit the company’s Web site at: http://www.arvinmeritor.com/.
###
All earnings per share amounts are on
a diluted basis. The company’s fiscal year ends on the Sunday nearest
Sept. 30, and its fiscal quarters end on the Sundays nearest Dec. 31, March 31
and June 30. All year and quarter references relate to the company’s
fiscal year and fiscal quarters, unless otherwise
stated.
This press release also contains statements relating
to future results of the company (including certain projections and business
trends) 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, global economic and market conditions; the demand
for commercial, specialty and light vehicles for which the company supplies
products; risks inherent in operating abroad (including foreign currency
exchange rates and potential disruption of production and supply due to
terrorist attacks or acts of aggression); availability and cost of raw
materials, including steel; OEM program delays; demand for and market acceptance
of new and existing products; successful development of new products; reliance
on major OEM customers; labor relations of the company, its customers and
suppliers; the financial condition of the company’s suppliers and customers,
including potential bankruptcies; successful integration of acquired or merged
businesses; the ability to achieve the expected annual savings and synergies
from past and future business combinations; success and timing of potential
divestitures; potential impairment of long-lived assets, including goodwill;
competitive product and pricing pressures; the amount of the company’s debt; the
ability of the company to access capital markets; credit ratings of the
company’s debt; the outcome of existing and any future legal proceedings,
including any litigation with respect to environmental or asbestos-related
matters; as well as other risks and uncertainties, including, but not limited
to, those detailed from time to time in the filings of the company with the
Securities and Exchange Commission.
Non-GAAP Measures
In addition to the
results reported in accordance with accounting principles generally accepted in
the United States of America (GAAP), we have provided information regarding
income from continuing operations, diluted earnings per share, segment operating
income and margins before special items which are non-GAAP financial measures.
These non-GAAP measures are defined as reported income or loss from continuing
operations, reported diluted earnings or loss per share and segment operating
income plus or minus special items.
We believe
these non-GAAP financial measures are useful to both management and investors in
the analysis of our results of operations. This non-GAAP measure should not be
considered a substitute for the reported results of operations prepared in
accordance with GAAP.
The company will host a
telephone conference call and Web cast to discuss the company’s fiscal year 2005
second-quarter financial results on Tuesday, May 3, 2005, at 9 a.m. (ET).
To participate, call (617) 786-4511 approximately 10 minutes prior to the start
of the call. Please reference ArvinMeritor when dialing in to
participate. Investors can also listen to the conference call in real time
— or for 90 days by recording — by visiting www.arvinmeritor.com.
A replay of
the call will be available from 11 a.m. May 3, until midnight, May 5, 2005, by
calling (617) 801-6888. Please refer to passcode 31869919.
To
access the listen-only audio Web cast, visit the ArvinMeritor Web site at
http://www.arvinmeritor.com/ and click on
the Web cast link on either the home page or investor
page.
ARVINMERITOR,
INC.
CONSOLIDATED INCOME
STATEMENT
(Unaudited, in
millions)
Quarter Ended Six Months
Ended
March 31, March
31,
2005 2004
2005
2004
(Unaudited)
Sales
$2,276 $1,996 $4,366
$3,920
Cost of
Sales
(2,124) (1,825) (4,083) (3,600)
GROSS
MARGIN
152 171
283 320
SG&A
(100) (99) (184)
(189)
Gain on
Divestitures
-
20
4 20
Environmental Remediation Costs
(6) (8)
(6) (8)
Restructuring
Costs
(64) (6)
(74) (7)
Customer
Bankruptcies
(5) -
(10)
-
Costs for Withdrawn Tender
Offer
-
- -
(16)
OPERATING INCOME
(LOSS)
(23) 78
13 120
Equity in Earnings of Affiliates
7
5
13
7
Gain on Sale of
Marketable
Securities
-
-
-
7
Interest Expense, Net and
Other (30)
(25) (58)
(51)
INCOME (LOSS) BEFORE
TAXES
(46) 58
(32) 83
Benefit (Provision) for Income
Taxes
13 (15)
9 (23)
Minority
Interests
(2) (3)
- (5)
Income
(Loss) From Continuing
Operations
(35) 40
(23) 55
Discontinued Operations
Income from
Discontinued
Operations
2
1
6
5
Gain on sale of
Discontinued
Operations
-
-
2 -
Income
from Discontinued Operations
2
1
8 5
NET INCOME
(LOSS)
$(33) $41
$(15) $60
DILUTED
EARNINGS (LOSS) PER SHARE
Continuing
Operations
$(0.51) $0.58 $(0.33)
$0.80
Discontinued
Operations
0.03 0.01
0.11 0.08
Diluted Earnings
(Loss) Per Share $(0.48) $0.59
$(0.22) $0.88
Diluted Shares
Outstanding
69.1 69.0
69.1 68.5
Note: Prior
periods have been restated for discontinued
operations.
ARVINMERITOR,
INC.
CONSOLIDATED BUSINESS SEGMENT
INFORMATION
(In
millions)
Quarter Ended Six Months
Ended
March 31, March
31,
2005 2004
2005
2004
(Unaudited)
(Unaudited)
Sales:
Light
Vehicle
Systems
$1,244 $1,227 $2,427
$2,466
Commercial Vehicle
Systems
1,032 769
1,939 1,454
Total
Sales
$2,276 $1,996 $4,366
$3,920
Operating Income
(Loss):
Light Vehicle
Systems
$(54) $50
$(55) $77
Commercial
Vehicle
Systems
37 36
74 67
Segment
Operating Income
(Loss)
(17) 86
19 144
Environmental Remediation
Costs
(6) (8)
(6) (8)
Costs
for Withdrawn Tender Offer
-
- -
(16)
Total Operating Income
(Loss)
$(23) $78
$13 $120
Note: Prior
periods have been restated for discontinued
operations.
