Earnings Up $114 Million Year-Over-Year on Diverse Product,
Customer and Geographic Mix
TROY, Mich. (July 29, 2008) — ArvinMeritor, Inc.
(NYSE: ARM) today reported
financial results for its third quarter ended June 30, 2008.
Financial Highlights for Third-Quarter Fiscal
Year 2008
•Sales
of $2.0 billion – approximately $340 million higher than the same period
last year.
•Net income was
$44 million, or $0.60 per diluted share, compared to a net loss of $70 million,
or $0.99 per diluted share, in the third quarter of fiscal year 2007.
•Income from
continuing operations, before special items, was $56 million, or $0.77 per
diluted share, compared to $18 million, or $0.25 per diluted share, one year ago.
•Cash flow from
operations, net of capital expenditures, was $59 million compared to an outflow
of $156 million in the same period last year.
•Commercial
Vehicle Systems (CVS) EBITDA margins increased by 1.2 percentage points, before
special items, in the third quarter of fiscal year 2008 compared to the same
period last year.
•Light Vehicle
Systems (LVS) sales, largely driven by overseas markets, increased by $34
million, a 6-percent increase over the same period last year (down five-percent
on a constant currency basis).
“ArvinMeritor’s favorable product, customer and
geographic mix, combined with a dedicated focus across the company to implement
and maintain cost reduction initiatives, drove strong results this
quarter.” said Chairman, CEO and President Chip McClure. “I am
pleased that the hard work and commitment of our global team is being reflected
in our financial results.”
Results for the Third-Quarter Fiscal Year
2008
In the third quarter of fiscal year 2008, ArvinMeritor posted sales from
continuing operations of $2.0 billion, up from $1.7 billion in the same period
last year. Approximately one-half of this increase was due to stronger
currencies outside the U.S.
The remaining increase is comprised of higher medium and heavy duty truck
production in Western Europe; favorable industry conditions in South America
and Asia Pacific; a steady demand for the company’s light vehicle product
mix in Europe; and increased specialty sales, including military products in
North America and off-highway products in China.
EBITDA, before special items, was $121 million, up $36 million from the same
period last year. This increase is primarily due to higher medium and heavy
duty truck volumes in Europe and South America,
and continued higher specialty and aftermarket sales.
On a GAAP basis, the company’s income from continuing operations was $51
million or $0.70 per diluted share, compared to a loss from continuing
operations of $4 million or $0.06 per diluted share in the same period last
year.
Income from continuing operations, before special items, was $56 million, or
$0.77 per diluted share, compared to $18 million, or $0.25 per diluted share a
year ago.
Earnings benefited from the favorable resolution of certain tax issues. These
tax benefits were included in the company’s full-year guidance previously
provided.
Free cash flow (cash flow from operations net of capital expenditures) was $59
million in the third quarter, increased from an outflow of $156 million in the
same period last year. This increase is primarily due to stronger earnings this
quarter as compared to the third fiscal quarter of 2007, in addition to the
negative impact on cash flow in the third quarter of last year resulting from
activities associated with discontinued operations.
Update on Plans to Spin-Off Light Vehicle
Systems
On May 6, 2008, the company announced its intent to spin off its LVS business
to ArvinMeritor shareholders, with the commercial vehicle business –
consisting of truck, trailer, specialty products and the commercial vehicle
aftermarket – remaining with ArvinMeritor. The new LVS business will be
named Arvin Innovation. On May 28, Arvin Innovation filed the initial
registration document (Form 10), and provided an update to the market via
webcast. On July 28, the company filed its first amendment to the Form 10.
LVS achieved the third quarter milestones required in order to complete the
spinoff, and is on track to achieve fourth quarter performance milestones.
Information related to the spinoff is available on the company’s website
at arvinmeritor.com.
Performance Plus “Wave 2”
The company is currently launching Wave 2 of Performance Plus designed to drive
idea generation and implementation with an emphasis on the company’s
business in Europe. ArvinMeritor’s
initial Performance Plus initiative, launched in December 2006, will fully
achieve the company’s 2008 target of $75 million in savings net of
material cost increases. ArvinMeritor is in the process of re-energizing and
refreshing the internal resources dedicated to the program. This team will
review processes, products and operations across the business to identify
additional ways to:
•Foster profitable growth
•Reduce costs
•Achieve
operational excellence
•Encourage
innovation
“Through Performance Plus, we are cultivating an
environment of innovation and continuous improvement,” said Jay Craig,
chief financial officer, who played a key role in leading Performance Plus
since its launch in 2006. “It is not a short-term solution –
it’s more like a long-distance race with no finish line.” Wave 2
will add confidence to the company’s targeted goal of $75 million in
savings for fiscal year 2009, in spite of unprecedented cost increases in raw
materials.
