Supplemental Guarantor Condensed Consolidating Financial Statements

6 Months Ended

Mar. 31, 2017

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Supplemental Guarantor Condensed Consolidating Financial Statements

Rule 3-10 of Regulation S-X requires that separate financial information for issuers and guarantors of registered securities be filed in certain circumstances. Certain of the company's 100-percent-owned subsidiaries, as defined in the credit agreement (the “Guarantors”), irrevocably and unconditionally guarantee amounts outstanding under the senior secured revolving credit facility on a joint and several basis. Similar subsidiary guarantees were provided for the benefit of the holders of the notes outstanding under the company's indentures (see Note 18).

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 Regulation S-X Rules 3-10. 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 consolidating financial statements.



	Three Months Ended March 31, 2017
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	391		$	415		$	—		$	806
Subsidiaries	—			30			14			(44		)	—
Total sales	—			421			429			(44		)	806
Cost of sales	(15		)	(345		)	(369		)	44			(685		)
GROSS MARGIN	(15		)	76			60			—			121
Selling, general and administrative	(20		)	(35		)	(11		)	—			(66		)
Restructuring costs	—			(2		)	(2		)	—			(4		)
Other operating expense, net	(2		)	—			—			—			(2		)
OPERATING INCOME (LOSS)	(37		)	39			47			—			49
Other income (expense), net	25			(5		)	(20		)	—			—
Equity in earnings of affiliates	—			6			2			—			8
Interest income (expense), net	(34		)	9			4			—			(21		)
INCOME (LOSS) BEFORE INCOME TAXES	(46		)	49			33			—			36
Provision for income taxes	15			(15		)	(13		)	—			(13		)
Equity income (loss) from continuing operations of subsidiaries	53			13			—			(66		)	—
INCOME (LOSS) FROM CONTINUING OPERATIONS	22			47			20			(66		)	23
LOSS FROM DISCONTINUED OPERATIONS, net of tax	—			—			—			—			—
NET INCOME (LOSS)	22			47			20			(66		)	23
Less: Net income attributable to noncontrolling interests	—			—			(1		)	—			(1		)
NET INCOME (LOSS) ATTRIBUTABLE TO MERITOR, INC.	$	22		$	47		$	19		$	(66	)	$	22



	Three Months Ended March 31, 2017
	Parent		Guarantors		Non- Guarantors			Elims			Consolidated
Net income (loss)	$	22	$	47	$	20		$	(66	)	$	23
Other comprehensive income (loss)	30		—		21			(19		)	32
Total comprehensive income (loss)	52		47		41			(85		)	55
Less: Comprehensive income attributable to noncontrolling interests	—		—		(2		)	—			(2		)
Comprehensive income (loss) attributable to Meritor, Inc.	$	52	$	47	$	39		$	(85	)	$	53



	Three Months Ended March 31, 2016
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	420		$	401		$	—		$	821
Subsidiaries	—			28			16			(44		)	—
Total sales	—			448			417			(44		)	821
Cost of sales	(12		)	(369		)	(363		)	44			(700		)
GROSS MARGIN	(12		)	79			54			—			121
Selling, general and administrative	(19		)	(21		)	(20		)	—			(60		)
Restructuring costs	—			(1		)	(1		)	—			(2		)
Other operating expense, net	(3		)	—			—			—			(3		)
OPERATING INCOME (LOSS)	(34		)	57			33			—			56
Other income (expense), net	35			(9		)	(28		)	—			(2		)
Equity in earnings of affiliates	—			7			—			—			7
Interest income (expense), net	(28		)	7			—			—			(21		)
INCOME (LOSS) BEFORE INCOME TAXES	(27		)	62			5			—			40
Provision for income taxes	—			—			(7		)	—			(7		)
Equity income (loss) from continuing operations of subsidiaries	60			(6		)	—			(54		)	—
INCOME (LOSS) FROM CONTINUING OPERATIONS	33			56			(2		)	(54		)	33
LOSS FROM DISCONTINUED OPERATIONS, net of tax	(1		)	(2		)	(1		)	3			(1		)
NET INCOME (LOSS)	32			54			(3		)	(51		)	32
Less: Net income attributable to noncontrolling interests	—			—			—			—			—
NET INCOME (LOSS) ATTRIBUTABLE TO MERITOR, INC.	$	32		$	54		$	(3	)	$	(51	)	$	32



