Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - NAVISTAR INTERNATIONAL CORP | d406811d8k.htm |
| EX-99.1 - PRESS RELEASE - NAVISTAR INTERNATIONAL CORP | d406811dex991.htm |
 NYSE:
NAV 3 QUARTER 2012 EARNINGS
PRESENTATION
September 6, 2012
Exhibit 99.2
RD |
 2
NYSE: NAV
Safe Harbor
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. |
 3
NYSE: NAV
Other Cautionary Notes
•
The financial information herein contains audited and unaudited information and has
been prepared by management in good faith and based on data currently
available to the Company.
•
Certain
non-GAAP
measures
are
used
in
this
presentation
to
assist
the
reader
in
understanding our core manufacturing business.
We believe this information is
useful
and
relevant
to
assess
and
measure
the
performance
of
our
core
manufacturing business as it illustrates manufacturing performance without regard
to selected historical legacy costs (i.e. pension and other postretirement
costs). It also excludes financial services and other items that may not be
related to the core manufacturing business or underlying results. Measures
may also be adjusted to exclude certain adjustments which are not considered
to be part of our ongoing business and are not representative of our
underlying performance. Management often
uses
this
information
to
assess
and
measure
the
underlying
performance
of
our operating segments.
We have chosen to provide this supplemental information
to investors, analysts, and other interested parties to enable them to perform
additional analyses of operating results. The non-GAAP numbers are
reconciled to the most appropriate GAAP number is in the appendix of this
presentation. |
 4
NYSE: NAV
Lewis Campbell,
Executive Chairman and CEO
•
Why Navistar?
•
Accelerate actions on:
–
Quality
–
Aligning cost with revenues
–
SG&A reduction actions
•
Return on invested capital
•
Maximize cash flow to improve balance sheet |
 5
NYSE: NAV
2012 3
rd
Quarter Results
Note:
This slide contains non-GAAP information; please see the REG G in
appendix for a detailed reconciliation.
* Attributable to Navistar International Corporation
2012 Q3
Actual
GAAP
2012 Q3
Actual
Adjusted Non-GAAP
Revenue
(Billions)
$3.3
$3.3
Manufacturing Segment Profit (Loss)
(Millions)
$(4)
$21
Loss
Before
Tax
(Millions)
$(100)
$(74)
Net Income (Loss)*
(Millions)
$84
$(14)
Diluted Earnings (Loss) Per Share*
$1.22
$(0.20) |
 6
NYSE: NAV
2012 Q3 vs. 2011 Q3
Note:
This slide contains non-GAAP information; please see the REG G in
appendix for a detailed reconciliation.
* Attributable to Navistar International Corporation
2012 Q3
Actual
Adjusted Non-GAAP
2011 Q3
Actual
Adjusted Non-GAAP
Revenue
$3.3
$3.5
Manufacturing
Segment
Profit
(Millions)
$21
$157
Profit
(Loss)
Before
Tax
(Millions)
$(74)
$82
Net Income (Loss)*
(Millions)
$(14)
$31
Diluted Earnings (Loss) Per Share*
$(0.20)
$0.40
(Billions) |
 7
NYSE: NAV
Navistar Financial Corporation
Note: Profitability relates to total financial services
•
Profitability strong in 2012: $22M in Q3, $75M YTD
Expected to decline as U.S. retail loan portfolio runs off due to G.E. Capital
alliance •
Increased liquidity
$745M U.S. availability as of July 31, 2012
Consolidated retail securitizations achieving lower fixed borrowing rate
Variable funding facility for dealer financing renewed
to
August
2013
and
increased to $750M
•
Service leverage of 3.7 to 1 and declining as GE Capital alliance sources retail
originations $1.7B since inception
Retail Notes
Bank Facility
•
$840M facility refinanced in
December 2011, maturity
extended from 2012 to 2016
•
Funding for retail notes,
wholesale notes, retail
accounts, and dealer open
accounts
•
On balance sheet
•
Situation as of July 31, 2012
•
$1.1B funding facility (NFSC)
•
$320M available
•
NFSC wholesale trust
•
Variable portion matures
August 2013
•
Public portions mature
October 2012 and October
2013
•
On balance sheet
•
Broader product offering
•
Enhanced ability to support
large fleets
•
Better access to less
expensive capital
Dealer
Floor
Plan |
 8
NYSE: NAV
2012 Manufacturing Cash Update
Note: This slide contains non-GAAP information, please
see the Reg G in appendix for detailed reconciliation.
