Supplemental Guarantor Condensed Consolidating Financial Statements

6 Months Ended

Mar. 31, 2015

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Supplemental Guarantor Condensed Consolidating Financial Statements

Article 3-10 of Regulation S-X (S-X Rule 3-10) requires that separate financial information for issuers and guarantors of registered securities be filed in certain circumstances. Certain of the company's 100% owned subsidiaries, as defined in the credit agreement (the Guarantors), irrevocably and unconditionally guarantee amounts outstanding under the senior secured revolving credit facility. Similar subsidiary guarantees were provided for the benefit of the holders of the notes outstanding under the company's indentures (see Note 16).

Schedule I of Article 5-04 of Regulation S-X (S-X Rule 5-04) requires that condensed financial information of the registrant (Parent) be filed when the restricted net assets of consolidated subsidiaries exceed 25 percent of consolidated net assets as of the end of the most recently completed fiscal year.

In lieu of providing separate audited financial statements for the Parent and Guarantors, the company has included the accompanying condensed consolidating financial statements as permitted by S-X Rules 3-10 and 5-04. These condensed consolidating financial statements are presented on the equity method. Under this method, the investments in subsidiaries are recorded at cost and adjusted for the Parent's share of the subsidiary's cumulative results of operations, capital contributions and distribution and other equity changes. The Guarantors are combined in the condensed consolidated financial statements. Certain subsidiaries in China and India are restricted by law from transfer of cash by dividends, loans or advances to Parent, which exceeded 25 percent of consolidated net assets of Parent as of September 30, 2014. As of March 31, 2015, the company’s proportionate share of net assets restricted from transfer by law was $31 million.



	Three Months Ended March 31, 2015
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	418		$	446		$	—		$	864
Subsidiaries	—			31			17			(48		)	—
Total sales	—			449			463			(48		)	864
Cost of sales	(10		)	(380		)	(407		)	48			(749		)
GROSS MARGIN	(10		)	69			56			—			115
Selling, general and administrative	(16		)	(26		)	(15		)	—			(57		)
Restructuring costs	(1		)	—			(2		)	—			(3		)
Other operating income	—			—			—			—			—
OPERATING INCOME (LOSS)	(27		)	43			39			—			55
Other income, net	37			(9		)	(26		)	—			2
Equity in earnings of affiliates	—			8			1			—			9
Interest income (expense), net	(29		)	6			2			—			(21		)
INCOME (LOSS) BEFORE INCOME TAXES	(19		)	48			16			—			45
Provision for income taxes	(1		)	—			(5		)	—			(6		)
Equity income from continuing operations of subsidiaries	59			8			—			(67		)	—
INCOME FROM CONTINUING OPERATIONS	39			56			11			(67		)	39
INCOME FROM DISCONTINUED OPERATIONS, net of tax	4			5			3			(8		)	4
NET INCOME	43			61			14			(75		)	43
Less: Net income attributable to noncontrolling interests	—			—			—			—			—
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	43		$	61		$	14		$	(75	)	$	43



	Three Months Ended March 31, 2015
	Parent			Guarantors			Non- Guarantors		Elims			Consolidated
Net income	$	43		$	61		$	14	$	(75	)	$	43
Other comprehensive income (loss)	(22		)	(65		)	27		38			(22		)
Total comprehensive income (loss)	21			(4		)	41		(37		)	21
Less: Comprehensive income attributable to noncontrolling interests	—			—			—		—			—
Comprehensive income (loss) attributable to Meritor, Inc.	$	21		$	(4	)	$	41	$	(37	)	$	21



