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Meritor Reports Second-Quarter Fiscal Year 2016 Results

TROY, Mich., May 4, 2016 /PRNewswire/ -- Meritor, Inc. MTOR, -1.47% today reported financial results for its second fiscal quarter ended March 31, 2016.

Second-Quarter Highlights

  • Sales were $821 million, down $43 million, or approximately 5 percent, from the same period last year.
  • Net income attributable to Meritor from continuing operations on a GAAP basis was $33 million, or diluted earnings per share of $0.36, compared to $39 million, or diluted earnings per share of $0.38 in the same period last year.
  • Adjusted income from continuing operations was $38 million, or adjusted diluted earnings per share of $0.41, compared to $43 million, or adjusted diluted earnings per share of $0.42, in the same period a year ago.
  • Adjusted EBITDA was $81 million, compared to $87 million in the same period last year. Adjusted EBITDA margin was 9.9 percent for the quarter, compared to 10.1 percent in the same period last year.
  • Free cash flow was $19 million in the second quarter of fiscal year 2016, compared to $27 million in the same period a year ago.

Second-Quarter Results

For the second quarter of fiscal year 2016, Meritor posted sales of $821 million, down $43 million, or approximately 5 percent, from the same period last year. The decrease in sales was driven by lower truck production volumes in North and South America and the effect of foreign exchange translation, particularly in Brazil.

Net income attributable to Meritor from continuing operations on a GAAP basis was $33 million, or $0.36 per diluted share, compared to $39 million, or $0.38 per diluted share, in the same period last year.

Adjusted income from continuing operations in the second quarter of fiscal year 2016 was $38 million, or adjusted diluted earnings per share of $0.41, compared to $43 million, or adjusted diluted earnings per share of $0.42, in the same period a year ago.

Adjusted EBITDA was $81 million, compared to $87 million in the second quarter of fiscal year 2015. Adjusted EBITDA margin for the second quarter of fiscal year 2016 was 9.9 percent, compared to 10.1 percent in the same period last year. The decline in Adjusted EBITDA and Adjusted EBITDA margin was driven by lower production volumes in North and South America and a non-recurring foreign currency hedge gain in the second quarter of 2015, which was partially offset by lower material, labor and burden costs.

Cash flow from operating activities in the second quarter of fiscal year 2016 was $44 million, compared to $38 million in the same period last year. Free cash flow for the second quarter of fiscal year 2016 was $19 million, compared to $27 million in the same period last year, primarily due to higher capital expenditures.

Second-Quarter Segment Results

Commercial Truck & Industrial sales for the second quarter of fiscal year 2016 were $631 million, down $50 million compared to the same period last year. The decrease in sales was due to lower production in North and South America and the effect of foreign exchange translation, particularly in Brazil.

Segment EBITDA for the Commercial Truck & Industrial segment was $56 million for the quarter, down $1 million from the second quarter of fiscal year 2015. Segment EBITDA margin increased to 8.9 percent, up from 8.4 percent in the same period last year. The increase in segment EBITDA margin was driven primarily by lower material, labor and burden costs which more than offset the one-time foreign exchange hedge gains from a year ago.

The Aftermarket & Trailer segment posted sales of $218 million, up $6 million from the same period a year ago. The increase in sales was primarily driven by higher trailer production in North America.

Segment EBITDA for Aftermarket & Trailer was $28 million for the quarter, down $2 million from the second quarter of fiscal year 2015. Segment EBITDA margin was 12.8 percent, down from 14.2 percent in the second quarter of fiscal year 2015. The decrease in Segment EBITDA and Segment EBITDA margin was primarily driven by unfavorable product mix.

Outlook for Fiscal Year 2016

The company is revising its guidance for fiscal year 2016 as follows:

  • Revenue to be approximately $3.275 billion, as compared to the prior outlook of approximately $3.4 billion.
  • Adjusted EBITDA margin to be approximately 10.0 percent, unchanged from prior expectations.
  • Adjusted diluted earnings per share from continuing operations to be in the range of $1.55 to $1.65, as compared to the prior outlook in the range of $1.65 to $1.75.
  • Free cash flow to be approximately $90 million, down from the prior outlook of approximately $110 million.

Meritor anticipates the following for the entire company:

  • Capital expenditures of approximately $90 million.
  • Interest expense in the range of $80 million to $90 million.
  • Cash interest in the range of $65 million to $75 million.
  • Effective income tax rate of approximately 15 percent.

"We are continuing to execute well despite volatility in certain end markets," said Jay Craig, CEO and president. "M2016 is a transformational strategy for the company. We remain on track to achieve the underlying financial goals for new business, net debt reduction and improved margin performance as we stay committed to M2016 and providing a greater return to our shareholders."

Second-Quarter Fiscal Year 2016 Conference Call

Meritor will host a conference call and webcast to discuss the company's second-quarter results for fiscal year 2016 on Wednesday, May 4 at 10 a.m. ET.

To participate, call (503) 343-6062 at least 10 minutes prior to the start of the call. Please reference passcode 90728042 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 meritor.com.

A replay of the call will be available starting at 1 p.m. ET on May 4, until 11:59 p.m. ET on May 11 by calling (855) 859-2056 (within the United States) or (404) 537-3406 for international calls. Please refer to replay passcode 90728042. 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 18 countries. Meritor's common stock is traded on the New York Stock Exchange under the ticker symbol MTOR. For important information, visit the company's website at 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...


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