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8-K - FORM 8-K - NAVISTAR INTERNATIONAL CORPd406811d8k.htm
EX-99.2 - SLIDE PRESENTATION - NAVISTAR INTERNATIONAL CORPd406811dex992.htm

Exhibit 99.1

 

LOGO

  

Navistar International Corporation       P : 331-332-5000 W : navistar.com

2701 Navistar Dr.

Lisle, IL 60532 USA

 

        Media Contact:    Karen Denning, 331-332-3535
        Investor Contact:    Heather Kos, 331-332-2406
        Web site:    www.Navistar.com/newsroom

NAVISTAR REPORTS THIRD QUARTER RESULTS

 

   

Reports net income of $84 million, including $196 million tax benefit, on revenue of $3.3 billion

 

   

Company accelerates cost reduction actions

 

   

Campbell sets focus on improving return on invested capital (ROIC)

LISLE, Ill. (September 6, 2012) — Navistar International Corporation (NYSE: NAV) today announced third quarter 2012 net income of $84 million, or $1.22 per diluted share, compared to third quarter 2011 net income of $1.4 billion, or $18.24 per diluted share. Current quarter results included an income tax benefit of $196 million that primarily resulted from a third quarter change in the company’s estimated annual effective tax rate, as well as the impact of $16 million in costs related to engineering integration and $10 million in non-conformance penalties (NCPs). The third quarter of 2011 included a $1.48 billion benefit from the release of a portion of the company’s income tax valuation allowance.

The company reported a pre-tax loss of $100 million in the third quarter 2012 versus a $54 million loss in the third quarter 2011. Revenues in the quarter were $3.3 billion, down 6 percent from the third quarter of 2011. The loss was driven by lower net sales in the company’s U.S. and Canada truck and engine segments, primarily due to lower military sales and reduced engine volumes in South America, respectively.

“Clearly we are not pleased with these results,” said Lewis B. Campbell, Navistar chairman and chief executive officer. “However, I was satisfied to learn on day one that Troy Clarke and his team were already working on a plan to deal with many of the important issues we face, most importantly restoring our core North American Truck, Engine and Parts businesses to their market leader positions. I believe we have good line of sight and a keen sense of urgency for moving forward.”

“Navistar is a great company with great people and great brands,” added Campbell. “With a laser focus on getting our quality right and hitting our clean engine launch dates, combined with actions to maximize cash flow and improve our balance sheet, I believe we can accelerate the pace of progress to deliver significant improvements during the next 12 to 18 months.”

The company announced that it is completing a voluntary separation program and a reduction in force of its salaried workforce. It anticipates these actions will generate $70 - $80 million in annual savings, which will contribute to Navistar’s overall goal to reduce costs by $150 - $175 million year-over-year, starting in fiscal year 2013. Additionally, Navistar is increasing efforts to cut discretionary spending and further reduce its material costs as part of its overall cost reduction program.


The company also announced it has launched a review of all of its non-core businesses with the goal of improving its return on invested capital and driving long-term profitability. As a result of this, along with uncertain industry conditions, the company is not providing fourth quarter earnings guidance until industry volumes solidify and these potential actions are defined.

EMISSIONS STRATEGY UPDATE

The company announced that it is on track to finalize its agreement with Cummins Inc. by the end of October 2012. As part of the agreement, Navistar will offer the Cummins ISX15 engine in certain truck models, expanding Navistar’s vehicle offerings. Navistar expects to launch the ISX15 in its ProStar+ model starting with initial customer deliveries in December 2012. Additionally, the agreement with Cummins Emission Solutions is on track to provide their proven selective catalytic reduction (SCR) aftertreatment system, which will be combined with Navistar’s MaxxForce 11- and 13-liter engines as part of the company’s clean engine solution. Navistar plans to begin production of its most popular 13-liter models with the SCR aftertreatment system in April 2013.

Last week, the U.S. Environmental Protection Agency (EPA) issued its Final Rule for NCPs for on-highway heavy-duty diesel engines, clearing the way for Navistar to continue to build and ship vehicles during the transition to its clean engine technology products.

