UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 6, 2011
NAVISTAR INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware | 1-9618 | 36-3359573 | ||
(State or other jurisdiction of incorporation or organization) |
(Commission File No.) |
(I.R.S. Employer Identification No.) |
4201 Winfield Road, P.O. Box 1488, Warrenville, Illinois | 60555 | |||
(Address of principal executive offices) | (Zip Code) |
Registrants telephone number, including area code (630) 753-5000
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
ITEM 2.02 | RESULTS OF OPERATIONS AND FINANCIAL CONDITION |
In accordance with General Instruction B.2. to Form 8-K, the following information shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.
The information regarding the results of operations and financial condition of Navistar International Corporation (the Company) responsive to this Item 2.02, and contained in Exhibit 99.1 filed herewith, is incorporated into this Item 2.02 by reference.
ITEM 7.01 | REGULATION FD DISCLOSURE |
In accordance with General Instruction B.2. to Form 8-K, the following information shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.
On September 6, 2011, the Company filed its Quarterly Report on Form 10-Q for the period ended July 31, 2011 with the Securities and Exchange Commission. The Companys press release announcing the filing is attached as Exhibit 99.1 to this Current Report and is incorporated by reference herein.
Navistar International Corporation, the nations largest combined commercial truck, school bus and mid-range diesel engine producer, previously announced that it will present via live web cast its fiscal 2011 third quarter financial results on Wednesday, September 7th. A live web cast is scheduled at approximately 10:00 AM ET. Speakers on the web cast will include Daniel C. Ustian, Chairman, President and Chief Executive Officer, A. J. Cederoth, Executive Vice President and Chief Financial Officer, and other Company leaders. Copies of the slides containing financial and operating information to be used as part of the web cast are attached as Exhibit 99.2 to this Current Report and are incorporated by reference herein.
The web cast can be accessed through a link on the investor relations page of the Companys web site at http://ir.navistar.com/events.cfm. Investors are advised to log on to the website at least 15 minutes prior to the start of the web cast to allow sufficient time for downloading any necessary software. The web cast will be available for replay at the same address approximately three hours following its conclusion, and will remain available for a period of 10 days.
ITEM 8.01 | OTHER EVENTS |
On September 6, 2011, a special committee of the Board of Directors of the Company authorized a share repurchase program for the Company to acquire from time to time ending on or before March 15, 2012 up to $175 million worth of the Companys common stock in the open market or in any private transaction. This share repurchase program will be executed in accordance with applicable laws, rules and regulations and is in addition to the Companys previously announced share repurchase program of $25 million on December 22, 2010. The Company intends to consummate these repurchases using excess cash reserves and to execute the majority of the $175 million repurchase through an accelerated share repurchase program.
PAGE 2
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, Monaco RV brands of recreational vehicles, and Workhorse® brand chassis for motor homes and step vans. It also is a private-label designer and manufacturer of diesel engines for the pickup truck, van and SUV markets. The Company also provides truck and diesel engine service parts. Another affiliate offers financing services. Additional information is available at www.Navistar.com/newsroom.
ITEM 9.01 | FINANCIAL STATEMENTS AND EXHIBITS |
(d) | Exhibits |
Exhibit |
Description | |
99.1 | Press Release | |
99.2 | Slide Presentation for Third Quarter Financial Results Web Cast to be held on September 7th |
Forward Looking Statements
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 Item 1A, Risk Factors, of our Form 10-K for the fiscal year ended October 31, 2010, which was filed on December 21, 2010 and Part II, Item 1A, Risk Factors, included within our Form 10-Q for the period ended July 31, 2011, which was filed on September 7, 2011. 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.
PAGE 3
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
NAVISTAR INTERNATIONAL CORPORATION | ||||
Registrant | ||||
Date: September 7, 2011 | /s/ Andrew J. Cederoth | |||
Andrew J. Cederoth Executive Vice President and Chief Financial Officer |
PAGE 4
Exhibit 99.1
Media Contact: | Karen Denning, 630-753-3535 | |
Investor Contact: | Heather Kos, 630-753-2406 | |
Web site: | www.Navistar.com/newsroom |
NAVISTAR REPORTS 3Q PROFIT; ANNOUNCES STOCK REPURCHASE
WARRENVILLE, Ill. (September 7, 2011) Navistar International Corporation (NYSE: NAV) today reported net income for the third quarter, ended July 31, 2011, of $1.4 billion, equal to $18.24 diluted earnings per share. These results include an income tax valuation allowance release and costs associated with the restructuring of North American manufacturing operations and engineering integration. Excluding these items, adjusted net income attributable to Navistar International Corporation for the 2011 third quarter was $61 million, equal to $0.79 diluted earnings per share.
The industry continued its recovery in the third quarter, and our results reflect this strengthening as well as our continued investments for future growth. We introduced new products for our growing global presence, invested in our engineering integration and heavy engine strategies, and took additional actions to reduce costs and further increase our manufacturing flexibility, said Daniel C. Ustian, Navistar chairman, president and chief executive officer. As a result, we are well positioned to deliver a strong fourth quarter, achieve our adjusted full-year earnings of $5 to $6 per share, and enter 2012 with positive momentum.
Included in the third quarter results were charges of $137 million for the companys plans to close its Chatham, Ontario operations; restructuring of its custom products business unit; and costs associated with engineering integration. Results also include $1.48 billion in net tax benefit from an income tax valuation allowance release.
Our proven ability to deliver consistent earnings, even in the toughest of times, coupled with our future growth prospects gives us the confidence that we can capture the benefits of these deferred tax assets. As a result, Navistar is now in its best equity position in the last ten years, said Ustian. Given our strong cash position, we are launching a significant buyback of our stock, which we believe is currently undervalued. We are also evaluating additional return on capital options and look forward to announcing them early in 2012.
The company plans to undertake share repurchases of up to $175 million approximately 5 percent of Navistars common stock in the upcoming months using a combination of approaches to execute the repurchase including open market repurchases and an accelerated repurchase program. The company has sufficient liquidity for this transaction and plans to use excess cash reserves for the repurchase.
Navistar reports its adjusted net income attributable to Navistar International Corporation guidance for fiscal year ending Oct. 31, 2011, to be between $388 million and $465 million, equal to $5.00 to $6.00 diluted earnings per share. Additionally, the company confirmed its full year forecast for manufacturing cash of $1.2 to $1.4 billion.
