Meritor Inc. reports financial results for its first fiscal quarter ended December 31, 2017.
First-Quarter Highlights
- Sales of $903 million.
- Net loss attributable to the company of $36 million and net loss from continuing operations attributable to the company of $35 million.
- Diluted loss per share from continuing operations of $0.40.
- Adjusted income from continuing operations attributable to the company of $55 million, or $0.62 per adjusted diluted share.
- Adjusted EBITDA of $99 million and adjusted EBITDA margin of 11.0%.
First-Quarter Results
For the first quarter of fiscal year 2018, Meritor posted sales of $903 million, up $204 million, or approximately 29%, from the same period last year. The increase in sales was driven by higher truck production in all of its markets, with North America experiencing the largest increase, in addition to new business wins and favorable foreign currency impacts.
Net loss attributable to the company was $36 million, or $0.41 per diluted share, compared to net income attributable to the company of $15 million, or $0.17 per diluted share, in the same period last year. Net loss from continuing operations attributable to the company was $35 million, or $0.40 per diluted share, compared to net income from continuing operations attributable to the company of $15 million, or $0.17 per diluted share, in the same quarter last year. First quarter 2018 results include a $77 million non-cash tax expense as a result of the enactment of the Tax Cuts and Jobs Act.
Adjusted income from continuing operations attributable to the company in the first quarter of fiscal year 2018 was $55 million, or $0.62 per adjusted diluted share, compared to $22 million, or $0.25 per adjusted diluted share, in the same period last year.
Adjusted EBITDA was $99 million, compared to $64 million in the first quarter of fiscal year 2017. Adjusted EBITDA margin for the first quarter of fiscal year 2018 was 11.0%, compared to 9.2% in the same period last year. Higher adjusted EBITDA and adjusted EBITDA margin year over year was driven primarily by conversion on higher revenue and the favorable impact of changes to the company’s retiree medical benefits.
Cash provided by operating activities in the first quarter of fiscal year 2018 was $33 million compared to cash flow used for operating activities of $14 million in the same period a year ago. Free cash flow was $15 million compared to cash flow used of $31 million in the same period last year. Higher earnings helped drive cash flow performance in the first quarter of fiscal 2018.
First-Quarter Segment Results
Commercial Truck & Industrial sales for the first quarter of fiscal year 2018 were $738 million, up $199 million compared to the same period last year. The increase in sales was primarily driven by higher production in all markets, with North America experiencing the largest increase. In addition, Meritor saw continued benefits from new business wins, as well as favorable foreign currency impacts this quarter due to the strengthening euro.
Segment adjusted EBITDA for the Commercial Truck & Industrial segment was $80 million for the quarter, up $38 million from the first quarter of fiscal year 2017. Segment adjusted EBITDA margin was 10.8%, up from 7.8% in the same period last year. The increases in both segment adjusted EBITDA and segment adjusted EBITDA margin were driven primarily by conversion on higher revenue and the favorable impact of changes to the company’s retiree medical benefits, partially offset by lower affiliate earnings from the Meritor WABCO sale.
The Aftermarket & Trailer segment posted sales of $195 million, up $11 million from the same period a year ago. The increase in sales was primarily driven by higher volumes across the segment.
Segment adjusted EBITDA for Aftermarket & Trailer was $21 million for the quarter, down $1 million from the first quarter of fiscal year 2017. Segment adjusted EBITDA margin decreased to 10.8%, compared to 12.0% in the same period last year. The decreases in segment adjusted EBITDA and segment adjusted EBITDA margin were driven in part by incremental investments supporting revenue growth initiatives.
Outlook for Fiscal Year 2018
The company is revising its guidance for fiscal year 2018 as follows:
- Revenue to be in the range of $3.8 billion to $3.9 billion.
- Net income attributable to the company and net income from continuing operations attributable to the company to be in the range of $120 million to $130 million (diluted earnings per share of $1.30 to $1.40).
- Adjusted EBITDA margin to be in the range of 11.0-11.2%.
- Adjusted diluted earnings per share from continuing operations to be in the range of $2.50 to $2.70.
- Operating cash flow to be in the range of $210 million to $225 million.
- Free cash flow to be in the range of $110 million to $125 million.
“Overall, this was an excellent quarter for us. We continue to drive strong operational execution, deliver new business wins and convert on stronger global markets,” says Jay Craig, CEO and President. “We are raising our financial guidance for the year to reflect the continued strength we expect in our results for fiscal 2018.”
