arvinmeritor Announcement_of_LVS_Spinoff_050608_FINAL


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arvinmeritor Announcement_of_LVS_Spinoff_050608_FINAL

  1. 1. Announcement of Light Vehicle Systems Spinoff Chip McClure Chairman, CEO and President Phil Martens President, Light Vehicle Systems Carsten Reinhardt President, Commercial Vehicle Systems Jim Donlon Executive Vice President and CFO 1
  2. 2. Forward-Looking Statements This presentation contains statements relating to future results of the company (including certain projections and business trends) that are “forward-looking statements” as defined in 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,” “will” and similar expressions. In addition, there are risks and uncertainties relating to the planned spinoff of ArvinMeritor’s Light Vehicle Systems business, including the timing and certainty of completion of the transition. 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 cycles and 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 and potential disruption of production and supply due to terrorist attacks or acts of aggression); availability and sharply rising cost of raw materials, including steel and oil; 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 suppliers and customers, including potential disruptions in supply of parts to our facilities or demand for our products due to work stoppages; the financial condition of the company’s suppliers and customers, including potential bankruptcies; possible adverse effects of any future suspension of normal trade credit terms by our suppliers; potential difficulties competing with companies that have avoided their existing contracts in bankruptcy and reorganization proceedings; successful integration of acquired or merged businesses; the ability to achieve the expected annual savings and synergies from past and future business combinations and the ability to achieve the expected benefits of restructuring actions; success and timing of potential divestitures; potential impairment of long-lived assets, including goodwill; potential adjustment of the value of deferred tax assets; competitive product and pricing pressures; the amount of the company’s debt; the ability of the company to continue to comply with covenants in its financing agreements; the ability of the company to access capital markets; 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; product liability and warranty and recall claims; rising costs of pension and other post-retirement benefits and possible changes in pension and other accounting rules; as well as other risks and uncertainties, including but not limited to those detailed from time to time in filings of the company with the SEC. 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. 2
  3. 3. Announcing the Separation of ArvinMeritor’s Two Business Units • ArvinMeritor to spin off our Light Vehicle Systems segment to shareholders • ArvinMeritor to continue as a commercial vehicle systems supplier • Spinoff represents a major step in corporate transformation • Improves corporate clarity and management focus • Allows each company to reach its full shareholder value potential • Allows holders to invest selectively • De-couples risk profiles • Improves customer dynamics Unlocks shareholder value and increases focus 3
  4. 4. Terms of the Spinoff • Spinoff expected to be implemented through a pro rata tax-free stock dividend to ArvinMeritor shareholders – Upon completion, ARM shareholders will own 100% of both companies • Spinoff expected to be completed within the next 12 months – Subject to market conditions and regulatory and other customary approvals • New company has applied to be listed as ARVI on the NASDAQ stock exchange • Transaction time line: Announce Update the Market Spinoff Effective File Form 10 FY 2008 Q3 Q4 FY 2009 4
  5. 5. Investment Thesis • Global supplier with $2 billion of value-added sales – Specialized in Body and Chassis Systems – Over 60% of revenue derived outside the U.S. • Diverse and robust business portfolio • Global manufacturing with an expanding LCCC footprint • Great brands and business building blocks • Strong book of business benefiting from emerging market growth • Experienced and respected management team • Margin expansion from an improving cost structure Positioned to win in the global automotive industry 5