The company earned $117 million, equal to $1.56 diluted earnings per share in the year-ago third quarter. Sales and revenues for the 2011 third quarter were $3.5 billion, compared with $3.2 billion in the year-ago third quarter.
Summary Financial Results: |
Third Quarter | Nine Months | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(Dollars in Millions, except per share data) |
||||||||||||||||
Sales and revenues |
$ | 3,537 | $ | 3,221 | $ | 9,635 | $ | 8,773 | ||||||||
Segment Results: |
||||||||||||||||
Truck |
$ | (75 | ) | $ | 227 | $ | 49 | $ | 338 | |||||||
Engine |
32 | (1 | ) | 26 | 68 | |||||||||||
Parts |
70 | 52 | 200 | 189 | ||||||||||||
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Manufacturing segment profit(A) |
$ | 27 | $ | 278 | $ | 275 | $ | 595 | ||||||||
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Income before taxes |
$ | (54 | ) | $ | 148 | $ | 45 | $ | 234 | |||||||
Net income attributable to Navistar International Corporation |
1,400 | 117 | 1,468 | 179 | ||||||||||||
Diluted earnings per share attributable to Navistar International Corporation |
18.24 | 1.56 | 19.04 | 2.44 | ||||||||||||
Adjusted income attributable to Navistar International Corporation(A) |
61 | 107 | 155 | 152 | ||||||||||||
Adjusted diluted earnings per share attributable to Navistar International Corporation(A) |
0.79 | 1.44 | 2.01 | 2.08 |
(A) | Non-GAAP measure, see SEC Regulation G Non-GAAP Reconciliation for additional information. |
Sales and revenues for the 2011 nine months were $9.6 billion, compared with $8.8 billion in the year-ago nine months. For the nine months ended July 31, 2011, net income attributable to Navistar International Corporation was $1.5 billion, equal to $19.04 diluted earnings per share, including the $1.48 billion impact of the release of a portion of the income tax valuation allowance, restructuring of North American manufacturing operations charges of $122 million and engineering integration costs of $41 million. Excluding the impacts of these items, adjusted net income attributable to Navistar International Corporation for the 2011 nine months was $155 million, equal to $2.01 diluted earnings per share.
For the nine months ended July 31, 2010, adjusted earnings were $152 million, equal to $2.08 diluted earnings per share, excluding the impact of benefits from the Ford restructuring and related activities. Including the impact of benefits from the Ford restructuring and related activities, nine months 2010 reported earnings were $179 million, equal to $2.44 diluted earnings per share.
Segment Results
Truck For the third quarter ended July 31, 2011, the truck segment recorded a loss of $75 million, compared with a year-ago third-quarter profit of $227 million. The $302 million decrease in segment profitability year-over-year included $119 million of charges for the restructuring of our North American manufacturing operations and $11 million of engineering integration charges.
The remaining year-over-year change of $172 million reflects the net impact of an increase in commercial profit from increased volume and improved pricing across all traditional products, mainly through the use of 2010 emissions-compliant engines, offset by decreased military revenues due to timing of contracted deliveries and higher commodity and fuel costs.
Traditional and Worldwide chargeouts were up on a stronger industry while sales improved in South America. Navistar anticipates traditional industry volumes for the full year 2011 to be in the range of 240,000 to 260,000 units.
Engine For the third quarter ended July 31, 2011, the engine segment posted a profit of $32 million realizing substantial quarterly improvement to profitability compared to a prior year third quarter loss of $1 million. The increase in third-quarter profit was driven primarily by strong intercompany sales and margins of big bore engines and continued strong performance in South America. Improved profitability from adjacent business segments with increased shipments to OEMs as well as improved performance from Pure Power Technologies contributed to positive third-quarter results. Engine segment profit was partially offset by higher adjustments to pre-existing warranties.
Parts The parts segment continues to deliver solid results reflective of increased commercial sales and profits. The segment realized a profit of $70 million, compared with a year-ago third-quarter profit of $52 million.
Financial Services The financial services segment earned $30 million in the third quarter of 2011 compared to $33 million in the third quarter of 2010. The decrease in year-over-year profits results from lower retail portfolio balances as originations are now funded under the GE Operating Agreement. This is partially offset by improved wholesale note revenues, lower administrative costs, and a lower credit loss provision as portfolio quality has improved. The GE Operating Agreement will continue to reduce NFC origination and portfolio balances in the future. Liquidity currently available to NFC is $622 million.
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, Monaco® RV brands of recreational vehicles, and Workhorse® brand chassis for motor homes and step vans. It also is a private-label designer and manufacturer of diesel engines for the pickup
truck, van and SUV markets. The company also provides truck and diesel engine service parts. Another affiliate offers financing services. Additional information is available at www.Navistar.com/newsroom.
Forward-Looking Statement
Information provided and statements contained in this report that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Such forward-looking statements only speak as of the date of this report and the company assumes no obligation to update the information included in this report. Such forward-looking statements include information concerning our possible or assumed future results of operations, including descriptions of our business strategy. These statements often include words such as believe, expect, anticipate, intend, plan, estimate, or similar expressions. These statements are not guarantees of performance or results and they involve risks, uncertainties, and assumptions. For a further description of these factors, see Item 1A, Risk Factors of our Form 10-K for the fiscal year ended October 31, 2010, which was filed on December 21, 2010 , and Part II, Item 1A, Risk Factors, included within our Form 10-Q for the period ended July 31, 2011, which was filed on September 7, 2011. Although we believe that these forward-looking statements are based on reasonable assumptions, there are many factors that could affect our actual financial results or results of operations and could cause actual results to differ materially from those in the forward-looking statements. All future written and oral forward-looking statements by us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to above. Except for our ongoing obligations to disclose material information as required by the federal securities laws, we do not have any obligations or intention to release publicly any revisions to any forward-looking statements to reflect events or circumstances in the future or to reflect the occurrence of unanticipated events.
