Form 8-K MERITOR INC For: Aug 03
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E-mailUNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 29, 2016
MERITOR, INC.
(Exact name of registrant as specified in its charter)
Indiana | 1-15983 | 38-3354643 | ||
(State or other jurisdiction | (Commission | (IRS Employer | ||
of incorporation) | File No.) | Identification No.) | ||
2135 West Maple Road
Troy, Michigan
(Address of principal executive offices)
48084-7186
(Zip code)
Registrant’s telephone number, including area code: (248) 435-1000
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition
On August 3, 2016, Meritor, Inc. ("Meritor") issued a press release, and will hold a conference call regarding its financial results for the third quarter ended June 30, 2016. The release is furnished as Exhibit 99-a to this Form 8-K. The presentation by Meritor accompanying the above-referenced conference call will be posted on the Meritor website (www.meritor.com).
Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On July 29, 2016, the Board of Directors of Meritor, Inc. (“Meritor”), pursuant to Section 7.01 of the Amended and Restated Articles of Incorporation of the Company and Section 3.1 of the Amended and Restated By-laws of the Company, approved an increase in the number of directors of the Company to (10) and elected Jan A. Bertsch, in each case effective as of September 29, 2016, to fill the newly created vacancy as a Class III director with a term expiring at the 2018 annual meeting of shareholders. Ms. Bertsch’s committee memberships will be determined at the effective time of her appointment and will be disclosed on an amendment to this Form 8-K at that time.
As a non-employee director of Meritor, Ms. Bertsch will receive a cash retainer at the rate of $90,000 per year for Board service. Non-employee directors also receive fees of $1,500 for attendance at each standing and special committee meeting ($750 for each telephone meeting). As part of director compensation, each non-employee director is also entitled to receive, immediately after each annual meeting of shareholders, an equity grant equal to a value of approximately $100,000, in the form of restricted stock or restricted share units, at the director’s discretion. The restricted stock and restricted share units vest upon the earliest of (a) three years from the date of grant or (b) the date the director resigns or ceases to be a director under circumstances the Board determines not to be adverse to the best interests of the Company. In connection with her appointment, Ms. Bertsch will receive an equity award pro-rated for her time of service for the current year.
There are no family relationships, as defined in Item 401 of Regulation S-K, between Ms. Bertsch and any of Meritor’s executive officers and any director, executive officer or person nominated to become a director or executive officer. Ms. Bertsch was not selected pursuant to any arrangement or understanding between her and any person other than Meritor. In addition, Ms. Bertsch did not have a direct or indirect material interest in any transaction that would be required to be disclosed under Item 404(a) of Regulation S-K.
Ms. Bertsch has been Senior Vice President and Chief Financial Officer of Owens-Illinois, Inc. since November 2015. From 2012 to November 2015, she served as Executive Vice President, Chief Financial Officer of Sigma-Aldrich Corporation. From 2009 to February 2012, she served in various capacities as Vice President and Treasurer and subsequently Vice President, Controller and Principal Accounting Officer of BorgWarner, Inc. From 2001 to 2009 she served in various capacities for Chrysler Group LLC, ultimately serving as Senior Vice President, Chief Information Officer and Treasurer of Chrysler LLC. Ms. Bertsch has been a director of BWX Technologies since 2015 (where she is the chair of the audit committee and a member of the nominating committee) and its predecessor Babcock & Wilcox from 2013 to 2015 (where she served as a member of the audit and nominating committees) and has also served as chair of the Board of Visitors for the Wayne State University School of Medicine from 2003 to 2016.
Item 7.01. Regulations FD Disclosure
On July 21, 2016, Meritor's Board of Directors authorized the repurchase of up to $150 million aggregate principal amount of any of the company’s public debt securities (including convertible debt securities) and up to $100 million of the company’s common stock, in each case from time to time through open market purchases, privately negotiated transactions or otherwise until September 30, 2019, subject to compliance with legal and regulatory requirements and the company’s debt covenants. The new debt repurchase authorization replaces the prior January 2015 authorization of the Offering Committee of the company’s Board of Directors.