Growth in Commercial Vehicle Aftermarket
ArvinMeritor recently announced another strategic move to expand its commercial
vehicle aftermarket business with the acquisition of Trucktechnic, a
remanufacturer and distributor of commercial vehicle disc and air system
components based in Liege, Belgium.
Trucktechnic’s line of brake kits, components, and testing equipment
expands and complements ArvinMeritor’s existing European aftermarket
portfolio both in product breadth and market depth and will be key in supporting
the company’s continued growth in that region. This acquisition follows
the company’s purchase of Mascot Truck Parts in December 2007.
Since that time, the company announced a multi-million-dollar supply agreement
to provide remanufactured transmissions and axle carriers to Navistar Parts,
and has recently entered into agreements with PACCAR to support its Peterbilt
and Kenworth dealer networks in Canada
with the Mascot brand of remanufactured transmissions and axle carriers.
Outlook
The company’s calendar year 2008 forecast for light vehicle
sales is in the range of 14.4 to 14.6 million vehicles in North
America. ArvinMeritor’s forecast for Western
Europe is 16.6 to 16.9 million vehicles, down from 17.1 in the
prior forecast.
On a calendar year basis, the company anticipates North America Class 8 truck
production to be in the range of 195,000 to 205,000 units; and heavy and medium
truck volumes in Western Europe to be in the
range of 550,000 to 560,000.
ArvinMeritor’s fiscal year 2008 forecast for North American Class 8 truck
production is in the range of 185,000 to 195,000 units. The company’s
fiscal year 2008 forecast for heavy and medium truck volumes in Western Europe is 565,000 to 575,000.
The company expects sales from continuing operations in fiscal year 2008 to be
in the range of $7.1 billion to $7.3 billion.
The outlook for full-year EBITDA from continuing operations, before special
items, is expected to be in the range of $400 million to $410 million for the
fiscal year.
ArvinMeritor is reiterating its forecast for diluted earnings per share from
continuing operations, before special items, to be at the top end of the
previously forecasted range of $1.40 to $1.60. The company is raising its
forecast for free cash flow for fiscal year 2008 to be in the range of negative
$50 million to negative $100 million.
“We look forward to 2009 with optimism,” said McClure. “We
have improved our results consistently through the first three quarters of
fiscal year 2008 despite deterioration in the North American and European
markets. Next year, we expect to benefit from Class 8 commercial vehicle
production volumes in North America which are
forecast to increase in the range of 20 to 40 percent.”
About ArvinMeritor
ArvinMeritor, Inc. is a premier global supplier of a broad range of
integrated systems, modules and components to the motor vehicle industry. The
company serves commercial truck, trailer and specialty original equipment
manufacturers and certain aftermarkets, and light vehicle manufacturers.
Headquartered in Troy, Mich., ArvinMeritor employs approximately
18,000 people in 24 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/. Editor’s Note:
High-resolution photos can be downloaded from ArvinMeritor's Photo Library at
http://www.arvinmeritor.com/media_room/photo_library.asp.
Forward-Looking Statements
This press release 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. Forward-looking statements are typically identified by words or phrases
such as “believe,” “expect,” “anticipate,”
“estimate,” “should,” “are likely to be,”
“will” and similar expressions. There are risks and
uncertainties relating to the planned spin-off of ArvinMeritor’s LVS
business, including the timing and certainty of completion of the transition.
In addition, 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 cycles and 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 sharply rising cost of raw materials, including
steel and oil; 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 suppliers and customers,
including potential disruptions in supply of parts to our facilities or demand
for our products due to work stoppages; the financial condition of the
company’s suppliers and customers, including potential bankruptcies;
possible adverse effects of any future suspension of normal trade credit terms
by our suppliers; potential difficulties competing with companies that have
avoided their existing contracts in bankruptcy and reorganization proceedings;
successful integration of acquired or merged businesses; the ability to achieve
the expected annual savings and synergies from past and future business
combinations and the ability to achieve the expected benefits of restructuring
actions; success and timing of potential divestitures; potential impairment of
long-lived assets, including goodwill; potential adjustment of the value of
deferred tax assets; competitive product and pricing pressures; the amount of
the company’s debt; the ability of the company to continue to comply with
covenants in its financing agreements; 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; the outcome of actual and
potential product liability and warranty and recall claims; rising costs of
pension and other post-retirement benefits and possible changes in pension and
other accounting rules; as well as other risks and uncertainties, including but
not limited to those detailed from time to time in filings of the company with
the SEC. These forward-looking statements are made only as of the date hereof,
and the company undertakes no obligation to update or revise the forward-looking
statements, whether as a result of new information, future events or otherwise,
except as otherwise required by law.
