TROY, MI — ArvinMeritor, Inc. reported financial results for its third fiscal quarter ended June 30, 2005. The company posted sales of $2.4 billion, up 15 percent from the same period last year. The Commercial Vehicle Systems (CVS) division posted sales of $1.1 billion, up $256 million, or 30 percent, from last year’s third quarter, with an operating margin of 6.4 percent, up from 5.7 percent in the third quarter of the prior year.
The primary factors that contributed to this increase were higher volumes in CVS and sales from the company’s new commercial vehicle axle joint ventures with the Volvo Group in Europe. In addition, currency translation, primarily due to the stronger euro in relation to the U.S. dollar, increased sales approximately $60 million.
“We had a strong third quarter, despite difficult industry conditions,” said Chairman, CEO and President Charles G. “Chip” McClure. “Continued strong volumes in our CVS business, along with a well-balanced product, customer and geographic mix, drove increased sales. The restructuring actions we announced in May are beginning to produce results and strengthen our overall financial position. I am proud of our entire organization and what we have been able to accomplish during an exceptionally demanding time.”
Income from continuing operations was $44 million, or $0.64 per diluted share, compared to $42 million, or $0.61 per diluted share a year ago. Excluding the $4 million of after-tax restructuring costs associated with programs announced in May, income from continuing operations was $48 million, or $0.70 per diluted share. These results are in line with the guidance the company provided in June.
James Donlon, ArvinMeritor’s chief financial officer, said, “Although the cost of steel continued to have a negative impact on our financial performance this quarter, we’re beginning to see some moderation in the higher costs for steel.” Steel costs, net of recovery, were approximately $20 million higher in the third quarter than in the same period last year.
Income from discontinued operations was $2 million, or $0.02 per diluted share, compared to $9 million, or $0.13 per diluted share last year. This decline is largely attributable to $6 million of after-tax costs associated with the company’s new supply agreement with Midas announced in May, and the loss of income resulting from the sale of Roll Coater in November 2004. Net income was $46 million, or $0.66 per diluted share, compared to net income of $51 million, or $0.74 per diluted share last year.
As part of its ongoing efforts to rationalize and refocus its business, ArvinMeritor is on track with its previously announced workforce reductions and facility closures. In large part, these actions affect the global operations of the Light Vehicle Systems (LVS) business. Recently, the company announced the closing of a light vehicle exhaust operation in Mosciano, Italy. It also announced its intention to move the manufacturing of trailer axles from Wrexham, U.K., to a more cost efficient location. This move will potentially affect about 200 employees.
The company also announced that it is extending the timeframe for completion of the proposed sale of its Light Vehicle Aftermarket (LVA) business into fiscal year 2006. “We remain committed to becoming a more focused company, said McClure. “We are approaching the sale of LVA in a disciplined manner, and we are determined to achieve fair market value and a favorable return for ArvinMeritor and its shareowners.”
McClure mentioned that sales going forward for 2005 is remaining strong and is expected to reach $8.8 billion. Company management expects income from continuing operations for the remaining fiscal year to at the higher end of its forecasted range of $1.40 to $1.60 per diluted share, before special items.
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