Announces Sale of Wheels Business Unit TROY, Mich., Aug. 4
/PRNewswire-FirstCall/ -- ArvinMeritor, Inc. (NYSE: ARM) today
reported financial results for its third quarter ended June 30,
2009. Highlights -- Cash flow from operations was $99 million
compared to $114 million in the same period last year. -- Free cash
flow was $73 million compared to $59 million in the same period
last year. -- Fully complied with all covenants in its revolving
credit facility in June; the debt to EBITDA covenant was met with a
comfortable cushion. -- Signed agreements to divest the majority of
its Chassis businesses, and closed selective sales during the
quarter. -- Signed an agreement on Aug. 4, 2009, to sell the Wheels
business unit. -- Awarded new axle business with Navistar and a
premier bus manufacturer in China; executed multi-year agreement
with Daimler Trucks North America. "Although sales are down
significantly, our performance this quarter demonstrates a
continued diligence to improve ArvinMeritor's liquidity position
through proactive management of working capital, improved
operational performance and ongoing cost reduction actions," said
Chairman, CEO and President Chip McClure. "With the completion of
several divestitures, we moved closer to our objective of becoming
a commercial vehicle company, enabling us to focus on expanding our
leadership position in both on- and off-highway markets, as
demonstrated by the new contracts we announced this quarter."
Results for the Third-Quarter Fiscal Year 2009 In the third quarter
of fiscal year 2009, ArvinMeritor posted sales of $993 million,
down from $1.9 billion, or 47 percent, from the same period last
year (42 percent excluding effects of foreign currency). This
decrease in sales is due to significantly lower production volumes
in most original equipment markets globally. Net loss was $162
million, or $2.23 per diluted share, compared to net income of $44
million or $0.60 per diluted share, in the third quarter of fiscal
year 2008. Net loss includes losses from discontinued operations of
$134 million or $1.84 per diluted share, primarily related to
non-cash, after-tax charges of approximately $90 million associated
with the divestiture of several of the company's chassis
businesses. EBITDA from continuing operations, before special
items, was $33 million, down $79 million or 71 percent, from the
same period last year. Despite sales being down nearly 50 percent
in our core Commercial Vehicle Systems business, EBITDA margins in
that business only declined by approximately 30 percent, due to
operational improvements, the impact of restructuring and other
cost reduction initiatives, and positive material performance. Loss
from continuing operations, on a GAAP basis, was $28 million or
$0.39 per diluted share, compared to income from continuing
operations of $48 million or $0.66 per diluted share in the prior
year. Loss from continuing operations, before special items, was
$18 million or $0.25 per diluted share, compared to income from
continuing operations, before special items, of $54 million or
$0.74 per diluted share a year ago. Special items for the quarter
primarily relate to restructuring charges and non-cash charges for
a valuation reserve against certain deferred tax assets. Free cash
flow was $73 million in the third quarter, an increase of $211
million from the second fiscal quarter of this year. This increase
is due to continued reductions in working capital levels, primarily
in accounts receivable and inventory. Divestiture of Wheels
Business On Aug. 4, 2009, ArvinMeritor entered into a purchase and
sale agreement to divest the entirety of its Wheels business -
previously a division of the company's LVS segment - to
Iochpe-Maxion, S. A. (Buyer), a Brazilian producer of wheels and
frames for commercial vehicles, railway freight cars and castings.