	Three Months Ended March 31, 2016
	Parent		Guarantors		Non- Guarantors			Elims			Consolidated
Net income (loss)	$	32	$	54	$	(3	)	$	(51	)	$	32
Other comprehensive income (loss)	18		23		(10		)	(13		)	18
Total comprehensive income (loss)	50		77		(13		)	(64		)	50
Less: Comprehensive income attributable to noncontrolling interests	—		—		—			—			—
Comprehensive income (loss) attributable to Meritor, Inc.	$	50	$	77	$	(13	)	$	(64	)	$	50



	Six Months Ended March 31, 2017
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	716		$	789		$	—		$	1,505
Subsidiaries	—			56			26			(82		)	—
Total sales	—			772			815			(82		)	1,505
Cost of sales	(29		)	(642		)	(706		)	82			(1,295		)
GROSS MARGIN	(29		)	130			109			—			210
Selling, general and administrative	(43		)	(53		)	(23		)	—			(119		)
Restructuring costs	2			(2		)	(4		)	—			(4		)
Other operating expense, net	(2		)	—			(3		)	—			(5		)
OPERATING INCOME (LOSS)	(72		)	75			79			—			82
Other income (expense), net	24			(5		)	(19		)	—			—
Equity in earnings of affiliates	—			15			3			—			18
Interest income (expense), net	(67		)	19			6			—			(42		)
INCOME (LOSS) BEFORE INCOME TAXES	(115		)	104			69			—			58
Provision for income taxes	35			(35		)	(19		)	—			(19		)
Equity income (loss) from continuing operations of subsidiaries	117			41			—			(158		)	—
INCOME (LOSS) FROM CONTINUING OPERATIONS	37			110			50			(158		)	39
LOSS FROM DISCONTINUED OPERATIONS, net of tax	—			—			—			—			—
NET INCOME (LOSS)	37			110			50			(158		)	39
Less: Net income attributable to noncontrolling interests	—			—			(2		)	—			(2		)
NET INCOME (LOSS) ATTRIBUTABLE TO MERITOR, INC.	$	37		$	110		$	48		$	(158	)	$	37



	Six Months Ended March 31, 2017
	Parent		Guarantors		Non- Guarantors			Elims			Consolidated
Net income (loss)	$	37	$	110	$	50		$	(158	)	$	39
Other comprehensive income (loss)	14		2		(6		)	4			14
Total comprehensive income (loss)	51		112		44			(154		)	53
Less: Comprehensive income attributable to noncontrolling interests	—		—		(1		)	—			(1		)
Comprehensive income (loss) attributable to Meritor, Inc.	$	51	$	112	$	43		$	(154	)	$	52



	Six Months Ended March 31, 2016
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	837		$	793		$	—		$	1,630
Subsidiaries	—			55			32			(87		)	—
Total sales	—			892			825			(87		)	1,630
Cost of sales	(26		)	(746		)	(720		)	87			(1,405		)
GROSS MARGIN	(26		)	146			105			—			225
Selling, general and administrative	(39		)	(42		)	(35		)	—			(116		)
Restructuring costs	—			(1		)	(2		)	—			(3		)
Other operating expense, net	(3		)	—			—			—			(3		)
OPERATING INCOME (LOSS)	(68		)	103			68			—			103
Other income (loss), net	34			(9		)	(26		)	—			(1		)
Equity in earnings of affiliates	—			16			1			—			17
Interest income (expense), net	(59		)	15			1			—			(43		)
INCOME (LOSS) BEFORE INCOME TAXES	(93		)	125			44			—			76
Provision for income taxes	—			—			(14		)	—			(14		)
Equity income from continuing operations of subsidiaries	154			21			—			(175		)	—
INCOME FROM CONTINUING OPERATIONS	61			146			30			(175		)	62
LOSS FROM DISCONTINUED OPERATIONS, net of tax	(3		)	(5		)	(4		)	9			(3		)
NET INCOME	58			141			26			(166		)	59
Less: Net income attributable to noncontrolling interests	—			—			(1		)	—			(1		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	58		$	141		$	25		$	(166	)	$	58



