Attached files
file | filename |
---|---|
EX-99.1 - PRESS RELEASE - NAVISTAR INTERNATIONAL CORP | d456485dex991.htm |
8-K - FORM 8-K - NAVISTAR INTERNATIONAL CORP | d456485d8k.htm |
NYSE:
NAV 4
TH
QUARTER 2012 EARNINGS
PRESENTATION
December 19, 2012
Exhibit 99.2 |
2
NYSE: NAV
4Q 2012 Earnings 12/19/2012
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,
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
4Q 2012 Earnings 12/19/2012
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. 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 in the appendix of this presentation.
|
4
NYSE: NAV
4Q 2012 Earnings 12/19/2012
Agenda
2012 Progress on Key Areas of Focus
Lewis Campbell
Warranty
Troy Clarke
2012 4
th
Quarter and Full Year Results
A. J. Cederoth
Drive to Deliver
Troy Clarke
2013 Key Areas of Focus and Near-Term
Priorities
Lewis Campbell |
NYSE:
NAV Lewis Campbell, Executive Chairman and CEO
2012 PROGRESS ON KEY
AREAS OF FOCUS |
6
NYSE: NAV
4Q 2012 Earnings 12/19/2012
Cash
ISX launch on schedule
Valuation allowance
Quality
ROIC actions
4
th
Quarter Actions |
7
4Q 2012 Earnings 12/19/2012
Quality
Quality
Cost
Cost
Sense of Urgency
Sense of Urgency
Great Products
Great Products
Customer Satisfaction
Customer Satisfaction
People
People
Near-Term Priorities
Drive to Deliver
Drive to Deliver
Deliver Our
2013 Plans
Hit Our
Launches
Improve
Quality |
NYSE:
NAV Troy Clarke, President & COO
WARRANTY |
9
NYSE: NAV
4Q 2012 Earnings 12/19/2012
Q4 FY10
Q4 FY11
Q4 FY12*
Q4 FY13*
Quarterly Average
HD Engine # of repairs for the first 12 months
Q4 FY10
Q4 FY11
Q4 FY12*
Q4 FY13*
Quarterly Average
HD Vehicle # of repairs for the first 12 months
NOT more issues
Fixes are more expensive
than anticipated
Data from larger populations
of vehicles in service
pointed to an unresolved
issue
More effort required to
ensure engine robustness
Field campaign in process
Warranty
Overall quality
Overall quality
continues to improve
Primary driver for increase in
Primary driver for increase in
warranty
warranty
* Forecasted |
10
NYSE: NAV
4Q 2012 Earnings 12/19/2012
Warranty
New calibrations improved performance and uptime
Again not more issues; but costlier hardware fixes
Once fixes have been identified and solutions validated,
field campaigns may be required
Customer satisfaction improving
this is our
TOP PRIORITY
Engine launches have been a challenge across industry
Engine launches have been a challenge across industry
Bottom Line
Trucks and Engines are getting better,
we have fixed a lot of issues |
NYSE:
NAV A. J. Cederoth, Executive Vice President & CFO
2012 4
TH
QUARTER AND FULL
YEAR RESULTS |
12
NYSE: NAV
4Q 2012 Earnings 12/19/2012
Pre-Existing Warranty
Expense Summary
$149M for adjustments to Pre-
Existing Warranties in Q4 and
$404M in 2012
Field campaigns
True-up for actual expenses
Cost/repair > estimates
Warranty
Cash Summary
Expect cash to be greater than
expense in 2013
Impact of cash will be spread over
several years and is factored into
our forecast
$(51)
$(895)
$(488)
$(413)
$(416)
$(322)
$(310)
$(404)
$(79)
($1,000)
($900)
($800)
($700)
($500)
($400)
($300)
($200)
($100)
$0
2010
2011
2012
Expense
Cash
($600)
Warranty Expense vs. Cash |
13
NYSE: NAV
4Q 2012 Earnings 12/19/2012
This decision is complex and based on weighting both
the
positive
and
negative
evidence
heavily
relying
upon the negative historical performance, not based on
our future outlook of the business
$2.0 billion reserve recorded as tax expense*
Non-cash accounting charge
Does not impair ability to use tax benefits in future
Strategy remains on track
Tax Valuation
* Excludes reversal of $233M in Q1-Q3 for domestic tax benefits.
|
14
NYSE: NAV
4Q 2012 Earnings 12/19/2012
4
th
Quarter Actions Improve Future Profitability
Actual 4Q 2012
Estimated 2013
Estimated
2014
Run Rate
($ million)
P&L
Impact
Cash
Impact
P&L
Impact
Cash
Impact
P&L
Impact
Functional Cost/
Restructuring
($73)
($16)
$175
$118
$175+
Garland Assembly
Plant
($4)
$-
($10-$25)
$-
$35
Rationalized
Investments
($31)
($2)
TBD
Positive
Positive |
15
NYSE: NAV
4Q 2012 Earnings 12/19/2012
2012 Manufacturing Cash Update
Mid-point of FY guidance
(as shown on 9/6/2012)
$950
Equity Issuance
net of fees and expenses
$192
NAV Defense Receivable
$175
Commercial Truck Net Working Capital Improvement
$188
2012 Year End Manufacturing Cash Balance*
$1,505
$ in millions
* Year end cash balance includes marketable securities.
