Meritor Inc. (NYSE: MTOR) reported coronavirus pandemic-impacted losses in its fiscal third quarter despite layoffs and pay cuts.
The supplier of commercial vehicle and industrial drivetrains, as well as mobility, braking and aftermarket components lost $36 million, or 50 cents per diluted share, in the April-June period. That compared to income of $86 million, or $1 per diluted share, in the same quarter of 2019.
The adjusted loss from continuing operations was $34 million, or a loss of 47 cents per adjusted diluted share. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were $7 million, a 1.4% margin of sales compared to a 12.5% margin a year ago.
Meritor posted sales of $514 million, down $652 million, or approximately 56%, from the same period last year. The decrease in sales was primarily due to lower market volume.
The decline in demand, coupled with government mandates resulting from the COVID-19 pandemic, led Meritor to idle most of its plants in April. They slowly restarted in May. And production increased throughout the rest of the quarter. Commercial truck sales were $336 million, down $589 million, or 64%, compared to the same period last year.
Meritor is cutting 230 salaried positions globally by the end of the year. Restructuring costs from those cuts nicked earnings. The company was among the first industrial companies to cut salaries. It partially restored the reductions in June.
“We took aggressive actions to reduce our cost structure in the short-term to preserve liquidity and stabilize cash flow,” Jay Craig, Meritor president and CEO, said in a statement. “At the same time, we are making the appropriate investments to ensure the company is in a strong product position for the future.”
Meritor burned through $102 million in operating cash during the quarter compared to adding $143 million in the same quarter a year ago. Free cash flow was negative $114 million. That compared to positive $124 million a year earlier.
Of the total decline in operating cash flow, $124 million involved lower balances available under accounts receivable factoring.
The company had $970 million of total liquidity at the end of June. This includes $280 million in cash and $690 million of available borrowing. Meritor issued $300 million of 6.25% unsecured senior notes due 2025. Proceeds plus cash were used to repay a $304 million balance under the company’s senior secured credit facility.
The fourth fiscal year should show improvement, Meritor said. It projects sales of approximately $700 million with a net loss of approximately $10 million, or 15 cents per fully diluted share. Operating cash flow should swing back to positive territory at $65 million with free cash flow of approximately $25 million.