SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 28, 2004
Commission file number 1-15983
ArvinMeritor, Inc.
| Indiana | 38-3354643 | |
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(State or other jurisdiction
of incorporation or organization) |
(I.R.S. Employer
Identification No.) |
| 2135 West Maple Road, Troy, Michigan | 48084-7186 | |
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| (Address of principal executive offices) | (Zip Code) |
(248) 435-1000
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 [ ]
69,377,477 shares of Common Stock, $1.00 par value, of ArvinMeritor, Inc. were outstanding on April 30, 2004.
ARVINMERITOR, INC.
INDEX
1
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
ARVINMERITOR, INC.
STATEMENT OF CONSOLIDATED INCOME
See notes to consolidated financial statements.
2
ARVINMERITOR, INC.
CONSOLIDATED BALANCE SHEET
See notes to consolidated financial statements.
3
ARVINMERITOR, INC.
CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS
See notes to consolidated financial statements.
4
ARVINMERITOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
ArvinMeritor, Inc. (the company or ArvinMeritor) is a leading global supplier
of a broad range of integrated systems, modules 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 six months ended March 31, 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 second quarter of fiscal 2004 and 2003 ended on March 28,
2004, and March 30, 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), the company expects the fiscal 2004
effective tax rate to be approximately 30 percent. The effective tax rate
was 26 percent in the second quarter of fiscal 2004 compared to 34 percent in
the prior quarter. The second quarter fiscal 2004 effective tax rate
reflects an adjustment to arrive at approximately 30 percent for the first
six months of fiscal 2004.
Certain prior period amounts have been reclassified to conform with 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
A reconciliation of basic average common shares outstanding to diluted
average common shares outstanding is as follows (in millions):
3. New Accounting Standards
On December 8, 2003, President Bush signed the Medicare Prescription Drug,
Improvement and Modernization Act (the Act) into law. This law 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
January 2004, the Financial Accounting Standards Board (FASB) issued FASB
Staff Position (FSP) No. FAS 106-1, “Accounting and Disclosure Requirements
Related to the Medicare Prescription Drug, Improvement and Modernization Act
of 2003.” The FSP permits companies that are a sponsor of a postretirement
heath care plan that provides a prescription drug benefit to either include
the effects of the Act in its financial statements or to defer accounting for
the Act until the FASB issues guidance on how to account for the federal
subsidy. The company has elected to defer accounting for the effects of the
Act until specific guidance is issued by the FASB.
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 Offer
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
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ARVINMERITOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
5. Acquisitions and Divestitures
As part of the company’s continuing strategy to divest non-core business, in
the second quarter of fiscal 2004 the company completed the sale of its
75-percent shareholdings in AP Amortiguadores, S.A. (APA), a joint venture
that manufactured ride control products. Net proceeds from the sale were $48
million, resulting in a pre-tax gain of $20 million.
In the second quarter of fiscal 2003, the company purchased the remaining
51-percent interest in Zeuna Stärker GmbH & Co. KG (Zeuna Stärker). The March
31, 2004 consolidated balance sheet includes $111 million of goodwill
associated with the purchase price allocation. Incremental sales from Zeuna
Stärker were $203 million in the first six months of fiscal year 2004.
The company completed the sale of net assets related to the manufacturing and
distribution of its off-highway planetary axle products in the second quarter
of fiscal 2003 for $36 million, resulting in a pre-tax gain of $2 million.
The company did not consider these products core to its commercial vehicle
systems business.
6. Restructuring Costs
During the first six months of fiscal 2004, the company recorded $9 million
of restructuring charges. The company recorded restructuring charges of $11
million for the first six months of fiscal 2003. At March 31, 2004 and
September 30, 2003, there were $13 million of restructuring reserves relating
to employee termination benefits in the consolidated balance sheet.
The company approved workforce reductions and facility consolidations in its
Light Vehicle Systems (LVS) business segment. These measures follow the
management realignment of the company’s LVS business and are also intended to
address the competitive challenges in the automotive supplier industry. The
company recorded restructuring costs related to these programs of $4 million
and $11 million in the first six months of fiscal 2004 and 2003,
respectively. These costs included severance and other employee termination
costs related to a reduction of approximately 200 salaried and 350 hourly
employees. The $11 million charge recorded in the first six months of fiscal
2003 also included $5 million related to asset impairments.
Due to the declining markets that continued in the company’s Light Vehicle
Aftermarket (LVA) business segment, the company approved plans for a work
force reduction. During the first six months of fiscal 2004 the company
recorded restructuring costs of $2 million. These costs included severance
and other termination costs related to a reduction of approximately 50
salaried employees.
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ARVINMERITOR, INC.
During the second quarter of fiscal 2004, the company recorded additional
restructuring costs totaling $3 million associated with certain
administrative and managerial employee termination costs.
In fiscal 2003, the company recorded restructuring costs of $5 million that
were incurred as a result of the acquisition of the remaining 51-percent
interest in Zeuna Stärker. In the first six months of fiscal 2004, the
company recorded an additional $1 million of restructuring costs. The
acquisition was accounted for utilizing the purchase method of accounting and
these restructuring costs were reflected in the purchase price allocation.
The changes in the restructuring reserves for the six months ended March 31,
2004 are as follows (in millions):
7. Accounts Receivable Securitization and Factoring
The company participates in U.S. and European accounts receivable
securitization facilities to enhance financial flexibility and lower interest
costs. Under the U.S. accounts receivable securitization facility, the
company sells substantially all of the trade receivables of certain U.S.
subsidiaries to ArvinMeritor Receivables Corporation (ARC), a wholly owned,
special purpose subsidiary. ARC has entered into an agreement to sell an
undivided interest in up to $250 million of eligible receivables to certain
bank conduits. Under the European facility, the company can sell up to 50
million euro of trade receivables to a bank. As of March 31, 2004 and
September 30, 2003 the company had utilized $190 million and $210 million,
respectively, of the U.S. accounts receivable securitization facility and 29
million euro ($35 million) and 24 million euro ($27 million), respectively,
of the European accounts receivable securitization facility.
As of March 31, 2004 and September 30, 2003 the banks had a preferential
interest in $248 million and $255 million, respectively, of the remainder of
the receivables held at ARC to secure the obligation under the U.S. accounts
receivable securitization facility. The bank had a preferential interest in
4 million euro ($5 million) as of March 31, 2004 and September 30, 2003, of
the remainder of the receivables held to secure the obligation under the
European accounts receivable securitization facility.
The company has no retained interest in the receivables sold, but does
perform collection and
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ARVINMERITOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
administrative functions. The receivables under these programs were sold at
fair market value and a discount on the sale was recorded in interest
expense, net and other. A discount of $2 million was recorded for the six
months ended March 31, 2004 and 2003. The gross amount of proceeds received
from the sale of receivables under these programs was $1,406 million and
$1,113 million for the six months ended March 31, 2004 and 2003,
respectively. The U.S. accounts receivable securitization program and the
European program mature in September 2004 and March 2005, respectively.
If the company’s credit ratings were reduced to certain levels, or if certain
receivables performance-based covenants were not met, it would constitute a
termination event, which, at the option of the banks, could result in
termination of the facilities. At March 31, 2004, the company was in
compliance with all covenants.
In addition to its securitization programs, several of the company’s European
subsidiaries factor eligible accounts receivable with financial institutions.
The receivables are factored without recourse to the company and are excluded
from accounts receivable. The amounts of factored receivables were $16
million and $47 million at March 31, 2004 and September 30, 2003,
respectively.
8. Stock Options
The company expenses the fair value of stock options granted under its
various stock-based compensation plans. The company recorded compensation
expense associated with the expensing of options of $3 million ($2 million
after-tax, or $0.03 per diluted share) for the six months ended March 31,
2004 and 2003.
9. Inventories
Inventories are summarized as follows (in millions):
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ARVINMERITOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Other Current Assets
Other Current Assets are summarized as follows (in millions):
11. Other Assets
Other Assets are summarized as follows (in millions):
The company anticipates amortization expense for patents, licenses and other
intangible assets of approximately $3 million per year for fiscal 2004 and
2005, $2 million in fiscal 2006 and $1 million per year for fiscal 2007 and
2008.
10
ARVINMERITOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. Other Current Liabilities
Other Current Liabilities are summarized as follows (in millions):
A summary of the changes in accrued product warranties is as follows (in
millions):
In the second quarter of fiscal 2004, the company dissolved its transmission
joint venture with ZF Freidrichshafen in favor of a marketing arrangement
that allows the company to provide the Freedomline
TM
transmission family to
its customers. As a result, the company reclassified $20 million of product
warranties that were previously included as other long-term liabilities in
the consolidated balance sheet.
13. Other Liabilities
Other Liabilities are summarized as follows (in millions):
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ARVINMERITOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. Long-Term Debt
Long-Term Debt, net of discount where applicable, is summarized as follows
(in millions):
Debt Securities
The company previously filed a shelf registration statement with the
Securities and Exchange Commission registering $750 million aggregate
principal amount of debt securities to be offered in one or more series on
terms determined at the time of sale. At March 31, 2004 the company has $150
million of debt securities available for issuance under this shelf
registration.
Subordinated Debentures
In January 1997, Arvin Capital I (the trust), a wholly owned finance
subsidiary trust of ArvinMeritor, issued 9.5 percent Company-Obligated
Mandatorily Redeemable Preferred Capital Securities of a Subsidiary Trust
(preferred capital securities), due February 1, 2027, and callable in
February 2007 at a premium and in February 2017 at par. The proceeds from
the preferred capital securities are invested entirely in 9.5 percent junior
subordinated debentures of the company, which are the sole assets of the
trust. The company fully and unconditionally guarantees the trust’s
obligation to the holders of the preferred capital securities.
Prior to fiscal 2003, the company consolidated the trust and the preferred
capital securities were included in the consolidated balance sheet. During
the fourth quarter of fiscal 2003, the company adopted FASB Interpretation
No. 46 (FIN 46), “Consolidation of Variable Interest Entities.” Under the
provisions of FIN 46, it was determined that the trust is a variable interest
entity in which the company does not have a variable interest and therefore
is not the primary beneficiary. Upon adoption of FIN 46, the company no
longer consolidates the trust, which issued the $39 million of outstanding
preferred capital securities, and has included in long-term debt $39 million
of junior subordinated debentures due to the trust.
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ARVINMERITOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Bank Revolving Credit Facilities
The company has two unsecured credit facilities, which mature on June 27,
2005: a three-year, $400-million revolving credit facility and a five-year,
$750-million revolving credit facility. Borrowings are subject to interest
based on quoted LIBOR rates plus a margin, and a facility fee, both of which
are based upon the company’s credit rating. At March 31, 2004, the margin
over the LIBOR rate was 125 basis points, and the facility fee was 25 basis
points.
Interest Rate Swap Agreements
The company has in place two interest rate swap agreements that convert $300
million of the company’s 8 3/4 percent notes and $100 million of the 6.8
percent notes to variable interest rates. The fair value of the swaps was
$51 million and $46 million as of March 31, 2004 and September 30, 2003,
respectively, and is recorded in Other Assets, with an offsetting amount
recorded in Long-Term Debt. The swaps have been designated as fair value
hedges and the impact of the changes in their fair values is offset by an
equal and opposite change in the carrying value of the related notes. Under
the terms of the swap agreements, the company receives a fixed rate of
interest of 8 3/4 percent and 6.8 percent on notional amounts of $300 million
and $100 million, respectively, and pays variable rates based on three-month
LIBOR plus a weighted-average spread of 2.51 percent.