Note:
This slide contains non-GAAP information; please see the REG G in
appendix for a detailed reconciliation.
Fiscal Year End Balances*
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
FY 2008
FY 2009
FY 2010
FY 2011
FY 2012 |
16
NYSE: NAV
4Q 2012 Earnings 12/19/2012
2012 4
th
Quarter and Full Year Results
* Attributable to Navistar International Corporation
2012 Q4
GAAP
FY 2012
GAAP
Revenue (Billions)
$3.3
$12.9
Manufacturing Segment Profit (Loss)
(Millions)
$(371)
$(642)
Profit (Loss) Before Tax (Millions)
$(566)
$(1,182)
Net Profit (Loss) * (Millions)
$(2,769)
$(3,010)
Diluted Profit (Loss) Per Share*
$(40.13)
$(43.56) |
17
NYSE: NAV
4Q 2012 Earnings 12/19/2012
Manufacturing Segment
Truck
Material costs increased by $91M
Engineering and SG&A increased
by $76M
Engine -
profitability declined due:
Warranty
MWM business lower by $160M
Parts
Lower Volume, higher material cost
Postive pricing
Manufacturing Segment Profit & Corporate
Corporate & Eliminations
Corporate spending was lower year over
year
Postretirement cost higher
Q4 Restructuring
Q4
GAAP
Full Year
GAAP
($ in millions)
2012
2011
2012
2011
Truck
$(160)
$287
$(320)
$336
Engine
$(287)
$58
$(562)
$84
Parts
$76
$87
$240
$287
Total Manufacturing Segment
Profit (Loss)
$(371)
$432
$(642)
$707
Corporate & Eliminations
$(224)
$(204)
$(679)
$(571) |
18
NYSE: NAV
4Q 2012 Earnings 12/19/2012
Navistar Financial Corporation
FY 2012 segment profit of $91 million vs. $129 million in
FY 2011
Wholesale financing renewal
Completed
$959 million of available capacity
Debt/Equity Leverage: 3:1
Evaluating dividends |
19
NYSE: NAV
4Q 2012 Earnings 12/19/2012
Results below expectations; redirecting strategy
Clean engine strategy
Product quality is improving
Supporting customers and dealers
Liquidity is strong -
$1.5 billion
Raised capital to support product transition
2012 Recap |
20
NYSE: NAV
4Q 2012 Earnings 12/19/2012
$533
$582
$668
$762
$837
$-
$200
$400
$600
$800
$1,000
$1,200
2008
2009
2010
2011
2012
2013 Forecast
2013 Q1 Manufacturing Cash Update
2012 Year End Manufacturing Cash Balance*
$1,505
Corporate EBITDA
$(50) -
$50
Maintenance CapEx/Cash Interest/Pension/OPEB Funding
$(215)
Change in Net Working Capital
Lower production
volumes
$(200)
Debt Payments
$(40)
Restructuring Cash
$(50)
2013 Q1 Manufacturing Cash Balance*
$950 -
$1,050
$ in millions
* Cash balance includes marketable securities.
Note:
This slide contains non-GAAP information; please see the REG G in
appendix for a detailed reconciliation.
