Meritor today announced reported financial results for its fourth quarter and full fiscal year ending Sept. 30, 2020.
Fourth-Quarter Highlights
- Sales were $758 million
- Net income attributable to Meritor and net income from continuing operations attributable to Meritor were each $1 million
- Diluted earnings per share from continuing operations was $0.01
- Adjusted income from continuing operations attributable to Meritor was $11 million, or $0.15 of adjusted diluted earnings per share
- Adjusted EBITDA was $60 million
- Adjusted EBITDA margin was 7.9 percent
Fourth-Quarter Results
For the fourth quarter of fiscal year 2020, Meritor posted sales of $758 million, down $270 million, or approximately 26 percent, from the same period last year. This decrease in sales was driven by lower market volumes primarily due to decreased customer demand as a result of the COVID-19 pandemic.
Net income attributable to Meritor was $1 million, or $0.01 per diluted share, compared to net income attributable to Meritor of $43 million, or $0.51 per diluted share in the prior year. Net income from continuing operations attributable to the company was $1 million, or $0.01 per diluted share, compared to net income from continuing operations attributable to the company of $42 million, or $0.50 per diluted share, in the prior year. Lower net income year over year was driven primarily by lower revenues as a result of lower market volumes due to the COVID-19 pandemic, partially offset by decreased SG&A due to cost reduction actions executed primarily in the second half of the year, reduced incentive compensation costs and operational performance.
Adjusted income from continuing operations attributable to the company in the fourth quarter was $11 million, or $0.15 of adjusted diluted earnings per share, compared with $70 million, or $0.83 of adjusted diluted earnings per share, in the prior year.
Adjusted EBITDA was $60 million, compared to $116 million in the fourth quarter of fiscal year 2019. Adjusted EBITDA margin for the fourth quarter of fiscal year 2020 was 7.9 percent, compared with 11.3 percent in the same period last year. The decrease in adjusted EBITDA year over year was driven primarily by lower revenues as a result of lower market volumes due to the COVID-19 pandemic. The impact from lower revenue was partially offset by cost reduction actions executed primarily in the second half of the year, reduced incentive compensation costs and operational performance.
Cash flow provided by operating activities in the fourth quarter of fiscal year 2020 was $77 million, compared to $62 million in the same period last year. Free cash flow for the fourth quarter of fiscal year 2020 was $37 million, compared to free cash flow of $22 million in the same period last year. The increase in operating cash flow and free cash flow year over year was driven by improved working capital performance and a one-time $48-million cash contribution and loan repayment to fund the Maremont 524(g) Trust made in fiscal year 2019, which did not repeat.
Fourth-Quarter Segment Results
Commercial Truck sales were $560 million in the fourth quarter of fiscal year 2020, down 28 percent compared to the fourth quarter of fiscal year 2019. The decrease in sales was driven by lower volumes primarily due to decreased customer demand as a result of the COVID-19 pandemic.
Commercial Truck segment adjusted EBITDA was $24 million in the fourth quarter of fiscal year 2020, down $48 million from the same period in the prior fiscal year. Segment adjusted EBITDA margin decreased to 4.3 percent from 9.3 percent in the same period of the prior fiscal year. The decrease in segment adjusted EBITDA and segment adjusted EBITDA margin were driven primarily by lower market volumes for most regions due to COVID-19 and higher costs incurred to support electrification initiatives, partially offset by the cost reduction actions, reduced incentive compensation costs and operational performance.
Aftermarket and Industrial sales were $226 million in the fourth quarter of fiscal year 2020, down 22 percent compared to the fourth quarter of fiscal year 2019. The decrease in sales was driven by lower volumes across the segment. Aftermarket sales decreased due to lower customer demand and the impact from the termination of the distribution arrangement with WABCO Holdings, Inc. (“WABCO”), which occurred in the second quarter of fiscal year 2020. Industrial sales also decreased, driven by lower market volumes primarily as a result of the impact of the COVID-19 pandemic.
Segment adjusted EBITDA for Aftermarket and Industrial was $34 million in the fourth quarter of fiscal year 2020, down $7 million from the same period in the prior year. Segment adjusted EBITDA margin increased to 15.0 percent in the fourth quarter of fiscal year 2020, compared to 14.2 percent in the same period of the prior year. The decrease in segment adjusted EBITDA was driven primarily by lower volumes and the impact from the termination of the WABCO distribution arrangement, partially offset by cost reduction actions, reduced incentive compensation costs and operational performance. Segment adjusted EBITDA margin increased due to cost reduction actions that more than offset the volume reductions and impact of the WABCO termination.
