Meritor Inc. has reported financial results for its first fiscal quarter ended December 31, 2012.
First-Quarter Highlights
- Sales were $891 million, down $268 million or 23%, from the same period last year.
- Net loss on a GAAP basis was $21 million, compared to a net loss of $22 million in the prior year's first quarter.
- Adjusted EBITDA was $46 million, compared with $79 million from the same period last year.
- Operating 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.
- Free 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,” says 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% 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%, compared with 6.8% 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%, down from 6.3% 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% from the first quarter of fiscal year 2012, and segment EBITDA margin declined to 6.4% from 7.8% in the first quarter of fiscal year 2012.
Recent Business Highlights
- Initiated structural cost reductions that will result in the elimination of 200 positions worldwide.
- Rationalized organizational and reporting structure to manage under two segments - Commercial Truck & Industrial and Aftermarket & Trailer.
- Initiated consolidation of North American remanufacturing operations.
- Implemented variable labor adjustments globally.
“These actions were necessary to drive efficiencies across the organization in alignment with the rationalization of our business segments,” says McClure.
Executive Appointments
Meritor announces 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 says, “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 adds, “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:
- Revenue to be approximately $3.8 billion (previously $4 billion).
- Free cash flow from continuing operations before restructuring payments to be slightly negative (previously about breakeven).
Despite these changes, the company continues to expect:
- Adjusted EBITDA margin to be approximately 7% for fiscal year 2013.
- Adjusted 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:
- Capital expenditures in the range of $65 million to $75 million.
- Interest expense in the range of $95 million to $105 million (previously $90 million to $100 million).
- Cash interest in the range of $75 million to $85 million.
- Cash 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,” says McClure. “We remain committed to driving toward meeting the needs of all our stakeholders while continuing to invest in our market leadership positions."
