TROY, Mich., June 23, 2014 /PRNewswire/ -- Meritor, Inc.
(NYSE: MTOR) today announced that ZF Meritor LLC, a joint venture
between a Meritor, Inc. subsidiary and ZF Friedrichshafen AG, and
Meritor Transmission Corporation have reached a settlement
agreement with Eaton Corporation (NYSE: ETN) relating to the
antitrust lawsuit filed in 2006.
Under the terms of the agreement, Eaton has agreed to pay $500 million to ZF Meritor LLC. Meritor will
receive net proceeds of $209
million. ZF Meritor LLC and Meritor Transmission
Corporation have agreed to dismiss all pending antitrust litigation
with Eaton. The settlement agreement is subject to ZF
Friedrichshafen AG corporate approval, which is expected to occur
in early July. Meritor expects to receive proceeds from
the settlement on or about July 15,
2014.
Meritor's Chairman and CEO, Ike
Evans, said, "We have reached an agreement with Eaton that we believe is in the best interests
of the Company and our shareholders. We'll use these proceeds
to accelerate our efforts to achieve our balance sheet goals under
our M2016 plan. This is an important outcome for Meritor that
delivers significant benefits to the Company, our shareholders and
our customers. We are successfully putting this lawsuit
behind us as we continue to execute on our plan to drive value for
all shareholders."
Meritor remains committed to maintaining its balanced and
disciplined approach to capital allocation, deploying capital to
areas where it will generate the best long-term value for its
shareholders.
Based on a thorough review of its options, Meritor has
determined that it will use the $209
million of net proceeds from the settlement to pre-fund the
next three years of mandatory pension contributions in its
United States and United Kingdom pension plans, consistent with
the Company's efforts to de-risk its pension obligations and
continue to strengthen its balance sheet. Using such proceeds
to pre-fund the company's global pension plans will accelerate the
Company's path toward its M2016 objective of reducing net debt,
including retirement liabilities, to less than $1.5 billion.
Meritor also announced today that its Board of Directors has
authorized the repurchase of up to $210
million of the Company's equity or equity-linked securities
funded with a portion of future free cash flow. The Company expects
repurchases under this program to be made through open market or
privately negotiated transactions, which would commence upon
achievement of its M2016 debt reduction target. With the
proceeds from the Eaton lawsuit
deployed to pre-fund pension contributions, the Company now expects
to achieve this target in the second half of calendar year
2015. The actual number of shares repurchased will depend on
a variety of factors, including price, legal and regulatory
restrictions, compliance with debt covenants, market conditions and
corporate liquidity requirements.
Mr. Evans continued, "As we have outlined previously, a
settlement agreement with Eaton
was not factored into our M2016 plan. We remain committed to
our strategy of further de-levering and strengthening our balance
sheet; however, with these additional proceeds, we are now better
positioned to use a portion of our future free cash flow to return
capital to our shareholders over time. This new repurchase
authorization reaffirms our Board's confidence in the company's
strategy and long-term growth potential."
A presentation outlining additional details of today's
announcement is available on the Investor Relations section of the
Company's website at
http://investors.meritor.com/phoenix.zhtml?c=122961&p=irol-presentations
and will be filed with the U.S. Securities and Exchange Commission
("SEC") and available on the SEC's website at www.sec.gov.
About Meritor
Meritor, Inc. is a leading global
supplier of drivetrain, mobility, braking and aftermarket solutions
for commercial vehicle and industrial markets. With more than a
100-year legacy of providing innovative products that offer
superior performance, efficiency and reliability, the company
serves commercial truck, trailer, off-highway, defense, specialty
and aftermarket customers around the world. Meritor is based in
Troy, Mich., United States, and is made up of more than
9,000 diverse employees who apply their knowledge and skills in
manufacturing facilities, engineering centers, joint ventures,
distribution centers and global offices in 18 countries. Common
stock is traded on the New York Stock Exchange under the ticker
symbol MTOR. For important information, visit the company's website
at meritor.com.
Forward-Looking Statement
This release contains
statements relating to future results of the company (including
certain projections and business trends) that
are "forward-looking statements" as defined in the
Private Securities Litigation Reform Act of 1995. Forward-looking
statements are typically identified by words or phrases such
as "believe," "expect,"
"anticipate," "estimate," "should," "are likely to
be," "will" and similar
expressions. SEC filings may differ materially from those
projected as a result of certain risks and uncertainties, including
but not limited to reduced production for certain military programs
and our ability to secure new military programs as our primary
military programs wind down by design through 2015; reliance on
major original equipment manufacturer ("OEM") customers and
possible negative outcomes from contract negotiations with our
major customers, including failure to negotiate acceptable terms in
contract renewal negotiations and our ability to obtain new
customers; the outcome of actual and potential product liability,
warranty and recall claims; our ability to successfully manage
rapidly changing volumes in the commercial truck markets and
work with our customers to adjust their demands in view of rapid
changes in production levels; global economic and market cycles and
conditions; availability and sharply rising costs of raw materials,
including steel, and our ability to manage or recover such costs;
our ability to manage possible adverse effects on our European
operations, or financing arrangements related thereto, in the event
one or more countries exit the European monetary union; risks
inherent in operating abroad (including foreign currency exchange
rates, implications of foreign regulations relating to pensions and
potential disruption of production and supply due to terrorist
attacks or acts of aggression); rising costs of pension and other
postretirement benefits; the ability to achieve the expected
benefits of restructuring actions; the demand for commercial and
specialty vehicles for which we supply products; whether our
liquidity will be affected by declining vehicle productions in the
future; OEM program delays; demand for and market acceptance of new
and existing products; successful development of new products;
labor relations of our company, our suppliers and customers,
including potential disruptions in supply of parts to our
facilities or demand for our products due to work stoppages; the
financial condition of our suppliers and customers, including
potential bankruptcies; possible adverse effects of any future
suspension of normal trade credit terms by our suppliers; potential
difficulties competing with companies that have avoided their
existing contracts in bankruptcy and reorganization proceedings;
potential impairment of long-lived assets, including goodwill;
potential adjustment of the value of deferred tax assets;
competitive product and pricing pressures; the amount of our debt;
our ability to continue to comply with covenants in our financing
agreements; our ability to access capital markets; credit ratings
of our debt; the outcome of existing and any future legal
proceedings, including any litigation with respect to environmental
or asbestos-related matters; and possible changes in accounting
rules; as well as other substantial costs, risks and uncertainties,
including but not limited to those detailed herein and from time to
time in other filings of the company with the SEC. These
forward-looking statements are made only as of the date hereof, and
the company undertakes no obligation to update or revise the
forward-looking statements, whether as a result of new information,
future events or otherwise, except as otherwise required by
law.
Non-GAAP Measure
The company has provided information
in this press release regarding net debt that has not been reported
in accordance with accounting principles generally accepted in
the United States ("GAAP").
Net debt, including retirement liabilities, is defined as total
debt plus pension assets, pension liability, retiree medical
liability and other retirement benefits less cash and cash
equivalents. Net debt, including retirement liabilities, is a
specific financial measure which is part of our three year plan,
M2016, to reduce debt and other balance sheet liabilities.
Management believes that this non-GAAP financial measure is useful
to both management and investors in their analysis of the company's
financial position. This non-GAAP financial measure, as
determined and presented by the company, may not be comparable to
related or similarly titled measures reported by other
companies.
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SOURCE Meritor, Inc.