Meritor Reports First-Quarter Fiscal Year 2013 Results

            Meritor Reports First-Quarter Fiscal Year 2013 Results

PR Newswire

TROY, Mich., Jan. 30, 2013

TROY, Mich., Jan. 30, 2013 /PRNewswire-FirstCall/ -- Meritor, Inc. (NYSE:
MTOR) today reported financial results for its first fiscal quarter ended Dec.
31, 2012.

First-Quarter Highlights

  oSales were $891 million, down $268 million or 23 percent, from the same
    period last year.
  oNet loss on a GAAP basis was $21 million, compared to a net loss of $22
    million in the prior year's first quarter.
  oAdjusted EBITDA was $46 million, compared with $79 million from the same
    period last year.
  oOperating cash flow was negative $91 million in the first quarter of
    fiscal year 2013, compared to positive $5 million in the same period last
    year.
  oFree cash flow was negative $106 million in the first quarter of fiscal
    year 2013, compared to negative $20 million in the same period last year.

"Our performance this quarter was slightly below our expectations driven
primarily by weaker than expected market conditions outside North America,"
said Chairman, CEO and President Chip McClure. "In response to these changing
conditions and the impact of reduced military spending, we have taken
aggressive actions targeted at variable labor and structural cost reductions
which we expect to drive improving margins in the coming quarters."

First-Quarter Results

For the first quarter of fiscal year 2013, Meritor posted sales of $891
million, down 23 percent from the same period last year. This decrease was
primarily due to lower sales in all global markets that the company serves.

Loss from continuing operations, on a GAAP basis, was $16 million or $0.17 per
diluted share, compared to a loss from continuing operations of $13 million or
$0.13 per diluted share in the prior year. Loss from continuing operations
includes $6 million of restructuring charges in the first quarter of fiscal
year 2013. Loss from continuing operations in the prior year period includes
$24 million of restructuring charges, primarily associated with the sale of
the company's facility in France.

Adjusted loss from continuing operations in the first quarter of fiscal year
2013 was $11 million, or $0.11 per diluted share, compared to adjusted income
from continuing operations of $11 million, or $0.12 per diluted share, a year
ago.

Adjusted EBITDA was $46 million, compared to $79 million in the first quarter
of fiscal year 2012. Adjusted EBITDA margin for the first quarter of fiscal
year 2013 was 5.2 percent, compared with 6.8 percent for the same period last
year. The decrease in Adjusted EBITDA was primarily due to lower sales,
partially offset by the favorable impact of lower material costs and the North
American pricing actions and European footprint rationalization that were
executed in fiscal year 2012.

Free cash flow for the first quarter of fiscal year 2013 was negative $106
million compared to free cash flow of negative $20 million in the same period
last year.

First-Quarter Segment Results

Commercial Truck & Industrial sales were $715 million, down $260 million from
the same period last year. Segment EBITDA for the Commercial Truck &
Industrial segment was $34 million for the quarter, down $27 million from the
first quarter of fiscal year 2012, primarily driven by lower sales in all
regions. Segment EBITDA margin was 4.8 percent, down from 6.3 percent in the
first quarter of fiscal year 2012.

The company's Aftermarket & Trailer segment posted sales of $203 million, down
$15 million from the same period last year, primarily due to lower volumes in
North America. Segment EBITDA for Aftermarket & Trailer was $13 million, down
$4 million or 24 percent from the first quarter of fiscal year 2012, and
segment EBITDA margin declined to 6.4 percent from 7.8 percent in the first
quarter of fiscal year 2012.

Recent Business Highlights

  oInitiated structural cost reductions that will result in the elimination
    of 200 positions worldwide.
  oRationalized organizational and reporting structure to manage under two
    segments - Commercial Truck & Industrial and Aftermarket & Trailer.
  oInitiated consolidation of North American remanufacturing operations.
  oImplemented variable labor adjustments globally.

"These actions were necessary to drive efficiencies across the organization in
alignment with the rationalization of our business segments," said McClure.

