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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
(Mark One)
Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarterly Period Ended June 28, 2020
Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from ________ to ________

Commission File No. 1-15983

MERITOR, INC.

(Exact name of registrant as specified in its charter)

Indiana38-3354643
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
 
2135 West Maple Road, Troy, Michigan
48084-7186
(Address of principal executive offices)(Zip Code)
(248) 435-1000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $1 Par ValueMTORNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YesNo
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Registration S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
YesNo
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated FilerAccelerated Filer
Non-accelerated FilerSmaller Reporting Company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YesNo
72,289,344 shares of Common Stock, $1.00 par value, of Meritor, Inc. were outstanding on July 27, 2020.



INDEX
Page
No.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2


MERITOR, INC.
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in millions, except per share amounts)
Three Months Ended June 30,Nine Months Ended June 30,
2020201920202019
(Unaudited)
Sales$514  $1,166  $2,286  $3,360  
Cost of sales(486) (987) (2,017) (2,866) 
GROSS PROFIT28  179  269  494  
Selling, general and administrative(52) (73) (181) (180) 
Income from WABCO distribution termination    265    
Other operating expense, net(17) (2) (32) (1) 
OPERATING INCOME (LOSS)(41) 104  321  313  
Other income, net12  10  36  30  
Equity in earnings of affiliates(1) 9  11  24  
Interest expense, net(17) (14) (47) (43) 
INCOME (LOSS) BEFORE INCOME TAXES(47) 109  321  324  
Benefit (provision) for income taxes13  (21) (73) (69) 
 INCOME (LOSS) FROM CONTINUING OPERATIONS(34) 88  248  255  
INCOME FROM DISCONTINUED OPERATIONS, net of tax  1  1    
NET INCOME (LOSS)(34) 89  249  255  
Less: Net income attributable to noncontrolling interests(2) (3) (5) (7) 
NET INCOME (LOSS) ATTRIBUTABLE TO MERITOR, INC.$(36) $86  $244  $248  
NET INCOME (LOSS) ATTRIBUTABLE TO MERITOR, INC.
Net income (loss) from continuing operations$(36) $85  $243  $248  
Income from discontinued operations  1  1    
Net income (loss)$(36) $86  $244  $248  
BASIC EARNINGS (LOSS) PER SHARE
Continuing operations$(0.50) $1.02  $3.26  $2.96  
Discontinued operations  0.01  0.01    
       Basic earnings per share$(0.50) $1.03  $3.27  $2.96  
DILUTED EARNINGS (LOSS) PER SHARE
Continuing operations$(0.50) $0.99  $3.19  $2.86  
Discontinued operations  0.01  0.01    
       Diluted earnings per share$(0.50) $1.00  $3.20  $2.86  
Basic average common shares outstanding72.1  83.0  74.6  83.7  
Diluted average common shares outstanding72.1  85.6  76.3  86.6  
See Notes to Condensed Consolidated Financial Statements.

3


MERITOR, INC.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(in millions)

Three Months Ended June 30,Nine Months Ended June 30,
2020201920202019
(Unaudited)
Net income (loss)$(34) $89  $249  $255  
Other comprehensive income (loss):
Foreign currency translation adjustments:
     Attributable to Meritor, Inc.10  (6) (25) (3) 
     Attributable to noncontrolling interest(2) (1) (2)   
Pension and other postretirement benefit related adjustments3  1  8  2  
Unrealized loss on cash flow hedges  (2) (3) (2) 
Other comprehensive income (loss), net of tax11  (8) (22) (3) 
 Total comprehensive income (loss)(23) 81  227  252  
Less: Comprehensive income attributable to noncontrolling interest  (2) (3) (7) 
 Comprehensive income (loss) attributable to Meritor, Inc.$(23) $79  $224  $245  
See Notes to Condensed Consolidated Financial Statements.

4


MERITOR, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(in millions)
June 30,
2020
September 30, 2019
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$280  $108  
Receivables, trade and other, net390  551  
Inventories495  526  
Other current assets35  31  
TOTAL CURRENT ASSETS1,200  1,216  
NET PROPERTY 498  515  
GOODWILL503  478  
OTHER ASSETS671  606  
TOTAL ASSETS$2,872  $2,815  
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Short-term debt$34  $41  
       Accounts and notes payable 322  610  
Other current liabilities284  285  
TOTAL CURRENT LIABILITIES640  936  
LONG-TERM DEBT1,193  902  
RETIREMENT BENEFITS308  336  
OTHER LIABILITIES328  226  
TOTAL LIABILITIES2,469  2,400  
COMMITMENTS AND CONTINGENCIES (See Note 20)
EQUITY:
Common stock (June 30, 2020 and September 30, 2019, 103.7 and 104.1 shares issued and 72.3 and 81.4 shares outstanding, respectively)
105  104  
Additional paid-in capital805  803  
Retained earnings735  491  
Treasury stock, at cost (June 30, 2020 and September 30, 2019, 31.4 and 22.7 shares, respectively)
(573) (332) 
Accumulated other comprehensive loss(701) (681) 
Total equity attributable to Meritor, Inc.371  385  
Noncontrolling interests32  30  
TOTAL EQUITY403  415  
TOTAL LIABILITIES AND EQUITY$2,872  $2,815  
See Notes to Condensed Consolidated Financial Statements.
5


