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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2000
COMMISSION FILE NUMBER 1-15983
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ARVINMERITOR, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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INDIANA 38-3354643
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
2135 WEST MAPLE ROAD 48084-7186
TROY, MICHIGAN (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (248) 435-1000
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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Common Stock, $1 Par Value New York Stock Exchange
(including the associated Preferred
Share Purchase Rights)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
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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 if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [X]
The aggregate market value of the registrant's voting stock held by
non-affiliates of the registrant on November 30, 2000 was approximately $871.2
million.
66,930,340 shares of the registrant's Common Stock, par value $1 per share,
were outstanding on November 30, 2000.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Certain information contained in the Annual Report to Shareowners of the
registrant for the fiscal year ended September 30, 2000 is incorporated by
reference into Part I, Part II and Part IV.
(2) Certain information contained in the Proxy Statement for the Annual Meeting
of Shareowners of the registrant to be held on February 14, 2001 is
incorporated by reference into Part III.
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PART I
ITEM 1. BUSINESS.
GENERAL
ArvinMeritor, Inc. (the "Company" or "ArvinMeritor"), headquartered in
Troy, Michigan, 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 services to the transportation, appliance,
construction and furniture industries.
ArvinMeritor was incorporated in Indiana in March 2000 in connection with
the merger (the "Merger") of Meritor Automotive, Inc. ("Meritor") and Arvin
Industries, Inc. ("Arvin"). The Merger was effected in two steps: (1) Meritor, a
Delaware corporation, reincorporated in Indiana by merging into ArvinMeritor,
its wholly-owned subsidiary, and (2) immediately thereafter, Arvin merged into
ArvinMeritor. The Merger was effective on July 7, 2000.
Prior to the Merger, Meritor was a Delaware corporation formed in
connection with the September 30, 1997 distribution by Rockwell International
Corporation, Meritor's former parent company ("Rockwell"), to Rockwell
shareowners on a pro rata basis of all of the issued and outstanding shares of
Meritor's common stock. Prior to this distribution, Rockwell transferred
substantially all of its operations, assets and liabilities related to the
automotive businesses then owned and operated by Rockwell (including liabilities
relating to former operations) to Meritor and its subsidiaries.
As used herein, the terms "Company" and "ArvinMeritor" include subsidiaries
and predecessors unless the context indicates otherwise.
Whenever an item of this Annual Report on Form 10-K refers to information
under specific captions of the 2000 Annual Report to Shareowners of the Company
(the "2000 Annual Report") or to information in the Proxy Statement for the
Annual Meeting of Shareowners of the Company to be held on February 14, 2001
(the "2001 Proxy Statement"), the information is incorporated in that item by
reference.
References in this Annual Report on Form 10-K to the Company's being a
leading supplier or the world's leading supplier, and other similar statements
as to the Company's relative market position, are based principally on
calculations made by the Company based on information collected by the Company,
including Company and industry sales data obtained from internal and available
external sources, as well as Company estimates. In addition to such quantitative
data, the Company's statements are based on other competitive factors such as
the Company's technological capabilities, its research and development efforts
and innovations and the quality of its products and services, in each case
relative to that of its competitors in its addressed markets.
ArvinMeritor serves a broad range of original equipment manufacturer
("OEM") customers worldwide, including truck OEMs, light vehicle OEMs,
semi-trailer producers and off-highway and specialty vehicle manufacturers, and
the related aftermarkets. Its ten largest customers accounted for 62% of total
fiscal 2000 sales. The Company operated over 150 manufacturing facilities in 26
countries around the world in fiscal 2000. Sales outside the United States
accounted for approximately 50% of total sales in fiscal 2000.
The Company serves its customers worldwide through three operating
segments: Light Vehicle Systems ("LVS"), Commercial Vehicle Systems ("CVS") and
Light Vehicle Aftermarket ("LVA"). The three operating segments supply the
following products and markets:
- LVS supplies roof, door, access control, suspension, exhaust, ride
control and motion control systems and wheel products for passenger cars,
light trucks and sport utility vehicles to original equipment
manufacturers.
- CVS supplies drivetrain systems and components, including axles, brakes
and drivelines, for medium-and heavy-duty trucks, trailers and
off-highway equipment and specialty vehicles.
- LVA supplies mufflers, exhaust and tail pipes, catalytic converters,
shock absorbers, struts, clamps, hangers, automotive oil, air and fuel
filters and accessories to the passenger car, light truck and sport
utility aftermarket.
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Business units that are not focused on automotive products are classified
as "Other." The Company's Coil Coating operation, which provides coil coating
applications for the transportation, appliance, construction and furniture
industries, is the primary component in this classification.
Note 22 of the Notes to Consolidated Financial Statements in the 2000
Annual Report contains financial information by segment for the three years
ended September 30, 2000, including information on sales and assets by
geographic area for each segment. The heading "Products" below includes
information on LVS, CVS and LVA sales by product for each of the three fiscal
years ended September 30, 2000.
ArvinMeritor began operations as a combined company on July 7, 2000 and,
accordingly, does not have an operating history as a combined company prior to
that date. Except where otherwise noted, the historic financial information
included or incorporated by reference in this Annual Report on Form 10-K for
periods prior to July 7, 2000 reflects only the results of Meritor and its
consolidated subsidiaries. The information for the period after July 7, 2000
represents the results of the Company and its consolidated subsidiaries. This
information may not be indicative of the future results of operations, financial
position or cash flows of the Company.
INDUSTRY DEVELOPMENTS AND OUTLOOK
The industry in which the Company operates is cyclical in nature and has
been characterized historically by periodic fluctuations in demand for vehicles
for which the Company supplies products. Recent declines in several of the
Company's principal markets, including commercial vehicle markets in North
America and the light vehicle aftermarket, together with the impact of plant
shutdowns by some North American OEM customers and currency fluctuations, had a
negative effect on the Company's financial results in fiscal year 2000. See
Chief Financial Officer's Review -- Management's Discussion and
Analysis -- Overview and Outlook and -- Results of Operations in the 2000 Annual
Report. For fiscal year 2001, the Company's most recent outlook show a 40%
decline in North American production in the heavy-duty commercial truck and
trailer markets and declines in light vehicle production of 10% in North America
and 2% in Europe. Conditions in foreign exchange markets, notably weakness of
the euro relative to the U.S. dollar, will also impact the Company in 2001.
The Company is seeking to mitigate the effects of these negative factors
not only by expanding its revenue base, but also by reducing costs and improving
operational efficiencies. In that connection, the Company has focused
significant effort on achieving projected Merger synergies, and has undertaken
restructuring actions in the third quarter of fiscal year 2000 and the first
quarter of fiscal year 2001 to improve efficiency and achieve cost reductions.
See "Strategic Initiatives" below and Notes 6 and 24 of the Notes to
Consolidated Financial Statements in the 2000 Annual Report.
INDUSTRY TRENDS
The automotive industry is experiencing several significant trends that
present opportunities and challenges to industry suppliers. These trends, which
influence the Company's business strategies, include the globalization of OEMs
and their suppliers, increased outsourcing by OEMs, increased demand for modules
and systems by OEMs, with an increasing emphasis on engineering and technology,
the consolidation of suppliers worldwide, and the growth of e-commerce.
As OEMs expand geographically to access new markets, they are able to
achieve significant cost savings and enhanced product quality and consistency by
sourcing from the most capable full-service global suppliers. OEMs and suppliers
also have the opportunity to take advantage of economies of scale through global
sourcing of components and systems and by designing platforms that can be used
in different geographic markets but still be adapted to local preferences.
OEMs are responding to global competitive pressures to improve quality and
reduce manufacturing costs and related capital investments by outsourcing
products that historically have been engineered and manufactured internally.
Outsourcing enables OEMs to focus on their core design, assembly and marketing
capabilities. In markets addressed by LVS, this increased outsourcing trend has
extended not only to
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components, but to entire modules and systems, requiring suppliers to provide a
higher level of engineering, design, and electromechanical and systems
integration expertise in order to remain competitive. Increased outsourcing by
light vehicle OEMs has produced higher overall per vehicle sales by independent
suppliers. Such increased outsourcing can result in supplier sales growth
independent of the overall automotive industry growth trend.
OEMs also are reducing their total number of suppliers and are more
frequently entering into supply arrangements with the most capable global
suppliers. Increasingly, the criteria for selection include quality, cost and
responsiveness, as well as certain full-service capabilities, including an
increasing emphasis on design and engineering. This trend and the globalization
trend described above have contributed to the consolidation of automotive
suppliers into larger, more efficient and more capable companies.
The Internet is taking a more significant role in the automotive industry
supply chain, as industry participants recognize the potential benefits of
e-commerce. These benefits include the potential to shorten processing time for
orders, reduce inventory and increase inventory turns, and reduce costs more
quickly than prices. Along with these benefits, e-commerce also presents
challenges. In particular, pressure to reduce prices results in the
corresponding need to reduce costs in order to maintain profit margins.
