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EX-99.2 - SLIDE PRESENTATION - NAVISTAR INTERNATIONAL CORPd456485dex992.htm
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Exhibit 99.1

 

LOGO  

Navistar International Corporation

 

2701 Navistar Dr.

 

Lisle, IL 60532 USA

  P : 331-332-5000   W : navistar.com

 

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

NAVISTAR REPORTS FOURTH QUARTER RESULTS

 

   

Reports fourth quarter loss of $2.8 billion, including $2 billion non-cash domestic tax valuation allowance, $149 million in additional pre-existing warranty reserve, on revenue of $3.3 billion

 

   

Manufacturing cash and marketable securities of $1.5 billion exceeds guidance

 

   

Company makes progress on 12-18 month turnaround plan

LISLE, Ill. (December 19, 2012) – Navistar International Corporation (NYSE: NAV) today announced a fourth quarter 2012 net loss of $2.8 billion, or $40.13 per diluted share, compared to fourth quarter 2011 net income of $255 million, or $3.48 per diluted share. Current quarter results included increased non-cash tax expense of $2 billion, or $28.59 per share, for the increase in deferred tax valuation allowance on U.S. deferred tax assets. Fourth quarter 2012 results also included pre-tax charges of $149 million in additional pre-existing warranty expenses primarily related to EPA 2010 big bore engines, $73 million for cost reduction actions, $16 million in charges for the restructuring of North American manufacturing operations and engineering integration and $14 million in non-conformance penalties (NCPs).

The company reported a pre-tax loss of $566 million in the fourth quarter 2012 versus a $275 million pre-tax profit in the fourth quarter 2011. Revenues in the quarter were $3.3 billion, down 24 percent from the fourth quarter of 2011. The loss was reflective of lower sales, as well as the adjustments to pre-existing warranties and the charges related to the cost-reduction actions.

The company exceeded its fiscal year 2012 guidance with $1.5 billion in manufacturing cash and marketable securities. Contributing factors in the fourth quarter included $363 million improvement in working capital and net proceeds of $192 million from an equity offering.

“We continue to make significant progress on our turnaround and the complexity of this quarter’s results is reflective of the actions necessary during this time of transition,” said Lewis B. Campbell, Navistar chairman and chief executive officer. “The team has delivered numerous successes, including exceeding our cash guidance, launching the ProStar with the ISX 15-liter ahead of schedule and moving forward with several opportunities identified during our ROIC-focused business reviews. Additionally, with the improvement to our manufacturing footprint by closing our Garland, Texas, manufacturing plant and the completion of workforce reductions in North America and South America, we are positioned to exceed our goal of reducing structural costs by $175 million.

“Unfortunately, we saw a spike in warranty spend in late October and early November for the few remaining engine issues and the cost to take the proactive actions


to support our customers and fix those items is higher than we anticipated,” Campbell continued. “However, the fact is that customer feedback and positive three- and nine-months-in-service data show today we are delivering the highest quality trucks since the 2010 launch, and quality will continue to be our top priority.”

The net loss for fiscal year 2012 was $3.0 billion, or $43.56 per diluted share, versus net income for fiscal 2011 of $1.7 billion, or $22.64 per diluted share.

SEGMENT REPORTING

Summary Financial Results:

 

      Quarter Ended
October 31
     Year Ended
October 31
 
(in millions, except per share data)    2012     2011      2012     2011  

Sales and revenues, net

   $ 3,279      $ 4,323       $ 12,948      $ 13,958   

Segment Results:

         

Truck

   $ (160   $ 287       $ (320   $ 336   

Engine

     (287     58         (562     84   

Parts

     76        87         240        287   

Financial Services

     16        27         91        129   

Income (loss) before income taxes

   $ (566   $ 275       $ (1,182   $ 320   

Net income (loss) attributable to Navistar International Corporation

     (2,769     255         (3,010     1,723   

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

     (40.13     3.48         (43.56     22.64   

Truck — For the fourth quarter 2012, the truck segment recorded a loss of $160 million, compared with a year-ago fourth quarter profit of $287 million. For the fiscal year 2012, the truck segment recorded a loss of $320 million compared with fiscal year 2011 profit of $336 million.

The segment’s 2012 loss was primarily driven by decreased military sales and product mix, higher commodity costs and warranty expense related to extended warranty contracts on 2010 emission engines. The realization of certain benefits from manufacturing cost efficiencies partially offset these factors.