The payments under the agreements coincide with the interest payment dates on
the hedged debt instruments, and the difference between the amounts paid and
received is included in interest expense, net and other.
Leases
The company has entered into agreements to lease certain manufacturing and
administrative assets. Under two of the agreements, the assets are held by
variable interest entities. The company has determined that it has a variable
interest in one of the variable interest entities, due to a $30 million
residual value guarantee that obligates the company to absorb a majority of
the variable interest entity’s losses. The assets and liabilities of this
variable interest entity are included in the company’s consolidated balance
sheet at March 31, 2004 and September 30, 2003.
The company has various other leasing arrangements that are not with variable
interest entities. The company has provided a $3 million residual value
guarantee associated with one of these leasing arrangements.
Covenants
The credit facilities require the company to maintain a total net debt to
earnings before interest, taxes, depreciation and amortization (EBITDA) ratio
no greater than 3.25x and a minimum fixed charge coverage ratio (EBITDA less
capital expenditures to interest expense) no less than 1.50x. In addition,
an operating lease requires the company to maintain financial ratios that are
similar to those required under the company’s credit facilities. At March
31, 2004, the company was in
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ARVINMERITOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
compliance with all covenants.
15. Financial Instruments
The company’s financial instruments include cash and cash equivalents,
marketable securities, short and long-term debt, interest rate swaps, and
foreign exchange contracts. The company uses derivatives for hedging and
non-trading purposes in order to manage its interest rate and foreign
exchange rate exposures. The company’s interest rate swap agreements are
discussed in Note 14.
Foreign Exchange Contracts
The company uses foreign exchange contracts, generally of short duration
(less than three months), for the purpose of settling foreign currency
denominated payables and receivables. The company has elected not to
designate the foreign exchange contracts as hedges; therefore, changes in the
fair value of the foreign exchange contracts are recognized in operating
income. The net income impact of recording these contracts at fair value in
the six months ended March 31, 2004 and 2003 did not have a significant
effect on the company’s results of operations. As of March 31, 2004 and
September 30, 2003, the fair value of foreign exchange contracts was not
material. The company does not enter into derivative instruments for
speculative purposes.
Fair Value
Fair values of financial instruments are summarized as follows (in
millions):
Cash and cash equivalents - All highly liquid investments purchased with
maturity of three months or less are considered to be cash equivalents. The
carrying value approximates fair value because of the short maturity of these
instruments.
Marketable Securities - Fair value is based on the current market price of
the underlying investment.
Interest rate swaps - Fair values are estimated by obtaining quotes from
external sources.
Short-term debt – The carrying value of short-term debt approximates fair
value because
14
ARVINMERITOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
of the short maturity of these borrowings.
Long-term debt - Fair values are based on the company’s current incremental
borrowing rate for similar types of borrowing arrangements.
16. Retirement Benefits
Retirement Benefits consisted of the following (in millions):
The components of net periodic pension and retiree medical expense for the
six months ended March 31 are as follows:
17. Contingencies
Environmental
Federal, state and local requirements relating to the discharge of substances
into the environment, the disposal of hazardous wastes and other activities
affecting the environment have, and will continue to have, an impact on the
manufacturing operations of the company. The process of estimating
environmental liabilities is complex and dependent on physical and scientific
data at the site, uncertainties as to remedies and technologies to be used
and the outcome of discussions with regulatory agencies. The company records
liabilities for environmental issues in the accounting period in which its
responsibility and remediation plan are established and the cost can
15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
be reasonably estimated. At environmental sites in which more than one
potentially responsible party has been identified, the company records a
liability for its allocable share of costs related to its involvement with
the site, as well as an allocable share of costs related to insolvent parties
or unidentified shares. At environmental sites in which ArvinMeritor is the
only potentially responsible party, the company records a liability for the
total estimated costs of remediation before consideration of recovery from
insurers or other third parties.
The company has been designated as a potentially responsible party at eight
Superfund sites, excluding sites as to which the company’s records disclose
no involvement or as to which the company’s potential liability has been
finally determined. Management estimates the total reasonably possible costs
the company could incur for the remediation of Superfund sites at March 31,
2004, to be approximately $30 million, of which $9 million is recorded as a
liability.
In addition to the Superfund sites, various other lawsuits, claims and
proceedings have been asserted against the company, alleging violations of
federal, state and local environmental protection requirements, or seeking
remediation of alleged environmental impairments, principally at previously
disposed-of properties. For these matters, management has estimated the
total reasonably possible costs the company could incur at March 31, 2004, to
be approximately $48 million, of which $27 million is recorded as a
liability. During the second quarter of fiscal 2004, the company recorded
environmental remediation costs of $8 million resulting from an agreement
with the Environmental Protection Agency to remediate a former Rockwell
facility that was sold in 1985.
Following are the components of the Superfund and Non-Superfund environmental
reserves (in millions):
A portion of the environmental reserves is included in Other Current
Liabilities with the majority of the amount recorded in Other Liabilities
(see Notes 12 and 13).
The actual amount of costs or damages for which the company may be held
responsible could materially exceed the foregoing estimates because of
uncertainties, including the financial condition of other potentially
responsible parties, the success of the remediation and other factors that
make it difficult to accurately predict actual costs. However, based on
management’s assessment, and subject to the difficulties inherent in
estimating these future costs, the company believes that its expenditures for
environmental capital investment and remediation necessary to comply with
present regulations governing environmental protection and other expenditures
for the resolution of environmental claims will not have a material adverse
effect on the company’s
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ARVINMERITOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
business, financial condition or results of operations. In addition, in
future periods, new laws and regulations, changes in the remediation plan,
advances in technology and additional information about the ultimate clean up
remedy could significantly change the company’s estimates. Management cannot
assess the possible effect of compliance with future requirements.
Asbestos
Maremont Corporation (“Maremont”, a subsidiary of the company) and many other
companies are defendants in suits brought by individuals claiming personal
injuries as a result of exposure to asbestos-containing products. Maremont
manufactured friction products containing asbestos from 1953 through 1977,
when it sold its friction product business. Arvin Industries, Inc.,
(“Arvin”) acquired Maremont in 1986.
Maremont’s asbestos-related reserves and corresponding asbestos-related
recoveries are summarized as follows (in millions):
A portion of the asbestos-related recoveries and reserves are included in
Other Current Assets and Liabilities, with the majority of the amounts
recorded in Other Assets and Liabilities (see Notes 10 through 13).
Unbilled Committed Settlements:
The liability for unbilled committed
settlements relates to committed settlements that Maremont agreed to pay when
Maremont participated in the Center for Claims Resolution (CCR). Maremont
shared in the payments of defense and indemnity costs of asbestos-related
claims with other CCR members. The CCR handled the resolution and processing
of asbestos claims on behalf of its members until February 1, 2001, when it
was reorganized and discontinued negotiating shared settlements. There were
$1 million in billings to insurance companies related to committed
settlements in the six months ended March 31, 2004.
Pending Claims:
Upon dissolution of the CCR in February 2001, Maremont began
handling asbestos-related claims through its own defense counsel and is
committed to examining the merits of each asbestos-related claim. For
purposes of establishing liabilities for pending asbestos-related claims,
Maremont estimates its defense and indemnity costs based on the history and
nature of filed claims to date and Maremont’s experience. Maremont developed
experience factors for indemnity and litigation costs using data on actual
experience in resolving claims since the dissolution of the CCR in February
2001 and its assessment of the nature of the claims.
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ARVINMERITOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Maremont had approximately 67,000 and 63,000 pending asbestos-related claims
at March 31, 2004 and September 30, 2003, respectively. Although Maremont
has been named in these cases, in the cases where actual injury has been
alleged very few claimants have established that a Maremont product caused
their injuries. The decline in the pending claims liability since September
30, 2003 was due to a decline in the cost per indemnity claim. Billings to
insurance companies for indemnity and defense costs of resolved cases were $6
million in the six months ended March 31, 2004.
Shortfall:
Several former members of the CCR have filed for bankruptcy
protection, and these members have failed, or may fail, to pay certain
financial obligations with respect to settlements that were reached while
they were CCR members. Maremont is subject to claims for payment of a
portion of these defaulted member shares (shortfall). In an effort to
resolve the affected settlements, Maremont has entered into negotiations with
plaintiffs’ attorneys, and an estimate of Maremont’s obligation for the
shortfall is included in the total asbestos-related reserves. In addition,
Maremont and its insurers are engaged in legal proceedings to determine
whether existing insurance coverage should reimburse any potential liability
related to this issue. There were no payments by the company related to
shortfall and other in the six months ended March 31, 2004.
Maremont has insurance that reimburses a substantial portion of the costs
incurred defending against asbestos-related claims. The coverage also
reimburses Maremont for any indemnity paid on those claims. The coverage is
provided by several insurance carriers based on the insurance agreements in
place. Based on its assessment of the history and nature of filed claims to
date, and of Maremont’s insurance carriers, management believes that existing
insurance coverage is adequate to cover substantially all costs relating to
pending claims.
The amounts recorded for the asbestos-related liabilities and recoveries from
insurance companies are based upon assumptions and estimates derived from
currently known facts. All such estimates of liabilities for
asbestos-related claims are subject to considerable uncertainty because such
liabilities are influenced by variables that are difficult to predict. If
the assumptions with respect to the nature of pending claims, the cost to
resolve claims and the amount of available insurance prove to be incorrect,
the actual amount of Maremont’s liability for asbestos-related claims, and
the effect on the company, could differ materially from current estimates.
Maremont has not recorded liabilities for unknown claims that may be asserted
against it in the future. Maremont does not have sufficient information to
make a reasonable estimate of its potential liability for asbestos-related
claims that may be asserted against it in the future.
Product Recall Campaign
The company has recalled certain of its commercial vehicle axles equipped
with TRW model 20-EDL tie rod ends because of potential safety-related
defects in those ends. TRW, Inc. (TRW) manufactured the affected tie rod
ends from June 1999 through June 2000 and supplied them to the company for
incorporation into its axle products.
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ARVINMERITOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TRW commenced recall campaigns in August 2000 and June 2001, covering 24
weeks of production, due to a purported manufacturing anomaly identified by
TRW. However, after an analysis of field returns and customer reports of
excessive wear, ArvinMeritor concluded that the defect was based on the
design of a bearing used in the ball socket, which is part of the tie rod
end, and not on the purported anomaly in the manufacturing process. The
company reported its finding to the National Highway Transportation Safety
Administration in April 2002 and expanded the recall campaign to cover all of
its axle products that had incorporated TRW model 20-EDL tie rod ends.
ArvinMeritor estimates the cost of its expanded recall of TRW model 20-EDL
tie rod ends to be approximately $17 million. On May 6, 2002, the company
filed suit against TRW in the U.S. District Court for the Eastern District of
Michigan, claiming breach of contract and breach of warranty, and seeking
compensatory and consequential damages in connection with the recall
campaign. The company recorded a liability and offsetting receivable for the
estimated cost of its expanded recall campaign. As of March 31, 2004 and
September 30, 2003, the company has a receivable due from TRW for $17
million. Although the outcome of this matter cannot be predicted with
certainty, the company believes that it is entitled to reimbursement by TRW
for its costs associated with the campaign. In addition, at March 31, 2004
and September 30, 2003, the company has a $1 million and $2 million
receivable, respectively, due from TRW for reimbursement of customer claims
paid to date covered by the TRW recall campaign. The company has product
warranty reserves for this matter of $4 million and $7 million, net of claims
paid to date, as of March 31, 2004 and September 30, 2003. See Note 12 for
additional information related to the company’s product warranties.