BUSINESS STRATEGIES
ArvinMeritor has developed leadership market positions as it has grown into
a global supplier of a broad range of components and systems for use in
commercial, specialty and light vehicles worldwide. ArvinMeritor seeks to
maintain these market positions in the face of the industry downturns described
above. In the longer term, the Company continues to work to enhance its
leadership positions and capitalize on its existing customer, product and
geographic strengths, as well as the industry trends described above, and to
increase its sales, earnings and profitability. To achieve these goals,
ArvinMeritor employs the following business strategies:
Continuously Improve Core Business Processes. The Company is continuously
seeking to improve its core business processes, through investment in
information technology and capital equipment, rationalization of production
among facilities, deintegration of non-core processes, establishment of flexible
assembly sites and simplification and increased commonality of products. The
goals of these actions are to reduce product costs, improve product quality and
lower required asset investment levels, which should result in reduced product
development times and more flexibility to meet customer needs. The Merger
provided an opportunity to advance this process by combining or selecting
between the best practices of both constituent companies.
Capitalize on Customer Outsourcing Activities. A significant growth
strategy of the Company is to provide lower cost and higher quality products to
customers that are increasing their outsourcing activities. Management believes
truck and trailer OEMs in Europe will increasingly outsource in order to achieve
cost and efficiency advantages. The Company works closely with current and
prospective customers worldwide to identify and implement mutually beneficial
outsourcing opportunities. An example of this strategy is the Company's December
1998 acquisition of Volvo Truck Corporation's heavy truck axle manufacturing
operations in Lindesberg, Sweden. With this acquisition, the Company entered
into a related supply contract and became the primary supplier of heavy-duty
axles for Volvo's heavy truck operations.
The Company has sought and will continue to seek to utilize its broad
product lines and its design, engineering and manufacturing expertise by
expanding its sales of higher value modules and systems. The Company will seek
to utilize its leadership positions in the supply of electromechanical systems
to light vehicle OEMs and its ability to provide drivetrain systems to truck and
specialty vehicle OEMs to capitalize on this anticipated customer demand.
Leverage Geographic Strengths. Geographic expansion to meet the global
sourcing needs of customers and to address new markets will continue to be an
important element of the Company's growth strategy. Management believes
opportunities exist to increase further the Company's presence in the North
American light vehicle OEM market, where its pro forma combined sales of light
vehicle products increased from approximately $1.94 billion in fiscal 1999 to
approximately $2.15 billion in fiscal 2000. The Merger has
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enhanced the Company's LVS product offerings and improved the Company's ability
to take advantage of these opportunities.
The Company also believes there are opportunities to increase sales to
heavy-duty and medium-duty commercial vehicle OEMs in Europe, building on
established customer relationships with their North American affiliates and the
Company's existing manufacturing presence in Europe. Emerging markets such as
the Asia/Pacific region and South America also present growth opportunities as
demand for commercial, specialty and light vehicles increases in these areas. In
evaluating opportunities in these emerging markets, the Company will continue to
assess the economic situation in these regions and its potential effect on the
Company's businesses and served markets.
Introduce New Systems and Technologies. ArvinMeritor plans to continue
investing in new technologies and product development. ArvinMeritor also plans
to continue working closely with its customers to develop and implement design,
engineering, manufacturing and quality improvements. The Company will draw upon
the engineering resources of its Technical Centers in Troy, Michigan and
Columbus, Indiana, and its engineering centers of expertise in the United
States, Brazil, Canada, France, Germany and the United Kingdom. See "Research
and Development."
Management believes that the strategy of continuing to introduce new and
improved systems and technologies will be an important factor in the Company's
efforts to achieve its growth objectives. LVS is implementing this strategy by
developing and strengthening its market position in two areas: aperture systems,
including door, access control and roof systems, and undercarriage components
and systems, including suspensions, ride and motion control products, wheels,
exhaust systems, corner modules and other components. See "Products -- Light
Vehicle Systems" below.
Expand Aftermarket Business. ArvinMeritor believes that the aftermarket
offers significant growth opportunities, through the Company's relationships
with OEM customers as well as acquisitions made by retailers. The Company also
expects growth opportunities from developing markets outside North America and
Europe. The Company is pursuing a strategy of expansion of its aftermarket
business by utilizing its distribution centers in Kentucky, North Carolina,
Ohio, Oklahoma, Tennessee, Utah and Ontario, and by leveraging its existing
aftermarket channels with new products, both those manufactured by the Company
and those manufactured by others and sold by the Company under distribution
agreements.
The Merger furthered this strategy by combining Arvin's strength in the
light vehicle aftermarket with Meritor's strength in the commercial vehicle
aftermarket, thus providing opportunities for operating synergies and
cross-selling of products. CVS' aftermarket capabilities were also enhanced with
the December 1998 acquisition of Euclid Industries, a leading North American
supplier and manufacturer of aftermarket replacement parts for a wide range of
medium- and heavy-duty vehicles.
Selectively Pursue Strategic Opportunities. The Company regularly
evaluates various strategic and business development opportunities, including
licensing agreements, marketing arrangements, joint ventures, acquisitions and
dispositions. The Company intends to continue to selectively pursue alliances
and acquisitions that would allow it to gain access to new customers and
technologies, penetrate new geographic markets and enter new product markets.
The Company also intends to continue to review the prospects of its existing
businesses to determine whether any of them should be modified, restructured,
sold or otherwise discontinued. See "Strategic Initiatives" and "Joint Ventures"
below for information on the Company's initiatives in these areas.
Participation in E-Commerce Initiatives. The Company has a number of
web-enabled initiatives in place or under development, including an online
customer catalog and ordering system for certain businesses to shorten delivery
time. In addition, the Company was the first supplier to participate in
Covisint, a web-based supply exchange sponsored by global OEMs. The Company
serves on Covisint's customer advisory council and participates in on-line
auctions for global procurement.
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PRODUCTS
ArvinMeritor designs, develops, manufactures, markets, distributes, sells,
services and supports a broad range of products for use in commercial, specialty
and light vehicles. In addition to sales of original equipment systems and
components, the Company provides its products to OEMs, dealers, distributors,
fleets and other end-users in the related aftermarkets. The Merger has enhanced
the Company's product lines and provided opportunities for increased sales
through cross-marketing products and services to customers of the two
constituent companies.
The following chart depicts operating segment sales by product for each of
the three fiscal years ended September 30, 2000. Product sales by Arvin and its
subsidiaries are included only for periods after the date of the Merger. A
narrative description of the principal products of the Company's three operating
segments and other operations follows the chart.
SALES BY PRODUCT
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FISCAL YEAR ENDED
SEPTEMBER 30,
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2000 1999 1998
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LVS:
Door Systems........................................... 11% 13% 13%
Roof Systems........................................... 6 7 10
Access Control Systems................................. 3 4 5
Exhaust Systems*....................................... 7 -- --
Suspension Systems..................................... 5 5 5
Wheel Products......................................... 3 3 4
Ride and Motion Control Systems*....................... 2 -- --
Seat Adjusting Systems**............................... 2 3 2
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Total LVS......................................... 39% 35% 39%
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CVS:
Original Equipment:
Truck and Trailer Axles and Brakes..................... 37% 39% 34%
Off-Highway, Specialty and Government Products......... 9 12 14
Transmissions, Clutches, Drivelines and Other***....... 1 5 5
Aftermarket............................................... 9 9 8
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Total CVS......................................... 56% 65% 61%
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LVA*:
Exhaust System Products................................ 2% --% --%
Ride Control Products.................................. 1 -- --
Filtration Products.................................... 1 -- --
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Total LVA......................................... 4 -- --
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Other*...................................................... 1 -- --
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Total............................................. 100% 100% 100%
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* Sales relating to ride and motion control systems, exhaust systems, LVA
products and Other are included only for periods after the date of the
Merger, July 7, 2000.
** The Company sold its seat adjusting systems business in November 1999.
*** In August 1999, the Company transferred its transmission and clutch business
to a new joint venture 50% owned by the Company.
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Light Vehicle Systems
A key strategy of LVS is to develop its market position in aperture systems
(including door, roof and access control systems and gas springs) and
undercarriage components and systems (including suspension systems, exhaust
systems, ride and motion control products and wheels). The Merger provided an
enhanced platform for expansion of this business and improved the Company's
ability to supply suspension systems and corner modules to light vehicle OEMs.
The following products comprise the Company's LVS portfolio.
Door Systems. The Company is a leading supplier of manual and power window
regulators and a leading supplier of integrated door modules and systems. In
fiscal year 2000, the Company manufactured window regulators at plants in North
America, Europe and the Asia/Pacific region for light vehicle and heavy-duty
commercial vehicle OEMs. The Company's wide range of power and manual door
system products utilizes numerous technologies and offers the Company's own
electric motors, which are designed for individual applications and to maximize
operating efficiency and reduce noise levels.
Roof Systems. ArvinMeritor is one of the world's leading independent
suppliers of sunroofs and roof systems products, including its Golde(R) brand
sunroofs, for use in passenger cars, light trucks and sport utility vehicles.
The Company makes one-piece, modular roof systems, some of which incorporate
sunroofs, that provide OEMs with cost savings by reducing assembly time and
parts. The Company has roof system manufacturing facilities in North America,
Europe and the Asia/Pacific region.
