SEC Filing | Meritor, Inc.

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mtor-20220102

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 January 2, 2022


☐			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)

Indiana

38-3354643

(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 Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $1 Par Value	MTOR	New 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.

Yes

☒

☐

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 (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes

☒

☐

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 filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller 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).

Yes

☐

☒

70,774,834 shares of Common Stock, $1.00 par value, of Meritor, Inc. were outstanding on February 2, 2022.

INDEX


			Page No.
PART I.	FINANCIAL INFORMATION:

	Item 1.	Financial Statements:

		Condensed Consolidated Statement of Operations - - Three Months Ended December 3 1 , 2021 and 2020	3

		Condensed Consolidated Statement Of Comprehensive Income - - Three Months Ended December 3 1 , 2021 and 2020	4

		Condensed Consolidated Balance Sheet - - December 3 1 , 2021 and September 30, 20 21	5

		Condensed Consolidated Statement of Cash Flows - - Three Months Ended December 3 1 , 2021 and 2020	6

		Condensed Consolidated Statement of Equity - - Three Months Ended December 31, 2021 and 2020	7

		Notes to Condensed Consolidated Financial Statements	8

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35

	Item 4.	Controls and Procedures	36

PART II.	OTHER INFORMATION:

	Item 1.	Legal Proceedings	38

	Item 1A.	Risk Factors	38

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38

	Item 5.	Other Information	39

	Item 6.	Exhibits	40

Signatures			41

MERITOR, INC.

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(in millions, except per share amounts)


	Three Months Ended December 31,
	2021		2020
	(Unaudited)
Sales	$	984	$	889
Cost of sales	(857)		(774)
GROSS PROFIT	127		115
Selling, general and administrative	(62)		(65)


Other operating expense, net	(3)		(7)
OPERATING INCOME	62		43
Other income, net	14		14
Equity in earnings of affiliates	7		11
Interest expense, net	(13)		(28)
INCOME BEFORE INCOME TAXES	70		40
Provision for income taxes	(12)		(7)
INCOME FROM CONTINUING OPERATIONS	58		33
INCOME FROM DISCONTINUED OPERATIONS, net of tax	—		—
NET INCOME	58		33
Less: Net income attributable to noncontrolling interests	(4)		(1)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	54	$	32
NET INCOME ATTRIBUTABLE TO MERITOR, INC.
Net income from continuing operations	$	54	$	32
Income from discontinued operations	—		—
Net income	$	54	$	32
BASIC EARNINGS PER SHARE
Continuing operations	$	0.77	$	0.44
Discontinued operations	—		—
Basic earnings per share	$	0.77	$	0.44
DILUTED EARNINGS PER SHARE
Continuing operations	$	0.76	$	0.44
Discontinued operations	—		—
Diluted earnings per share	$	0.76	$	0.44

Basic average common shares outstanding	70.2		72.2
Diluted average common shares outstanding	71.2		73.2

See Notes to Condensed Consolidated Financial Statements.

MERITOR, INC.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(in millions)


	Three Months Ended December 31,
	2021		2020
	(Unaudited)
Net income	$	58	$	33
Other comprehensive income (loss):
Foreign currency translation adjustments:
Attributable to Meritor, Inc.	(14)		55
Attributable to noncontrolling interests	—		1

Pension and other postretirement benefit related adjustments	1		3
Unrealized gain on cash flow hedges	1		1
Other comprehensive income (loss), net of tax	(12)		60
Total comprehensive income	46		93
Less: Comprehensive income attributable to noncontrolling interests	(4)		(2)
Comprehensive income attributable to Meritor, Inc.	$	42	$	91

See Notes to Condensed Consolidated Financial Statements.

MERITOR, INC.

CONDENSED CONSOLIDATED BALANCE SHEET

(in millions)


	December 31, 2021		September 30, 2021
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	113	$	101

Receivables, trade and other, net	555		534
Inventories	667		601
Other current assets	69		50
TOTAL CURRENT ASSETS	1,404		1,286
NET PROPERTY	508		517
GOODWILL	507		507
OTHER ASSETS	628		628
TOTAL ASSETS	$	3,047	$	2,938
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Short-term debt	$	74	$	19
Accounts and notes payable	635		573
Other current liabilities	270		308
TOTAL CURRENT LIABILITIES	979		900
LONG-TERM DEBT	1,027		1,008
RETIREMENT BENEFITS	183		191
OTHER LIABILITIES	220		224
TOTAL LIABILITIES	2,409		2,323
COMMITMENTS AND CONTINGENCIES (See Note 16)

EQUITY:
Common stock (December 31, 2021 and September 30, 2021, 104.7 and 104.0 shares issued and 70.8 and 70.1 shares outstanding, respectively)	106		105
Additional paid-in capital	761		798
Retained earnings	1,006		935
Treasury stock, at cost (December 31, 2021 and September 30, 2021, 33.9 and 33.9 shares, respectively)	(632)		(632)
Accumulated other comprehensive loss	(644)		(632)
Total equity attributable to Meritor, Inc.	597		574
Noncontrolling interests	41		41
TOTAL EQUITY	638		615
TOTAL LIABILITIES AND EQUITY	$	3,047	$	2,938

See Notes to Condensed Consolidated Financial Statements.

