Meritor Reports Second-Quarter Fiscal Year 2013 Results

           Meritor Reports Second-Quarter Fiscal Year 2013 Results

Company Achieves Sequential Margin Expansion of 120 Basis Points

Executes Agreement to Sell Brazilian Joint Venture

PR Newswire

TROY, Mich., April 30, 2013

TROY, Mich., April 30, 2013 /PRNewswire-FirstCall/ --Meritor, Inc. (NYSE:
MTOR) today reported financial results for its second fiscal quarter ended
March 31, 2013.

Second-Quarter Highlights

  oSales were $908 million, down $252 million or 22 percent, from the same
    period last year.
  oNet loss on a GAAP basis was $4 million, compared to net income of $20
    million from the same period last year and a net loss of $21 million from
    the prior quarter.
  oAdjusted EBITDA was $58 million, compared with $95 million from the same
    period last year and $46 million from the prior quarter.
  oAdjusted EBITDA margin was 6.4 percent, compared to 8.2 percent in the
    second quarter of fiscal year 2012 and 5.2 percent in the first quarter of
    fiscal year 2013.
  oOperating cash flow was negative $18 million in the second quarter of
    fiscal year 2013, compared to negative $51 million in the same period last
    year.
  oFree cash flow was negative $26 million in the second quarter of fiscal
    year 2013, compared to negative $69 million in the same period last year.

"Our improved performance this quarter was in line with our expectations,"
said Chairman, CEO and President Chip McClure. "We drove higher EBITDA margins
quarter-over-quarter as a result of net material performance, pricing actions
and lower structural costs."

Second-Quarter Results

For the second quarter of fiscal year 2013, Meritor posted sales of $908
million, down 22 percent from the same period last year. This decrease was
primarily due to lower sales in all global markets that the company serves,
excluding South America.

Loss from continuing operations, on a GAAP basis, was $4 million or $0.04 per
diluted share, compared to a net income from continuing operations of $29
million or $0.30 per diluted share in the prior year. Loss from continuing
operations includes $11 million of restructuring charges in the second quarter
of fiscal year 2013.

Adjusted income from continuing operations in the second quarter of fiscal
year 2013 was $6 million, or $0.06 per diluted share, compared to adjusted
income from continuing operations of $32 million, or $0.33 per diluted share,
a year ago.

Adjusted EBITDA was $58 million, compared to $95 million in the second quarter
of fiscal year 2012. Adjusted EBITDA margin for the second quarter of fiscal
year 2013 was 6.4 percent, compared with 8.2 percent for the same period last
year. Compared to the first quarter of fiscal year 2013, Adjusted EBITDA
improved $12 million and Adjusted EBITDA margin improved 120 basis points to
6.4 percent. The increase in Adjusted EBITDA and Adjusted EBITDA margin are
primarily due to improved net material performance, pricing and lower
structural costs.

Free cash flow for the second quarter of fiscal year 2013 was negative $26
million compared to free cash flow of negative $69 million in the same period
last year.

Second-Quarter Segment Results

Commercial Truck & Industrial sales were $712 million, down $240 million from
the same period last year. Segment EBITDA for the Commercial Truck &
Industrial segment was $37 million for the quarter, down $38 million from the
second quarter of fiscal year 2012, primarily driven by lower sales in all
regions, excluding South America. Segment EBITDA margin was 5.2 percent, down
from 7.9 percent in the second quarter of fiscal year 2012.

The company's Aftermarket & Trailer segment posted sales of $224 million, down
$19 million from the same period last year, primarily due to lower volumes in
North America. Segment EBITDA for Aftermarket & Trailer was $22 million, down
$2 million or 8 percent from the second quarter of fiscal year 2012, and
Segment EBITDA margin was 9.8 percent, compared to 9.9 percent in the second
quarter of fiscal year 2012.

