Meritor Announces Additional Cost and Liquidity Actions

TROY, Mich., June 3, 2020 /PRNewswire/ -- Meritor, Inc. (NYSE: MTOR) today announced actions designed to enhance the financial position of the company in light of current market conditions resulting from the COVID-19 pandemic.

"It remains too early to forecast the long-term impact of this crisis on the industry, but the actions we are announcing today reflect a set of coordinated steps toward finalizing our business plan for fiscal year 2021 and 2022," said Jay Craig, CEO and president of Meritor.

Cost Savings Initiatives

Meritor is taking actions to right-size the company and align with current market forecasts for global truck and trailer production. These restructuring actions represent approximately an eight-percent reduction in global salaried positions. The company expects the vast majority of these actions to be completed by the end of fiscal year 2020. Meritor anticipates incurring approximately $25 million in employee severance costs related to this restructuring plan.

Salaried Pay Reductions (United States and Canada)

Effective June 16, 2020, the base salaries of the company's salaried employees in the United States and Canada will be partially restored, but remain reduced from original levels as follows:

• CEO/Board of Directors: 20-percent reduction (from 60-percent reduction)
• Other officers: 15-percent reduction (from 50-percent reduction)
• Executives (vice presidents and directors): 15-percent reduction (from 25-percent reduction)
• All other salaried employees in the United States and Canada: 10-percent reduction (from 20-percent reduction)

Proposed Offering of Notes

Meritor announced today that it intends, subject to market and other conditions, to offer $300 million aggregate principal amount of unsecured senior notes in a private placement to qualified institutional buyers in reliance on Rule 144A and to non-U.S. persons in offshore transactions in reliance on Regulation S under the Securities Act of 1933, as amended.

The company currently expects to use the net proceeds from the offering of the notes to repay a portion of the outstanding balance under its senior secured credit facility.

Outlook for Third Quarter Fiscal Year 2020

Meritor is reaffirming its financial guidance for the third quarter of fiscal 2020 as follows:

• Revenue to be in the range of $400 million to $500 million
• Cash flow from operations to be in the range of negative $150 million to negative $225 million, inclusive of the one-time impact from receivable factoring programs of negative $125 million to negative $175 million

Meritor will provide a longer-term outlook for fiscal 2021 and its M2022 plan performance during the company's third-quarter earnings call, assuming a reliable set of market forecasts is available. This outlook will include a summation of the benefits it expects from cost reduction actions.

"We moved quickly during the pandemic to stabilize cash flow for the third and fourth quarter so that we could focus on the long-term health of the company, which includes rightsizing the organization," added Craig. "As we have begun to see the benefits of our cost preservation actions, we are pleased that we were able to lessen the salary reductions previously initiated and look forward to regaining our full momentum."

Not an Offer to Sell

The notes to be offered as described herein have not been registered under the Securities Act or applicable state securities laws and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act and applicable state securities laws. This press release shall not constitute an offer to sell or the solicitation of an offer to buy the notes, nor shall there be any offer or sale of the notes in any state in which such offer, solicitation or sale would be unlawful.

About Meritor

Meritor, Inc. is a leading global supplier of drivetrain, mobility, braking and aftermarket solutions for commercial vehicle and industrial markets. With more than a 110-year legacy of providing innovative products that offer superior performance, efficiency and reliability, the company serves commercial truck, trailer, off-highway, defense, specialty and aftermarket customers around the world. Meritor is based in Troy, Mich., United States, and is made up of more than 7,000 diverse employees who apply their knowledge and skills in manufacturing facilities, engineering centers, joint ventures, distribution centers and global offices in 19 countries. Meritor common stock is traded on the New York Stock Exchange under the ticker symbol MTOR. For important information, visit the company's website at www.meritor.com.

Forward-Looking Statement

This release contains statements relating to future results of the company (including certain outlooks, projections and business trends) that are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are typically identified by words or phrases such as "believe," "expect," "anticipate," "estimate," "should," "are likely to be," "will" and similar expressions. Actual results may differ materially from those projected as a result of certain risks and uncertainties, including but not limited to the duration and severity of the COVID-19 pandemic and its effects on public health, the global economy, financial markets and operations; reliance on major OEM customers and possible negative outcomes from contract negotiations with our major customers, including failure to negotiate acceptable terms in contract renewal negotiations and our ability to obtain new customers; the outcome of actual and potential product liability, warranty and recall claims; our ability to successfully manage rapidly changing volumes in the commercial truck markets and work with our customers to manage demand expectations in view of rapid changes in production levels; global economic and market cycles and conditions; availability and sharply rising costs of raw materials, including steel, and our ability to manage or recover such costs; our ability to manage possible adverse effects on European markets or our European operations, or financing arrangements related thereto following the United Kingdom's decision to exit the European Union or, in the event one or more other countries exit the European monetary union; risks inherent in operating abroad (including foreign currency exchange rates, restrictive government actions regarding trade, implications of foreign regulations relating to pensions and potential disruption of production and supply due to terrorist attacks or acts of aggression); risks related to our joint ventures; rising costs of pension benefits; the ability to achieve the expected benefits of strategic initiatives and restructuring actions; our ability to successfully integrate the products and technologies of Fabco Holdings, Inc., AA Gear Mfg., Inc., AxleTech and Transportation Power, Inc. and future results of such acquisitions, including their generation of revenue and their being accretive; the demand for commercial and specialty vehicles for which we supply products; whether our liquidity will be affected by declining vehicle production in the future; OEM program delays; demand for and market acceptance of new and existing products; successful development and launch of new products; labor relations of our company, our suppliers and customers, including potential disruptions in supply of parts to our facilities or demand for our products due to work stoppages; the financial condition of our suppliers and customers, including potential bankruptcies; possible adverse effects of any future suspension of normal trade credit terms by our suppliers; potential impairment of long-lived assets, including goodwill; potential adjustment of the value of deferred tax assets; competitive product and pricing pressures; the amount of our debt; our ability to continue to comply with covenants in our financing agreements; our ability to access capital markets; credit ratings of our debt; the outcome of existing and any future legal proceedings, including any proceedings or related liabilities with respect to environmental, asbestos-related, or other matters; possible changes in accounting rules; and other substantial costs, risks and uncertainties, including but not limited to those detailed in our Annual Report on Form 10-K for the year ended September 30, 2019, as amended and from time to time in other filings of the company with the SEC. These forward-looking statements are made only as of the date hereof, and the company undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise, except as otherwise required by law.

SOURCE Meritor, Inc.