Meritor Inc. reports financial results for its first fiscal quarter ended December 31, 2016.
First-Quarter Highlights
- Sales of $699 million.
- Net income attributable to the company and net income from continuing operations attributable to the company of $15 million each.
- Diluted earnings per share from continuing operations of $0.17.
- Adjusted income from continuing operations attributable to the company of $22 million, or $0.25 per adjusted diluted share.
- Adjusted EBITDA of $64 million and Adjusted EBITDA margin of 9.2%.
First-Quarter Results
For the first quarter of fiscal year 2017, Meritor posted sales of $699 million, down $110 million, or approximately 14%, from the same period last year. The decrease in sales was driven primarily by lower production in the North America Class 8 truck market.
Net income attributable to the company was $15 million, or $0.17 per diluted share, compared to $26 million, or $0.28 per diluted share, in the same period last year. Net income from continuing operations attributable to the company was $15 million, or $0.17 per diluted share, compared to $28 million, or $0.30 per diluted share, in the same quarter last year. Lower net income year over year was driven primarily by lower revenue.
Adjusted income from continuing operations attributable to the company in the first quarter of fiscal year 2017 was $22 million, or $0.25 per adjusted diluted share, compared to $31 million, or $0.33 per adjusted diluted share, in the same period last year.
Adjusted EBITDA was $64 million, compared to $76 million in the first quarter of fiscal year 2016. Adjusted EBITDA margin for the first quarter of fiscal year 2017 was 9.2%, compared to 9.4% in the same period last year. Revenue declines which impacted Adjusted EBITDA and EBITDA margin were partially offset by material, labor and burden performance.
Cash flow used for operating activities in the first quarter of fiscal year 2017 was $14 million compared to $5 million in the same period a year ago. In the prior year, the company received $17 million in cash from an insurance settlement related to asbestos liabilities. Free cash flow used was $31 million compared to $27 million in the same period last year.
First-Quarter Segment Results
Commercial Truck & Industrial sales for the first quarter of fiscal year 2017 were $539 million, down $94 million compared to the same period last year. The decrease in sales was primarily driven by lower Class 8 truck sales in North America.
Segment EBITDA for the Commercial Truck & Industrial segment was $42 million for the quarter, down $10 million from the first quarter of fiscal year 2016. Segment EBITDA margin was 7.8%, down from 8.2% in the same period last year. The decrease in segment EBITDA margin was driven primarily by lower sales in North America, partially offset by material, labor and burden performance.
The Aftermarket & Trailer segment posted sales of $184 million, down $19 million from the same period a year ago. The decrease in sales was primarily due to lower volumes across the segment.
Segment EBITDA for Aftermarket & Trailer was $22 million for the quarter, up $2 million from the first quarter of fiscal year 2016. Segment EBITDA margin increased to 12.0%, compared to 9.9% in the same period last year. The increase in margin was driven primarily by material, labor and burden performance. In addition, the company incurred costs in the prior year's first quarter associated with the launch of a new warehouse system.
Outlook for Fiscal Year 2017
The company's guidance for fiscal year 2017 is unchanged from the prior quarter:
- Revenue to be in the range of $3.0 billion to $3.1 billion.
- Net income attributable to the company and net income from continuing operations attributable to the company to be in the range of $80 million to $85 million (diluted earnings per share of $0.90 to $0.95).
- Adjusted EBITDA margin to be in the range of 9.6-10.0%.
- Adjusted diluted earnings per share from continuing operations to be in the range of $1.25 to $1.40.
- Operating cash flow to be in the range of $140 million to $160 million.
- Free cash flow to be in the range of $50 million to $70 million.
"We remain on track to deliver financial results in fiscal year 2017 consistent with our prior guidance. As we look beyond 2017, we are fully aligned to our M2019 plan with significant attention on growing our top line," says Jay Craig, CEO and President. "As our growth initiatives gain traction and truck volumes rebound in the global markets, we will be well-positioned to achieve our three-year financial objectives."