Access Control Systems. ArvinMeritor supplies manual and power activated
latch systems to light vehicle and heavy-duty commercial vehicle manufacturers,
with leadership market positions in Europe and a market presence in North
America and the Asia/Pacific region. The Company's access control products
include modular and integrated door latches, actuators, trunk and hood latches
and fuel flap locking devices. The Company has access control systems
manufacturing facilities in North America, Europe and the Asia/ Pacific region.
Exhaust Systems. ArvinMeritor is a leading global supplier of a complete
line of exhaust system components, including mufflers, exhaust pipes, catalytic
converters, and exhaust manifolds. The Company sells these products to OEMs,
either as original equipment or as replacement parts in connection with
manufacturers' recall or warranty programs or as dealer service parts.
ArvinMeritor participates in this business both directly and through joint
ventures and affiliates. These alliances include the Company's 50% interest in
Arvin Sango Inc., an exhaust joint venture, and its 49% interest in Zeuna
Starker GmbH & Co., an exhaust systems supplier headquartered in Germany.
Suspension Systems. Through its 57%-owned joint venture with Mitsubishi
Steel Manufacturing Co., the Company is one of the leading independent suppliers
of products used in suspension systems for passenger cars, light trucks and
sport utility vehicles in North America. The Company's suspension system
products, which are manufactured at three facilities in the United States and
Canada, include coil springs, stabilizer bars and torsion bars. This business
has experienced significant sales growth over the past five years as light
vehicle OEMs have increased their outsourcing of suspension system products and
the light vehicle market has grown.
In February 2000 the joint venture acquired Tempered Spring Co., a supplier
of automotive suspension components based in England. The acquisition added new
products and processes to the Company's portfolio and expanded its presence in
the European suspensions market.
Wheel Products. ArvinMeritor is a leading supplier of steel wheel products
to the light vehicle OEM market, principally in North and South America. The
Company has wheel manufacturing facilities in Brazil and Mexico.
Ride and Motion Control Systems. The Company provides ride control
products, including shock absorbers, struts, ministruts and corner modules.
Through its two majority-owned joint ventures with Kayaba Industries, Inc., the
Company manufactures ride control products and is a leading supplier in the
European OEM market.
The Company is a worldwide leader in the manufacture and supply of climate
control and counterbalancing systems for the automotive industry. Its products
include gas lift supports and vacuum actuators.
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Seat Adjusting Systems. Before November 1999, the Company supplied manual
and power seat adjusting systems for passenger cars, light trucks and sport
utility vehicles, principally in North America. The Company sold its seat
adjusting systems business at that time. See "Strategic Initiatives" below. The
Company continues to supply electric motors for seat adjusting systems at
facilities in the United States and France.
Commercial Vehicle Systems
Truck and Trailer Products
Truck Axles. ArvinMeritor is one of the world's leading independent
suppliers of axles for heavy-duty commercial vehicles. The Company's axle
manufacturing facilities located in the United States, Brazil, England, Sweden
and Italy produce axles for medium- and heavy-duty commercial vehicles. The
Company's extensive truck axle product line includes a wide range of drive and
non-drive front steer axles and single and tandem rear drive axles, which can
include driver-controlled differential lock for extra traction, aluminum
carriers to reduce weight and pressurized filtered lubrication systems for
longer life. The Company's front steer and rear drive axles can be equipped with
the Company's cam, wedge or air disc brakes, automatic slack adjusters and
anti-lock braking systems.
Brakes. The Company is a leading independent supplier of air brakes to
medium- and heavy-duty commercial vehicle manufacturers in North America and
Europe. Through manufacturing facilities located in the United States, Canada,
the United Kingdom and Italy, the Company manufactures a broad range of
foundation air brakes as well as automatic slack adjusters for brake systems.
The Company's foundation air brake products include cam drum brakes, which offer
improved lining life and tractor/trailer interchangeability, air disc brakes,
which provide fade resistant braking for demanding applications, wedge drum
brakes, which are lightweight and provide automatic internal wear adjustment,
hydraulic brakes and wheel end components such as hubs, drums and rotors.
Federal regulations require that new heavy-duty and medium-duty vehicles
sold in the United States be equipped with anti-lock braking systems ("ABS").
Through its 50%-owned joint venture with WABCO Automotive Products ("WABCO"), a
wholly-owned subsidiary of American Standard, Inc., the Company is the leading
supplier of ABS and a supplier of other electronic and pneumatic control systems
for North American heavy-duty commercial vehicles. Through the joint venture the
Company also supplies hydraulic ABS to the North American medium-duty truck
market.
Trailer Products. ArvinMeritor believes it is the world's leading
manufacturer of heavy-duty trailer axles, with leadership positions in North
America and in Europe. The Company's trailer axles are available in over forty
models in capacities from 20,000 to 30,000 pounds for virtually all heavy
trailer applications and are available with the Company's broad range of brake
products, including ABS. In addition, the Company supplies trailer air
suspension products for which it has strong market positions in Europe and a
market presence in North America.
Transmissions and Clutches. Through its 50%-owned joint venture with ZF
Friedrichshafen AG ("ZF"), the Company produces technologically-advanced medium-
and heavy-duty transmission components and systems for heavy vehicle original
equipment manufacturers and the aftermarket for the United States, Canada and
Mexico. This transmission product line enables the Company to supply a complete
drivetrain system to heavy-duty commercial vehicle manufacturers in North
America. The joint venture's range of transmission models includes the Engine
Synchro Shift(TM) transmission for heavy-duty trucks that is designed to reduce
gear shifting effort for drivers and reduce wear on clutches and other
drivetrain components in a cost efficient manner by synchronizing engine speed
to road speed shifts without use of the clutch. (See Item 3. Legal Proceedings
for information with respect to a patent infringement lawsuit filed against the
Company by Eaton Corporation and an adverse judgment in the case.) The joint
venture, through its 60% interest in Meritor Clutch Co., also supplies clutches,
including diaphragm-spring clutches.
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Drivelines and Other Products. ArvinMeritor also supplies universal joints
and driveline components, including its Permalube(TM) universal joint, a
permanently lubricated universal joint used in the high mileage on-highway
market.
Off-Highway, Specialty and Government Products
Off-Highway Vehicle Products. The Company supplies heavy-duty axles,
brakes and drivelines for use in numerous off-highway vehicle applications,
including construction, material handling, agriculture, mining and forestry, in
North America, South America, Europe and the Asia/Pacific region. These products
are designed to tolerate high tonnages and operate under extreme conditions.
Specialty Vehicle Products. The Company supplies axles, brakes and
transfer cases for use in buses, coaches and recreational, fire and other
specialty vehicles in North America and Europe, and is the leading supplier of
bus and coach axles and brakes in North America.
Government Products. The Company supplies axles, brakes, brake system
components including ABS, trailer products, transfer cases and drivelines for
use in medium-duty and heavy-duty military tactical wheeled vehicles,
principally in North America.
Light Vehicle Aftermarket
The principal LVA products include mufflers; exhaust and tail pipes;
catalytic converters; shock absorbers; struts; clamps; hangers; automotive oil,
air, and fuel filters; and accessories. These products are sold under the brand
names Maremont(R), TIMAX(R), ANSA(R) and ROSI(R) (mufflers), Gabriel(R) (shock
absorbers) and Purolator(R) (filters). The Company also markets products under
private label to customers such as Pep Boys, Midas, Sears, AutoZone, Kwik-Fit,
Partco, CarQuest and Meineke.
Other
"Other" includes business units that are not focused on automotive
products, and consists primarily of the Company's Coil Coating operation. Coil
coated steel and aluminum substrates are used in a variety of construction
applications, such as garage and entry doors, interior and exterior building
panels, heating and air conditioning and roofs. In addition, coated substrates
are used in consumer goods manufacturing for the appliance, lighting fixture and
office products markets.
CUSTOMERS; SALES AND MARKETING
The Company's operating segments have numerous customers worldwide and have
developed long-standing business relationships with many of these customers.
Original Equipment. Both LVS and CVS market and sell their products
principally to OEMs. In North America, CVS also markets its truck and trailer
products directly to dealers, fleets and other end-users, which may designate
the components and systems of a particular supplier for installation in the
vehicles they purchase from OEMs.
Consistent with industry practice, LVS and CVS make most of their sales to
OEMs through open purchase orders, which do not require the purchase of a
minimum number of products. The customer typically may cancel these purchase
orders on reasonable notice without penalty. LVS and CVS also sell products to
certain customers under long-term arrangements that require the Company to
provide annual cost reductions (through price reductions or other cost benefits
for the OEMs). If the Company were unable to generate sufficient cost savings in
the future to offset such price reductions, the Company's gross margins could be
adversely affected.
Both LVS and CVS are dependent upon large OEM customers with substantial
bargaining power, including with respect to price and other commercial terms.