Segment results for fiscal year 2012 included charges of $100 million for the integration of engineering operations, restructuring of North American manufacturing operations and the impact of fourth quarter cost reduction initiatives, compared to $173 million in engineering integration and restructuring charges in fiscal year 2011.

Engine — For the fourth quarter 2012, the engine segment recorded a loss of $287 million, compared with a year-ago fourth quarter profit of $58 million. For the fiscal year 2012, the engine segment posted a loss of $562 million compared to the prior year profit of $84 million. The 2012 loss is predominantly due to increased warranty expense for 2010 emission engines and lower sales at our South American operations.

Segment results for fiscal year 2012 included the company’s non conformance penalty charges of $34 million. SG&A and engineering expense were lower by $48 million and $25 million, respectively.


Parts — For the fourth quarter 2012, the parts segment recorded profit of $76 million, compared with a year-ago fourth quarter profit of $87 million. For the fiscal year 2012, the parts segment realized a profit of $240 million compared to the prior year profit of $287 million. The year-over-year decrease was driven by lower military volume partially offset by increased commercial sales and lower SG&A expense.

Financial Services — For the fourth quarter 2012, the financial services segment recorded profit of $16 million, down from fourth quarter 2011 profit of $27 million. For the fiscal year 2012, the financial services segment recorded a profit of $91 million compared to a year-ago profit of $129 million, primarily due to expected lower portfolio balances.

Corporate — For fiscal year 2012, tax expense was $1.8 billion or $25.76 per share. This included the negative impact of the non-cash U.S. valuation allowance of $2.0 billion and a tax benefit of $189 million related to the release of the Canadian valuation allowance. In fiscal 2011, the company realized a $1.5 billion tax valuation release benefit.

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.

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, 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

 

     Quarter Ended
October 31
    Year Ended
October 31
 
     2012     2011     2012     2011  
(in millions, except per share data)                         

Sales and revenues

        

Sales of manufactured products, net

   $ 3,240      $ 4,277      $ 12,780      $ 13,758   

Finance revenues

     39        46        168        200   
  

 

 

   

 

 

   

 

 

   

 

 

 

Sales and revenues, net

     3,279        4,323        12,948        13,958   
  

 

 

   

 

 

   

 

 

   

 

 

 

Costs and expenses

        

Costs of products sold

     3,152        3,432        11,670        11,262   

Restructuring charges

     84        12        108        92   

Impairment of property and equipment and intangible assets

     6        —          44        64   

Selling, general and administrative expenses

     376        428        1,444        1,434   

Engineering and product development costs

     131        125        539        532   

Interest expense

     77        60        259        247   

Other expense (income), net

     11        (25     37        (64
  

 

 

   

 

 

   

 

 

   

 

 

 

Total costs and expenses

     3,837        4,032        14,101        13,567   

Equity in loss of non-consolidated affiliates

     (8     (16     (29     (71
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     (566     275        (1,182     320   

Income tax benefit (expense)

     (2,190     —          (1,780     1,458   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     (2,756     275        (2,962     1,778   

Less: Net income attributable to non-controlling interests

     13        20        48        55   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to Navistar International Corporation

   $ (2,769   $ 255      $ (3,010   $ 1,723   
  

 

 

   

 

 

   

 

 

   

 

 

 

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

        

Basic

   $ (40.13   $ 3.52      $ (43.56   $ 23.66   

Diluted

   $ (40.13   $ 3.48      $ (43.56   $ 22.64   

Weighted average shares outstanding:

        

Basic

     69.0        72.5        69.1        72.8   

Diluted

     69.0        73.2        69.1        76.1   


Navistar International Corporation and Subsidiaries

Consolidated Balance Sheets

 

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

ASSETS

    

Current assets

    

Cash and cash equivalents

   $ 1,087      $ 539   

Restricted cash

     —          100   

Marketable securities

     466        718   

Trade and other receivables, net

     749        1,219   

Finance receivables, net

     1,663        2,198   

Inventories

     1,537        1,714   

Deferred taxes, net

     74        474   

Other current assets

     261        273   
  

 

 

   

 

 

 

Total current assets

     5,837        7,235   

Restricted cash

     161        227   

Trade and other receivables, net

     94        122   

Finance receivables, net

     486        715   

Investments in non-consolidated affiliates

     62        60   

Property and equipment, net

     1,660        1,570   

Goodwill

     280        319   

Intangible assets, net

     171        234   

Deferred taxes, net

     189        1,583   

Other noncurrent assets

     162        226   
  

 

 

   

 

 