ARVINMERITOR,
INC.
SUMMARY CONSOLIDATED BALANCE
SHEET
(In
millions)
March 31, September
30,
2005
2004
(Unaudited)
ASSETS
Cash
$99
$132
Receivables
1,607
1,478
Inventories
606
523
Other current
assets
261
238
Assets of discontinued
operations
555
615
Net
property
1,056
1,032
Goodwill
822
808
Other
assets
836
813
TOTAL
ASSETS
$5,842
$5,639
LIABILITIES AND SHAREOWNERS'
EQUITY
Short-term
debt
$7
$3
Accounts
payable
1,440
1,366
Accrued and other
current
liabilities
649
622
Liabilities of
discontinued
operations
236
282
Other
liabilities
852
830
Long-term
debt
1,537
1,487
Minority
interest
59
61
Equity
1,062
988
TOTAL LIABILITIES AND
SHAREOWNERS'
EQUITY
$5,842
$5,639
ARVINMERITOR,
INC.
CONSOLIDATED STATEMENT OF CASH
FLOWS
(Unaudited, in
millions)
Six Months
Ended
March
31,
2005
2004
OPERATING ACTIVITIES
Income
(loss) from continuing
operations
$(23)
$55
Adjustments to income
from
continuing
operations
Depreciation and
other
amortization
93
95
Gain on
divestitures
(4)
(20)
Gain on sale of
marketable
securities
-
(7)
Restructuring costs, net
of
expenditures
58
(3)
Pension and retiree
medical
expense
55
66
Pension and retiree
medical
contributions
(46)
(44)
Changes in
receivable
securitization
and
factoring
38
(27)
Changes in assets and
liabilities
(244)
(84)
Net cash flows provided by (used
for)
continuing
operations
(73)
31
Net cash flows provided by (used
for)
discontinued
operations
(130)
3
CASH PROVIDED BY (USED FOR)
OPERATING
ACTIVITIES
(203)
34
INVESTING
ACTIVITIES
Capital
expenditures
(63)
(63)
Acquisitions of businesses
and
investments, net of cash
acquired
(22)
-
Proceeds from dispositions
of
property and
businesses
33
70
Proceeds from sale of
marketable
securities
-
18
Net investing cash flows
provided
by (used for)
discontinued
operations
159
(7)
CASH PROVIDED BY INVESTING
ACTIVITIES
107
18
FINANCING
ACTIVITIES
Net change in revolving
debt
48
(23)
Net change in other
debt
20
(9)
Net change in
debt
68
(32)
Proceeds from exercise of
stock
options
5
5
Cash
dividends
(14)
(14)
CASH PROVIDED BY (USED FOR)
FINANCING
ACTIVITIES
59
(41)
IMPACT OF CURRENCY ON
CASH
4
5
CHANGE IN
CASH
(33)
16
CASH AT BEGINNING OF
PERIOD
132
103
CASH AT END OF
PERIOD
$99
$119
Note: Prior periods have been restated for
discontinued
operations.
ARVINMERITOR,
INC.
SELECTED FINANCIAL INFORMATION -
RECONCILIATION
Non-GAAP
(Unaudited, in
millions)
New
Restruct-
Q2 FY 05 Customer Environ- uring
Q2
FY05
Reported Bankruptcy mental Actions
Adjusted
Sales
$2,276
$-
$- $-
$2,276
Operating Income
(Loss)
(23)
9
6
62 54
Income
(Loss) from
Continuing
Operations
(35)
7
4
45 21
Diluted
Earnings (Loss)
Per Share -
Continuing
Operations
$(0.51) $0.10 $0.06
$0.65 $0.30
Operating Income
(Loss)
LVS Operating Income (Loss)
$(54) $9
$-
$49 $4
CVS
Operating
Income
37
-
-
13 50
Segment
Operating Income
(Loss)
(17)
9
-
62 54
Environmental Remediation
Costs
(6)
-
6
- -
Total
Operating Income (Loss) $(23)
$9 $6
$62 $54
Operating
Margins
LVS
-4.3%
0.3%
CVS
3.6%
4.8%
Segment Operating Margins
-0.7%
Total Operating
Margins
-1.0%
2.4%
ARVINMERITOR,
INC.
SELECTED FINANCIAL INFORMATION -
RECONCILIATION
Non-GAAP
(Unaudited, in
millions)
Gain
on
Q2 FY 04 Sale of Environ- Q2
FY04
Reported Business mental
Adjusted
Sales
$1,996
$- $-
$1,996
Operating Income
(Loss)
78 (20)
8 66
Income (Loss) from Continuing
Operations
40 (15)
6 31
Diluted Earnings (Loss) Per Share -
Continuing
Operations
$0.58 $(0.22) $0.09
$0.45
Operating Income (Loss)
LVS Operating Income
(Loss)
$50 $(20)
$- $30
CVS
Operating
Income
36
-
- 36
Segment Operating Income (Loss)
86 (20)
- 66
Environmental Remediation Costs
(8)
-
8 -
Total Operating Income (Loss)
$78 $(20)
$8 $66
Operating Margins
LVS
4.1%
2.4%
CVS
4.7%
4.7%
Segment Operating
Margins
4.3%
Total Operating
Margins
3.9%
3.3%
