WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 27, 2004
Commission file number 1-15983
| ArvinMeritor, Inc. |
| (Exact name of registrant as specified in its charter) |
| Indiana | 38-3354643 |
| (State or other jurisdiction | (I.R.S. Employer |
| of incorporation or organization) | Identification No.) |
| 2135 West Maple Road, Troy, Michigan | 48084-7186 |
| (Address of principal executive offices) | (Zip Code) |
| (248) 435-1000 |
| (Registrant’s telephone number, including area code) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes [X] No [ ]
69,380,624 shares of Common Stock, $1.00 par value, of ARVINMERITOR, INC. were outstanding on June 30, 2004.
ARVINMERITOR, INC.
INDEX
1
ARVINMERITOR, INC.
STATEMENT OF
CONSOLIDATED INCOME
(in millions, except per share amounts)
| Three Months Ended June 30, |
Nine Months Ended June 30, | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2004 |
2003 |
2004 |
2003 | |||||||||||
| (Unaudited) | ||||||||||||||
| Sales | $ | 2,388 | $ | 2,109 | $ | 6,822 | $ | 5,811 | ||||||
| Cost of sales | (2,159 | ) | (1,896 | ) | (6,210 | ) | (5,238 | ) | ||||||
| GROSS MARGIN | 229 | 213 | 612 | 573 | ||||||||||
| Selling, general and administrative | (123 | ) | (111 | ) | (363 | ) | (326 | ) | ||||||
| Gain on divestitures | — | — | 20 | 2 | ||||||||||
| Restructuring costs | (4 | ) | (5 | ) | (13 | ) | (16 | ) | ||||||
| Environmental remediation costs | — | — | (8 | ) | — | |||||||||
| Costs for withdrawn tender offer | — | — | (16 | ) | — | |||||||||
| OPERATING INCOME | 102 | 97 | 232 | 233 | ||||||||||
| Equity in earnings of affiliates | 5 | 4 | 12 | 6 | ||||||||||
| Gain on sale of marketable securities | — | — | 7 | — | ||||||||||
| Interest expense, net and other | (26 | ) | (26 | ) | (77 | ) | (78 | ) | ||||||
| INCOME BEFORE INCOME TAXES | 81 | 75 | 174 | 161 | ||||||||||
| Provision for income taxes | (24 | ) | (24 | ) | (51 | ) | (52 | ) | ||||||
| Minority interests | (4 | ) | (4 | ) | (10 | ) | (6 | ) | ||||||
| NET INCOME | $ | 53 | $ | 47 | $ | 113 | $ | 103 | ||||||
| BASIC EARNINGS PER SHARE | $ | 0.78 | $ | 0.70 | $ | 1.68 | $ | 1.54 | ||||||
| DILUTED EARNINGS PER SHARE | $ | 0.77 | $ | 0.69 | $ | 1.65 | $ | 1.52 | ||||||
| Basic average common shares outstanding | 67.6 | 66.9 | 67.3 | 66.9 | ||||||||||
| Diluted average common shares outstanding | 68.8 | 67.8 | 68.6 | 67.6 | ||||||||||
| Cash dividends per common share | $ | 0.10 | $ | 0.10 | $ | 0.30 | $ | 0.30 | ||||||
See notes to consolidated financial statements.
2
ARVINMERITOR, INC.
CONSOLIDATED BALANCE SHEET
(in millions)
| June 30, 2004 |
September 30, 2003 | |||||||
|---|---|---|---|---|---|---|---|---|
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | $ | 122 | $ | 103 | ||||
| Receivables (less allowance for doubtful accounts: | ||||||||
| June 30, 2004, $27 and September 30, 2003, $24) | 1,751 | 1,327 | ||||||
| Inventories | 579 | 543 | ||||||
| Other current assets | 239 | 253 | ||||||
| TOTAL CURRENT ASSETS | 2,691 | 2,226 | ||||||
| NET PROPERTY | 1,248 | 1,332 | ||||||
| GOODWILL | 985 | 951 | ||||||
| OTHER ASSETS | 705 | 731 | ||||||
| TOTAL ASSETS | $ | 5,629 | $ | 5,240 | ||||
| LIABILITIES AND SHAREOWNERS' EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Short-term debt | $ | 5 | $ | 20 | ||||
| Accounts payable | 1,460 | 1,311 | ||||||
| Compensation and benefits | 303 | 238 | ||||||
| Income taxes | 32 | 31 | ||||||
| Other current liabilities | 309 | 265 | ||||||
| TOTAL CURRENT LIABILITIES | 2,109 | 1,865 | ||||||
| LONG-TERM DEBT | 1,585 | 1,541 | ||||||
| RETIREMENT BENEFITS | 610 | 683 | ||||||
| OTHER LIABILITIES | 161 | 188 | ||||||
| MINORITY INTERESTS | 64 | 64 | ||||||
| SHAREOWNERS' EQUITY: | ||||||||
| Common stock (June 30, 2004, 71.0 shares issued and | ||||||||
| 69.4 outstanding; September 30, 2003, 71.0 shares issued | ||||||||
| and 68.5 outstanding) | 71 | 71 | ||||||
| Additional paid-in capital | 571 | 561 | ||||||
| Retained earnings | 731 | 639 | ||||||
| Treasury stock (June 30, 2004, 1.6 shares; | ||||||||
| September 30, 2003, 2.5 shares) | (25 | ) | (37 | ) | ||||
| Unearned compensation | (17 | ) | (12 | ) | ||||
| Accumulated other comprehensive loss | (231 | ) | (323 | ) | ||||
| TOTAL SHAREOWNERS' EQUITY | 1,100 | 899 | ||||||
| TOTAL LIABILITIES AND SHAREOWNERS' EQUITY | $ | 5,629 | $ | 5,240 | ||||
See notes to consolidated financial statements.
