Supplemental Guarantor Condensed Consolidating Financial Statements

3 Months Ended

Dec. 31, 2018

Condensed Financial Information 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 December 31, 2018
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	589		$	449		$	—		$	1,038
Subsidiaries	—			32			57			(89		)	—
Total sales	—			621			506			(89		)	1,038
Cost of sales	(15		)	(534		)	(437		)	89			(897		)
GROSS MARGIN	(15		)	87			69			—			141
Selling, general and administrative	(25		)	(27		)	18			—			(34		)
OPERATING INCOME (LOSS)	(40		)	60			87			—			107
Other income, net	—			5			6			—			11
Equity in earnings of affiliates	—			7			2			—			9
Interest income (expense), net	(32		)	12			6			—			(14		)
INCOME (LOSS) BEFORE INCOME TAXES	(72		)	84			101			—			113
Benefit (provision) for income taxes	11			(12		)	(20		)	—			(21		)
Equity income from continuing operations of subsidiaries	151			40			—			(191		)	—
INCOME FROM CONTINUING OPERATIONS	90			112			81			(191		)	92
LOSS FROM DISCONTINUED OPERATIONS, net of tax	—			—			—			—			—
NET INCOME	90			112			81			(191		)	92
Less: Net income attributable to noncontrolling interests	—			—			(2		)	—			(2		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	90		$	112		$	79		$	(191	)	$	90



	Three Months Ended December 31, 2018
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Net income	$	90		$	112		$	81		$	(191	)	$	92
Other comprehensive loss, net of tax	(3		)	(8		)	(9		)	18			(2		)
Total comprehensive income	87			104			72			(173		)	90
Less: Comprehensive income attributable to noncontrolling interests	—			—			(3		)	—			(3		)
Comprehensive income attributable to Meritor, Inc.	$	87		$	104		$	69		$	(173	)	$	87



	Three Months Ended December 31, 2017 ⁽¹⁾
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	468		$	435		$	—		$	903
Subsidiaries	—			32			44			(76		)	—
Total sales	—			500			479			(76		)	903
Cost of sales	(19		)	(418		)	(410		)	76			(771		)
GROSS MARGIN	(19		)	82			69			—			132
Selling, general and administrative	(28		)	(20		)	(19		)	—			(67		)
Restructuring costs	—			—			(2		)	—			(2		)
Other operating expense, net	(1		)	—			—			—			(1		)
OPERATING INCOME (LOSS)	(48		)	62			48			—			62
Other income (expense), net	4			6			(3		)	—			7
Equity in earnings of affiliates	—			4			1			—			5
Interest income (expense), net	(37		)	9			4			—			(24		)
INCOME (LOSS) BEFORE INCOME TAXES	(81		)	81			50			—			50
Provision for income taxes	(23		)	(49		)	(11		)	—			(83		)
Equity income from continuing operations of subsidiaries	69			37			—			(106		)	—
INCOME (LOSS) FROM CONTINUING OPERATIONS	(35		)	69			39			(106		)	(33		)
LOSS FROM DISCONTINUED OPERATIONS, net of tax	(1		)	—			—			—			(1		)
NET INCOME (LOSS)	(36		)	69			39			(106		)	(34		)
Less: Net income attributable to noncontrolling interests	—			—			(2		)	—			(2		)
NET INCOME (LOSS) ATTRIBUTABLE TO MERITOR, INC.	$	(36	)	$	69		$	37		$	(106	)	$	(36	)

⁽¹⁾Prior period has been recast, see Note 20.



	Three Months Ended December 31, 2017
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Net income (loss)	$	(36	)	$	69		$	39		$	(106	)	$	(34	)
Other comprehensive loss, net of tax	(5		)	(7		)	(7		)	15			(4		)
Total comprehensive income (loss)	(41		)	62			32			(91		)	(38		)
Less: Comprehensive loss (income) attributable to noncontrolling interests	—			—			(3		)	—			(3		)
Comprehensive income (loss) attributable to Meritor, Inc.	$	(41	)	$	62		$	29		$	(91	)	$	(41	)



	December 31, 2018
	Parent		Guarantors			Non- Guarantors		Elims			Consolidated
CURRENT ASSETS:
Cash and cash equivalents	$	24	$	8		$	95	$	—		$	127
Receivables trade and other, net	5		57			477		—			539
Inventories	—		268			254		—			522
Other current assets	6		13			33		—			52
TOTAL CURRENT ASSETS	35		346			859		—			1,240
NET PROPERTY	23		242			216		—			481
GOODWILL	—		250			168		—			418
OTHER ASSETS	178		192			224		—			594
INVESTMENTS IN SUBSIDIARIES	3,744		893			—		(4,637		)	—
TOTAL ASSETS	$	3,980	$	1,923		$	1,467	$	(4,637	)	$	2,733
CURRENT LIABILITIES:
Short-term debt	$	92	$	—		$	80	$	—		$	172
Accounts and notes payable	49		284			347		—			680
Other current liabilities	79		54			167		—			300
TOTAL CURRENT LIABILITIES	220		338			594		—			1,152
LONG-TERM DEBT	727		—			4		—			731
RETIREMENT BENEFITS	234		—			20		—			254
INTERCOMPANY PAYABLE (RECEIVABLE)	2,419		(2,659		)	240		—			—
OTHER LIABILITIES	50		122			61		—			233
MEZZANINE EQUITY	1		—			—		—			1
EQUITY ATTRIBUTABLE TO MERITOR, INC.	329		4,122			515		(4,637		)	329
NONCONTROLLING INTERESTS	—		—			33		—			33
TOTAL LIABILITIES, MEZZANINE EQUITY AND EQUITY	$	3,980	$	1,923		$	1,467	$	(4,637	)	$	2,733



