Meritor Inc. (MTOR) posted a profit to $32.0 million or 33 cents per share in the second quarter of fiscal 2012 ended March 31, 2012, which was more than double compared with $13 million or 13 cents in the same quarter of prior fiscal year, driven by successful completion of business activities during the quarter.
The bottom line also exceeded the Zacks Consensus Estimate by 8 cents per share. The results excluded the restructuring costs and losses related to the divestitures of the company’s light vehicle business in 2011.
However, sales in the quarter fell marginally by 1% to $1.2 billion. Lower sales in the company’s Commercial Truck and Aftermarket & Trailer segments in South America and Europe as well as in the Industrial segment in Asia Pacific were more than offset the higher sales in the first two segments in North America.
Adjusted EBITDA was $95 million compared with $82 million in the second quarter of fiscal 2011. Consequently, adjusted EBITDA margin increased to 8.2% from 7.0% in the same quarter last year.
Segment Results
In the Commercial Truck segment, revenues were flat at $693 million. However, segment EBITDA went up $9 million to $49 million, driven by initiatives completed in the quarter.
In the Industrial segment, revenues dipped 5.5% to $289 million due to lower sales in North America and Asia Pacific. However, segment EBITDA rose 22% to $22 million from $18 million a year ago driven by favorable sales mix of military products.
In the Aftermarket & Trailer segment, sales inched up 2% to $263 million, driven by better sales in North America, partially offset by lower sales in Europe. Nevertheless, EBITDA slid $1 million to $28 million, due to lower earnings from the company's unconsolidated trailer joint venture in Brazil.
Financial Position
Meritor had cash and cash equivalents of $109 million as of March 31, 2012, down from $217 million as of September 30, 2011. Long-term debt decreased by $59 million to $975 million from $1.0 billion as of September 30, 2011. The company had a shareholder deficit of $985 million as of March 31, 2012, compared with $995 million as of September 30, 2011.
In the first half of fiscal 2012, Meritor had an operating cash outflow of $38 million from continuing operations, which was higher compared with $7 million in the same period of prior fiscal year. The decline in cash flow can be attributable to higher expenses for pension and retiree medical contributions and lower favorable changes in off-balance sheet receivable securitization and factoring compared with the prior year.
Capital expenditures for continuing operations increased $1 million to $43 million from the prior fiscal year period. Free cash flow from continuing operations (before restructuring payments) was a use of $71 million compared with a use of $42 million in the first half of fiscal 2011.
Guidance
For fiscal 2012, Meritor reiterated its revenues and earnings guidance provided while presenting the first quarter results. The company anticipates revenues of $4.8 billion, adjusted EBITDA margin in the range of 8.2%–8.6% and adjusted profit in the range of $105 million–$135 million or $1.08 and $1.39 per share.
The company also expects capital expenditures in the range of $100 million to $110 million and free cash flow from continuing operations (before restructuring payments) in the range of $0 to $50 million compared with the prior guidance of $25 million to $75 million.
Our Take
Headquartered in Troy, Michigan, 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 19 countries across North America, South America, Europe and Asia-Pacific. Some of its big customers include Volvo AB (VOLVY), Navistar International Corporation (NAV) and Daimler AG (DDAIY).
We are optimistic about Meritor’s focus on cost savings program and its reliance on OEMs in low cost countries across Asia and South America to generate revenues. However, based on the high customer concentration, the company retains a Zacks #3 Rank, which translates to a Hold rating for the short term (1–3 months).
Read the Full Research Report on MTORRead the Full Research Report on NAV
Read the Full Research Report on DDAIF
Read the Full Research Report on VOLVY
More From Zacks.com