Navistar International Corporation and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
Three Months Ended July 31, |
Nine Months Ended July 31, |
|||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(in millions, except per share data) | (Revised)(A) | (Revised)(A) | ||||||||||||||
Sales and revenues |
||||||||||||||||
Sales of manufactured products, net |
$ | 3,490 | $ | 3,162 | $ | 9,481 | $ | 8,610 | ||||||||
Finance revenues |
47 | 59 | 154 | 163 | ||||||||||||
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Sales and revenues, net |
3,537 | 3,221 | 9,635 | 8,773 | ||||||||||||
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Costs and expenses |
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Costs of products sold |
2,930 | 2,525 | 7,830 | 6,976 | ||||||||||||
Restructuring charges (benefit) |
56 | (9 | ) | 80 | (23 | ) | ||||||||||
Impairment of property and equipment and intangible assets |
64 | | 64 | | ||||||||||||
Selling, general and administrative expenses |
334 | 380 | 1,006 | 1,075 | ||||||||||||
Engineering and product development costs |
141 | 113 | 407 | 338 | ||||||||||||
Interest expense |
62 | 58 | 187 | 189 | ||||||||||||
Other income, net |
(18 | ) | (7 | ) | (39 | ) | (48 | ) | ||||||||
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Total costs and expenses |
3,569 | 3,060 | 9,535 | 8,507 | ||||||||||||
Equity in loss of non-consolidated affiliates |
(22 | ) | (13 | ) | (55 | ) | (32 | ) | ||||||||
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Income (loss) before income tax benefit (expense) |
(54 | ) | 148 | 45 | 234 | |||||||||||
Income tax benefit (expense) |
1,463 | (19 | ) | 1,458 | (17 | ) | ||||||||||
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Net income |
1,409 | 129 | 1,503 | 217 | ||||||||||||
Less: Net income attributable to non-controlling interests |
9 | 12 | 35 | 38 | ||||||||||||
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Net income attributable to Navistar International Corporation |
$ | 1,400 | $ | 117 | $ | 1,468 | $ | 179 | ||||||||
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Earnings per share attributable to Navistar International Corporation: |
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Basic |
$ | 19.10 | $ | 1.61 | $ | 20.13 | $ | 2.49 | ||||||||
Diluted |
18.24 | 1.56 | 19.04 | 2.44 | ||||||||||||
Weighted average shares outstanding: |
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Basic |
73.3 | 72.0 | 73.0 | 71.6 | ||||||||||||
Diluted |
76.8 | 74.3 | 77.1 | 73.1 |
(A) | Starting with the first quarter of 2011, the company changed its method of accruing for certain incentive compensation specifically relating to cash bonuses for interim reporting purposes from a ratable method to a performance-based method. The company believes that the performance-based method is preferable because it links the accrual of incentive compensation with the achievement of performance. We have revised our previously reported Consolidated Statement of Operations for the three and nine months ended July 31, 2010 and our Consolidated Statement of Stockholders Equity, and Condensed Consolidated Statement of Cash Flows for the nine months ended July 31, 2010 on a retrospective basis to reflect this change in principle based on information that would have been available as of our previous filing. The change will have no impact on our annual financial results. See Note 1, Summary of significant accounting policies of our Form 10Q for additional information. |
Navistar International Corporation and Subsidiaries
Consolidated Balance Sheets
July 31, 2011 |
October 31, 2010 |
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(in millions, except per share data) | (Unaudited) | |||||||
ASSETS |
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Current assets |
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Cash and cash equivalents |
$ | 444 | $ | 585 | ||||
Marketable securities |
620 | 586 | ||||||
Trade and other receivables, net |
1,004 | 987 | ||||||
Finance receivables, net |
1,996 | 1,770 | ||||||
Inventories |
1,731 | 1,568 | ||||||
Deferred taxes, net |
523 | 83 | ||||||
Other current assets |
284 | 256 | ||||||
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Total current assets |
6,602 | 5,835 | ||||||
Restricted cash and cash equivalents |
159 | 180 | ||||||
Trade and other receivables, net |
132 | 44 | ||||||
Finance receivables, net |
799 | 1,145 | ||||||
Investments in non-consolidated affiliates |
111 | 103 | ||||||
Property and equipment (net of accumulated depreciation and amortization of $2,039 and $1,928, at the respective dates) |
1,492 | 1,442 | ||||||
Goodwill |
334 | 324 | ||||||
Intangible assets (net of accumulated amortization of $94 and $124, at the respective dates) |
225 | 262 | ||||||
Deferred taxes, net |
1,049 | 63 | ||||||
Other noncurrent assets |
275 | 332 | ||||||
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Total assets |
$ | 11,178 | $ | 9,730 | ||||
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LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT) |
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Liabilities |
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Current liabilities |
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Notes payable and current maturities of long-term debt |
$ | 754 | $ | 632 | ||||
Accounts payable |
1,921 | 1,827 | ||||||
Other current liabilities |
1,119 | 1,130 | ||||||
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Total current liabilities |
3,794 | 3,589 | ||||||
Long-term debt |
3,801 | 4,238 | ||||||
Postretirement benefits liabilities |
2,036 | 2,097 | ||||||
Deferred taxes, net |
72 | 142 | ||||||
Other noncurrent liabilities |
718 | 588 | ||||||
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Total liabilities |
10,421 | 10,654 | ||||||
Redeemable equity securities |
5 | 8 | ||||||
Stockholders equity (deficit) |
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Series D convertible junior preference stock |
3 | 4 | ||||||
Common stock ($0.10 par value per share, 220.0 and 110.0 shares authorized, at the respective dates, 75.4 shares issued at both dates) |
7 | 7 | ||||||
Additional paid in capital |
2,289 | 2,206 | ||||||
Accumulated deficit |
(410 | ) | (1,878 | ) | ||||
Accumulated other comprehensive loss |
(1,066 | ) | (1,196 | ) | ||||
Common stock held in treasury, at cost (2.5 and 3.6 shares, at the respective dates) |
(112 | ) | (124 | ) | ||||
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Total stockholders equity (deficit) attributable to Navistar International Corporation |
711 | (981 | ) | |||||
Stockholders equity attributable to non-controlling interests |
41 | 49 | ||||||