The information in items 2.02 and 7.01 of this Form 8-K and the exhibit attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits
99-a – Press release of Meritor, Inc., dated August 3, 2016
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
MERITOR, INC. | ||
By: | /s/ Richard D. Rose | |
Richard D. Rose | ||
Interim Senior Vice President, General Counsel & Secretary | ||
Date: August 3, 2016
EXHIBIT INDEX
Exhibit No. | Description | |
99-a | Press release of Meritor, Inc., dated August 3, 2016 | |
CONTACTS:
Media Inquiries
Cheryl Kilborn
(248) 435-7907
Investor Inquiries
Eric Birge
(248) 435-1816
Meritor Reports Third-Quarter Fiscal Year 2016 Results
Generates Net Income Attributable to Meritor of $41 Million
Achieves Adjusted EBITDA of $96 million and Adjusted EBITDA Margin of 11.4 Percent
TROY, Mich. (Aug. 3, 2016) - Meritor, Inc. (NYSE: MTOR) today reported financial results for its third fiscal quarter ended June 30, 2016.
Third-Quarter Highlights
• | Sales of $841 million |
• | Net income attributable to Meritor of $41 million |
• | Diluted earnings per share from continuing operations of $0.46 |
• | Adjusted diluted earnings per share of $0.57 |
• | Adjusted EBITDA of $96 million, adjusted EBITDA margin at 11.4 percent |
• | Repurchased $38 million of common stock; $210 million repurchase program now complete |
• | Board of Directors approves new authorizations for up to $150 million debt and $100 million equity repurchases |
Third-Quarter Results
For the third quarter of fiscal year 2016, Meritor posted sales of $841 million, down $68 million, or approximately 7 percent, from the same period last year. The decrease in sales was driven by lower production in the North America Class 8 truck market partially offset by new business wins.
Net income attributable to Meritor was $41 million, or $0.45 per diluted share (net income of $42 million and $0.46 per diluted share from continuing operations), compared to $13 million, or $0.13 per diluted share (net income of $15 million and $0.15 per diluted share from continuing operations), in the same period last year.
Adjusted income from continuing operations attributable to the company in the third quarter of fiscal year 2016 was $52 million, or adjusted diluted earnings per share from continuing operations of $0.57, compared to $42 million, or adjusted diluted earnings per share of $0.42, in the same period a year ago.
Adjusted EBITDA was $96 million, compared to $87 million in the third quarter of fiscal year 2015. Adjusted EBITDA margin for the third quarter of fiscal year 2016 was 11.4 percent, compared to 9.6 percent in the same period last year.
The increases in net income attributable to Meritor and income from continuing operations were primarily driven by a $19 million loss on debt extinguishment recognized in the prior year. Improvements in Adjusted EBITDA and adjusted income from continuing operations attributable to the company were driven primarily by lower material, labor and burden costs and a supplier recovery and an insurance settlement in the current period, partially offset by lower sales in North America.
Cash flow from operating activities in the third quarter of fiscal year 2016 was $105 million, compared to $93 million in the same period last year. Free cash flow for the third quarter of fiscal year 2016 was $86 million, compared to $71 million in the same period last year.
Third-Quarter Segment Results
Commercial Truck & Industrial sales for the third quarter of fiscal year 2016 were $640 million, down $65 million, or 9 percent, compared to the same period last year. The decrease in sales was due to lower production in the North America Class 8 truck market and was partially offset by new business wins.
Segment EBITDA for the Commercial Truck & Industrial segment was $61 million for the quarter, up $3 million from the third quarter of fiscal year 2015. Segment EBITDA margin increased to 9.5 percent, up from 8.2 percent in the same period last year. The increase in segment EBITDA and segment EBITDA margin was driven primarily by lower material, labor and burden costs, which more than offset the unfavorable impact of lower revenue.