	Six Months Ended March 31, 2016
	Parent		Guarantors		Non- Guarantors			Elims			Consolidated
Net income	$	58	$	141	$	26		$	(166	)	$	59
Other comprehensive income (loss)	24		12		(2		)	(10		)	24
Total comprehensive income	82		153		24			(176		)	83
Less: Comprehensive income attributable to noncontrolling interests	—		—		(1		)	—			(1		)
Comprehensive income attributable to Meritor, Inc.	$	82	$	153	$	23		$	(176	)	$	82



	March 31, 2017
	Parent			Guarantors			Non- Guarantors		Elims			Consolidated
CURRENT ASSETS:
Cash and cash equivalents ⁽¹⁾	$	67		$	4		$	67	$	—		$	138
Receivables trade and other, net ⁽¹⁾	1			57			384		—			442
Inventories ⁽¹⁾	—			151			187		—			338
Other current assets	7			14			21		—			42
TOTAL CURRENT ASSETS	75			226			659		—			960
NET PROPERTY	22			202			206		—			430
GOODWILL ⁽¹⁾	—			219			166		—			385
OTHER ASSETS	443			130			188		—			761
INVESTMENTS IN SUBSIDIARIES	2,728			714			—		(3,442		)	—
TOTAL ASSETS	$	3,268		$	1,491		$	1,219	$	(3,442	)	$	2,536
CURRENT LIABILITIES:
Short-term debt	$	128		$	3		$	1	$	—		$	132
Accounts and notes payable ⁽¹⁾	40			198			290		—			528
Other current liabilities	85			73			87		—			245
TOTAL CURRENT LIABILITIES	253			274			378		—			905
LONG-TERM DEBT	848			1			8		—			857
RETIREMENT BENEFITS	659			—			21		—			680
INTERCOMPANY PAYABLE (RECEIVABLE)	1,629			(1,859		)	230		—			—
OTHER LIABILITIES	29			149			41		—			219
MEZZANINE EQUITY	13			—			—		—			13
EQUITY (DEFICIT) ATTRIBUTABLE TO MERITOR, INC.	(163		)	2,926			516		(3,442		)	(163		)
NONCONTROLLING INTERESTS ⁽¹⁾	—			—			25		—			25
TOTAL LIABILITIES AND EQUITY (DEFICIT)	$	3,268		$	1,491		$	1,219	$	(3,442	)	$	2,536

⁽¹⁾ As of March 31, 2017, Assets and Liabilities held for sale were: (i) $1 million Cash and cash equivalents; (ii) $8 million Receivables, trade and other, net; (iii) $1 million Inventories; (iv) $1 million Goodwill; (v) $6 million Accounts and notes payable; and (vi) $2 million Noncontrolling interests. These assets and liabilities held for sale are included in the Non-Guarantors column.



	September 30, 2016
	Parent			Guarantors			Non- Guarantors		Elims			Consolidated
CURRENT ASSETS:
Cash and cash equivalents ⁽¹⁾	$	90		$	4		$	66	$	—		$	160
Receivables trade and other, net ⁽¹⁾	1			39			356		—			396
Inventories ⁽¹⁾	—			143			173		—			316
Other current assets	5			12			16		—			33
TOTAL CURRENT ASSETS	96			198			611		—			905
NET PROPERTY ⁽¹⁾	22			198			219		—			439
GOODWILL	—			219			171		—			390
OTHER ASSETS	447			132			181		—			760
INVESTMENTS IN SUBSIDIARIES	2,575			679			—		(3,254		)	—
TOTAL ASSETS	$	3,140		$	1,426		$	1,182	$	(3,254	)	$	2,494
CURRENT LIABILITIES:
Short-term debt	$	1		$	4		$	9	$	—		$	14
Accounts and notes payable ⁽¹⁾	42			172			261		—			475
Other current liabilities	90			74			104		—			268
TOTAL CURRENT LIABILITIES	133			250			374		—			757
LONG-TERM DEBT	971			3			8		—			982
RETIREMENT BENEFITS	680			—			23		—			703
INTERCOMPANY PAYABLE (RECEIVABLE)	1,534			(1,768		)	234		—			—
OTHER LIABILITIES	34			162			42		—			238
EQUITY (DEFICIT) ATTRIBUTABLE TO MERITOR, INC.	(212		)	2,779			476		(3,254		)	(211		)
NONCONTROLLING INTERESTS ⁽¹⁾	—			—			25		—			25
TOTAL LIABILITIES AND EQUITY (DEFICIT)	$	3,140		$	1,426		$	1,182	$	(3,254	)	$	2,494

