Meritor has posted fourth quarter net income of US$3m, down from US$41m.

The company sold its Mascot remanufacturing business in the fourth quarter of fiscal year 2014 and recognised a US$23m loss on the sale.

The Mascot remanufacturing business, including the loss on the sale, is reported in discontinued operations.

Sales were US$933m, up 3% from the same period last year, primarily due to higher sales in North America, partially offset by lower revenues in Europe, Defence and South America.

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TROY, Mich. (Nov. 12, 2014) - Meritor, Inc. (NYSE: MTOR) today reported financial results for its fourth quarter and full fiscal year ended Sept. 30, 2014.

Fourth-Quarter Highlights

  • Sales were $933 million, up $31 million, or 3 percent, from the same period last year.
  • Net income was $3 million, compared to $41 million in the same period last year. Net income from continuing operations was $29 million, compared to $40 million in the prior year.
  • Adjusted income from continuing operations was $35 million, or $0.35 per diluted share, compared to $13 million, or $0.13 per diluted share, a year ago.
  • Adjusted EBITDA was $80 million, compared to $73 million in the same period last year. Adjusted EBITDA margin of 8.6 percent, increased from 8.1 percent in the same period last year.
  • Free cash flow was $74 million in the fourth quarter of fiscal year 2014, compared to negative $46 million in the same period last year.

Fourth-Quarter Results
For the fourth quarter of fiscal year 2014, Meritor posted sales of $933 million, up 3 percent from the same period last year, primarily due to higher sales in North America, partially offset by lower revenues in Europe, Defense and South America. Net income from continuing operations was $29 million, or $0.29 per diluted share, compared to $40 million, or $0.41 per diluted share, in the prior year. The prior year was favorably impacted by the gain on the sale of the company’s ownership interest in its Suspensys joint venture, partially offset by a non-cash pension settlement loss.

Net income was $3 million, compared to $41 million in the same period last year. The company sold its Mascot remanufacturing business in the fourth quarter of fiscal year 2014 and recognized a $23 million loss on the sale. The Mascot remanufacturing business, including the loss on the sale, is reported in discontinued operations.

Adjusted EBITDA was $80 million, compared to $73 million in the fourth quarter of fiscal year 2013. Adjusted EBITDA margin for the fourth quarter of fiscal year 2014 was 8.6 percent, compared to 8.1 percent in the same period last year. The increases in Adjusted EBITDA and Adjusted EBITDA margin compared to the prior year were primarily driven by improvements in material cost and operating performance and slightly higher revenue, partially offset by the unfavorable mix impact.

Cash flow from operating activities for the fourth fiscal quarter was $112 million, compared to negative $23 million in the same period last year. Free cash flow for the fourth quarter of fiscal year 2014 was $74 million, compared to negative $46 million in the same period last year. Free cash flow for the fourth quarter of fiscal year 2014 includes $209 million in proceeds from the settlement of the Eaton antitrust litigation, partially offset by $134 million associated with the voluntary pre-funding of the next three years of mandatory contributions to the company’s U.S. and U.K. pension plans. Free cash flow in the prior year’s fourth quarter included $54 million of voluntary pension contributions and $33 million of income tax payments associated with the gain on sale of Suspensys.

Fourth-Quarter Segment Results
Commercial Truck & Industrial sales were $729 million, up $20 million compared with the same period last year, primarily driven by higher revenues in North America, partially offset by lower sales in Europe, Defense and South America. Segment EBITDA for the Commercial Truck & Industrial segment was $53 million for the quarter, down $1 million from the fourth quarter of fiscal year 2013. Segment EBITDA margin declined to 7.3 percent, down from 7.6 percent in the same period last year, as the favorable impact of material and operating performance and higher sales in North America was more than offset by the unfavorable mix impact of lower sales in South America and Defense and higher variable incentive compensation.
The company's Aftermarket & Trailer segment posted sales of $240 million, up $13 million from the same period last year. Segment EBITDA for Aftermarket & Trailer was $34 million, up $7 million from the fourth quarter of fiscal year 2013. Segment EBITDA margin increased to 14.2 percent from 11.9 percent in the fourth quarter of fiscal year 2013. The increase in segment EBITDA margin was primarily due to certain value-added tax accruals recognized in the prior year and current year pricing initiatives.

Fiscal Year Results
For fiscal year 2014, Meritor posted sales of $3.76 billion, up $94 million, or 3 percent, from the prior fiscal year primarily due to higher sales in North America offset by lower revenues in Defense and South America.

Net income was $249 million compared to a net loss of $22 million in the prior fiscal year. Net income in fiscal year 2014 included a gain of $209 million from the settlement of the Eaton antitrust litigation, $31 million of losses associated with debt extinguishments and a loss from discontinued operations of $30 million primarily associated with the sale of Mascot. Adjusted income from continuing operations in fiscal year 2014 was $101 million, or $1.02 per diluted share, compared to $41 million, or $0.42 per diluted share, a year ago.