The Aftermarket & Trailer segment posted sales of $227 million, down $6 million from the same period a year ago. The decrease in sales was primarily driven by lower sales in North America Aftermarket.
Segment EBITDA for Aftermarket & Trailer was $38 million for the quarter, up $7 million from the third quarter of fiscal year 2015. Segment EBITDA margin was 16.7 percent, up 3.4 percentage points from 13.3 percent in the third quarter of fiscal year 2015. The increase in Segment EBITDA and Segment EBITDA margin was primarily driven by a supplier recovery and lower material costs.
Equity and Debt Repurchases
In the third quarter, Meritor repurchased 4.7 million common shares using $38 million of cash. Overall, the company repurchased 12.8 million common shares under its $210 million repurchase program that has now been completed a quarter early. In addition, Meritor bought back a total of $74 million in convertible debt during the program, which lowered interest expense, improved the company’s debt maturity profile and mitigated long-term equity dilution risk.
On July 21, 2016, Meritor’s Board of Directors authorized the repurchase of up to $150 million aggregate principal amount of any of our public debt securities and up to $100 million of our common stock until Sept. 30, 2019.
Meritor Board of Directors
The Board of Directors has elected Jan Bertsch to the Meritor Board of Directors, effective Sept. 29, 2016, as a Class III director with a term expiring at the 2018 annual meeting of shareholders.
Bertsch has served as senior vice president and chief financial officer of Owens-Illinois, Inc. since November 2015. From 2012 to 2015 she served as executive vice president, chief financial officer of Sigma-Aldrich Corporation.
Before joining Sigma-Aldrich Corporation, she served in various capacities as vice president and treasurer and subsequently vice president, controller and principal accounting officer at BorgWarner, Inc. from 2009 to 2012. Prior to that, she served in various capacities for Chrysler Group LLC, ultimately serving as senior vice president, chief information officer and treasurer of Chrysler LLC.
Bertsch earned a Bachelor of Arts degree in finance from Wayne State University and a Master of Business Administration from Eastern Michigan University.
Outlook for Fiscal Year 2016
The company is revising its guidance for fiscal year 2016 as follows:
• | Revenue to be approximately $3.225 billion, as compared to the prior outlook of approximately $3.275 billion. |
• | Net income attributable to Meritor to be approximately $115 million (approximately $1.25 diluted earnings per share). |
• | Net income from continuing operations attributable to Meritor to be approximately $120 million (approximately $1.30 diluted earnings per share from continuing operations). |
• | Adjusted EBITDA margin to be approximately 10.0 percent, unchanged from prior expectations. |
• | Adjusted diluted earnings per share from continuing operations will be approximately $1.60, compared to prior outlook of $1.55 to $1.65. |
• | Operating cash flow to be approximately $180 million. |
• | Free cash flow to be approximately $90 million, unchanged from prior outlook. |
“Upon completion of another strong performance quarter, Meritor is on track to meet the commitments presented in our M2016 plan,” said Jay Craig, CEO and president of Meritor. “M2016 established the foundation for sustainable growth. We are now ready to accelerate the execution of our growth initiatives as we launch M2019. ”
Third-Quarter Fiscal Year 2016 Conference Call
Meritor will host a conference call and webcast to discuss the company's third-quarter results for fiscal year 2016 on Wednesday, Aug. 3 at 10 a.m. ET.
To participate, call (503) 343-6062 at least 10 minutes prior to the start of the call. Investors can also listen to the conference call in real time or access a recording of the call for seven days after the event by visiting the investors page on meritor.com.
A replay of the call will be available starting at 1 p.m. ET on Aug. 3, until 11:59 p.m. ET on Aug. 10 by calling (855) 859-2056 (within the United States) or (404) 537-3406 for international calls. Please refer to replay passcode 46671078. To access the listen-only audio webcast, visit meritor.com and select the webcast link from the home page or the investors page.
