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 on a joint and several basis. Similar subsidiary guarantees were provided for the benefit of the holders of the publicly-held notes outstanding under the company's indentures (see Note 18).

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. As of September 30, 2019, net assets of certain subsidiaries in China and India and certain unconsolidated subsidiaries that are restricted by law from transfer by cash dividends, loans or advances to Meritor, Inc did not exceed 25 percent of the consolidated net assets of Meritor, Inc. As of September 30, 2019 the amount of the net assets restricted from transfer by law was $73 million.

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 Guarantor subsidiaries are combined in the Condensed Consolidating Financial Statements.

MERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (In millions)


	Fiscal Year Ended September 30, 2019
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	2,621		$	1,767		$	—		$	4,388
Subsidiaries	—			110			201			(311		)	—
Total sales	—			2,731			1,968			(311		)	4,388
Cost of sales	(65		)	(2,298		)	(1,696		)	311			(3,748		)
GROSS MARGIN	(65		)	433			272			—			640
Selling, general and administrative	(92		)	(127		)	(37		)	—			(256		)
Restructuring costs	—			(6		)	(2		)	—			(8		)
Other operating expense, net	(3		)	(10		)	—			—			(13		)
OPERATING INCOME (LOSS)	(160		)	290			233			—			363
Other income (expense), net	50			36			(46		)	—			40
Equity in earnings of affiliates	—			21			10			—			31
Interest income (expense), net	(130		)	47			26			—			(57		)
INCOME (LOSS) BEFORE INCOME TAXES	(240		)	394			223			—			377
Benefit (provision) for income taxes	53			(84		)	(51		)	—			(82		)
Equity income from continuing operations of subsidiaries	477			108			—			(585		)	—
INCOME FROM CONTINUING OPERATIONS	290			418			172			(585		)	295
LOSS FROM DISCONTINUED OPERATIONS, net of tax	1			—			—			—			1
NET INCOME	291			418			172			(585		)	296
Less: Net income attributable to noncontrolling interests	—			—			(5		)	—			(5		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	291		$	418		$	167		$	(585	)	$	291

MERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS) (In millions)


	Fiscal Year Ended September 30, 2019
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Net income	$	291		$	418		$	172		$	(585	)	$	296
Other comprehensive income, net of tax	(115		)	(62		)	(64		)	125			(116		)
Total comprehensive income	176			356			108			(460		)	180
Less: Comprehensive income attributable to noncontrolling interests	—			—			(4		)	—			(4		)
Comprehensive income attributable to Meritor, Inc.	$	176		$	356		$	104		$	(460	)	$	176

MERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (In millions)


	Fiscal Year Ended September 30, 2018⁽¹⁾
	Parent			Guarantors			Non-Guarantors			Elims			Consolidated
Sales
External	$	—		$	2,290		$	1,888		$	—		$	4,178
Subsidiaries	—			143			219			(362		)	—
Total sales	—			2,433			2,107			(362		)	4,178
Cost of sales	(74		)	(2,037		)	(1,804		)	362			(3,553		)
GROSS MARGIN	(74		)	396			303			—			625
Selling, general and administrative	(91		)	(104		)	(118		)	—			(313		)
Restructuring costs	(1		)	(3		)	(2		)	—			(6		)
Other operating expense, net	(14		)	(1		)	1			—			(14		)
OPERATING INCOME (LOSS)	(180		)	288			184			—			292
Other income (expense), net	77			17			(68		)	—			26
Equity in earnings of affiliates	—			19			8			—			27
Interest income (expense), net	(118		)	29			22			—			(67		)
INCOME (LOSS) BEFORE INCOME TAXES	(221		)	353			146			—			278
Benefit (provision) for income taxes	(2		)	(81		)	(66		)	—			(149		)
Equity income from continuing operations of subsidiaries	343			88			—			(431		)	—
INCOME FROM CONTINUING OPERATIONS	120			360			80			(431		)	129
LOSS FROM DISCONTINUED OPERATIONS, net of tax	(3		)	(1		)	(1		)	2			(3		)
NET INCOME	117			359			79			(429		)	126
Less: Net income attributable to noncontrolling interests	—			—			(9		)	—			(9		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	117		$	359		$	70		$	(429	)	$	117

MERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS) (In millions)


