Meritor Inc. has reported financial results for its first fiscal quarter ended Dec. 31, 2018.
First-Quarter Highlights
- Sales of $1,038 million
- Net income attributable to the company and net income from continuing operations attributable to the company of $90 million
- Diluted earnings per share from continuing operations of $1.03
- Adjusted income from continuing operations attributable to the company of $69 million, or $0.79 per adjusted diluted share
- Adjusted EBITDA of $119 million and adjusted EBITDA margin of 11.5%
- Repurchased 3 million common shares
First-Quarter Results
For the first quarter of fiscal year 2019, Meritor posted sales of $1,038 million, up from $903 million, or approximately 15%, from the same period last year. Higher sales were driven by increased truck production, primarily in North America, and market share gains.
Net income attributable to the company was $90 million, or $1.03 per diluted share, compared to net loss attributable to the company of $36 million, or $0.41 per diluted share, in the same period last year. The company recognized $31 million of income related to remeasuring the Maremont asbestos liability in the current period. In addition, Meritor incurred $77 million of tax expense in the prior year related to the enactment of the Tax Cuts and Jobs Act that did not repeat.
Adjusted income from continuing operations attributable to the company in the first quarter of fiscal year 2019 was $69 million, or $0.79 per adjusted diluted share, compared to $55 million, or $0.62 per adjusted diluted share, in the same period last year.
Adjusted EBITDA was $119 million, compared to $99 million in the first quarter of fiscal year 2018. Adjusted EBITDA margin for the first quarter of fiscal year 2019 was 11.5%, compared to 11.0% in the same period last year. Higher adjusted EBITDA and adjusted EBITDA margin were driven primarily by conversion on higher revenue and increased earnings from unconsolidated affiliates.
Cash provided by operating activities in the first quarter of fiscal year 2019 was $11 million compared to $33 million in the same period a year ago. Free cash flow was negative $12 million compared to free cash flow of $15 million in the same period last year. The decrease in cash flow was driven primarily by higher incentive compensation payments and investments in inventory to support stronger revenue.
First-Quarter Segment Results
Commercial Truck & Trailer sales for the first quarter of fiscal year 2019 were $824 million, up $111 million, or 16%, compared to the same period last year. The increase in sales was driven primarily by higher truck production in North America and increased market share, partially offset by the strengthening U.S. dollar against most currencies.
Segment adjusted EBITDA for the Commercial Truck & Trailer segment was $79 million for the quarter, compared to $69 million in the prior year. The increase in segment adjusted EBITDA was driven primarily by conversion on higher revenue, partially offset by higher material and freight costs, selling, general and administrative expense, and the strengthening of the U.S. dollar against most currencies. Segment adjusted EBITDA margin decreased from 9.7% in the same period last year to 9.6% in the first quarter of fiscal year 2019.
The Aftermarket & Industrial segment posted sales of $257 million, up $28 million or 12%, from the same period last year. Higher sales were driven by increased aftermarket volumes across North America and higher sales in the Industrial business.
Segment adjusted EBITDA for Aftermarket & Industrial was $38 million compared to $32 million in the first quarter of fiscal year 2018. Segment adjusted EBITDA margin increased from 14.0-14.8% in the first quarter of fiscal year 2019. The increase in segment adjusted EBITDA and segment adjusted EBITDA margin was driven primarily by conversion on higher revenue.
Outlook for Fiscal Year 2019
The company is increasing its full-year guidance for revenue, net income, diluted earnings per share and adjusted diluted earnings per share for fiscal year 2019. Meritor maintains its prior guidance for adjusted EBITDA margin, operating cash flow and free cash flow as follows:
- Revenue to be approximately $4.3 billion.
- Net income attributable to the company and net income from continuing operations attributable to the company to be approximately $265 million (diluted earnings per share of approximately $3.10).
- Adjusted diluted earnings per share from continuing operations to be approximately $3.30.
- Adjusted EBITDA margin to be approximately 11.5%.
- Operating cash flow to be in the range of $290 million to $300 million.
- Free cash flow to be in the range of $175 million to $185 million.
"Overall, this was an excellent quarter for Meritor," says Jay Craig, CEO and President. "Fiscal year 2019 has started strong and we are raising our outlook to reflect the financial results we now expect this year."