About Meritor
Meritor, Inc. is a leading global supplier of drivetrain, mobility, braking and aftermarket solutions for commercial vehicle and industrial markets. With more than a 100-year legacy of providing innovative products that offer superior performance, efficiency and reliability, the company serves commercial truck, trailer, off-highway, defense, specialty and aftermarket customers around the world. Meritor is based in Troy, Mich., United States, and is made up of approximately 8,400 diverse
employees who apply their knowledge and skills in manufacturing facilities, engineering centers, joint ventures, distribution centers and global offices in 19 countries. Meritor common stock is traded on the New York Stock Exchange under the ticker symbol MTOR. For important information, visit the company's website at www.meritor.com.
Forward-Looking Statement
This release contains statements relating to future results of the company (including certain projections and business trends) that are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are typically identified by words or phrases such as “believe,” “expect,” “anticipate,” “estimate,” “should,” “are likely to be,” “will” and similar expressions. Actual results may differ materially from those projected as a result of certain risks and uncertainties, including but not limited to reliance on major original equipment manufacturer (“OEM”) customers and possible negative outcomes from contract negotiations with our major customers, including failure to negotiate acceptable terms in contract renewal negotiations and our ability to obtain new customers; the outcome of actual and potential product liability, warranty and recall claims; our ability to successfully manage rapidly changing volumes in the commercial truck markets and work with our customers to manage demand expectations in view of rapid changes in production levels; global economic and market cycles and conditions; availability and sharply rising costs of raw materials, including steel, and our ability to manage or recover such costs; our ability to manage possible adverse effects on our European operations, or financing arrangements related thereto, following the United Kingdom’s decision to exit the European Union or in the event one or more additional countries exit the European monetary union; risks inherent in operating abroad (including foreign currency exchange rates, implications of foreign regulations relating to pensions and potential disruption of production and supply due to terrorist attacks or acts of aggression); rising costs of pension and other postemployment benefits; the ability to achieve the expected benefits of restructuring actions; the demand for commercial and specialty vehicles for which we supply products; whether our liquidity will be affected by declining vehicle productions in the future; OEM program delays; demand for and market acceptance of new and existing products; successful development of new products; labor relations of our company, our suppliers and customers, including potential disruptions in supply of parts to our facilities or demand for our products due to work stoppages; the financial condition of our suppliers and customers, including potential bankruptcies; possible adverse effects of any future suspension of normal trade credit terms by our suppliers; potential difficulties competing with companies that have avoided their existing contracts in bankruptcy and reorganization proceedings; potential impairment of long-lived assets, including goodwill; potential adjustment of the value of deferred tax assets; competitive product and pricing pressures; the amount of our debt; our ability to continue to comply with covenants in our financing agreements; our ability to access capital markets; credit ratings of our debt; the outcome of existing and any future legal proceedings, including any litigation with respect to environmental or asbestos-related matters; possible changes in accounting rules; and other substantial costs, risks and uncertainties, including but not limited to those detailed herein and from time to time in other filings of the company with the SEC. See also the following portions of our Annual Report on Form 10-K for the fiscal year ended September 30, 2015, as amended: Item 1.Business, “Customers; Sales and Marketing”; “Competition”; “Raw Materials and Supplies”; “Employees”; “Environmental Matters”; “International Operations”; and “Seasonality; Cyclicality”; Item 1A.Risk Factors; Item 3.Legal Proceedings; and Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations. These forward-looking statements are made only as of the date hereof, and the company undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise, except as otherwise required by law. All earnings per share amounts are on a diluted basis. The company's fiscal year ends on the Sunday nearest Sept. 30, and its fiscal quarters generally end on the Sundays nearest Dec. 31, March 31 and June 30. All year and quarter references relate to the company's fiscal year and fiscal quarters, unless otherwise stated.
Non-GAAP Financial Measures
In addition to the results reported in accordance with accounting principles generally accepted in the United States (“GAAP”) we have provided information regarding non-GAAP financial measures. These non-GAAP financial measures include Adjusted income (loss) from continuing operations
attributable to the company, Adjusted diluted earnings (loss) per share from continuing operations, Adjusted EBITDA, Adjusted EBITDA margin, and Free cash flow.
