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ArvinMeritor Reports First-Quarter Fiscal Year 2006 Results

Company Meets First-Quarter Expectations and Increases Outlook for Free Cash Flow

TROY, Mich., Jan. 24 /PRNewswire-FirstCall/ -- ArvinMeritor, Inc. (NYSE: ARM) today reported financial results for its first fiscal quarter, ended Dec. 31, 2005.

First-Quarter Fiscal Year 2006 Highlights

* Net income was $34 million, or $0.49 per diluted share, compared to $18 million, or $0.26 per diluted share last year -- an increase of 88 percent.

* Income from continuing operations, before special items, was $11 million, or $0.16 per diluted share -- the higher end of the company's previous guidance. On a GAAP basis, income from continuing operations was $27 million, or $0.39 per diluted share, compared to $14 million, or $0.20 per diluted share in the same period last year.

* Sales from continuing operations of $2.1 billion, up slightly from the same period last year.

* Free cash flow of $75 million -- a significant improvement from the first quarter of fiscal year 2005.

* Net debt as of Dec. 31, 2005 improved $120 million since Sept. 30, 2005 to the lowest level since the merger of Arvin and Meritor.

* Cash proceeds, resulting from the sale of the company's off-highway brake assets and its 39-percent equity investment in Purolator India, were $48 million.

"We delivered a good quarter and are pleased to have met first-quarter expectations at the higher end of our guidance, in addition to reporting another quarter of strong free cash flow. We are starting to see the benefits of the restructuring plan we announced in fiscal year 2005 and other aggressive cost reduction programs, which continue to strengthen our global businesses," said Chairman, CEO and President Chip McClure.

In December 2005, the company sold its Asti, Italy ride control business. This sale, along with the previous divestiture of its shareholdings in AP Amortiguadores, S.A. (APA) in fiscal year 2004, continues to move the company toward its plan to exit the Light Vehicle Systems (LVS) ride control business, and focus resources on its core operations. As a result, ride control is now reported as discontinued operations. All prior year results have been reclassified to conform to this presentation.

First-Quarter Fiscal Year 2006 Results

For the first quarter of fiscal year 2006, the company posted sales of $2.1 billion, a one-percent increase when compared to the same period last year. Stronger volumes in its Commercial Vehicle Systems (CVS) business were largely offset by the loss of sales associated with divestitures and the impact of foreign currency translation, which lowered sales by approximately $65 million when compared to the same period last year.

Operating income from continuing operations in the first quarter of fiscal year 2006 was $64 million, up $24 million from the prior year's first quarter. Included in operating income in the first quarter of fiscal year 2006 was a gain on the sale of certain assets of the company's off-highway brake business of $23 million. Excluding this gain and restructuring costs, operating income would have been $42 million. The benefits of stronger volumes in ArvinMeritor's CVS business, and cost reductions resulting from restructuring programs, were largely offset by the loss of income from previous divestitures and higher energy and pension costs.

Income from discontinued operations was $7 million, or $0.10 per diluted share, compared to $4 million, or $0.06 per diluted share in the same period last year.

"We continue to make significant progress in our efforts to refocus and maximize our operational efficiencies through the sale of non-core assets," McClure said. "In the first quarter of fiscal year 2006, we completed the divestiture of our off-highway brake assets and the sale of our 39-percent share in Purolator India, for total proceeds of $48 million."

He continued, "We are encouraged by the interest in our global Light Vehicle Aftermarket businesses, and continue to work diligently to divest these businesses at a fair market value."

Outlook

The company's fiscal year 2006 outlook for light vehicle production is 15.6 million vehicles in North America and 16.4 million vehicles in Western Europe. The forecast for North American Class 8 truck production is 325,000 units in fiscal year 2006, up from the 305,000 units projected in our previous outlook.

For the second quarter of fiscal year 2006, the sales forecast for continuing operations is $2.2 billion. The company's outlook for diluted earnings per share from continuing operations for the second quarter is $0.35 to $0.40, before special items.

McClure said, "Our sales from continuing operations in fiscal year 2006 are expected to be approximately $8.6 billion, unchanged from our previous outlook, and the outlook for full-year diluted earnings per share from continuing operations is in the range of $1.50 to $1.70, also unchanged. In addition, we now forecast free cash flow to be in the range of $120-170 million for fiscal year 2006." This outlook includes higher production levels for commercial vehicles and a $13 million impact related to a recent preliminary injunction issued in connection with class-action lawsuits related to retiree medical benefits. It excludes gains or losses on divestitures, restructuring costs, other special items and the potential impact of any extended customer shutdowns or production interruptions.

"In spite of continued challenges in the North American light vehicle market, including pricing pressures and rising energy costs, ArvinMeritor's diverse mix of customers, geographic markets and products continues to differentiate us from our peers," he continued. "Both financially and operationally, we are off to a good start."

