Supplemental Guarantor Condensed Consolidating Financial Statements

9 Months Ended

Jun. 30, 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 June 30, 2015, the company’s proportionate share of net assets restricted from transfer by law was $29 million.



	Three Months Ended June 30, 2015
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	461		$	448		$	—		$	909
Subsidiaries	—			34			19			(53		)	—
Total sales	—			495			467			(53		)	909
Cost of sales	(14		)	(416		)	(408		)	53			(785		)
GROSS MARGIN	(14		)	79			59			—			124
Selling, general and administrative	(20		)	(29		)	(16		)	—			(65		)
Restructuring costs	—			(2		)	(7		)	—			(9		)
Other operating income (expense), net	(2		)	—			3			—			1
OPERATING INCOME (LOSS)	(36		)	48			39			—			51
Other income (expense), net	10			(6		)	(5		)	—			(1		)
Equity in earnings of other affiliates	—			9			1			—			10
Interest income (expense), net	(47		)	7			2			—			(38		)
INCOME (LOSS) BEFORE INCOME TAXES	(73		)	58			37			—			22
Provision for income taxes	(1		)	—			(5		)	—			(6		)
Equity income from continuing operations of subsidiaries	89			28			—			(117		)	—
INCOME FROM CONTINUING OPERATIONS	15			86			32			(117		)	16
LOSS FROM DISCONTINUED OPERATIONS, net of tax	(2		)	(1		)	(2		)	3			(2		)
NET INCOME	13			85			30			(114		)	14
Less: Net income attributable to noncontrolling interests	—			—			(1		)	—			(1		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	13		$	85		$	29		$	(114	)	$	13



	Three Months Ended June 30, 2015
	Parent		Guarantors		Non- Guarantors			Elims			Consolidated
Net income	$	13	$	85	$	30		$	(114	)	$	14
Other comprehensive income (loss)	23		30		(15		)	(15		)	23
Total comprehensive income	36		115		15			(129		)	37
Less: Comprehensive income attributable to noncontrolling interests	—		—		(1		)	—			(1		)
Comprehensive income attributable to Meritor, Inc.	$	36	$	115	$	14		$	(129	)	$	36



	Three Months Ended June 30, 2014
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	382		$	597		$	—		$	979
Subsidiaries	—			41			17			(58		)	—
Total sales	—			423			614			(58		)	979
Cost of sales	(14		)	(355		)	(544		)	58			(855		)
GROSS MARGIN	(14		)	68			70			—			124
Selling, general and administrative	(28		)	(4		)	(21		)	—			(53		)
Other operating expense	—			—			(1		)	—			(1		)
OPERATING INCOME (LOSS)	(42		)	64			48			—			70
Other income (expense), net	13			(6		)	(7		)	—			—
Equity in earnings of ZF Meritor	—			190			—			—			190
Equity in earnings of other affiliates	—			9			2			—			11
Interest income (expense), net	(31		)	11			(2		)	—			(22		)
INCOME (LOSS) BEFORE INCOME TAXES	(60		)	268			41			—			249
Provision for income taxes	(1		)	(1		)	(10		)	—			(12		)
Equity income from continuing operations of subsidiaries	298			27			—			(325		)	—
INCOME FROM CONTINUING OPERATIONS	237			294			31			(325		)	237
LOSS FROM DISCONTINUED OPERATIONS, net of tax	(3		)	(3		)	(1		)	4			(3		)
NET INCOME	234			291			30			(321		)	234
Less: Net income attributable to noncontrolling interests	—			—			—			—			—
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	234		$	291		$	30		$	(321	)	$	234



	Three Months Ended June 30, 2014
	Parent		Guarantors			Non- Guarantors		Elims			Consolidated
Net income	$	234	$	291		$	30	$	(321	)	$	234
Other comprehensive income (loss)	19		(10		)	19		(9		)	19
Total comprehensive income	253		281			49		(330		)	253
Less: Comprehensive income attributable to noncontrolling interests	—		—			—		—			—
Comprehensive income attributable to Meritor, Inc.	$	253	$	281		$	49	$	(330	)	$	253