Adjusted EBITDA was $314 million in fiscal year 2014, compared to $264 million in fiscal year 2013, primarily driven by improved material and operating performance and pricing initiatives. Adjusted EBITDA margin was 8.3 percent in fiscal year 2014 compared to 7.2 percent in the prior fiscal year.

Cash flow provided by operating activities for the full fiscal year was $215 million, as compared to cash flow used for operating activities of negative $96 million in the prior fiscal year. Free cash flow for fiscal year 2014 was $138 million, compared to negative $150 million in fiscal year 2013.

Fiscal Year Accomplishments

  • Strong financial performance
    • Drove Adjusted EBITDA margin improvement of 110 basis points year over year.
    • Increased Adjusted diluted earnings per share from continuing operations to $1.02 compared to $0.42 in the same period last year.
    • Generated free cash flow of $138 million for fiscal year 2014.
  • Strengthened balance sheet
    • Received $209 million in after-tax proceeds from the settlement with Eaton Corporation.
    • Reduced net debt, including retirement benefit liabilities, by $260 million resulting in a balance of $1.44 billion - enabling the company to achieve its M2016 target of less than $1.5 billion two years earlier than planned.
    • Increased pension funded position from 80 percent to 88 percent.
  • Focus on Customer Value
    • Extended contract with Volvo to supply axles in Europe and South America through December 2021 and in Australia through May 2019. Meritor also entered into agreements with Volvo Group North America to extend existing contracts for the supply of axles and drivelines through May 2019.
    • Completed new four-year agreement with Daimler Trucks North America. With this contract, Meritor retains standard position for air drum brakes and drivelines and holds a strong optional position for front and rear axles.

M2016 Priorities
The company remains focused on M2016, its three-year plan for achieving margin, debt reduction and revenue growth targets through driving operational excellence, focusing on customer value, reducing product costs and investing in a high performing team. The plan includes the following 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.
  • Book incremental revenue of $500 million per year (at run-rate) by the end of fiscal year 2016 from new products or new customers.

Outlook for Fiscal Year 2015
Meritor expects the following from continuing operations:

  • Revenue to be approximately $3.8 billion.
  • Adjusted EBITDA margin in the range of 8.8 percent to 9.0 percent.
  • Adjusted earnings per share from continuing operations in the range of $1.20 to $1.30.
  • Total free cash flow to be approximately $100 million.

The company anticipates the following for the entire company:

  • Capital expenditures in the range of $80 million to $90 million.
  • Interest expense in the range of $80 million to $90 million.
  • Cash interest in the range of $65 million to $75 million.
  • Effective tax rate to be approximately 20 percent.

“Our improved performance in fiscal year 2014 reflects our commitment across the organization to achieve M2016 objectives,” said Ike Evans, chairman and CEO. “We believe our focus on achieving the plan will continue to drive improving results in fiscal year 2015.”

Fourth-Quarter and Fiscal Year 2014 Conference Call
Meritor will host a conference call and webcast to discuss the company’s fourth-quarter and full-year results for fiscal year 2014 at 9 a.m. (ET) Wednesday, Nov. 12, 2014.

To participate, call (617) 213-4866 10 minutes prior to the start of the call. When registering, reference passcode 60647739. 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 from 1:00 p.m. Nov. 12 to 11:59 p.m. Nov. 19 by calling (888) 286-8010 within the United States or (617) 801-6888 for international calls. Refer to replay passcode 86499578. To access the listen-only audio webcast, visit meritor.com and select the webcast link from the homepage or the investor page.

The company’s fourth-quarter and full-year financial results for fiscal year 2014 will be released prior to the conference call and webcast on Nov. 12. The release will be distributed through PR Newswire, First Call and meritor.com.

About Meritor
Meritor, Inc. is a leading global supplier of drivetrain, mobility, braking and aftermarket solutions for commercial vehicle and industrial markets. With more than a 100-year legacy of providing innovative products that offer superior performance, efficiency and reliability, the company serves commercial truck, trailer, off-highway, defense, specialty and aftermarket customers in more than 70 countries. Meritor is based in Troy, Mich., United States, and is made up of more than 9,000 diverse employees who apply their knowledge and skills in manufacturing facilities, engineering centers, joint ventures, distribution centers and global offices in 18 countries. Meritor’s common stock is traded on the New York Stock Exchange under the ticker symbol MTOR. For important information, visit the company's website at meritor.com.

Original source: http://www.meritor.com/ourcompany/news/pressreleases/Lists/allnewsitems/DispForm.aspx?id=1754&Source=/

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