“With the EPA Final Rule set to take effect and our progress with Cummins, we now have greater clarity on the transition to our new clean engine solution in 2013, which is our top priority,” said Troy Clarke, Navistar president and chief operating officer. “I am committed to ensuring that we remain diligent in achieving key milestones and delivering a smooth launch.”

SEGMENT REPORTING

Summary Financial Results:

 

     Three Months Ended
July 31,
    Nine Months Ended
July 31,
 
(in millions, except per share data)    2012     2011     2012     2011  

Sales and revenues, net

   $ 3,319      $ 3,537      $ 9,669      $ 9,635   

Segment Results:

        

Truck

   $ (30   $ (75   $ (160   $ 49   

Engine

     (47     32        (275     26   

Parts

     73        70        164        200   

Financial Services

     22        30        75        102   

Income (loss) before income taxes

   $ (100   $ (54   $ (616   $ 45   

Net income (loss) attributable to Navistar International Corporation

     84        1,400        (241     1,468   

Diluted earnings (loss) per share attributable to Navistar International Corporation

     1.22        18.24        (3.49     19.04   


Truck — For the third quarter 2012, the truck segment recorded a loss of $30 million, compared with a year-ago third quarter loss of $75 million. Segment results included charges of $11 million for engineering integration, compared to $129 million in engineering integration and restructuring charges in the third quarter of 2011.

The segment’s loss was driven by a combination of segment performance and deteriorating industry volumes, partially offset by manufacturing efficiencies. Year-over-year sales declined 5-percent, primarily due to lower military sales and decreased traditional volumes. Traditional chargeouts were down 7-percent, primarily due to a 22-percent decrease in Navistar’s Class 6 and 7 medium trucks, partially offset by a 32-percent increase in school bus volumes.

Engine — For the third quarter 2012, the engine segment recorded a loss of $47 million, compared with a year-ago third quarter profit of $32 million. The loss reflects lower sales volumes and $14 million in expenses related to non-conformance penalties and engineering integration.

Segment sales decreased by 13-percent, primarily due to lower sales volumes in South America, resulting from a pre-buy of pre-Euro V emissions engines in the prior year quarter. Partially offsetting the decrease in sales was lower SG&A and engineering spend.

Parts — For the third quarter 2012, the parts segment recorded profit of $73 million, compared with a year-ago third quarter profit of $70 million. The year-over-year increase was driven by continued improvements in commercial markets and lower SG&A expenses, partially offset by lower military sales.

Financial Services — For the third quarter 2012, the financial services segment recorded profit of $22 million, down from third quarter 2011 profit of $30 million primarily due to lower portfolio balances.

About Navistar

Navistar International Corporation (NYSE: NAV) is a holding company whose subsidiaries and affiliates produce International® brand commercial and military trucks, MaxxForce® brand diesel engines, IC Bus™ brand school and commercial buses and Navistar RV brands of recreational vehicles. It also is a private-label designer and manufacturer of diesel engines for the pickup truck, van and SUV markets. The company also provides truck and diesel engine service parts. Another affiliate offers financing services. Additional information is available at www.Navistar.com/newsroom.

Forward-Looking Statement

Information provided and statements contained in this report that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Such forward-looking statements only speak as of the date of this report and the company assumes no obligation to update the information included in this report. Such forward-looking statements include information concerning our possible or assumed future results of operations, including descriptions of our business strategy. These statements often include words such as “believe,” “expect,” “anticipate,” “intend,” “plan,”


“estimate,” or similar expressions. These statements are not guarantees of performance or results and they involve risks, uncertainties, and assumptions. For a further description of these factors, see the risk factors set forth in our filings with the Securities and Exchange Commission, including our annual report on Form 10-K for the fiscal year ended October 31, 2011 and quarterly reports for fiscal 2012. Although we believe that these forward-looking statements are based on reasonable assumptions, there are many factors that could affect our actual financial results or results of operations and could cause actual results to differ materially from those in the forward-looking statements. All future written and oral forward-looking statements by us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to above. Except for our ongoing obligations to disclose material information as required by the federal securities laws, we do not have any obligations or intention to release publicly any revisions to any forward-looking statements to reflect events or circumstances in the future or to reflect the occurrence of unanticipated events.