	Nine Months Ended June 30, 2015
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	1,282		$	1,370		$	—		$	2,652
Subsidiaries	—			95			52			(147		)	—
Total sales	—			1,377			1,422			(147		)	2,652
Cost of sales	(38		)	(1,167		)	(1,240		)	147			(2,298		)
GROSS MARGIN	(38		)	210			182			—			354
Selling, general and administrative	(54		)	(83		)	(50		)	—			(187		)
Restructuring costs	(1		)	(5		)	(9		)	—			(15		)
Other operating income (expense), net	(2		)	—			4			—			2
OPERATING INCOME (LOSS)	(95		)	122			127			—			154
Other income (expense), net	47			(15		)	(29		)	—			3
Equity in earnings of affiliates	—			24			4			—			28
Interest income (expense), net	(105		)	20			7			—			(78		)
INCOME (LOSS) BEFORE INCOME TAXES	(153		)	151			109			—			107
Provision for income taxes	(2		)	—			(17		)	—			(19		)
Equity income from continuing operations of subsidiaries	241			81			—			(322		)	—
INCOME FROM CONTINUING OPERATIONS	86			232			92			(322		)	88
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, net of tax	(1		)	1			(2		)	1			(1		)
NET INCOME	85			233			90			(321		)	87
Less: Net income attributable to noncontrolling interests	—			—			(2		)	—			(2		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	85		$	233		$	88		$	(321	)	$	85



	Nine Months Ended June 30, 2015
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Net income	$	85		$	233		$	90		$	(321	)	$	87
Other comprehensive income (loss)	(21		)	(62		)	3			58			(22		)
Total comprehensive income	64			171			93			(263		)	65
Less: Comprehensive income attributable to noncontrolling interests	—			—			(1		)	—			(1		)
Comprehensive income attributable to Meritor, Inc.	$	64		$	171		$	92		$	(263	)	$	64



	Nine Months Ended June 30, 2014
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	1,039		$	1,794		$	—		$	2,833
Subsidiaries	—			107			46			(153		)	—
Total sales	—			1,146			1,840			(153		)	2,833
Cost of sales	(40		)	(978		)	(1,621		)	153			(2,486		)
GROSS MARGIN	(40		)	168			219			—			347
Selling, general and administrative	(68		)	(49		)	(61		)	—			(178		)
Restructuring costs	(1		)	—			(2		)	—			(3		)
Other operating expense	—			(1		)	(1		)	—			(2		)
OPERATING INCOME (LOSS)	(109		)	118			155			—			164
Other income (loss), net	52			(14		)	(38		)	—			—
Equity in earnings of ZF Meritor	—			190			—			—			190
Equity in earnings of other affiliates	—			21			7			—			28
Interest income (expense), net	(119		)	28			(6		)	—			(97		)
INCOME (LOSS) BEFORE INCOME TAXES	(176		)	343			118			—			285
Provision for income taxes	(1		)	(2		)	(28		)	—			(31		)
Equity income from continuing operations of subsidiaries	427			75			—			(502		)	—
INCOME FROM CONTINUING OPERATIONS	250			416			90			(502		)	254
LOSS FROM DISCONTINUED OPERATIONS, net of tax	(4		)	(4		)	(2		)	6			(4		)
NET INCOME	246			412			88			(496		)	250
Less: Net income attributable to noncontrolling interests	—			—			(4		)	—			(4		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	246		$	412		$	84		$	(496	)	$	246



	Nine Months Ended June 30, 2014
	Parent		Guarantors		Non- Guarantors			Elims			Consolidated
Net income	$	246	$	412	$	88		$	(496	)	$	250
Other comprehensive income	41		—		19			(19		)	41
Total comprehensive income	287		412		107			(515		)	291
Less: Comprehensive income attributable to noncontrolling interests	—		—		(4		)	—			(4		)
Comprehensive income attributable to Meritor, Inc.	$	287	$	412	$	103		$	(515	)	$	287