Q1 Ending Balances* |
21
NYSE: NAV
4Q 2012 Earnings 12/19/2012
Summary
Improving market share
Cost Reductions
2014
Class
8
industry
215K
Quality
Sense of Urgency
Great Products
Customer Satisfaction
People
Cost |
NYSE:
NAV Troy Clarke, President & COO
DRIVE TO DELIVER |
23
NYSE: NAV
4Q 2012 Earnings 12/19/2012
A Leader in Several Commercial Vehicle Segments
U.S. and Canada School Bus & Class 6-8: 23%
Market Share
FY2012: ~47%
Note: Based on market share position determined by brand
Market Share
FY2012: ~33%
Market Share
FY2012: ~30%
Market Share
FY2012: ~15%
Market Share
Trailing Six
Months: ~47%
Market Share
Trailing Six
Months: ~30%
Market Share
Trailing Six
Months: ~35%
Market Share
Trailing Six
Months: ~14% |
24
NYSE: NAV
4Q 2012 Earnings 12/19/2012
Clear P&L accountability across our business units
Strong emphasis on functional excellence
Organizational changes to align senior leadership for clear
accountability
Material procurement
Product launches
Quality
Manufacturing
Functional excellence
Leader of North American truck and parts also heads up sales and
marketing
Leader of global initiatives is responsible for quality
Chief procurement officer is responsible for driving our Lean initiatives
Head of Defense business is also responsible for Manufacturing
Product development is integrated with product planning
Drive To Deliver |
ProStar with 15L ISX
FY2012
FY2013
Sep
Oct
Nov
Dec
Jan
Feb
Mar
We are in Production
Ahead of Schedule
Hit Our Launches
Critical Product Introduction Milestones
25
NYSE: NAV
4Q 2012 Earnings 12/19/2012
Test Units
11/12
1
production
build
unit
12/11
Volume
production
12/14
OK to Ship
st |
26
NYSE: NAV
4Q 2012 Earnings 12/19/2012
Hit Our Launches
Critical Product Introduction Milestones
ProStar
with
MaxxForce
13L
SCR
13L with SCR on Track
5 million mile test program
Same proven SCR after-treatment system used
with ISX
Minimal engine hardware changes
New program launch process
Use of advanced engineering processes making
milestones possible
New quality system improving first time quality
FY2012
FY2013
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
MaxxForce 13L
MaxxForce 13L
with SCR
with SCR
Test Units
1/10
Submit for
EPA
certification
3/05
Start Lead
Unit
Production
4/30
OK
To Ship |
27
NYSE: NAV
4Q 2012 Earnings 12/19/2012
Driving Financial Improvement
Working capital
SG&A
VSP/RIF
Product
development
Fixed and variable
manufacturing
Garland closure
Structural Cost Actions
All actions to achieve above
goal are complete;
Additional savings identified
Discontinue non-related
engineering programs
Discontinue MaxxForce 15L
Sale of equity interest in
Mahindra JV
Capable partner
Capital focus needs to be
allocated to business
opportunities with more
immediate returns
Focus on the core North
America Truck, Engine & Parts
businesses
Return on Invested Capital
(ROIC) |
Drive
to Deliver Summary
A lot has been accomplished this past
quarter
Quality -
customer satisfaction
Functional excellence
Launches
ROIC
Structural cost actions
Momentum will be evident as 2013
progresses
Stay tuned next quarter for updates on
the Drive to Deliver
accomplishments
28
NYSE: NAV
4Q 2012 Earnings 12/19/2012
|
NYSE:
NAV Lewis Campbell, Executive Chairman and CEO
2013 KEY AREAS OF FOCUS &
NEAR-TERM PRIORITIES |
Quality
Quality
Cost
Cost
Sense of Urgency
Sense of Urgency
Great Products
Great Products
Customer Satisfaction
Customer Satisfaction
People
People
Near-Term Priorities
30
Drive to Deliver
Drive to Deliver
Improve
Quality
Hit Our
Launches
Deliver Our
2013 Plans
30
NYSE: NAV
4Q 2012 Earnings 12/19/2012
|
31
NYSE: NAV
4Q 2012 Earnings 12/19/2012
Key Metrics Focused on Creating Shareholder
Value and Incentivizing/Retaining Employees
Note: Additional detail will be provided in our 2013 Proxy. Incentive
goals are subject to shareholder approval. 2013 Incentive Goals:
Achieve our operating plans
Improve our profits and cash flow
Hit our launch dates with appropriate quality
metrics
Reduce our SG&A
Improve our ROIC |
9/6
Announced
ROIC
focused
strategy
11/15
First
saleable ProStar
with ISX to roll
off line
Drive to Deliver Progress
8/27
Announced U.S.
Voluntary Separation
Package results and
need for Reduction In
Force as part of goal to
reduce costs by $150M-
$175M. 10/31 completion
date
Launch ProStar
with MxF13 SCR
in April
12/11
Regular
production of
ProStar with
ISX engines
10/23
Cummins
contract
finalized
9/6
Realigned
Senior Leadership
weekly meetings.
Established daily cash
management report
and manufacturing
excellence system
August
September
October
November
December
January
April
8/30
EPA
issued final
ruling
10/8
Company
adds two new
board
members:
Vincent J.
Intrieri and
Mark H.
Rachesky
August
September
October
November
December
January
April
August
September
October
November
December
January
April
10/24
ROIC
update -
elimination of
MxF15
Equity offering;
confirmed cash
guidance
10/27
Board approves
annual incentive plans
that tie to increasing
shareholder value
10/16
Board approves
2013 operating plan and
addition of John C. Pope
to BOD
10/30
Announced closure
of Garland facility
10/26
Brazil
restructuring
complete;
approx. 700
jobs
eliminated
8/27
Lewis
Campbell named
Executive
Chairman and CEO
12/10
Company
adds new
board
member:
Samuel J.