Navistar International Corporation and Subsidiaries

Consolidated Statements of Operations

(Unaudited)

 

     Three Months Ended
July 31,
    Nine Months Ended
July 31,
 
(in millions, except per share data)    2012     2011     2012     2011  

Sales and revenues

        

Sales of manufactured products, net

   $ 3,277      $ 3,490      $ 9,540      $ 9,481   

Finance revenues

     42        47        129        154   
  

 

 

   

 

 

   

 

 

   

 

 

 

Sales and revenues, net

     3,319        3,537        9,669        9,635   
  

 

 

   

 

 

   

 

 

   

 

 

 

Costs and expenses

        

Costs of products sold

     2,876        2,930        8,518        7,830   

Restructuring charges

     4        56        24        80   

Impairment of property and equipment and intangible assets

     —          64        38        64   

Selling, general and administrative expenses

     328        334        1,068        1,006   

Engineering and product development costs

     137        141        408        407   

Interest expense

     59        62        182        187   

Other expense (income), net

     5        (18     26        (39
  

 

 

   

 

 

   

 

 

   

 

 

 

Total costs and expenses

     3,409        3,569        10,264        9,535   

Equity in loss of non-consolidated affiliates

     (10     (22     (21     (55
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     (100     (54     (616     45   

Income tax benefit

     196        1,463        410        1,458   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     96        1,409        (206     1,503   

Less: Net income attributable to non-controlling interests

     12        9        35        35   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to Navistar International Corporation

   $ 84      $ 1,400      $ (241   $ 1,468   
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) per share attributable to Navistar International Corporation:

        

Basic

   $ 1.22      $ 19.10      $ (3.49   $ 20.13   

Diluted

     1.22        18.24        (3.49     19.04   

Weighted average shares outstanding:

        

Basic

     68.7        73.3        69.1        73.0   

Diluted

     68.9        76.8        69.1        77.1   


Navistar International Corporation and Subsidiaries

Consolidated Balance Sheets

 

     July 31,
2012
    October 31,
2011
 
(in millions, except per share data)    (Unaudited)        

ASSETS

    

Current assets

    

Cash and cash equivalents

   $ 547      $ 539   

Restricted cash

     125        100   

Marketable securities

     159        718   

Trade and other receivables, net

     822        1,219   

Finance receivables, net

     1,812        2,198   

Inventories

     1,877        1,714   

Deferred taxes, net

     480        474   

Other current assets

     293        273   
  

 

 

   

 

 

 

Total current assets

     6,115        7,235   

Restricted cash

     154        227   

Trade and other receivables, net

     110        122   

Finance receivables, net

     523        715   

Investments in non-consolidated affiliates

     46        60   

Property and equipment (net of accumulated depreciation and amortization of $2,170 and $2,056 at the respective dates)

     1,646        1,570   

Goodwill

     280        319   

Intangible assets (net of accumulated amortization of $100 and $99, at the respective dates)

     179        234   

Deferred taxes, net

     1,926        1,583   

Other noncurrent assets

     164        226   
  

 

 

   

 

 

 

Total assets

   $ 11,143      $ 12,291   
  

 

 

   

 

 

 

LIABILITIES and STOCKHOLDERS’ EQUITY (DEFICIT)

    

Liabilities

    

Current liabilities

    

Notes payable and current maturities of long-term debt

   $ 1,416      $ 1,379   

Accounts payable

     1,816        2,122   

Other current liabilities

     1,298        1,297   
  

 

 

   

 

 

 

Total current liabilities

     4,530        4,798   

Long-term debt

     2,996        3,477   

Postretirement benefits liabilities

     3,057        3,210   

Deferred taxes, net

     56        59   

Other noncurrent liabilities

     862        719   
  

 

 

   

 

 

 

Total liabilities

     11,501        12,263   

Redeemable equity securities

     5        5   

Stockholders’ equity (deficit)

     —       

Series D convertible junior preference stock

     3        3   

Common stock ($0.10 par value per share, 220.0 shares authorized, and 75.4 shares issued, at both dates)