MERITOR, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(in millions)


	Three Months Ended December 31,
	2021		2020
	(Unaudited)
OPERATING ACTIVITIES
Net income	$	58	$	33
Less: Income from discontinued operations, net of tax	—		—
Income from continuing operations	58		33
Adjustments to income from continuing operations to arrive at cash provided by operating activities:
Depreciation and amortization	25		27
Deferred income tax expense	1		1
Restructuring costs	4		6
Stock compensation expense	4		6
Equity in earnings of affiliates	(7)		(11)
Pension and retiree medical income	(13)		(13)
Loss on debt extinguishment	—		8

Dividends received from equity method investments	4		1
Pension and retiree medical contributions	(2)		(3)
Restructuring payments	(4)		(4)


Changes in off-balance sheet accounts receivable securitization and factoring programs	153		85
Changes in receivables, inventories and accounts payable	(181)		(77)
Changes in other current assets and liabilities	(58)		(22)
Changes in other assets and liabilities	(5)		7
Operating cash flows provided by (used for) continuing operations	(21)		44
Operating cash flows used for discontinued operations	—		—
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES	(21)		44
INVESTING ACTIVITIES
Capital expenditures	(18)		(10)





Other investing activities	2		(3)



CASH USED FOR INVESTING ACTIVITIES	(16)		(13)
FINANCING ACTIVITIES

Borrowing and securitization	55		—


Redemption of notes	—		(281)
Proceeds from debt issuances	—		275
Redemption of convertible notes	—		(53)
Debt issuance costs	—		(4)
Term loan payments	(5)		(4)



CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES	50		(67)
EFFECT OF CHANGES IN FOREIGN CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	(1)		4
CHANGE IN CASH AND CASH EQUIVALENTS	12		(32)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	101		315
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	113	$	283

See Notes to Condensed Consolidated Financial Statements.

MERITOR, INC.

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

(in millions)

(Unaudited)


	Three months ended December 31, 2021
	Common Stock		Additional Paid-in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total Equity Attributable to Meritor, Inc.		Noncontrolling Interests		Total
Beginning Balance at September 30, 2021	$	105	$	798	$	935	$	(632)	$	(632)	$	574	$	41	$	615
Comprehensive income (loss)	—		—		54		—		(12)		42		4		46
Vesting of equity based awards	1		(1)		—		—		—		—		—		—
Adjustments upon adoption of ASU 2020-06	—		(40)		17		—		—		(23)		—		(23)
Equity based compensation expense	—		4		—				—		4		—		4

Noncontrolling interest dividends	—		—		—		—		—		—		(4)		(4)



Ending Balance at December 31, 2021	$	106	$	761	$	1,006	$	(632)	$	(644)	$	597	$	41	$	638

	Three months ended December 31, 2020
	Common Stock		Additional Paid-in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total Equity Attributable to Meritor, Inc.		Noncontrolling Interests		Total
Beginning Balance at September 30, 2020	$	105	$	808	$	736	$	(573)	$	(614)	$	462	$	33	$	495
Comprehensive income	—		—		32		—		59		91		2		93
Vesting of equity based awards	1		(1)		—		—		—		—		—		—
Repurchase of convertible notes	—		(30)		—		—		—		(30)		—		(30)

Equity based compensation expense	—		6		—		—		—		6		—		6





Other equity adjustments	—		1		—		—		—		1		—		1
Ending Balance at December 31, 2020	$	106	$	784	$	768	$	(573)	$	(555)	$	530	$	35	$	565

See Notes to Condensed Consolidated Financial Statements.

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation

Meritor, Inc. (the "company" or "Meritor"), headquartered in Troy, Michigan, is a premier global supplier of a broad range of integrated products, systems, modules and components to original equipment manufacturers ("OEMs") and the aftermarket for the commercial vehicle, transportation and industrial sectors. The company serves commercial truck, trailer, military, bus and coach, construction and other industrial OEMs and certain aftermarkets. The Condensed Consolidated Financial Statements are those of the company and its consolidated subsidiaries.