Adjusted income (loss) from continuing operations attributable to the company and Adjusted diluted earnings (loss) per share from continuing operations are defined as reported income or loss from continuing operations and reported diluted earnings (loss) per share from continuing operations before restructuring expenses, asset impairment charges, non-cash tax expense related to the use of deferred tax assets in jurisdictions with net operating loss carry forwards, and other special items as determined by management. Adjusted EBITDA is defined as income (loss) from continuing operations before interest, income taxes, depreciation and amortization, non-controlling interests in consolidated joint ventures, loss on sale of receivables, restructuring expenses, asset impairment charges and other special items as determined by management. Adjusted EBITDA margin is defined as Adjusted EBITDA divided by consolidated sales from continuing operations. Free cash flow is defined as cash flows provided by (used for) operating activities less capital expenditures.
Management believes these non-GAAP financial measures are useful to both management and investors in their analysis of the company's financial position and results of operations. In particular, management believes that Adjusted EBITDA, Adjusted EBITDA margin and Adjusted diluted earnings (loss) per share from continuing operations are meaningful measures of performance as they are commonly utilized by management and the investment community to analyze operating performance in our industry. Further, management uses these non-GAAP financial measures for planning and forecasting future periods. Management believes that Free cash flow is useful in analyzing our ability to service and repay debt and return value directly to shareholders.
Adjusted income (loss) from continuing operations attributable to the company, Adjusted diluted earnings (loss) per share from continuing operations and Adjusted EBITDA should not be considered a substitute for the reported results prepared in accordance with GAAP and should not be considered as an alternative to net income as an indicator of our operating performance. Free cash flow should not be considered a substitute for cash provided by (used for) operating activities, or other cash flow statement data prepared in accordance with GAAP, or as a measure of financial position or liquidity. In addition, these non-GAAP cash flow measures do not reflect cash used to repay debt or cash received from the divestitures of businesses or sales of other assets and thus do not reflect funds available for investment or other discretionary uses.
These non-GAAP financial measures, as determined and presented by the company, may not be comparable to related or similarly titled measures reported by other companies. Set forth on the
following pages are reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP.
Segment EBITDA and EBITDA Margins
Segment EBITDA is defined as income (loss) from continuing operations before interest expense, income taxes, depreciation and amortization, non-controlling interests in consolidated joint ventures, loss on sale of receivables, restructuring expense and asset impairment charges. We use Segment EBITDA as the primary basis for the Chief Operating Decision Maker to evaluate the performance of each of our reportable segments. Segment EBITDA margin is defined as Segment EBITDA divided by consolidated sales from continuing operations.