The base purchase price is $180 million; actual closing proceeds
may vary depending on taxes and the net cash or debt position of
the business at closing. The closing and funding of the entire
adjusted purchase price is expected to be on or before Sept. 23,
2009, prior to the end of ArvinMeritor's fourth fiscal quarter. The
agreement also requires certain true-up payments for working
capital and other miscellaneous adjustments, on a post-closing
basis. The completion of the transaction is subject to several
conditions, including the clearance or waiver of applicable
competition law waiting periods in the United States and Mexico,
and the fulfillment of Buyer's committed financing. The Buyer will
be pursuing corporate approvals, which are required under Brazilian
law. Divestiture of Chassis Businesses As previously announced, in
the third quarter of fiscal year 2009, ArvinMeritor completed the
sale of its 51-percent stake in Gabriel de Venezuela, substantially
completed the sale of its Gabriel Ride Control Products North
America business and entered into a binding letter of intent to
sell its stake in Meritor Suspension Systems Company. All of these
businesses are included in the company's discontinued operations
for the third quarter. These transactions largely complete the
divestiture of Chassis Systems, representing 72 percent of total
Chassis revenue based on 2008 sales, including $117 million of
pass-through sales, and 87 percent of value-added sales. The
remaining Chassis businesses operate near breakeven and primarily
support the company's suspension module assembly business which is
expected to run-off over the next two years as various vehicle
programs come to a conclusion. New Business Wins During the third
quarter, ArvinMeritor announced a long-term supply agreement with
Navistar. Effective July 13, Meritor axles are now in standard
position on International medium-duty trucks and IC Bus(TM) brand
school and commercial buses. In addition, ArvinMeritor gains
additional standard axle positions on International's heavy-duty
trucks. The company also completed a multi-year agreement with
Daimler Trucks North America this quarter for the supply of axles,
brakes and drivelines. In Asia Pacific, ArvinMeritor signed a
supply agreement with Yutong Group Co., Ltd., the largest producer
of high-end buses and coaches in the China market, to supply
drivetrain components for buses and coaches in China. Production
under this agreement is expected to begin at the end of calendar
year 2009. Credit Line Covenant Compliance ArvinMeritor was in
compliance with the covenants in its revolving credit facility as
of June 28, 2009. Stronger cash flow and improved regional cash
efficiencies in the third quarter allowed the company to reduce
usage of the revolver in the quarter by $145 million. In addition,
the company has identified actions that should allow it to meet its
covenants at the September measurement date and is working
diligently to implement those actions. These include executing the
sale of Wheels and replacing the U.S. accounts receivable
securitization program, as well as continued improvements in
working capital. ArvinMeritor is in negotiations with potential
lenders for a replacement to its US securitization program. Based
on discussions with those lenders and progress to date, the company
expects to complete a transaction in August 2009. If the company is
unable to complete these actions by the September measurement date,
it is likely that ArvinMeritor will seek and obtain an amendment or
waiver to its revolving credit line agreement. Outlook While market
conditions remain depressed in North America and Europe, South
America and Asia Pacific continue to show signs of improvement. For
the fourth quarter of fiscal year 2009 (compared to the third
fiscal quarter of 2009), the company anticipates: -- Revenue to be
slightly lower, due largely to seasonal patterns -- Loss per share,
before special items, to be greater -- Free cash flow, before
factoring and restructuring, to be slightly negative -- Total free
cash flow to be negative "While we anticipate market conditions
will remain tough through our fourth fiscal quarter, we are taking
appropriate actions that should help offset the impact and allow us
to remain in compliance with our year-end credit line financial
covenant," said McClure. "We will continue to proactively manage
working capital levels, execute key initiatives and reduce costs,
while at the same time positioning the company for a recovery in
our key markets." 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
marks its centennial anniversary in 2009, celebrating a long
history of 'forward thinking.' ArvinMeritor serves commercial
truck, trailer and specialty original equipment manufacturers and
certain aftermarkets, and light vehicle manufacturers. 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/. 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 present the company's fiscal year 2009 third-quarter
financial results on Tuesday, Aug. 4, 2009, at 9 a.m. (ET). To
participate, call (617) 213-4867, ten minutes prior to the start of
the call. Please reference passcode 51892323 when dialing in.
Investors can also listen to the conference call in real time - or
for seven days by recording - by visiting
http://www.arvinmeritor.com/ and selecting the Web cast link from
the home page or the investor page. A replay of the call will be
available from 12 p.m. Aug. 4, to 11:59 p.m. Aug. 11, 2009, by
calling (888) 286-8010 (within the United States) or (617) 801-6888
for international calls. Please refer to replay pass code number
98701091. 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 our
ability to obtain any needed waiver or amendment to our credit
agreement; our ability to finalize the replacement of our U.S.
securitization facility in an amount and on terms acceptable to
ArvinMeritor; our ability to complete the sale of the Wheels
business, including with respect to the competition filings
required and other closing conditions; our ability to achieve
anticipated or continued cost savings from reduction actions; and
our ability to execute the Company's announced plans for the Body
Systems and Chassis Systems businesses of LVS, including the timing
and certainty of completion or the terms upon which any sale
agreement with respect to any portion of the business may be made
and the amount of any exit costs. 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, including the recent global economic
crisis; whether we will have sufficient liquidity as we continue to
be affected by declining vehicle production volumes; 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; 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 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 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; 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; 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 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.