($ millions)
April 30, 2012 ending manufacturing cash and marketable securities
1
681
$
Manufacturing EBITDA
(16)
2
29
Capital expenditures
(76)
Intercompany and other
9
July 31, 2012 ending manufacturing cash and marketable securities
1
627
$
Plus: Funded Term Loan
1,000
$
Less: Pay down existing ABL facility
(238)
Less: Transaction expenses and other
(39)
Net cash flows
723
$
July 31, 2012 ending pro forma manufacturing cash and marketable
securities
1
1,350
$
October 31, 2012 forecasted ending manufacturing cash and marketable securities
1
$875-$1,025
1
Includes cash from the consolidation of minority interests
2
NWC = A/R, Inventory, Other Current Assets, A/P & Other Current Liabilities
Pro forma Manufacturing Cash
Change in net working capital |
 NYSE:
NAV Troy Clarke, President & COO
DRIVE TO DELIVER |
 10
NYSE: NAV
Drive To Deliver
Material Procurement
Quality/Warranty
Manufacturing
SG&A
PD/Engineering
Market Share
Truck
Engine
Parts
Revenue
Price Realization
Growth
Clear P&L Accountability |
 11
NYSE: NAV
Drive To Deliver
First Things First
•
SCR based clean engine strategy
•
Dialogue with EPA/CARB
–
Create pathway to certification
–
Recognize the importance of NCPs/credits during transition
•
Strengthen Cummins relationship
–
Cummins Emission Solution-SCR system for
MaxxForce
®
11L/13L
–
Cummins ISX-15L
•
Hit the ‘Pause’
button
–
EGR development |
 12
NYSE: NAV
SCR Based Clean Engine Strategy
•
MaxxForce
®
11L/13L transition
–
Sales
supported
by
emission
credits
–
California
+9
states
–
Sales
supported
by
NCPs
–
40
states
–
First units with SCR aftertreatment delivered in April 2013
•
Cummins ISX –
15L transition
–
300 unit customer deliveries in December 2012
–
Regular production beginning January 2013 |
 13
NYSE: NAV
Drive To Deliver
•
Focus our attention to North American truck, engine and
parts
•
Evaluate under performing parts of our business via an
ROIC based strategic analysis
•
Right size cost structure
•
Change the organization to be: faster, more efficient, and
more focused
•
Drive ‘functional’
excellence
–
Material procurement
–
Quality/Warranty
–
Manufacturing
–
capacity
utilization
–
SG&A
–
PD/Engineering
–
Market share
Turnaround/Business Plan |
 14
Medium
Truck
Market Share
Severe Service
Truck
Heavy
Truck
FY10
59%
FY11
49%
Q3’12
47%
YTD ‘12
48%
FY10
38%
FY11
41%
Q3’12
36%
YTD ‘12
33%
FY10
40%
FY11
35%
Q3’12
30%
YTD ‘12
30%
FY10
24%
FY11
17%
Q3’12
15%
YTD ‘12
16%
Class 8
School
Bus
(U.S. & Canada)
18% Market Share
Q3’12
Class 4-5
YTD ’12
Industry
33K
Navistar
2,000
Market Share
~6%
We define our “traditional” markets to include U.S. and Canada School bus and Class 6
through 8 medium and heavy truck. We classify militarized commercial vehicles sold to the U.S.
and Canadian militaries as Class 8 severe service within our “traditional” markets. Beginning in 2011, our competitors
are reporting certain RV and commercial bus chassis units consistently with how we report these units.
Our “traditional” markets include CAT-branded units sold to Caterpillar under our
North America supply agreement.
School Bus & Combined Class 6-8 Market Share –
FY10:
34%;
34%;
FY11:
28%;
28%;
Q3‘12:
24%;
24%;
YTD‘12:
23% |
 15
NYSE: NAV
LOW
HIGH
ROIC Based Strategic Analysis
Grow/Sell
Grow
Close/Sell
Improve
STRATEGIC FIT |
 16
NYSE: NAV
Structural Cost Reductions on Track
•
Appropriate cost structure
–
Size business to realistic volume assumptions with NCPs at
$3,775 per unit
–
Reduce discretionary spending
–
Affordable program spending
•
Target for structural costs $150-$175M reduction
from Q3 YTD levels
–
Voluntary
Separation
Plan
(VSP)
–
Completed
–
Involuntary
Reduction
in
Force
(RIF)
–
Q4
–
Potential for more actions in Q4 |
 17
NYSE: NAV
Drive To Deliver
•
EPA -
Final Rule approved
•
SCR based clean engine solution on track
–
MaxxForce
®
11L/13L
–
ISX 15L
•
Affordable business plan created
•
ROIC focus
–
Manage capital expenditures
–
Working capital discipline
–
ROIC strategic asset analysis
•
Structural cost reductions underway
–
Manufacturing capacity utilization assessment
–
Lean organization progressing
Q3 Progress Summary |
 18
NYSE: NAV
Summary |
 NYSE:
NAV APPENDIX |
 20
NYSE: NAV
$272
$191
$68
$62
$-
$50
$100
$150
$200
$250
$300
$350
$400
Q3 2011
Q3 2012
Truck
Parts
64,200
52,200
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
Q3 2011
Q3 2012
28,900
27,100
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
Q3 2011
Q3 2012
Q3 Year Over Year Operational Results
Consolidated
Revenues
($
in
millions)
Quarterly Truck Chargeouts
Quarterly Engine Shipments
Charge
outs
decreased
6%
Military Revenues
($ in millions)
Engine shipments
decreased 19%
Truck
Revenues
decreased
30%
Parts
Revenues
decreased
9%
$3,537
$3,319
$340
$253
$340
$253
$2,306
$2,320
$891
$746
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
Q3 2011
Q3 2012
Military
U.S. & Canada
ROW |
 21
NYSE: NAV
21
Q3 Year Over Year Financial Information
Q3 Adj. Manufacturing Segment Profit
($ in millions)
Q3 Adj. Earnings (Loss) Per Share
Q3 Adj. Net Income (Loss)
($ in millions)
Note:
This slide contains non-GAAP information; please see the REG G in
appendix for a detailed reconciliation.
$157
$21
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
Q3 2011
Q3 2012
$0.40
$(0.20)
-$0.30
-$0.20
-$0.10
$0.00
$0.10
$0.20
$0.30
$0.40
$0.50
Q3 2011
Q3 2012
$31
$(14)
-$20.0
-$15.0
-$10.0
-$5.0
$0.0
$5.0
$10.0
$15.0
$20.0
$25.0
$30.0
$35.0
Q3 2011
Q3 2012 |
 22
NYSE: NAV
Supplemental
Information
–
Truck
Worldwide Truck Chargeouts
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
Actual
Actual
Actual
Forecast
Q1
Q2
Q3
Q4
Traditional
Expansionary
Towables
We define our “traditional” markets to include U.S. and Canada School bus and Class 6
through 8 medium and heavy truck. We classify militarized commercial vehicles sold to the U.S.