Merksamer
12/18
Announced
intent to sell
India equity to
Mahindra
9/6
3Q
Earnings
call
12/19
4Q
Earnings
call
12/14
OK to
ship-
five days
ahead of
schedule
32
NYSE: NAV
4Q 2012 Earnings
12/19/2012 |
Summary
2014
33
NYSE: NAV
4Q 2012 Earnings 12/19/2012
Quality
Cost
Sense of Urgency
Great Products
Customer Satisfaction
People
Improve
Quality
Hit Our
Launches
Deliver Our
2013 Plans
Drive to Deliver |
Ample liquidity to
manage through this
transitional year
2014
Summary
34
NYSE: NAV
4Q 2012 Earnings 12/19/2012
Quality
Cost
Sense of Urgency
Great Products
Customer Satisfaction
People |
Questions?
35
NYSE: NAV
4Q
2012
Earnings
12/19/2012 |
NYSE:
NAV APPENDIX |
37
NYSE: NAV
Navistar Financial Corporation
Increased liquidity
Total U.S. availability of $959M as of October 31, 2012
Consolidated retail securitizations, lower fixed borrowing rate
Variable funding facility for dealer floor plan increased to $750M,
$450M available as of October 31, 2012
Bank facility availability of $460M as of October 31, 2012
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
NFSC wholesale trust
$974M funding facility
Variable portion matures
August 2013
Public portion matures
October 2013
On balance sheet
Broader product offering
Enhanced ability to support
large fleets
Better access to less
expensive capital
4Q 2012 Earnings 12/19/2012
Dealer Floor Plan |
Q4 and
Full Year Operational Results Consolidated Revenues
($ in millions)
Yearly and Quarterly Truck Chargeouts
Yearly and Quarterly Engine Shipments
Military Revenues
($ in millions)
NYSE: NAV
38
4Q 2012 Earnings 12/19/2012
|
Supplemental Information
Truck
Worldwide Truck Chargeouts
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
Actual
Actual
Actual
Actual
Q1
Q2
Q3
Q4
Traditional
Expansionary
Towables
4Q 2012 Earnings 12/19/2012
39
NYSE: NAV
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.
|
40
NYSE: NAV
4Q 2012 Earnings 12/19/2012
Market Share
U.S. & Canada School Bus and Class 6-8
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. 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%
47%
47%
Class 6 and 7 medium trucks
33%
44%
36%
36%
38%
36%
36%
46%
44%
41%
27%
36%
36%
34%
33%
Class 8 heavy trucks
23%
22%
30%
20%
24%
17%
16%
17%
18%
17%
17%
15%
15%
13%
15%
Class 8 severe service trucks
40%
41%
38%
40%
40%
33%
32%
36%
37%
35%
31%
30%
30%
30%
30%
Combined Class 8
28%
28%
32%
25%
28%
21%
19%
21%
22%
21%
19%
18%
18%
17%
18%
Total Traditional Market Share
33%
35%
35%
32%
34%
27%
26%
29%
29%
28%
22%
24%
24%
22%
23%
2010
2011
2012
Market Share
U.S. & Canada School Bus and Class 6-8 |
41
NYSE: NAV
4Q 2012 Earnings 12/19/2012
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
2,500
9,700
MEDIUM
4,300
7,100
5,800
4,700
21,900
HEAVY
8,000
7,200
6,300
5,600
27,100
SEVERE
3,300
3,600
3,600
3,100
13,600
TOTAL
17,300
20,500
18,600
15,900
72,300
NON-TRADITIONAL MILITARY
200
400
500
500
1,600
EXPANSIONARY
7,400
7,500
8,000
8,300
31,200
WORLDWIDE TRUCK
24,900
28,400
27,100
24,700
105,100 |
42
NYSE: NAV
4Q 2012 Earnings 12/19/2012
Worldwide Engine Shipments
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
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
Q1
Q2
Q3
Q4
Full Year
OEM sales - South America
24,100
25,300
28,600
28,700
106,700
Other OEM sales
2,200
2,000
3,000
2,900
10,100
Intercompany sales
21,600
23,400
20,600
17,500
83,100
Total Shipments
47,900
50,700
52,200
49,100
199,900
World Wide Engine Shipments
2010
2011
2012 |
43
NYSE: NAV
4Q 2012 Earnings 12/19/2012
Order Receipts
U.S. & Canada
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.