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.
Non-GAAP Measures
In addition to the results reported in accordance with accounting
principles generally accepted in the United States (“GAAP”)
included throughout this press release, the company has provided information
regarding income from continuing operations, diluted earnings per share and
operating income 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 operating income
or loss plus or minus special items. Other non-GAAP financial measures include
EBITDA and EBITDA, before special items, and free cash flow. EBITDA is defined
as income (loss) from continuing operations before income taxes, depreciation
and amortization and loss of sale on receivables. EBITDA, before special items,
is defined as EBITDA, plus or minus special items. Free cash flow represents
net cash provided by operating activities, less capital expenditures.
Management believes that the non-GAAP financial measures used in this press
release are useful to both management and investors in their analysis of the
company's financial position and results of operations. Management uses EBITDA
as the primary basis to evaluate the performance of each of its reportable
segments.
Management believes EBITDA is a meaningful measure of performance as it is
commonly utilized by management and investors to analyze operating performance
and entity valuation. Management, the investment community and the banking
institutions routinely use EBITDA, together with other measures, to measure
operating performance in our industry. Free cash flow is useful in
analyzing the company’s ability to service and repay its debt. Further,
management uses these non-GAAP measures for planning and forecasting in future
periods.
These non-GAAP measures should not be considered a substitute for the reported
results prepared in accordance with GAAP. EBITDA should not be considered as an
alternative to net income as an indicator of our operating performance or to
cash flows as a measure of liquidity. Free cash flow should not be considered a
substitute for cash provided by operating activities or other cash flow
statement data prepared in accordance with GAAP or as a measure of liquidity.
In addition, the calculation of free cash flow does not reflect cash used to
service debt or cash received from the divestitures or businesses or sales of
other assets and thus does not reflect funds available for investment or other
discretionary uses.
These non-GAAP measures should not be considered a substitute for the reported
results prepared in accordance with GAAP. These non-GAAP financial measures, as
determined and presented by the company, may not be comparable to related or
similarly titled measures reported by other companies.
Set forth on the following pages are reconciliations of these non-GAAP
financial measures, if applicable, to the most directly comparable financial
measures calculated and presented in accordance with GAAP.
Third-Quarter Conference Call
ArvinMeritor will host a conference call and web cast to discuss the
company’s third-quarter fiscal year 2008 financial results on Tuesday,
July 29, 2008, at 8 a.m. (ET).
To participate, call (888) 686-9704 ten minutes prior to the start of the call.
Please reference participant conference ID 8087740 when dialing in. Investors
can also listen to the conference call in real time – or for seven days
by recording – by visiting www.arvinmeritor.com.
A telephone replay of the call will be available from 11 a.m. on July 29 to
11:59 p.m. on Aug. 5, 2008, by calling (888) 203-1112 (within the United States)
or (719) 457-0820 for international calls. Please refer to replay Passcode
8087740.
To access the listen-only audio Web cast, visit the ArvinMeritor Web site at www.arvinmeritor.com and select the Web cast
link from the home page or the investor page.