and Canadian militaries as Class 8 severe service within our “traditional” markets. Our “traditional” markets include CAT-branded units
sold to Caterpillar under our North America supply agreement. |
 23
NYSE: NAV
Market Share –
U.S. & Canada School Bus and Class 6-8
Traditional Market Share
Q1
Q2
Q3
Q4
Full Year
Q1
Q2
Q3
Q4
Full Year
Q1
Q2
Q3
Q4
Full Year
School buses
60%
63%
53%
61%
59%
49%
45%
47%
53%
49%
48%
48%
47%
Class 6 and 7 medium trucks
33%
44%
36%
36%
38%
36%
36%
46%
44%
41%
27%
36%
36%
Class 8 heavy trucks
23%
22%
30%
20%
24%
17%
16%
17%
18%
17%
17%
15%
15%
Class 8 severe service trucks
40%
41%
38%
40%
40%
33%
32%
36%
37%
35%
31%
30%
30%
Combined Class 8
28%
28%
32%
25%
28%
21%
19%
21%
22%
21%
19%
18%
18%
Total Traditional Market Share
33%
35%
35%
32%
34%
27%
26%
29%
29%
28%
22%
24%
24%
Market Share - U.S. & Canada School Bus and Class 6-8
2010
2011
2012
We define our “traditional” markets to include U.S. and Canada School bus and Class 6
through 8 medium and heavy truck. We classify militarized commercial vehicles sold to the U.S.
and Canadian militaries as Class 8 severe service within our “traditional” markets. Beginning in 2011, our competitors are reporting
certain RV and commercial bus chassis units consistently with how we report these units. Our
“traditional” markets include CAT-branded units sold to Caterpillar under our
North America supply agreement. |
 24
NYSE: NAV
Worldwide Truck Chargeouts
We define our “traditional”
markets
to include U.S. and Canada School
bus and Class 6 through 8 medium
and heavy truck. We classify
militarized commercial vehicles
sold to the U.S. and Canadian
militaries as Class 8 severe service
within our “traditional”
markets. Our
“traditional”
markets include CAT-
branded units sold to Caterpillar
under our North America supply
agreement.
FISCAL YEAR 2010
Q1
Q2
Q3
Q4
FULL YEAR
BUS
3,100
3,000
2,400
3,900
12,400
MEDIUM
3,900
5,300
3,900
5,400
18,500
HEAVY
5,200
4,600
6,400
5,400
21,600
SEVERE
3,900
3,800
2,200
4,100
14,000
TOTAL
16,100
16,700
14,900
18,800
66,500
NON-TRADITIONAL MILITARY
100
200
1,000
100
1,400
EXPANSIONARY
3,900
4,500
4,700
6,000
19,100
WORLDWIDE TRUCK
20,100
21,400
20,600
24,900
87,000
FISCAL YEAR 2011
Q1
Q2
Q3
Q4
FULL YEAR
BUS
2,100
2,000
2,200
2,900
9,200
MEDIUM
4,600
7,200
7,400
7,900
27,100
HEAVY
4,700
5,200
6,800
9,000
25,700
SEVERE
2,700
3,200
3,700
3,700
13,300
TOTAL
14,100
17,600
20,100
23,500
75,300
NON-TRADITIONAL MILITARY
100
400
200
700
1,400
EXPANSIONARY
5,300
7,600
8,600
10,200
31,700
WORLDWIDE TRUCK
19,500
25,600
28,900
34,400
108,400
FISCAL YEAR 2012
Q1
Q2
Q3
Q4
FULL YEAR
BUS
1,700
2,600
2,900
7,200
MEDIUM
4,300
7,100
5,800
17,200
HEAVY
8,000
7,200
6,300
21,500
SEVERE
3,300
3,600
3,600
10,500
TOTAL
17,300
20,500
18,600
-
56,400
NON-TRADITIONAL MILITARY
200
400
500
1,100
EXPANSIONARY
7,400
7,500
8,000
22,900
WORLDWIDE TRUCK
24,900
28,400
27,100
-
80,400 |
 25
NYSE: NAV
Worldwide Engine Shipments
Navistar
Q1
Q2
Q3
Q4
Full Year
OEM sales - South America
30,700
34,600
33,600
33,900
132,800
Ford sales - U.S. and Canada
24,700
200
-
-
24,900
Other OEM sales
2,000
3,600
3,700
4,900
14,200
Intercompany sales
16,400
17,700
15,600
18,800
68,500
Total Shipments
73,800
56,100
52,900
57,600
240,400
Navistar
Q1
Q2
Q3
Q4
Full Year
OEM sales - South America
27,200
37,100
38,200
36,100
138,600
Other OEM sales
4,500
4,400
3,700
3,600
16,200
Intercompany sales
17,300
23,500
22,300
25,700
88,800
Total Shipments
49,000
65,000
64,200
65,400
243,600
Navistar
Q1
Q2
Q3
Q4
Full Year
OEM sales - South America
24,100
25,300
28,600
78,000
Other OEM sales
2,200
2,000
3,000
7,200
Intercompany sales
21,600
23,400
20,600
65,600
Total Shipments
47,900
50,700
52,200
-
150,800
World Wide Engine Shipments
2010
2011
2012 |
 26
NYSE: NAV
Order Receipts –
U.S. & Canada
2012
2011
Change
2,500
2,700
(200)
4,000
6,800
(2,800)
Class 8 heavy trucks
5,000
6,200
(1,200)
Class 8 severe service trucks
3,100
3,100
-
14,600
18,800
(4,200)
8,100
9,300
(1,200)
Order Receipts: U.S. & Canada (Units)
Three Months Ended
July 31,
Total "Traditional" Markets
Combined Class 8 (Heavy and Severe Service)
"Traditional" Markets
School buses
Class 6 and 7 medium trucks
We define our “traditional” markets to include U.S. and Canada School bus and Class 6
through 8 medium and heavy truck. We classify militarized commercial vehicles sold to the U.S.
and Canadian militaries as Class 8 severe service within our “traditional”
markets. Our “traditional” markets include CAT-branded units sold to Caterpillar under
our North America supply agreement. |
 27
NYSE: NAV
27
U.S. and Canada Dealer Stock Inventory*
*Includes U.S. and Canada Class 4-8 and school bus inventory, but does not
include U.S. IC Bus or Workhorse Custom Chassis inventory. |
 28
NYSE: NAV
Frequently Asked Questions
Q1:
What is in your Dealcor debt?