	Fiscal Year Ended September 30, 2018⁽¹⁾
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Net income	$	117		$	359		$	79		$	(429	)	$	126
Other comprehensive income, net of tax	(21		)	(42		)	(41		)	81			(23		)
Total comprehensive income	96			317			38			(348		)	103
Less: Comprehensive income attributable to noncontrolling interests	—			—			(7		)	—			(7		)
Comprehensive income attributable to Meritor, Inc.	$	96		$	317		$	31		$	(348	)	$	96

MERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (In millions)


	Fiscal Year Ended September 30, 2017 ⁽¹⁾
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	1,762		$	1,585		$	—		$	3,347
Subsidiaries	—			123			149			(272		)	—
Total sales	—			1,885			1,734			(272		)	3,347
Cost of sales	(37		)	(1,583		)	(1,502		)	272			(2,850		)
GROSS MARGIN	(37		)	302			232			—			497
Selling, general and administrative	(82		)	(100		)	(84		)	—			(266		)
Restructuring costs	2			(2		)	(6		)	—			(6		)
Other operating expense, net	(3		)	(1		)	(3		)	—			(7		)
OPERATING INCOME (LOSS)	(120		)	199			139			—			218
Other income (expense), net	14			(11		)	(12		)	—			(9		)
Gain on sale of equity investment	—			243			—			—			243
Equity in earnings of affiliates	—			42			6			—			48
Interest income (expense), net	(168		)	35			14			—			(119		)
INCOME (LOSS) BEFORE INCOME TAXES	(274		)	508			147			—			381
Benefit (provision) for income taxes	96			(126		)	(22		)	—			(52		)
Equity income from continuing operations of subsidiaries	503			114			—			(617		)	—
INCOME FROM CONTINUING OPERATIONS	325			496			125			(617		)	329
LOSS FROM DISCONTINUED OPERATIONS, net of tax	(1		)	(1		)	(1		)	2			(1		)
NET INCOME	324			495			124			(615		)	328
Less: Net income attributable to noncontrolling interests	—			—			(4		)	—			(4		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	324		$	495		$	120		$	(615	)	$	324

MERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS) (In millions)


	Fiscal Year Ended September 30, 2017 ⁽¹⁾
	Parent		Guarantors		Non- Guarantors			Elims			Consolidated
Net income	$	324	$	495	$	124		$	(615	)	$	328
Other comprehensive income, net of tax	264		21		23			(44		)	264
Total comprehensive income	588		516		147			(659		)	592
Less: Comprehensive income attributable to noncontrolling interests	—		—		(4		)	—			(4		)
Comprehensive income attributable to Meritor, Inc.	$	588	$	516	$	143		$	(659	)	$	588

MERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING BALANCE SHEET (In millions)


	September 30, 2019
	Parent		Guarantors			Non- Guarantors		Elims			Consolidated
CURRENT ASSETS
Cash and cash equivalents	$	4	$	4		$	100	$	—		$	108
Receivables, trade and other, net	3		92			456		—			551
Inventories	—		292			234		—			526
Other current assets	6		10			15		—			31
TOTAL CURRENT ASSETS	13		398			805		—			1,216
NET PROPERTY	21		260			234		—			515
GOODWILL	—		337			141		—			478
OTHER ASSETS	170		225			211		—			606
INVESTMENTS IN SUBSIDIARIES	4,432		899			—		(5,331		)	—
TOTAL ASSETS	$	4,636	$	2,119		$	1,391	$	(5,331	)	$	2,815
CURRENT LIABILITIES
Short-term debt	$	32	$	—		$	9	$	—		$	41
Accounts and notes payable	53		283			274		—			610
Other current liabilities	77		109			99		—			285
TOTAL CURRENT LIABILITIES	162		392			382		—			936
LONG-TERM DEBT	898		—			4		—			902
RETIREMENT BENEFITS	312		1			23		—			336
INTERCOMPANY PAYABLE (RECEIVABLE)	2,833		(3,005		)	172		—			—
OTHER LIABILITIES	46		112			68		—			226
MEZZANINE EQUITY	—		—			—		—			—
EQUITY ATTRIBUTABLE TO MERITOR, INC.	385		4,619			712		(5,331		)	385
NONCONTROLLING INTERESTS	—		—			30		—			30
TOTAL LIABILITIES, MEZZANINE EQUITY AND EQUITY	$	4,636	$	2,119		$	1,391	$	(5,331	)	$	2,815

MERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING BALANCE SHEET (In millions)


	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

MERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (In millions)


