ArvinMeritor on Wednesday reported sales of $US2.0 billion and net income of $24 million (down $11 million year on year), or $0.36 per diluted share, for its second fiscal quarter ended March 31, 2003. Sales increased $306 million, or 18%, compared with Q2, 2002. Earnings per share were at the top end of the range forecast by the company at the end of March.
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The company’s acquisition of the remaining 51% interest in Zeuna Starker added sales of $198 million in the second fiscal quarter, and the stronger euro also favourably impacted sales by approximately $100 million. Without these items, sales would have been essentially flat, year-on-year. Results for the second quarter of fiscal year 2003 included previously announced restructuring costs of $11 million ($7 million after tax, or $0.10 per diluted share).
ArvinMeritor chairman and CEO Larry Yost said: “We are pleased with the performance of our commercial vehicle systems business group, which benefited from the stronger North American Class 8 truck and trailer volumes.
“Some of our other businesses, however, did not meet our expectations and remain challenged due to softening demand in the markets they serve, higher steel costs, and continued pricing pressures from vehicle manufacturers. We are continuing to be aggressive in addressing these challenges by implementing programmes aimed at lowering costs, including facility rationalisations and workforce reductions.”
Operating income for the second quarter of fiscal year 2003 was $63 million, compared to $82 million for the same period last year. Restructuring costs of $11 million associated with the LVS segment were included in operating income in the second fiscal quarter of 2003. Operating margin declined to 3.2%, from 4.9% in the second quarter of fiscal year 2002.
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By GlobalDataNet interest expense of $27 million was up slightly from $25 million in last year’s second quarter. The effective tax rate was 32% in the second quarter of fiscal years 2003 and 2002. The company expects the full-year effective tax rate to approximate the second-quarter rate of 32%.
Light vehicle systems (LVS) sales were $1,164 million, up $260 million, or 29%, from the second quarter of fiscal year 2002. Foreign currency translation favourably impacted sales by approximately $70 million, as compared to the prior year, and the acquisition of Zeuna Starker added sales of $198 million. Operating margin was 2.5%, down from 5.8% in last year’s second quarter. LVS continues to implement cost-reduction initiatives to help address the competitive challenges in the automotive supplier industry. During the second quarter of fiscal year 2003, LVS recorded restructuring costs of $11 million associated with workforce reductions and a facility closing, partially offset by savings of $2 million. Higher steel prices and other costs associated with steel shortages also negatively impacted operating income by $5 million in the second quarter of fiscal year 2003.
Commercial vehicle systems (CVS) sales were $589 million, up $57 million, or 11%, from the second quarter of fiscal year 2002, and operating margin improved to 4.9%, up from 3.0% in last year’s second quarter. During the second quarter of fiscal year 2003, CVS sold net assets related to its off-highway planetary axle products and recognised a pre-tax gain on the sale of $2 million. Sales of off-highway planetary axle products were approximately $30 million in the second quarter of fiscal year 2002. Higher North American Class 8 truck and trailer production was the major factor behind the sales and operating margin improvement. Foreign currency translation increased sales by approximately $20 million, as compared to last year’s second quarter.
Net income for the first six months of fiscal year 2003 was $56 million, or $0.83 per diluted share, up from $46 million, or $0.69 per diluted share, before the cumulative effect of accounting change, in the same period last year. Net income in the first six months of fiscal year 2002 included the cumulative effect of the goodwill accounting change of $42 million, or $0.63 per diluted share.
Yost added: “Our fiscal year 2003 outlook for light vehicle production is 15.8 million vehicles in North America, down from our previous forecast of 16.0 million vehicles. Our light vehicle production outlook for Western Europe in fiscal year 2003 is 16.5 million vehicles and is unchanged from our previous forecast. Our current outlook for Class 8 truck production in North America is 166,000 units for fiscal year 2003, up 3% from our previous forecast.
“Our latest sales outlook for fiscal year 2003 is $7.7 billion, and we anticipate full-year diluted earnings per share in the range of $2.00 to $2.10. For the third quarter of fiscal year 2003, we expect sales of about $2.1 billion, and our outlook for diluted earnings per share is in the range of $0.67 to $0.72. Our fiscal year 2003 earnings outlook reflects softening demand across our business groups, with the exception of the commercial vehicle systems group.”