MERITOR, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(In millions, except per share amounts)
Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Sales | $ | 841 | $ | 909 | $ | 2,471 | $ | 2,652 | |||||||
Cost of sales | (714 | ) | (785 | ) | (2,119 | ) | (2,298 | ) | |||||||
GROSS MARGIN | 127 | 124 | 352 | 354 | |||||||||||
Selling, general and administrative | (59 | ) | (65 | ) | (175 | ) | (187 | ) | |||||||
Restructuring costs | (6 | ) | (9 | ) | (9 | ) | (15 | ) | |||||||
Other operating income (expense), net | — | 1 | (3 | ) | 2 | ||||||||||
OPERATING INCOME | 62 | 51 | 165 | 154 | |||||||||||
Other income (expense), net | — | (1 | ) | (1 | ) | 3 | |||||||||
Equity in earnings of affiliates | 9 | 10 | 26 | 28 | |||||||||||
Interest expense, net | (20 | ) | (38 | ) | (63 | ) | (78 | ) | |||||||
INCOME BEFORE INCOME TAXES | 51 | 22 | 127 | 107 | |||||||||||
Provision for income taxes | (8 | ) | (6 | ) | (22 | ) | (19 | ) | |||||||
INCOME FROM CONTINUING OPERATIONS | 43 | 16 | 105 | 88 | |||||||||||
LOSS FROM DISCONTINUED OPERATIONS, net of tax | (1 | ) | (2 | ) | (4 | ) | (1 | ) | |||||||
NET INCOME | 42 | 14 | 101 | 87 | |||||||||||
Less: Net income attributable to noncontrolling interests | (1 | ) | (1 | ) | (2 | ) | (2 | ) | |||||||
NET INCOME ATTRIBUTABLE TO MERITOR, INC. | $ | 41 | $ | 13 | $ | 99 | $ | 85 | |||||||
NET INCOME ATTRIBUTABLE TO MERITOR, INC. | |||||||||||||||
Net income from continuing operations | $ | 42 | $ | 15 | $ | 103 | $ | 86 | |||||||
Loss from discontinued operations | (1 | ) | (2 | ) | (4 | ) | (1 | ) | |||||||
Net income | $ | 41 | $ | 13 | $ | 99 | $ | 85 | |||||||
DILUTED EARNINGS (LOSS) PER SHARE | |||||||||||||||
Continuing operations | $ | 0.46 | $ | 0.15 | $ | 1.10 | $ | 0.85 | |||||||
Discontinued operations | (0.01 | ) | (0.02 | ) | (0.04 | ) | (0.01 | ) | |||||||
Diluted earnings per share | $ | 0.45 | $ | 0.13 | $ | 1.06 | $ | 0.84 | |||||||
Diluted average common shares outstanding | 92.0 | 100.3 | 93.1 | 101.0 | |||||||||||
MERITOR, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited, in millions)
June 30, 2016 | September 30, 2015 | |||||||
ASSETS: | ||||||||
Cash and cash equivalents | $ | 129 | $ | 193 | ||||
Receivables, trade and other, net | 422 | 461 | ||||||
Inventories | 335 | 338 | ||||||
Other current assets | 53 | 50 | ||||||
TOTAL CURRENT ASSETS | 939 | 1,042 | ||||||
Net property | 428 | 419 | ||||||
Goodwill | 392 | 402 | ||||||
Other assets | 325 | 332 | ||||||
TOTAL ASSETS | $ | 2,084 | $ | 2,195 | ||||
LIABILITIES AND EQUITY (DEFICIT): | ||||||||
Short-term debt | $ | 14 | $ | 15 | ||||
Accounts and notes payable | 503 | 574 | ||||||
Other current liabilities | 267 | 279 | ||||||
TOTAL CURRENT LIABILITIES | 784 | 868 | ||||||
Long-term debt | 980 | 1,036 | ||||||
Retirement benefits | 601 | 632 | ||||||
Other liabilities | 315 | 305 | ||||||
Total deficit attributable to Meritor, Inc. | (621 | ) | (671 | ) | ||||
Noncontrolling interests | 25 | 25 | ||||||
TOTAL DEFICIT | (596 | ) | (646 | ) | ||||
TOTAL LIABILITIES AND DEFICIT | $ | 2,084 | $ | 2,195 | ||||
MERITOR, INC.