Business Highlights

  oSigned a purchase and sale agreement to sell 50 percent ownership interest
    in Suspensys Sistemas Automotivos LTDA to joint venture partner Randon
    S.A. Implementos E Participacoes at a purchase price of $195 million in
    cash and other consideration. The agreement is subject to Brazilian
    antitrust approval. The sale is expected to be consummated by Meritor's
    fiscal year end.
  oCompleted the consolidation of remanufacturing operations from
    Mississauga, Ontario, Canada into the North American remanufacturing
    center of excellence in Plainfield, Ind. The company's corresponding
    Canadian customer service support was moved to its Brampton, Ontario
    facility.
  oExecuted majority of previously announced reductions of 200 salaried
    positions as well as 50 hourly positions to substantially mitigate the mix
    effects of the ramp-down in the FMTV military program.Targeted reductions
    also include the restructuring of the on-highway business in China which
    is being transferred to Xuzhou Meritor Axle Co. Ltd., Meritor's majority
    owned off-highway joint venture. These actions in China are intended to
    improve efficiency, preserve revenue growth potential and reduce overhead
    costs.

Outlook for 2013

For fiscal year 2013, the company is reaffirming guidance for its continuing
operations, inclusive of the impact of the Suspensys divestiture as follows:

  oRevenue to be approximately $3.8 billion.
  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.
  oFree cash flow from continuing operations before restructuring payments to
    be slightly negative.

For fiscal year 2013, the company continues to anticipate 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.
  oCash interest in the range of $75 million to $85 million.
  oCash income taxes in the range of $45 million to $55 million (excludes the
    impact of the Suspensys sale).

"We are reconfirming our fiscal year 2013 guidance as we continue to expect
revenue to be stronger in the second half of the year," said McClure. "Today,
we're announcing the launch of our three-year strategy, M2016, that we believe
will improve our ability to expand our EBITDA margin, reduce net debt and
drive incremental revenue. We plan to provide progress updates on these three
metrics as we drive toward maximizing value for our shareholders, customers
and employees."

Second-Quarter Fiscal Year 2013 Conference Call

The company will host a telephone conference call and webcast to discuss the
company's second-quarter results for fiscal year 2013 on Tuesday, April 30, at
11 a.m. (ET).

To participate, call (617) 213-4845 at least 10 minutes prior to the start of
the call. Please reference participant pass code 34795919 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 the Investors page on
the Meritor website at www.meritor.com. 

To access the listen-only audio webcast, visit the Investors page on
meritor.com.

A replay of the call will be available from 1 p.m. April 30 to 11:59 p.m. May
7 by calling (888) 286-8010 within the United States or (617) 801-6888 for
international calls. Please refer to replay pass code number 27012852.

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 failure to receive the Brazilian regulatory approvals
required to complete the sale of our ownership stake in the Suspensys joint
venture or to otherwise successfully complete the sale of such ownership
stake; 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)
                                    Quarter Ended        Six Months Ended
                                    March 31,            March 31,
                                    2013       2012      2013       2012
Sales                               $ 908      $ 1,160   $ 1,799    $ 2,319
Cost of sales                       (813)      (1,026)   (1,621)    (2,079)
GROSS MARGIN                        95         134       178        240
Selling, general and administrative (65)       (72)      (127)      (137)
Restructuring costs                 (11)       (3)       (17)       (27)
Other operating expense             (1)        (1)       (2)        (2)
OPERATING INCOME                    18         58        32         74
Other income, net                   —          1         —          5
Equity in earnings of affiliates    10         14        19         29
Interest expense, net               (25)       (23)      (54)       (47)
INCOME (LOSS) BEFORE INCOME TAXES   3          50        (3)        61
Provision for income taxes          (7)        (17)      (17)       (37)
INCOME (LOSS) FROM CONTINUING       (4)        33        (20)       24
OPERATIONS
LOSS FROM DISCONTINUED OPERATIONS,  —          (9)       (5)        (18)
net of tax
NET INCOME (LOSS)                   (4)        24        (25)       6
Less: Net Income attributable to    —          (4)       —          (8)
noncontrolling interests
NET INCOME (LOSS) ATTRIBUTABLE TO   $ (4)      $ 20      $ (25)     $ (2)
MERITOR, INC.
NET INCOME (LOSS) ATTRIBUTABLE TO
MERITOR, INC.
Net income (loss) from continuing   $ (4)      $ 29      $ (20)     $ 16
operations
Loss from discontinued operations   —          (9)       (5)        (18)
Net income (loss)                   $ (4)      $ 20      $ (25)     $ (2)
DILUTED EARNINGS (LOSS) PER SHARE
Continuing operations               $ (0.04)   $ 0.30    $ (0.20)   $ 0.17
Discontinued operations             —          (0.09)    (0.05)     (0.19)
Diluted earnings (loss) per share   $ (0.04)   $ 0.21    $ (0.25)   $ (0.02)
Diluted average common shares       97.2       97.2      96.9       97.2
outstanding







