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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 July 3, 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)

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 Act:
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 (§ 232.405 of this chapter) 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
70,864,196 shares of Common Stock, $1.00 par value, of Meritor, Inc. were outstanding on 8/1/2022.



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,
2022202120222021
(Unaudited)
Sales$1,212 $1,016 $3,350 $2,888 
Cost of sales(1,058)(884)(2,932)(2,493)
GROSS PROFIT154 132 418 395 
Selling, general and administrative(63)(69)(195)(203)
Other operating expense, net(2)(4)(6)(13)
OPERATING INCOME89 59 217 179 
Other income, net10 12 38 49 
Equity in earnings of affiliates12 8 30 24 
Interest expense, net(14)(20)(39)(65)
INCOME BEFORE INCOME TAXES97 59 246 187 
Provision for income taxes(21)(14)(48)(43)
INCOME FROM CONTINUING OPERATIONS76 45 198 144 
INCOME FROM DISCONTINUED OPERATIONS, net of tax  1  
NET INCOME76 45 199 144 
Less: Net income attributable to noncontrolling interests(3)(3)(10)(7)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.$73 $42 $189 $137 
NET INCOME ATTRIBUTABLE TO MERITOR, INC.
Net income from continuing operations$73 $42 $188 $137 
Income from discontinued operations  1  
Net income$73 $42 $189 $137 
BASIC EARNINGS PER SHARE
Continuing operations$1.03 $0.58 $2.67 $1.90 
Discontinued operations  0.01  
Basic earnings per share$1.03 $0.58 $2.68 $1.90 
DILUTED EARNINGS PER SHARE
Continuing operations$1.02 $0.58 $2.63 $1.87 
Discontinued operations  0.01  
Diluted earnings per share$1.02 $0.58 $2.64 $1.87 
Basic average common shares outstanding70.7 72.0 70.5 72.2 
Diluted average common shares outstanding71.8 72.8 71.5 73.2 
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,
2022202120222021
(Unaudited)
Net income$76 $45 $199 $144 
Other comprehensive income (loss):
Foreign currency translation adjustments:
Attributable to Meritor, Inc.(61)15 (60)48 
Attributable to noncontrolling interests(3) (3) 
Pension and other postretirement benefit related adjustments1 3 4 8 
Unrealized gain (loss) on cash flow hedges(1) (1)1 
Other comprehensive income (loss), net of tax(64)18 (60)57 
Total comprehensive income12 63 139 201 
Less: Comprehensive income attributable to noncontrolling interests (3)(7)(7)
Comprehensive income attributable to Meritor, Inc.$12 $60 $132 $194 
See Notes to Condensed Consolidated Financial Statements.
4


MERITOR, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(in millions)
June 30,
2022
September 30, 2021
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$105 $101 
Receivables, trade and other, net753 534 
Inventories710 601 
Other current assets60 50 
TOTAL CURRENT ASSETS1,628 1,286 
NET PROPERTY 501 517 
GOODWILL497 507 
OTHER ASSETS628 628 
TOTAL ASSETS$3,254 $2,938 
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Short-term debt$19 $19 
Accounts and notes payable 797 573 
Other current liabilities301 308 
TOTAL CURRENT LIABILITIES1,117 900 
LONG-TERM DEBT1,023 1,008 
RETIREMENT BENEFITS160 191 
OTHER LIABILITIES220 224 
TOTAL LIABILITIES2,520 2,323 
COMMITMENTS AND CONTINGENCIES (See Note 17)
EQUITY:
Common stock (June 30, 2022 and September 30, 2021, 104.7 and 104.0 shares issued and 70.9 and 70.1 shares outstanding, respectively)
106 105 
Additional paid-in capital770 798 
Retained earnings1,141 935 
Treasury stock, at cost (June 30, 2022 and September 30, 2021, 33.9 and 33.9 shares, respectively)
(632)(632)
Accumulated other comprehensive loss(689)(632)
Total equity attributable to Meritor, Inc.696 574 
Noncontrolling interests38 41 
TOTAL EQUITY734 615 
TOTAL LIABILITIES AND EQUITY$3,254 $2,938 
See Notes to Condensed Consolidated Financial Statements.
5


MERITOR, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
Nine Months Ended June 30,
20222021
(Unaudited)
OPERATING ACTIVITIES
Net income$199 $144 
Less: Income from discontinued operations, net of tax1  
Income from continuing operations198 144 
Adjustments to income from continuing operations to arrive at cash provided by operating activities:
Depreciation and amortization75 78 
Deferred income tax expense  1 
Restructuring costs5 9 
Stock compensation expense13 14 
Equity in earnings of affiliates(30)(24)
Pension and retiree medical income(40)(39)
Loss on debt extinguishment 11 
Dividends received from equity method investments15 7 
Pension and retiree medical contributions(7)(8)
Restructuring payments(9)(11)
Changes in off-balance sheet accounts receivable securitization and factoring programs134 35 
Changes in receivables, inventories and accounts payable(251)(103)
Changes in other current assets and liabilities(19)26 
Changes in other assets and liabilities(2)6 
Operating cash flows provided by continuing operations82 146 
Operating cash flows used for discontinued operations(3) 
CASH PROVIDED BY OPERATING ACTIVITIES79 146 
INVESTING ACTIVITIES
Capital expenditures(63)(47)
Other investing activities5 (3)
CASH USED FOR INVESTING ACTIVITIES(58)(50)
FINANCING ACTIVITIES
Redemption of notes (458)
Proceeds from debt issuances 275 
Redemption of convertible notes (53)
Debt issuance costs (5)
Term loan payments(13)(9)
Other financing activities (1)
Net change in debt(13)(251)
Repurchase of common stock (25)
CASH USED FOR FINANCING ACTIVITIES(13)(276)
EFFECT OF CHANGES IN FOREIGN CURRENCY EXCHANGE
RATES ON CASH AND CASH EQUIVALENTS
(4)3 
CHANGE IN CASH AND CASH EQUIVALENTS4 (177)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD101 315 
CASH AND CASH EQUIVALENTS AT END OF PERIOD$105 $138 
See Notes to Condensed Consolidated Financial Statements.
6