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Total stockholders equity (deficit) |
752 | (932 | ) | |||||
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Total liabilities and stockholders equity (deficit) |
$ | 11,178 | $ | 9,730 | ||||
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Navistar International Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended July 31, |
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2011 | 2010 | |||||||
(in millions) | (Revised)(A) | |||||||
Cash flows from operating activities |
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Net income |
$ | 1,503 | $ | 217 | ||||
Adjustments to reconcile net income to cash provided by operating activities: |
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Depreciation and amortization |
217 | 198 | ||||||
Depreciation of equipment leased to others |
28 | 38 | ||||||
Deferred taxes |
(1,472 | ) | 9 | |||||
Impairment of property and equipment, goodwill, and intangible assets |
73 | | ||||||
Amortization of debt issuance costs and discount |
33 | 29 | ||||||
Stock-based compensation |
33 | 20 | ||||||
Provision for doubtful accounts, net of recoveries |
(5 | ) | 33 | |||||
Equity in loss of non-consolidated affiliates, net of dividends |
57 | 35 | ||||||
Other non-cash operating activities |
(9 | ) | 51 | |||||
Changes in other assets and liabilities, exclusive of the effects of businesses acquired and disposed |
81 | 34 | ||||||
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Net cash provided by operating activities |
539 | 664 | ||||||
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Cash flows from investing activities |
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Purchases of marketable securities |
(1,109 | ) | (944 | ) | ||||
Sales or maturities of marketable securities |
1,075 | 643 | ||||||
Net change in restricted cash and cash equivalents |
21 | 341 | ||||||
Capital expenditures |
(291 | ) | (162 | ) | ||||
Purchase of equipment leased to others |
(35 | ) | (27 | ) | ||||
Proceeds from sales of property and equipment |
27 | 11 | ||||||
Investments in non-consolidated affiliates |
(48 | ) | (83 | ) | ||||
Proceeds from sales of affiliates |
6 | 4 | ||||||
Acquisition of intangibles |
(15 | ) | (12 | ) | ||||
Business acquisitions, net of cash received |
(1 | ) | (2 | ) | ||||
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Net cash used in investing activities |
(370 | ) | (231 | ) | ||||
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Cash flows from financing activities |
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Proceeds from issuance of securitized debt |
348 | 1,170 | ||||||
Principal payments on securitized debt |
(560 | ) | (1,178 | ) | ||||
Proceeds from issuance of non-securitized debt |
158 | 609 | ||||||
Principal payments on non-securitized debt |
(73 | ) | (802 | ) | ||||
Net decrease in notes and debt outstanding under revolving credit facilities |
(85 | ) | (832 | ) | ||||
Principal payments under financing arrangements and capital lease obligations |
(81 | ) | (56 | ) | ||||
Debt issuance costs |
(6 | ) | (26 | ) | ||||
Purchase of treasury stock |
(11 | ) | | |||||
Proceeds from exercise of stock options |
36 | 33 | ||||||
Dividends paid by subsidiaries to non-controlling interest |
(43 | ) | (45 | ) | ||||
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Net cash used in financing activities |
(317 | ) | (1,127 | ) | ||||
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Effect of exchange rate changes on cash and cash equivalents |
7 | (3 | ) | |||||
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Decrease in cash and cash equivalents |
(141 | ) | (697 | ) | ||||
Cash and cash equivalents at beginning of period |
585 | 1,212 | ||||||
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Cash and cash equivalents at end of the period |
$ | 444 | $ | 515 | ||||
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(A) | Starting with the first quarter of 2011, the company changed its method of accruing for certain incentive compensation specifically relating to cash bonuses for interim reporting purposes from a ratable method to a performance-based method. The company believes that the performance-based method is preferable because it links the accrual of incentive compensation with the achievement of performance. We have revised our previously reported Consolidated Statement of Operations for the three and nine months ended July 31, 2010 and our Consolidated Statement of Stockholders Equity, and Condensed Consolidated Statement of Cash Flows for the nine months ended July 31, 2010 on a retrospective basis to reflect this change in principle based on information that would have been available as of our previous filing. The change will have no impact on our annual financial results. See Note 1, Summary of significant accounting policies of our Form 10Q for additional information. |
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 expense. Our results for interim periods are not necessarily indicative of results for a full year. Selected financial information is as follows:
Truck(A) | Engine(B) | Parts | Financial Services(C) |
Corporate and Eliminations |
Total | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Three Months Ended July 31, 2011 |
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External sales and revenues, net |
$ | 2,457 | $ | 546 | $ | 487 | $ | 47 | $ | | $ | 3,537 | ||||||||||||
Intersegment sales and revenues(D) |
| 422 | 29 | 26 | (477 | ) | | |||||||||||||||||
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|||||||||||||
Total sales and revenues, net |
$ | 2,457 | $ | 968 | $ | 516 | $ | 73 | $ | (477 | ) | $ | 3,537 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income (loss) attributable to NIC |
$ | (75 | ) | $ | 32 | $ | 70 | $ | 30 | $ | 1,343 | $ | 1,400 | |||||||||||
Income tax benefit |
| | | | 1,463 | 1,463 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Segment profit (loss)(D)(E) |
$ | (75 | ) | $ | 32 | $ | 70 | $ | 30 | $ | (120 | ) | $ | (63 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Depreciation and amortization |
$ | 37 | $ | 32 | $ | 2 | $ | 8 | $ | 5 | $ | 84 | ||||||||||||
Interest expense |
| | | 28 | 34 | 62 | ||||||||||||||||||
Equity in income (loss) of non-consolidated affiliates |
(22 | ) | (1 | ) | 1 | | | (22 | ) | |||||||||||||||
Capital expenditures(F) |
15 | 47 | 7 | 1 | 36 | 106 | ||||||||||||||||||
Three Months Ended July 31, 2010 (Revised)(G) |
||||||||||||||||||||||||
External sales and revenues, net |
$ | 2,311 | $ | 456 | $ | 395 | $ | 59 | $ | | $ | 3,221 | ||||||||||||
Intersegment sales and revenues |
| 216 | 45 | 23 | (284 | ) | | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total sales and revenues, net |