ARVINMERITOR,
INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(in millions, except per share amounts)
Quarter Ended Nine Months Ended
June 30,
June 30,
2008
2007 2008
2007
(Unaudited)
(Unaudited)
Sales
$2,003 $1,662
$5,447 $4,857
Cost of
sales
(1,807) (1,526)
(4,954) (4,474)
GROSS
MARGIN
196
136 493
383
Selling, general and
administrative
(130)
(93) (327) (265)
Restructuring
costs
(4)
(24) (19)
(61)
Other income
(expense)
-
-
(1) 12
OPERATING
INCOME
62
19
146 69
Equity in earnings of
affiliates
12 10
29 24
Interest expense,
net
(19)
(27)
(66) (88)
INCOME BEFORE INCOME
TAXES
55
2
109 5
Benefit (provision) for
income
taxes
3
(1) (21)
(2)
Minority
interests
(7)
(5) (14)
(10)
INCOME (LOSS) FROM
CONTINUING
OPERATIONS
51
(4) 74
(7)
LOSS FROM DISCONTINUED
OPERATIONS
(7)
(66) (22)
(150)
NET INCOME
(LOSS)
44
(70) 52
(157)
DILUTED EARNINGS (LOSS)
PER SHARE
Continuing
operations
$0.70 $(0.06)
$1.02 $(0.10)
Discontinued
operations
(0.10) (0.93)
(0.30) (2.14)
Diluted earnings (loss)
per
share
$0.60 $(0.99)
$0.72 $(2.24)
Diluted average common
shares
outstanding
72.9 70.8
72.6 70.1
ARVINMERITOR, INC.
CONSOLIDATED BALANCE SHEET
(in millions)
June 30, September 30,
2008 2007
(Unaudited)
ASSETS:
Cash and cash
equivalents
$432 $409
Receivables, trade and other,
net
1,356 1,223
Inventories
638 541
Other current
assets
242 216
Net
property
771 738
Goodwill
525 520
Other
assets
1,123 1,142
TOTAL
ASSETS
$5,087 $4,789
LIABILITIES AND SHAREOWNERS' EQUITY
Short-term
debt
$224 $18
Accounts
payable
1,347 1,342
Other current
liabilities
662 719
Long-term
debt
1,068 1,130
Retirement
benefits
790 763
Other
liabilities
238 209
Minority
interests
78 65
Shareowners'
equity
680 543
TOTAL LIABILITIES AND SHAREOWNERS'
EQUITY
$5,087 $4,789
ARVINMERITOR, INC.
CONSOLIDATED BUSINESS SEGMENT INFORMATION
(in millions)
Quarter Ended Nine Months Ended
June
30,
June 30,
2008
2007
2008 2007
(Unaudited)
(Unaudited)
Sales:
Commercial Vehicle
Systems $1,356
$1,049 $3,628 $3,170
Light Vehicle
Systems
647 613
1,819 1,687
Total
sales
$2,003 $1,662
$5,447 $4,857
EBITDA:
Commercial Vehicle
Systems $101
$63
$256 $186
Light Vehicle
Systems
23
12 44
34
Total Segment
EBITDA
124
75 300
220
Unallocated Corporate
Costs
(13)
(7) (18)
(8)
ET Corporate
Allocations
-
(9) -
(27)
Total
EBITDA
111 59
282 185
Loss on Sale
of Receivables
(6)
(3)
(15) (6)
Depreciation and
Amortization
(38) (32)
(106) (96)
Interest Expense,
Net
(19)
(27)
(66) (88)
Benefit (Provision) for
Income
Taxes
3 (1)
(21) (2)
Income (Loss) From Continuing
Operations
$51 $(4)
$74 $(7)
ARVINMERITOR, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
Nine Months Ended
June 30,
2008 2007
(Unaudited)
OPERATING ACTIVITIES
Income (loss) from continuing
operations
$74 $(7)
Adjustments to income (loss) from
continuing
operations:
Depreciation and
amortization
106 96
Gain on
divestitures
- (2)
Adjustment to impairment
reserves,
net
- (10)
Restructuring costs, net
of
payments
(7) 38
Loss on debt
extinguishment
3 6
Pension and retiree
medical
expense
78 99
Other adjustments to
income (loss) from
continuing
operations
(3) 6
Pension and retiree medical
contributions
(62) (182)
Proceeds from unwind of swap
agreement
28 -
Changes in off-balance sheet receivable
securitization and
factoring
209 115
Changes in assets and
liabilities
(403) (231)
Cash flows provided by (used for) continuing
operations
23 (72)
Cash flows used for discontinued
operations
(17) (118)
CASH PROVIDED BY (USED FOR) OPERATING
ACTIVITIES
6 (190)
INVESTING ACTIVITIES
Capital
expenditures
(118) (72)
Acquisitions of businesses and
investments,
net of cash
acquired
(41) (2)
Proceeds from disposition of
property and
businesses
9 11
Proceeds from investments and
marketable securities
5 5
Net investing cash flows provided by
discontinued
operations
55 177
CASH PROVIDED BY (USED FOR) BY INVESTING
ACTIVITIES
(90) 119
FINANCING ACTIVITIES
Borrowings on accounts
receivable securitization
program
118 49
Issuance of convertible
notes
- 200
Repayment of
notes
(5) (249)
Borrowings on lines of
credit and other, net
8 -
Net change in
debt
121 -
Debt issuance and extinguishment
costs
(6) (10)
Proceeds from exercise of stock
options
- 21
Cash dividends
(23) (21)
Other financing
activities
- (1)
CASH PROVIDED BY (USED FOR) FINANCING
ACTIVITIES
92 (11)
EFFECT OF CHANGES IN FOREIGN CURRENCY EXCHANGE
RATES ON CASH AND CASH
EQUIVALENTS
15 16
CHANGE IN CASH AND CASH
EQUIVALENTS
23 (66)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD
409 350
CASH AND CASH EQUIVALENTS AT END OF
PERIOD
$432 $284
ARVINMERITOR, INC.