A:
Dealcor debt is comprised of wholesale (floor plan) financing and also retail
financing on lease and rental fleets for company owned dealers.
Q2:
How many Dealcor dealers did you have as of July 31, 2012?
A:
Of our 270 primary NAFTA dealers, we have ownership interest in five Dealcor
dealers as of July 31, 2012. Q3:
How are your dealers doing?
A:
Our
industry
leading
dealer
network
continues
to
excel
in
nearly
all
operational
and
financial
aspects
of
their
business.
Considerable
investments
continue
in
facility
upgrades,
hours
of
service,
technician
training,
tooling
and
inventory.
Additional
fixed
operations
and
facility
preparedness,
concentrated
on
the
increasing
focus
on
our
ever
expanding
customer
base
and
the
continued acceptance of CNG and LNG, continues for many of our domestic and
Canadian dealers. Q4:
What kind of rates do you charge your dealers and customers?
A:
Generally, our rates vary (those with higher credit risk have always had to pay
higher interest rates) and are usually in line with the market.
Q5:
How do you fund your wholesale business?
A:
We
primarily
finance
our
wholesale
portfolio
through
NFC,
funded
with
traditional
private
or
public
securitizations,
and
through
NFC’s bank facility.
Q6:
How is your NFC portfolio performing?
A:
NFC‘s wholesale portfolio has not experienced any credit losses in 2012.
NFC’s retail notes portfolio in the U.S. is in run-off mode now
that Navistar
Capital,
the
new
GE
Capital
retail
program,
is
financing
retail
customers.
Q7:
What is your total amount of capacity at NFC?
A:
As of July 31, 2012, total availability in our U.S. funding facilities is $745
million. Q8:
What is the status of the retail financing alliance with GE Capital in the United
States? A:
Navistar
Capital
–
the
alliance
we
formed
with
GE
Capital
in
the
United
States
to
support
the
sale
of
Navistar
products
–
is
progressing
consistent
with
expectations.
Since
its
inception
in
2010,
the
alliance
has
funded
more
than
$1.7
billion
in
retail
financings. |
 29
NYSE: NAV
Frequently Asked Questions
Q9:
What is included in Corporate and Eliminations?
A:
The primary drivers of Corporate and Eliminations are Corporate SG&A, pension
and OPEB expense (excluding amounts allocated to the segments), annual
incentive, manufacturing interest expense, and the elimination of intercompany sales and profit between
segments.
Q10:
How will the changing Department of Defense (DoD) budget affect Navistar in FY
2012? A:
The coming year will present challenges, but Navistar’s commercial expertise
may be an advantage when the DoD is asked to “do more with less”.
In addition, the Company continues to pursue a number of foreign military opportunities, especially in the
Middle East, where defense spending is growing. Finally, the Company has a fleet of
more than 34,000 vehicles in operation in approximately 26 countries,
including more than 9,000 vehicles operating with Afghan Security Forces. These vehicles will require
parts and sustainment support throughout their lifecycles.
Q11:
How does your FY 2012 Class 8 industry compare to ACT Research?
A:
Q12:
What is included in your equity in loss of non-consolidated affiliates?
A:
Equity in loss of non-consolidated affiliates is derived from our ownership
interests in partially-owned affiliates that are not consolidated,
and
is
primarily
comprised
of
continued
investment
and
start-up
losses
associated
with
our
Mahindra
joint
ventures.
Reconciliation to ACT
2012
ACT*
232,000
CY to FY adjustment
2,500
Other misc. specialty vehicles Included in ACT
(3,500)
Total (ACT comparable Class 8 to Navistar)
231,000
Navistar Industry Retail Deliveries Combined Class 8 Trucks
216,500
Navistar difference from ACT:
14,500
~7%
*Source: ACT N.A. Commercial Vehicle Outlook -
August, 2012
U.S. and Canadian Class 8 Truck Sales |
 30
NYSE: NAV
30
Frequently Asked Questions
Q13:
What is your net income attributable to non-controlling interests?
A:
Net income attributable to non-controlling interests is the result of the
consolidation of subsidiaries in which we do not own 100%, and is primarily
comprised of Ford's non-controlling interest in our Blue Diamond Parts joint venture.
Q14:
What is your expectation for future cash tax payments?
A:
Our cash tax payments will remain low in through 2013 and will gradually increase
as we exhaust available net operating losses (NOLs) and tax credits in the
future years. Q15:
What is the current balance of net operating losses as compared to other deferred tax
assets? A:
As of October 31, 2011 the Company has U.S. federal NOLs valued at $126 million,
state NOLs valued at $79 million and foreign NOLs
valued
at
$102
million,
for
a
total
undiscounted
cash
value
of
$307
million.
In
addition
to
NOLs,
the
Company
has
accumulated tax credits of $208 million and other deferred tax assets of $1.5
billion resulting in net deferred tax assets of approximately $2 billion.
Q16:
How will $2 billion of deferred tax assets be used to offset future taxable income?