Executive Appointments

Meritor announced today that Jay Craig is appointed senior vice president and
president of Meritor's Commercial Truck & Industrial segment. Craig has been
the company's senior vice president and chief financial officer with
additional responsibility for Treasury, Tax, Purchasing, Information Systems,
Investor Relations and Communications. McClure said, "Jay's experience and
success in leading each of these disciplines, as well as his operations
background previously at GMAC and at Meritor, where he successfully led the
turnaround of the Body Systems business prior to its sale, makes him the
perfect candidate for this position."

Replacing Craig in his role of chief financial officer is Kevin Nowlan,
Meritor's vice president and controller since 2010. Prior to that, Nowlan held
roles including Treasurer and vice president of Shared Services at the
company.

McClure added, "We've been diligent in building the bench strength of our
management team and are confident these moves will continue to enhance the
company's performance."

Tim Bowes, who formerly held the position of vice president and president of
the company's Commercial Truck & Industrial segment, has elected to leave the
company.

Revised Outlook for 2013

For fiscal year 2013, the company is revising its expectations to the
following results from continuing operations:

  oRevenue to be approximately $3.8 billion (previously $4 billion).
  oFree cash flow from continuing operations before restructuring payments to
    be slightly negative (previously about breakeven).

Despite these changes, the company continues to expect:

  oAdjusted EBITDA margin to be approximately 7 percent for fiscal year 2013.
  oAdjusted earnings per share from continuing operations in the range of
    $0.25 to $0.35.

For fiscal year 2013, the company anticipates the following for the entire
company:

  oCapital expenditures in the range of $65 million to $75 million.
  oInterest expense in the range of $95 million to $105 million (previously
    $90 million to $100 million).
  oCash interest in the range of $75 million to $85 million.
  oCash income taxes in the range of $45 million to $55 million (previously
    in the range of $50 million to $60 million).

"We're executing on our 2013 priorities in the face of significant volume
pressures outside North America," said McClure. "We remain committed to
driving toward meeting the needs of all our stakeholders while continuing to
invest in our market leadership positions."

First-Quarter Fiscal Year 2013 Conference Call

The company will host a telephone conference call and webcast to discuss the
company's first-quarter results for fiscal year 2013 on Wednesday, Jan. 30, at
9 a.m. (ET).

To participate, call (617) 213-4847 at least 10 minutes prior to the start of
the call. Please reference participant pass code 94256449 when dialing in.
Investors can also listen to the conference call in real time or access a
recording of the call for seven days after by visiting www.meritor.com.

To access the listen-only audio webcast, visit the Meritor website at
meritor.com and select the webcast link from the home page or the investor
page.

A replay of the call will be available from 11 a.m. on Jan. 30, to 11:59 p.m.
on Feb. 5, by calling (888) 286-8010 (within the United States) or (617)
801-6888 for international calls. Please refer to replay pass code number
30070335.

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 in more than 70 countries. Meritor is based in Troy, Mich., United
States, and is made up of more than 9,000 diverse employees who apply their
knowledge and skills in manufacturing facilities, engineering centers, joint
ventures, distribution centers and global offices in 19 countries. 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 press release contains statements relating to our future results
(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 reduced production for certain
military programs and our ability to secure new military programs as our
primary military programs wind down by design in future years; 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; our
ability to successfully manage rapidly changing volumes in the commercial
truck markets and work with our customers to adjust their demands 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, in the event one or more 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 postretirement 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; the outcome of actual and potential
product liability, warranty and recall claims; and possible changes in
accounting rules; as well as other substantial costs, risks and uncertainties,
including but not limited to those detailed herein and from time to time in
our Annual Report on Form 10-K for the year ended September 30, 2012 and from
time to time in our other filings with the SEC. See also the following
portions of our Annual Report on Form 10-K for the year ended September 30,
2012: 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 respective dates on which they were made,
and we undertake 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 Measures

In addition to the results reported in accordance with accounting principles
generally accepted in the United States ("GAAP") included throughout this
press release, the company has provided information regarding Adjusted income
or loss from continuing operations, Adjusted diluted earnings per share from
continuing operations, Adjusted EBITDA, Adjusted EBITDA margin, free cash flow
and free cash flow from continuing operations before restructuring payments
which are non-GAAP financial measures.

Adjusted income (loss) from continuing operations and Adjusted diluted
earnings (loss) per share from continuing operations are defined as reported
income or loss from continuing operations and reported diluted earnings or
loss per share from continuing operations before restructuring expenses, asset
impairment charges 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. Free cash flow is defined as cash flows
provided by (used for) operating activities less capital expenditures.