Although the Company believes that it generally enjoys good relations with its
OEM customers, loss of all or a substantial portion of sales to any of its large
volume customers for whatever reason (including, but not limited to, loss of
contracts, reduced or delayed
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customer requirements, plant shutdowns, strikes or other work stoppages
affecting production by such customers) could have a significant adverse effect
on the Company's financial results. During fiscal 2000, DaimlerChrysler AG
(which owns Chrysler, Mercedes-Benz AG and Freightliner Corporation) accounted
for approximately $617 million of sales for CVS, $369 million of sales for LVS
and $7 million of sales for LVA, or 18% of the total sales of the Company.
Except as noted above with respect to the North American market for
heavy-duty trucks and trailers, LVS and CVS generally compete for new business
from OEMs both at the beginning of the development of new vehicle platforms and
upon the redesign of existing platforms. New platform development generally
begins two to four years prior to start-up of production. Once a supplier has
been designated to supply products to a new platform, an OEM will generally
continue to purchase those products from the supplier for the life of the
platform, which typically lasts four to six years.
Aftermarkets. CVS also provides its truck and trailer products and
off-highway and specialty products to OEMs, dealers and distributors in the
aftermarket. LVA sells its products primarily to wholesale distributors,
retailers and installers. The light vehicle aftermarket includes fewer and
larger customers as the market consolidates and as OEMs increase their presence
in the market.
Coil Coating. The Company's Coil Coating customers include steel
companies, service centers and end manufacturers engaged in the transportation,
appliance, construction and furniture industries.
COMPETITION
Each of the Company's businesses operates in a highly competitive
environment.
LVS and CVS compete worldwide with a number of United States and
international vehicle manufacturers and independent suppliers. Some of these
competitors are larger and some are smaller than the Company in terms of
resources and market shares. The principal competitive factors are price,
quality, service, product performance, design and engineering capabilities, new
product innovation and timely delivery. LVS has numerous competitors across its
various product lines worldwide. In North America, the major competitors of CVS
are Eaton Corporation and Dana Corporation. In addition, certain OEMs
manufacture for their own use products of the types supplied by the Company, and
any future increase in this activity could displace sales by the Company.
LVA competes with both OEMs and independent suppliers in North America and
Europe and serves the market through its own sales force as well as a network of
manufacturers' representatives. Competitive factors include customer loyalty,
competitive pricing, customized service, quality, timely delivery, product
development and manufacturing process efficiency.
The Company's Coil Coating operation competes with other coil coaters and
with internal paint systems.
RAW MATERIALS AND SUPPLIES
The Company believes it has adequate sources for the supply of raw
materials and components for its business segments' manufacturing needs with
suppliers located around the world. The Company does, however, concentrate its
purchases of certain raw materials and parts over a limited number of suppliers,
some of which are located in developing countries, and is dependent upon the
ability of its suppliers to meet performance and quality specifications and
delivery schedules. Although the Company historically has not experienced any
significant difficulties in obtaining an adequate supply of raw materials and
components necessary for its manufacturing operations, the loss of a significant
supplier or the inability of a supplier to meet performance and quality
specifications or delivery schedules could have an adverse effect on the
Company.
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<PAGE> 11
STRATEGIC INITIATIVES
ArvinMeritor regularly considers various strategic and business
opportunities, including licensing agreements, marketing arrangements and
acquisitions, and reviews the prospects of its existing businesses to determine
whether any of them should be modified, restructured, sold or otherwise
discontinued.
The industry in which the Company operates continues to experience
significant consolidation among suppliers. This trend is due in part to
globalization and increased outsourcing of product engineering and manufacturing
by OEMs, and in part to OEMs reducing the total number of their suppliers by
more frequently awarding long-term, sole-source or preferred supplier contracts
to the most capable global suppliers. Scale is an important competitive factor,
with the largest industry participants able to maximize key resources and
contain costs.
Consistent with this trend, the Company's primary strategic initiative in
fiscal year 2000 was the Merger. Arvin and Meritor determined to enter into the
Merger in order to enhance the financial strength and diversity of operations
and product lines of both companies and better position themselves to take
advantage of global opportunities. In addition, the Company believes that
efficiencies and cost savings resulting from the Merger should enable it to
improve upon and increase its strategic options and lower its average cost of
capital. Annual pre-tax synergies are estimated to be approximately $50 million
in fiscal year 2001, increasing to approximately $100 million in fiscal year
2003.
In addition, on November 30, 1999, the Company sold its LVS seat adjusting
systems business for approximately $135 million cash. The Company had determined
that retention of this business was not consistent with the LVS strategy of
developing its market position in aperture systems and undercarriage components
and systems.
On November 8, 2000, the Company announced restructuring actions to realign
operations at selected facilities throughout the world, with a cost of
approximately $90 million. The Company expects these restructuring activities to
reduce operating costs by approximately $25 million in fiscal year 2001 and $50
million in fiscal year 2002 and thereafter. The Company also recorded a
restructuring charge of $26 million in the third quarter of fiscal 2000 relating
to workforce reductions and other facility-related costs for the rationalization
of operations. See Notes 6 and 24 of the Notes to Consolidated Financial
Statements in the 2000 Annual Report.
No assurance can be given as to whether or when any additional strategic
initiatives will be consummated in the future. The Company will continue to
consider acquisitions as a means of further expansion, but cannot predict
whether its participation or lack of participation in industry consolidation
will ultimately be beneficial to the Company. If an agreement with respect to
any additional acquisitions were to be reached, the Company could finance such
acquisitions by issuance of additional debt or equity securities. The additional
debt from any such acquisitions, if consummated, could increase the Company's
debt to capitalization ratio. In addition, the ultimate benefit of any
acquisition would depend on the ability of the Company to successfully integrate
the acquired entity or assets into its existing business and to achieve any
projected synergies.
JOINT VENTURES
As the automotive industry has become more globalized, joint ventures and
other cooperative arrangements have become an important element of the business
strategies of the Company. At September 30, 2000, the Company had interests in
joint ventures with operations in the United States, Argentina, Belgium, Brazil,
Canada, China, Colombia, the Czech Republic, Germany, Hungary, India, Italy,
Japan, Mexico, Peru, the Philippines, South Africa, Spain, Turkey, Venezuela and
the United Kingdom.
In accordance with accounting principles generally accepted in the United
States, the consolidated financial statements of the Company include the
operating results of those majority-owned joint ventures in which the Company
has control. Consolidated joint ventures include the Company's 57%-owned joint
venture with Mitsubishi Steel Manufacturing Co. (suspension products for
passenger cars, light trucks and sport utility vehicles); and its 50.1% and 75%
interests in two joint ventures with Kayaba Industries Inc. (ride control
products). Unconsolidated joint ventures of the Company include its 50%-owned
joint venture with WABCO
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<PAGE> 12
(ABS systems for heavy-duty commercial vehicles); its 50%-owned joint venture
with ZF (transmissions and clutches); its 50% interests in Arvin Sango Inc. and
Arvin Exhaust GmbH (exhaust systems); and its 49% interest in Zeuna Starker GmbH
& Co. (exhaust systems).
In February 2000, the Company acquired an additional 20% interest in an
exhaust joint venture in Shanghai, China, bringing its total ownership to 55%.
RESEARCH AND DEVELOPMENT
The Company has significant research, development, engineering and product
design capabilities. The Company spent approximately $115 million, $117 million
and $111 million in fiscal 2000, 1999 and 1998, respectively, on research,
development and engineering. At September 30, 2000, the Company employed
approximately 1,700 professional engineers and scientists.
Pursuant to a transitional services agreement entered into with Rockwell,
Rockwell's Science Center provided assistance to the Company in the development
of various technological and product advancements through September 30, 2000.
This arrangement has now expired.
PATENTS AND TRADEMARKS
Numerous United States and foreign patents and patent applications are
owned or licensed by the Company in its manufacturing operations and other
activities. While in the aggregate these patents and licenses are considered
important to the operation of the Company's businesses, management does not
consider them of such importance that the loss or termination of any one of them
would materially affect a business segment or the Company as a whole. (See Item
3. Legal Proceedings for information with respect to a patent infringement
lawsuit filed against the Company by Eaton Corporation and an adverse judgment
in the case.)
The Company's name, its registered trademarks Arvin(TM) and Meritor(TM) and
its symbol are important to its business. Other significant trademarks owned by
the Company include Golde(R)(sunroofs) and Fumagalli(TM) (wheels) with respect
to LVS; Gabriel(R) (shock absorbers and struts), Purolator(R)(filters) and
Maremont(R) (exhaust products) with respect to LVA; and ROR(R) (trailer axles)
with respect to CVS. Under the terms of an agreement entered into by Meritor and
Rockwell in 1997, the Company may continue to apply the "Rockwell" brand name to
its products until September 30, 2007.
EMPLOYEES
At September 30, 2000, the Company had approximately 36,000 full-time
employees. At that date, approximately 7,400 Company employees in the United
States and Canada were covered by collective bargaining agreements. The Company
believes its relationship with unionized employees is satisfactory. No
significant work stoppages have occurred in the past five years.
ENVIRONMENTAL MATTERS
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 had, and will continue to have, an
impact on the manufacturing operations of the Company. Thus far, compliance with
environmental requirements and resolution of environmental claims have been
accomplished without material effect on the Company's liquidity and capital
resources, competitive position or financial statements.
