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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 April 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
70,855,599 shares of Common Stock, $1.00 par value, of Meritor, Inc. were outstanding on 4/29/2022.



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 March 31,Six Months Ended March 31,
2022202120222021
(Unaudited)
Sales$1,154 $983 $2,138 $1,872 
Cost of sales(1,017)(835)(1,874)(1,609)
GROSS PROFIT137 148 264 263 
Selling, general and administrative(70)(69)(132)(134)
Other operating expense, net(1)(2)(4)(9)
OPERATING INCOME66 77 128 120 
Other income, net14 23 28 37 
Equity in earnings of affiliates11 5 18 16 
Interest expense, net(12)(17)(25)(45)
INCOME BEFORE INCOME TAXES79 88 149 128 
Provision for income taxes(15)(22)(27)(29)
INCOME FROM CONTINUING OPERATIONS64 66 122 99 
INCOME FROM DISCONTINUED OPERATIONS, net of tax1  1  
NET INCOME65 66 123 99 
Less: Net income attributable to noncontrolling interests(3)(3)(7)(4)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.$62 $63 $116 $95 
NET INCOME ATTRIBUTABLE TO MERITOR, INC.
Net income from continuing operations$61 $63 $115 $95 
Income from discontinued operations1  1  
Net income$62 $63 $116 $95 
BASIC EARNINGS PER SHARE
Continuing operations$0.86 $0.87 $1.63 $1.31 
Discontinued operations0.01  0.01  
Basic earnings per share$0.87 $0.87 $1.64 $1.31 
DILUTED EARNINGS PER SHARE
Continuing operations$0.85 $0.86 $1.61 $1.30 
Discontinued operations0.01  0.02  
Diluted earnings per share$0.86 $0.86 $1.63 $1.30 
Basic average common shares outstanding70.7 72.4 70.4 72.3 
Diluted average common shares outstanding71.4 73.4 71.3 73.3 
See Notes to Condensed Consolidated Financial Statements.

3


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

Three Months Ended March 31,Six Months Ended March 31,
2022202120222021
(Unaudited)
Net income$65 $66 $123 $99 
Other comprehensive income (loss):
Foreign currency translation adjustments:
Attributable to Meritor, Inc.15 (22)1 33 
Attributable to noncontrolling interests (1)  
Pension and other postretirement benefit related adjustments2 2 3 5 
Unrealized gain on cash flow hedges(1)  1 
Other comprehensive income (loss), net of tax16 (21)4 39 
Total comprehensive income81 45 127 138 
Less: Comprehensive income attributable to noncontrolling interests(3)(2)(7)(4)
Comprehensive income attributable to Meritor, Inc.$78 $43 $120 $134 
See Notes to Condensed Consolidated Financial Statements.
4


MERITOR, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(in millions)
March 31,
2022
September 30, 2021
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$115 $101 
Receivables, trade and other, net769 534 
Inventories719 601 
Other current assets60 50 
TOTAL CURRENT ASSETS1,663 1,286 
NET PROPERTY 511 517 
GOODWILL504 507 
OTHER ASSETS644 628 
TOTAL ASSETS$3,322 $2,938 
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Short-term debt$114 $19 
Accounts and notes payable 779 573 
Other current liabilities297 308 
TOTAL CURRENT LIABILITIES1,190 900 
LONG-TERM DEBT1,025 1,008 
RETIREMENT BENEFITS171 191 
OTHER LIABILITIES216 224 
TOTAL LIABILITIES2,602 2,323 
COMMITMENTS AND CONTINGENCIES (See Note 16)
EQUITY:
Common stock (March 31, 2022 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 capital765 798 
Retained earnings1,068 935 
Treasury stock, at cost (March 31, 2022 and September 30, 2021, 33.9 and 33.9 shares, respectively)
(632)(632)
Accumulated other comprehensive loss(628)(632)
Total equity attributable to Meritor, Inc.679 574 
Noncontrolling interests41 41 
TOTAL EQUITY720 615 
TOTAL LIABILITIES AND EQUITY$3,322 $2,938 
See Notes to Condensed Consolidated Financial Statements.
5