Indemnifications
The company has provided indemnifications in conjunction with certain
transactions, primarily divestitures. These indemnities address a variety of
matters, which may include environmental, tax, asbestos, employment-related
matters, and the periods of indemnification vary in duration. The overall
maximum amount of the obligation under such indemnifications cannot be
reasonably estimated. The company is not aware of claims or other
information that would give rise to material payments under such
indemnifications.
Other
Various other lawsuits, claims and proceedings have been or may be instituted
or asserted against the company, relating to the conduct of the company’s
business, including those pertaining to product liability, intellectual
property, safety and health, and employment matters. Although the outcome of
litigation cannot be predicted with certainty, and some lawsuits, claims or
proceedings
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ARVINMERITOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
may be disposed of unfavorably to the company, management believes the
disposition of matters that are pending will not have a material adverse
effect on the company’s business, financial condition or results of
operations.
18. Comprehensive Income
On an annual basis, disclosure of comprehensive income is incorporated into
the Statement of Consolidated Shareowners’ Equity. This statement is not
presented on a quarterly basis. Comprehensive income includes net income and
components of other comprehensive income, such as foreign currency
translation adjustments and unrealized gains and losses on equity securities.
The difference between net income and comprehensive income for the periods
presented principally represents foreign currency translation adjustments.
Comprehensive income is summarized as follows (in millions):
19. Business Segment Information
The company has three reportable operating segments: Light Vehicle Systems
(LVS), Commercial Vehicle Systems (CVS), and Light Vehicle Aftermarket (LVA).
LVS is a major supplier of air and emission systems, aperture systems (roof
and door systems and motion control products), and undercarriage systems
(suspension and ride control systems and wheel products) for passenger cars,
motorcycles, all-terrain vehicles, light trucks and sport utility vehicles to
original equipment manufacturers (OEMs). CVS supplies drivetrain systems and
components, including axles and drivelines, braking and suspension systems,
and exhaust and ride control products, for medium- and heavy-duty trucks,
trailers and specialty vehicles to OEMs and the commercial vehicle
aftermarket. LVA supplies exhaust, ride control and filter products and
other automotive parts to the passenger car, light truck and sport utility
aftermarket. Business units that are not focused on automotive products are
classified as “Other.” The company’s coil coating operation is included in
this classification.
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ARVINMERITOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Segment information is summarized as follows (in millions):
A summary of the changes in the carrying value of goodwill for the six months
ended March 31, 2004, is as follows (in millions):
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ARVINMERITOR, INC.
Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition
OVERVIEW and OUTLOOK
The increase in net income and diluted earnings per share in the second quarter
of fiscal 2004 compared to the same period last year was principally due to:
offset partially by:
The increase in sales in the second quarter of fiscal 2004 compared to the same
period last year was principally due to:
During the first six months
of fiscal 2004, the company has experienced significant price
increases and surcharges for steel, a raw material used in
Commercial Vehicles Systems, Light Vehicle Aftermarket and select
Light Vehicle Systems products. The company believes this is primarily
driven by an increase in worldwide demand for steel, causing a global
shortage of scrap and certain base materials. The company is working
with its suppliers and customers to mitigate this impact.
In the second quarter of fiscal 2004, as part of the company’s continuing
strategy to divest non-core businesses, the company completed the sale of its
75-percent shareholdings in APA, a joint venture that manufactured ride control
products.
Also during the quarter the company dissolved a transmission joint venture with
ZF Freidrichshafen in favor of a marketing arrangement that allows the company
to provide the Freedomline
TM
transmission family to its customers.
In May 2004, the company completed the sale of its Commercial Vehicle Systems
Kenton, OH facility to a subsidiary of Sypris Solutions, Inc. The divestiture
of this facility will enable the company to concentrate on its core processes
for the design and assembly of complete systems.
Over the business cycle, the company experiences periodic fluctuations in
demand for light, commercial and specialty vehicles and related aftermarkets,
most notably commercial vehicle markets in North America. Looking forward, the
company’s fiscal 2004 outlook for light vehicle production is 16.1 million
vehicles in North America and 16.6 million vehicles in Western Europe. The
company expects North American Class 8 truck production of 227,000 units in
fiscal 2004. Western European heavy- and medium-duty truck production is
estimated at 367,000 units for fiscal 2004.
Intense competition coupled with global excess capacity has created pressure
from customers to reduce prices. This leads to margin erosion unless the
company can offset these price decreases with
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ARVINMERITOR, INC.
cost reductions and productivity improvements. The company continues to
address the competitive challenges in the automotive supplier industry by
restructuring operations, improving productivity and reducing costs.
Anticipated restructuring actions include facility closures, business
consolidations and work force downsizing. The company recorded restructuring
costs of $9 million in the first six months of fiscal 2004. For the entire
year, the company estimates total pre-tax restructuring costs of $18 million
and annualized pre-tax savings of approximately $20 million related to these
and prior restructuring actions.
Other factors that could affect the company’s results for the full fiscal year
include the uncertainty of steel prices and supply, and the company’s ability
to recover these costs from its customers and the impact of currency
fluctuations on sales and operating income.
RESULTS OF OPERATIONS
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ARVINMERITOR, INC.
Fiscal 2004 Second Quarter Compared to Fiscal 2003 Second Quarter
Total Company
Sales for the second quarter of fiscal 2004 were $2,254 million, an increase of
$261 million, or 13 percent, as compared to last year’s second quarter.
Foreign currency translation, driven primarily by the stronger euro, increased
sales by approximately $140 million. On a constant currency basis, sales would
have increased approximately 6 percent, primarily due to stronger North
American commercial vehicle truck and trailer volumes in the Commercial Vehicle
Systems (CVS) segment.
Operating income for the second quarter of fiscal 2004 was $81 million,
compared to $63 million in the same period last year. Operating income for the
second quarter of fiscal 2004 included a $20 million gain on the sale of APA.
This gain was partially offset by $8 million of environmental remediation costs
resulting from an agreement with the Environmental Protection Agency to
remediate a former Rockwell facility that was sold in 1985. Operating margin
improved to 3.6 percent, from 3.2 percent in the second quarter of fiscal 2003.
Operating margins were favorably impacted by the gain on the sale of APA,
stronger North American commercial vehicle truck and trailer volumes and
productivity and cost reduction initiatives, but were partially offset by the
environmental charge, customer pricing pressures, higher pension and retiree
medical costs of $8 million, higher steel costs of $8 million, and higher premium product launch costs of $4 million.
Additionally, the second quarter of fiscal 2004 included restructuring costs of
$8 million for severance and employee termination costs. Restructuring costs
of $11 million were recorded in last year’s second quarter. For additional
information concerning the company’s restructuring programs, see Note 6 of the
Notes to Consolidated Financial Statements and the discussion under the heading
Overview and Outlook.
Equity in earnings of affiliates for the second quarter of fiscal 2004 was $5
million, up $4 million compared to the same period last year, primarily as a
result of higher commercial vehicle affiliate earnings in Brazil, Mexico and
India. Interest expense, net and other of $25 million was down slightly from
$27 million in last year’s second quarter.
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 APA, the
effective tax rate was 26 percent in the second quarter of fiscal 2004 compared
to 34 percent in the prior quarter and 32 percent in the second quarter of
fiscal 2003. The second quarter fiscal 2004 effective tax rate reflects an
adjustment to arrive at approximately 30 percent for both the first six months
of fiscal 2004 and the full year. Excluding the tax benefit of the APA sale,
the company’s full-year tax rate would approximate 32 percent.
Net income for the second quarter of fiscal 2004 was $41 million, or $0.59 per
diluted share, an increase of $17 million compared to last year’s second
quarter net income of $24 million, or $0.36 per diluted share. Included in net
income in the second quarter of fiscal 2004 was the gain on the sale of APA and
associated tax benefits of $0.23 per diluted share and the environmental
remediation costs of $0.08 per diluted share.
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ARVINMERITOR, INC.
Business Segments
Light Vehicle Systems (LVS) sales were $1,239 million, up $75 million, or 6
percent, from the second quarter of fiscal 2003. The increase is primarily
attributable to favorable foreign currency translation, due to the stronger
euro. On a constant currency basis and excluding the effects of the disposition
of APA, sales would have been nearly flat. Operating income was $46 million,
an increase of $17 million from last year’s second quarter. Operating margin
was 3.7 percent, up from 2.5 percent in last year’s second quarter. Operating
margin for the second quarter of fiscal 2004 was positively impacted by the $20
million gain on the sale of APA, partially offset by the $8 million of
environmental remediation costs. As a result of various cost reduction
initiatives, LVS was able to reduce the impact of customer pricing
pressure, higher premium launch costs of $4 million and higher steel and
pension and retiree medical costs. The second quarter of fiscal 2004 included
restructuring costs of $3 million for severance and employee termination costs.
Restructuring costs of $11 million were recorded in last year’s second
quarter.
Commercial Vehicle Systems (CVS) sales were $769 million, up $180 million, or
31 percent, from last year’s second quarter. On a constant currency basis,
sales would have increased approximately 25 percent, primarily due to stronger
North American truck and trailer volumes. Compared to the same quarter last
year, heavy truck (more commonly known as the Class 8 trucks) volumes were up
51 percent, trailer volumes were up 19 percent and medium duty truck volumes
were up 31 percent in North America. Operating income was $38 million, 31
percent higher than the same period last year and operating margin was 4.9
percent unchanged from the same period last year. During the second quarter of
fiscal 2004, CVS dissolved its transmission joint venture with ZF
Friedrichshafen. As a result, CVS recognized sales of $8 million that would
have been recognized by the joint venture prior to the dissolution. Factors
negatively impacting operating margins during the quarter included $14 million higher steel
and pension and retiree medical costs, investments in commercial vehicle
exhaust technology and the consolidation of the transmissions business. During
the second quarter of fiscal 2003, CVS sold net assets related to its
off-highway planetary axle products and recognized a pre-tax gain on the sale
of $2 million.
Light Vehicle Aftermarket (LVA) sales were $199 million, down $5 million or 2
percent, from last year’s second quarter. On a constant currency basis, sales
would have decreased approximately 7 percent. LVA incurred an operating loss
of $3 million, compared to operating income of $6 million in last year’s second
quarter. Difficult market conditions continued during the quarter,
particularly in the European exhaust market. In addition, increased steel
costs and pricing pressures negatively impacted the results for the quarter.
Management is implementing actions to improve profitability, reduce costs and
align itself with current market conditions. LVA recorded $2 million of
restructuring costs in the second quarter of fiscal 2004.
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ARVINMERITOR, INC.