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 light vehicle, commercial truck, trailer and specialty original equipment manufacturers and certain aftermarkets. Headquartered in Troy, Mich., ArvinMeritor employs approximately 29,000 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 .

Forward-Looking Statements

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 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; 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 ("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 "net debt" and "free cash flow". Net debt is defined as total debt less the fair value adjustment of debt due to interest rate swaps, plus factored receivables, less cash. Free cash flow represents net cash provided by operating activities before the net change in factored accounts receivable, less capital expenditures. The company believes it is appropriate to exclude the net change in factored accounts receivable in the calculation of free cash flow since the factored receivables may be viewed as a substitute for borrowing activity.

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. In particular, management believes that net debt is an important indicator of the company's overall leverage and 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. Neither net debt nor free cash flow should be considered substitutes for debt, cash provided by operating activities or other balance sheet or cash flow statement data prepared in accordance with GAAP or as a measure of financial position or liquidity. In addition, the calculation of free cash flow does not reflect cash used to service debt and thus does not reflect funds available for investment or other discretionary uses. 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.

First-Quarter Fiscal Year 2006 Conference Call

The company will host a telephone conference call and Web cast to discuss the company's fiscal year 2006 first-quarter financial results on Tuesday, Jan. 24, 2006, at 9 a.m. (ET). To participate, call (706) 643-7449 ten minutes prior to the start of the call. Please reference ArvinMeritor when dialing in. Investors can also listen to the conference call in real time -- or for 90 days by recording -- by visiting http://www.arvinmeritor.com .

A replay of the call will be available from noon on Jan. 24, until 11:59 p.m. on Jan. 27, 2006, by calling (800) 642-1687 within the United States and Canada, or (706) 645-9291 for international calls. Please refer to conference ID number 4227897.

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 STATEMENT OF INCOME
              (Unaudited, in millions, except per share amount)

                                                       Three Months Ended
                                                           December 31,
                                                      2005              2004
                                                           (Unaudited)
     Sales                                          $2,086            $2,067
     Cost of Sales                                  (1,957)           (1,933)
     GROSS MARGIN                                      129               134
       Selling, General, & Administrative              (87)              (83)
       Restructuring Costs                              (1)              (10)
       Gain on Divestitures, Net                        23                 4
       Customer Bankruptcies                             -                (5)
     OPERATING INCOME                                   64                40
       Equity in Earnings of Affiliates                  7                 6
       Interest Expense, Net and Other                 (32)              (28)
     INCOME BEFORE TAXES                                39                18
       Provision for Income Taxes                      (10)               (6)
       Minority Interests                               (2)                2
     Income From Continuing Operations                  27                14
     Income from Discontinued Operations                 7                 4

     NET INCOME                                        $34               $18

     DILUTED EARNINGS PER SHARE
       Continuing Operations                         $0.39             $0.20
       Discontinued Operations                        0.10              0.06
     Diluted Earnings Per Share                      $0.49             $0.26

     Diluted Shares Outstanding                       69.8              69.0



                              ARVINMERITOR, INC.
                  CONSOLIDATED BUSINESS SEGMENT INFORMATION
                                (In millions)

                                               Three Months Ended December 31,
                                                      2005              2004
                                                           (Unaudited)
    Sales:
      Light Vehicle Systems                         $1,150            $1,160
      Commercial Vehicle Systems                       936               907
    Total Sales                                     $2,086            $2,067


    Operating Income (Loss):
      Light Vehicle Systems                            $(3)               $3
      Commercial Vehicle Systems                        67                37
    Total Operating Income                             $64               $40



                              ARVINMERITOR, INC.
                      SUMMARY CONSOLIDATED BALANCE SHEET
                                (In millions)

                                                  December 31,   September 30,
                                                      2005              2005
                                                  (Unaudited)
     ASSETS
     Cash and Cash Equivalents                        $302              $187
     Receivables, Net                                1,452             1,655
     Inventories                                       550               541
     Other Current Assets                              256               256
     Assets of Discontinued Operations                 525               531
     Net Property                                      982             1,013
     Goodwill                                          787               801
     Other Assets                                      875               886
     TOTAL ASSETS                                   $5,729            $5,870

     LIABILITIES AND SHAREOWNERS' EQUITY
     Short-Term Debt                                   $99              $131
     Accounts Payable                                1,448             1,483
     Other Current Liabilities                         618               667
     Liabilities of Discontinued Operations            221               242
     Other Liabilities                                 968               963
     Long-Term Debt                                  1,438             1,451
     Minority Interests                                 60                58
     Shareowners' Equity                               877               875
     TOTAL LIABILITIES AND SHAREOWNERS' EQUITY      $5,729            $5,870



                              ARVINMERITOR, INC.
            SUMMARY CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                           (Unaudited, in millions)