$ | 2,311 | $ | 672 | $ | 440 | $ | 82 | $ | (284 | ) | $ | 3,221 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income (loss) attributable to NIC |
$ | 227 | $ | (1 | ) | $ | 52 | $ | 33 | $ | (194 | ) | $ | 117 | ||||||||||
Income tax expense |
| | | | (19 | ) | (19 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Segment profit (loss)(E) |
$ | 227 | $ | (1 | ) | $ | 52 | $ | 33 | $ | (175 | ) | $ | 136 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Depreciation and amortization |
$ | 40 | $ | 26 | $ | 2 | $ | 6 | $ | 4 | $ | 78 | ||||||||||||
Interest expense |
| | | 24 | 34 | 58 | ||||||||||||||||||
Equity in income (loss) of non-consolidated affiliates |
(15 | ) | 1 | 1 | | | (13 | ) | ||||||||||||||||
Capital expenditures(F) |
22 | 47 | 3 | | 12 | 84 | ||||||||||||||||||
Nine Months Ended July 31, 2011 |
||||||||||||||||||||||||
External sales and revenues, net |
$ | 6,510 | $ | 1,526 | $ | 1,445 | $ | 154 | $ | | $ | 9,635 | ||||||||||||
Intersegment sales and revenues(D) |
18 | 1,180 | 128 | 75 | (1,401 | ) | | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total sales and revenues, net |
$ | 6,528 | $ | 2,706 | $ | 1,573 | $ | 229 | $ | (1,401 | ) | $ | 9,635 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income attributable to NIC |
$ | 49 | $ | 26 | $ | 200 | $ | 102 | $ | 1,091 | $ | 1,468 | ||||||||||||
Income tax benefit |
| | | | 1,458 | 1,458 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Segment profit(D) (E) |
$ | 49 | $ | 26 | $ | 200 | $ | 102 | $ | (367 | ) | $ | 10 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Depreciation and amortization |
$ | 112 | $ | 91 | $ | 7 | $ | 21 | $ | 14 | $ | 245 | ||||||||||||
Interest expense |
| | | 84 | 103 | 187 | ||||||||||||||||||
Equity in income (loss) of non-consolidated affiliates |
(57 | ) | (3 | ) | 5 | | | (55 | ) | |||||||||||||||
Capital expenditures(F) |
53 | 131 | 11 | 1 | 95 | 291 |
Truck | Engine | Parts | Financial Services(C) |
Corporate and Eliminations |
Total | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Nine Months Ended July 31, 2010 (Revised)(G) |
||||||||||||||||||||||||
External sales and revenues, net |
$ | 5,874 | $ | 1,525 | $ | 1,211 | $ | 163 | $ | | $ | 8,773 | ||||||||||||
Intersegment sales and revenues(D) |
1 | 645 | 143 | 70 | (859 | ) | | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total sales and revenues, net |
$ | 5,875 | $ | 2,170 | $ | 1,354 | $ | 233 | $ | (859 | ) | $ | 8,773 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income attributable to NIC |
$ | 338 | $ | 68 | $ | 189 | $ | 61 | $ | (477 | ) | $ | 179 | |||||||||||
Income tax expense |
| | | | (17 | ) | (17 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Segment profit(E) |
$ | 338 | $ | 68 | $ | 189 | $ | 61 | $ | (460 | ) | $ | 196 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Depreciation and amortization |
$ | 120 | $ | 79 | $ | 5 | $ | 21 | $ | 11 | $ | 236 | ||||||||||||
Interest expense |
| | | 85 | 104 | 189 | ||||||||||||||||||
Equity in income (loss) of non-consolidated affiliates |
(33 | ) | (1 | ) | 2 | | | (32 | ) | |||||||||||||||
Capital expenditures(F) |
56 | 81 | 7 | 1 | 17 | 162 | ||||||||||||||||||
As of July 31, 2011 |
||||||||||||||||||||||||
Segment assets |
$ | 2,551 | $ | 1,876 | $ | 721 | $ | 3,318 | $ | 2,712 | $ | 11,178 | ||||||||||||
As of October 31, 2010 |
||||||||||||||||||||||||
Segment assets |
2,457 | 1,715 | 811 | 3,497 | 1,250 | 9,730 |
(A) | Includes impairments of property and equipment and intangible assets. See Note 2, Restructurings and impairments. |
(B) | In the third quarter of 2011, the Engine segment recognized a $10 million gain on the extinguishment of a liability related to an equipment financing transaction. Previously, such gains were not material and were recorded within Corporate. |
(C) | Total sales and revenues in the Financial Services segment include interest revenues of $72 million and $225 million for the three and nine months ended July 31, 2011, respectively, and $67 million and $197 million for the three and nine months ended July 31, 2010, respectively. |
(D) | Beginning in the second quarter of 2011, certain purchases from the Engine segment by the Parts segment are recorded at market-based pricing. All other intersegment purchases from the Truck and Engine segments by the Parts segment continue to be recorded at standard production cost. The effect of this change did not have a material impact on our segment reporting. |
(E) | In the first quarter of 2011, we began allocating gains and losses on commodities derivatives to the segment to which the underlying commodities relate. Previously, the impacts of commodities derivatives were not material and were recorded within Corporate. |
(F) | Exclusive of purchase of equipment leased to others. |
(G) | Certain amounts have been revised to reflect a retrospective change in accounting principle. See Note 1, Summary of significant accounting policies. |
SEC Regulation G Non-GAAP Reconciliation
The financial measures presented below of adjusted income and adjusted diluted earnings per share attributable to Navistar International Corporation, manufacturing segment profit, and adjusted manufacturing segment profit 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.
We believe manufacturing segment profit, which includes the segment profits of our Truck, Engine, and Parts reporting segments, provides 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. 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.
In addition, we believe that adjusted income and adjusted diluted earnings per share attributable to Navistar International Corporation and manufacturing segment profit excluding certain items, which are not considered to be part of our ongoing business, improves the comparability of year to year results and is 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 reconciliationsbelow, and to provide an additional measure of performance.
Adjustments included in the following schedules have not been adjusted to reflect their income tax effect as the adjustments are intended to represent the impact on the Companys consolidated statement of operations without the incremental income tax effect that would result from the release of the income tax valuation allowance. The charges related to our Canadian operations would not be impacted as a full income tax valuation allowance remains for Canada. In addition, on a non-GAAP basis no incremental income tax for the three and nine months ended July 31, 2011 is presented because the cumulative impact from the increased effective tax rate was offset by the tax benefit from restructuring and impairment charges in the quarter.