A:
Simply put, deferred tax assets represent the value of future tax deductions
attributable to items that have already been expensed or deducted for book
purposes. The most commonly understood component of deferred tax assets is
the value of our net operating losses,
which
will
serve
to
immediately
reduce
taxable
income
in
the
future.
In
addition,
we
have
several
other
major
components
of deferred
taxes
which
will
reduce
taxable
income
in
the
future.
For
example,
the
Company
has
accrued
significant
OPEB,
pension
and
other
employee
benefit
expenses
during
prior
years
based
on
expected
payments
to
be
made
in
the
future.
As
these
payments are made, the Company will realize tax deductions to offset future taxable
income. Q17:
How would future tax proposals to reduce U.S. tax rates impact Navistar?
A:
While
lower
tax
rates
would
favorably
impact
future
tax
expense,
because
of
the
Company’s
large
balance
of
deferred
tax
assets
we
would
incur
a
one-time
adverse
impact
to
our
P&L
to
reset/reduce
our
deferred
tax
balances
to
the
lower
statutory
rates.
We
estimate that for every 1% reduction in tax rates, we would incur an immediate,
one-time tax increase of $50 million. Q18:
What are your expected 2012 and beyond pension funding requirements?
A:
Current forecasts indicate that we may need to contribute approximately $157
million in 2012 to our U.S. and Canadian pension plans.
Future contributions are dependent upon a number of factors, principally the
changes in values of plan assets, changes in interest
rates
and
the
impact
of
any
funding
relief
currently
under
consideration.
We
currently
expect
that
from
2013
through
2015,
the
Company
will
be
required
to
contribute
at
least
$141
million
per
year
in
aggregate
to
the
Plans,
depending
on
asset
performance and discount rates. This is lower than our previously reported
expectations due to the impact of the Moving Ahead for Progress in the 21st
Century Act which was enacted in July 2012. |
 31
NYSE: NAV
31
Frequently Asked Questions
Q19:
What causes the variance between manufacturing cash interest payments and GAAP
interest expense? A:
The main variance between cash and GAAP interest results from our manufacturing
segment’s $1 billion of senior unsecured high yield
notes
and
$570
million
of
senior
subordinated
convertible
notes.
As
a
result
of
this
issuance,
manufacturing
interest
expense
is
higher
than
cash
interest
payments
due
to
the
amortization
of
debt
issuance
costs
which
are
amortized
over
the
life
of
each
note,
amortization of the original issue discount of the high yield notes and
amortization of the embedded call option in the convertible notes.
The timing of interest payments also impacts the overall variance on a quarterly
basis, but not on a fiscal year basis. Q20:
What should we assume for capital expenditures in fiscal 2012?
A:
We plan to continue capital spending within the traditionally guided range of $250
million to $350 million for products and development.
Capital spending related to Engineering Integration is funded through the RZFBs
and is not included in that range. Q21:
What are the differences between the accounting vs. economic dilution on your
convertible debt? A:
Please
see
the
presentation
on
the
IR
website
(http://ir.navistar.com/dilution.cfm)
entitled
Dilution
overview
resulting
from
the
Convertible Notes issued on October 2009.
Q22:
Why are the convertible debt holders no longer able to convert their notes?
A:
The
indenture
in
our
convertible
notes
contains
a
provision
that
allows
the
note
holders
to
convert
anytime
during
the
following
fiscal quarter should the price of Navistar’s common stock close 130% above
the conversion price for any 20 day period (consecutive or
non-consecutive) out of the last 30 consecutive day trading period of each fiscal quarter. The conversion price of
the notes is $50.274 per share of Navistar’s common stock and 130% of the
conversion price equals $65.356 per share of Navistar’s common stock.
Since Navistar’s common stock closed above $65.356 per share for more than 20 trading days during the
30 consecutive trading day period ending on April 30, 2011, the note holders had
the right to convert their notes any time from May 2, 2011 through July 31,
2011. A very small minority of note holders chose to convert their notes
during the conversion period. Navistar opted to settle the conversion in
cash instead of shares, therefore there was a 40 trading day observation period to determine the value that was
remitted in cash, so the note holders did not receive the cash for almost two
months after their respective conversion notices were received.
Navistar’s common stock did not close above $65.356 per share for 20 trading
days (consecutive or non-consecutive) during the 30 day consecutive
trading day period ending July 31, 2012, therefore the note holders do not have the right to convert their notes,
however that threshold could be triggered once again in the future.