  6. 6. The New Company: Arvin Innovation We are a high-performance team. Together In all we do, we aim for profitable and with our customers we create value growth. We grow value for our everyday. As great team members, we shareholders, associates, become invaluable partners. customers and the communities where we work and live. Individually and collectively, our goal is to never stop growing. Collaborate. Innovate. GROW. We are out to change the game through original thinking, new advances and optimized performance. We look to innovate in every aspect of our business. 6 6
  7. 7. Diverse and Robust Business Portfolio LVS 2007 Value-Added Sales(1) Geographic Mix Customer Mix Toyota South Asia Pacific 2% Honda America 6% Fiat 2% Other 2% 10% 5% North Nissan VW BMW 2% America 25% 3% 38% Hyundai 5% Europe Renault 8% 46% Chrysler Aftermkt 13% 9% Segment Mix PSA Ford 7% GM 10% 7% Chassis Systems 40% Ford GM Chrysler Total North America 4.1% 2.9% 12.6% 19.5% South America 0.0 2.9 0.2 3.0 Body Systems Europe 2.7 1.5 0.0 4.2 60% Asia Pacific 2.7 0.0 0.0 2.7 Only 20% of sales are to the (1) Value-added sales are defined to be total sales less pass- Detroit 3 in North America through sales. In 2007, LVS had value-added sales of $2.0 billion and pass-through sales of $200 million. 7
  8. 8. A World Leader in Body and Chassis Systems 8 8
  9. 9. Global Sourcing/Manufacturing Model Arvin Innovation Facilities • 42 facilities and approximately 9,000 employees in 16 countries • Favorable labor arrangements Headquarters in Detroit, but center of gravity in Europe 12
  10. 10. Great Brands and Other Building Blocks Gabriel brand shocks & struts • Instant name recognition • Outstanding product heritage High value-add products in the Outstanding joint venture pipeline partners • Smart motors and latches • Local experts • Active chassis products • Rapidly growing customers • Highly-engineered wheels Existing plants in low-cost The world’s best steel wheels regions business • 8 plants in Asia • Fumagalli brand – respected • 6 plants in Mexico and South around the world America • Brazil home base and home • 6 plants in Central/Eastern market Europe • Great products and processes 10
  11. 11. Strong Growth Trajectory Asia Europe • Able to offer the full product portfolio in China • Building three new plants • Our largest region • Expanding engineering capability • Growing with Central/ Eastern European South America customers and demand • Sales up more than 30% FYTD • Potential to double business within region Industry Sales (millions of units) • Leverage existing footprint 8 smart systems ™ 6 Central • Improving vehicle performance & integration Europe • Emphasis on materials engineering 4 Eastern • Development contracts for advanced chassis Europe 2 • Launching many new programs this year Customers 0 2006 2007 2008 2014 • Strategic body systems supplier to Hyundai • Growing with Chery and other emerging OEMs 11
  12. 12. Experienced and Respected Management Team James Marley Phil Martens Jim Donlon Rakesh Sachdev Non-Executive Chief Executive Executive Vice Executive Vice Chairman Officer President & Chief President, Chief Financial Officer Administrative Retired Chairman, Current President, Officer & Managing AMP Inc. and Light Vehicle Current Executive Director of Emerging current member of Systems Vice President and Markets ArvinMeritor Board Chief Financial of Directors Officer Current President, Asia Pacific 12
  13. 13. Cost Structure Is Improving • Performance Plus has accelerated cost reduction efforts and focus, especially in labor and burden productivity • Aggressive restructuring efforts have shifted footprint toward low-cost countries and will continue to improve cost structure N. America S. America Europe Asia Pacific • Toronto • Brussels • Restructure • Frankfurt Out some labor agreements Production • Expand Puebla • Expand Brazil Body • Expand • Changchun Systems Lozorno • Expand San • Pune In Luis Potosi • Extend offering • Romania • Waigaoqaio from Venezuela JV • Wuhu • S. America Tech • Consolidate • Offshore Engineering Center Body Engineering Engineering Center 13
  14. 14. Margin Expansion Trend Underway LVS Segment Results(1) 2006 2007 2008 2010 Actual Actual Estimate Target(2) Sales (billions) $ 2.2 $2.2 $ 2.4 $2.7 - $2.9 Annual Sales Growth 0% 7% 7 - 10% EBITDA Before Special Items $ 69 $ 90 (millions)(3) EBITDA Margin 3.1% 4.0% 3-5 year EBITDA margin target of 7-8%(2) (1) Actual and estimated results and targets are on the basis of the LVS segment of ArvinMeritor, Inc. and are not on the basis of LVS as a separate, stand-alone entity. Financial results, estimates and targets for the LVS segment of ArvinMeritor will differ from, and may not be indicative of, the results of operations and financial position LVS would have had or may have if it operated as a separate, stand-alone entity during those periods. (2) Based on management assumptions regarding pricing, currency exchange rates, volume and timing of vehicle production, option mix, and other factors not in the control of management. 14 (3) See Appendix – “Non-GAAP Financial Information”