The Company has been designated as a potentially responsible party at ten
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 September 30, 2000 to be
approximately $20 million, of which probable costs of $13 million had been
accrued.
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<PAGE> 13
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 September 30, 2000 to be approximately $50 million.
ArvinMeritor expects that any amounts that may be required to be paid in excess
of recorded reserves of $25 million will not have a material adverse effect on
the Company's financial condition.
Based on its assessment and after consulting with Vernon G. Baker, II,
Esq., General Counsel of the Company, management believes that the Company's
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 liquidity and capital resources, competitive
position or financial statements. Management cannot assess the possible effect
of compliance with future requirements.
INTERNATIONAL OPERATIONS
Approximately 52% of ArvinMeritor's total assets as of September 30, 2000,
50% of fiscal 2000 sales, and 46% of pro forma combined fiscal 2000 sales were
outside the United States. Note 22 of the Notes to Consolidated Financial
Statements in the 2000 Annual Report includes financial information by
geographic area for the three fiscal years ended September 30, 2000.
Management believes that international operations have significantly
benefited the financial performance of the Company. However, the Company's
international operations are subject to a number of risks inherent in operating
abroad, including, but not limited to, risks with respect to currency exchange
rate fluctuations, local economic and political conditions, disruptions of
capital and trading markets, restrictive governmental actions (such as
restrictions on transfer of funds and trade protection measures, including
export duties and quotas and customs duties and tariffs), changes in legal or
regulatory requirements, import or export licensing requirements, limitations on
the repatriation of funds, difficulty in obtaining distribution and support,
nationalization, the laws and policies of the United States affecting trade,
foreign investment and loans, and tax laws. There can be no assurance that these
risks will not have a material adverse impact on the Company's ability to
increase or maintain its foreign sales or on its financial condition or results
of operations.
During fiscal 2000, the Company's sales and operating income were
negatively impacted by approximately $130 million and $20 million, respectively,
due to exchange rate changes. (See Chief Financial Officer's
Review -- Management's Discussion and Analysis -- Results of Operations in the
2000 Annual Report.) The impact that the euro and other currencies will have on
the Company's sales and operating income is difficult to predict in the upcoming
year.
The Company enters into foreign currency forward exchange contracts to
minimize the risk of unanticipated gains and losses from currency rate
fluctuations on foreign currency commitments entered into in the ordinary course
of business. It is the policy of the Company not to enter into derivative
financial instruments for speculative purposes and therefore the Company holds
no derivative instruments for trading purposes. The Company has not experienced
any material adverse effect on its consolidated financial position, results of
operations or cash flow related to these foreign currency forward exchange
contracts. (See Chief Financial Officer's Review -- Management's Discussion and
Analysis -- Quantitative and Qualitative Disclosures about Market Risk in the
2000 Annual Report.)
On January 1, 1999, the euro became the common currency of eleven countries
of the European Union. During a three-year transition period, the present
national currencies of these eleven countries will become sub-units of the euro
at fixed exchange rates. The European Union's current plans call for the
transition period to be completed by July 1, 2002, at which time the euro will
become the sole legal tender in those participating countries.
The Company is engaged in business in some of the countries that
participate in the European Monetary Union, and sales for fiscal 2000 in these
countries were approximately 17% of the Company's total sales. In
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<PAGE> 14
addition, the Company enters into foreign currency forward exchange contracts
with respect to several of the existing currencies that have been subsumed into
the euro and has borrowings in participating currencies primarily under its bank
revolving credit arrangements. The Company has analyzed the potential effects of
the euro conversion on competitive conditions, information technology and other
systems, currency risks, financial instruments and contracts, and has examined
the tax and accounting consequences of euro conversion, and believes that the
conversion will not have a material adverse effect on its business, operations
and financial condition.
The Company is making the necessary adjustments to accommodate the
conversion, including modifications to its information technology systems and
programs, pricing schedules and financial instruments. The Company expects that
all necessary actions will be completed in a timely manner, and that the costs
associated with the conversion to the euro will not be material.
SEASONALITY; CYCLICALITY
LVS and CVS may experience seasonal variations in the demand for their
products to the extent automotive vehicle production fluctuates. Historically,
for both segments, such demand has been somewhat lower in the Company's first
and fourth fiscal quarters (the fourth and third calendar quarters,
respectively) when OEM plants may close during model changeovers and vacation
and holiday periods.
In addition, the industry in which LVS and CVS operate has been
characterized historically by periodic fluctuations in overall demand for
trucks, passenger cars and other vehicles for which the Company supplies
products, resulting in corresponding fluctuations in demand for products of the
Company. Cycles in the major automotive industry markets of North America and
Europe are not necessarily concurrent or related. The cyclical nature of the
automotive industry is outside the control of the Company and cannot be
predicted with certainty. The Company has sought and will continue to seek to
expand its operations globally to mitigate the effect of periodic fluctuations
in demand of the automotive industry in one or more particular countries.
The following table sets forth vehicle production in principal markets
served by LVS and CVS for the last five fiscal years:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,
------------------------------------
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Light Vehicles (in millions):
North America......................................... 15.1 15.2 15.4 16.9 17.5
South America......................................... 1.8 2.1 2.0 1.5 2.0
Europe................................................ 14.5 15.2 17.7 18.2 19.3
Asia/Pacific (calendar year data)..................... 16.6 17.1 15.4 15.6 17.5
Commercial Vehicles (in thousands):
North America, Heavy-Duty Trucks...................... 203 201 245 292 269
North America, Medium-Duty Trucks..................... 125 138 141 175 165
North America, Trailers............................... 266 252 327 366 367
Europe, Trailers...................................... 91 81 130 124 119
</TABLE>
---------------
Source: Automotive industry publications and management estimates
Recent declines in several of the Company's principal markets, including
commercial vehicle markets in North America and the light vehicle aftermarket,
together with plant shutdowns by North American OEM customers, had a negative
effect on the Company's financial results in fiscal year 2000. See Chief
Financial Officer's Review -- Management's Discussion and Analysis -- Overview
and Outlook and -- Results of Operations in the 2000 Annual Report for
information on recent downturns in certain markets and their effects on the
Company's sales and earnings. The Company's most recent outlook for fiscal year
2001 shows a 40% decline in North American production in the heavy-duty
commercial truck and trailer markets. For light vehicle production, the Company
currently expects a 10% decline in North America and a 2% decline in Europe
during fiscal year 2001.
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<PAGE> 15
CAUTIONARY STATEMENT
This Annual Report on Form 10-K 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" 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; 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; as well as other risks and uncertainties, including those
detailed herein and from time to time in other filings of the Company with the
Securities and Exchange Commission. See also "Customers; Sales and Marketing,"
"Competition," "Raw Materials and Supplies," "Strategic Initiatives,"
"International Operations" and "Seasonality; Cyclicality" in this Annual Report
on Form 10-K, and Chief Financial Officer's Review -- Management's Discussion
and Analysis in the 2000 Annual Report. 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.
ITEM 2. PROPERTIES.
At September 30, 2000, the Company's operating segments operated the
following facilities in the United States, Europe, South America, Canada,
Mexico, Australia, South Africa and the Far East:
<TABLE>
<CAPTION>
MANUFACTURING ENGINEERING FACILITIES, SALES OFFICES, WAREHOUSES
FACILITIES AND SERVICE CENTERS
------------- -------------------------------------------------
<S> <C> <C>
LVS................................ 87 49
CVS................................ 37 44
LVA................................ 23 29
Other.............................. 4 2
</TABLE>
These facilities had an aggregate floor space of approximately 32.5 million
square feet, substantially all of which is in use. The Company owned
approximately 74% and leased approximately 26% of this floor space. There are no
major encumbrances (other than financing arrangements which in the aggregate are
not material) on any of the Company's plants or equipment. In the opinion of
management, the Company's properties have been well maintained, are in sound
operating condition and contain all equipment and facilities necessary to
operate at present levels. A summary of floor space of these facilities at
September 30, 2000 is as follows:
<TABLE>
<CAPTION>
OWNED LEASED
FACILITIES FACILITIES
--------------------------------- ---------------------------------
LOCATION LVS CVS LVA OTHER LVS CVS LVA OTHER TOTAL
-------- ------ ------ ------ ------ ------ ------ ------ ------ ------
(IN THOUSANDS OF SQUARE FEET)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
United States........ 3,986 4,698 2,043 642 533 999 900 479 14,280
Canada............... 446 413 -- -- 104 120 107 -- 1,190
Europe............... 3,462 2,934 1,076 -- 1,738 139 868 -- 10,217
Asia/Pacific......... 341 677 -- -- 181 1,255 597 -- 3,051
Latin America........ 958 2,092 -- -- 89 142 188 -- 3,469
Africa............... 304 -- -- -- -- 11 1 -- 316
Total...... 9,497 10,814 3,119 642 2,645 2,666 2,661 479 32,523
</TABLE>
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<PAGE> 16
ITEM 3. LEGAL PROCEEDINGS.
On July 17, 1997 Eaton Corporation filed suit against Rockwell in the U.S.