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

Three months ended June 30, 2022
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, 2022
$106 $765 $1,068 $(632)$(628)$679 $41 $720 
Comprehensive income— — 73 — (61)12 — 12 
Equity based compensation expense— 5 — — 5 — 5 
Noncontrolling interest dividends— — — — — — (3)(3)
Ending Balance at June 30, 2022
$106 $770 $1,141 $(632)$(689)$696 $38 $734 
Three months ended June 30, 2021
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, 2021
$106 $788 $831 $(573)$(575)$577 $36 $613 
Comprehensive income— — 42 — 18 60 3 63 
Equity based compensation expense— 4 — — — 4 — 4 
Repurchase of common stock— — — (25)— (25)— (25)
Ending Balance at June 30, 2021
$106 $792 $873 $(598)$(557)$616 $39 $655 
See Notes to Condensed Consolidated Financial Statements.


7


MERITOR, INC.
CONDENSED CONSOLIDATED STATEMENT OF EQUITY
(in millions)
(Unaudited)
Nine months ended June 30, 2022
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, 2021
$105 $798 $935 $(632)$(632)$574 $41 $615 
Comprehensive income— — 189 — (57)132 7 139 
Equity based compensation expense— 13 — — — 13 — 13 
Vesting of equity based awards1 (1)— — — — —  
Adjustments upon adoption of ASU 2020-06— (40)17 — — (23)— (23)
Noncontrolling interest dividend— — — — — — (10)(10)
Ending Balance at June 30, 2022
$106 $770 $1,141 $(632)$(689)$696 $38 $734 
Nine Months Ended June 30, 2021
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, 2020
$105 $808 $736 $(573)$(614)$462 $33 $495 
Comprehensive income — — 137 — 57 194 7 201 
Repurchase of convertible notes— (30)— — — (30)— (30)
Equity based compensation expense— 14 — — — 14 — 14 
Vesting of equity based awards1 (1)— — — — —  
Repurchase of common stock— — — (25)— (25)— (25)
Noncontrolling interest dividend— — — — — — (1)(1)
Other equity adjustments— 1 — — — 1 — 1 
Ending Balance at June 30, 2021
$106 $792 $873 $(598)$(557)$616 $39 $655 
See Notes to Condensed Consolidated Financial Statements.
8


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.

As previously announced, on February 21, 2022, Meritor, Cummins Inc., an Indiana corporation (“Cummins”), and Rose NewCo Inc., an Indiana corporation (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) pursuant to which, among other things, Merger Sub will merge with and into the company (the “Merger”), with the company surviving the Merger as a wholly owned subsidiary of Cummins. On May 26, 2022, the company's shareholders voted in favor of the Merger. The companies are working to complete the acquisition in the coming week as all regulatory approvals to close the transaction have been received.

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 and nine months ended June 30, 2022 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 third quarter of fiscal years 2022 and 2021 ended on July 3, 2022 and July 4, 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 June 30 are used consistently throughout this report to represent the fiscal year end and third 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 per share is calculated using the weighted average number of shares outstanding during each period. The diluted earnings 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.

9


MERITOR, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

A reconciliation of basic average common shares outstanding to diluted average common shares outstanding is as follows (in millions):
Three Months Ended June 30,Nine Months Ended June 30,
2022202120222021
Basic average common shares outstanding70.7 72.0 70.5 72.2 
Impact of restricted shares, restricted share units and performance share units1.1 0.8 1.0 1.0 
Diluted average common shares outstanding71.8 72.8 71.5 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 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 2020-06Balance 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 

10


MERITOR, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

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 14), 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.

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 and nine months ended June 30, 2022 and 2021 (in millions).
Three Months Ended June 30, 2022
Primary Geographical MarketCommercial TruckAftermarket & IndustrialTotal
U.S.$482 $206 $688 
Canada 15 15 
Mexico59 9 68 
Total North America541 230 771 
Sweden80  80 
Italy65 3 68 
United Kingdom39 2 41 
Other Europe3 27 30 
Total Europe187 32 219 
Brazil117  117 
China26  26 
India52  52 
Other Asia-Pacific27  27 
Total sales$950 $262 $1,212 

Three Months Ended June 30, 2021
Primary Geographical MarketCommercial TruckAftermarket & IndustrialTotal
U.S.$365 $183 $548 
Canada 16 16 
Mexico49 6 55 
Total North America414 205 619 
Sweden65  65 
Italy61 4 65 
United Kingdom37 3 40 
Other Europe3 39 42 
Total Europe166 46 212 
Brazil82 1 83 
China41