Meritor posted sales of $945 million, up $187 million for the fourth quarter of fiscal year 2021 ending Sept. 30, or approximately 25 percent, from the same period last year. This increase in sales was driven primarily by higher global truck production in all markets.
Net income attributable to Meritor was $62 million, or $0.87 per diluted share, compared to net income attributable to Meritor of $1 million, or $0.01 per diluted share in the same period last year. Net income from continuing operations attributable to the company was $63 million, or $0.88 per diluted share, compared to net income from continuing operations attributable to the company of $1 million, or $0.01 per diluted share in the same period last year.
The increase in net income year over year was driven primarily by higher sales volumes and lower tax expense including a net tax benefit from certain tax initiatives, partially offset by higher freight and steel costs, the company says.
Adjusted income from continuing operations attributable to the company in the fourth quarter was $57 million, or $0.80 of adjusted diluted earnings per share, compared with $8 million, or $0.11 of adjusted diluted earnings per share in the same period last year.
Adjusted EBITDA was $91 million, compared to $60 million in the fourth quarter of fiscal year 2020. Adjusted EBITDA margin for the fourth quarter of fiscal year 2021 was 9.6 percent, compared with 7.9 percent in the same period last year. The increase in adjusted EBITDA year over year was driven primarily by higher sales volumes, partially offset by higher freight and steel costs.
Cash flow provided by operating activities in the fourth quarter of fiscal year 2021 was $51 million, compared to $77 million in the same period last year. Free cash flow for the fourth quarter of fiscal year 2021 was $8 million, compared to free cash flow of $37 million in the same period last year. The decrease in operating cash flow and free cash flow year over year was driven primarily by higher working capital requirements.
Fourth-Quarter segment results
Commercial truck sales were $740 million in the fourth quarter of fiscal year 2021, up 32 percent compared to the fourth quarter of fiscal year 2020. The increase in sales was driven by higher global truck production in all markets.
Commercial Truck segment adjusted EBITDA was $54 million in the fourth quarter of fiscal year 2021, up $30 million from the same period in the prior fiscal year. Segment adjusted EBITDA margin increased to 7.3 percent from 4.3 percent in the same period of the prior fiscal year. The increase in segment adjusted EBITDA and segment adjusted EBITDA margin was driven primarily by conversion on higher revenue, partially offset by higher freight and steel costs.
Aftermarket & Industrial sales were $250 million in the fourth quarter of fiscal year 2021, up 11 percent compared to the fourth quarter of fiscal year 2020. The increase in sales was driven by higher sales volumes across the segment.
Segment adjusted EBITDA for Aftermarket & Industrial was $34 million in the fourth quarter of fiscal years 2021 and 2020. Segment adjusted EBITDA margin decreased to 13.6 percent in the fourth quarter of fiscal year 2021, compared to 15.0 percent in the same period of the prior year. Segment adjusted EBITDA margin decreased primarily due to higher freight costs, which more than offset conversion on higher sales volumes.
Fiscal Year 2021 results
For fiscal year 2021, Meritor posted sales of $3.8 billion, up $0.8 billion, or approximately 26 percent from the prior year. The increase in sales was driven primarily by higher global truck production in all markets.
Net income attributable to Meritor was $199 million, or $2.73 per diluted share, compared to $245 million, or $3.24 per diluted share in the prior year. Net income from continuing operations attributable to the company was $200 million, or $2.74 per diluted share, compared to net income from continuing operations attributable to the company of $244 million, or $3.23 per diluted share in the prior year. The decrease in net income year over year was driven primarily by income, net of tax, associated with the termination of the company's distribution arrangement with WABCO Holdings, Inc. ("WABCO") in fiscal 2020 and higher freight, steel and electrification costs in fiscal year 2021, partially offset by conversion on higher revenue.
Adjusted income from continuing operations in fiscal year 2021 was $195 million, or $2.68 of adjusted diluted earnings per share, compared to $73 million, or $0.97 of adjusted diluted earnings per share in the prior year.
Adjusted EBITDA was $411 million in fiscal year 2021, compared with $272 million in fiscal year 2020. Adjusted EBITDA margin was 10.7 percent in fiscal year 2021, up 180 basis points compared with the prior fiscal year. The increase in adjusted EBITDA and adjusted EBITDA margin year over year was driven primarily by higher sales volumes, partially offset by higher freight, steel and electrification costs.
Cash flow from operating activities in the fiscal year was $197 million, compared to $265 million in fiscal year 2020. Free cash flow for the full fiscal year was $107 million, compared to $180 million in fiscal year 2020. The decrease in cash provided by operating activities was driven primarily by $265 million of cash received in fiscal year 2020 from the termination of the distribution arrangement with WABCO and an increase in fiscal year 2021 working capital requirements.
Outlook for Fiscal Year 2022
The company is providing the following guidance for fiscal year 2022:
- Revenue to be in the range of $4.1 billion to $4.3 billion
- Net income attributable to Meritor and net income from continuing operations attributable to Meritor to be in the range of $220 million to $255 million
- Diluted earnings per share from continuing operations in the range of $3.05 to $3.55
- Adjusted diluted earnings per share from continuing operations to be in the range of $3.25 to $3.75
- Adjusted EBITDA margin to be in the range of 11.5 percent to 12.5 percent
- Operating cash flow to be in the range of $275 million to $320 million
- Free cash flow to be in the range of $175 million to $200 million
“While 2021 was a challenging industry environment, we performed well. Now in the last year of our M2022 plan, we remain focused on earnings and growth, particularly as we expand our customer base in the growing commercial vehicle electrification market,” says Chris Villavarayan, CEO and president of Meritor.
Additional earnings information is available.
Meritor also announced plans to provide zero emission battery electric drivetrain technology to Paccar for the SuperTruck 3 program.
SuperTruck 3 will fund projects to electrify medium- and heavy-duty freight trucks. Additional investment will boost vehicle efficiency and expand EV Infrastructure.
“We are excited to be working on the SuperTruck program again and proud of our contribution in each of the previous two initiatives,” says Tim Bowes, senior vice president and president, Electrification, Industrial and North America Aftermarket, Meritor. “As part of the project, Meritor Blue Horizon technology will be utilized to develop the next generation of electric powertrains for commercial vehicles.”
“Paccar is pleased to work with Meritor on the SuperTruck 3 program to extend our leadership in zero emission trucks,” says John Rich, Paccar senior chief technology officer.
