Meritor Loses as Revenues Fall

Meritor Inc. ( MTOR - Analyst Report ) reported an adjusted loss of $11.0 million or 11 cents per share in the first quarter of fiscal 2013 compared with the prior-year profit of $11.0 million or 12 cents. The EPS missed the Zacks Consensus Estimate of a profit of 4 cents.

On a reported basis, the company posted a net loss of $16.0 million or 17 cents per share in the first quarter of fiscal 2013 compared with a loss of $13.0 million or 13 cents in the corresponding quarter last year.

Revenues went down 23.1% to $891.0 million in the reported quarter, missing the Zacks Consensus Estimate of $939 million. The decline in revenues was due to lower sales volumes in global markets.

Adjusted EBITDA was $46.0 million compared with $79.0 million in the first quarter of fiscal 2012. Adjusted EBITDA margin was 5.2%, down from 6.8% in the year ago quarter. The decrease in EBITDA margin was driven by lower sales, partially offset by the favorable impact of lower material costs, pricing actions in North America and rationalization of European footprint.

Segment Results

Revenues from the Commercial Truck & Industrial segment fell 26.7% to $715.0 million in the reported quarter. Segment EBITDA decreased 44.3% to $34.0 million from $61.0 million in the year-ago quarter, due to lower sales in all regions. EBITDA margin went down to 4.8% from 6.3% in the prior-year quarter.

Revenues from the Aftermarket & Trailer segment decreased 6.9% to $203.0 million, due to lower volumes in North America. Segment EBITDA plummeted 23.5% to $13.0 million from $17.0 million a year ago. EBITDA margin declined to 6.4% from 7.8% in the first quarter of fiscal 2012.

Financial Position

Meritor’s cash and cash equivalents decreased to $139.0 million as of Dec 31, 2012 from $257.0 million as of Sep 30, 2012. Total debt remained flat at $1.1 billion as of Dec 31, 2012 compared with the same as of Sep 30, 2012.

In the first quarter of fiscal 2013, the company had cash outflow of $91.0 million from operating activities compared with a cash flow of $5.0 million in the year-ago period. Capital expenditures declined to $15.0 million from $25.0 million a year ago. The company had free cash outflow from continuing operations of $106.0 million for the quarter compared with $20.0 million last year.

Outlook

For fiscal 2013, the company expects revenues to be $3.8 billion, lower than the previous guidance of $4.0 billion. Adjusted EBITDA margin is likely to be 7.0% and adjusted earnings per share are expected between 25 cents and 35 cents for the year.

In addition, the company expects capital expenditures between $65.0 million and $75.0 million for the fiscal year. Interest expense is projected in the range of $95.0 million to $105.0 million for the year, higher than the previous estimate of $90 million to $100 million.

Our Take

Headquartered in Troy, Mich., Meritor is a global automotive parts manufacturer and supplier to various customers in North America, Europe and other parts of the world. The company operates manufacturing facilities in North America, South America, Europe and Asia-Pacific.

Some of its big customers include AB Volvo ( VOLVY ) , Navistar International Corporation ( NAV - Analyst Report ) and Daimler AG ( DDAIF ) . Currently, Meritor retains a Zacks Rank #3 (Hold).