MERITOR, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited, in millions)
                                             March 31,  September 30,
                                             2013       2012
ASSETS:
Cash and cash equivalents                    $  117     $   257
Receivables, trade and other, net            555        542
Inventories                                  420        438
Other current assets                         54         61
TOTAL CURRENT ASSETS                         1,146      1,298
Net property                                 395        417
Goodwill                                     427        433
Other assets                                 369        353
TOTAL ASSETS                                 $  2,337   $   2,501
LIABILITIES AND EQUITY (DEFICIT):
Short-term debt                              $  25      $   18
Accounts payable                             616        697
Other current liabilities                    297        313
TOTAL CURRENT LIABILITIES                    938        1,028
Long-term debt                               1,030      1,042
Retirement benefits                          1,056      1,075
Other liabilities                            327        338
Total deficit attributable to Meritor, Inc.  (1,042)    (1,023)
Noncontrolling interests                     28         41
TOTAL DEFICIT                                (1,014)    (982)
TOTAL LIABILITIES AND DEFICIT                $  2,337   $   2,501





MERITOR, INC.
CONSOLIDATED BUSINESS SEGMENT INFORMATION
(Unaudited, in millions)
                       Quarter Ended       Quarter Ended  Six Months Ended
                       March 31,           December 31,   March 31,
                       2013     2012       2012           2013       2012
Sales:
Commercial Truck &     $ 712    $ 952      $   715        $ 1,427    $ 1,927
Industrial
Aftermarket & Trailer  224      243        203            427        461
Intersegment Sales     (28)     (35)       (27)           (55)       (69)
Total sales            $ 908    $ 1,160    $   891        $ 1,799    $ 2,319
EBITDA:
Commercial Truck &     $ 37     $ 75       $   34         $ 71       $ 136
Industrial
Aftermarket & Trailer  22       24         13             35         41
Segment EBITDA         59       99         47             106        177
Unallocated legacy and (1)      (4)        (1)            (2)        (3)
corporate costs, net
Adjusted EBITDA        58       95         46             104        174
Interest expense, net  (25)     (23)       (29)           (54)       (47)
Provision for income   (7)      (17)       (10)           (17)       (37)
taxes
Depreciation and       (17)     (16)       (16)           (33)       (33)
amortization
Loss on sale of        (2)      (3)        (1)            (3)        (6)
receivables
Restructuring costs    (11)     (3)        (6)            (17)       (27)
Noncontrolling         —        (4)        —              —          (8)
interests
Income (loss) from
Continuing Operations  (4)      29         (16)           (20)       16
attributable to
Meritor, Inc.
Loss from Discontinued
Operations             —        (9)        (5)            (5)        (18)
attributable to
Meritor, Inc.
Net income (loss)
attributable to        $ (4)    $ 20       $   (21)       $ (25)     $ (2)
Meritor, Inc.
Adjusted EBITDA Margin 6.4   %  8.2     %  5.2        %   5.8     %  7.5     %
^(1)
^(1) Adjusted EBITDA margin equals Adjusted EBITDA divided by consolidated
sales.