	Three Months Ended March 31, 2014
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	348		$	606		$	—		$	954
Subsidiaries	—			33			15			(48		)	—
Total sales	—			381			621			(48		)	954
Cost of sales	(13		)	(326		)	(545		)	48			(836		)
GROSS MARGIN	(13		)	55			76			—			118
Selling, general and administrative	(23		)	(22		)	(21		)	—			(66		)
Restructuring costs	(1		)	—			(1		)	—			(2		)
OPERATING INCOME (LOSS)	(37		)	33			54			—			50
Other income (loss), net	39			(8		)	(31		)	—			—
Equity in earnings of affiliates	—			6			3			—			9
Interest income (expense), net	(54		)	8			(2		)	—			(48		)
INCOME (LOSS) BEFORE INCOME TAXES	(52		)	39			24			—			11
Provision for income taxes	—			1			(9		)	—			(8		)
Equity income from continuing operations of subsidiaries	53			10			—			(63		)	—
INCOME FROM CONTINUING OPERATIONS	1			50			15			(63		)	3
INCOME FROM DISCONTINUED OPERATIONS, net of tax	—			—			—			—			—
NET INCOME	1			50			15			(63		)	3
Less: Net income attributable to noncontrolling interests	—			—			(2		)	—			(2		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	1		$	50		$	13		$	(63	)	$	1



	Three Months Ended March 31, 2014
	Parent		Guarantors		Non- Guarantors			Elims			Consolidated
Net income	$	1	$	50	$	15		$	(63	)	$	3
Other comprehensive income	22		5		11			(16		)	22
Total comprehensive income	23		55		26			(79		)	25
Less: Comprehensive income attributable to noncontrolling interests	—		—		(2		)	—			(2		)
Comprehensive income attributable to Meritor, Inc.	$	23	$	55	$	24		$	(79	)	$	23



	Six Months Ended March 31, 2015
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	821		$	922		$	—		$	1,743
Subsidiaries	—			61			33			(94		)	—
Total sales	—			882			955			(94		)	1,743
Cost of sales	(24		)	(751		)	(832		)	94			(1,513		)
GROSS MARGIN	(24		)	131			123			—			230
Selling, general and administrative	(34		)	(54		)	(34		)	—			(122		)
Restructuring costs	(1		)	(3		)	(2		)	—			(6		)
Other operating income	—			—			1			—			1
OPERATING INCOME (LOSS)	(59		)	74			88			—			103
Other income, net	37			(9		)	(24		)	—			4
Equity in earnings of affiliates	—			15			3			—			18
Interest income (expense), net	(58		)	13			5			—			(40		)
INCOME (LOSS) BEFORE INCOME TAXES	(80		)	93			72			—			85
Provision for income taxes	(1		)	—			(12		)	—			(13		)
Equity income from continuing operations of subsidiaries	152			53			—			(205		)	—
INCOME FROM CONTINUING OPERATIONS	71			146			60			(205		)	72
INCOME FROM DISCONTINUED OPERATIONS, net of tax	1			2			—			(2		)	1
NET INCOME	72			148			60			(207		)	73
Less: Net income attributable to noncontrolling interests	—			—			(1		)	—			(1		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	72		$	148		$	59		$	(207	)	$	72



	Six Months Ended March 31, 2015
	Parent			Guarantors			Non- Guarantors		Elims			Consolidated
Net income	$	72		$	148		$	60	$	(207	)	$	73
Other comprehensive income (loss)	(44		)	(92		)	18		73			(45		)
Total comprehensive income	28			56			78		(134		)	28
Less: Comprehensive income attributable to noncontrolling interests	—			—			—		—			—
Comprehensive income attributable to Meritor, Inc.	$	28		$	56		$	78	$	(134	)	$	28