Adjusted net income and diluted earnings per share attributable to Navistar International Corporation reconciliation:
Three Months Ended July 31, | Nine Months Ended July 31, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Revised(A) | Revised(A) | |||||||||||||||
(in millions, except per share data) |
||||||||||||||||
Net income attributable to Navistar International Corporation |
$ | 1,400 | $ | 117 | $ | 1,468 | $ | 179 | ||||||||
Plus: |
||||||||||||||||
Engineering integration costs(B) |
15 | | 41 | | ||||||||||||
Restructuring of North American manufacturing operations(C) |
122 | | 122 | | ||||||||||||
Ford restructuring and related charges (benefits)(D) |
| (10 | ) | | (27 | ) | ||||||||||
Less: |
||||||||||||||||
Income tax valuation allowance release(E) |
1,476 | | 1,476 | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Adjusted income attributable to Navistar International Corporation |
$ | 61 | $ | 107 | $ | 155 | $ | 152 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Diluted earnings per share attributable to Navistar International Corporation |
$ | 18.24 | $ | 1.56 | $ | 19.04 | $ | 2.44 | ||||||||
Effect of adjustments on diluted earnings per share attributable to Navistar International Corporation |
(17.45 | ) | (0.12 | ) | (17.03 | ) | (0.36 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Adjusted diluted earnings per share attributable to Navistar International Corporation |
$ | 0.79 | $ | 1.44 | $ | 2.01 | $ | 2.08 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Diluted weighted shares outstanding |
76.8 | 74.3 | 77.1 | 73.1 |
Manufacturing segment profit and adjusted manufacturing segment profit reconciliation:
Three Months Ended April 30, | Nine Months Ended April 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Revised(A) | Revised(A) | |||||||||||||||
(in millions, except per share data) | ||||||||||||||||
Net income (loss) attributable to Navistar International Corporation |
$ | 1,400 | $ | 117 | $ | 1,468 | $ | 179 | ||||||||
Less: |
||||||||||||||||
Financial services segment profit |
30 | 33 | 102 | 61 | ||||||||||||
Corporate and eliminations |
(120 | ) | (175 | ) | (367 | ) | (460 | ) | ||||||||
Income tax benefit (expense) |
1,463 | (19 | ) | 1,458 | (17 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Manufacturing segment profit |
$ | 27 | $ | 278 | $ | 275 | $ | 595 | ||||||||
Plus: |
||||||||||||||||
Engineering integration costs(B) |
12 | | 33 | | ||||||||||||
Restructuring of North American manufacturing operations (C) |
119 | | 119 | | ||||||||||||
Ford restructuring and related charges (benefits)(D) |
| (10 | ) | | (17 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Adjusted manufacturing segment profit |
$ | 158 | $ | 268 | $ | 427 | $ | 578 | ||||||||
|
|
|
|
|
|
|
|
(A) | Net income attributable to Navistar International Corporation has been revised to reflect a retrospective change in accounting principle. See Note 1, Summary of significant accounting policies of our Form 10Q for additional information. |
(B) | Engineering integration costs relate to the consolidation of our truck and engine engineering operations as well as the move of our world headquarters. These costs include restructuring charges for activities at our Fort Wayne facility of $4 million and $23 million for the three and nine months ended July 31, 2011, respectively. The restructuring charges recorded are based on restructuring plans that have been committed to by management and are based upon managements best estimates of future events. Changes to the estimates may require future adjustments to the restructuring liabilities. We also incurred an additional $11 million and $18 million of other related costs for the three and nine months ended July 31, 2011, respectively. Our manufacturing segment recognized $12 million and $33 million of the engineering integration costs for the three and nine months ended July 31, 2011, respectively. For the remainder of 2011, we expect to incur |
approximately $36 million of additional charges related to these activities and between $80 million and $110 million of additional charges in 2012. We continue to develop plans for efficient transitions related to these activities and the optimization of our operations and management structure. |
(C) | Restructuring of North American manufacturing operations are charges primarily related to our plans to close our Chatham, Ontario heavy truck plant and Workhorse 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. These costs include restructuring charges of $53 million and related charges of $5 million for the three and nine months ended July 31, 2011. The restructuring and related charges recorded are based on restructuring plans that have been committed to by management and are based upon managements best estimates of future events. Changes to the estimates may require future adjustments to the restructuring liabilities. In addition, the Company recognized $64 million of impairment charges related to certain intangible assets and property plant and equipment primarily related to these facilities. The Truck segment recognized $119 million of restructuring of North American manufacturing operation charges for the three and nine months ended July 31, 2011. We expect to incur $40 million to $90 million of additional charges related to these activities. |
(D) | Ford restructuring and related charges (benefits) are charges and benefits recognized in 2010 related to restructuring activity at our Indianapolis Casting Corporation and Indianapolis Engine Plant. The net benefits were included in Restructuring charges in our Engine segment. |
(E) | In the third quarter of 2011, the Company recognized an income tax benefit of $1.476 billion from the release of a portion of our income tax valuation allowance. |
Fiscal 2011 guidance: adjusted net income and diluted earnings per share attributable to Navistar International Corporation reconciliation: | ||||||||
Lower | Upper | |||||||
(in millions, except per share data) |
||||||||
Net income attributable to Navistar International Corporation |
$ | 1,647 | $ | 1,764 | ||||
Plus: |
||||||||
Engineering integration costs(A) |
77 | 77 | ||||||
Restructuring of North American manufacturing operations(B) |
140 | 100 | ||||||
Less: |
||||||||
Income tax valuation allowance release(C) |
1,476 | 1,476 | ||||||
|
|
|
|
|||||
Adjusted net income attributable to Navistar International Corporation |
$ | 388 | $ | 465 | ||||
|
|
|
|
|||||
Diluted earnings per share attributable to Navistar International Corporation |
$ | 21.13 | $ | 22.13 | ||||
Effect of adjustments on diluted earnings per share attributable to Navistar International Corporation |
(16.13 | ) | (16.13 | ) | ||||
|
|
|
|
|||||
Adjusted diluted earnings per share attributable to Navistar International Corporation |
$ | 5.00 | $ | 6.00 | ||||
|
|
|
|
|||||
Approximate diluted weighted shares outstanding(D) |
77.6 | 77.6 |
(A) | Engineering integration costs relate to the consolidation of our truck and engine engineering operations as well as the move of our world headquarters. We continue to develop plans for efficient transitions related to these activities and the optimization of our operations and management structure. We expect to incur approximately $77 million of engineering integration costs in fiscal 2011 with approximately $67 million of the costs to be recognized by our manufacturing segment and approximately $10 million of corporate charges. |
(B) | Restructuring of North American manufacturing operations are charges primarily related to our plans to close our Chatham, Ontario heavy truck plant and Workhorse 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. We expect to incur $100 million to $140 million of restructuring, impairment and related charges in fiscal 2011 with approximately $3 million of corporate charges and the remainder of the costs to be recognized by our manufacturing segments. |
(C) | In the third quarter of 2011, the Company recognized an income tax benefit of $1.476 billion from the release of a portion of our income tax valuation allowance. |
(D) | Approximate diluted weighted shares outstanding based on assumed average share price of $65 per share during the period. |
3rd
Quarter 2011 Earnings Presentation September 7, 2011
NYSE: NAV
1
Exhibit 99.2
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd |
NYSE: NAV
2
3 Quarter 2011 Earnings Call
Sept. 7, 2011
2
rd
Safe Harbor
Statement
Information provided and statements contained in this presentation 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 presentation and the Company assumes no
obligation to update the information included in this
presentation. 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 Item 1A, Risk Factors,
included within our Form 10-K for the year ended October
31, 2010, which was filed on
December 21, 2010, and Part II, Item 1A, Risk Factors, included within our Form
10-Q for the period ended July 31, 2011, which was filed on September 7,
2011. 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 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
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.