|
 32
NYSE: NAV
32
Frequently Asked Questions
Q23:
A:
8.25% Senior Notes due November 1, 2021
$900 million
3.0% Senior Subordinated Convertible Notes due October 15, 2014
$570 million
Debt of majority owned dealerships (various maturity dates)
$75 million
Financing arrangements and capital lease obligations (various maturity
dates) $146 million
Loan Agreement related to the 6.5% Tax Exempt Bonds due October 1, 2040
$225 million
Asset-Based Revolving Credit Facility due November 1, 2016
$238 million
Promissory Note due September 30, 2015
$33 million
Other (various maturity dates)
$43 million
Total
$2,230 million
The
amounts
and
maturity
dates
are
as
follows
(the
values
shown
below
are
the
amounts
due
and
exclude
the
accounting impact of
any OID or bifurcation), however the chart below does not reflect the new $1
billion term loan entered into on August 17, 2012 nor using a portion of the
$1 billion term loan proceeds to repay the $238 million outstanding under the Asset Based Revolving Credit
Facility:
For the manufacturing debt currently outstanding in your most recent financial statement filings, what
are the respective maturity dates and principal amounts outstanding? |
 33
NYSE: NAV
33
Manufacturing Cash Flow
Beginning Mfg. Cash1 Balance
Fiscal 2010
Fiscal 2011
Q1 2012
Q2 2012
Q3 2012
October 31, 2009
$1,152
October 31, 2010
$1,100
October 31, 2011
$1,186
January 31, 2012
$837
April 30, 2012
$681
Approximate Cash Flows:
From Operations
409
680
(142)
(72)
(78)
From Investing / (Cap Ex)
(350)
(485)
(125)
(75)
(81)
From Financing / (Debt Pay Down)
(110)
(106)
(85)
(2)
110
Exchange Rate Effect
(1)
(3)
3
(7)
(5)
Net Cash Flow
($52)
$86
($349)
($156)
($54)
Ending Mfg. Cash1 Balance:
October 31, 2010
$1,100
October 31, 2011
$1,186
January 31, 2012
$837
April 30, 2012
$681
July 31, 2012
$627
1Cash = Cash, Cash Equivalents & Marketable Securities
2Includes cash from the consolidation of minority interests |
 34
NYSE: NAV
34
Outstanding Debt Balances
July 31,
October 31,
2012
2011
$ 872
$ 967
514
497
75
94
146
118
225
225
33
40
238
-
43
39
2,146
1,980
356
99
$ 1,790
$ 1,881
$ 1,299
$ 1,664
857
1,072
53
70
57
70
2,266
2,876
1,060
1,280
$ 1,206
$ 1,596
(in millions)
Manufacturing operations
8.25%
Senior
Notes,
due
2021,
net
of
unamortized
discount
of
$28
and
$33
at
the
respective
dates ……………………..
3.0% Senior Subordinated Convertible Notes, due 2014, net of unamortized discount of $56 and $73,
respectively …….. Debt of majority-owned dealerships
………………………………………………………………………………………………….
Financing arrangements and capital lease obligations
……………………………………………………………………………
Loan Agreement related to 6.5% Tax Exempt Bonds, due
2040…………………………………………………………………
Promissory Note
……………………………………………………………………………………………………………………….
Asset-Based Credit Facility
…………………………………………………………………………………………………………..
Other
…………………………………………………………………………………………………………………………………….
Total manufacturing operations debt
………………………………………………………………………………………………
Less: Current portion
………………………………………………………………………………………………………………….
Net long-term manufacturing operations debt
…………………………………………………………………………………..
Financial services operations
Asset-backed debt
issued
by
consolidated
SPEs,
at
fixed
and
variable
rates,
due
serially
through
2019
………………….
Bank
revolvers,
at
fixed
and
variable
rates,
due
dates
from
2013
through
2017………………………………………………..
Commercial paper, at variable rates, due serially through 2012
………………………………………………………………….
Borrowings secured by operating and finance leases, at various rates, due serially through 2017
…………………………. Total financial services
operations debt ………………………………………………………………………………………….
Less: Current portion
………………………………………………………………………………………………………………….
Net long-term financial services operations debt
………………………………………………………………………………. |
 35
NYSE: NAV
35
SEC Regulation G Non-GAAP Reconciliation
The financial measures presented below are unaudited and not in accordance with, or
an alternative for, financial measures presented in accordance with U.S.
generally
accepted
accounting
principles
(GAAP).
The
non-GAAP
financial
information
presented
herein
should
be
considered
supplemental
to,
and
not
as a
substitute for, or superior to, financial measures calculated in
accordance with GAAP.
Manufacturing Segment Results:
segments, provide meaningful information of our core manufacturing business and
therefore we use it to supplement our GAAP reporting by identifying items
that may not be related to the core manufacturing business. Management often uses
this information to assess and measure the performance of our operating
segments. We have chosen to provide this supplemental information to investors,
analysts and other interested parties to enable them to perform additional
analyses of operating results, to illustrate the results of operations giving
effect to the non-GAAP adjustments shown in the below reconciliation, and to provide
an additional measure of performance.
Adjusted
Net
Income
and
Diluted
Earnings
Per
Share
Attributable
To
Navistar
International
Corporation
and
Adjusted
Manufacturing
Segment
Profit:
We
believe
that
adjusted
net
income,
diluted
earnings
per
share
attributable
to
Navistar
International
Corporation,
and
adjusted
manufacturing
segment
profit
excluding certain adjustments which are not considered to be part of our ongoing
business, improve the comparability of year to year results and are
representative of our underlying performance. We have chosen to provide this
supplemental information to investors, analysts, and other interested parties to
enable
them
to
perform
additional
analyses
of
operating
results,
to
illustrate
the
results
of
operations
giving
effect
to
the
non-GAAP
adjustments
shown
in
the
below reconciliations, and to provide an additional measure of performance.
Manufacturing Earnings Before Interest, Income Taxes, Depreciation, and Amortization
(“EBITDA”): consolidated net income (loss) from continuing
operations minus the net income (loss) from our financial services operations plus interest expense, income
taxes, and depreciation and amortization. EBITDA is a measure commonly used and is
presented to aid in developing an understanding of the ability of our
operations to generate cash for debt service and taxes, as well as cash for
investments in working capital, capital expenditures, and other liquidity needs. This
information is presented as a supplement to the other data provided because it
provides information which we believe is useful to investors for additional
analysis. EBITDA should not be considered in isolation or as a substitute for net
income, cash flows from operating activities or other consolidated operations, or
cash flow statement data prepared in accordance with GAAP, or as
a measure of our profitability or liquidity as determined in accordance with GAAP.
Manufacturing Cash Flow and Manufacturing Cash, Cash Equivalents, and
Marketable Securities: aid
in
developing
an
understanding
of
the
ability
of
our
operations
to
generate
cash
for
debt
service
and
taxes,
as
well
as
cash
for
investments
in
working
capital,
capital
expenditures
and
other
liquidity
needs.
This
information
is
presented
as
a
supplement
to
the
other
data
provided
because
it
provides
information
which
we believe is useful to investors for additional analysis. Our manufacturing cash
flow is prepared with marketable securities being treated as a cash equivalent.
