Meritor, Inc. today announced actions designed to enhance the financial position of the company in light of current market conditions resulting from the COVID-19 pandemic.
“It remains too early to forecast the long-term impact of this crisis on the industry, but the actions we are announcing today reflect a set of coordinated steps toward finalizing our business plan for fiscal year 2021 and 2022,” said Jay Craig, CEO and president of Meritor.
Cost Savings Initiatives
Meritor is taking actions to right-size the company and align with current market forecasts for global truck and trailer production. These restructuring actions represent approximately an eight-percent reduction in global salaried positions. The company expects the vast majority of these actions to be completed by the end of fiscal year 2020. Meritor anticipates incurring approximately $25 million in employee severance costs related to this restructuring plan.
Salaried Pay Reductions (United States and Canada)
Effective June 16, 2020, the base salaries of the company’s salaried employees in the United States and Canada will be partially restored, but remain reduced from original levels as follows:
- CEO/Board of Directors: 20-percent reduction (from 60-percent reduction)
- Other officers: 15-percent reduction (from 50-percent reduction)
- Executives (vice presidents and directors): 15-percent reduction (from 25-percent reduction)
- All other salaried employees in the United States and Canada: 10-percent reduction (from 20-percent reduction)
Proposed Offering of Notes
Meritor announced today that it intends, subject to market and other conditions, to offer $300 million aggregate principal amount of unsecured senior notes in a private placement to qualified institutional buyers in reliance on Rule 144A and to non-U.S. persons in offshore transactions in reliance on Regulation S under the Securities Act of 1933, as amended.
The company currently expects to use the net proceeds from the offering of the notes to repay a portion of the outstanding balance under its senior secured credit facility.
Outlook for Third Quarter Fiscal Year 2020
Meritor is reaffirming its financial guidance for the third quarter of fiscal 2020 as follows:
- Revenue to be in the range of $400 million to $500 million
- Cash flow from operations to be in the range of negative $150 million to negative $225 million, inclusive of the one-time impact from receivable factoring programs of negative $125 million to negative $175 million
Meritor will provide a longer-term outlook for fiscal 2021 and its M2022 plan performance during the company’s third-quarter earnings call, assuming a reliable set of market forecasts is available. This outlook will include a summation of the benefits it expects from cost reduction actions.
“We moved quickly during the pandemic to stabilize cash flow for the third and fourth quarter so that we could focus on the long-term health of the company, which includes rightsizing the organization,” added Craig. “As we have begun to see the benefits of our cost preservation actions, we are pleased that we were able to lessen the salary reductions previously initiated and look forward to regaining our full momentum.”
Not an Offer to Sell
The notes to be offered as described herein have not been registered under the Securities Act or applicable state securities laws and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act and applicable state securities laws. This press release shall not constitute an offer to sell or the solicitation of an offer to buy the notes, nor shall there be any offer or sale of the notes in any state in which such offer, solicitation or sale would be unlawful.
SOURCE: Meritor