3
ARVINMERITOR, INC.
CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS
(in millions)
| Nine Months Ended June 30, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2004 |
2003 | |||||||
| (Unaudited) | ||||||||
| OPERATING ACTIVITIES | ||||||||
| Net income | $ | 113 | $ | 103 | ||||
| Adjustments to net income to arrive at cash provided by operating activities: | ||||||||
| Depreciation and amortization | 164 | 161 | ||||||
| Gain on divestitures | (20 | ) | (2 | ) | ||||
| Gain on sale of marketable securities | (7 | ) | — | |||||
| Restructuring costs, net of expenditures | 1 | 2 | ||||||
| Pension and retiree medical expense | 99 | 73 | ||||||
| Pension and retiree medical contributions | (185 | ) | (141 | ) | ||||
| Changes in receivable securitization and factoring | (115 | ) | 148 | |||||
| Changes in assets and liabilities, excluding effects of | ||||||||
| acquisitions, divestitures and foreign currency adjustments | (65 | ) | (138 | ) | ||||
| CASH (USED FOR) PROVIDED BY OPERATING ACTIVITIES | (15 | ) | 206 | |||||
| INVESTING ACTIVITIES | ||||||||
| Capital expenditures | (108 | ) | (119 | ) | ||||
| Proceeds from disposition of property and businesses | 85 | 42 | ||||||
| Acquisitions of businesses and investments, net of cash acquired | — | (104 | ) | |||||
| Proceeds from sale of marketable securities | 18 | — | ||||||
| Other investing activities | (1 | ) | — | |||||
| CASH USED FOR INVESTING ACTIVITIES | (6 | ) | (181 | ) | ||||
| FINANCING ACTIVITIES | ||||||||
| Net change in revolving debt | 45 | 44 | ||||||
| Net change in other debt | 5 | (22 | ) | |||||
| Net change in debt | 50 | 22 | ||||||
| Proceeds from exercise of stock options | 5 | — | ||||||
| Cash dividends | (21 | ) | (20 | ) | ||||
| CASH PROVIDED BY FINANCING ACTIVITIES | 34 | 2 | ||||||
| EFFECT OF CHANGES IN FOREIGN CURRENCY EXCHANGE | ||||||||
| RATES ON CASH | 6 | 20 | ||||||
| CHANGE IN CASH AND CASH EQUIVALENTS | 19 | 47 | ||||||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 103 | 56 | ||||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 122 | $ | 103 | ||||
See notes to consolidated financial statements.