Management often uses this information to assess and measure the
performance of our operating segments.
A reconciliation to the most
appropriate GAAP number is included in the appendix of this
presentation.
3 |
NYSE: NAV
4
4
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
Agenda
Current truck environment
3
rd
quarter
results
Progress to longer term
strategy and shareholder
value
Balance sheet and return
on capital
Leveraging Assets/Controlling Destiny |
2011
Industry Status Class 8 Age of Fleet
Retail Sales
Source: ACT
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
NYSE: NAV
5
5
Industry
School Bus
18,000
15,000
18,000
Class 6-7 -
Medium
52,500
58,000
60,000
67,000
Combined
Class
8
(Heavy
&
Severe
Service)
171,000
184,000
165,000
175,000
Total Industry Demand
240,000
260,000
240,000
260,000
FY 2012 Preliminary Guidance
275,000
310,000
FY 11
FY 11
Industry Projection
United
States
and
Canadian
Class
6-8
Truck
Industry
-
Retail
Sales
Volume
Original Guidance
As shown 08/10/11
100,000
200,000
300,000
400,000
500,000
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
U.S. and Canada Class 6-8 Retail Industry
6.0
16,500 |
NYSE: NAV
6
6
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
Freight and Trucking Update |
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
NYSE: NAV
7
7
Used Truck Environment
5 Year Old Sleeper -
Retail
Used truck market devalued as
much as 50% in 2008/2009
Today
Recovery has collected
nearly 100% of the devaluation
ProStar
®
Spec for Spec
commands highest residual value in
its class
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
$45,000
1st
2nd
3rd
4th
1st
2nd
3rd
4th
1st
2nd
3rd
4th
1st
2nd
3rd
4th
1st
2nd
3rd
4th
1st
2nd
3rd
4th
1st
2nd
3rd
4th
1st
2nd
2004
2005
2006
2007
2008
2009
2010
2011
Retail |
NYSE: NAV
8
8
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
Supplier Constraints
Rate of Change
Retail Sales
Other markets
Latin America truck shipments
~3,000 in 2010
~11,000 in 2011
Mexico industry
South America
Class 6-8
Retail Sales
FY 2010
Q1 2011
Q2-Q4 2011
Actual/Expected
194K
52K
~200K
Annualized
NA
208K
~264K
Industry rate of
change: up ~30% in 2
half of year
nd |
NYSE: NAV
9
9
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
Status of Industry Commodity Cost
Note:
Costs related to steel, precious metals, resins, and
petroleum products
Commodities
Market Profile
2009
Average
2010
High
March 11
(data shown in Q1)
July 2011
Sheet steel
($/short ton)
$482
$699
$861
$713
Scrap steel
($/long ton)
$260
$473
$480
$510
Crude oil
($/bbl)
$62
$91
$95
$98
Platinum
($/troy oz.)
$1,203
$1,754
$1,829
$1,760
Natural
Rubber
($/lb)
$0.82
$2.25
$2.34
$2.07
Copper
($/lb)
$2.41
$4.23
$4.55
$4.46
2011 Actions
Navistar has mitigated a
significant portion of 2011 market
risk
Systematic hedging
Supplier negotiations
Commodity surcharges
Within a range, commodity
volatility has been factored into
2011 guidance
Focus on FY2012
Pricing Actions |
NYSE: NAV
10
10
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
Trucking Industry Environment Summary
2011 Sales as expected
Supplier constraints
Limit Class 8
Costly
Short term
Medium growth slowed pending
economy
Opportunity
highway bill
Commodity cost
high but stable |
NYSE: NAV
11
3
rd
Quarter 2011 Earnings Call
Sept. 7, 2011
11
Q3 Financials & Operational Information
Note: This slide contains non-GAAP information; please see the
REG G in appendix for a detailed reconciliation.
Key Takeaways for Q3
Revenue increase
Product development* Q3 2011 was $132M compared to $113M in
Q3 2010
Inventory
higher due to parts shortages/rate of production change
Production of big bore ~800 per week
FY 2011
Q3 2010
Q3
2011
Change
Truck Chargeouts
20,600
28,900
8,300
Revenue ($Billions)
$3.2
$3.5
$0.3
Adj. Mfg. Segment
Profit ($Millions)
$268
$158
($110)
Adj. Diluted EPS
Attributable to NIC**
$1.44
$0.79
($0.65)
Weighted average
shares outstanding
(Diluted)
74.3
76.8
2.5
Quarterly Adjusted Diluted Earnings
Per Share
Revenue
Q3 11 over Q3 10
U.S. & Canada Truck
~$500M
Military
~($500)M
Global Truck
~$150M
Engine
~$100M
Parts
~$75M
Total
~$325M
*Excludes engineering integration costs, restructuring of North
American manufacturing operations, and impact of release of
portion of income tax valuation allowance
**Excludes impact of Ford restructuring and related charges
(benefits).