     8        7   

Additional paid in capital

     2,274        2,253   

Accumulated deficit

     (396     (155

Accumulated other comprehensive loss

     (2,020     (1,944

Common stock held in treasury, at cost (6.8 and 4.9 shares, at the respective dates)

     (276     (191
  

 

 

   

 

 

 

Total stockholders’ deficit attributable to Navistar International Corporation

     (407     (27

Stockholders’ equity attributable to non-controlling interests

     44        50   
  

 

 

   

 

 

 

Total stockholders’ equity (deficit)

     (363     23   
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity (deficit)

   $ 11,143      $ 12,291   
  

 

 

   

 

 

 


Navistar International Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

     Nine Months Ended July 31,  
(in millions)    2012     2011  

Cash flows from operating activities

    

Net income (loss)

   $ (206   $ 1,503   

Adjustments to reconcile net income (loss) to cash provided by operating activities:

    

Depreciation and amortization

     209        217   

Depreciation of equipment leased to others

     37        28   

Deferred taxes, including change in valuation allowance

     (405     (1,472

Impairment of property and equipment and intangible assets

     38        73   

Amortization of debt issuance costs and discount

     31        33   

Stock-based compensation

     16        33   

Provision for doubtful accounts, net of recoveries

     —          (5

Equity in loss of non-consolidated affiliates, net of dividends

     27        57   

Write-off of debt issuance cost and discount

     8        —     

Other non-cash operating activities

     5        (9

Changes in other assets and liabilities, exclusive of the effects of businesses acquired and disposed

     586        81   
  

 

 

   

 

 

 

Net cash provided by operating activities

     346        539   
  

 

 

   

 

 

 

Cash flows from investing activities

    

Purchases of marketable securities

     (672     (1,109

Sales or maturities of marketable securities

     1,230        1,075   

Net change in restricted cash and cash equivalents

     48        21   

Capital expenditures

     (250     (291

Purchase of equipment leased to others

     (49     (35

Proceeds from sales of property and equipment

     12        27   

Investments in non-consolidated affiliates

     (18     (48

Proceeds from sales of affiliates

     1        6   

Business acquisitions, net of cash received

     (12     (1

Acquisition of intangibles

     (14     (15
  

 

 

   

 

 

 

Net cash provided by (used in) investing activities

     276        (370
  

 

 

   

 

 

 

Cash flows from financing activities

    

Proceeds from issuance of securitized debt

     1,155        348   

Principal payments on securitized debt

     (1,532     (560

Proceeds from issuance of non-securitized debt

     717        158   

Principal payments on non-securitized debt

     (582     (73

Net decrease in notes and debt outstanding under revolving credit facilities

     (195     (85

Principal payments under financing arrangements and capital lease obligations

     (30     (81

Debt issuance costs

     (20     (6

Purchase of treasury stock

     (75     (11

Proceeds from exercise of stock options

     2        36   

Dividends paid by subsidiaries to non-controlling interest

     (44     (43

Other financing activities

     (3     —     
  

 

 

   

 

 

 

Net cash used in financing activities

     (607     (317
  

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents

     (7     7   
  

 

 

   

 

 

 

Increase (decrease) in cash and cash equivalents

     8        (141

Cash and cash equivalents at beginning of the period

     539        585   
  

 

 

   

 

 

 

Cash and cash equivalents at end of the period

   $ 547      $ 444   
  

 

 

   

 

 

 


Navistar International Corporation and Subsidiaries

Segment Reporting

(Unaudited)

We define segment profit (loss) as net income (loss) attributable to Navistar International Corporation excluding income tax benefit (expense). Our results from interim periods are not necessarily indicative of results for a full year. Selected financial information is as follows:

 

(in millions)    Truck     Engine     Parts      Financial
Services(A)
     Corporate
and
Eliminations
    Total  

Three Months Ended July 31, 2012

              

External sales and revenues, net

   $ 2,323      $ 441      $ 513       $ 42       $ —        $ 3,319   

Intersegment sales and revenues

     13        399        29         22         (463     —     
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total sales and revenues, net

   $ 2,336      $ 840      $ 542       $ 64       $ (463   $ 3,319   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Net income (loss) attributable to NIC