	Six Months Ended March 31, 2014
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	657		$	1,197		$	—		$	1,854
Subsidiaries	—			66			29			(95		)	—
Total sales	—			723			1,226			(95		)	1,854
Cost of sales	(26		)	(623		)	(1,077		)	95			(1,631		)
GROSS MARGIN	(26		)	100			149			—			223
Selling, general and administrative	(40		)	(45		)	(40		)	—			(125		)
Restructuring costs	(1		)	—			(2		)	—			(3		)
Other operating expense	—			(1		)	—			—			(1		)
OPERATING INCOME (LOSS)	(67		)	54			107			—			94
Other income (loss), net	39			(8		)	(31		)	—			—
Equity in earnings of affiliates	—			12			5			—			17
Interest income (expense), net	(88		)	17			(4		)	—			(75		)
INCOME (LOSS) BEFORE INCOME TAXES	(116		)	75			77			—			36
Provision for income taxes	—			(1		)	(18		)	—			(19		)
Equity income from continuing operations of subsidiaries	129			48			—			(177		)	—
INCOME FROM CONTINUING OPERATIONS	13			122			59			(177		)	17
LOSS FROM DISCONTINUED OPERATIONS, net of tax	(1		)	(1		)	(1		)	2			(1		)
NET INCOME	12			121			58			(175		)	16
Less: Net income attributable to noncontrolling interests	—			—			(4		)	—			(4		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	12		$	121		$	54		$	(175	)	$	12



	Six Months Ended March 31, 2014
	Parent		Guarantors		Non- Guarantors			Elims			Consolidated
Net income	$	12	$	121	$	58		$	(175	)	$	16
Other comprehensive income	22		10		—			(10		)	22
Total comprehensive income	34		131		58			(185		)	38
Less: Comprehensive income attributable to noncontrolling interests	—		—		(4		)	—			(4		)
Comprehensive income attributable to Meritor, Inc.	$	34	$	131	$	54		$	(185	)	$	34



	March 31, 2015
	Parent			Guarantors			Non- Guarantors		Elims			Consolidated
CURRENT ASSETS:
Cash and cash equivalents	$	99		$	4		$	104	$	—		$	207
Receivables trade and other, net	1			43			501		—			545
Inventories	—			164			201		—			365
Other current assets	9			18			28		—			55
TOTAL CURRENT ASSETS	109			229			834		—			1,172
NET PROPERTY	13			153			221		—			387
GOODWILL	—			278			136		—			414
OTHER ASSETS	76			125			143		—			344
INVESTMENTS IN SUBSIDIARIES	2,230			341			—		(2,571		)	—
TOTAL ASSETS	$	2,428		$	1,126		$	1,334	$	(2,571	)	$	2,317
CURRENT LIABILITIES:
Short-term debt	$	1		$	3		$	1	$	—		$	5
Accounts and notes payable	48			227			343		—			618
Other current liabilities	98			65			118		—			281
TOTAL CURRENT LIABILITIES	147			295			462		—			904
LONG-TERM DEBT	907			9			29		—			945
RETIREMENT BENEFITS	636			—			101		—			737
INTERCOMPANY PAYABLE (RECEIVABLE)	1,287			(1,705		)	418					—
OTHER LIABILITIES	47			211			43		—			301
EQUITY (DEFICIT) ATTRIBUTABLE TO MERITOR, INC.	(596		)	2,316			255		(2,571		)	(596		)
NONCONTROLLING INTERESTS	—			—			26		—			26
TOTAL LIABILITIES AND EQUITY (DEFICIT)	$	2,428		$	1,126		$	1,334	$	(2,571	)	$	2,317