Six Months Ended March 31, 2004 Compared to Six Months Ended March 31, 2003
Total Company
For the first six months of fiscal 2004, sales were $4,434, up $732 million, or
20 percent, compared to the same period last year. The company’s acquisition
of the remaining 51-percent interest in Zeuna Stärker in the second quarter of
fiscal 2003 added sales of $203 million and foreign currency translation,
driven primarily by the stronger euro, added approximately $275 million in
sales. On a constant currency basis and excluding the impact of the
incremental sales associated with Zeuna Stärker, sales would have increased by
7 percent, primarily due to stronger North American commercial vehicle truck
and trailer volumes.
Operating income for the first six months of fiscal 2004 was $130 million, a
decline of $6 million compared to the same period last year. Operating income
in fiscal year 2004 includes the costs associated with the withdrawn tender
offer for Dana Corporation of $16 million (before a non-operating gain of $7
million on the sale of Dana stock owned by the company) and the environmental
remediation costs of $8 million, partially offset by the gain on the sale of
APA of $20 million. Operating margin was 2.9 percent for the first six months
of 2004, down from 3.7 percent in the same period last year. Operating margins
were also impacted by customer pricing pressures, higher premium product launch
costs of $10 million, higher pension and retiree medical costs of $15 million,
higher steel costs of $11 million and additional investments in commercial
vehicle exhaust technology. Operating income in the first six months of fiscal
2004 and 2003 included restructuring costs of $9 million and $11 million,
respectively.
Equity in earnings of affiliates for the first six months of fiscal 2004 was $7
million, an increase of $5 million compared to the same period last year,
primarily due to higher earnings from commercial vehicle affiliates. Interest
expense, net and other of $51 million was down slightly from $52 million in the
same period last year.
The effective tax rate was approximately 30 percent in the first six months of
fiscal 2004 compared to 32 percent in the prior year. The ongoing legal entity
restructuring and the favorable tax treatment of the gain on the sale of APA
favorably impacted the effective tax rate.
Net income for the first six months of fiscal 2004 was $60 million, or $0.88
per diluted share, an increase of $4 million, compared to last year’s net
income of $56 million, or $0.83 per diluted share.
Business Segments
LVS sales were $2,490 million, up $423 million, or 20 percent, from the first
six months of fiscal 2003. The company’s acquisition of the remaining
51-percent interest in Zeuna Stärker in the second quarter of fiscal 2003 added
sales of $203 million and foreign currency translation, driven by the stronger
euro, increased sales by approximately $180 million. On a constant currency
basis and excluding the impact of the incremental sales associated with Zeuna
Stärker, sales would have increased by approximately
2 percent. Operating income increased to $77 million from $71 million in the
same period last year. Operating
margin decreased to 3.1 percent from 3.4 percent in the same period last year.
Contributing to the decline in operating margins were customer pricing
pressures, higher premium product launch costs of $10 million, higher steel
and pension and retiree medical costs and $8 million of environmental remediation costs. Operating margins were positively
affected by the $20 million gain on the sale
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ARVINMERITOR, INC.
of APA. Operating income in the first six months of fiscal 2004 and 2003 includes
restructuring costs of $4 million and $11 million, respectively.
CVS sales were $1,454 million, up $293 million, or 25 percent, from last year’s
first six months. Foreign currency translation, driven by the stronger euro,
increased sales by approximately $70 million. On a constant currency basis,
sales would have increased approximately 19 percent, as a result of stronger
North American truck and trailer volumes. CVS operating income increased to
$70 million from $53 million in the first six months of fiscal 2003, and
operating margin increased to 4.8 percent from 4.6 percent. The operating
margin improvement is largely attributable to the higher sales volume.
Partially offsetting the benefit of higher sales volumes on operating margins
were higher steel and pension and retiree medical costs, additional investments
in commercial vehicle exhaust technology and the impact of the dissolution of a
transmission joint venture with ZF Friedrichshafen. During the first six
months of fiscal 2003, CVS sold net assets related to its off-highway planetary
axle products and recognized a pre-tax gain on the sale of $2 million.
Off-highway planetary axle products had approximately $25 million of sales in
the first six months of fiscal 2003.
LVA sales were $397 million for the first six months of fiscal 2004, down $4
million or 1 percent, from $401 million in the same period last year. On a
constant currency basis, sales would have decreased approximately 6 percent.
During the first six months of fiscal 2004, difficult industry conditions
existed, particularly in the European exhaust market, where capacity exceeded
demand. LVA incurred an operating loss of $2 million in the first six months
of fiscal 2004 compared to operating income of $12 million in the same period
last year. LVA recorded $2 million of restructuring costs in the first six
months of fiscal 2004. Lower sales volumes and customer pricing pressures were
the major factors behind the operating income decline.
FINANCIAL CONDITION
See Condensed Statement of Consolidated Cash Flows for additional detail on the
company’s cash flows.
Operating Activities
– Cash provided by operating activities was $34 million
for the first six months of fiscal 2004 compared to $236 million for the same
period in fiscal 2003. The decrease is largely attributable to the company’s
accounts receivable securitization and factoring programs. The company reduced
its balances under the accounts receivable securitization and factoring
programs by $27 million, compared to an increase in these balances of $180
million in the first six months of fiscal 2003. Also contributing to the
decrease in operating cash flow was higher uses of cash for working capital.
Investing Activities
– Cash provided by investing activities was $18 million
for the first six months of fiscal 2004 compared to cash used for investing
activities of $118 million for the same period last year. Capital expenditures
were $71 million in the first six months of fiscal 2004 compared to $69 million
in the same period last year. As a percentage of sales, capital expenditures
were 1.6 percent compared to 1.9 percent for the same period last year.
Investing activities in the first six months of fiscal 2004 include proceeds of
$71 million from the dispositions of property and businesses. The company used
this cash to reduce debt, including amounts outstanding under the accounts
receivable securitization and factoring programs and for other general
corporate purposes. Cash from investing
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ARVINMERITOR, INC.
activities also includes $18 million of proceeds from the sale of Dana stock
owned by the company. In the first six months of fiscal 2003, proceeds from
the disposition of property and businesses were $42 million and the company
used cash of $69 million to purchase the remaining 51 percent interest in Zeuna
Stärker and $22 million for other acquisitions of businesses and investments.
Financing Activities
– Cash used for financing activities was $41 million in
the first six months of fiscal 2004 compared to $63 million in the same period
last year. During the first six months of fiscal 2004 the company used cash
generated from dispositions of property and businesses and cash from operations
to reduce borrowings under its bank revolving credit facilities and other debt
by $32 million. During the first six months of fiscal 2003 the company
reduced bank revolving credit facilities and other debt by $50 million. The
company paid dividends of $14 million compared to $13 million in the first six
months of 2003. The company received $5 million in cash from the exercise of
stock options in the first six months of fiscal 2004.
LIQUIDITY
The company is contractually obligated to make certain payments as disclosed in
Item 7,
Management’s Discussion and Analysis of Financial Condition and Results
of Operations – Liquidity
in the company’s Annual Report on Form 10-K for the
fiscal year ended September 30, 2003, which is incorporated in this Form 10-Q
by reference.
Bank Revolving Credit Facilities and Other Debt
– The company has two unsecured
credit facilities, which mature on June 27, 2005: a three-year, $400-million
revolving credit facility and a five-year, $750-million revolving credit
facility. The credit facilities require the company to maintain a total net
debt to earnings before interest, taxes, depreciation and amortization (EBITDA)
ratio of no greater than 3.25x and a minimum fixed charge coverage ratio
(EBITDA less capital expenditures to interest expense) of no less than 1.50x.
Non-compliance with these covenants would constitute an event of default, and
could allow lenders to suspend additional borrowings and accelerate repayment
of outstanding borrowings. At March 31, 2004, the company was in compliance
with all covenants.
The company has $150 million of debt securities available for issuance under a
shelf registration previously filed with the SEC (see Note 14 of the Notes to
Consolidated Financial Statements).
Leases
– One operating lease requires the company to maintain financial ratios
that are similar to those required by the company’s revolving credit
agreements. At March 31, 2004, the company was in compliance with all covenants
(see Note 14 of the Notes to Consolidated Financial Statements). The company
has residual value guarantees of $33 million related to two of its leases.
Accounts Receivable Securitization and Factoring Facilities
- As discussed in
Note 7 of the Notes to Consolidated Financial Statements, the company
participates in two accounts receivable securitization programs to improve
financial flexibility and lower interest costs. ArvinMeritor Receivables
Corporation (ARC), a wholly owned subsidiary of the company, has entered into
an agreement to sell an undivided interest in up to $250 million of eligible
trade receivables of certain U.S. subsidiaries to a group of banks. The amount
of available funding under the U.S. securitization program varies based on the
credit ratings of the company and its obligors, the company’s receivables
performance and various other factors. As of March 31, 2004 and September 30,
2003, the company had utilized $190 million and $210 million, respectively of
the U.S. accounts receivable securitization facility. In
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ARVINMERITOR, INC.
addition to the U.S. securitization program, Zeuna Stärker had entered into an
agreement to sell an undivided interest in up to 50 million euro of eligible
trade receivables to a bank. As a result of the acquisition of the remaining
51-percent interest in Zeuna Stärker, the company amended this agreement and
continued selling receivables under this program. The amount of available
funding under the European program varies based on similar factors noted for
the U.S. program. As of March 31, 2004 and September 30, 2003, the company had
utilized 29 million euro ($35 million) and 24 million euro ($27 million),
respectively of the accounts receivable securitization facility. The U.S.
accounts receivable securitization program matures in September 2004 and the
company expects to renew the facility at that time. The European program
matures in March 2005.
In addition to its securitization programs, several of the company’s European
subsidiaries factor accounts receivable with financial institutions. Such
receivables are factored without recourse to the company and are excluded from
accounts receivable. The amounts of factored receivables were $16 million and
$47 million at March 31, 2004 and September 30, 2003, respectively. There can
be no assurance that this facility will be used or available to the company in
the future.
If the company’s credit ratings were reduced to certain levels, or if certain
receivables performance-based covenants were not met, it would constitute a
termination event, which, at the option of the banks, could result in
termination of the securitization facilities. At March 31, 2004, the company
was in compliance with all covenants.
On January 9, 2004, Standard & Poor’s affirmed the company’s BB+ ratings on its
long-term debt and removed the company from CreditWatch.
On February 13, 2004, Moody’s Investor Service lowered the company’s long-term
debt rating to Ba1 from Baa3.
TENDER OFFER
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 pre-tax 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.
CRITICAL ACCOUNTING POLICIES
Information concerning the company’s critical accounting policies is included
under Item 7,
Management’s Discussion and Analysis of Financial Condition and
Results of Operations – Critical Accounting Policies
in the company’s Annual
Report on Form 10-K for the fiscal year ended September 30, 2003, which is
incorporated in this Form 10-Q by reference.
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NEW ACCOUNTING PRONOUNCEMENTS
New accounting pronouncements are discussed in Note 3 of the Notes to
Consolidated Financial Statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The company is exposed to foreign currency exchange rate risk related to its
transactions denominated in currencies other than the U.S. dollar and interest
rate risk associated with the company’s debt.
The impact the euro and other currencies will have on the company’s sales and
operating income is difficult to predict. The company uses foreign exchange
contracts for the purpose of settling foreign currency denominated payables and
receivables. The company also uses interest rate swaps to offset the effects
of interest rate fluctuations on the fair value of its debt portfolio (see Note
15 of the Notes to Consolidated Financial Statements). It is the policy of the
company not to enter into derivative instruments for speculative purposes, and
therefore the company holds no derivative instruments for trading purposes.