Percentage
Percentage
2012
2011
Change
Change
2012
2011
Change
Change
3,100
2,300
800
35%
10,900
8,600
2,300
27%
4,600
6,800
(2,200)
-32%
20,300
28,000
(7,700)
-28%
Class 8 heavy trucks
3,800
6,400
(2,600)
-41%
22,500
29,600
(7,100)
-24%
Class 8 severe service trucks
2,400
3,100
(700)
-23%
12,500
13,100
(600)
-5%
13,900
18,600
(4,700)
-25%
66,200
79,300
(13,100)
-17%
6,200
9,500
(3,300)
-35%
35,000
42,700
(7,700)
-18%
Twelve
Months
Ended
October 31,
Order Receipts: U.S. & Canada (Units)
Three Months Ended
October 31,
Total "Traditional" Markets
Combined Class 8 (Heavy and Severe Service)
"Traditional" Markets
School buses
Class 6 and 7 medium trucks |
44
NYSE: NAV
4Q 2012 Earnings 12/19/2012
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. -
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
11,000
12,000
13,000 |
45
NYSE: NAV
4Q 2012 Earnings 12/19/2012
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 October 31, 2012? How many points
of service do you have now, in addition to retail outlets in Mexico and the
rest of the world? A:
Of our 269 primary NAFTA dealers, we have ownership interest in five Dealcor
dealers as of October 31, 2012. We currently have 784 retail outlets in
U.S. and Canada, 86 retail outlets in Mexico and 292 in the rest of the world.
Q3:
How are your dealers doing?
A:
Our industry leading dealer network continues to make substantial investments in
facility upgrades, expansions and acquisitions. Channel-wide focus on
expanding hours of service, technician training, tooling and a re-engagement with their respective Cummins
distributors
in
anticipation
of
our
expanded
engine
line-up
and
enhancement
of
our
big
bore
emissions
solutions
continues
at
a
rapid
pace.
Financial performance across the distribution network in all significant aspects
of operations continues to remain strong. 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, which uses traditional
private or public securitizations and a bank credit facility.
Q6:
How is your NFC portfolio performing?
A:
NFCs
wholesale
portfolio
has
not
experienced
any
credit
losses
in
2012.
NFCs
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 October 31, 2012, total availability in our U.S. funding facilities is $959
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
$1.9
billion
in
retail
financings. |
46
NYSE: NAV
4Q 2012 Earnings 12/19/2012
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
2013? A:
We ended FY 2012 with approximately $1.1 billion in military revenues and based on
the current environment we expect military revenues for FY 2013 to be
approximately $750 million. The coming year will present challenges, but Navistars 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. 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 would Sequestration impact Navistar?
A:
The
full
impact
of
Sequestration
is
still
not
known.
While
we
will
likely
see
some
impact
to
the
number
of
defense
orders
if
the
fiscal
cliff is not addressed, our business structure and product portfolio lessen the
risk. Q12:
How does your FY 2013 Class 8 industry compare to ACT Research?
A:
Q13:
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
2013
ACT*
227,500
CY to FY adjustment
(4,500)
Other misc. specialty vehicles Included in ACT
(3,500)
Total (ACT comparable Class 8 to Navistar)
219,500
Navistar Industry Retail Deliveries Combined Class 8 Trucks
215,000
Navistar difference from ACT:
4,500
2%
*Source: ACT N.A. Commercial Vehicle Outlook - December, 2012
U.S. and Canadian Class 8 Truck Sales |
47
NYSE: NAV
47
4Q 2012 Earnings 12/19/2012
Frequently Asked Questions
Q14:
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.
Q15:
Why did the Company establish an additional valuation allowance on its domestic
deferred tax assets in the fourth quarter of 2012?
A:
On a quarterly basis, we are required to evaluate the need to establish a valuation
allowance for our deferred tax assets based on our assessment of whether it
is more likely than not that current or deferred tax benefits will be realized through the generation of
future taxable income. We give appropriate consideration to all available evidence,
both positive and negative, in assessing the need
for
a
valuation
allowance.
In
the
fourth
quarter
of
2012
we
concluded
that
with
the
continued
deterioration
of
our
domestic
performance and additional significant warranty charges, there was not sufficient
objective evidence of our ability to realize the benefits of domestic
deferred tax assets on a more likely than not basis and accordingly established a full domestic valuation
allowance.
Q16:
How will the establishment of the valuation allowance affect future tax expense?
A:
In the foreseeable future, our tax expense will be limited to our significant
foreign locations. Therefore, our effective tax rate could be impacted and
distortive in comparison to our peers without a valuation allowance. Q17:
What is your expectation for future cash tax payments?
A:
Our
cash
tax
payments
will
remain
low
in
2013
and
will
gradually
increase
as
we
exhaust
available
net
operating
losses
(NOLs)
and tax credits in the future years.
Q18:
What is the current balance of net operating losses as compared to other deferred tax
assets? A:
As of October 31, 2012 the Company has U.S. federal NOLs valued at $319 million,
state NOLs valued at $95 million, and foreign NOLs
valued
at
$169
million,
for
a
total
undiscounted
cash
value
of
$583
million.
