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ArvinMeritor Inc. Reports Operating Results (10-Q)

February 03, 2011 | About:

ArvinMeritor Inc. (ARM) filed Quarterly Report for the period ended 2011-01-02.

Arvinmeritor has a market cap of $1.72 billion; its shares were traded at around $18.28 with a P/E ratio of 65.3 and P/S ratio of 0.5. Hedge Fund Gurus that owns ARM: Larry Robbins of Glenview Capital, Steven Cohen of SAC Capital Advisors, Manning & Napier Advisors, Inc, Jim Simons of Renaissance Technologies LLC. Mutual Fund and Other Gurus that owns ARM: Chuck Royce of Royce& Associates, Jeremy Grantham of GMO LLC.

Highlight of Business Operations:

On January 3, 2011, we completed the sale of our Body Systems business to an affiliate of Inteva Products, LLC. Pursuant to the Agreement signed in August 2010, total consideration was approximately $35 million, subject to certain potential adjustments for items such as working capital fluctuations. The actual purchase price at the closing was $27 million (excluding estimated closing expenses for outside advisory fees of $12 million), consisting of $12 million in cash at closing (adjusted for estimated balances in working capital and other items at the time of the closing) and a five year, 8 percent promissory note for $15 million. In addition to the purchase price, we will receive the cash held at the time of the sale by the Body Systems entities operating in China and Brazil of approximately $32 million, net of applicable taxes and other withholding, at such time as it becomes available for distribution, as provided in the Purchase and Sale Agreement.

Our remaining LVS chassis operations include two facilities in Europe, which had combined sales of $5 million in the first three months of fiscal year 2011. Our facility in Bonneval, France makes ride control parts (shock absorbers) for sales in Europe, and our facility in Leicester, England makes and distributes gas springs for industrial applications. We continue to pursue strategic alternatives for these businesses. Potential cash costs associated with such alternatives could be in the range of $10 million to $15 million.

Higher sales in the first quarter of fiscal year 2011 resulted in improved operating results compared to the prior year s first fiscal quarter. The increase in sales is primarily due to stronger commercial truck demand in all regions. However the regional mix of earnings produced a higher effective tax rate, resulting in a net loss for the quarter ended December 31, 2010 of $2 million compared to breakeven in the same period in fiscal year 2010. Our effective tax rate in the first quarter of fiscal year 2011 was approximately 133 percent driven by strong earnings in many markets in which we are profitable and continue to be a taxpayer, such as Brazil, China and India. However, we are unable to realize tax benefits on losses in the United States and many Western European jurisdictions where we are subject to valuation allowances. Adjusted EBITDA for the three months ended December 31, 2010 was $62 million compared to $51 million in the three months ended December 31, 2009. Loss from continuing operations in the first quarter of fiscal year 2010 was $9 million, or $0.10 per diluted share, compared to a loss of $4 million, or $0.06 per diluted share, in the prior year s first fiscal quarter.

Cash flow from operating activities was an outflow of $49 million in the quarter ended December 31, 2010 compared to an inflow of $27 million in the prior fiscal year s first quarter. The decrease in cash flows in the first quarter of fiscal year 2011 was primarily due to variable compensation payments relating to our prior year performance, as well as working capital investments in both our continuing and discontinued operations.

Read the The complete Report

About the author:

Charlie Tian, Ph.D. - Founder of GuruFocus. You can now order his book Invest Like a Guru on Amazon.

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