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Monday, September 26, 2022

Meritor Reports Financial Results

 

Meritor, Inc. (NYSE: MTOR) reported financial results for its second fiscal quarter ended March 31, 2019.

Second-Quarter Highlights

  • Sales of $1,156 million
  • Net income attributable to the company of $72 million and net income from continuing operations attributable to the company of $73 million
  • Diluted earnings per share of $0.84
  • Adjusted income from continuing operations attributable to the company of $88 million, or $1.03 per adjusted diluted share
  • Adjusted EBITDA of $139 million and adjusted EBITDA margin of 12.0 percent

Second-Quarter Results

For the second quarter of fiscal year 2019, Meritor posted sales of $1,156 million, up from $1,066 million, or approximately 8 percent from the same period last year. The increase in sales was driven by higher truck production, primarily in North America, partially offset by the strengthening of the U.S. dollar against most currencies. Sales were also favourably impacted by revenue outperformance.

Net income attributable to the company was $72 million, or $0.84 per diluted share, compared to net income attributable to the company of $57 million, or $0.63 per diluted share, in the same period last year. Higher net income year over year is attributable to conversion on increased revenue.

Adjusted income from continuing operations attributable to the company in the second quarter of fiscal year 2019 was $88 million, or $1.03 per adjusted diluted share, compared to $68 million, or $0.75 per adjusted diluted share, in the same period last year.

Adjusted EBITDA was $139 million, compared to $122 million in the second quarter of fiscal year 2018. Adjusted EBITDA margin for the second quarter of fiscal year 2019 was 12.0 percent, compared to 11.4 percent in the same period last year. Higher adjusted EBITDA year over year was driven primarily by conversion on higher revenue, partially offset by the strengthening of the U.S. dollar against most currencies. Also, in the prior year, the company recorded an incremental environmental accrual of $8 million, principally related to a legacy site, that did not repeat.

Cash provided by operating activities in the second quarter of fiscal year 2019 was $40 million compared to $39 million in the same period a year ago. Free cash flow was $19 million compared to free cash flow of $22 million in the same period last year.

Second-Quarter Segment Results

On March 13, 2019, the company realigned its operations resulting in a change to its reportable segments.  As of the second quarter of fiscal year 2019, the reportable segments are:

  • Commercial Truck; and
  • Aftermarket, Industrial and Trailer

Prior year reportable segment financial results have been recast for these changes.

Commercial Truck sales for the second quarter of fiscal year 2019 were $876 million, up $61 million, or 7 percent, compared to the same period last year. The increase in sales was driven primarily by higher truck production in North America partially offset by the strengthening of the U.S. dollar against most currencies.

Segment adjusted EBITDA for the Commercial Truck segment was $88 million for the quarter, compared to $94 million in the prior year. Segment adjusted EBITDA margin decreased from 11.5 percent in the same period last year to 10.0 percent in the second quarter of fiscal year 2019. The decrease in segment adjusted EBITDA and segment adjusted EBITDA margin was driven primarily by higher net steel, freight and layered capacity costs, partially offset by conversion on higher revenue.

The Aftermarket, Industrial and Trailer segment posted sales of $329 million, up $33 million or 11 percent, from the same period last year. Higher sales were driven by increased industrial, trailer and aftermarket volumes in North America and pricing actions within the company’s Aftermarket business.

Segment adjusted EBITDA for Aftermarket, Industrial and Trailer was $52 million compared to $38 million in the second quarter of fiscal year 2018. Segment adjusted EBITDA margin increased from 12.8 percent to 15.8 percent in the second quarter of fiscal year 2019. The increase in segment adjusted EBITDA and segment adjusted EBITDA margin was driven primarily by pricing actions within the company’s Aftermarket business and conversion on higher volumes.

Outlook for Fiscal Year 2019

The company is increasing its full-year guidance for revenue, net income, adjusted EBITDA margin, diluted earnings per share and adjusted diluted earnings per share for fiscal year 2019 as follows:

  • Revenue to be approximately $4.4 billion.
  • Net income attributable to the company and net income from continuing operations attributable to the company to be approximately $285 million (diluted earnings per share of approximately $3.30).
  • Adjusted EBITDA margin to be approximately 11.7 percent.
  • Adjusted diluted earnings per share from continuing operations to be approximately $3.50.
  • Operating cash flow to be in the range of $280 million to $290 million.
  • Free cash flow to be in the range of $175 million to $185 million.

“We delivered solid execution on our priorities during the quarter with strong conversion while continuing investments in our future,” said Jay Craig, CEO and president. “We expect to successfully deliver our M2019 plan and build on this success as we transition to M2022.”

Second-Quarter Fiscal Year 2019 Conference Call