In
addition
to
NOLs,
the
Company
has
accumulated tax credits of $218 million and other deferred tax assets of $2.1
billion resulting in net deferred tax assets before valuation allowances of
approximately $2.9 billion. Of this amount, $2.7 billion is subject to a valuation allowance at the end of
FY2012.
Q19:
What are your expected 2013 and beyond pension funding requirements?
A:
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.
In
2013,
we
expect
to
contribute
$166
million
to
meet
the
minimum required contributions for all plans. We currently expect that from 2014
through 2016, the Company will be required to contribute
at
least
$200
million
per
year
in
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. |
48
NYSE: NAV
48
4Q 2012 Earnings 12/19/2012
Frequently Asked Questions
Q20:
What causes the variance between manufacturing cash interest payments and GAAP
interest expense? A:
Manufacturing
GAAP
interest
expense
is
higher
than
cash
interest
payments
due
to
the
amortization
of
debt
issuance
costs
which
are
amortized
over
the
life
of
our
$1
billion
of
senior
unsecured
high
yield
notes,
$1
billion
senior
secured
term
loan
and
$570
million
of senior subordinated convertible notes, 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. Q21:
What is the change in interest expense year over year?
A:
Interest expense will increase by approximately $80 million.
Q22:
What should we assume for capital expenditures in FY2013?
A:
We plan to continue capital spending within the traditionally guided range of $250
million to $350 million for products and development
although
we
expect
to
be
at
the
lower
end
of
the
range.
Capital
spending
related
to
Engineering
Integration
is
funded
through the RZFBs and is not included in that range.
Q23:
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. |
49
NYSE: NAV
49
4Q 2012 Earnings 12/19/2012
Frequently Asked Questions
Q24:
For the manufacturing debt currently outstanding in your most recent financial
statement filings, what are the respective maturity dates and principal amounts
outstanding? A:
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): Senior Secured Term Loan Credit Facility, due July 16,
2014 $1,000 million
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)
$60 million
Financing arrangements and capital lease obligations (various maturity
dates) $140 million
Loan Agreement related to the 6.5% Tax Exempt Bonds due October 1, 2040
$225 million
Promissory Note due September 30, 2015
$30 million
Other (various maturity dates)
$67 million
Total
$2,992 million |
50
NYSE: NAV
4Q 2012 Earnings 12/19/2012
Manufacturing Cash Flow
Beginning Mfg. Cash1 Balance
Fiscal 2010
Fiscal 2011
Q1 2012
Q2 2012
Q3 2012
Q4 2012
October 31, 2009
$1,152
October 31, 2010
$1,100
October 31, 2011
$1,186
January 31, 2012
$837
April 30, 2012
$681
July 31, 2012
$627
Approximate Cash Flows:
From Operations
409
680
(142)
(72)
(78)
(6)
From Investing / (Cap Ex)
(350)
(485)
(125)
(75)
(81)
(81)
From Financing / (Debt Pay Down)
(110)
(106)
(85)
(2)
110
954
Exchange Rate Effect
(1)
(3)
3
(7)
(5)
11
Net Cash Flow
($52)
$86
($349)
($156)
($54)
$878
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
October 31, 2012
$1,505
1Cash = Cash, Cash Equivalents & Marketable Securities
2Includes cash from the consolidation of minority interests |
51
NYSE: NAV
51
4Q 2012 Earnings 12/19/2012
Outstanding Debt Balances
October 31,
October 31,
2012
2011
(in millions)
Manufacturing operations
Senior Secured Term Loan Credit Facility, due 2014, net of unamortized discount of
$9
..
$ 991
-
8.25% Senior Notes, due 2021, net of unamortized discount of $28
and $33, respectively
.. 872
$ 967
3.0% Senior Subordinated Convertible Notes, due 2014, net of unamortized discount of $50 and $73,
respectively
.. 520
497
Debt of majority-owned dealerships
.
60
94
Financing arrangements and capital lease obligations
140
118
Loan Agreement related to 6.5% Tax Exempt Bonds, due
2040
225
225
Promissory Note
.
30
40
Other
.
67
39
Total manufacturing operations debt
2,905
1,980
Less: Current portion
.
172
99
Net long-term manufacturing operations debt
..
$ 2,733
$ 1,881
Financial services operations
Asset-backed debt issued by consolidated SPEs, at fixed and variable rates, due serially through
2019
. $ 994
$ 1,664
Bank
revolvers,
at
fixed
and
variable
rates,
due
dates
from
2013
through
2019
..
763
1,072
Commercial paper, at variable rates, due serially through 2013
.
31
70
Borrowings secured by operating and finance leases, at various rates, due serially through 2017
. 78
70
Total financial services operations debt
.
1,866
2,876
Less: Current portion
.
1,033
1,280
Net long-term financial services operations debt
.