ADJUSTED EBITDA-RECONCILIATION
Non-GAAP
AND
CONSOLIDATED BUSINESS SEGMENT INFORMATION
(Unaudited)
(in millions, except per share amounts)
Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Net income attributable to Meritor, Inc. | $ | 41 | $ | 13 | $ | 99 | $ | 85 | |||||||
Loss from Discontinued Operations, net of tax, attributable to Meritor, Inc. | 1 | 2 | 4 | 1 | |||||||||||
Income from Continuing Operations, net of tax, attributable to Meritor, Inc. | 42 | 15 | 103 | 86 | |||||||||||
Interest expense, net | 20 | 38 | 63 | 78 | |||||||||||
Provision for income taxes | 8 | 6 | 22 | 19 | |||||||||||
Depreciation and amortization | 17 | 17 | 48 | 49 | |||||||||||
Noncontrolling interests | 1 | 1 | 2 | 2 | |||||||||||
Loss on sale of receivables | 2 | 1 | 6 | 4 | |||||||||||
Restructuring costs | 6 | 9 | 9 | 15 | |||||||||||
Adjusted EBITDA | $ | 96 | $ | 87 | $ | 253 | $ | 253 | |||||||
Sales: | |||||||||||||||
Commercial Truck & Industrial | $ | 640 | $ | 705 | $ | 1,904 | $ | 2,089 | |||||||
Aftermarket & Trailer | 227 | 233 | 648 | 653 | |||||||||||
Intersegment Sales | (26 | ) | (29 | ) | (81 | ) | (90 | ) | |||||||
Total sales | $ | 841 | $ | 909 | $ | 2,471 | $ | 2,652 | |||||||
Segment EBITDA: | |||||||||||||||
Commercial Truck & Industrial | $ | 61 | $ | 58 | $ | 169 | $ | 171 | |||||||
Aftermarket & Trailer | 38 | 31 | 86 | 86 | |||||||||||
Segment EBITDA | 99 | 89 | 255 | 257 | |||||||||||
Unallocated legacy and corporate costs, net | (3 | ) | (2 | ) | (2 | ) | (4 | ) | |||||||
Adjusted EBITDA | 96 | 87 | 253 | 253 | |||||||||||
Adjusted EBITDA Margin (1) | 11.4 | % | 9.6 | % | 10.2 | % | 9.5 | % | |||||||
(1) Adjusted EBITDA Margin equals Adjusted EBITDA divided by consolidated sales from continuing operations.
MERITOR, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited, in millions)
Nine Months Ended June 30, | |||||||
2016 | 2015 | ||||||
OPERATING ACTIVITIES | |||||||
Income from continuing operations | $ | 105 | $ | 88 | |||
Adjustments to income from continuing operations to arrive at cash provided by operating activities: | |||||||
Depreciation and amortization | 48 | 49 | |||||
Restructuring costs | 9 | 15 | |||||
Loss on debt extinguishment | — | 20 | |||||
Gain on sale of property | (2 | ) | (3 | ) | |||
Equity in earnings of affiliates | (26 | ) | (28 | ) | |||
Pension and retiree medical expense | 15 | 20 | |||||
Other adjustments to income from continuing operations | 7 | 8 | |||||
Dividends received from equity method investments | 29 | 26 | |||||
Pension and retiree medical contributions | (32 | ) | (36 | ) | |||
Restructuring payments | (8 | ) | (10 | ) | |||
Changes in off-balance sheet accounts receivable factoring | (30 | ) | 94 | ||||
Changes in assets and liabilities, excluding effects of acquisitions, divestitures, foreign currency adjustments and discontinued operations | 31 | (111 | ) | ||||
Operating cash flows provided by continuing operations | 146 | 132 | |||||
Operating cash flows used for discontinued operations | (2 | ) | (10 | ) | |||
CASH PROVIDED BY OPERATING ACTIVITIES | 144 | 122 | |||||
INVESTING ACTIVITIES | |||||||
Capital expenditures | (66 | ) | (45 | ) | |||
Proceeds from sale of property | 3 | 4 | |||||
Net investing cash flows provided by discontinued operations | 4 | 4 | |||||
CASH USED FOR INVESTING ACTIVITIES | (59 | ) | (37 | ) | |||
FINANCING ACTIVITIES | |||||||
Repayment of notes and term loan | (55 | ) | (159 | ) | |||
Proceeds from debt issuance | — | 225 | |||||
Debt issuance costs | — | (4 | ) | ||||
Repurchase of common stock | (81 | ) | (30 | ) | |||
Other financing activities | (15 | ) | (7 | ) | |||
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES | (151 | ) | 25 | ||||
EFFECT OF CHANGES IN FOREIGN CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS | 2 | (12 | ) | ||||
CHANGE IN CASH AND CASH EQUIVALENTS | (64 | ) | 98 | ||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 193 | 247 | |||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 129 | $ | 345 | |||
MERITOR, INC.