 

Total assets

   $ 9,102      $ 12,291   
  

 

 

   

 

 

 

LIABILITIES and STOCKHOLDERS’ EQUITY (DEFICIT)

    

Liabilities

    

Current liabilities

    

Notes payable and current maturities of long-term debt

   $ 1,205      $ 1,379   

Accounts payable

     1,686        2,122   

Other current liabilities

     1,462        1,297   
  

 

 

   

 

 

 

Total current liabilities

     4,353        4,798   

Long-term debt

     3,566        3,477   

Postretirement benefits liabilities

     3,405        3,210   

Deferred taxes, net

     42        59   

Other noncurrent liabilities

     996        719   
  

 

 

   

 

 

 

Total liabilities

     12,362        12,263   

Redeemable equity securities

     5        5   

Stockholders’ equity (deficit)

    

Series D convertible junior preference stock

     3        3   

Common stock (86.0 and 75.4 shares issued, respectively; and $.10 par value per share and 220.0 shares authorized at both dates)

     9        7   

Additional paid in capital

     2,440        2,253   

Accumulated deficit

     (3,165     (155

Accumulated other comprehensive loss

     (2,325     (1,944

Common stock held in treasury, at cost (6.8 and 4.9 shares, respectively)

     (272     (191
  

 

 

   

 

 

 

Total stockholders’ deficit attributable to Navistar International Corporation

     (3,310     (27

Stockholders’ equity attributable to non-controlling interests

     45        50   
  

 

 

   

 

 

 

Total stockholders’ equity (deficit)

     (3,265     23   
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity (deficit)

   $ 9,102      $ 12,291   
  

 

 

   

 

 

 


Navistar International Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

 

     Year Ended October 31  
(in millions)    2012     2011  

Net income (loss)

   $ (2,962   $ 1,778   

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

    

Depreciation and amortization

     277        290   

Depreciation of equipment leased to others

     46        38   

Deferred taxes, including change in valuation allowance

     1,778        (1,513

Impairment of property and equipment and intangible assets

     44        75   

Amortization of debt issuance costs and discount

     46        44   

Stock-based compensation

     19        36   

Provision for doubtful accounts, net of recoveries

     14        (6

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

     36        75   

Other non-cash operating activities

     20        (15

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

    

Trade and other receivables

     454        (212

Finance receivables

     741        8   

Inventories

     76        (129

Accounts payable

     (399     247   

Other assets and liabilities

     420        164   
  

 

 

   

 

 

 

Net cash provided by operating activities

     610        880   
  

 

 

   

 

 

 

Cash flows from investing activities

    

Purchases of marketable securities

     (1,209     (1,562

Sales or maturities of marketable securities

     1,461        1,430   

Net change in restricted cash and cash equivalents

     165        (147

Capital expenditures

     (309     (429

Purchase of equipment leased to others

     (61     (71

Proceeds from sales of property and equipment

     18        32   

Investments in non-consolidated affiliates

     (42     (65

Proceeds from sales of affiliates

     1        3   

Business acquisitions, net of cash received

     (12     12   

Acquisition of intangibles

     (14     (26
  

 

 

   

 

 

 

Net cash used in investing activities

     (2     (823
  

 

 

   

 

 

 

Cash flows from financing activities

    

Proceeds from issuance of securitized debt

     1,313        599   

Principal payments on securitized debt

     (1,976     (708

Proceeds from issuance of non-securitized debt

     1,517        214   

Principal payments on non-securitized debt

     (616     (107

Net increase (decrease) in notes and debt outstanding under revolving credit facilities

     (269     137   

Principal payments under financing arrangements and capital lease obligations

     (35     (86

Debt issuance costs

     (57     (11

Issuance of common stock

     192        —     

Purchase of treasury stock

     (75     (125

Proceeds from exercise of stock options

     2        40   

Dividends paid by subsidiaries to non-controlling interest

     (56     (53

Other financing activities

     (3     —     
  

 

 

   

 

 

 

Net cash used in financing activities

     (63     (100
  

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents

     3        (3
  

 

 

   

 

 

 

Increase (decrease) in cash and cash equivalents

     548        (46

Cash and cash equivalents at beginning of the year

     539        585   
  

 

 

   

 

 

 

Cash and cash equivalents at end of the year

   $ 1,087      $ 539   
  

 

 

   

 

 

 


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(B)
     Corporate
and
Eliminations
    Total  

Quarter Ended October 31, 2012

              