Management believes that the non-GAAP financial measures used in this press
release 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 and Adjusted EBITDA margin 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 Adjusted EBITDA for planning and forecasting future
periods. Management believes that free cash flow is useful in analyzing our
ability to service and repay debt.

Adjusted income (loss) from continuing operations, 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 or to cash flows as a measure of
liquidity. 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 service 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, noncontrolling
interests in consolidated joint ventures, loss on sale of receivables,
restructuring costs 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.

(Logo: http://photos.prnewswire.com/prnh/20110330/DE73783LOGO )



MERITOR, INC.

CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited)

(In millions, except per share amounts)


                                                      Three Months Ended
                                                      December 31,
                                                      2012       2011
Sales                                                 $ 891      $ 1,159
Cost of sales                                         (808)      (1,053)
GROSS MARGIN                                          83         106
Selling, general and administrative                   (62)       (65)
Restructuring costs                                   (6)        (24)
Other operating expense                               (1)        (1)
OPERATING INCOME                                      14         16
Other income, net                                     —          4
Equity in earnings of affiliates                      9          15
Interest expense, net                                 (29)       (24)
INCOME (LOSS) BEFORE INCOME TAXES                     (6)        11
Provision for income taxes                            (10)       (20)
LOSS FROM CONTINUING OPERATIONS                       (16)       (9)
LOSS FROM DISCONTINUED OPERATIONS, net of tax         (5)        (9)
NET LOSS                                              (21)       (18)
Less: Income attributable to noncontrolling interests —          (4)
NET LOSS ATTRIBUTABLE TO MERITOR, INC.                $ (21)     $ (22)
NET LOSS ATTRIBUTABLE TO MERITOR, INC.
Net loss from continuing operations                   $ (16)     $ (13)
Loss from discontinued operations                     (5)        (9)
Net loss                                              $ (21)     $ (22)
DILUTED LOSS PER SHARE
Continuing operations                                 $ (0.17)   $ (0.13)
Discontinued operations                               (0.05)     (0.10)
Diluted loss per share                                $ (0.22)   $ (0.23)
Diluted average common shares outstanding             96.7       94.5



MERITOR, INC.

CONDENSED CONSOLIDATED BALANCE SHEET

(Unaudited, In millions)


                                             December 31,  September 30,
                                             2012          2012
ASSETS:
Cash and cash equivalents                    $   139       $   257
Receivables, trade and other, net            483           542
Inventories                                  463           438
Other current assets                         56            61
TOTAL CURRENT ASSETS                         1,141         1,298
Net property                                 407           417
Goodwill                                     433           433
Other assets                                 360           353
TOTAL ASSETS                                 $   2,341     $   2,501
LIABILITIES AND EQUITY (DEFICIT):
Short-term debt                              $   23        $   18
Accounts payable                             597           697
Other current liabilities                    297           313
TOTAL CURRENT LIABILITIES                    917           1,028
Long-term debt                               1,032         1,042
Retirement benefits                          1,070         1,075
Other liabilities                            333           338
Total deficit attributable to Meritor, Inc.  (1,041)       (1,023)
Noncontrolling interests                     30            41
TOTAL DEFICIT                                (1,011)       (982)
TOTAL LIABILITIES AND DEFICIT                $   2,341     $   2,501



MERITOR, INC.

CONSOLIDATED BUSINESS SEGMENT INFORMATION

(Unaudited, In millions)


                                                           Three Months Ended
                                                           December 31,
                                                           2012      2011
Sales:
Commercial Truck & Industrial                              $ 715     $ 975
Aftermarket & Trailer                                      203       218
Intersegment Sales                                         (27)      (34)
Total sales                                                $ 891     $ 1,159
EBITDA:
Commercial Truck & Industrial                              $ 34      $ 61
Aftermarket & Trailer                                      13        17
Segment EBITDA                                             47        78
Unallocated legacy and corporate costs, net                (1)       1
Adjusted EBITDA                                            46        79
Interest expense, net                                      (29)      (24)
Provision for income taxes                                 (10)      (20)
Depreciation and amortization                              (16)      (17)
Loss on sale of receivables                                (1)       (3)
Restructuring costs                                        (6)       (24)
Noncontrolling interests                                   —         (4)
Loss from Continuing Operations attributable to Meritor,   (16)      (13)
Inc.
Loss from Discontinued Operations attributable to Meritor, (5)       (9)
Inc.
Net loss attributable to Meritor, Inc.                     $ (21)    $ (22)
Adjusted EBITDA Margin ^(1)                                5.2    %  6.8     %



(1) Adjusted EBITDA margin equals Adjusted EBITDA divided by consolidated
sales.