MERITOR, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
Six Months Ended March 31,
20222021
(Unaudited)
OPERATING ACTIVITIES
Net income$123 $99 
Less: Income from discontinued operations, net of tax1  
Income from continuing operations122 99 
Adjustments to income from continuing operations to arrive at cash provided by (used for) operating activities:
Depreciation and amortization50 52 
Deferred income tax expense  2 
Restructuring costs4 8 
Stock compensation expense8 10 
Equity in earnings of affiliates(18)(16)
Pension and retiree medical income(27)(26)
Loss on debt extinguishment 8 
Dividends received from equity method investments5 2 
Pension and retiree medical contributions(4)(6)
Restructuring payments(8)(8)
Changes in off-balance sheet accounts receivable securitization and factoring programs88 35 
Changes in receivables, inventories and accounts payable(225)(63)
Changes in other current assets and liabilities(20)5 
Changes in other assets and liabilities(10)5 
Operating cash flows provided by (used for) continuing operations(35)107 
Operating cash flows used for discontinued operations(3) 
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES(38)107 
INVESTING ACTIVITIES
Capital expenditures(39)(26)
Other investing activities5 (3)
CASH USED FOR INVESTING ACTIVITIES(34)(29)
FINANCING ACTIVITIES
Borrowing and securitization95  
Redemption of notes (281)
Proceeds from debt issuances 275 
Redemption of convertible notes (53)
Debt issuance costs (5)
Term loan payments(9)(7)
Other financing activities (1)
Net change in debt86 (72)
Repurchase of common stock  
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES86 (72)
EFFECT OF CHANGES IN FOREIGN CURRENCY EXCHANGE
RATES ON CASH AND CASH EQUIVALENTS
  
CHANGE IN CASH AND CASH EQUIVALENTS14 6 
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD101 315 
CASH AND CASH EQUIVALENTS AT END OF PERIOD$115 $321 
See Notes to Condensed Consolidated Financial Statements.
6


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

Three months ended March 31, 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 December 31, 2021
$106 $761 $1,006 $(632)$(644)$597 $41 $638 
Comprehensive income— — 62 — 16 78 3 81 
Equity based compensation expense— 4 — — 4 — 4 
Noncontrolling interest dividends— — — — — — (3)(3)
Ending Balance at March 31, 2022
$106 $765 $1,068 $(632)$(628)$679 $41 $720 
Three months ended March 31, 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 December 31, 2020
$106 $784 $768 $(573)$(555)$530 $35 $565 
Comprehensive income (loss)— — 63 — (20)43 2 45 
Equity based compensation expense— 4 — — — 4 — 4 
Noncontrolling interest dividend— — — — — — (1)(1)
Ending Balance at March 31, 2021
$106 $788 $831 $(573)$(575)$577 $36 $613 
See Notes to Condensed Consolidated Financial Statements.


7


MERITOR, INC.
CONDENSED CONSOLIDATED STATEMENT OF EQUITY
(in millions)
(Unaudited)
Six months ended March 31, 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— — 116 — 4 120 7 127 
Equity based compensation expense— 8 — — — 8 — 8 
Vesting of equity based awards1 (1)— — — — —  
Adjustments upon adoption of ASU 2020-06— (40)17 — — (23)— (23)
Noncontrolling interest dividend— — — — — — (7)(7)
Ending Balance at March 31, 2022
$106 $765 $1,068 $(632)$(628)$679 $41 $720 
Six Months Ended March 31, 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 — — 95 — 39 134 4 138 
Repurchase of convertible notes— (30)— — — (30)— (30)
Equity based compensation expense— 10 — — — 10 — 10 
Vesting of equity based awards1 (1)— — — — —  
Noncontrolling interest dividend— — — — — — (1)(1)
Other equity adjustments— 1 — — — 1 — 1 
Ending Balance at March 31, 2021
$106 $788 $831 $(573)$(575)$577 $36 $613 
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. Consummation of the Merger is subject to customary closing conditions, including approval by Meritor’s shareholders and applicable regulatory approvals.

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 six months ended March 31, 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 second quarter of fiscal years 2022 and 2021 ended on April 3, 2022 and April 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 March 31 are used consistently throughout this report to represent the fiscal year end and second 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 March 31,Six Months Ended March 31,
2022202120222021
Basic average common shares outstanding70.7 72.4 70.4 72.3 
Impact of restricted shares, restricted share units and performance share units0.7 1.0 0.9 1.0 
Diluted average common shares outstanding71.4 73.4 71.3 73.3 

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.

10


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

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 

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.

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 March 31, 2022 and 2021 (in millions).
Three Months Ended March 31, 2022
Primary Geographical MarketCommercial TruckAftermarket & IndustrialTotal
U.S.$445 $194 $639 
Canada 14 14 
Mexico52 8 60 
Total North America497 216 713 
Sweden78  78 
Italy69 5 74 
United Kingdom39 2 41 
Other Europe1 34 35 
Total Europe187 41 228 
Brazil100  100 
China25  25 
India57  57 
Other Asia-Pacific31  31 
Total sales$897 $257 $1,154 

11


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

Three Months Ended March 31, 2021
Primary Geographical MarketCommercial TruckAftermarket & IndustrialTotal
U.S.$337 $177 $514 
Canada 14 14 
Mexico44 5 49 
Total North America381 196 577 
Sweden74  74 
Italy58 5 63 
United Kingdom36 3 39 
Other Europe3 35 38 
Total Europe171 43 214 
Brazil81 1 82 
China34 1 35 
India50  50 
Other Asia-Pacific25  25 
Total sales$742 $241 $983 

Six Months Ended March 31, 2022
Primary Geographical MarketCommercial TruckAftermarket & IndustrialTotal
U.S.$793 $