	September 30, 2014
	Parent			Guarantors			Non- Guarantors		Elims			Consolidated
CURRENT ASSETS:
Cash and cash equivalents	$	71		$	5		$	171	$	—		$	247
Receivables trade and other, net	1			45			564		—			610
Inventories	—			151			228		—			379
Other current assets	9			18			29		—			56
TOTAL CURRENT ASSETS	81			219			992		—			1,292
NET PROPERTY	13			158			253		—			424
GOODWILL	—			277			154		—			431
OTHER ASSETS	75			128			152		—			355
INVESTMENTS IN SUBSIDIARIES	2,185			267			—		(2,452		)	—
TOTAL ASSETS	$	2,354		$	1,049		$	1,551	$	(2,452	)	$	2,502
CURRENT LIABILITIES:
Short-term debt	$	1		$	3		$	3	$	—		$	7
Accounts and notes payable	46			230			404		—			680
Other current liabilities	97			87			167		—			351
TOTAL CURRENT LIABILITIES	144			320			574		—			1,038
LONG-TERM DEBT	916			10			39		—			965
RETIREMENT BENEFITS	656			—			119		—			775
INTERCOMPANY PAYABLE (RECEIVABLE)	1,198			(1,736		)	538		—			—
OTHER LIABILITIES	52			208			49		—			309
EQUITY (DEFICIT) ATTRIBUTABLE TO MERITOR, INC.	(612		)	2,247			205		(2,452		)	(612		)
NONCONTROLLING INTERESTS	—			—			27		—			27
TOTAL LIABILITIES AND EQUITY (DEFICIT)	$	2,354		$	1,049		$	1,551	$	(2,452	)	$	2,502



	Six Months Ended March 31, 2015
	Parent			Guarantors			Non- Guarantors			Elims		Consolidated
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES	$	7		$	10		$	12		$	—	$	29
INVESTING ACTIVITIES
Capital expenditures	(1		)	(10		)	(12		)	—		(23		)
Net investing cash flows provided by discontinued operations	—			1			3			—		4
CASH USED FOR INVESTING ACTIVITIES	(1		)	(9		)	(9		)	—		(19		)
FINANCING ACTIVITIES
Repayment of notes and term loan	(16		)	—			—			—		(16		)
Repurchase of common stock	(16		)									(16		)
Intercompany advances	54			—			(54		)	—		—
Other financing activities	—			(2		)	(4		)	—		(6		)
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES	22			(2		)	(58		)	—		(38		)
EFFECT OF CHANGES IN FOREIGN CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	—			—			(12		)	—		(12		)
CHANGE IN CASH AND CASH EQUIVALENTS	28			(1		)	(67		)	—		(40		)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	71			5			171			—		247
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	99		$	4		$	104		$	—	$	207



	Six Months Ended March 31, 2014
	Parent			Guarantors			Non- Guarantors			Elims		Consolidated
CASH FLOWS PROVIDED BY (USED FOR) OPERATING ACTIVITIES	$	(30	)	$	8		$	40		$	—	$	18
INVESTING ACTIVITIES
Capital expenditures	(2		)	(11		)	(12		)	—		(25		)
Net investing cash flows provided by discontinued operations	—			—			3			—		3
CASH USED FOR INVESTING ACTIVITIES	(2		)	(11		)	(9		)	—		(22		)
FINANCING ACTIVITIES
Repayment term loan	(308		)	—			—			—		(308		)
Proceeds from debt issuance	225			—			—			—		225
Debt issuance costs	(9		)	—			—			—		(9		)
Intercompany advances	92			—			(92		)	—		—
Other financing activities	—			—			13			—		13
CASH USED FOR FINANCING ACTIVITIES	—			—			(79		)	—		(79		)
EFFECT OF CHANGES IN FOREIGN CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	—			—			(2		)	—		(2		)
CHANGE IN CASH AND CASH EQUIVALENTS	(32		)	(3		)	(50		)	—		(85		)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	144			6			168			—		318
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	112		$	3		$	118		$	—	$	233

Basis of Presentation

Certain information and footnote disclosures normally included in financial statements prepared in conformity with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. As of March 31, 2015 and September 30, 2014, Parent-only obligations included $662 million and $684 million of pension and retiree medical benefits, respectively, (see Note 18). All debt is debt of the Parent other than $42 million and $55 million at March 31, 2015 and September 30, 2014, respectively (see Note 16), and is primarily related to capital lease obligations and lines of credit. Cash dividends paid to the Parent by subsidiaries and investments accounted for by the equity method were $37 million and $5 million for the six months ended March 31, 2015 and 2014, respectively.