Fiscal Year 2020 Results
For fiscal year 2020, Meritor posted sales of $3.0 billion, down $1.3 billion, or approximately 31 percent from the prior year. The decrease in sales was driven by lower market volumes primarily due to decreased customer demand, as a result of the COVID-19 pandemic.
Net income attributable to Meritor was $245 million, or $3.24 per diluted share, compared to $291 million, or $3.37 per diluted share, in the same period last year. Net income from continuing operations attributable to the company was $244 million, or $3.23 per diluted share, compared to net income from continuing operations attributable to the company of $290 million, or $3.36 per diluted share, in the same period last year. Lower net income year over year was driven primarily by lower revenues as a result of significantly reduced market volumes due to the COVID-19 pandemic, as well as higher restructuring costs related to actions taken in fiscal year 2020. This decrease was partially offset by $203 million of after tax income associated with the termination of the company’s distribution arrangement with WABCO in fiscal year 2020.
Adjusted income from continuing operations in fiscal year 2020 was $85 million, or $1.12 per adjusted diluted share, compared to $330 million, or $3.82 per adjusted diluted share, in the prior year. The decrease in adjusted income year over year was driven primarily by lower revenues as a result of reduced market volumes due to the COVID-19 pandemic.
Adjusted EBITDA was $272 million in fiscal year 2020, compared with $520 million in fiscal year 2019. Adjusted EBITDA margin was 8.9 percent in fiscal year 2020, down 300 basis points compared with the prior fiscal year. The decrease in adjusted EBITDA year over year was driven primarily by lower revenues as a result of reduced market volumes due to the COVID-19 pandemic. Cost reduction actions executed primarily in the second half of fiscal year 2020 partially offset the impact from lower revenue.
Cash flow from operating activities in the fiscal year was $265 million, compared to $256 million in fiscal year 2019. Free cash flow for the full fiscal year was $180 million, compared to $153 million in fiscal year 2019. The increase in cash provided by operating activities was driven primarily by $265 million of cash received from the termination of the distribution arrangement with WABCO in fiscal year 2020 and a one-time $48 million cash contribution and loan repayment to fund the Maremont 524(g) Trust made in fiscal year 2019, which did not repeat, largely offset by lower fiscal year 2020 revenues as a result of significantly reduced market volumes primarily due to the impact of the COVID-19 pandemic.
Fiscal Year 2020 Highlights
Capital Return
In fiscal year 2020, the company repurchased 10.4 million shares of common stock for $241 million, representing more than 12 percent of the average shares outstanding at the beginning of the fiscal year.
Advanced Technology Investment
Meritor acquired all the outstanding common shares of Transportation Power, Inc. (“TransPower”) in fiscal year 2020. Through the addition of TransPower’s product portfolio, the company continues to advance its M2022 priorities through increased investment in next-generation electrification technologies, and it further establishes the value of Meritor’s Blue Horizon™ brand across the industry.
Outlook for Fiscal Year 2021
The company is providing the following guidance for fiscal year 2021:
- Revenue to be in the range of $3.1 billion to $3.35 billion
- Net income attributable to Meritor and net income from continuing operations attributable to Meritor to be in the range of $45 million to $75 million
- Diluted earnings per share from continuing operations to be in the range of $0.60 to $1.05
- Adjusted diluted earnings per share from continuing operations to be in the range of $1.10 to $1.75
- Adjusted EBITDA margin to be in the range of 9.2 percent to 10.2 percent
- Operating cash flow to be in the range of $145 million to $185 million
- Free cash flow to be in the range of $60 million to $100 million
“While fiscal year 2020 brought unforeseen headwinds, Meritor implemented cost containment actions early, bolstered our liquidity and maintained a strong balance sheet, which helped offset the financial impact of the pandemic and enabled us to continue making long-term investments,” said Jay Craig, president and CEO of Meritor. “We remain confident that our M2022 plan remains on track.”
Fourth-Quarter and Fiscal Year 2020 Conference Call
Meritor will host a conference call and webcast to discuss the company’s fourth-quarter and full-year results for fiscal year 2020 on Thursday, Nov. 12 at 9 a.m. ET.
To participate, call (844) 412-1003 within the U.S. or (216) 562-0450 from outside the U.S. at least 10 minutes prior to the start of the call. Please reference conference ID: 7619875 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 12 p.m. ET on Nov. 12 until 12 p.m. ET on Nov. 19 by calling (855) 859-2056 within the U.S. or (404) 537-3406 from outside the U.S. Please refer to replay conference ID 7619875. To access the listen-only audio webcast, visit meritor.com and select the webcast link from the Investors page.
SOURCE: Meritor