ARVINMERITOR, INC. CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
(In millions, except per share amounts) Quarter Ended Nine Months
Ended June 30, June 30, -------------- ----------------- 2009 2008
2009 2008 ---- ---- ---- ---- Sales $993 $1,877 $3,280 $5,101 Cost
of sales (916) (1,697) (3,043) (4,637) ---- ------ ------ ------
GROSS MARGIN 77 180 237 464 Selling, general and administrative
(69) (123) (228) (309) Restructuring costs (6) (2) (78) (9) Asset
impairments - - (223) - Other expense, net - - (1) (1) --- --- ---
--- OPERATING INCOME (LOSS) 2 55 (293) 145 Equity in earnings of
affiliates 7 12 8 29 Interest expense, net (22) (19) (65) (65) ---
--- --- --- INCOME (LOSS) BEFORE INCOME TAXES (13) 48 (350) 109
Benefit (provision) for income taxes (12) 3 (665) (20) Minority
interests (3) (3) (6) (10) --- --- --- --- INCOME (LOSS) FROM
CONTINUING OPERATIONS (28) 48 (1,021) 79 LOSS FROM DISCONTINUED
OPERATIONS (134) (4) (179) (27) ---- --- ---- --- NET INCOME (LOSS)
$(162) $44 $(1,200) $52 ===== === ======= === DILUTED EARNINGS
(LOSS) PER SHARE Continuing operations $(0.39) $0.66 $(14.08) $1.09
Discontinued operations (1.84) (0.06) (2.47) (0.37) ----- -----
----- ----- Diluted income (loss) per share $(2.23) $0.60 $(16.55)
$0.72 ====== ===== ======= ===== Diluted average common shares
outstanding 72.7 72.9 72.5 72.6 ARVINMERITOR, INC. CONSOLIDATED
BALANCE SHEET (Unaudited, In millions) June 30, September 30, 2009
2008 ---- ---- ASSETS: ------- Cash and cash equivalents $76 $497
Receivables, trade and other, net 679 1,114 Inventories 401 623
Other current assets 114 218 Assets of discontinued operations 53 -
Net property 523 775 Goodwill 438 522 Other assets 343 925 --- ---
TOTAL ASSETS $2,627 $4,674 ====== ====== LIABILITIES AND
SHAREOWNERS' EQUITY (DEFICIT)
-------------------------------------------- Short-term debt $109
$240 Accounts payable 671 1,287 Other current liabilities 453 610
Liabilities of discontinued operations 87 - Long-term debt 1,235
1,063 Retirement benefits 617 690 Other liabilities 301 247
Minority interests 26 75 Shareowners' equity (deficit) (872) 462
---- --- TOTAL LIABILITIES AND SHAREOWNERS' EQUITY (DEFICIT) $2,627
$4,674 ====== ====== ARVINMERITOR, INC. CONDENSED CONSOLIDATED
STATEMENT OF CASH FLOWS (Unaudited, In millions) Nine Months Ended
June 30, ------------------------- 2009 2008 ---- ---- OPERATING
ACTIVITIES Income (loss) from continuing operations $(1,021) $79
Adjustments to loss from continuing operations: Depreciation and
amortization 66 96 Asset impairment charges 223 - Deferred income
tax expense (benefit) 642 (18) Restructuring costs, net of payments
34 (10) Pension and retiree medical expense 57 73 Other adjustments
to income (loss) from continuing operations, net 17 - Pension and
retiree medical contributions (78) (57) Proceeds from terminations
of interest rate swaps - 28 Changes in off-balance sheet receivable
securitization and factoring (260) 203 Changes in assets and
liabilities 51 (324) ------ ------ Cash flows provided by (used
for) continuing operations (269) 70 Cash flows provided by (used
for) discontinued operations, net (72) (64) ------ ------ CASH
PROVIDED BY (USED FOR) OPERATING ACTIVITIES (341) 6 INVESTING
ACTIVITIES Capital expenditures (103) (99) Acquisitions of
businesses and investments, net of cash acquired - (43) Proceeds
from disposition of property and businesses 3 9 Proceeds from
investments and marketable securities 6 5 Net investing cash flows
provided by (used for) discontinued operations (25) 38 ------
------ CASH USED FOR INVESTING ACTIVITIES (119) (90) ------ ------
FINANCING ACTIVITIES Borrowings (payments) on accounts receivable
securitization program (33) 118 Borrowings on revolving credit
facility, net 181 - Repayment of notes (83) (5) Borrowings
(payments) on lines of credit and other, net (4) 6 ------ ------
Net change in debt 61 119 Debt issuance and extinguishment costs -
(6) Cash dividends (8) (23) Net financing cash flows provided by
discontinued operations 4 2 ------ ------ CASH PROVIDED BY
FINANCING ACTIVITIES 57 92 ------ ------ EFFECT OF CHANGES IN