The company has performed a sensitivity analysis assuming a hypothetical
10-percent movement in foreign currency exchange rates and interest rates
applied to the underlying exposures described above. As of March 31, 2004, the
analysis indicated that such market movements would not have a material effect
on the company’s business, financial condition or results of operations.
Actual gains or losses in the future may differ significantly from that
analysis, however, based on changes in the timing and amount of interest rate
and foreign currency exchange rate movements and the company’s actual
exposures.
Item 4. Controls and Procedures
As required by Rule 13a-15 under the Securities Exchange Act of 1934,
management, with the participation of Larry D. Yost, Chairman of the Board and
Chief Executive Officer, and S. Carl Soderstrom, Jr., Senior Vice President and
Chief Financial Officer, evaluated the effectiveness of the design and
operation of the company’s disclosure controls and procedures as of March 31,
2004. Based upon that evaluation, the Chief Executive Officer and the Chief
Financial Officer have concluded that the company’s disclosure controls and
procedures are effective at a reasonable level of assurance to ensure that
information required to be disclosed in the reports the company files or
submits under the Securities Exchange Act is recorded, processed, summarized
and reported, within the time periods specified in the Securities and Exchange
Commission’s rules and forms.
There have been no changes in the company’s internal controls over financial
reporting in the fiscal quarter ended March 31, 2004 that have materially
affected or are reasonably likely to materially affect the company’s internal
controls over financial reporting.
In connection with the rule, the company continues to review and document its
disclosure controls and procedures, including the company’s internal control
over financial reporting, and may from time to time make changes aimed at
enhancing their effectiveness and ensuring that the company’s systems evolve
with the business.
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PART II. OTHER INFORMATION
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities
On January 2, 2004, the company issued 1,700 shares of Common Stock to three
non-employee directors of the company, pursuant to the terms of the company’s
Directors Stock Plan, in lieu of cash payment of the quarterly retainer fee for
board service. The issuance of these securities was exempt from registration
under the Securities Act of 1933, as a transaction not involving a public
offering under Section 4(2).
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of shareowners of the company was held February 18, 2004.
The following matters were voted on and received the specified number of votes
in favor, votes withheld or against, abstentions and broker non-votes:
Election of directors: The following individuals were elected to the Board of
Directors, with terms expiring at the annual meeting of shareowners in the
years noted. The number of shares noted below voted in favor of their election
or were withheld. Abstentions and broker non-votes were not applicable.
Appointment of auditors: The shareowners approved the selection of Deloitte &
Touche LLP as the company’s auditors. A total of 61,344,011 votes were cast in
favor, 1,820,840 votes were cast against, and there were 276,132 abstentions.
Broker non-votes were not applicable.
Approval of 2004 Directors Stock Plan: The shareowners approved the adoption
by the Board of Directors of the 2004 Directors Stock Plan. A total of
31,513,807 votes were cast in favor, 21,828,236 votes were cast against, and
there were 622,914 abstentions and 9,476,026 broker non-votes.
Item 5. Other Information.
Cautionary Statement
This Quarterly Report on Form 10-Q contains statements relating to future
results of the company (including certain projections and business trends) that
are “forward-looking statements” as defined in
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ARVINMERITOR, INC.
the Private Securities Litigation Reform Act of 1995. Forward-looking
statements are typically identified by words or phrases such as “believe,”
“expect,” “anticipate,” “estimate,” “should,” “are likely to be” and similar
expressions. Actual results may differ materially from those projected as a
result of certain risks and uncertainties, including but not limited to global
economic and market conditions; the demand for commercial, specialty and light
vehicles for which the company supplies products; risks inherent in operating
abroad, including foreign currency exchange rates; the availability and cost of
raw materials; OEM program delays; demand for and market acceptance of new and
existing products; successful development of new products; reliance on major
OEM customers; labor relations of the company, its customers and suppliers;
successful integration of acquired or merged businesses; achievement of the
expected annual savings and synergies from past and future business
combinations; competitive product and pricing pressures; the amount of the
company’s debt; the ability of the company to access capital markets; the
credit ratings of the company’s debt; the outcome of existing and any future
legal proceedings, including any litigation with respect to environmental or
asbestos-related matters; as well as other risks and uncertainties, including
but not limited to those detailed herein and from time to time in other filings
of the company with the Securities and Exchange Commission. See also
“Management’s Discussion and Analysis of Results of Operations and Financial
Condition” and “Quantitative and Qualitative Disclosures about Market Risk”
herein. These forward-looking statements are made only as of the date hereof,
and the company undertakes no obligation to update or revise the
forward-looking statements, whether as a result of new information, future
events or otherwise, except as otherwise required by law.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
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(b) Reports on Form 8-K.
On January 28, 2004, we filed a Current Report on Form 8-K (i) reporting under
Item 12, “Results of Operations and Financial Condition,” that on January 28,
2004, ArvinMeritor had issued a press release reporting its financial results
for the fiscal quarter ended December 31, 2003 and had held a web-cast
conference call to discuss its financial results for the quarter, and (ii)
furnishing the press release and the presentation made on the conference call
as exhibits under Item 7. “Financial Statements and Exhibits.”
On February 17, 2004, we filed a Current Report on Form 8-K reporting under
Item 5, “Other Events and Regulation FD Disclosure” that on February 13, 2004,
Moody’s Investors Service had lowered the rating of the company’s senior
unsecured long-term debt to Ba1 from Baa3.
33
ARVINMERITOR, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
34
Exhibit Index
Three Months Ended
Six Months Ended
March 31,
March 31,
2004
2003
2004
2003
(Unaudited)
$
2,254
$
1,993
$
4,434
$
3,702
(2,053
)
(1,807
)
(4,051
)
(3,342
)
201
186
383
360
(124
)
(114
)
(240
)
(215
)
20
2
20
2
(8
)
—
(8
)
—
(8
)
(11
)
(9
)
(11
)
—
—
(16
)
—
81
63
130
136
5
1
7
2
—
—
7
—
(25
)
(27
)
(51
)
(52
)
61
37
93
86
(16
)
(12
)
(27
)
(28
)
(4
)
(1
)
(6
)
(2
)
$
41
$
24
$
60
$
56
$
0.61
$
0.36
$
0.89
$
0.84
$
0.59
$
0.36
$
0.88
$
0.83
67.5
66.9
67.2
66.9
69.0
67.5
68.5
67.5
$
0.10
$
0.10
$
0.20
$
0.20
Table of Contents
Table of Contents
Six Months Ended
March 31,
2004
2003
(Unaudited)
$
60
$
56
112
103
(20
)
(2
)
(7
)
—
(2
)
3
66
48
(44
)
(102
)
(27
)
180
(104
)
(50
)
34
236
(71
)
(69
)
71
42
—
(91
)
18
—
18
(118
)
(23
)
(27
)
(9
)
(23
)
(32
)
(50
)
5
—
(14
)
(13
)
(41
)
(63
)
5
10
16
65
103
56
$
119
$
121
Table of Contents
Table of Contents
Three Months Ended
Six Months Ended
March 31,
March 31,
2004
2003
2004
2003
67.5
66.9
67.2
66.9
0.9
0.6
0.9
0.6
0.6
—
0.4
—
69.0
67.5
68.5
67.5
Table of Contents
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Table of Contents
Table of Contents
March 31,
September 30,
2004
2003
$
126
$
124
63
61
13
13
45
55
$
247
$
253
Table of Contents
March 31,
September 30,
2004
2003
$
97
$
86
40
38
13
13
11
12
13
13
15
11
91
92
$
280
$
265
March 31,
September 30,
2004
2003
$
63
$
69
21
22
83
97
$
167
$
188
Table of Contents
March 31,
September 30,
2004
2003
$
199
$
199
100
100
150
150
499
499
400
400
39
39
30
53
62
75
51
46
1,530
1,561
(3
)
(20
)
$
1,527
$
1,541
Table of Contents
Table of Contents
March 31,
September 30,
2004
2003
Fair
Fair
Carrying Value
Value
Carrying Value
Value
$
119
$
119
$
103
$
103
—
—
17
17
51
51
46
46
3
3
20
20
1,527
1,569
1,541
1,533
Table of Contents
Table of Contents
Superfund
Non-Superfund
Sites
Sites
Total
$
11
$
22
$
33
—
8
8
(2
)
(3
)
(5
)
$
9
$
27
$
36
Table of Contents
March 31,
September 30,
2004
2003
$
3
$
4
67
72
6
6
$
76
$
82
$
70
$
76
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Three Months Ended
Six Months Ended
March 31,
March 31,
2004
2003
2004
2003
$
1,239
$
1,164
$
2,490
$
2,067
769
589
1,454
1,161
199
204
397
401
47
36
93
73
$
2,254
$
1,993
$
4,434
$
3,702
$
46
$
29
$
77
$
71
38
29
70
53
(3
)
6
(2
)
12
—
(1
)
1
—
81
63
146
136
—
—
(16
)
—
81
63
130
136
5
1
7
2
—
—
7
—
(25
)
(27
)
(51
)
(52
)
61
37
93
86
(16
)
(12
)
(27
)
(28
)
(4
)
(1
)
(6
)
(2
)
$
41
$
24
$
60
$
56
Table of Contents
•
Stronger North American commercial vehicle truck and trailer volumes;
•
A pre-tax gain of $20 million on the sale of the company’s 75-percent
shareholdings in AP Amortiguadores, S.A. (APA); and
•
The results of the company’s productivity and cost reduction
initiatives, including the benefits of restructuring programs;
•
A charge of $8 million resulting from an agreement with the
Environmental Protection Agency to remediate a former Rockwell facility
that was sold in 1985;
•
Higher steel, pension and retiree medical costs and premium product
launch costs of $20 million; and
•
Customer pricing pressures
•
Stronger North American commercial vehicle truck and trailer volumes; and
•
The favorable impact from currency translation
Table of Contents
Three Months Ended
Six Months Ended
March 31,
March 31,
2004
2003
2004
2003
$
1,239
$
1,164
$
2,490
$
2,067
769
589
1,454
1,161
199
204
397
401
47
36
93
73
$
2,254
$
1,993
$
4,434
$
3,702
$
46
$
29
$
77
$
71
38
29
70
53
(3
)
6
(2
)
12
—
(1
)
1
—
81
63
146
136
—
—
(16
)
—
81
63
130
136
5
1
7
2
—
—
7
—
(25
)
(27
)
(51
)
(52
)
61
37
93
86
(16
)
(12
)
(27
)
(28
)
(4
)
(1
)
(6
)
(2
)
$
41
$
24
$
60
$
56
$
0.59
$
0.36
$
0.88
$
0.83
69.0
67.5
68.5
67.5
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Name of Nominee
Votes in Favor
Votes Withheld
Term Ending
61,899,372
1,541,611
2007
62,140,263
1,300,720
2007
61,505,672
1,935,311
2007
62,020,386
1,420,597
2005
Table of Contents
2004 Directors Stock Plan.
Agreement, dated as of January 30, 2004, between ArvinMeritor and
Terrence E. O’Rourke.
Computation of ratio of earnings to fixed charges.
Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)
under the Securities Exchange Act of 1934, as amended (Exchange Act).
Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)
under the Exchange Act.
Certification of the Chief Executive Officer pursuant to Rule 13a-14(b)
under the Exchange Act and 18 U.S.C. Section 1350.