ADJUSTED INCOME AND EARNINGS PER SHARE — RECONCILIATION
Non-GAAP
(Unaudited)
(in millions, except per share amounts)
Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||
2016 | 2015(1) | 2016 | 2015(1) | ||||||||||||
Income from continuing operations attributable to Meritor, Inc. | $ | 42 | $ | 15 | $ | 103 | $ | 86 | |||||||
Adjustments: | |||||||||||||||
Loss on debt extinguishment | — | 19 | — | 19 | |||||||||||
Restructuring costs | 6 | 9 | 9 | 15 | |||||||||||
Non-cash tax expense (2) | 5 | 1 | 10 | 3 | |||||||||||
Income tax benefits | (1 | ) | (2 | ) | (1 | ) | (2 | ) | |||||||
Adjusted income from continuing operations attributable to Meritor, Inc. | $ | 52 | $ | 42 | $ | 121 | $ | 121 | |||||||
Diluted earnings per share from continuing operations | $ | 0.46 | $ | 0.15 | $ | 1.10 | $ | 0.85 | |||||||
Impact of adjustments on diluted earnings per share | 0.11 | 0.27 | 0.20 | 0.35 | |||||||||||
Adjusted diluted earnings per share from continuing operations | $ | 0.57 | $ | 0.42 | $ | 1.30 | $ | 1.20 | |||||||
Diluted average common shares outstanding | 92.0 | 100.3 | 93.1 | 101.0 | |||||||||||
(1) The three and nine months ended June 30, 2015 have been recast to reflect non-cash tax expense.
(2) Represents tax expense related to the use of deferred tax assets in jurisdictions with net operating loss carry forwards.
MERITOR, INC.
FREE CASH FLOW — RECONCILIATION
Non-GAAP
(Unaudited, in millions)
Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Cash provided by operating activities | $ | 105 | $ | 93 | $ | 144 | $ | 122 | |||||||
Capital expenditures | (19 | ) | (22 | ) | (66 | ) | (45 | ) | |||||||
Free cash flow | $ | 86 | $ | 71 | $ | 78 | $ | 77 | |||||||
MERITOR, INC.
OUTLOOK FOR FISCAL YEAR 2016— RECONCILIATIONS
Non-GAAP
(Unaudited)
(in millions, except per share amounts)
Fiscal Year | |||
2016 Outlook(1) | |||
Net income attributable to Meritor, Inc. | $ | 115 | |
Loss from Discontinued Operations, net of tax, attributable to Meritor, Inc. | 5 | ||
Income from Continuing Operations, net of tax, attributable to Meritor, Inc. | 120 | ||
Interest expense, net | 85 | ||
Provision for income taxes | 28 | ||
Depreciation and amortization | 65 | ||
Restructuring | 14 | ||
Other (noncontrolling interests, loss on sale of receivables, etc.) | 10 | ||
Adjusted EBITDA | $ | 322 | |
Sales | 3,225 | ||
Adjusted EBITDA Margin (2) | 10.0 | % | |
Diluted earnings per share | $ | 1.25 | |
Diluted loss per share from discontinued operations | 0.05 | ||
Diluted earnings per share from continuing operations | $ | 1.30 | |
Adjustments: | |||
Restructuring costs | 0.15 | ||
Non-cash tax expense (3) | 0.16 | ||
Income tax benefits | (0.01 | ) | |
Adjusted diluted earnings per share from continuing operations | $ | 1.60 | |
Diluted average common shares outstanding | 92.0 | ||
Cash provided by operating activities | $ | 180 | |
Capital expenditures | (90 | ) | |
Free cash flow | $ | 90 | |
(1) Amounts are approximate.
(2) Adjusted EBITDA Margin equals Adjusted EBITDA divided by consolidated sales from continuing operations.
(3) Represents tax expense related to the use of deferred tax assets in jurisdictions with net operating loss carry forwards.
# # #
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