QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The following is a condensed summary of the company’s unaudited quarterly results of continuing operations for fiscal years 2017 and 2016. Per share amounts are based on the weighted average shares outstanding for that quarter. Earnings per share for the year may not equal the sum of the four fiscal quarters’ earnings per share due to changes in basic and diluted shares outstanding.



	2017 Fiscal Quarters (Unaudited)
	First			Second			Third			Fourth			2017
	(In millions, except share related data)
Sales	$	699		$	806		$	920		$	922		$	3,347
Cost of sales	(610		)	(685		)	(778		)	(790		)	(2,863		)
Gross margin	89			121			142			132			484
Provision for income taxes	(6		)	(13		)	(11		)	(22		)	(52		)
Net income	16			23			51			238			328
Net income from continuing operations attributable to Meritor, Inc.	15			22			49			239			325
Net income attributable to Meritor, Inc.	15			22			48			239			324
Basic earnings per share from continuing operations	$	0.17		$	0.25		$	0.55		$	2.70		$	3.69
Diluted earnings per share from continuing operations	$	0.17		$	0.24		$	0.52		$	2.63		$	3.60

The company recognized restructuring costs in its continuing operations during fiscal year 2017 as follows: an insignificant amount in the first quarter, $4 million in the second quarter, an insignificant amount in the third quarter and $2 million in the fourth quarter (see Note 6). During the third quarter of fiscal year 2017, the company resolved all claims with Sisamex and entered into a confidential settlement agreement in which the company paid $10 million to Quimmco (see Note 24). During the fourth quarter of fiscal year 2017, the company entered into an agreement to sell the its interest in Meritor WABCO Vehicle Control Systems to a subsidiary of its joint venture partner, WABCO Holdings Inc. The total purchase price for the sale was $250 million, and the company also received a $8 million partnership distribution immediately prior to the transaction closing on October 1, 2017. The company recognized a $243 million pre-tax ($154 million, after-tax) gain associated with this sale. During the fourth quarter of fiscal year 2017, the company recognized a $52 million income tax benefit related to the partial reversal of the U.S. valuation allowance and a $15 million income tax benefit related to capital losses associated with the sale of an equity investment. Also in the fourth quarter of fiscal year 2017, the company recognized a $36 million loss on debt extinguishment ($22 million, after-tax).



	2016 Fiscal Quarters (Unaudited)
	First			Second			Third			Fourth			2016
	(In millions, except share related data)
Sales	$	809		$	821		$	841		$	728		$	3,199
Cost of sales	(705		)	(700		)	(714		)	(644		)	(2,763		)
Gross margin	104			121			127			84			436
Benefit (provision) for income taxes	(7		)	(7		)	(8		)	446			424
Net income	27			32			42			474			575
Net income from continuing operations attributable to Meritor, Inc.	28			33			42			474			577
Net income attributable to Meritor, Inc.	26			32			41			474			573
Basic earnings per share from continuing operations	$	0.30		$	0.36		$	0.47		$	5.47		$	6.40
Diluted earnings per share from continuing operations	$	0.30		$	0.36		$	0.46		$	5.34		$	6.27

The company recognized restructuring costs in its continuing operations during fiscal year 2016 as follows: $1 million in the first quarter, $2 million in the second quarter, $6 million in the third quarter and $7 million in the fourth quarter (see Note 6). During the fourth quarter of fiscal year 2016, the company recognized a $438 million tax benefit from the partial reversal of the U.S. valuation allowance and a $25 million income tax benefit related to other correlated tax relief, which were partially offset by a $9 million non-cash charge to income tax expense in Brazil related to the establishment of a valuation allowance (see Note 23). Also in the fourth quarter of fiscal year 2016, the company recognized $31 million as reduction in asbestos expense due to settlement agreements (see Note 24).