Certification of the Chief Financial Officer pursuant to Rule 13a-14(b)
under the Exchange Act and 18 U.S.C. Section 1350.
Table of Contents
Table of Contents
ARVINMERITOR, INC.
Date: May 7, 2004
By:
/s/ V. G. Baker, II
V. G. Baker, II
Senior Vice President
and General Counsel
(For the registrant)
Date: May 7, 2004
By:
/s/ R. Sachdev
R. Sachdev
Vice President and Controller
(Chief Accounting Officer)
Table of Contents
2004 Directors Stock Plan.
Agreement, dated as of January 30, 2004, between ArvinMeritor and
Terrence E. O’Rourke.
Computation of ratio of earnings to fixed charges.
Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)
under the Securities Exchange Act of 1934, as amended (Exchange Act).
Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)
under the Exchange Act.
Certification of the Chief Executive Officer pursuant to Rule 13a-14(b)
under the Exchange Act and 18 U.S.C. Section 1350.
Certification of the Chief Financial Officer pursuant to Rule 13a-14(b)
under the Exchange Act and 18 U.S.C. Section 1350.
Exhibit 10-a
ARVINMERITOR, INC.
2004 DIRECTORS STOCK PLAN
1. PURPOSE OF THE PLAN.
The purpose of the 2004 Directors Stock Plan (the Plan) is to link the compensation of non-employee directors of ArvinMeritor, Inc. (ArvinMeritor) directly with the interests of the ArvinMeritor shareowners.
2. PARTICIPANTS.
Participants in the Plan shall consist of directors of ArvinMeritor who are not employees of ArvinMeritor or any of its subsidiaries (Non-Employee Directors). The term "subsidiary" as used in the Plan means a corporation more than 50% of the voting stock of which, or an unincorporated business entity more than 50% of the equity interest in which, shall at the time be owned directly or indirectly by ArvinMeritor.
3. SHARES RESERVED UNDER THE PLAN.
Subject to the provisions of Section 14, there shall be reserved for delivery under the Plan 275,000 shares of Common Stock, par value $1.00 per share, of ArvinMeritor (Shares). Shares to be delivered under the Plan may be authorized and unissued Shares, Shares held in treasury or any combination thereof. Shares with respect to the unexercised, undistributed or unearned portion of any terminated or forfeited award or grant made pursuant to the Plan shall be available for further awards or grants.
4. ADMINISTRATION OF THE PLAN.
The Plan shall be administered by the Corporate Governance and Nominating Committee (the Committee) of the Board of Directors of ArvinMeritor (the Board), subject to the right of the Board, in its sole discretion, to exercise or authorize another committee or person to exercise some or all of the responsibilities, powers and authority vested in the Committee under the Plan. The Committee (or the Board or any other committee or person authorized by the Board) shall have authority to interpret the Plan, and to prescribe, amend and rescind rules and regulations relating to the administration of the Plan, and all such interpretations, rules and regulations shall be conclusive and binding on all persons.
5. EFFECTIVE DATE OF THE PLAN.
The Plan has been approved by the Board and shall be submitted to the shareowners of ArvinMeritor for approval at the Annual Meeting of Shareowners to be held in 2004 and, if approved by the shareowners, shall become effective on the date and at the time of such approval.
6. RESTRICTED SHARE UNITS.
(a) Annual Awards. Immediately following each Annual Meeting of
Shareowners of ArvinMeritor, each Non-Employee Director who is elected
a director at, or who was previously elected and continues as a
director after, that Annual Meeting may be awarded a right to receive
Shares (Restricted Share Units) upon the terms and conditions set
forth in the Plan and the applicable award agreement. The number of
Restricted Share Units, if any, so awarded (the Annual RSU Amount)
shall be fixed from time to time by the Board. Unless otherwise
provided in the applicable award agreement, (i) each Restricted Share
Unit shall be paid or settled by the issuance of one Share after the
earliest of (A) six (6) years from the date of the award, (B) ten days
after the Non-Employee Director retires from the Board after reaching
age 72 and having served at least three years as a director or (C) the
date the Non-Employee Director resigns from the Board or ceases to be
a director by reason of the antitrust laws, compliance with
ArvinMeritor's conflict of interest policies, death, disability or
other circumstances that the Board determines not to be adverse to the
best interests of ArvinMeritor and (ii) if the Non-Employee Director
ceases to be a director prior to six years from the date of the award
of the Restricted Share Unit for any reason other than as described in
clause (i)(B) or clause (i)(C) above, such Restricted Share Unit will
terminate and all right, title and interest of the Non-Employee
Director thereunder will be forfeited. A participant shall not be
required to make any payment for any Restricted Share Units or Shares
delivered under this Section 6. Upon the delivery of Shares under this
Section 6, the recipient shall have the entire beneficial ownership
interest in, and all rights and privileges of a shareowner as to those
Shares, including the right to vote the Shares and to receive
dividends thereon.
(b) Discretionary Awards. At such times as the Board may determine, the Board may award to each Non-Employee Director, or to one or more designated Non-Employee Directors, such additional number of Restricted Share Units as the Board in its sole discretion shall determine.
(c) Dividend Equivalents. If and to the extent provided for in the applicable award agreement, a recipient of Restricted Share Units shall be entitled,
during the period after the Restricted Share Units are awarded and until the termination and forfeiture or payment and settlement thereof, to receive dividend equivalents in respect of such Restricted Share Units equal to the amount or value of any cash or other dividends or distributions payable on an equivalent number of Shares. Any such dividend equivalents shall be paid, with or without interest, as and when provided for in the applicable award agreement.
(d) Deferrals. If and to the extent provided for in the applicable award agreement and on such terms and conditions as may be set forth therein, a Non-Employee Director may from time to time elect in advance to defer the issuance and delivery of Shares otherwise issuable in respect of Restricted Share Units held by the Non-Employee Director.
7. SHARES.
(a) Annual Awards. Immediately following each Annual Meeting of
Shareowners of ArvinMeritor, each Non-Employee Director who is elected
a director at, or who was previously elected and continues as a
director after, that Annual Meeting may receive an award of Shares.
The number of Shares, if any, so awarded (the Annual Share Amount)
shall be fixed from time to time by the Board. A participant shall not
be required to make any payment for any Shares delivered under this
Section 7. Upon the delivery of Shares under this Section 7, the
recipient shall have the entire beneficial ownership interest in, and
all rights and privileges of a shareowner as to those Shares,
including the right to vote the Shares and to receive dividends
thereon.
(b) Discretionary Awards. At such times as the Board may determine, the Board may award to each Non-Employee Director, or to one or more designated Non-Employee Directors, such additional number of Shares as the Board in its sole discretion shall determine.
8. RESTRICTED SHARES.
(a) Annual Awards. Immediately following each Annual Meeting of Shareowners of ArvinMeritor, each Non-Employee Director who is elected a director at, or who was previously elected and continues as a director after, that Annual Meeting may receive an award of restricted Shares (Restricted Shares). The number of Restricted Shares, if any, so awarded (the Annual Restricted Share Amount) shall be fixed from time to time by the Board. A participant shall not be required to make any payment for any Restricted Shares delivered under this Section 8. Upon receipt of an award of Restricted Shares, the recipient shall have the right to vote the Restricted Shares and to receive dividends thereon, and the
Restricted Shares shall have all the attributes of outstanding Shares,
except that the Restricted Shares shall be held in book-entry accounts
subject to the direction of ArvinMeritor (or if ArvinMeritor elects,
certificates therefor may be issued in the recipient's name but
delivered to and held by ArvinMeritor). Unless otherwise provided in
the applicable award agreement, (i) the Restricted Shares so held
shall be delivered to the Non-Employee Director and cease to be
Restricted Shares upon the earliest of (A) the date the restrictions
set forth in the applicable award agreement lapse, (B) ten days after
the Non-Employee Director retires from the Board after reaching age 72
and having served at least three years as a director or (C) the date
the Non-Employee Director resigns from the Board or ceases to be a
director by reason of the antitrust laws, compliance with
ArvinMeritor's conflict of interest policies, death, disability or
other circumstances the Board determines not to be adverse to the best
interests of ArvinMeritor and (ii) if the Non-Employee Director ceases
to be a director for any reason other than as described in clause
(i)(B) or clause (i)(C) above prior to the date the restrictions set
forth in the applicable award agreement lapse, all right, title and
interest of the Non-Employee Director in such Restricted Shares shall
be forfeited and such Restricted Shares shall be transferred to
ArvinMeritor.
(b) Discretionary Awards. At such times as the Board may determine, the Board may award to each Non-Employee Director, or to one or more designated Non-Employee Directors, such additional number of Restricted Shares as the Board in its sole discretion shall determine.
9. STOCK OPTIONS.
(a) Annual Grants. Immediately following each Annual Meeting of Shareowners of ArvinMeritor, each Non-Employee Director who is elected a director at, or was previously elected and continues as a director after, that Annual Meeting may be granted an option (Option) to purchase Shares. The number of Shares subject to Options, if any, so granted (the Annual Option Amount) shall be fixed from time to time by the Board.
(b) Discretionary Grants. At such times as the Board may determine, the Board may grant to each Non-Employee Director, or to one or more designated Non-Employee Directors, Options for such additional number of Shares as the Board in its sole discretion shall determine.
(c) Exercise Price. The exercise price per Share for each Option granted under this Section 9 shall be one-hundred percent (100%) of the Fair Market Value (as defined below) of the Shares on the date of grant.
(d) Exercise and Termination. The purchase price of the Shares with respect to which an Option or portion thereof is exercised shall be payable in full in cash, Shares valued at their Fair Market Value on the date of exercise, or a combination thereof. Unless otherwise provided in the applicable award agreement: (i) each Option may be exercised in whole or in part at any time after it becomes exercisable, (ii) each Option shall become exercisable in three approximately equal installments on each of the first, second and third anniversaries of the date the Option is granted and (iii) no Option shall be exercisable prior to one year or after ten years from the date of the grant thereof; provided, however, that (A) if the holder of an Option dies, the Option may be exercised from and after the date of the optionee's death for a period of three years (or until the expiration date specified in the Option if earlier) even if it was not exercisable at the date of death; (B) if an optionee retires after reaching age 72 and having served at least three years as a director, all Options then held by that optionee shall be exercisable even if they were not exercisable at the optionee's retirement date, provided, however, that each such Option shall expire at the earlier of five years after the date of the optionee's retirement or the expiration date specified in the Option; (C) if an optionee ceases to be a director by reason of disability or resignation from the Board for reasons of the antitrust laws, compliance with ArvinMeritor's conflict of interest policies or other circumstances that the Board determines not to be adverse to the best interests of ArvinMeritor, all Options then held by such optionee may be exercised from and after such termination date for a period of one year (or until the expiration date specified in the Option, if earlier), even if they were not exercisable at such termination date, unless otherwise determined by the Board; and (D) if an optionee ceases to be a director while holding unexercised Options for any reason not specified above, such Options are then void.
(e) Nonassignability. Except as otherwise provided in an applicable award agreement, Options granted under the Plan are not transferable other than (i) by will or by the laws of descent and distribution or (ii) by gift to the grantee's spouse or natural, adopted or step-children or grandchildren (Immediate Family Members) or to a trust for the benefit of one or more of the grantee's Immediate Family Members or to a family charitable trust established by the grantee or a member of the grantee's family.