  15. 15. 2008 Progress on Underlying Profitability LVS Segment Results (millions)(1) 2008 2008 2007 Better/Worse FYTD FYTD Than 2007 EBITDA Before Special Items as Reported (2) $ 36 $ 46 $ (10) Changes to Certain Benefit Programs (2) - (2) Legal/Commercial Dispute with Customer 9 - 9 Commercial Settlement with Supplier 2 - 2 ET Corporate Allocations 5 - 5 Adjustments to Pricing Reserves - (5) 5 Adjusted EBITDA on Comparable Basis $ 50 $ 41 $ 9 (1) Actual results are on the basis of the LVS segment of ArvinMeritor, Inc. and are not on the basis of LVS as a separate, stand-alone entity. Financial results for the LVS segment of ArvinMeritor will differ from, and may not be indicative of, the results of operations and financial position LVS would have had if it had operated as a separate, stand-alone entity during those periods. 15 (2) See Appendix – “Non-GAAP Financial Information”
  16. 16. ArvinMeritor After the Spinoff • Will continue to be a leader in providing undercarriage components and systems to global truck, trailer, specialty and aftermarket customers • Experienced management team will remain in place, with Chip McClure as CEO, Carsten Reinhardt as COO and Jay Craig as CFO • Well positioned to benefit from significant operating improvements and expected rebound in North American truck and trailer markets • Will continue to trade as ARM on the New York Stock Exchange • Management will recommend that the board maintain the current dividend policy until the spinoff is completed 16
  17. 17. Creating Value Through Transformation • Roll Coater divestiture • LVA divestitures • Balance sheet restructuring – Pay-down and re-timing • Emissions Technologies divestiture • Performance Plus profit improvement program • Spinoff of Light Vehicle Systems Optimizing structure for greatest shareholder value 17
  18. 18. Appendix 18
  19. 19. Use of Non-GAAP Financial Information Included in this presentation, the Company has provided information regarding segment EBITDA and segment EBITDA margins. ArvinMeritor uses Segment EBITDA as the primary basis for the chief operating decision maker to evaluate the performance of each of the company’s reportable segments. Segment EBITDA is defined as earnings before interest, tax, depreciation and amortization and losses on sales of receivables. Segment EBITDA margins are defined as Segment EBITDA as a percentage of sales. This presentation also includes Segment EBITDA before special items (BSI) and Segment EBITDA BSI margins. Segment EBITDA before special items is defined as Segment EBITDA plus or minus special items. Management believes that the non-GAAP financial measures used in this presentation are useful to both management and investors in their analysis of the Company’s financial position and results of operations. Segment EBITDA is a meaningful measure of performance commonly used by management, the investment community and banking institutions to analyze operating performance and entity valuation. Further, management uses these non-GAAP measures for planning and forecasting in future periods. These non-GAAP measures should not be considered a substitute for the reported results prepared in accordance with GAAP. Segment EBITDA should not be considered an alternative to operating income as an indicator of operating performance or to cash flows as a measure of liquidity. These non-GAAP financial measures, as determined and presented by the Company, may not be comparable to related or similarly titled measures reported by other companies. Set forth on the following slide are reconciliations of the Segment EBITDA as reported in the company’s Form 10-K and Form 10-Q to Segment EBITDA before special items. 19
  20. 20. Non-GAAP Financial Information (1) Segment EBITDA Before Special Items Reconciliation Twelve Months Ended (in millions) September 30, 2007 2006 $ 2,244 $ 2,236 Segment Sales Segment EBITDA - Reported $ 36 $ 58 54 12 Restructuring Costs Ride Control Fair Value Adjustments (12) 3 12 - Product Disruptions/Supplier Reorganizations - (5) Gain On Divestitures Other - 1 $ 90 $ 69 Segment EBITDA - Before Special Items Segment EBITDA Margins - Before Special Items 4.0% 3.1% Six Months Ended March 31, 2008 2007 Segment EBITDA - Reported $ 21 $ 22 Restructuring Costs 15 29 - (10) Ride Control Fair Value Adjustments Product Disruptions - 5 $ 36 $ 46 Segment EBITDA - Before Special Items (1) See Slide 19 – “Non-GAAP Financial Information” 20