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Arvin Industries Inc.

Following four years of downsizing and restructuring, the "new" Arvin is a world-class manufacturer of automobile parts.

Mufflers and shock absorbers (both original and aftermarket equipment), catalytic converters, tubular manifolds, fuel-filler tubes and tire valves constitute about 80 percent of sales. A decade ago, 80 percent of Arvin's sales were made to the U.S. "Big Three" automakers. Today, this percentage of OEM business is about 20 percent of revenues. The aging fleet of existing cars and trucks represents a pent-up replacement-parts demand.

Arvin's European sales alone now exceed the company's total corporate automotive sales of 10 years ago. The European auto market is 20 percent larger than that in the United States, and currently is fragmented. The catalytic converter business in Europe promises to be an area of opportunity for companies such as Arvin, as global air-quality emission standards are tightened.

Arvin is a classic turnaround story. Its fortunes remain dependent on the depressed auto industry, which is growing at 2 percent to 3 percent worldwide. The key to margin improvement and earnings growth is the application of new technologies such as electronically adjustable shocks (now available in some upper-end vehicles), just-in-time inventory and increased replacement sales of mufflers and shocks.

Arvin is expected to maintain high capital expenditures--in the $100 million range--as it upgrades and adds robotics to older plants and builds new facilities next to customer plants to provide just-in-time deliveries. State-of-the-art metal-bending technologies are necessary to maintain product quality, and quality is the key to the OEM business.

Different from its major customers, Arvin is profitable, and management deserves credit for the painful cost reductions in recent years. Sales and margins are expected to improve in 1992; revenue predictions are up 8 percent of 1990 levels; and operating margins should be slightly above 1990 levels, and significantly above those of 1991.

CEO James Baker has a five-year goal of a 10 percent operating margin and a 15 percent return on equity. These goals may be difficult to achieve, but with good inventory management, margins should be able to recover to 1987 levels. The current price of Arvin's common stock allows the potential for noteworthy growth by 1993, and downside risk would seem to be relatively low.

Overall, Arvin is better positioned than arch-rival, Deerfield, Ill.-based Tenneco Automotive. Tenneco does not have sufficient cash flow to grow, so Arvin is expected to gain market share.
FINANCIAL DATA
12 MO. 1990 - LAST 12 MOS. -
RANGE E.P.S. E.P.S. P/E
$26.38-$16.00 $1.35 $0.79 25.6
 3-YEAR ($MM)
AVG. P/E DIVIDENDS YIELD MKT. CAP
17.8 $0.68 2.99% $429.8
ANNUAL TRENDS
FISCAL - PER SHARE DATA -
YEAR SALES (MM) EARNINGS DIVIDENDS
1985 $821.0 $2.16 $0.61
1986 995.6 2.43 0.65
1987 1,373.1 2.39 0.68
1988 1,313.3 0.70 0.68
1989 1,540.5 0.70 0.68
1990 1,687.1 1.35 0.68
LAST 12 MONTHS PRICE CHANGE: 27.0%
AVG. DAILY VOLUME: 48,207 SHARES


This information has been obtained from sources we believe to be reliable, but it is not guaranteed and does not purport to be a statement of all material facts. This report is for informational purposes only and is not a solicitation of orders to buy or sell securities.
COPYRIGHT 1992 Curtis Magazine Group, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992 Gale, Cengage Learning. All rights reserved.

Article Details
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Title Annotation:Investment Indiana; Proxy Report Excerpts
Author:Diggle, R.H., Jr.
Publication:Indiana Business Magazine
Article Type:Company Profile
Date:Feb 1, 1992
Words:561
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