Meritor Inc. has reported financial results for its second fiscal quarter ended March 31, 2016.
Second-Quarter Highlights
- Sales were $821 million, down $43 million, or approximately 5%, from the same period last year.
- Net income attributable to Meritor from continuing operations on a GAAP basis was $33 million, or diluted earnings per share of $0.36, compared to $39 million, or diluted earnings per share of $0.38 in the same period last year.
- Adjusted income from continuing operations was $38 million, or adjusted diluted earnings per share of$0.41, compared to $43 million, or adjusted diluted earnings per share of $0.42, in the same period a year ago.
- Adjusted EBITDA was $81 million, compared to $87 million in the same period last year. Adjusted EBITDA margin was 9.9% for the quarter, compared to 10.1% in the same period last year.
- Free cash flow was $19 million in the second quarter of fiscal year 2016, compared to $27 million in the same period a year ago.
Second-Quarter Results
For the second quarter of fiscal year 2016, Meritor posted sales of $821 million, down $43 million, or approximately 5%, from the same period last year. The decrease in sales was driven by lower truck production volumes in North and South America and the effect of foreign exchange translation, particularly in Brazil.
Net income attributable to Meritor from continuing operations on a GAAP basis was $33 million, or $0.36 per diluted share, compared to $39 million, or $0.38 per diluted share, in the same period last year.
Adjusted income from continuing operations in the second quarter of fiscal year 2016 was $38 million, or adjusted diluted earnings per share of $0.41, compared to $43 million, or adjusted diluted earnings per share of $0.42, in the same period a year ago.
Adjusted EBITDA was $81 million, compared to $87 million in the second quarter of fiscal year 2015. Adjusted EBITDA margin for the second quarter of fiscal year 2016 was 9.9%, compared to 10.1% in the same period last year. The decline in Adjusted EBITDA and Adjusted EBITDA margin was driven by lower production volumes in North and South America and a non-recurring foreign currency hedge gain in the second quarter of 2015, which was partially offset by lower material, labor and burden costs.
Cash flow from operating activities in the second quarter of fiscal year 2016 was $44 million, compared to $38 million in the same period last year. Free cash flow for the second quarter of fiscal year 2016 was $19 million, compared to $27 million in the same period last year, primarily due to higher capital expenditures.
Second-Quarter Segment Results
Commercial Truck & Industrial sales for the second quarter of fiscal year 2016 were $631 million, down $50 million compared to the same period last year. The decrease in sales was due to lower production in North and South America and the effect of foreign exchange translation, particularly in Brazil.
Segment EBITDA for the Commercial Truck & Industrial segment was $56 million for the quarter, down $1 millionfrom the second quarter of fiscal year 2015. Segment EBITDA margin increased to 8.9%, up from 8.4% in the same period last year. The increase in segment EBITDA margin was driven primarily by lower material, labor and burden costs which more than offset the one-time foreign exchange hedge gains from a year ago.
The Aftermarket & Trailer segment posted sales of $218 million, up $6 million from the same period a year ago. The increase in sales was primarily driven by higher trailer production in North America.
Segment EBITDA for Aftermarket & Trailer was $28 million for the quarter, down $2 million from the second quarter of fiscal year 2015. Segment EBITDA margin was 12.8%, down from 14.2% in the second quarter of fiscal year 2015. The decrease in Segment EBITDA and Segment EBITDA margin was primarily driven by unfavorable product mix.
Outlook for Fiscal Year 2016
The company is revising its guidance for fiscal year 2016 as follows:
- Revenue to be approximately $3.275 billion, as compared to the prior outlook of approximately $3.4 billion.
- Adjusted EBITDA margin to be approximately 10.0%, unchanged from prior expectations.
- Adjusted diluted earnings per share from continuing operations to be in the range of $1.55 to $1.65, as compared to the prior outlook in the range of $1.65 to $1.75.
- Free cash flow to be approximately $90 million, down from the prior outlook of approximately $110 million.
Meritor anticipates the following for the entire company:
- Capital expenditures of approximately $90 million.
- Interest expense in the range of $80 million to $90 million.
- Cash interest in the range of $65 million to $75 million.
- Effective income tax rate of approximately 15%.
"We are continuing to execute well despite volatility in certain end markets," says Jay Craig, CEO and President. "M2016 is a transformational strategy for the company. We remain on track to achieve the underlying financial goals for new business, net debt reduction and improved margin performance as we stay committed to M2016 and providing a greater return to our shareholders."