Manufacturing cash, cash equivalents, and marketable securities represents the
Company’s consolidated cash, cash equivalents, and marketable securities
excluding cash, cash equivalents, and marketable securities of our financial
services operations. We include marketable securities with our cash and cash
equivalents
when
assessing
our
liquidity
position
as
our
investments
are
highly
liquid
in
nature.
We
have
chosen
to
provide
this
supplemental
information
to
investors, analysts and other interested parties to enable them to perform
additional analyses of operating results, to illustrate the results of operations giving
effect to the non-GAAP adjustments shown in the below reconciliation, and to
provide an additional measure of performance. We believe manufacturing
segment results, which includes the segment results of our Truck, Engine, and Parts reporting
Manufacturing segment EBITDA is defined as our
Manufacturing cash flow is used and is presented to
|
 36
NYSE: NAV
36
SEC Regulation G –
Manufacturing EBITDA
Three Months Ended July 31, 2012
($ millions)
Net income attributable to NIC
84
$
Less income tax benefit
(204)
Loss before income tax benefit
(120)
$
Less equity income from financial service operations
(13)
Loss before income tax benefit and equity income from financial service
operations (133)
$
Add back manufacturing interest expense
40
Manufacturing EBIT
(93)
$
Add back manufacturing depreciation and amortization¹ 77
Manufacturing EBITDA
(16)
$
1
Includes
depreciation
of
equipment
leased
to
others
and
excludes
debt
issuance
cost/discount
amortization
Navistar International Corporation (Manufacturing operations with
financial services operations on a pre-tax equity basis)
|
 37
NYSE: NAV
37
SEC Regulation G –
Manufacturing Cash Fiscal Year Comparison
Manufacturing cash, cash equivalents, and marketable securities reconciliation:
(Dollars in Millions)
July 31,
2012
October 31,
2011
October 31,
2010
October 31,
2009
Manufacturing segment cash and cash equivalents
488
$
488
$
534
$
1,152
$
Financial services segment cash and cash equivalents
59
51
51
60
Consolidated cash and cash equivalents
547
$
539
$
585
$
1,212
$
Manufacturing marketable securities
139
$
698
$
566
$
-
$
Financial services segment marketable securities
20
20
20
-
Consolidated marketable securities
159
$
718
$
586
$
-
$
Manufacturing segment cash and cash equivalents
488
$
488
$
534
$
1,152
$
Manufacturing marketable securities
139
698
566
-
Manufacturing segment cash, cash equivalents and marketable securities
627
$
1,186
$
1,100
$
1,152
$ |
 38
NYSE: NAV
38
SEC Regulation G –
Manufacturing Cash
Manufacturing
Operations
Financial
Services
Operations
Adjustments
Condensed
Consolidated
Cash Flows
($ in Millions)
For the year ended October 31, 2010
Cash flows from operations
409
698
-
1,107
Cash flows from investing / capital expenditures
(350)
492
(576)
(434) Cash flows from financing / debt pay down
(110)
(1,180)
(10)
(1,300)
Effect of exchange rate changes
(1)
1
-
- Net cash flows
(52)
11
(586)
(627) Blue Diamond Consolidation
-
-
-
- Beginning cash, cash equivalents and
marketable securities balance
1,152
60
-
1,212
Ending cash, cash equivalents and marketable securities balance
1,100
71
(586)
585 Manufacturing segment cash flow reconciliation:
Manufacturing
Operations
Financial
Services
Operations
Adjustments
Condensed
Consolidated
Cash Flows
($ in Millions)
For the year ended October 31, 2011
Cash flows from operations
680
200
-
880 Cash flows from investing / capital expenditures
(485)
(206)
(132)
(823) Cash flows from financing / debt pay down
(106)
6
-
(100) Effect of exchange rate changes
(3)
-
-
(3) Net cash flows
86
-
(132)
(46) Blue Diamond Consolidation
-
-
-
- Beginning cash, cash equivalents and
marketable securities balance
1,100
71
(586)
585 Ending cash, cash equivalents and marketable securities balance
1,186
71
(718)
539 Manufacturing segment cash flow reconciliation:
|
 39
NYSE: NAV
39
SEC Regulation G –
Manufacturing Cash
Manufacturing
Operations
Financial
Services
Operations
Adjustments
Condensed
Consolidated
Cash Flows
($ in Millions)
For the nine months ended July 31, 2012
Cash flows from operations
(292)
638
-
346 Cash flows from investing / capital expenditures
(281)
(2)
559
276 Cash flows from financing / debt pay down
23
(630)
-
(607) Effect of exchange rate changes
(9)
2
-
(7) Net cash flows
(559)
8
559
8 Blue Diamond Consolidation
-
-
-
- Beginning cash, cash equivalents and
marketable securities balance
1,186
71
(718)
539 Ending cash, cash equivalents and marketable securities balance
627
79
(159)
547 Manufacturing segment cash flow reconciliation:
Manufacturing
Operations
Financial
Services
Operations
Adjustments
Condensed
Consolidated
Cash Flows
($ in Millions)
For the three months ended July 31, 2012
Cash flows from operations
(78)
375
-
297 Cash flows from investing / capital expenditures
(81)
(146)
178
(49) Cash flows from financing / debt pay down
110
(207)
-
(97) Effect of exchange rate changes
(5)
1
-
(4) Net cash flows
(54)
23
178
147 Blue Diamond Consolidation
-
-
-
- Beginning cash, cash equivalents and
marketable securities balance
681
56
(337)
400 Ending cash, cash equivalents and marketable securities balance
627
79
(159)
547 Manufacturing segment cash flow reconciliation:
|
 40
NYSE: NAV
40
SEC Regulation G –
Adjusted
Net
Income
and
Diluted
EPS
–
Three
Months
Ended
July 31, 2012 and 2011
See notes at slide 42.
