First-Quarter Highlights
- Sales were $907 million, up $16 million or 2 percent, from the same period last year.
- Net income on a GAAP basis was $11 million, compared to a net loss of $21 million in the same period last year.
- Adjusted EBITDA was $70 million, compared with $46 million in the same period last year.
- Adjusted EBITDA margin of 7.7 percent, compared to 5.2 percent in the same period last year.
- Free cash flow was negative $16 million in the first quarter of fiscal year 2014, compared to negative $106 million in the same period last year.
“We expanded our Adjusted EBITDA margin by 250 basis points from the same quarter last year despite the planned step down in our defense business,” said Chairman, CEO and President Ike Evans. “We’re executing well on our M2016 performance initiatives which are continuing to drive improved financial results.”
First-Quarter Results
For the first quarter of fiscal year 2014, Meritor posted sales of $907 million, up 2 percent from the same period last year. The increase was primarily due to higher commercial truck production in Europe and South America, partially offset by lower defense revenue and continued weakness in India.
Net income from continuing operations, on a GAAP basis, was $11 million or $0.11 per diluted share, compared to a loss from continuing operations of $16 million or $0.17 per diluted share in the prior year. The increase in net income from continuing operations was primarily driven by the execution of global pricing initiatives throughout calendar year 2013, lower material and structural costs and slightly higher revenues.
Adjusted income from continuing operations in the first quarter of fiscal year 2014 was $12 million, or $0.12 per diluted share, compared to an adjusted loss from continuing operations of $11 million, or $0.11 per diluted share, a year ago.
Adjusted EBITDA was $70 million, compared to $46 million in the first quarter of fiscal year 2013. Adjusted EBITDA margin for the first quarter of fiscal year 2014 was 7.7 percent, compared to 5.2 percent in the same period last year.
Cash flow used by operating activities in the first quarter of fiscal 2014 was negative $4 million, compared to negative $91 million in the same period last year. Free cash flow for the first quarter of fiscal year 2014 was negative $16 million, compared to negative $106 million in the same period in the prior year. The improvement is primarily due to an increase in factored receivables, less cash used for working capital and higher net income.
First-Quarter Segment Results
Commercial Truck & Industrial sales were $727 million, up $12 million, compared with the same period last year. This increase was primarily driven by higher revenue in Europe and South America, partially offset by lower defense revenue and continued weakness in India. Segment EBITDA for the Commercial Truck & Industrial segment was $53 million for the quarter, up $19 million or 56 percent from the first quarter of fiscal year 2013. Segment EBITDA margin increased to 7.3 percent, up from 4.8 percent in the same period last year. Year-over-year reductions in material and structural costs and the favorable impact of higher revenue in Europe and South America more than offset the unfavorable impact of the planned step-down in the company’s defense revenue.
The Aftermarket & Trailer segment posted sales of $208 million, up $5 million from the same period last year. Segment EBITDA for Aftermarket & Trailer was $19 million, up $6 million or 46 percent from the first quarter of fiscal year 2013. Segment EBITDA margin improved to 9.1 percent from 6.4 percent in the first quarter of fiscal year 2013. The increase in segment EBITDA margin was primarily due to pricing actions executed throughout calendar year 2013 and lower material and structural costs.
M2016 Priorities
The company remains focused on M2016, its detailed three-year plan for achieving margin, leverage, and growth targets through driving operational excellence, focusing on customer value, reducing product costs and investing in a high performing team. M2016 includes three financial targets for driving sustainable strength:
- Achieve 10 percent adjusted EBITDA margin for the full year 2016.
- Reduce net debt, including retirement benefit liabilities, by $400 million to less than $1.5 billion.
- Generate incremental booked revenue of $500 million per year (at run-rate) between the beginning of fiscal year 2013 and the end of fiscal year 2016 (from new products, new customers or new programs).
Outlook for Fiscal Year 2014
The company is reaffirming guidance as follows:
- Revenue to be approximately $3.7 billion.
- Adjusted EBITDA margin to be approximately 7.5 percent.
- Adjusted earnings per share from continuing operations in the range of $0.30 to $0.40.
- Total free cash flow to be about breakeven to $25 million.
The company continues to anticipate the following for the entire company:
- Capital expenditures in the range of $80 million to $90 million.
- Interest expense in the range of $105 million to $115 million.
- Cash interest in the range of $85 million to $95 million.
- Cash income taxes in the range of $45 million to $55 million.
“We’re confident that our business initiatives and cost management actions will enable us to improve margins for the year despite our expectations for flat year-over-year revenue,” said Evans.
First-Quarter Fiscal Year 2014 Conference Call
Meritor will host a conference call and webcast to discuss the company’s first-quarter results for fiscal year 2014 on Wednesday, Jan. 29, 2014, at 9 a.m. (ET).
To participate, call (617) 213-4846, 10 minutes prior to the start of the call. Please reference passcode 10695914 when registering. Investors can also listen to the conference call in real time or access a recording of the call for seven days after the event by visiting the investors page on meritor.com.
A replay of the call will be available starting at 1 p.m. on Jan. 29, until 11:59 p.m. Feb. 5, by calling (888) 286-8010 (within the United States) or (617) 801-6888 for international calls. Please refer to replay passcode 60154192. To access the listen-only audio webcast, visit meritor.com and select the webcast link from the home page or the investor page.