External sales and revenues, net

   $ 2,204      $ 454      $ 582       $ 39       $ —        $ 3,279   

Intersegment sales and revenues

     9        347        30         21         (407     —     
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total sales and revenues, net

   $ 2,213      $ 801      $ 612       $ 60       $ (407   $ 3,279   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Net income (loss) attributable to NIC(A)

   $ (160   $ (287   $ 76       $ 16       $ (2,414   $ (2,769

Income tax expense

     —          —          —           —           (2,190     (2,190
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Segment profit (loss)(A)

   $ (160   $ (287   $ 76       $ 16       $ (224   $ (579
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Depreciation and amortization

   $ 29      $ 31      $ 2       $ 8       $ 7      $ 77   

Interest expense

     —          —          —           21         56        77   

Equity in income (loss) of non-consolidated affiliates

     (1     (9     2         —           —          (8

Capital expenditures(C)

     22        32        3         1         1        59   

Quarter Ended October 31, 2011

              

External sales and revenues, net

   $ 3,180      $ 575      $ 522       $ 46       $ —        $ 4,323   

Intersegment sales and revenues

     30        510        60         16         (616     —     
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total sales and revenues, net

   $ 3,210      $ 1,085      $ 582       $ 62       $ (616   $ 4,323   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Net income (loss) attributable to NIC(A)

   $ 287      $ 58      $ 87       $ 27       $ (204   $ 255   

Income tax benefit (expense)

     —          —          —           —           —          —     
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Segment profit (loss)(A)

   $ 287      $ 58      $ 87       $ 27       $ (204   $ 255   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Depreciation and amortization

   $ 39      $ 29      $ 2       $ 7       $ 6      $ 83   

Interest expense

     —          —          —           25         35        60   

Equity in income (loss) of non-consolidated affiliates

     (16     (1     1         —           —          (16

Capital expenditures(C)

     30        41        8         1         58        138   

Year Ended October 31, 2012

              

External sales and revenues, net

   $ 9,034      $ 1,755      $ 1,991       $ 168       $ —        $ 12,948   

Intersegment sales and revenues

     35        1,639        128         91         (1,893     —     
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total sales and revenues, net

   $ 9,069      $ 3,394      $ 2,119       $ 259       $ (1,893   $ 12,948   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Net income (loss) attributable to NIC(A)

   $ (320   $ (562   $ 240       $ 91       $ (2,459   $ (3,010

Income tax expense

     —          —          —           —           (1,780     (1,780
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Segment profit (loss)(A)

   $ (320   $ (562   $ 240       $ 91       $ (679   $ (1,230
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Depreciation and amortization

   $ 140      $ 118      $ 10       $ 33       $ 22      $ 323   

Interest expense

     —          —          —           88         171        259   

Equity in income (loss) of non-consolidated affiliates

     (28     (7     6         —           —          (29

Capital expenditures(C)

     75        148        21         3         62        309   


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

Year Ended October 31, 2011

  

External sales and revenues, net

   $  9,690      $ 2,101      $ 1,967       $ 200       $ —        $ 13,958   

Intersegment sales and revenues

     48        1,690        188         91         (2,017     —     
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total sales and revenues, net

   $ 9,738      $ 3,791      $ 2,155       $ 291       $ (2,017   $ 13,958   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Net income (loss) attributable to NIC(A)

   $ 336      $ 84      $ 287       $ 129       $ 887      $ 1,723   

Income tax benefit

     —          —          —           —           1,458        1,458   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Segment profit (loss)(A)

   $ 336      $ 84      $ 287       $ 129       $ (571   $ 265   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Depreciation and amortization

   $ 151      $ 120      $ 9       $ 28       $ 20      $ 328   

Interest expense

     —          —          —           109         138        247   

Equity in income (loss) of non-consolidated affiliates

     (73     (4     6         —           —          (71

Capital expenditures(C)

     83        172        19         2         153        429   

As of October 31, 2012

              

Segment assets

   $ 2,118      $ 1,777      $ 707       $ 2,563       $ 1,937      $ 9,102   

As of October 31, 2011

              

Segment assets

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

 

(A) See Note 2, Restructurings and Impairments, of the 2012 Annual Report on Form 10-K for further discussion.
(B) Total sales and revenues in the Financial Services segment include interest revenues of $59 million and $60 million for the quarters ended October 31, 2012 and 2011, respectively, and $254 million, and $285 million for the years ended October 31, 2012 and 2011, respectively.
(C) Exclusive of purchases of equipment leased to others.