In the opinion of the company, the unaudited Condensed Consolidated Financial Statements contain all adjustments, consisting solely of adjustments of a normal, recurring nature, necessary to present fairly the financial position, results of operations and cash flows for the periods presented. These statements should be read in conjunction with the company’s audited Consolidated Financial Statements and notes thereto included in the company's Annual Report on Form 10-K for the fiscal year ended September 30, 2021. The Condensed Consolidated Balance Sheet data as of September 30, 2021 was derived from audited financial statements but does not include all annual disclosures required by accounting principles generally accepted in the United States of America. The results of operations for the three months ended December 31, 2021 are not necessarily indicative of the results for the full year.

The company’s fiscal year ends on the Sunday nearest September 30, and its fiscal quarters generally end on the Sundays nearest December 31, March 31 and June 30. The first quarter of fiscal years 2022 and 2021 ended on January 2, 2022 and January 3, 2021, respectively. Fiscal year 2021 ended on October 3, 2021. All year and quarter references relate to the company’s fiscal year and fiscal quarters, unless otherwise stated. For ease of presentation, September 30 and December 31 are used consistently throughout this report to represent the fiscal year end and first fiscal quarter end, respectively.

COVID-19 Pandemic Update

The COVID-19 pandemic adversely affected our financial performance during the beginning of fiscal year 2021, however the direct adverse impacts of the pandemic on our operations and financial performance started to dissipate over the course of the third fiscal quarter of fiscal year 2021. All of our facilities have been fully operational since the end of fiscal year 2020 and our salaried employees have returned to work on a hybrid in person basis consistent with local, regional and business requirements, in each case under enhanced safety guidelines. Although we are optimistic that the worst of the pandemic is behind us, the progression of the pandemic, and its direct and indirect impacts on our markets, operations and financial performance, have been unpredictable. As a result of this continued uncertainty, there may still be impacts on our industry, operations, workforce, supply chains, distribution systems and demand for our products in the future which cannot be reasonably estimated at this time.

2. Earnings per Share

Basic earnings (loss) per share is calculated using the weighted average number of shares outstanding during each period. The diluted earnings (loss) per share calculation includes the impact of dilutive common stock options, restricted shares, restricted share units, performance share unit awards and convertible securities, if applicable.

A reconciliation of basic average common shares outstanding to diluted average common shares outstanding is as follows (in millions):


	Three Months Ended December 31,
	2021	2020
Basic average common shares outstanding	70.2	72.2
Impact of restricted shares, restricted share units and performance share units	1.0	1.0



Diluted average common shares outstanding	71.2	73.2

In November 2021, the Board of Directors approved a grant of 0.4 million performance share units to all executives eligible to participate in the long-term incentive plan. Each performance share unit represents the right to receive one share of common stock or its cash equivalent upon achievement of certain performance and time vesting criteria. The fair value of each performance share unit was $25.65, which was the company’s share price on the grant date of December 1, 2021. The Board of

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Directors also approved a grant of 0.3 million restricted share units to these executives. The restricted share units vest at the earlier of three years from the date of grant or upon termination of employment with the company under certain circumstances. The fair value of each restricted share unit was $25.65, which was the company's share price on the grant date of December 1, 2021.

The actual number of performance share units that will vest depends upon the company’s performance relative to the established performance metrics for the three-year performance period of October 1, 2021 to September 30, 2024, measured at the end of the performance period. The number of performance share units that vest will depend on adjusted EBITDA margin and adjusted diluted earnings per share from continuing operations which are each weighted at 50%. The number of performance share units that vest will be between 0% and 200% of the grant date amount of 0.4 million performance share units.

On December 1, 2020, in response to retention and attrition concerns resulting from the COVID-19 pandemic’s impact on the company’s incentive compensation plans, and to continue to incentivize executive performance in a difficult and uncertain environment, the Compensation Committee of the Board of Directors adjusted the threshold level of the performance metrics required to be achieved for payout for the fiscal 2019-2021 performance cycle. The target and maximum levels were not modified. The impact of this adjustment did not have a material impact on the company's Condensed Consolidated Financial Statements.

3. New Accounting Standards

Accounting standards implemented during fiscal year 2022

On October 1, 2021, the company adopted Accounting Standards Update ("ASU") 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (Subtopic 815-40). As a result of adopting this ASU, entities are no longer required to separately present in equity an embedded conversion feature in such debt and instead should account for a convertible debt instrument wholly as debt. ASU 2020-06 also amended the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments.