$ 833
$ 1,596 |
52
NYSE: NAV
4Q 2012 Earnings 12/19/2012
SEC Regulation G
Manufacturing Cash Fiscal Year Comparison
Manufacturing cash, cash equivalents, and marketable securities reconciliation:
(Dollars in Millions)
October 31,
2012
October 31,
2011
October 31,
2010
October 31,
2009
Manufacturing segment cash and cash equivalents
1,059
$
488
$
534
$
1,152
$
Financial services segment cash and cash equivalents
28
51
51
60
Consolidated cash and cash equivalents
1,087
$
539
$
585
$
1,212
$
Manufacturing marketable securities
446
$
698
$
566
$
-
$
Financial services segment marketable securities
20
20
20
-
Consolidated marketable securities
466
$
718
$
586
$
-
$
Manufacturing segment cash and cash equivalents
1,059
$
488
$
534
$
1,152
$
Manufacturing marketable securities
446
698
566
-
Manufacturing segment cash, cash equivalents and marketable securities
1,505
$
1,186
$
1,100
$
1,152
$ |
53
NYSE: NAV
4Q 2012 Earnings 12/19/2012
SEC Regulation G
Manufacturing Cash
Manufacturing
Operations
Financial
Services
Operations
Adjustments
Condensed
Consolidated
Cash Flows
(Dollars 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)
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
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)
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: |
54
NYSE: NAV
4Q 2012 Earnings 12/19/2012
SEC Regulation G
Manufacturing Cash
Manufacturing
Operations
Financial
Services
Operations
Adjustments
Condensed
Consolidated
Cash Flows
(Dollars in Millions)
For the twelve months ended October 31, 2012
Cash flows from operations
(298)
908
-
610
Cash flows from investing / capital expenditures:
(362)
108
252
(2)
Cash flows from financing / debt pay down
977
(1,040)
-
(63)
Effect of exchange rate changes
2
1
-
3
Net cash flows
319
(23)
252
548
Beginning cash, cash equivalents and marketable securities balance
1,186
71
(718)
539
Ending cash, cash equivalents and marketable securities balance
1,505
48
(466)
1,087
For the three months ended October 31, 2012
Cash flows from operations
(6)
270
-
264
Cash flows from investing / capital expenditures:
(81)
110
(307)
(278)
Cash flows from financing / debt pay down
954
(410)
-
544
Effect of exchange rate changes
11
(1)
-
10
Net cash flows
878
(31)
(307)
540
Beginning cash, cash equivalents and marketable securities balance
627
79
(159)
547
Ending cash, cash equivalents and marketable securities balance
1,505
48
(466)
1,087
Manufacturing segment cash flow reconciliation: |
55
NYSE: NAV
4Q 2012 Earnings
12/19/2012
SEC Regulation G
See notes at slide 57 & 58
Significant items included within our results:
2012
2011
2012
2011
($ in millions)
Engineering
integration
costs
(A)
9
23
66
64
Restructuring
of
North
American
manufacturing
operations
(B)
7
5
45
127
Cost-reduction
actions
and
other
strategic
initiatives
(C)
73
-
73
-
(D)
149
-
404
-
Charges
for
non-conformance
penalties
(E)
14
-
34
-
Impact
of
Medicare
Part
D
legal
ruling
(F)
-
15
-
15
Net
impact
of
income
tax
valuation
allowances
(G)
2,206
(51)
1,785
(1,527)
Diluted weighted shares outstanding
69.0
73.2
69.1
76.1
Three Months Ended
October 31,
For the Year Ended
October 31,
Adjustments to pre-existing warranties Significant Items Three Months and Year Ended October 31, 2012
and 2011 |
56
NYSE: NAV
4Q 2012 Earnings
12/19/2012
SEC Regulation G
Manufacturing
Segment
Profit
Three
Months
and
Year
Ended
October 31, 2012 and 2011
Manufacturing segment profit (loss) and adjusted manufacturing
segment profit (loss) reconciliation:
2012
2011
2012
2011
($ in millions)
Net income (loss) attributable to Navistar International Corporation
$ (2,769)
$ 255
$(3,010)
$ 1,723
Less:
Financial services segment profit
16
27
91
129
Corporate and eliminations
(224)
(204)
(679)
(571)
Income tax benefit (expense)
(2,190)
-
(1,780)
1,458
Manufacturing segment profit (loss)
$ (371)
$ 432
$ (642)
$ 707
Three Months Ended
October 31,
For the Year Ended
October 31, |
57
NYSE: NAV
4Q 2012 Earnings
12/19/2012
(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 October 31, 2012, the charges
included other related costs of $9 million, of which $8 was recognized
within our manufacturing operations by our Truck segment. For the three months ended October 31,
2011, the charges included restructuring charges of $6 million and other related
costs of $17 million, of which $19 was recognized
within
our
manufacturing
operations,
primarily
by
our
Truck
segment.