FOREIGN CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS (18)
15 ------ ------ CHANGE IN CASH AND CASH EQUIVALENTS (421) 23 CASH
AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 497 409 ------ ------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $76 $432 ====== ======
ARVINMERITOR, INC. CONSOLIDATED BUSINESS SEGMENT INFORMATION
(Unaudited, In millions) Quarter Ended Nine Months Ended June 30,
June 30, ----------------- ----------------- 2009 2008 2009 2008
---- ---- ---- ---- Sales: Commercial Vehicle Systems $683 $1,356
$2,378 $3,628 Light Vehicle Systems 310 521 902 1,473 --- --- ---
----- Total sales $993 $1,877 $3,280 $5,101 ==== ====== ======
====== EBITDA: Commercial Vehicle Systems $30 $101 $75 $256 Light
Vehicle Systems (1) 16 (268) 38 -- -- ---- -- Total Segment EBITDA
29 117 (193) 294 Unallocated Corporate Costs (3) (13 (25) (19) --
--- --- --- Total EBITDA 26 104 (218) 275 Loss on Sale of
Receivables (1) (6) (7) (15) Depreciation and Amortization (19)
(34) (66) (96) Interest Expense, Net (22) (19) (65) (65) Benefit
(Provision) for Income Taxes (12) 3 (665) (20) --- --- ---- ---
Loss from Continuing Operations $(28) $48 $(1,021) $79 ==== ===
======= === ARVINMERITOR, INC. SELECTED FINANCIAL INFORMATION -
RECONCILIATION Non-GAAP (Unaudited) (In millions, except per share
amounts) Q3 FY 09 LVS Income Before Q3 FY 09 Restruc- Separation
Tax Special Reported turing Costs Charges Items -------- --------
---------- ------- -------- Sales $993 $- $- $- $993 Gross Margin
77 - - - 77 Operating Income 2 6 1 - 9 Loss from Continuing
Operations (28) 6 1 3 (18) Diluted Loss Per Share - Continuing
Operations $(0.39) $0.09 $0.01 $0.04 $(0.25) Segment EBITDA:
Commercial Vehicle Systems $30 $5 $- $- $35 Light Vehicle Systems
(1) 1 - - - ------- ------- ------- ------- ------- Total Segment
EBITDA $29 $6 $- $- $35 Segment EBITDA Margins Commercial Vehicle
Systems 4.4% 5.1% Light Vehicle Systems -0.3% 0.0% Total Segment
EBITDA Margins 2.9% 3.5% ARVINMERITOR, INC. SELECTED FINANCIAL
INFORMATION - RECONCILIATION Non-GAAP (Unaudited) (In millions,
except per share amounts) Q3 FY 08 LVS Before Q3 FY 08 Restruc-
Separation Special Reported turing Costs Items -------- --------
---------- -------- Sales $1,877 $- $- $1,877 Gross Margin 180 - -
180 Operating Income (Loss) 55 2 6 63 Income from Continuing
Operations 48 2 4 54 Basic Loss Per Share - Continuing Operations
$0.66 $0.02 $0.06 $0.74 Segment EBITDA: Commercial Vehicle Systems
$101 $- $- $101 Light Vehicle Systems 16 1 - 17 ------- -------
------- ------- Total Segment EBITDA $117 $1 $- $118 =======
======= ======= ======= Segment EBITDA Margins Commercial Vehicle
Systems 7.4% 7.4% Light Vehicle Systems 3.1% 3.3% Total Segment
EBITDA Margins 6.2% 6.3% ARVINMERITOR, INC. EBITDA BEFORE SPECIAL
ITEMS RECONCILIATION Non-GAAP (Unaudited, in millions) Three Months
Ended June 30, 2009 2008 ---- ---- Total EBITDA - Before Special
Items $33 $112 Restructuring Costs, net of minority interests (6)
(2) LVS Separation Costs (1) (6) Loss on Sale of Receivables (1)
(6) Depreciation and Amortization (19) (34) Interest Expense, Net
(22) (19) Benefit (Provision) for Income Taxes (12) 3 --- - Income
(Loss) From Continuing Operations $(28) $48 ==== === ARVINMERITOR,
INC. FREE CASH FLOW - RECONCILIATION Non-GAAP (Unaudited, in
millions) Quarter Ended June 30, ----------------- 2009 2008 ----
---- Cash flows provided by for continuing operations $117 $121
Capital expenditures - continuing operations (26) (46) --- --- Free
cash flows provided by continuing operations 91 75 Cash flows used
for discontinued operations (18) (7) Capital expenditures -
discontinued operations - (9) - -- Cash flows used for discontinued
operations (18) (16) Free cash flow - full company $73 $59 === ===
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http://www.newscom.com/cgi-bin/prnh/20010524/ARVINLOGODATASOURCE:
ArvinMeritor, Inc. CONTACT: Media Inquiries, Lin Cummins,
+1-248-435-7112, ; or Investor Inquiries, Terry Huch,
+1-248-435-9426, Web Site: http://www.arvinmeritor.com/
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