The company elected to adopt the ASU using the modified retrospective method. The cumulative effect of the changes following implementation on October 1, 2021 was as follows:


	Balance at September 30, 2021		Adjustments Upon Adoption of ASU 2020-06		Balance at October 1, 2021
Liabilities
Long-Term debt	$	1,008	$	23	$	1,031
Equity
Additional paid-in capital	$	798	$	(40)	$	758
Retained earnings	$	935	$	17	$	952

The prior period consolidated financial statements have not been retrospectively adjusted and continue to be reported under the accounting standards in effect for that period. Interest expense recognized in future periods will be reduced as a result of the derecognition of the unamortized debt discount on the 3.25 Percent Convertible Notes (see Note 13), which will no longer be amortized to interest expense. The reduction in interest expense will have a favorable impact on both basic and diluted earnings per share.

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

4. Revenue

Disaggregation of revenue

In the following tables, revenue is disaggregated for each of our operating segments by primary geographical market for the three months ended December 31, 2021 and 2020 (in millions).



	Three Months Ended December 31, 2021
Primary Geographical Market	Commercial Truck		Aftermarket & Industrial		Total
U.S.	$	348	$	177	$	525
Canada	—		12		12
Mexico	43		6		49
Total North America	391		195		586
Sweden	76		—		76
Italy	54		4		58
United Kingdom	38		2		40
Other Europe	1		35		36
Total Europe	169		41		210
Brazil	89		—		89
China	26		—		26
India	44		—		44
Other Asia-Pacific	29		—		29
Total sales	$	748	$	236	$	984



	Three Months Ended December 31, 2020
Primary Geographical Market	Commercial Truck		Aftermarket & Industrial		Total
U.S.	$	310	$	170	$	480
Canada	—		12		12
Mexico	36		5		41
Total North America	346		187		533
Sweden	77		—		77
Italy	53		5		58
United Kingdom	41		2		43
Other Europe	2		35		37
Total Europe	173		42		215
Brazil	56		—		56
China	30		—		30
India	33		—		33
Other Asia-Pacific	22		—		22
Total sales	$	660	$	229	$	889

As of December 31, 2021 and September 30, 2021, Trade receivables, net, which are included in Receivables, trade and other, net, on the Condensed Consolidated Balance Sheet, were $493 million and $471 million, respectively.

For the three months ended December 31, 2021 and 2020, the company had no material bad-debt expense. There were no material contract assets, contract liabilities or deferred contract costs recorded on the Condensed Consolidated Balance Sheet as of December 31, 2021 and September 30, 2021.

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

5. Restructuring Costs

Restructuring reserves were $5 million at December 31, 2021 and $6 million at September 30, 2021. Restructuring costs are recorded within Other operating expense, net within the Condensed Consolidated Statement of Operations. The changes in restructuring reserves for the three months ended December 31, 2021 and 2020 are as follows (in millions):


	Employee Termination Benefits		Plant Shutdown & Other		Total
Balance at September 30, 2021	$	5	$	1	$	6
Activity during the period:
Charges	1		3		4

Cash payments	(4)		—		(4)

Other	—		(1)		(1)
Total restructuring reserves at December 31, 2021	2		3		5
Less: non-current restructuring reserves	(1)		—		(1)
Restructuring reserves – current, at December 31, 2021	$	1	$	3	$	4

Balance at September 30, 2020	$	10	$	—	$	10
Activity during the period:
Charges	5		1		6

Cash payments	(4)		—		(4)
Other	(1)		(1)		(2)
Total restructuring reserves at December 31, 2020	10		—		10
Less: non-current restructuring reserves	—		—		—
Restructuring reserves – current, at December 31, 2020	$	10	$	—	$	10

Global Restructuring Programs Fiscal Year 2021: On November 11, 2020, the company approved a restructuring plan to close three U.S. manufacturing plants and one European administration office in its Aftermarket & Industrial segment and consolidate their operations into existing facilities. The site closures include:

• Chicago, Illinois

• Livermore, California

• Livonia, Michigan

• Zurich, Switzerland

The closures impacted approximately 150 hourly and salaried workers. These restructuring plans were intended to optimize the company’s manufacturing footprint, reduce costs and increase efficiencies. With this restructuring plan, the company incurred approximately $13 million in restructuring charges in the Aftermarket & Industrial segment, consisting of an impact on long-lived assets of $3 million, severance related costs of $5 million and other associated costs of $5 million. During fiscal year 2021, the company incurred $10 million in restructuring costs related to this plan. During the first quarter of fiscal year 2022, the company incurred $3 million in restructuring costs related to this plan. Restructuring actions associated with this plan are substantially complete.