SELECTED FINANCIAL INFORMATION - RECONCILIATION
Non-GAAP
(in millions, except per share amounts)
(unaudited)
Q3 FY 08
Spin-Off
Before
Q3 FY
08
Transaction Tax Special
Reported Restructuring Costs
Impact Items
Sales
$2,003
$- $-
$- $2,003
Gross Margin
196
-
-
- 196
Operating
Income
62
4
6
- 72
Income from Continuing
Operations
51
3 4
(2) 56
Diluted Earnings (Loss)
Per Share - Continuing
Operations
$0.70 $0.04
0.06 $(0.03) $0.77
Segment EBITDA:
Commercial Vehicle
Systems
$101
$- $-
$- $101
Light Vehicle Systems
23
3
-
- 26
Total Segment EBITDA
$124
$3
$-
$- $127
Segment EBITDA Margins
Commercial Vehicle
Systems
7.4%
7.4%
Light Vehicle Systems
3.6%
4.0%
Total Segment EBITDA
Margins
6.2%
6.3%
ARVINMERITOR, INC.
SELECTED FINANCIAL INFORMATION - RECONCILIATION
Non-GAAP
(in millions, except per share amounts)
(unaudited)
Q3 FY 07
Before
Q3 FY 07
Product
Income Special
Reported Disruptions Restructuring
Taxes Items
Sales
$1,662
$- $-
$- $1,662
Gross
Margin
136
2
-
- 138
Operating
Income
19 2
24
- 45
Income (Loss)
from Continuing
Operations
(4)
1
15
6 18
Diluted Earnings
(Loss) Per Share -
Continuing
Operations $(0.06)
$0.02
$0.21 $0.08 $0.25
Segment EBITDA:
Commercial Vehicle
Systems
$63
$- $2
$- $65
Light Vehicle
Systems
12
2 17
- 31
Total Segment
EBITDA
$75
$2 $19
$- $96
Segment EBITDA
Margins
Commercial Vehicle
Systems
6.0%
6.2%
Light Vehicle
Systems
(1)
2.0%
4.9%
Total Segment
EBITDA
Margins
4.5%
5.8%
(1) LVS margins before special items are adjusted to
reflect the impact of
reduced volumes in our Brussels operation.
ARVINMERITOR, INC.
EBITDA Before Special Items Reconciliation
Non-GAAP
(Unaudited, in millions)
Quarter Ended
June 30,
2008 2007
Total EBITDA - Before Special
Items
121 85
Restructuring
Costs
(4) (24)
Spin-Off Transaction
Costs
(6) -
Product
Disruptions
- (2)
Loss on Sale of
Receivables
(6) (3)
Depreciation and
Amortization
(38) (32)
Interest Expense,
Net
(19) (27)
Benefit (Provision) for Income
Taxes
3 (1)
Income (Loss) From Continuing
Operations
$51 $(4)
ARVINMERITOR, INC.
FREE CASH FLOW - RECONCILIATION
Non-GAAP
(Unaudited, in millions)
Quarter Ended June 30,
2008 2007
Cash provided by (used for) operating
activities
$114 $(127)
Less: Capital expenditures
(1)
(55) (29)
Free cash
flow
$59 $(156)
(1) Includes capital expenditures of discontinued
operations of $5 million
in the prior year.
CONTACTS:
Media Inquiries
Lin Cummins
(248) 435-7112
linda.cummins@arvinmeritor.com
Investor Inquiries
Terry Huch
(248) 435-9426
terry.huch@arvinmeritor.com