4
ARVINMERITOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
| ArvinMeritor, Inc. (the company or ArvinMeritor) is a leading global supplier of a broad range of integrated systems, module and components serving light vehicle, commercial truck, trailer and specialty original equipment manufacturers and certain aftermarkets. The company also provides coil coating applications to the transportation, appliance, construction and furniture industries. The consolidated financial statements are those of the company and its consolidated subsidiaries. |
| In the opinion of the company, the unaudited financial statements contain all adjustments, consisting solely of adjustments of a normal, recurring nature, necessary to present fairly the financial position, results of operations and cash flows for the periods presented. These statements should be read in conjunction with the company’s financial statements included in the Annual Report on Form 10-K for the fiscal year ended September 30, 2003. The results of operations for the three and nine months ended June 30, 2004, are not necessarily indicative of the results for the full year. |
| The company’s fiscal year ends on the Sunday nearest September 30. The company’s fiscal quarters end on the Sundays nearest December 31, March 31, and June 30. The third quarter of fiscal 2004 and 2003 ended on June 27, 2004 and June 29, 2003, respectively. All year and quarter references relate to the company’s fiscal year and fiscal quarters unless otherwise stated. |
|
For each interim reporting period the company makes an estimate of the effective tax rate
expected to be applicable for the full fiscal year. The rate so determined is used in
providing for income taxes on a year-to-date basis. As a result of ongoing legal entity
restructuring to more closely align the company’s organizational structure with the
underlying operations of the businesses and the favorable tax treatment of the gain on the
sale of AP Amortiguadores, S.A. (see Note 5) recorded by the company in the second quarter
of fiscal 2004, the company expects the fiscal 2004 effective tax rate to be approximately
30 percent. Certain prior period amounts have been reclassified to conform with the current period presentation. |
2. Earnings per Share
| Basic earnings per share are based upon the weighted average number of shares outstanding during each period. Diluted earnings per share assumes the exercise of common stock options and the impact of restricted stock when dilutive. |
5
ARVINMERITOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
| A reconciliation of basic average common shares outstanding to diluted average common shares outstanding is as follows (in millions): |
| Three Months Ended June 30, |
Nine Months Ended June 30, | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2004 |
2003 |
2004 |
2003 | |||||||||||
| Basic average common shares outstanding | 67 | .6 | 66 | .9 | 67 | .3 | 66 | .9 | ||||||
| Impact of restricted stock | 0 | .9 | 0 | .7 | 0 | .9 | 0 | .6 | ||||||
| Impact of stock options | 0 | .3 | 0 | .2 | 0 | .4 | 0 | .1 | ||||||
| Diluted average common shares outstanding | 68 | .8 | 67 | .8 | 68 | .6 | 67 | .6 | ||||||
3. New Accounting Standards
| On December 8, 2003, President Bush signed the Medicare Prescription Drug, Improvement and Modernization Act (the Act) into law. The Act introduces a prescription drug benefit under Medicare as well as a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to the benefit established by the law. In May 2004, the Financial Accounting Standards Board (FASB) issued FASB Staff Position (FSP) No. FAS 106-2, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003.” The FSP provides guidance on how to account for the federal subsidy. In the third quarter of fiscal 2004, the company amended its retiree medical plans (see Note 16). As a result of the amendment, the adoption of FSP 106-2 did not have a material impact on the company’s results of operations or financial position. |
| In December 2003, the FASB issued Statement of Financial Accounting Standards No. 132 (revised 2003), “Employers’ Disclosures about Pensions and Other Postretirement Benefits, an amendment of FASB Statements No. 87, 88, and 106.” This Statement revises employers’ disclosures about pension and other postretirement benefit plans. It does not change the measurement or recognition of those plans required by FASB Statements No. 87, No. 88 and No. 106. It requires additional disclosures to those in the original FASB Statement No. 132 about the assets, obligations, cash flows, and net periodic benefit cost of defined benefit pension plans and other defined benefit postretirement plans. Certain of these disclosures are required for financial statements with interim periods ending after December 15, 2003. The company has included the additional disclosure requirements in Note 16. |
4. Dana Corporation Tender Offers
| On July 9, 2003, the company commenced a tender offer to acquire all of the outstanding shares of Dana Corporation (Dana) for $15.00 per share in cash. On July 22, 2003, Dana’s Board of Directors recommended that its shareowners reject the company’s initial cash tender offer. On November 17, 2003, the company increased its tender offer to $18.00 per share in cash and indicated it would withdraw its offer on December 2, 2003 unless the Dana Board of Directors agreed to begin negotiating a definitive merger agreement. On November 24, 2003, following Dana’s announcement that its Board of Directors recommended that its shareowners reject the company’s increased offer, the company announced that it had withdrawn its $18.00 per share all cash tender offer. As a result of the company’s decision to withdraw its tender offer, the company recorded a net charge of $9 million ($6 million after-tax, or $0.09 per diluted share) in the first quarter of fiscal 2004. The pre-tax charge includes $16 million in direct incremental acquisition costs and a gain on the sale of Dana stock owned by the company of $7 million. |
6
ARVINMERITOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
5. Acquisitions and Divestitures
| As part of the company’s continuing strategy to divest non-core businesses, in the third quarter of fiscal 2004 the company completed the sale of its Commercial Vehicle Systems Kenton, OH trailer beam fabrication facility. The divestiture of this facility is in line with the company’s strategy to be less vertically integrated and more focused on its core process |