District Court in Wilmington, Delaware, asserting infringement of Eaton's U.S.
Patent No. 4850236, which covers certain aspects of heavy-duty truck
transmissions, by the Company's Engine Synchro Shift(TM) transmission for
heavy-duty trucks, and seeking damages and injunctive relief. Meritor was joined
as a defendant on June 11, 1998, and trial in this matter began on June 23,
1998. On July 1, 1998, the jury rendered a verdict in favor of Eaton, finding
that Meritor had infringed Eaton's patent and awarding compensatory damages in
an amount equal to 13% of total product sales. At September 30, 2000, said
damages totalled approximately $3.75 million. A judgment was entered on July 17,
1998. Because the jury found the infringement to be willful, the judge in the
case has discretion to increase the damages to an amount up to three times the
amount of the award. Eaton's request for a permanent injunction is pending. A
separate phase of the trial with respect to Meritor's allegations of inequitable
conduct by Eaton in obtaining its patent was held from April 19-21, 1999. The
judge is expected to rule on this phase of the proceedings at the same time as
he rules on Eaton's request for a permanent injunction and the damage issue. The
Company is considering further actions, including post-trial motions and an
appeal to the United States Court of Appeals for the Federal Circuit. Based on
advice of M. Lee Murrah, Esq., Assistant General Counsel of the Company,
management believes the Company's truck transmissions do not infringe Eaton's
patent. The Company intends to continue to defend this suit vigorously.
Various other lawsuits, claims and proceedings have been or may be
instituted or asserted against the Company or its subsidiaries relating to the
conduct of the Company's business, including those pertaining to product
liability, intellectual property, environmental, safety and health, and
employment matters.
Included in these matters are claims for alleged asbestos-related personal
injuries, which arose from products manufactured prior to 1977 by a subsidiary
acquired by Arvin in 1986. During fiscal years 1995 through 2000, the Company
and its predecessors paid asbestos-related claims of approximately $35 million,
substantially all of which was reimbursed by insurance. Management believes that
existing insurance coverage will reimburse substantially all of the potential
liabilities and expenses related to pending cases.
The outcome of litigation cannot be predicted with certainty and some
lawsuits, claims or proceedings may be disposed of unfavorably to the Company.
However, based on its evaluation of matters which are pending or asserted and
after consulting with Vernon G. Baker, II, Esq., General Counsel of the Company,
management believes the disposition of such matters will not have a material
adverse effect on the Company's financial statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
See the information reported under Item 4. Submission of Matters to a Vote
of Security Holders in the Company's Quarterly Report on Form 10-Q for the
Quarterly Period ended June 30, 2000, with respect to a special meeting of
shareowners of Meritor held July 6, 2000. There were no other matters submitted
to a vote of security holders during the fourth quarter of fiscal 2000.
ITEM 4A. EXECUTIVE OFFICERS OF THE COMPANY.
The name, age, positions and offices held with the Company and principal
occupations and employment during the past five years of each of the executive
officers of the Company as of December 15, 2000 are as follows:
LARRY D. YOST, 62 -- Chairman of the Board and Chief Executive Officer.
Chairman of the Board and Chief Executive Officer of Meritor from May 1997 to
July 2000; Acting President, Light Vehicle Systems of Meritor from January 1998
to March 1999; Senior Vice President, President, Automotive and Acting
President, Heavy Vehicle Systems of Rockwell (electronic controls and
communications) from March 1997 to September 1997; President, Heavy Vehicle
Systems of Rockwell from November 1994 to March 1997.
V. WILLIAM HUNT, 56 -- Vice Chairman and President. Chairman of the Board,
President and Chief Executive Officer of Arvin from April 1999 to July 2000;
President and Chief Executive Officer of Arvin from
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<PAGE> 17
May 1998 to April 1999; President and Chief Operating Officer of Arvin from 1996
to May 1998; Executive Vice President of Arvin from 1990 to 1996.
VERNON G. BAKER, II, 47 -- Senior Vice President, General Counsel and
Secretary. Senior Vice President, General Counsel and Secretary of Meritor from
August 1999 to July 2000; Vice President and General Counsel, Corporate Research
and Technology of Hoechst Celanese Corporation, a subsidiary of Hoechst AG
(pharmaceuticals and industrial chemicals), from 1989 to July 1999.
GARY L. COLLINS, 54 -- Senior Vice President, Human Resources. Senior Vice
President, Human Resources of Meritor from August 1997 to July 2000; Vice
President -- Human Resources and Government Relations, Automotive of Rockwell
from September 1991 to September 1997.
LINDA M. CUMMINS, 52 -- Senior Vice President, Communications. Senior Vice
President, Communications of Meritor from April 2000 to July 2000; Vice
President, Communications of Meritor from August 1999 to April 2000; Vice
President of Advanced Marketing and Worldwide Communications of United
Technologies Automotive (automotive component supplier) from August 1997 to
August 1999; Vice President of Communications and External Affairs of United
Technologies Automotive from June 1996 to August 1997; Director of Broadcast
News/Global News Department of Ford Motor Company (automotive) from 1993 to
1996.
WILLIAM K. DANIEL, 35 -- Senior Vice President and President, Light Vehicle
Aftermarket. President of Arvin Replacement Products business group from
December 1999 to July 2000; Managing Director of Arvin Replacement Products in
Europe from January 1998 to November 1999; Managing Director of Gabriel Europe
from May 1996 to December 1997; Vice President, Sales, of Arvin Replacement
Products from 1995 to 1996.
JUAN L. DE LA RIVA, 56 -- Senior Vice President, Corporate Development and
Strategy. Senior Vice President, Business Development of Meritor from February
2000 to July 2000; Senior Vice President, Business Development and
Communications of Meritor from February 1999 to February 2000; Vice President,
Business Development and Communications of Meritor from September 1998 to
February 1999; Managing Director -- Wheels, Light Vehicle Systems of Meritor
from September 1997 to September 1998; Managing Director -- Wheels, Light
Vehicle Systems of Rockwell, from 1994 to September 1997.
THOMAS A. GOSNELL, 50 -- Senior Vice President and President, Commercial
Vehicle Systems. Senior Vice President and President, Heavy Vehicle Systems
Aftermarket Products of the Company from July 2000 to November 2000; Senior Vice
President and President, Worldwide Aftermarket of Meritor from September 1999 to
July 2000; Vice President and General Manager, Aftermarket, of Meritor from
February 1998 to September 1999; General Manager, Worldwide Aftermarket
Services, Heavy Vehicle Systems, of Meritor from September 1997 to February
1998; General Manager, Worldwide Aftermarket Services, Heavy Vehicle Systems, of
Rockwell from November 1996 to September 1997; General Manager - North America,
Aftermarket Services, Heavy Vehicle Systems, of Rockwell from June 1991 to
November 1996.
PERRY L. LIPE, 54 -- Senior Vice President and Chief Information Officer.
Vice President, Information Technology, of Arvin from September 1998 to July
2000; Vice President, Information Technology, of Fisher Controls International,
Inc. (valves, regulators and instrumentation) from September 1992 to August
1998.
WILLIAM M. LOWE, 47 -- Vice President and Controller. Vice President,
Financial Operations and Chief Accounting Officer of Arvin from June 1998 to
July 2000; Corporate Controller and Chief Accounting Officer of Arvin from 1994
to June 1998.
THOMAS A. MADDEN, 47 -- Senior Vice President and Chief Financial Officer.
Senior Vice President and Chief Financial Officer of Meritor from May 1997 to
July 2000; Vice President and Senior Vice President -- Finance, Automotive of
Rockwell from March 1997 to September 1997; Vice President, Corporate
Development of Rockwell from September 1996 to March 1997; Vice
President -- Finance & Administration, Light Vehicle Systems of Rockwell from
May 1996 to September 1996; Vice President -- Finance & Administration,
Automotive of Rockwell from October 1994 to May 1996.
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<PAGE> 18
TERRENCE E. O'ROURKE, 53 -- Senior Vice President and President, Light
Vehicle Systems. Senior Vice President and President, Light Vehicle Systems of
Meritor from March 1999 to July 2000; Group Vice President and President -- Ford
Division of Lear Corporation (automotive component supplier) from January 1996
to January 1999; President -- Chrysler Division of Lear Corporation from October
1994 to January 1996.
A. R. SALES, 52 -- Senior Vice President and President, Roll Coater. Vice
President and Treasurer of the Company from July 2000 to October 2000; Executive
Vice President and Chief Financial Officer of Arvin -- Roll Coater, Inc. from
January 1999 to July 2000; Vice President and Treasurer of Arvin from April 1997
to December 1998; Treasurer of Arvin from September 1990 to April 1997.
S. CARL SODERSTROM, 47 -- Senior Vice President, Engineering, Quality and
Procurement. Senior Vice President, Engineering, Quality and Procurement of
Meritor from February 1998 to July 2000; Vice President, Engineering and
Quality, Heavy Vehicle Systems of Meritor from September 1997 to February 1998;
Vice President, Engineering and Quality, Heavy Vehicle Systems of Rockwell from
October 1995 to September 1997; Director of Development -- Operator Interface
and Logic Division of Allen-Bradley Company, LLC (automation), a subsidiary of
Rockwell, from 1993 to October 1995.