⁽¹⁾ As of September 30, 2016, Assets and Liabilities held for sale were: (i) $1 million Cash and cash equivalents; (ii) $8 million Receivables, trade and other, net; (iii) $1 million Inventories; (iv) $3 million Net property; (v) $5 million Accounts and notes payable; and (vi) $3 million Noncontrolling interests.These assets and liabilities held for sale are included in the Non-Guarantors column.



	Six Months Ended March 31, 2017
	Parent			Guarantors			Non- Guarantors			Elims		Consolidated
CASH FLOWS PROVIDED BY (USED FOR) OPERATING ACTIVITIES	$	(51	)	$	21		$	60		$	—	$	30
INVESTING ACTIVITIES
Capital expenditures	(6		)	(21		)	(13		)	—		(40		)
Net investing cash flows provided by discontinued operations	—			2			—			—		2
CASH USED FOR INVESTING ACTIVITIES	(6		)	(19		)	(13		)	—		(38		)
FINANCING ACTIVITIES
Debt issuance costs	(4		)	—			—			—		(4		)
Intercompany advances	38			—			(38		)	—		—
Other financing activities	—			(2		)	(9		)	—		(11		)
CASH USED FOR FINANCING ACTIVITIES	34			(2		)	(47		)	—		(15		)
EFFECT OF CHANGES IN FOREIGN CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	—			—			1			—		1
CHANGE IN CASH AND CASH EQUIVALENTS	(23		)	—			1			—		(22		)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	90			4			66			—		160
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	67		$	4		$	67		$	—	$	138



	Six Months Ended March 31, 2016
	Parent			Guarantors			Non- Guarantors			Elims		Consolidated
CASH FLOWS PROVIDED BY (USED FOR) OPERATING ACTIVITIES	$	(20	)	$	18		$	41		$	—	$	39
INVESTING ACTIVITIES
Capital expenditures	(12		)	(22		)	(13		)	—		(47		)
Other investing activities	—			4			(1		)	—		3
Net investing cash flows provided by discontinued operations	—			1			3			—		4
CASH USED FOR INVESTING ACTIVITIES	(12		)	(17		)	(11		)	—		(40		)
FINANCING ACTIVITIES
Repayment of notes	(55		)	—			—			—		(55		)
Repurchase of common stock	(43		)	—			—			—		(43		)
Intercompany advances	81			—			(81		)	—		—
Other financing activities	—			(2		)	—			—		(2		)
CASH USED FOR FINANCING ACTIVITIES	(17		)	(2		)	(81		)	—		(100		)
EFFECT OF CHANGES IN FOREIGN CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	—			—			2			—		2
CHANGE IN CASH AND CASH EQUIVALENTS	(49		)	(1		)	(49		)	—		(99		)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	73			6			114			—		193
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	24		$	5		$	65		$	—	$	94

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, 2017 and September 30, 2016, Parent-only obligations included $686 million and $708 million of pension and retiree medical benefits, respectively (see Note 20). All debt is debt of the Parent other than $13 million and $24 million at March 31, 2017 and September 30, 2016, respectively (see Note 18), and is primarily related to capital lease obligations and lines of credit. There were $1 million and $17 million cash dividends paid to the Parent by subsidiaries and investments accounted for by the equity method for the six months ended March 31, 2017 and March 31, 2016, respectively.