TROY, Mich. — Meritor, Inc. (NYSE: MTOR) reported its financial results on Jan. 30 for its first fiscal quarter that ended Dec. 31, 2019.
“Overall, this was a solid quarter for us, even as we managed declining production volumes in our global end markets,” said Jay Craig, CEO and president of Meritor. “We are driving strong operational performance, executing our share repurchase plan and winning meaningful new business, as demonstrated by the electrification award we announced from PACCAR this quarter.”
First-Quarter Results
For the first quarter of fiscal year 2020, Meritor posted sales of $901 million, down $137 million, or approximately 13 percent, from the same period last year. The decrease in sales was driven by lower global production volumes, partially offset by sales from the company’s AxleTech business, which was acquired in the fourth quarter of fiscal year 2019.
Net income attributable to Meritor and net income from continuing operations attributable to Meritor were $39 million, or $0.48 per diluted share, compared to net income attributable to Meritor and net income from continuing operations attributable to Meritor of $90 million, or $1.03 per diluted share, in the same period last year.
In the prior year, the company recognized $31 million of income related to remeasuring the Maremont asbestos liability, which did not repeat. Lower revenue year over year and higher restructuring costs, related to programs announced in September 2019, also contributed to lower net income from continuing operations.
Adjusted income from continuing operations attributable to the company in the first quarter of fiscal year 2020 was $52 million, or $0.64 per adjusted diluted share, compared to $69 million, or $0.79 per adjusted diluted share, in the same period last year.
Adjusted EBITDA was $98 million, compared to $119 million in the first quarter of fiscal year 2019. The adjusted EBITDA margin for the first quarter of fiscal year 2020 was 10.9 percent, compared to 11.5 percent in the same period last year.
The decrease in adjusted EBITDA and adjusted EBITDA margin year over year was driven primarily by lower revenue, partially offset by lower material and labor and burden costs. The adjusted EBITDA margin was also negatively impacted by the AxleTech business, as the expected benefit from executed synergies continues to ramp up to a full run-rate.
Cash used for operating activities in the first quarter of fiscal year 2020 was $19 million compared to cash flow provided by operating activities of $11 million in the same period a year ago. Free cash flow was negative $35 million, compared to the free cash flow of negative $12 million, in the same period last year. The decrease in cash flow was driven primarily by lower earnings in the first quarter of fiscal year 2020.
First-Quarter Segment Results
Commercial Truck sales for the first quarter of fiscal year 2020 were $622 million, down $157 million, or 20 percent, compared to the same period last year. The decrease in sales was driven primarily by decreased market volumes for most regions across the segment.
Segment adjusted EBITDA for Commercial Truck was $56 million, or 9.0 percent of sales for the quarter, compared to $77 million, or 9.9 percent of sales in the prior year. The decrease in segment adjusted EBITDA and segment adjusted EBITDA margin was driven primarily by lower volumes, partially offset by lower freight, labor and burden and material costs.
The Aftermarket, Industrial and Trailer segment posted sales of $317 million, up $14 million, or 5 percent, from the same period a year ago. The increase in sales was primarily driven by revenue from the company’s AxleTech business, partially offset by decreased volumes across the segment.
Segment adjusted EBITDA for Aftermarket, Industrial and Trailer was $40 million, or 12.6 percent of sales for the quarter, compared to $40 million, or 13.2 percent of sales a year ago. The decrease in segment adjusted EBITDA margin was driven primarily by the impact from the AxleTech business, as the benefit from executed synergies continues to ramp up to the full run rate.
Capital Return
The company repurchased 4.9 million shares of common stock for $100 million in the first fiscal quarter. Additionally, Meritor repurchased 3.9 million shares of common stock through January 29 for $100 million, totaling 8.8 million common shares repurchased for $200 million. This completes two-thirds of the $300 million share repurchase target for fiscal year 2020.
Outlook for Fiscal Year 2020
The company is revising its guidance from its prior outlook for fiscal year 2020 due to weakening end markets globally:
- Revenue to be approximately $3.7 billion compared to the prior outlook of $3.7 billion to $3.8 billion
- Net income attributable to Meritor and net income from continuing operations attributable to Meritor to be approximately $150 million compared to the prior outlook of $145 million to $155 million
- Diluted earnings per share from continuing operations to be approximately $2.00 compared to the prior outlook of $1.95 to $2.05
- Adjusted diluted earnings per share from continuing operations to be approximately $2.75 compared to the prior outlook of $2.75 to $2.85
- Adjusted EBITDA margin to be approximately 11.0 percent compared to the prior outlook of 11.0 percent to 11.2 percent
- Operating cash flow to be approximately $280 million compared to the prior outlook of $280 million to $290 million
- Free cash flow to be approximately $165 million compared to the prior outlook of $165 million to $175 million
First-Quarter Fiscal Year 2020 Conference Call
Meritor will host a conference call and webcast to discuss the company’s first-quarter results for fiscal year 2020 on Thursday, Jan. 30 at 9 a.m. ET.
To participate, call 844-412-1003 or 216-562-0450 for international, for at least 10 minutes prior to the start of the call. Please reference conference ID 2975367 when registering. 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 www.meritor.com.
A replay of the call will be available starting at 12 p.m. ET on Jan. 30, until 12 p.m. ET on Feb. 6 by calling 855-859-2056 or 404-537-3406 for international calls. Please refer to replay conference ID 2975367. To access the listen-only audio webcast, visit www.meritor.com and select the webcast link from the investor’s 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 110-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, which is based in Troy, Mich., has approximately 9,100 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. www.meritor.com