DIANE M. STELFOX, 43 -- Vice President, Corporate Development. Vice
President and Controller of Meritor from September 1998 to July 2000; Assistant
Controller of Meritor from January 1998 to September 1998; Controller -- Body
Systems N.A. of ITT Automotive, Inc. (automotive component supplier) from 1995
to 1997.
CRAIG M. STINSON, 39 -- Senior Vice President and President, Exhaust
Systems. Executive Vice President, Exhaust Systems of the Company from July 2000
to September 2000; Executive Vice President, Exhaust Systems, of Arvin from
January 2000 to July 2000; Vice President -- General Motors Business Group,
Exhaust Systems, of Arvin from June 1998 to January 2000; and Vice
President -- DaimlerChrysler Business Group, Exhaust Systems, of Arvin from
February 1995 to June 1998.
FRANK A. VOLTOLINA, 40 -- Vice President and Treasurer. Vice President and
Treasurer of Mallinckrodt Inc. (medical products) from October 1997 to October
2000; Staff Vice President-Director of Corporate Tax of Mallinckrodt from
October 1995 to October 1997; Assistant Controller-Director of Corporate Tax of
Mallinckrodt from January 1993 to September 1995.
There are no family relationships, as defined in Item 401 of Regulation
S-K, between any of the above executive officers and any director, executive
officer or person nominated to become a director or executive officer. No
officer of the Company was selected pursuant to any arrangement or understanding
between him or her and any person other than the Company. All executive officers
are elected annually.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock, par value $1 per share, is listed on the New
York Stock Exchange and trades under the symbol "ARM." On December 8, 2000,
there were 44,798 shareowners of record of the Company's Common Stock.
In connection with the Merger, each outstanding share of Meritor common
stock was exchanged for 0.75 shares of the Company's Common Stock. The high and
low sale prices per share of Meritor's common stock for each quarter in fiscal
year 1999 and the first three quarters of fiscal year 2000, restated to reflect
the
17
<PAGE> 19
exchange rate in the Merger, and the high and low sale prices per share of the
Company's Common Stock for the fourth quarter of fiscal year 2000, were as
follows:
<TABLE>
<CAPTION>
2000 1999
------------------ ------------------
QUARTER ENDED HIGH LOW HIGH LOW
------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
December 31....................... $28.58 $20.00 $29.50 $18.83
March 31.......................... 26.50 18.17 28.92 18.92
June 30........................... 22.33 14.67 35.33 20.92
September 30...................... 18.63 13.75 34.67 26.17
</TABLE>
A quarterly cash dividend, in the amount of 22 cents per share of Company
Common Stock, was declared and paid in the fourth quarter of fiscal 2000.
Quarterly cash dividends, each in the amount of 10.5 cents per share of Meritor
common stock (14 cents per share, after adjustment to reflect the exchange rate
in the Merger), were declared and paid in each quarter of fiscal 1999 and the
first three quarters of fiscal 2000.
On July 10, 2000, the Company issued 750 shares of Common Stock to each of
Steven C. Beering, Joseph P. Flannery, Robert E. Fowler, Jr., William D. George,
Jr., Ivan W. Gorr, Richard W. Hanselman, Don J. Kacek, James E. Perrella and
Martin D. Walker, newly-elected non-employee directors of the Company. All of
these shares were issued pursuant to the terms of the Company's Directors Stock
Plan and, in each case, the issuance was exempt from registration under the
Securities Act of 1933, as amended, as a transaction not involving a public
offering under Section 4(2).
In July 2000 the Company's board of directors authorized the purchase of up
to $100 million of the Company's Common Stock. Under the repurchase program, the
Company expects to purchase shares periodically in the open market or through
privately negotiated transactions. Through September 30, 2000, the Company had
acquired approximately 3.1 million shares under this program at an aggregate
cost of $53 million, or an average of $16.98 per share.
ITEM 6. SELECTED FINANCIAL DATA.
See the information in the table captioned Selected Financial Data in the
2000 Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION.
See the discussion and analysis under the caption Chief Financial Officer's
Review -- Management's Discussion and Analysis in the 2000 Annual Report.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
See Chief Financial Officer's Review -- Management's Discussion and
Analysis -- Quantitative and Qualitative Disclosures About Market Risk in the
2000 Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See Statement of Consolidated Income, Consolidated Balance Sheet, Statement
of Consolidated Cash Flows, Statement of Consolidated Shareowners' Equity, Notes
to Consolidated Financial Statements, and Independent Auditors' Report in the
2000 Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
18
<PAGE> 20
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
See the information under the captions Election of Directors and
Information as to Nominees for Directors and Continuing Directors in the 2001
Proxy Statement. No nominee for director was selected pursuant to any
arrangement or understanding between the nominee and any person other than the
Company pursuant to which such person is or was to be selected as a director or
nominee. There are no family relationships, as defined in Item 401 of Regulation
S-K, between any of the directors or nominees for directors and any other
director, executive officer or person nominated to become a director or
executive officer. See also the information with respect to executive officers
of the Company under Item 4a of Part I.
ITEM 11. EXECUTIVE COMPENSATION.
See the information under the captions Compensation of Directors, Executive
Compensation, Employment Agreement with V. William Hunt, Offer Letters to Other
Executive Officers and Retirement Benefits in the 2001 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
See the information under the captions Voting Securities and Ownership by
Management of Equity Securities in the 2001 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) Financial Statements, Financial Statement Schedules and Exhibits.
(1) Financial Statements (all financial statements listed below are those
of the Company and its consolidated subsidiaries and are incorporated by
reference in Item 8 from the 2000 Annual Report):
Statement of Consolidated Income, years ended September 30, 2000, 1999 and
1998.
Consolidated Balance Sheet, September 30, 2000 and 1999.
Statement of Consolidated Cash Flows, years ended September 30, 2000, 1999
and 1998.
Statement of Consolidated Shareowners' Equity, years ended September 30,
2000, 1999 and 1998.
Notes to Consolidated Financial Statements.
Independent Auditors' Report.
(2) Financial Statement Schedule for the years ended September 30, 2000,
1999, and 1998.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................ S-1
Schedule II -- Valuation and Qualifying Accounts............ S-2
</TABLE>
Schedules not filed with this Annual Report on Form 10-K are omitted
because of the absence of conditions under which they are required or because
the information called for is shown in the financial statements or related
notes.
19
<PAGE> 21
(3) Exhibits
<TABLE>
<S> <C>
3-a Restated Articles of Incorporation of the Company, filed as
Exhibit 4.01 to the Company's Registration Statement on Form
S-4, as amended (Registration No. 333-36448)("Form S-4") is
incorporated herein by reference.
3-b By-laws of the Company, filed as Exhibit 4.02 to the Form
S-4, is incorporated herein by reference.
4-a Rights Agreement, dated as of July 3, 2000, between the
Company and EquiServe Trust Company, N.A., as rights agent,
filed as Exhibit 4.03 to the Form S-4, is incorporated
herein by reference.
4-b Indenture, dated as of April 1, 1998, between the Company
and The Chase Manhattan Bank, as trustee, filed as Exhibit 4
to Meritor's Registration Statement on Form S-3
(Registration No. 333-49777), is incorporated by reference.
4-b-1 First Supplemental Indenture, dated as of July 7, 2000, to
the Indenture, dated as of April 1, 1998, between the
Company and The Chase Manhattan Bank, as trustee.
4-c Indenture dated as of July 3, 1990, as supplemented by a
First Supplemental Indenture dated as of March 31, 1994,
between the Company and Harris Trust and Savings Bank, as
trustee, filed as Exhibit 4-4 to Arvin's Registration
Statement on Form S-3 (Registration No. 33-53087), is
incorporated by reference.
4-c-1 Second Supplemental Indenture, dated as of July 7, 2000, to
the Indenture dated as of July 3, 1990, between the Company
and Harris Trust and Savings Bank, as trustee.
4-d Indenture dated as of January 28, 1997 between the Company
and Wilmington Trust Company, as trustee, filed as Exhibit
4.4 to Arvin's Registration Statement on Form S-3
(Registration No. 333-18521), is incorporated by reference.
4-d-1 First Supplemental Indenture dated as of January 28, 1997,
to Indenture dated as of January 28, 1997, between the
Company and Wilmington Trust Company, as trustee, filed as
Exhibit 4.5 to Arvin's Current Report on Form 8-K dated
February 10, 1997 (File No. 1-302), is incorporated by
reference.
4-d-2 Second Supplemental Indenture dated as of July 7, 2000, to
Indenture dated as of January 28, 1997, between the Company
and Wilmington Trust Company.
10-a Agreement and Plan of Reorganization dated as of April 6,
2000, between Meritor, Arvin and Mu Sub, Inc., filed as
Exhibit 2.1 to Meritor's Current Report on Form 8-K dated
April 14, 2000 (File No. 1-13093), is incorporated by
reference.
