Net income attributable to Meritor was $1 million, compared with net income attributable to Meritor of $43 million in the prior year. Net income from continuing operations attributable to the company was $1 million, compared with net income from continuing operations attributable to the company of $42 million 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 selling, general and administrative expense (SG&A) due to cost reduction actions executed primarily in the second half of the year, reduced incentive compensation costs and operational performance, Meritor reports.
Adjusted income from continuing operations attributable to the company in the fourth quarter was $11 million, compared with $70 million in the prior year.
Adjusted EBITDA was $60 million, compared with $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 with $62 million in the same period last year. Free cash flow for the fourth quarter of fiscal year 2020 was $37 million, compared with $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.
Q4 segment results
Commercial truck sales were $560 million in the fourth quarter of fiscal year 2020, down 28 percent compared with 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.
Aftermarket and Industrial sales were $226 million in the fourth quarter of fiscal year 2020, down 22 percent compared with 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, 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 percent in the fourth quarter of fiscal year 2020, compared with 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.
FY2020 results
For fiscal year 2020, Meritor posted sales of $3 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, the company says.
Net income attributable to Meritor was $245 million, compared to $291 million in the same period last year. Net income from continuing operations attributable to the company was $244 million, compared to net income from continuing operations attributable to the company of $290 million 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, compared to $330 million in the prior year. 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 income and EBITDA year over year was driven primarily by lower revenues as a result of reduced market volumes due to the COVID-19 pandemic.
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.
“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,” says Jay Craig, Meritor president and CEO. “We remain confident that our M2022 plan remains on track.”
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In other Meritor news, the company recently posted videos showing its progress regarding electrification.
One video looks at the manufacturing and assembly of 14Xe electric powertrains inside Meritor’s facilities. The second video is a technical video animation showing attributes of Meritor’s 14Xe electric powertrain versus a conventional remote mount system.