10. STOCK APPRECIATION RIGHTS.
(a) Annual Grants. Immediately following each Annual Meeting of Shareowners of ArvinMeritor, each Non-Employee Director who is elected a director at, or was previously elected and continues as a director after, that Annual Meeting may be granted Stock Appreciation Rights (as defined below). The number of Stock Appreciation Rights, if any, so
granted (the Annual SAR Amount) shall be fixed from time to time by the Board. Tandem SARs (as defined below) may be granted at the time of grant of an Option or at any time thereafter during the term of an Option.
(b) Discretionary Grants. At such times as the Board may determine, the Board may grant to each Non-Employee Director, or to one or more designated Non-Employee Directors, awards of such additional number of Stock Appreciation Rights as the Board in its sole discretion shall determine.
(c) Exercise and Other Terms. A Tandem SAR shall be exercisable only when
and to the extent that the related Option is exercisable and in lieu
thereof. Freestanding SARs (as defined below) may be granted on terms
and conditions determined by the Committee, consistent with the
provisions of the Plan. The payment to which the grantee of a Stock
Appreciation Right is entitled upon exercise thereof may be made in
Shares valued at their Fair Market Value on the date of exercise, or
in cash or partly in cash and partly in Shares, as the Committee may
determine. Upon exercise of a Tandem SAR and surrender of the related
Option or part thereof, such Option, to the extent surrendered, shall
not thereafter be exercisable, and the Shares covered by the
surrendered Option shall not again be available for grants pursuant to
the Plan. Upon exercise of a Freestanding SAR, any Shares delivered in
payment thereof shall not again be available for grants pursuant to
the Plan. Unless otherwise provided in the applicable award agreement:
(i) each Freestanding SAR may be exercised in whole or in part at any
time after it becomes exercisable, (ii) each Freestanding SAR shall
become exercisable in three approximately equal installments on each
of the first, second and third anniversaries of the date the
Freestanding SAR is granted and (iii) no Freestanding SAR shall be
exercisable prior to one year or after ten years from the date of the
grant thereof; provided, however, that (A) if the holder of a
Freestanding SAR dies, the Freestanding SAR may be exercised from and
after the date of the Non-Employee Director's death for a period of
three years (or until the expiration date specified in the
Freestanding SAR if earlier) even if it was not exercisable at the
date of death; (B) if a Non-Employee Director retires after reaching
age 72 and having served at least three years as a director, all
Freestanding SARs then held by that Non-Employee Director shall be
exercisable even if they were not exercisable at the Non-Employee
Director's retirement date, provided, however, that each such
Freestanding SAR shall expire at the earlier of five years after the
date of the Non-Employee Director's retirement or the expiration date
specified in the Freestanding SAR; (C) if a Non-Employee Director
ceases to be a director by reason of disability or resignation from
the Board for reasons of the antitrust laws, compliance with
ArvinMeritor's conflict of interest
policies or other circumstances that the Board determines not to be adverse to the best interests of ArvinMeritor, all Freestanding SARs then held by such Non-Employee Director may be exercised from and after such termination date for a period of one year (or until the expiration date specified in the Freestanding SAR, if earlier), even if they were not exercisable at such termination date, unless otherwise determined by the Board; and (D) if a Non-Employee Director ceases to be a director while holding unexercised Freestanding SARs for any reason not specified above, such Freestanding SARs are then void.
(d) Definitions. For purposes of the Plan, "Stock Appreciation Right" or "SAR" means a right granted to a Non-Employee Director (i) in conjunction with all or any part of any Option, which entitles the Non-Employee Director, upon exercise of such right, to surrender such Option, or any part thereof, and to receive a payment equal to the excess of the Fair Market Value on the date of such exercise of the Shares covered by such Option, or part thereof, over the purchase price of such Shares pursuant to the Option (a Tandem SAR) or (ii) separate and apart from any Option, which entitles the Non-Employee Director, upon exercise of such right, to receive a payment measured by the increase in the Fair Market Value of a number of Shares designated by such right from the date of grant of such right to the date on which the Non-Employee Director exercises such right (a Freestanding SAR).
11. PRO RATA AWARDS.
Each Non-Employee Director who is elected a director at any meeting of the Board shall receive effective immediately after that meeting an award of one hundred percent (100%) of the Annual RSU Amount, the Annual Share Amount, the Annual Restricted Share Amount, the Annual Option Amount and the Annual SAR Amount (the "Annual Grant Amount") if elected after an Annual Meeting of Shareowners and prior to May 1; an award of seventy-five percent (75%) of the Annual Grant Amount if elected between May 1 and July 31; an award of fifty percent (50%) of the Annual Grant Amount if elected between August 1 and October 31; and an award of twenty-five percent (25%) of the Annual Grant Amount if elected between November 1 and the next Annual Meeting of Shareowners.
12. RESTRICTED SHARE UNITS OR RESTRICTED SHARES IN LIEU OF CASH COMPENSATION OR SHARES.
(a) Each Non-Employee Director may elect each year, not later than December 31 of the year preceding the year as to which deferral of fees is to be applicable, to defer all or any portion of the cash retainer to be paid for Board or other service related to Board activities in the following calendar year through the issuance or transfer of Restricted Share Units
or Restricted Shares, valued at the Fair Market Value of the Shares on the date when each payment of such retainer amount would otherwise be made in cash. Such Restricted Share Units or Restricted Shares shall be the same as and subject to the same provisions as are applicable to Restricted Share Units and Restricted Shares that may be awarded pursuant to Sections 6 and 8, respectively.
(b) Each Non-Employee Director may elect each year, not later than December 31 of the year preceding the year in which an annual award of Shares is to be made pursuant to Section 7(a), to receive the annual award in the form of Restricted Share Units or Restricted Shares. Such Restricted Share Units or Restricted Shares shall be the same as and subject to the same provisions as are applicable to Restricted Share Units and Restricted Shares that may be awarded pursuant to Sections 6 and 8, respectively.
13. AWARD AGREEMENTS.
Each award or grant under the Plan may be evidenced by an award agreement setting forth such terms and conditions of the award or grant, not inconsistent with the terms of the Plan, as the Committee shall determine. In the event of any conflict between an award agreement and the Plan, the terms of the Plan shall govern.
14. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
If there shall be any change in or affecting Shares on account of any merger, consolidation, reorganization, recapitalization, reclassification, stock dividend, stock split or combination, or other distribution to holders of Shares (other than a cash dividend), there shall be made or taken such amendments to the Plan and outstanding awards or grants and award agreements and such adjustments and actions thereunder as the Board may deem appropriate under the circumstances.
15. GOVERNMENT AND OTHER REGULATIONS.
The obligations of ArvinMeritor to issue or deliver Shares under the Plan or upon exercise of Options granted under the Plan shall be subject to (a) all applicable laws, rules and regulations and such approvals by any governmental agencies as may be required, including, without limitation, compliance with the Securities Act of 1933, as amended, and (b) the condition that such Shares shall have been duly listed on the New York Stock Exchange.
16. AMENDMENT AND TERMINATION OF THE PLAN.
The Plan may be amended by the Board in any respect, provided that, without
shareowner approval, no amendment shall (a) materially increase the number
of Shares available under the Plan (other than adjustments pursuant to
Section 14), (b) expand the types of awards available under the Plan, (c)
materially expand the class of directors eligible to participate in the
Plan, (d) materially change the method of determining the exercise price of
Options under the Plan or (e) otherwise be effective to the extent that
shareowner approval is necessary to comply with applicable requirements of
the New York Stock Exchange. The Plan may also be terminated at any time by
the Board. Termination of the Plan shall not affect the rights of
Non-Employee Directors with respect to awards previously granted to them
and all unexpired awards shall continue in force and effect after
termination of the Plan except as they may lapse or be terminated by their
own terms and conditions.
17. MISCELLANEOUS.
(a) Nothing contained in the Plan shall be deemed to confer upon any person any right to continue as a director of or to be associated in any other way with ArvinMeritor.
(b) For purposes of the Plan, the "Fair Market Value" of Shares means the closing sale price of the Shares as reported in the New York Stock Exchange -- Composite Transactions on the date of a determination (or on the next preceding day that Shares were traded if they were not traded on the date of a determination).
(c) Notwithstanding any other provision of the Plan, if a Change of
Control as defined in Section 8.10 of ArvinMeritor's Amended By-Laws
shall occur, then, unless prior to the occurrence thereof the Board of
Directors shall determine otherwise by vote of at least two-thirds of
its members, (i) all Options and Stock Appreciation Rights then
outstanding pursuant to the Plan shall forthwith become fully
exercisable whether or not then exercisable, (ii) the restrictions on
all Restricted Shares awarded under the Plan shall forthwith lapse and
(iii) all outstanding Restricted Share Units shall forthwith be paid
or settled by the issuance of Shares thereunder.
(d) To the extent that Federal laws do not otherwise control, the Plan and all determinations made and actions taken pursuant hereto shall be governed by the laws of the State of Delaware.
Exhibit 10-b
February 12, 2004
Mr. Terry E. O'Rourke
Dear Terry:
Subject: Mutually Agreed Upon Separation
This letter confirms the substance of our conversation regarding a mutually agreed upon separation between you and the Company. We emphasize that your acceptance of this agreement is completely voluntary. ArvinMeritor agrees to provide you the following:
1. Beginning February 1, 2004, through July 31, 2006 (the "Separation Period"), you will receive separation pay equal to thirty months of pay (at your current compensation rate of $605,000 annually), spread equally over the Separation Period. The Separation Period is inclusive of unused vacation for calendar year 2004. If you elect to retire prior to July 31, 2006, the payments set forth in this paragraph will terminate. Your Separation Period will be treated as credited service under the ArvinMeritor Retirement Plan.
2. You will be eligible to receive an incentive compensation plan (ICP) payment for fiscal year 2004 on a prorated basis (4 months out of 12) for time worked during the fiscal year. Such payment will be subject to the applicable formula. Final award determination, if any, is subject to Board of Directors' approval.
3. You will be eligible to receive long term incentive plan (LTIP) payments based on your grant letters for FY2002-2004 and FY2003-2005 plan years as follows:
- FY2002-2004 LTIP will be paid in December, 2004, pending Board of Directors' approval based on the applicable formulas, on a pro-rated basis (28 months out of 36) for time worked during the performance cycle.
- FY2003-2005 LTIP will be paid in December, 2005, pending Board of Directors' approval, based on the applicable formulas on a prorated basis (16 months out of 36) for time worked during the performance cycle.
4. All outstanding stock options will continue to vest through your Separation Period. Stock options can be exercised up to three months after the last day of your Separation Period. Any option not exercised by October 31, 2006 will be forfeited.
Mr. Terry O'Rourke
February 12, 2004
If you elect to retire within thirty (30) days after the end of your Separation Period (July 31, 2006), your stock options that were granted more than 12 months prior to your retirement will continue to vest and can be exercised up to five years following your retirement but not beyond the expiration date of those options.
5. You received a grant of restricted stock in exchange for cancelled options on July 16, 2001. These restricted shares and the associated shares purchased with reinvested dividends, will vest on July 16, 2006. However, if the Company achieves performance objectives set forth in the Restricted Stock Agreement these restricted shares and the associated shares purchased with reinvested dividends will vest on January 3, 2005 or January 3, 2006.