Adjusted net income (loss) attributable to Navistar International Corporation and adjusted diluted
earnings (loss) per share attributable to Navistar International Corporation
reconciliation: 2012
2011
($ in millions, except per share data)
Net income attributable to Navistar International Corporation
$ 84
$ 1,400
Plus:
Engineering integration costs, net of tax
(A)
(5)
5
Restructuring
of
North
American
manufacturing
operations,
net
of
tax
(B)
(14)
102
Adjustments to pre-existing warranties, net of tax
(C)
(81)
-
Charges for non-conformance penalties, net of tax
(D)
2
-
Less:
Net impact of valuation allowance release
(E)
-
1,476
Adjusted net income (loss) attributable to Navistar International Corporation
$ (14)
$ 31
Diluted loss per share attributable to Navistar International Corporation
$ 1.22
$ 18.24
Effect of adjustments on diluted loss per share attributable to Navistar International Corporation
(1.42)
(17.84)
Adjusted diluted earnings (loss) per share attributable to Navistar International Corporation
$ (0.20)
$ 0.40
Diluted weighted shares outstanding
68.9
76.8
Three Months Ended
July 31, |
 41
NYSE: NAV
41
SEC Regulation G –
Adjusted
Manufacturing
Segment
Profit
Before
Tax
–
Three
Months
Ended July 31, 2012 and 2011
See notes at slide 42.
Manufacturing segment profit (loss) and adjusted manufacturing segment profit reconciliation:
2012
2011
($ in millions)
Net income attributable to Navistar International Corporation
$ 84
$ 1,400
Less:
Financial services segment profit
22
30
Corporate and eliminations
(130)
(120)
Income tax benefit
196
1,463
Manufacturing segment profit (loss)
(4)
27
Plus:
Engineering integration costs
(A)
15
11
Restructuring of North American manufacturing operations
(B)
-
119
Charges for non-conformance penalties
(D)
10
-
Adjusted manufacturing segment profit
$ 21
$ 157
Profit (loss) before tax and adjusted profit (loss) before tax reconciliation:
2012
2011
($ in millions)
Loss before tax
$ (100)
$ (54)
Plus:
Engineering integration costs
(A)
16
14
Restructuring of North American manufacturing operations
(B)
-
122
Charges for non-conformance penalties
(D)
10
-
Adjusted profit (loss) before tax
$ (74)
$ 82
Three Months Ended
July 31,
Three Months Ended
July 31, |
 42
NYSE: NAV
42
SEC Regulation G –
Notes
(A)
Engineering
integration
costs
relate
to
the
consolidation
of
our
truck
and
engine
engineering
operations,
as
well
as
the
relocation
of
our
world
headquarters. For the three months ended July 31, 2012, the charges included
restructuring charges of $3 million and other related costs of $13 million,
with an associated income tax benefit of $21 million. For the three months ended July 31, 2011, the charges included restructuring
charges of $4 million and other related costs of $10 million, with an associated
income tax benefit of $9 million. Our manufacturing operations,
primarily
our
Truck
segment,
recognized
charges
of
$15
million
relating
to
these
actions
in
the
three
months
ended
July
31,
2012
compared
to
$11
million in the three months ended July 31, 2011.
(B)
Restructuring of North American manufacturing operations are charges primarily
related to our ongoing restructuring plans related to our plans to close our
Chatham, Ontario heavy truck plant and WCC chassis plant in Union City, Indiana, and to significantly scale back operations at our
Monaco recreational vehicle headquarters and motor coach manufacturing plant in
Coburg, Oregon. In the second quarter of 2012, the Company incurred charges
of $38 million for impairments of certain intangible assets. For the three months ended July 31, 2012, the associated tax impact
of the adjustment was an income tax benefit of $14 million. For the three months
ended July 31, 2011, the charges, which primarily impacted the Truck
segment, included restructuring charges of $53 million, impairment charges of $64 million related to certain intangible assets and property
and equipment, and other charges of $5 million, and the tax impact of these charges
was income tax benefit of $20 million. (C)
During the first and second quarters of 2012, the Company incurred charges of $123
million and $104 million, respectively, for adjustments to pre- existing
warranties. For the three months ended July 31, 2012, the associated tax impact of the adjustments was an income tax benefit of $81
million.
(D)
In
the
three
months
ended
July
31,
2012,
the
Company
recorded
charges
totaling
$10
million
for
NCPs
for
certain
13L
engine
sales
that
did
not
comply with emission standards, recognized in the Engine segment. The tax impact of
the adjustment was an income tax benefit of $8 million. (E)
In the nine months ended July 31, 2012, we recognized an income tax benefit of $181
million in the second quarter of 2012 from the release of a significant
portion of
our
income
tax
valuation
allowance
on
our
Canadian
deferred
tax
assets.
In
the
three
months
ended
July
31,
2011,
we
recognized
an
income
tax
benefit
of
$1.476
billion
in
the
third
quarter
of
2011
from
the
release
of
a
significant
portion
of
our
income
tax
valuation
allowance on our domestic deferred tax assets.
The above items described in notes A through D, have been adjusted to reflect the
impact of income taxes which are calculated based on the respective
periods
estimated
annual
effective
tax
rate.
The
income
tax
impact
of
the
adjustments
reflects
the
impact
of
a
change
in
the
quarter
to
the Company's estimated annual
effective
tax
rate.
The
change
is
the
result
of
updates
to
the
amounts
and
jurisdictional
mix
of
our
2012 forecasted
results. The tax impact of the adjustments may be adjusted for future changes in
the estimated annual effective tax rate. |