MERITOR, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
Nine Months Ended June 30,
20202019
(Unaudited)
OPERATING ACTIVITIES
Net income$249  $255  
Less: Income from discontinued operations, net of tax1    
Income from continuing operations248  255  
Adjustments to income from continuing operations to arrive at cash provided by operating activities:
Depreciation and amortization74  64  
Deferred income tax expense (benefit)(4) 27  
Restructuring costs27  (2) 
Asset impairment charges  1  
Equity in earnings of affiliates(11) (24) 
Pension and retiree medical income(31) (28) 
Asbestos related liability remeasurement  (31) 
Other adjustments to income from continuing operations3  13  
Dividends received from equity method investments8  14  
Pension and retiree medical contributions(11) (12) 
Restructuring payments(21) (2) 
Changes in off-balance sheet accounts receivable securitization and factoring programs(104) 41  
Changes in receivables, inventories and accounts payable
11  (96) 
Changes in other current assets and liabilities
(26) (21) 
Changes in other assets and liabilities25  (3) 
Operating cash flows provided by continuing operations188  196  
Operating cash flows used for discontinued operations  (2) 
CASH PROVIDED BY OPERATING ACTIVITIES188  194  
INVESTING ACTIVITIES
Capital expenditures(45) (63) 
Cash paid for acquisition of Transportation Power, Inc., net of cash acquired(13) (6) 
Other investing activities9  17  
CASH USED FOR INVESTING ACTIVITIES(49) (52) 
FINANCING ACTIVITIES
Securitization(8)   
Borrowings against revolving line of credit304    
Repayments of revolving line of credit(304) (46) 
Redemption of notes  (24) 
Proceeds from debt issuances300    
Deferred issuance costs(4) (4) 
Term loan payments(6)   
Other financing activities(1) (2) 
Net change in debt281  (76) 
Repurchase of common stock(241) (71) 
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES40  (147) 
EFFECT OF CHANGES IN FOREIGN CURRENCY EXCHANGE
RATES ON CASH AND CASH EQUIVALENTS
(7) 1  
CHANGE IN CASH AND CASH EQUIVALENTS172  (4) 
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD108  115  
CASH AND CASH EQUIVALENTS AT END OF PERIOD$280  $111  
See Notes to Condensed Consolidated Financial Statements.
6


MERITOR, INC.
CONDENSED CONSOLIDATED STATEMENT OF EQUITY
(in millions)
(Unaudited)

Three months ended June 30, 2020
Common
Stock
Additional
Paid-in
Capital
Retained EarningsTreasury StockAccumulated
Other
Comprehensive
Loss
Total Equity Attributable to
Meritor, Inc.
Noncontrolling
Interests
Total
Beginning Balance at March 31, 2020
$105  $803  $771  $(573) $(714) $392  $32  $424  
Comprehensive income (loss)—  —  (36) —  13  (23)   (23) 
Equity based compensation expense—  2  —  —  —  2  —  2  
Ending Balance at June 30, 2020$105  $805  $735  $(573) $(701) $371  $32  $403  
Three months ended June 30, 2019
Common
Stock
Additional
Paid-in
Capital
Retained EarningsTreasury StockAccumulated
Other
Comprehensive
Loss
Total Equity Attributable to
Meritor, Inc.
Noncontrolling
Interests
Total
Beginning Balance at March 31, 2019
$104  $793  $362  $(286) $(562) $411  $34  $445  
Comprehensive income (loss)—  —  86  —  (7) 79  2  81  
Equity based compensation expense—  5  —  —  —  5  —  5  
Repurchase of common stock—  —  —  (21) —  (21) —  (21) 
Ending Balance at June 30, 2019$104  $798  $448  $(307) $(569) $474  $36  $510  
See Notes to Condensed Consolidated Financial Statements.

7


MERITOR, INC.
CONDENSED CONSOLIDATED STATEMENT OF EQUITY
(in millions)
(Unaudited)

Nine months ended June 30, 2020
Common
Stock
Additional
Paid-in
Capital
Retained EarningsTreasury StockAccumulated
Other
Comprehensive
Loss
Total Equity Attributable to
Meritor, Inc.
Noncontrolling
Interests
Total
Beginning Balance at September 30, 2019
$104  $803  $491  $(332) $(681) $385  $30  $415  
Comprehensive income (loss)—  —  244  —  (20) 224  3  227  
Equity based compensation expense—  3  —  —  —  3  —  3  
Vesting of equity based awards1  (1) —  —  —  —  —    
Repurchase of common stock—  —  —  (241) —  (241) —  (241) 
Noncontrolling interest dividend—  —  —  —  —  —  (1) (1) 
Ending Balance at June 30, 2020$105  $805  $735  $(573) $(701) $371  $32  $403  
Nine months ended June 30, 2019
Common
Stock
Additional
Paid-in
Capital
Retained EarningsTreasury StockAccumulated
Other
Comprehensive
Loss
Total Equity Attributable to
Meritor, Inc.
Noncontrolling
Interests
Total
Beginning Balance at September 30, 2018
$102  $787  $200  $(236) $(566) $287  $30  $317  
Comprehensive income (loss)—  —  248