6. You also received two grants of performance contingent restricted shares. The first grant occurred on November 22, 2002, and the second grant occurred on January 2, 2004. The restrictions on these restricted shares will not lapse until after the corresponding LTIP performance cycles (FY2003-2005) (FY2004-2006), are completed and the Compensation and Management Development Committee of the Board of Directors determines the extent to which the restricted shares in the aforementioned grants and the associated shares purchased with reinvested dividends will vest as set forth in the Restricted Stock Agreement.
7. In addition, pursuant to the provisions of the Incentive Compensation Plan of ArvinMeritor, Inc., you received 11,445 shares of Common Stock (the "Deferred Share Award"). As soon as practicable after January 1, 2005, certificates for the Deferred Shares will be delivered to you, pursuant to the terms and conditions of the Deferred Share Award Agreement.
8. Your present Company vehicle may be driven at Company expense through the end of your lease period, May 27, 2006, at which time you may purchase it in accordance with the Company Car Policy as though you were an active employee. If you elect to retire prior to May 27, 2006, you must immediately return your Company vehicle to the Company.
9. You will continue to be provided financial counseling reimbursement at your current annual rate through your Separation Period. If you elect to retire prior to the end of your Separation Period, your financial counseling reimbursement will terminate.
10. Short and long term disability coverage will cease as of January 31, 2004.
11. Medical, dental, vision and flexible spending account coverage will remain in force through July 31, 2006. After July 31, 2006, you will be entitled to continue your group medical, dental, vision and flexible spending account coverage at your own expense for a period of up to 18 months through COBRA. Information as to the cost of such coverage will be supplied following the expiration of benefits. Basic life and accidental death and dismemberment coverage will remain in force through July 31, 2006 and the life insurance coverage only may be converted to an individual policy within 31 days after termination of coverage by contacting Prudential at 800-778-3827. Payroll deductions for any optional life insurance and/or supplemental accidental death and dismemberment insurance coverage that you may have elected will continue through
Mr. Terry O'Rourke
February 12, 2004
July 31, 2006. Prudential will contact you through the mail following that date with regard to your ability to convert these coverages to an individual policy.
Based on your age as of the end of your Separation Period you will be eligible to retire under the ArvinMeritor Retirement Plan. You can elect to retire at any time following the end of your Separation Period and will be able to do so by calling the ArvinMeritor Retirement Center at 1-888-869-3772.
Because you will not have met the minimum service requirement of ten years at the end of your Separation Period (July 31, 2006), you will not be eligible for retiree medical coverage from ArvinMeritor.
12. You may continue to submit your Travis Pointe Country Club expenses to the Company for reimbursement, during your Separation Period. Your membership to the Renaissance Club will be canceled immediately.
13. You will be eligible to continue to participate in the Company savings plan through the Separation Period. As a designated participant in the ArvinMeritor Supplemental Savings Plan you have made an irrevocable contribution election for 2004. If you wish to change the direction of your investments or your contribution level for 2005 or later, you will need to call T. Rowe Price at 1-800-922-9945.
14. You will receive Company sponsored outplacement assistance from the outplacement firm of your choice under the executive management program.
15. Your compensation checks will be mailed to your home or direct deposited unless you specify otherwise. Please let us know in writing if you change your address.
16. You will not disparage, portray in a negative light, or take any action which would be harmful to, or lead to unfavorable publicity for, the Company or its subsidiaries or divisions, or any of its or their current or former officers, directors, employees, agents, consultants, contractors, owners, divisions, parents or successors, whether public or private, including without limitation, in any and all interviews, oral statements, written materials, electronically displayed materials and materials or information displayed on Internet- or intranet-related sites. In the event of a breach or threatened breach of this paragraph 16, you agree that the Company will be entitled to injunctive relief in a court of appropriate jurisdiction to remedy any such breach or threatened breach and you acknowledge that damages would be inadequate and insufficient.
17. You will deliver promptly to the Company (and not keep in your possession or deliver to any other person or entity) any and all property belonging to the Company in your possession or under your control, including without limitation, credit cards, software, palm pilots, pagers, other electronic equipment, records, data, notes, reports, correspondence, financial information, customer files and information and other documents or information (including any and all copies of such Company property). You may, however, retain your computer hardware.
18. You agree, on behalf of yourself, your heirs, executors, administrators and assigns, to release, acquit and forever discharge the Company and its subsidiaries and divisions
Mr. Terry O'Rourke
February 12, 2004
and its and their respective current and former officers, directors, employees, agents, owners, affiliates, successors and assigns (the "Company Released Parties") of and from any and all manner of actions and causes of action, suits, debts, damages, dues, accounts, bonds, covenants, contracts, agreements, judgments, charges, claims, rights and demands whatsoever, whether known or unknown ("Losses"), which you, your heirs, executors, administrators and assigns ever had, now have or may hereafter have, against the Company Released Parties or any of them arising out of or by reason of any cause, matter or thing whatsoever from the beginning of the world to the date hereof, including without limitation, any and all matters relating to your employment by the Company and its predecessors and the cessation thereof, any and all matters relating to your compensation and benefits by or from the Company and its predecessors and any and all matters arising under any federal, state or local statute, rule, regulation or principle of contract law or common law.
You understand that as a result of this paragraph 18, you will not have the right to assert that the Company unlawfully terminated your employment or violated any of your rights in connection with your employment.
You affirm that you have not filed, and agree not to initiate or cause to be initiated on your behalf, any complaint, charge, claim or proceeding against the Company Released Parties before any federal, state or local agency, court or other body relating to your employment, the cessation thereof or any other matters covered by the terms of this paragraph 18, and agree not to voluntarily participate in such a proceeding.
19. The Company and you agree that the terms and conditions of this Letter Agreement are confidential and that neither party will disclose the terms of this Letter Agreement to any third parties, other than (i) disclosure by you to your spouse, (ii) disclosure by the Company or you to its or your respective attorneys, auditors, financial advisors and accountants, (iii) as may be required by law (including securities laws) or (iv) as may be necessary to enforce this Letter Agreement. Without limiting the generality of the foregoing, you acknowledge that the Company may, to the extent required by applicable law, describe or incorporate the terms of this Letter Agreement in, and/or file or incorporate this Letter Agreement as an exhibit to, one or more filings with the Securities and Exchange Commission.
20. ArvinMeritor shall have the right to terminate this agreement at any time if you materially breach any of the obligations stated herein under this agreement.
21. You acknowledge that you have been advised to consult with an attorney prior to signing this agreement. You also acknowledge, understand and agree that this agreement is voluntarily entered into by you in consideration of the undertakings by ArvinMeritor as set forth herein and is consistent in all respects with the discussions by ArvinMeritor personnel with you relating to your separation.
22. You agree that for a period of eighteen months following the date of your departure (January 31, 2004) from the Company, you will not join or start a business that competes with ArvinMeritor, nor will you provide consultancy services, nor for the same eighteen month period will you solicit for employment any ArvinMeritor related employee, unless permission to do so is granted to you in writing by ArvinMeritor's CEO or his designee.
Mr. Terry O'Rourke
February 12, 2004
Notwithstanding the foregoing, specific companies that would be deemed as competing against ArvinMeritor are: Dana, Tenneco, Knorr, Federal Mogul, Webasto, TRW and American Axle.
In the event there is any question as to direct or indirect competition, you agree to obtain approval from ArvinMeritor in writing prior to commencement of employment with the company which could be in competition. You also agree that you will not disclose, nor will you use any ArvinMeritor proprietary information.
23. This agreement is a complete and final agreement between ArvinMeritor and its successors and Terry O'Rourke, and supercedes all other offers, agreements, and negotiations except for the Invention Assignment and Arbitration Agreements which remain in full force.
24. You will have until March 29, 2004, in which to consider this agreement, and you may revoke this agreement within seven days of signing. This agreement will not become effective until the revocation period has expired.
Sincerely,
Larry D. Yost
cc: V. Baker, II
E. Whitus
Accepted and Agreed by:
Exhibit 12
ArvinMeritor, Inc.
Computation of Earnings to Fixed Charges
Six Months Ended March 31, 2004
Earnings Available for Fixed Charges:
Pre-tax income from continuing operations $ 93
Adjustments:
Equity in earnings (losses) of affiliates plus
dividends from affiliates (3)
--------
90
Add fixed charges included in earnings:
Interest expense 53
Interest element of rentals 6
--------
Total 59
--------
Total earnings available for fixed charges: $ 149
--------
Fixed Charges:
Fixed charges included in earnings $ 59
Capitalized interest --
--------
Total fixed charges $ 59
--------
Ratio of Earnings to Fixed Charges (1) 2.52
========
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1 = "Earnings" are defined as pre-tax income from continuing operations, adjusted for undistributed earnings of less than majority owned subsidiaries and fixed charges excluding capitalized interest.
"Fixed charges" are defined as interest on borrowings (whether expensed or capitalized), the portion of rental expense applicable to interest, and amortization of debt issuance costs.
Exhibit 31-a
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO
RULE 13a-14(a) UNDER THE EXCHANGE ACT
I, Larry D. Yost, Chairman of the Board and Chief Executive Officer of ArvinMeritor, Inc., certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of ArvinMeritor, Inc. for the Quarterly Period Ended March 28, 2004;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: May 7, 2004
/s/ Larry D. Yost
------------------------------------
Larry D. Yost, Chairman of the Board
and Chief Executive Officer
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Exhibit 31-b
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO
RULE 13a-14(a) UNDER THE EXCHANGE ACT
I, S. Carl Soderstrom, Jr., Senior Vice President and Chief Financial Officer of ArvinMeritor, Inc., certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of ArvinMeritor, Inc. for the Quarterly Period Ended March 28, 2004;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: May 7, 2004
/s/ S. Carl Soderstrom, Jr.
-------------------------------------------------
S. Carl Soderstrom, Jr.,
Senior Vice President and Chief Financial Officer
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Exhibit 32-a
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO RULE
13a-14(b) UNDER THE EXCHANGE ACT AND 18 U.S.C. SECTION 1350
(as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)
As required by Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, I, Larry D. Yost, Chairman of the Board and Chief Executive Officer of ArvinMeritor, Inc., hereby certify that:
1. The Quarterly Report of ArvinMeritor, Inc. on Form 10-Q for the Quarterly Period Ended March 28, 2004 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, and
2. The information contained in that report fairly presents, in all material respects, the financial condition and results of operations of ArvinMeritor, Inc.
/s/ Larry D. Yost ----------------- Larry D. Yost Date: May 7, 2004 |
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to ArvinMeritor, Inc. and will be retained by ArvinMeritor, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32-b
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO
RULE 13a-14(b) UNDER THE EXCHANGE ACT AND 18 U.S.C. SECTION 1350
(as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)
As required by Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, I, S. Carl Soderstrom, Jr., Senior Vice President and Chief Financial Officer of ArvinMeritor, Inc., hereby certify that:
1. The Quarterly Report of ArvinMeritor, Inc. on Form 10-Q for the Quarterly Period Ended March 28, 2004 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, and
2. The information contained in that report fairly presents, in all material respects, the financial condition and results of operations of ArvinMeritor, Inc.
/s/ S. Carl Soderstrom, Jr. --------------------------- S. Carl Soderstrom, Jr. Date: May 7, 2004 |
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to ArvinMeritor, Inc. and will be retained by ArvinMeritor, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.