Meritor cuts debt by $500 million, ends Q1 with cash, equivalents of $214 million

By Lisa Kerner

Charlotte, N.C., Jan. 28 – Meritor, Inc. reduced its net debt by $500 million in two years, said chairman and chief executive officer Ike Evans during the company’s earnings call on Wednesday to discuss fiscal 2015 first-quarter results.

At Dec. 31, Meritor had cash and cash equivalents of $214 million and long-term debt of $962 million. This compares to $247 million and $965 million, respectively, at Sept. 30.

Chief financial officer Kevin Nowlan said the first quarter was “very solid.”

Free cash flow was a negative $21 million for the period, compared to a negative $16 million a year ago. Nowlan said Meritor is on track to generate $100 million of free cash flow for the full year.

“Interest expense was $19 million in the first quarter of 2015, compared to $27 million in the same period last year,” said Nowlan on the call.

“The decrease was driven by the capital markets transactions we executed that reduced our gross debt balances by $171 million and lowered our cost of debt.”

Financial highlights

Meritor’s first-quarter sales were down 2% year over year at $879 million. The decline was attributed to lower commercial truck production and unfavorable exchange rates in Europe and South America, in addition to lower revenue from Meritor’s defense business, partially offset by higher sales in North America due to improvements in the class 8 truck market.

Net income attributable to Meritor from continuing operations, on a GAAP basis, was $32 million, or $0.32 per diluted share, compared to $12 million, or $0.12 per diluted share, in the prior year, according to the earnings news release.

The company had earnings of $0.29 per diluted share, compared to $0.11 for the same period last year.

Adjusted EBITDA for the quarter was up $7 million year over year at $79 million.

Meritor is a Troy, Mich.-based auto components maker.

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