MERITOR, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited, In millions)


                                                            Three Months Ended
                                                            December 31,
                                                            2012        2011
OPERATING ACTIVITIES
Loss from continuing operations                             $  (16)     $ (9)
Adjustments to income from continuing operations:
Depreciation and amortization                               16          17
Restructuring costs                                         6           24
Loss on debt extinguishment                                 5           —
Equity in earnings of affiliates                            (9)         (15)
Pension and retiree medical expense                         10          14
Other adjustments to income from continuing operations      4           4
Dividends received from affiliates                          3           3
Pension and retiree medical contributions                   (15)        (25)
Restructuring payments                                      (5)         (7)
Changes in off-balance sheet accounts receivable factoring  33          77
Changes in assets and liabilities                           (113)       (75)
Operating cash flows provided by (used for) continuing      (81)        8
operations
Operating cash flows used for discontinued operations       (10)        (3)
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES            (91)        5
INVESTING ACTIVITIES
Capital expenditures                                        (15)        (25)
Other investing activities, net                             —           2
Net investing cash flows used for continuing operations     (15)        (23)
Net investing cash flows provided by discontinued           —           11
operations
CASH USED FOR INVESTING ACTIVITIES                          (15)        (12)
FINANCING ACTIVITIES
Repayment of notes                                          (233)       —
Proceeds from debt issuance                                 225         —
Debt issuance costs                                         (5)         —
Other financing activities                                  1           —
CASH USED FOR FINANCING ACTIVITIES                          (12)        —
EFFECT OF CHANGES IN FOREIGN CURRENCY EXCHANGE
                                                            —           1
RATES ON CASH AND CASH EQUIVALENTS
CHANGE IN CASH AND CASH EQUIVALENTS                         (118)       (6)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD            257         217
CASH AND CASH EQUIVALENTS AT END OF PERIOD                  $  139      $ 211



MERITOR, INC.

ADJUSTED INCOME AND EARNINGS PER SHARE — RECONCILIATION

Non-GAAP

(Unaudited)

(In millions, except per share amounts)


                                                          Three Months Ended
                                                          December 31,
                                                          2012       2011
Loss from continuing operations attributable to Meritor,  $ (16)     $ (13)
Inc.
Adjustments:
Restructuring costs (net of tax)                          5          24
Adjusted income (loss) from continuing operations         $ (11)     $ 11
Diluted loss per share from continuing operations         $ (0.17)   $ (0.13)
Impact of adjustments on diluted earnings (loss) per      0.06       0.25
share
Adjusted diluted earnings (loss) per share from           $ (0.11)   $ 0.12
continuing operations



MERITOR, INC.

FREE CASH FLOW — RECONCILIATION

Non-GAAP

(Unaudited, in millions)


                                                            Three Months Ended
                                                            December 31,
                                                            2012       2011
Cash flows provided by (used for) operating activities —    $  (81)    $ 8
continuing operations
Capital expenditures — continuing operations                (15)       (25)
Free cash flow - continuing operations                      (96)       (17)
Cash flow used for operating activities - discontinued      (10)       (3)
operations
Free cash flow — discontinued operations                    (10)       (3)
Free cash flow — total company                              $  (106)   $ (20)
Freecash flow - continuing operations                      $  (96)    $ (17)
Restructuring payments - continuing operations              5          7
Free cash flow from continuing operations before            $  (91)    $ (10)
restructuring payments



SOURCE Meritor, Inc.

Website: http://www.meritor.com
Contact: Media, Robert Herta, +1-248-435-1185, robert.herta@meritor.com;
Investors, Christy Daehnert, +1-248-435-9426, christy.daehnert@meritor.com
 
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