USA: ArvinMeritor net income off 16% in fiscal Q1
ArvinMeritor today reported sales of $1.6 billion and net income before special items of $21 million, or $0.32 per diluted share, for its first fiscal quarter ended December 31, 2001. Sales declined $93 million, or six percent, and net income before special items decreased $4 million, or 16 percent, as compared to last year's first-quarter results.
ArvinMeritor Chairman and Chief Executive Officer Larry Yost said, "Our Commercial Vehicle Systems business continues to be affected by reduced build rates for North American Class 8 trucks. The softening in North American and Western European light vehicle production has also contributed to our company's weaker results.
"On the positive side, we are seeing benefits from the restructuring actions we executed in fiscal year 2001, and we continue to implement a number of aggressive cost-reduction actions in response to the current market conditions, including salaried workforce reductions, delays in merit increases and limitations on capital spending."
The first quarter of fiscal year 2002 includes a restructuring charge of $15 million relating to employee severance benefits for 450 salaried employees. The company said that it expects to recover these costs in less than one year and estimates these actions, when fully implemented, will reduce annual operating costs by approximately $24 million ($16 million after-tax). ArvinMeritor's Light Vehicle Systems is expected to account for approximately 50 percent of the annual savings, Commercial Vehicle Systems about 42 percent, and Light Vehicle Aftermarket and other business about 8 percent.
Light Vehicle Systems (LVS) sales were $852 million, down $18 million, or two percent, from the first quarter of fiscal year 2001. LVS operating margin fell to 5.2 percent from 6.2 percent in last year's first quarter. Continued margin pressures from the vehicle manufacturers and production declines contributed to the operating margin decline. LVS continues to offset these margin challenges through restructuring and other programs aimed at lowering fixed costs. In addition, start-up costs associated with the new Detroit manufacturing facility, as well as higher engineering and launch costs associated with new product development, negatively impacted first-quarter results by approximately $6 million.
Commercial Vehicle Systems (CVS) sales were $483 million, down $69 million, or 13 percent, from last year's first quarter. Operating margin was 2.3 percent, compared to 2.7 percent in last year's first quarter. The continued decline in Class 8 North American truck volumes was the major factor in the sales decrease. CVS has been able to offset much of the impact of the sales decline on its margins by lowering its fixed-cost structure through restructuring programs and other cost-reduction activities.
Light Vehicle Aftermarket (LVA) sales were $194 million, down slightly from $197 million in last year's first quarter. While the markets remained weak for aftermarket parts, LVA was able to increase its operating margin to 4.6 percent, up from 2.0 percent in the prior year's first quarter, as the result of improved pricing and the impact of ongoing cost reductions.
As far as the outlook is concerned, Yost said: "Our vehicle production outlook for the North American Class 8 truck market remains unchanged at 130,000 units for fiscal year 2002. There is still great uncertainty in the light vehicle original equipment markets, but our current estimates are for North American and Western European light vehicle production at 15.1 million and 16.0 million vehicles, respectively.
"We also believe the light vehicle replacement market will remain weak over the same period. As a result, we expect fiscal year 2002 consolidated sales to be down about four percent from fiscal year 2001."