For
the
year
ended
October
31,
2012,
the
charges included restructuring charges of $23 million and other related costs of
$43 million, of which $42 million was recognized within our manufacturing
operations, primarily by our Truck and Engine segments. For the year ended October 31, 2011, the
charges included restructuring charges of $29 million and other related costs of
$35 million, of which $51 was recognized within our manufacturing operations,
primarily by our Truck segment. (B)
Restructuring of North American manufacturing operations are impairment charges,
restructuring charges, and other related charges that are the result of our
continued efforts to restructure and rationalize our manufacturing operations in an effort to
optimize our cost structure. The Company committed to plans for the restructuring
of certain North American manufacturing operations, including the closure of
its Chatham, Ontario heavy truck plant and actions related to Workhorse Custom Chassis and
Monaco RV recreational vehicles operations. In the fourth quarter of 2012, the
Company announced its plan to cease operations and close its Garland, Texas
truck manufacturing operations in the first half of 2013. For the three months ended October 31,
2012 and 2011, the charges included restructuring charges of $7 million and $5
million, respectively, recognized within our manufacturing operations by our
Truck segment. For the year ended October 31, 2012, the charges included charges of $45
million recognized within our manufacturing operations by our Truck and Engine
segments, of which $38 million related to the impairment of certain
intangible assets. For the year ended October 31, 2011, the charges included charges of $58 million,
impairment charges of $64 million related to certain intangible assets and property
and equipment, and $5 million of other related costs,
of
which
$124
million
was
recognized
by
our
manufacturing
operations
by
our
Truck
segment.
The
charges
for
the
three
months and year ended October 31, 2012 include $4 million related to the pending
closure of our Garland, Texas truck manufacturing operations.
(C)
In the fourth quarter of 2012, we announced actions to control spending across the
Company with targeted reductions of certain costs.
For
the
three
months
and
year
ended
October
31,
2012,
the
charges
included
restructuring
charges
of
$73
million. Of the
restructuring charges, $57 million was recognized within our manufacturing
operations, primarily by our Truck and Engine segments.
SEC Regulation G
Notes |
58
NYSE: NAV
4Q 2012 Earnings
12/19/2012
(D)
During 2012, we recognized adjustments to pre-existing warranties that were
significantly larger than our historical experience. For the three months
and year ended October 31, 2012, we incurred charges of $149 million and $404 million, respectively, for
adjustments to pre-existing warranties.
(E)
For the three months and year ended October 31, 2012, we recorded charges of $14
million and $34 million, respectively, for NCPs
for
certain
13L
engine
sales.
These
charges
were
recognized
by
our
Engine
segment.
(F)
In the fourth quarter of 2011, we had an unfavorable ruling related to a 2010
administrative change that we made to the prescription drug program under
our OPEB plan affecting plan participants who are Medicare eligible. The charges were
recognized within Corporate.
(G)
During
the
three
months
ended
October
31,
2012,
we
recognized
an
income
tax
expense
of
$1.973
billion
for
the
increase
in
our
income tax valuation allowance on our U.S. deferred tax assets, as well as an
income tax expense of $233 million relating to the reversal of income tax
benefits recorded during the first nine months of 2012. For the year ended October 31, 2012, we also
recognized an income tax benefit of $189 million from the release of a significant
portion of our valuation allowance on our Canadian deferred tax assets in
the second quarter of 2012. SEC Regulation G
Notes
In the third quarter of 2011, we recognized an income tax benefit of $1.476 billion from the release
of a portion of our income tax valuation allowance on our U.S. deferred tax assets. For the
three months ended October 31, 2011, we recognized an additional income tax benefit of $61
million related to the release of a portion of our income tax valuation allowance. As domestic earnings were
taxable upon the release of the income tax valuation allowance, we recognized $10 million of domestic
income tax expense in the three months and year ended October 31, 2011 that would not have been
recognized had we not released a portion of the income tax valuation allowance. The $10 million
of domestic income taxes were netted against the benefit of $61 million and $1.537 billion from
the release of a portion of the income tax valuation allowance for the three months and year ended October 31, 2012,
respectively.
|
59
NYSE: NAV
4Q 2012 Earnings 12/19/2012
ROIC Definition
(PBT
1
+ Mfg Interest + Implied Interest on Operating Leases) X (1-Cash Tax
Rate) Paid-in-Capital
Treasury Stock + Retained Earnings
2
+ Book Value of
Operating Leases + Book Value of Mfg Debt
3
Mfg Cash
4
1
Excludes significant items items such as restructuring, impairments, and
engineering integration expenses
2
If an Accumulated Deficit exists, then it will not be included in the
calculation 3
Excludes Financial Services Operation debt
4
Manufacturing Cash includes Cash and cash equivalents + Marketable
securities |