MERITOR, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited, in millions)
                                                             Six Months Ended
                                                             March 31,
                                                             2013      2012
OPERATING ACTIVITIES
Income (loss) from continuing operations                     $  (20)   $ 24
Adjustments to income from continuing operations:
Depreciation and amortization                                33        33
Restructuring costs                                          17        27
Loss on debt extinguishment                                  5         —
Equity in earnings of affiliates                             (19)      (29)
Pension and retiree medical expense                          22        26
Other adjustments to income from continuing operations       7         7
Dividends received from affiliates                           7         8
Pension and retiree medical contributions                    (48)      (50)
Restructuring payments                                       (12)      (10)
Changes in off-balance sheet accounts receivable factoring   (44)      8
Changes in assets and liabilities                            (44)      (82)
Operating cash flows used for continuing operations          (96)      (38)
Operating cash flows used for discontinued operations        (13)      (8)
CASH USED FOR OPERATING ACTIVITIES                           (109)     (46)
INVESTING ACTIVITIES
Capital expenditures                                         (23)      (43)
Other investing activities, net                              —         16
Net investing cash flows used for continuing operations      (23)      (27)
Net investing cash flows provided by discontinued operations 6         28
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES             (17)      1
FINANCING ACTIVITIES
Borrowings on accounts receivable securitization program,    —         19
net
Repayment of notes and term loan                             (236)     (84)
Proceeds from debt issuance                                  225       —
Debt issuance costs                                          (6)       —
Other financing activities                                   2         —
CASH USED FOR FINANCING ACTIVITIES                           (15)      (65)
EFFECT OF CHANGES IN FOREIGN CURRENCY EXCHANGE
                                                             1         2
RATES ON CASH AND CASH EQUIVALENTS
CHANGE IN CASH AND CASH EQUIVALENTS                          (140)     (108)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD             257       217
CASH AND CASH EQUIVALENTS AT END OF PERIOD                   $  117    $ 109







MERITOR, INC.
ADJUSTED INCOME AND EARNINGS PER SHARE — RECONCILIATION
Non-GAAP
(Unaudited)
(In millions, except per share amounts)
                                       Quarter Ended       Six Months Ended
                                       March 31,           March 31,
                                       2013       2012     2013       2012
Income (loss) from continuing
operations attributable to Meritor,    $ (4)      $ 29     $ (20)     $ 16
Inc.
Adjustments:
Restructuring costs (net of tax)       10         3        15         27
Adjusted income (loss) from continuing $ 6        $ 32     $ (5)      $ 43
operations
Diluted earnings (loss) per share from $ (0.04)   $ 0.30   $ (0.20)   $ 0.17
continuing operations
Impact of adjustments on diluted       0.10       0.03     0.15       0.28
earnings per share
Adjusted diluted earnings (loss) per   $ 0.06     $ 0.33   $ (0.05)   $ 0.45
share from continuing operations





MERITOR, INC.
FREE CASH FLOW — RECONCILIATION
Non-GAAP
(Unaudited, in millions)
                                          Quarter Ended     Six Months Ended
                                          March 31,         March 31,
                                          2013     2012     2013      2012
Cash flows used for operating activities  $ (15)   $ (46)   $ (96)    $ (38)
— continuing operations
Capital expenditures — continuing         (8)      (18)     (23)      (43)
operations
Free cash flow - continuing operations    (23)     (64)     (119)     (81)
Cash flow used for operating activities - (3)      (5)      (13)      (8)
discontinued operations
Free cash flow — discontinued operations  (3)      (5)      (13)      (8)
Free cash flow — total company            $ (26)   $ (69)   $ (132)   $ (89)
Freecash flow - continuing operations    $ (23)   $ (64)   $ (119)   $ (81)
Restructuring payments - continuing       7        3        12        10
operations
Free cash flow from continuing operations $ (16)   $ (61)   $ (107)   $ (71)
before restructuring payments



SOURCE Meritor, Inc.

Website: http://www.meritor.com
Contact: Media Inquiries: Robert Herta, (248) 435-1185,
robert.herta@meritor.com; Investor Inquiries: Christy Daehnert, (248)
435-9426, christy.daehnert@meritor.com
 
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