	September 30, 2018
	Parent		Guarantors			Non- Guarantors		Elims			Consolidated
CURRENT ASSETS:
Cash and cash equivalents	$	24	$	6		$	85	$	—		$	115
Receivables trade and other, net	2		62			524		—			588
Inventories	—		242			235		—			477
Other current assets	6		12			28		—			46
TOTAL CURRENT ASSETS	32		322			872		—			1,226
NET PROPERTY	24		241			218		—			483
GOODWILL	—		250			171		—			421
OTHER ASSETS	179		182			235		—			596
INVESTMENTS IN SUBSIDIARIES	3,583		855			—		(4,438		)	—
TOTAL ASSETS	$	3,818	$	1,850		$	1,496	$	(4,438	)	$	2,726
CURRENT LIABILITIES:
Short-term debt	$	47	$	—		$	47	$	—		$	94
Accounts and notes payable	64		297			339		—			700
Other current liabilities	77		71			142		—			290
TOTAL CURRENT LIABILITIES	188		368			528		—			1,084
LONG-TERM DEBT	726		—			4		—			730
RETIREMENT BENEFITS	241		—			21		—			262
INTERCOMPANY PAYABLE (RECEIVABLE)	2,325		(2,640		)	315		—			—
OTHER LIABILITIES	50		124			158		—			332
MEZZANINE EQUITY	1		—			—		—			1
EQUITY ATTRIBUTABLE TO MERITOR, INC.	287		3,998			440		(4,438		)	287
NONCONTROLLING INTERESTS	—		—			30		—			30
TOTAL LIABILITIES, MEZZANINE EQUITY AND EQUITY	$	3,818	$	1,850		$	1,496	$	(4,438	)	$	2,726



	Three Months Ended December 31, 2018
	Parent			Guarantors			Non- Guarantors			Elims		Consolidated
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES	$	(9	)	$	15		$	5		$	—	$	11
INVESTING ACTIVITIES
Capital expenditures	(1		)	(12		)	(10		)	—		(23		)
Cash paid for investment in Transportation Power, Inc.	(3		)	—			—			—		(3		)
Other investing activities	—			—			(1		)			(1		)
CASH USED FOR INVESTING ACTIVITIES	(4		)	(12		)	(11		)	—		(27		)
FINANCING ACTIVITIES
Borrowings and securitization	45			—			33			—		78
Repurchase of common stock	(50		)	—			—			—		(50		)
Intercompany advances	18			—			(18		)	—		—
Other financing activities	—			(1		)	—			—		(1		)
CASH PROVIDED BY FINANCING ACTIVITIES	13			(1		)	15			—		27
EFFECT OF CHANGES IN FOREIGN CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	—			—			1			—		1
CHANGE IN CASH AND CASH EQUIVALENTS	—			2			10			—		12
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	24			6			85			—		115
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	24		$	8		$	95		$	—	$	127



	Three Months Ended December 31, 2017
	Parent			Guarantors			Non- Guarantors			Elims		Consolidated
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES	$	(75	)	$	10		$	98		$	—	$	33
INVESTING ACTIVITIES
Capital expenditures	(1		)	(9		)	(8		)	—		(18		)
Proceeds from prior year sale of equity method investment	250			—			—			—		250
Cash paid for investment in Transportation Power, Inc.	(3		)	—			—			—		(3		)
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES	246			(9		)	(8		)	—		229
FINANCING ACTIVITIES
Borrowings and securitization	—			—			(51		)	—		(51		)
Redemption of notes	(181		)	—			—			—		(181		)
Intercompany advances	23			—			(23		)	—		—
Other financing activities	—			(1		)	—			—		(1		)
CASH USED FOR FINANCING ACTIVITIES	(158		)	(1		)	(74		)	—		(233		)
EFFECT OF CHANGES IN FOREIGN CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	—			—			(1		)	—		(1		)
CHANGE IN CASH AND CASH EQUIVALENTS	13			—			15			—		28
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	10			3			75			—		88
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	23		$	3		$	90		$	—	$	116

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 December 31, 2018 and September 30, 2018, Parent-only obligations included $241 million and $248 million of pension and retiree medical benefits, respectively (see Note 20). All debt is debt of the Parent other than $84 million and $51 million at December 31, 2018 and September 30, 2018, respectively (see Note 18), and is primarily related to U.S. accounts receivable securitization and capital lease obligations. There were no cash dividends paid to the Parent by subsidiaries and investments accounted for by the equity method for the three months ended December 31, 2018 and $6 million of cash dividends paid to the Parent by subsidiaries and investments accounted for by the equity method for the three months ended December 31, 2017.