	Fiscal Year Ended September 30, 2019
	Parent			Guarantors			Non- Guarantors			Elims		Consolidated
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES	$	91		$	49		$	116		$	—	$	256
INVESTING ACTIVITIES
Capital expenditures	(4		)	(50		)	(49		)	—		(103		)
Cash paid for investment in Transportation Power, Inc.	(6		)	—			—			—		(6		)
Cash paid for business acquisitions, net of cash acquired	(168		)	—			—			—		(168		)
Other investing activities	6			—			—			—		6
CASH (USED FOR) INVESTING ACTIVITIES	(172		)	(50		)	(49		)	—		(271		)
FINANCING ACTIVITIES
Securitization	—			—			(38		)	—		(38		)
Redemption of notes	(24		)	—			—			—		(24		)
Term loan borrowings	175			—			—			—		175
Intercompany advances	11			—			(11		)	—		—
Repurchase of common stock	(96		)	—			—			—		(96		)
Deferred issuance costs	(4		)	—			—			—		(4		)
Other financing activities	(1		)	(1		)	—			—		(2		)
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES	61			(1		)	(49		)	—		11
EFFECT OF CHANGES IN CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	—			—			(3		)	—		(3		)
CHANGE IN CASH AND CASH EQUIVALENTS	(20		)	(2		)	15			—		(7		)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	24			6			85			—		115
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	4		$	4		$	100		$	—	$	108

MERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (In millions)


	Fiscal Year Ended September 30, 2018
	Parent			Guarantors			Non- Guarantors			Elims		Consolidated
CASH PROVIDED BY OPERATING ACTIVITIES	$	59		$	55		$	137		$	—	$	251
INVESTING ACTIVITIES
Capital expenditures	(10		)	(49		)	(45		)	—		(104		)
Cash paid for business acquisitions, net of cash acquired	(35		)	—			—			—		(35		)
Cash paid for investment in Transportation Power, Inc.	(6		)	—			—			—		(6		)
Proceeds from sale of equity method investment	250			—			—			—		250
Other investing activities	4			—			2			—		6
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES	203			(49		)	(43		)	—		111
FINANCING ACTIVITIES
Securitization	—			—			(43		)	—		(43		)
Redemption of notes	(181		)	—			—			—		(181		)
Repurchase of common stock	(100		)	—			—			—		(100		)
Other financing activities	(2		)	(3		)	—			—		(5		)
Intercompany advances	35			—			(35		)	—		—
CASH USED FOR FINANCING ACTIVITIES	(248		)	(3		)	(78		)	—		(329		)
EFFECT OF CHANGES IN CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	—			—			(6		)	—		(6		)
CHANGE IN CASH AND CASH EQUIVALENTS	14			3			10			—		27
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	10			3			75			—		88
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	24		$	6		$	85		$	—	$	115

MERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (In millions)


	Fiscal Year Ended September 30, 2017
	Parent			Guarantors			Non- Guarantors			Elims		Consolidated
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES	$	33		$	85		$	58		$	—	$	176
INVESTING ACTIVITIES
Capital expenditures	(9		)	(51		)	(35		)	—		(95		)
Cash paid for business acquisitions, net of cash acquired	—			(32		)	(2		)	—		(34		)
Net investing cash flows provided by discontinued operations	—			2			—			—		2
CASH USED FOR INVESTING ACTIVITIES	(9		)	(81		)	(37		)	—		(127		)
FINANCING ACTIVITIES
Securitization	—			—			89			—		89
Proceeds from debt issuance	325			—			—			—		325
Redemption of notes	(103		)	—			—			—		(103		)
Repayment of notes and term loan	(408		)	—			—			—		(408		)
Other financing activities	(1		)	(3		)	(9		)	—		(13		)
Debt issuance costs	(12		)	—			—			—		(12		)
Intercompany advances	95			—			(95		)	—		—
CASH USED FOR FINANCING ACTIVITIES	(104		)	(3		)	(15		)	—		(122		)
EFFECT OF CHANGES IN CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	—			—			1			—		1
CHANGE IN CASH AND CASH EQUIVALENTS	(80		)	1			7			—		(72		)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	90			2			68			—		160
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	10		$	3		$	75		$	—	$	88

Certain information and footnote disclosures normally included in financial statements prepared in conformity with GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC. As of September 30, 2019 and 2018, Parent-only obligations included $315 million and $248 million, respectively, of pension and retiree medical benefits (see Notes 22 and 23). All debt is debt of the Parent other than $13 million and $51 million at September 30, 2019 and 2018, respectively, (see Note 18) 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 $29 million, $29 million and $1 million for 2019, 2018, and 2017, respectively.