   $ (30   $ (47   $ 73       $ 22       $ 66      $ 84   

Income tax benefit

     —          —          —           —           196        196   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Segment profit (loss)

   $ (30   $ (47   $ 73       $ 22       $ (130   $ (112
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Depreciation and amortization

   $ 41      $ 28      $ 2       $ 9       $ 6      $ 86   

Interest expense

     —          —          —           20         39        59   

Equity in income (loss) of non-consolidated affiliates

     (12     1        1         —           —          (10

Capital expenditures(B)

     21        39        6         1         7        74   

Three Months Ended July 31, 2011

              

External sales and revenues, net

   $ 2,457      $ 546      $ 487       $ 47       $ —        $ 3,537   

Intersegment sales and revenues

     —          422        29         26         (477     —     
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total sales and revenues, net

   $ 2,457      $ 968      $ 516       $ 73       $ (477   $ 3,537   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Net income (loss) attributable to NIC

   $ (75   $ 32      $ 70       $ 30       $ 1,343      $ 1,400   

Income tax benefit

     —          —          —           —           1,463        1,463   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Segment profit (loss)

   $ (75   $ 32      $ 70       $ 30       $ (120   $ (63
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Depreciation and amortization

   $ 37      $ 32      $ 2       $ 8       $ 5      $ 84   

Interest expense

     —          —          —           28         34        62   

Equity in income (loss) of non-consolidated affiliates

     (22     (1     1         —           —          (22

Capital expenditures(B)

     15        47        7         1         36        106   

Nine Months Ended July 31, 2012

              

External sales and revenues, net

   $ 6,830      $ 1,301      $ 1,409       $ 129       $ —        $ 9,669   

Intersegment sales and revenues

     26        1,292        98         70         (1,486     —     
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total sales and revenues, net

   $ 6,856      $ 2,593      $ 1,507       $ 199       $ (1,486   $ 9,669   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Net income (loss) attributable to NIC

   $ (160   $ (275   $ 164       $ 75       $ (45   $ (241

Income tax benefit

     —          —          —           —           410        410   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Segment profit (loss)

   $ (160   $ (275   $ 164       $ 75       $ (455   $ (651
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Depreciation and amortization

   $ 111      $ 87      $ 8       $ 25       $ 15      $ 246   

Interest expense

     —          —          —           67         115        182   

Equity in income (loss) of non-consolidated affiliates

     (27     2        4         —           —          (21

Capital expenditures(B)

     53        116        18         2         61        250   

 


     Truck     Engine     Parts      Financial
Services(A)
     Corporate
and
Eliminations
    Total  

Nine Months Ended July 31, 2011

              

External sales and revenues, net

   $ 6,510      $ 1,526      $ 1,445       $ 154       $ —        $ 9,635   

Intersegment sales and revenues

     18        1,180        128         75         (1,401     —     
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total sales and revenues, net

   $ 6,528      $ 2,706      $ 1,573       $ 229       $ (1,401   $ 9,635   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Net income (loss) attributable to NIC

   $ 49      $ 26      $ 200       $ 102       $ 1,091      $ 1,468   

Income tax benefit

     —          —          —           —           1,458        1,458   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Segment profit (loss)

   $ 49      $ 26      $ 200       $ 102       $ (367   $ 10   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Depreciation and amortization

   $ 112      $ 91      $ 7       $ 21       $ 14      $ 245   

Interest expense

     —          —          —           84         103        187   

Equity in income (loss) of non-consolidated affiliates

     (57     (3     5         —           —          (55

Capital expenditures(B)

     53        131        11         1         95        291   

As of July 31, 2012

              

Segment assets

   $ 2,509      $ 1,715      $ 708       $ 2,898       $ 3,313      $ 11,143   

As of October 31, 2011

              

Segment assets

     2,771        1,849        700         3,580         3,391        12,291   

 

(A) Total sales and revenues in the Financial Services segment include interest revenues of $63 million and $195 million for the three and nine months ended July 31, 2012, respectively, and $72 million and $225 million for the three and nine months ended July 31, 2011, respectively.
(B) Exclusive of purchases of equipment leased to others.