10-b-1 Five-Year Revolving Credit Agreement dated as of June 28,
2000 among the Company, the foreign subsidiary borrowers and
lenders from time to time party to the agreement, Bank One,
NA, as Administrative Agent, The Chase Manhattan Bank as
Syndication Agent, and Citicorp USA, Inc. and Bank of
America, NA, as Documentation Agents, filed as Exhibit 10-a
to the Company's Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2000 (File No. 1-15983), is
incorporated by reference.
10-b-2 364-Day Credit Agreement dated as of June 28, 2000 among the
Company, the lenders from time to time party to the
agreement, Bank One, NA, as Administrative Agent, The Chase
Manhattan Bank as Syndication Agent, and Citicorp USA, Inc.
and Bank of America, NA, as Documentation Agents, filed as
Exhibit 10-b to the Company's Quarterly Report on Form 10-Q
for the quarterly period ended June 30, 2000 (File No.
1-15983), is incorporated by reference.
*10-c-1 The Company's 1997 Long-Term Incentives Plan, filed as
Exhibit 10-a-1 to Meritor's Annual Report on Form 10-K for
the fiscal year ended September 30, 1997 (File No. 1-13093)
("1997 Form 10-K"), is incorporated by reference.
*10-c-2 Form of Restricted Stock Agreement under the Company's 1997
Long-Term Incentives Plan, filed as Exhibit 10-a-2 to the
1997 Form 10-K, is incorporated by reference.
</TABLE>
20
<PAGE> 22
<TABLE>
<S> <C>
*10-c-3 Form of Option Agreement under the Company's 1997 Long-Term
Incentives Plan, filed as Exhibit 10(a) to Meritor's
Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 1998 (File No. 1-13093), is incorporated by
reference.
*10-d-1 The Company's Directors Stock Plan, filed as Exhibit 10-b-1
to the 1997 Form 10-K, is incorporated by reference.
*10-d-2 Form of Restricted Stock Agreement under the Company's
Directors Stock Plan, filed as Exhibit 10-b-2 to the 1997
Form 10-K, is incorporated by reference.
*10-d-3 Form of Option Agreement under the Company's Directors Stock
Plan, filed as Exhibit 10(b) to Meritor's Quarterly Report
on Form 10-Q for the quarterly period ended March 31, 1998
(File No. 1-13093), is incorporated by reference.
*10-e The Company's Incentive Compensation Plan, filed as Exhibit
10-c-1 to the 1997 Form 10-K, is incorporated by reference.
*10-f Copy of resolution of the Board of Directors of the Company,
adopted on July 6, 2000, providing for its Deferred
Compensation Policy for Non-Employee Directors.
*10-g The Company's Deferred Compensation Plan, filed as Exhibit
10-e-1 to Meritor's Annual Report on Form 10-K for the
fiscal year ended September 30, 1998 (File No. 1-13093), is
incorporated by reference.
*10-h Arvin's 1998 Stock Benefit Plan, filed as Exhibit 10(A) to
Arvin's Annual Report on Form 10-K for the fiscal year ended
January 3, 1999 (File No. 1-302), is incorporated by
reference.
*10-i Arvin's 1988 Stock Benefit Plan, as amended, filed as
Exhibit 10 to Arvin's Quarterly Report on Form 10-Q for the
quarter ended July 3, 1988, and as Exhibit 10(E) to Arvin's
Quarterly Report on Form 10-Q for the quarter ended July 4,
1993 (File No. 1-302), is incorporated by reference.
*10-j Employment Agreement, dated as of April 6, 2000, among the
Company, Arvin and V. William Hunt, filed as Exhibit 10.01
to the Form S-4, is incorporated by reference.
*10-k-1 Employment offer letter between the Company and Larry D.
Yost.
*10-k-2 Employment offer letter between the Company and Prakash R.
Mulchandani.
*10-k-3 Employment offer letter between the Company and Terrence E.
O'Rourke.
*10-k-4 Employment offer letter between the Company and Thomas A.
Madden.
*10-l Form of Arvin Change of Control Agreement, filed as Exhibit
10(I) to Arvin's Annual Report on Form 10-K for the fiscal
year ended December 28, 1997 (File No. 1-302), is
incorporated by reference.
10-m Distribution Agreement dated as of September 30, 1997 by and
between Rockwell and Meritor, filed as Exhibit 2.1 to
Meritor's Current Report on Form 8-K dated October 10, 1997
(File No. 1-13093), is incorporated by reference.
10-n Employee Matters Agreement dated as of September 30, 1997 by
and between Rockwell and Meritor, filed as Exhibit 2.2 to
Meritor's Current Report on Form 8-K dated October 10, 1997
(File No. 1-13093), is incorporated by reference.
10-o Tax Allocation Agreement dated as of September 30, 1997 by
and between Rockwell and Meritor, filed as Exhibit 2.3 to
Meritor's Current Report on Form 8-K dated October 10, 1997
(File No. 1-13093), is incorporated by reference.
13 Portions of the 2000 Annual Report to Shareowners.
21 List of Subsidiaries of the Company.
23-a Consent of M. Lee Murrah, Esq., Assistant General Counsel of
the Company.
23-b Consent of Vernon G. Baker, II, Esq., Senior Vice President,
General Counsel and Secretary of the Company.
23-c Independent auditors' consent.
</TABLE>
21
<PAGE> 23
<TABLE>
<S> <C>
24 Power of Attorney authorizing certain persons to sign this
Annual Report on Form 10-K on behalf of certain directors
and officers of the Company.
27 Financial Data Schedule.
</TABLE>
---------------
* Management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K.
The Company filed a Current Report on Form 8-K, dated July 10, 2000,
reporting under Item 2, Acquisition or Disposition of Assets, the consummation
of the Merger on July 7, 2000; reporting under Item 5, Other Matters, that the
Company is successor issuer to Meritor under Rule 12g-3 under the Securities
Exchange Act of 1934; and filing under Item 7, Financial Statements, Pro Forma
Financial Information and Exhibits, certain financial statements and exhibits.
22
<PAGE> 24
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
ARVINMERITOR, INC.
By: /s/ VERNON G. BAKER, II
------------------------------------
Vernon G. Baker, II
Senior Vice President, General
Counsel and Secretary
Date: December 21, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on the 21st day of December, 2000 by the following
persons on behalf of the registrant and in the capacities indicated.
<TABLE>
<C> <S>
Larry D. Yost* Chairman of the Board and Chief Executive
Officer (principal executive officer) and
Director
V. William Hunt* Vice Chairman and President and Director
Joseph B. Anderson, Jr., Steven C. Beering, Directors
Rhonda L. Brooks, John J. Creedon,
Joseph P. Flannery, Robert E. Fowler, Jr.,
William D. George, Jr., Richard W. Hanselman,
Charles H. Harff, Victoria B. Jackson,
Don J. Kacek, James E. Marley
and Harold A. Poling*
Thomas A. Madden* Senior Vice President and Chief Financial
Officer (principal financial officer)
William M. Lowe* Vice President and Controller
(principal accounting officer)
*By: /s/ VERNON G. BAKER, II
------------------------------------------------
Vernon G. Baker, II,
Attorney-in-fact**
**By authority of powers of attorney filed herewith
</TABLE>
23
<PAGE> 25
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareowners of ArvinMeritor, Inc.
Troy, Michigan
We have audited the consolidated financial statements of ArvinMeritor, Inc. and
subsidiaries (formerly Meritor Automotive, Inc. and subsidiaries -- See Note 1)
as of September 30, 2000 and 1999, and for each of the three years in the period
ended September 30, 2000, and have issued our report thereon dated November 7,
2000; such financial statements and report are included in your 2000 Annual
Report to Shareowners and are incorporated herein by reference. Our audits also
included the financial statement schedule of ArvinMeritor, Inc. and
subsidiaries, listed in Item 14(a)(2). This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audits. In our opinion, such financial statement schedule,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
DELOITTE & TOUCHE
Detroit, Michigan
November 7, 2000
S-1
<PAGE> 26
SCHEDULE II
ARVINMERITOR, INC.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEAR ENDED SEPTEMBER 30, 2000, 1999, AND 1998
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
BEGINNING OF COSTS AND OTHER END OF
DESCRIPTION YEAR(A) EXPENSES DEDUCTIONS OTHER YEAR(A)
----------- ------------ ---------- ---------- ----- ----------
<S> <C> <C> <C> <C> <C>
Year ended September 30, 2000:
Allowance for doubtful accounts..... $10.4 $2.8 $2.4(b) $10.9(d) $21.7
Year ended September 30, 1999:
Allowance for doubtful accounts..... $13.8 $1.2 $3.9(b) $(0.7)(c) $10.4
Year ended September 30, 1998:
Allowance for doubtful accounts..... $11.6 $3.2 $1.0(b) $ -- $13.8
</TABLE>
---------------
(a) Includes allowances for trade and other long-term receivables.
(b) Uncollectible accounts written off.
(c) Includes increase in allowance of $1.8 million due to acquisition of
businesses, less reversal of reserve of $2.5 million due to change in
estimate of collectibility of note receivable.
(d) Includes increase in allowance of $11.9 million due to Merger.
S-2