	June 30, 2015
	Parent			Guarantors			Non- Guarantors		Elims			Consolidated
CURRENT ASSETS:
Cash and cash equivalents	$	238		$	5		$	102	$	—		$	345
Receivables trade and other, net	—			39			491		—			530
Inventories	—			163			202		—			365
Other current assets	7			18			27		—			52
TOTAL CURRENT ASSETS	245			225			822		—			1,292
NET PROPERTY	13			154			226		—			393
GOODWILL	—			277			143		—			420
OTHER ASSETS	77			122			149		—			348
INVESTMENTS IN SUBSIDIARIES	2,340			444			—		(2,784		)	—
TOTAL ASSETS	$	2,675		$	1,222		$	1,340	$	(2,784	)	$	2,453
CURRENT LIABILITIES:
Short-term debt	$	1		$	3		$	14	$	—		$	18
Accounts and notes payable	45			222			344		—			611
Other current liabilities	115			67			121		—			303
TOTAL CURRENT LIABILITIES	161			292			479		—			932
LONG-TERM DEBT	1,054			7			18		—			1,079
RETIREMENT BENEFITS	625			—			104		—			729
INTERCOMPANY PAYABLE (RECEIVABLE)	1,406			(1,712		)	306		—			—
OTHER LIABILITIES	47			212			45		—			304
EQUITY (DEFICIT) ATTRIBUTABLE TO MERITOR, INC.	(618		)	2,423			361		(2,784		)	(618		)
NONCONTROLLING INTERESTS	—			—			27		—			27
TOTAL LIABILITIES AND EQUITY (DEFICIT)	$	2,675		$	1,222		$	1,340	$	(2,784	)	$	2,453



	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



	Nine Months Ended June 30, 2015
	Parent			Guarantors			Non- Guarantors			Elims		Consolidated
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES	$	76		$	19		$	27		$	—	$	122
INVESTING ACTIVITIES
Capital expenditures	(4		)	(17		)	(24		)	—		(45		)
Proceeds from the sale of property	—			—			4			—		4
Net investing cash flows provided by discontinued operations	—			1			3			—		4
CASH USED FOR INVESTING ACTIVITIES	(4		)	(16		)	(17		)	—		(37		)
FINANCING ACTIVITIES
Repayment of notes	(159		)	—			—			—		(159		)
Proceeds from debt issuance	225			—			—			—		225
Debt issuance costs	(4		)	—			—			—		(4		)
Repurchase of common stock	(30		)	—			—			—		(30		)
Intercompany advances	63			—			(63		)	—		—
Other financing activities	—			(3		)	(4		)	—		(7		)
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES	95			(3		)	(67		)	—		25
EFFECT OF CHANGES IN FOREIGN CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	—			—			(12		)	—		(12		)
CHANGE IN CASH AND CASH EQUIVALENTS	167			—			(69		)	—		98
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	71			5			171			—		247
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	238		$	5		$	102		$	—	$	345



	Nine Months Ended June 30, 2014
	Parent			Guarantors			Non- Guarantors			Elims		Consolidated
CASH FLOWS PROVIDED BY (USED FOR) OPERATING ACTIVITIES	$	(5	)	$	20		$	88		$	—	$	103
INVESTING ACTIVITIES
Capital expenditures	(2		)	(17		)	(20		)	—		(39		)
Net investing cash flows provided by discontinued operations	—			—			3			—		3
CASH USED FOR INVESTING ACTIVITIES	(2		)	(17		)	(17		)	—		(36		)
FINANCING ACTIVITIES
Repayment of notes and term loan	(308		)	—			—			—		(308		)
Proceeds from debt issuance	225			—			—			—		225
Debt issuance costs	(9		)	—			—			—		(9		)
Intercompany advances	(2		)	—			2			—		—
Other financing activities	—			(2		)	12			—		10
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES	(94		)	(2		)	14			—		(82		)
EFFECT OF CHANGES IN FOREIGN CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	—			—			—			—		—
CHANGE IN CASH AND CASH EQUIVALENTS	(101		)	1			85			—		(15		)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	144			6			168			—		318
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	43		$	7		$	253		$	—	$	303

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 June 30, 2015 and September 30, 2014, Parent-only obligations included $652 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 June 30, 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 nine months ended June 30, 2015 and 2014, respectively.