Meritor: Earnings slightly below expectations


Meritor announced first quarter sales of $891 million – down 23 percent from the same period last year – on an earnings call Wednesday morning.

“Our performance this quarter was slightly below our expectations driven primarily by weaker than expected market conditions outside North America,” says Chairman, CEO and President Chip McClure. “In response to these changing conditions and the impact of reduced military spending, we have taken aggressive actions targeted at variable labor and structural cost reductions which we expect to drive improving margins in the coming quarters.”

With a swing of negative $96 million, operating cash flow was among the hardest hit in the first quarter of fiscal year 2013. The company reported operating cash flow of negative $91 million, compared to positive $5 million in the same period last year.

The company reported an adjusted EBITDA of $46 million, compared to $79 million in the first quarter of fiscal year 2012, with a margin for the first quarter of fiscal year 2013 of 5.2 percent, compared with 6.8 percent for the same period last year.

Sales from Meritor’s Commercial Truck & Industrial division were $715 million, down $260 million from the same period last year. The company’s Aftermarket & Trailer segment posted sales of $203 million, down $15 million from the same period last year, primarily due to lower volumes in North America.

Adjusting expectations

Upon the release of their Q1 results, the company revised their earnings expectations for the remainder of the year. to the following results from continuing operations. Meritor expects revenue of approximately $3.8 billion, slightly down from $4 billion announced previously. Free cash flow from continuing operations before restructuring payments is expected to be slightly negative, which previously was forecast about break even.

“We’re executing on our 2013 priorities in the face of significant volume pressures outside North America,” McClure says. “We remain committed to driving toward meeting the needs of all our stakeholders while continuing to invest in our market leadership positions.”

Despite revenue and cash flow adjustments, Meritor expects an adjusted EBITDA margin of approximately 7 percent for fiscal year 2013, with adjusted earnings per share from continuing operations in the range of $0.25 to $0.35.

For fiscal year 2013, the company says they anticipate the following across company:

  • Capital expenditures in the range of $65 million to $75 million.
  • Interest expense in the range of $95 million to $105 million (previously $90 million to $100 million).
  • Cash interest in the range of $75 million to $85 million.
  • Cash income taxes in the range of $45 million to $55 million (previously in the range of $50 million to $60 million).
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