                                                        Three Months Ended
                                                           December 31,
                                                      2005              2004
    OPERATING ACTIVITIES
    Income from Continuing Operations                  $27               $14
      Adjustments to Income From
       Continuing Operations
       Depreciation and Amortization                    40                45
        Gains on Divestitures, Net                     (23)               (4)
        Restructuring Costs, Net of Payments            (7)                -
        Pension and Retiree Medical Expense             33                27
        Other Adjustments to Income                      1                 -
    Pension and Retiree Medical Contributions          (28)              (22)
    Changes in Receivable Securitization
     and Factoring                                      37               (41)
    Changes in Assets and Liabilities                   83              (144)
    Cash Flows Provided By (Used For)
     Continuing Operations                             163              (125)
    Cash Flows Used By Discontinued Operations         (12)              (95)
    CASH PROVIDED BY (USED FOR) OPERATING
     ACTIVITIES                                        151              (220)

    INVESTING ACTIVITIES
      Capital Expenditures                             (37)              (27)
      Acquisitions of Businesses and
       Investments, Net of Cash Acquired                (1)              (22)
      Proceeds from Disposition of
       Property and Businesses                          39                33
      Net Cash Flows Provided By
       Discontinued Operations                           7               162
    CASH PROVIDED BY INVESTING ACTIVITIES                8               146

    FINANCING ACTIVITIES
        Net Change in Revolving Credit Facilities        -                11
        Borrowings on Accounts Receivable
         Securitization Program                        (24)                -
        Purchase of Notes                               (3)                -
        Net Change on Lines of Credit and Other        (14)               20
      Net Change in Debt                               (41)               31
      Proceeds from Exercise of Stock Options            -                 5
      Cash Dividends                                    (7)               (7)
      Net Financing Cash Flows Provided
       By Discontinued Operations                        2                 -
    CASH PROVIDED BY (USED FOR) FINANCING
     ACTIVITIES                                        (46)               29

    EFFECT OF CHANGES IN FOREIGN CURRENCY
     EXCHANGE RATES ON CASH                              2                 4

    CHANGE IN CASH AND CASH EQUIVALENTS                115               (41)
    CASH AND CASH EQUIVALENTS AT
     BEGINNING OF YEAR                                 187               132
    CASH AND CASH EQUIVALENTS AT END OF YEAR          $302               $91



                              ARVINMERITOR, INC.
               SELECTED FINANCIAL INFORMATION - RECONCILIATION
                                   Non-GAAP
                           (Unaudited, in millions)

                                              Restruc- Gain on
    (in millions, except per share   Q1 FY 06  turing  Divest- Income Q1 FY06
      amounts)                       Reported  Actions  iture  Taxes  Adjusted
    Sales                             $2,086     $-      $-      $-   $2,086
    Gross Margin                         129      -       -       -      129
    Operating Income                      64      1     (23)      -       42
    Income from Continuing Operations     27      1     (14)     (3)      11
    Diluted Earnings Per Share -
     Continuing Operations             $0.39  $0.01  $(0.20) $(0.04)   $0.16

    Segment Operating Income
      LVS Operating Loss                 $(3)    $-      $-      $-      $(3)
      CVS Operating Income                67      1     (23)      -       45
    Total Operating Income               $64     $1    $(23)     $-      $42

    Operating Margins
      LVS                               -0.3%                           -0.3%
      CVS                                7.2%                            4.8%
    Total Operating Margins              3.1%                            2.0%



                              ARVINMERITOR, INC.
                       FREE CASH FLOW - RECONCILIATION
                                   Non-GAAP
                           (Unaudited, in millions)

                                                        Three Months Ended
                                                            December 31,
                                                      2005               2004
     Cash Provided by (Used for)
      Operating Activities                            $151              $(220)
     Changes in Receivables
      Securitization and Factoring                     (37)                41
     Cash Provided by (Used for)
      Operations before Receivables
     Securitization and Factoring                      114               (179)
     Capital Expenditures (1)                          (39)               (27)
     Free Cash Flow                                    $75              $(206)

    (1) Includes capital expenditures of discontinued operations.



                              ARVINMERITOR, INC.
                             NET DEBT COMPOSITION
                                   Non-GAAP
                           (Unaudited, in millions)

                                                  December 31,   September 30,
                                                      2005              2005
     Total debt                                     $1,537            $1,582
     Fair value of interest rate swaps                 (14)              (17)
     Receivable factoring                               60                23
        Subtotal                                     1,583             1,588
     Less: cash                                       (302)             (187)
         Net Debt                                   $1,281            $1,401


     

SOURCE ArvinMeritor, Inc.

CONTACT:

Media Inquiries:
Lin Cummins
+1-248-435-7112
linda.cummins@arvinmeritor.com

Investor Inquiries:
Brian Casey
+1-248-435-0015
brian.casey@arvinmeritor.com

both of ArvinMeritor, Inc.
Web site: http://www.arvinmeritor.com
(ARM)

 
 
 
 
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