6. Income Taxes

For the three months ended December 31, 2021 and 2020, the company recognized tax expense of $12 million and $7 million, respectively. This resulted in effective tax rates of 17% and 18%, respectively.

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

7. Accounts Receivable Factoring and Securitization

The company has a U.S. accounts receivable securitization facility with PNC Bank and participates in various accounts receivable factoring programs, primarily with Nordea Bank for trade receivables from AB Volvo, as follows:


	Current Expiration	Total Facility Size as of 12/31/21				Utilized as of 12/31/21				Utilized as of 9/30/21
		EUR		USD		EUR		USD		EUR		USD
On-balance sheet arrangement

Committed U.S. accounts receivable securitization (1)	March 2024	N/A		$	110	N/A		$	57	N/A		$	3
Total on-balance sheet arrangement: (1)		N/A		$	110	N/A		$	57	N/A		$	3
Off-balance sheet arrangements
Committed Swedish factoring facility (2)(3)	March 2024	€	155	$	176	€	162	$	184	€	75	$	88
Committed U.S. factoring facility (2)	February 2023	N/A		75		N/A		85		N/A		49
Uncommitted U.K. factoring facility	April 2022	25		28		5		6		2		2
Uncommitted Italy factoring facility	June 2022	30		34		25		28		14		17
Other uncommitted factoring facilities (4)	None	N/A		N/A		15		17		15		17
Total off-balance sheet arrangements		€	210	$	313	€	207	$	320	€	106	$	173

(1) Availability subject to adequate eligible accounts receivable available for sale. The utilized amount includes $2 million of letters of credit as of December 31, 2021 and $3 million as of September 30, 2021.

(2) Actual amounts may exceed the bank's commitment at the bank's discretion.

(3) The facility is backed by a 364-day liquidity commitment from Nordea Bank which extends through June 22, 2022.

(4) There is no explicit facility size under the agreement, but the counterparty approves the purchase of receivable tranches at its discretion.

Off-balance sheet arrangements

Total costs associated with all of the off-balance sheet arrangements described above were $1 million for each of the three months ended December 31, 2021 and 2020.

8. Inventories

Inventories are stated at the lower of cost (using FIFO or average methods) or market (determined on the basis of estimated realizable values) and are summarized as follows (in millions):


	December 31, 2021		September 30, 2021
Finished goods	$	148	$	137
Work in process	52		47
Raw materials, parts and supplies	467		417
Total	$	667	$	601

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

9. Net Property

Net property is summarized as follows (in millions):


	December 31, 2021		September 30, 2021
Property at cost:
Land and land improvements	$	42	$	41
Buildings	230		231
Machinery and equipment	1,049		1,051
Company-owned tooling	166		164
Construction in progress	61		63
Total	1,548		1,550
Less: accumulated depreciation	(1,040)		(1,033)
Net property	$	508	$	517

10. Other Assets

Other assets are summarized as follows (in millions):


	December 31, 2021		September 30, 2021
Prepaid pension costs	$	199	$	191
Deferred income tax assets	41		42
Investments in non-consolidated joint ventures	129		132





Other	259		263
Other assets	$	628	$	628

11. Other Current Liabilities

Other current liabilities are summarized as follows (in millions):


	December 31, 2021		September 30, 2021
Compensation and benefits	$	78	$	125
Income taxes	27		17


Product warranties	17		15





Other	148		151
Other current liabilities	$	270	$	308

Compensation and benefits includes the current portion of pension and retiree medical liability, accrued incentive compensation, salary and wages and accrued vacation, holiday and sick leave pay.

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

A summary of the changes in product warranties is as follows (in millions):


	Three Months Ended December 31,
	2021		2020
Total product warranties – beginning of period	$	43	$	54
Accruals for product warranties	6		6
Payments	(5)		(4)
Change in estimates and other	(1)		1
Total product warranties – end of period	43		57
Less: non-current product warranties	(26)		(37)
Product warranties – current	$	17	$	20

12. Other Liabilities

Other liabilities are summarized as follows (in millions):


	December 31, 2021		September 30, 2021
Asbestos-related liabilities (see Note 16)	$	51	$	52


Liabilities for uncertain tax positions	52		52
Product warranties (see Note 11)	26		28


Other	91		92
Other liabilities	$	220	$	224

13. Long-Term Debt

Long-Term debt, net of discounts where applicable, is summarized as follows (in millions):


	December 31, 2021		September 30, 2021
3.25 percent convertible notes due 2037 (1)	$	321	$