$1.44
$0.79
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
$1.40
$1.60
Q3 2010
Q3 2011
Recovery of commercial truck volume
Military full year on track, expect higher Q4 revenue Strengthen global legacy
business |
NYSE: NAV
12
NYSE: NAV
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
14,900
20,100
5,700
8,800
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
Q3 2010
Q3 2011
Traditional
Expansionary
$785
$272
$49
$68
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
Q3 2010
Q3 2011
Truck
Parts
19,300
26,000
33,600
38,200
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
Q3 2010
Q3 2011
All Other
OEM Sales South America
Q3 Financials & Operational Information
Consolidated Revenues
($ in millions)
Quarterly Truck Chargeouts
Quarterly Engine Shipments
Military Revenues
($ in millions)
$834
$340
52,900
64,200
20,600
28,900
$3,221
$3,537
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
Q3 2010
Q3 2011 |
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
NYSE: NAV
Medium
Truck
Great Products
Market Share
Severe Service
Truck
Heavy
Truck
Class 8
School
Bus
(U.S. & Canada)
School
Bus
&
Combined
Class
6-8
Market
Share
FY09:
36%;
FY10:
34%;
YTD11:
27%
21% Market Share
Q311
13
FY09
FY10
Q311
YTD11
61%
59%
47%
48%
FY09
FY10
Q311
YTD11
35%
38%
46%
40%
43%
40%
36%
34%
FY09
FY10
Q311
YTD11
FY09
FY10
Q311
YTD11
25%
24%
17%
17%
Class 4-5
Industry
Navistar
Market Share
YTD11
26K
1K
~4%
As of Q3 2011 we have changed the methodology of how traditional units are categorized
and prior periods have been restated. We now 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 for consistency with industry reporting.
Additionally, bus industry may include some of our competitors commercial and RV chassis,
which we exclude. |
14
14
NYSE: NAV
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
Great Products
Growing Market Share
with Increased Customer Experience
(U.S. & Canada)
Class 6-7
Combined Class 8
10%
0%
10%
20%
30%
40%
50%
60%
Nov-
Mar
Apr-
Jul
Nov-
Mar
Apr-
Jul
19%
22%
35%
44%
Convert
to
proprietary
U.S.
and
Canada
diesel
engine
Transition industry
from 15L to 13L
Customer
experience during
transition will drive
increased second
half momentum
Class 8 Strategy
What Weve
Said |
15
15
NYSE: NAV
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
Continue to Broaden Product Offering
Severe Service
Heavy
ProStar
®
with
MaxxForce
®
15
Sloped Nose WorkStar
®
MaxxForce
®
11/13
PayStar
®
with
MaxxForce
®
15
LoneStar
®
with
500HP MaxxForce
®
13
9900 with
MaxxForce
®
15
CAT CT660
Combined
Class 8
Available now
Expected Q1 2012 |
16
16
NYSE: NAV
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
Heavy Duty Recognition
MaxxForce
®
Wins Best
Class 8 Heavy Duty Engine
MaxxForce
®
engines rank
highest in customer
.
perform
particularly
well in four of eight factors: engine
reliability and dependability, engine
warranty, vibration at idle and
average fuel economy.
JDPA
Press Release, 9/1/11
Best Class 8 Truck,
Pick Up & Delivery
International
®
brand trucks rank
highest in customer satisfaction
Scoring highest in all six categories
measured:
Engine
Cost of Operation
Warranty
Cab and Body
Ride/Handling/Braking
Transmission
satisfaction
The J.D. power and Associates 2011 U.S. heavy-Duty Truck Engine and Transmission Study |
17
17
NYSE: NAV
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
Used Truck Environment
5 Year Old Sleeper -
Retail
Independent Value Guides
2009 Model Year
$56,500
$57,000
$57,500
$58,000
$58,500
$59,000
$59,500
$60,000
$60,500
$61,000
$61,500
International
ProStar
Competitor A
Competitor B
Competitor C
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
$45,000
1st
2nd
3rd
4th
1st
2nd
3rd
4th
1st
2nd
3rd
4th
1st
2nd
3rd
4th
1st
2nd
3rd
4th
1st
2nd
3rd
4th
1st
2nd
3rd
4th
1st
2nd
2004
2005
2006
2007
2008
2009
2010
2011
Retail
Used truck market devalued as much as
50% in 2008/2009
Today
Recovery has collected nearly
100% of the devaluation
ProStar
®
Spec for Spec commands
highest residual value in its class |
18
18
NYSE: NAV
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
$5.00 -
$6.00 adjusted EPS
Q4 2011
Revenue up ~$1B
Revenue
North America Truck chargeouts
up 30% Q4 2011 over Q3 2011
Latin America increases ~200%
Military will be ~$700 million
Cost
JV investments down
Manufacturing in place
Supplier constraints
Full production rate of Big Bore
engine
Manufacturing segment profit
Assumptions for 4Q 2011
FY 2011
July YTD
Full Year
Guidance
Truck Industry Units
182,500
240K
260K
Revenue ($Billions)
$9.6
$13.6
$14.1
Adj. Diluted EPS
Attributable to NIC*
$2.01
$5.00
$6.00
Weighted average shares
outstanding (Diluted)
77.1
77.6
*Excludes
2011 Engineering Integration costs, valuation
allowance release and manufacturing footprint rationalization
costs.
Note: Guidance based off 77.6M shares
FY 2011 EPS Drivers:
Supplier constraints
(-)
Customer mix/Fleets
(-)
Product development
(-)
Manufacturing segment profit change
~($100)M
Financial services
+
Annual incentive compensation
+
Corporate items
~$100M+
Adj. Diluted EPS Attributable to NIC
$5.00 -
$6.00
Note: This slide contains non-GAAP information; please see the REG
G in appendix for a detailed reconciliation. 2011 FY Guidance
does not include engineering integration costs, restructuring of
N.A. manufacturing operations, or income tax valuation
allowance release. |
19
NYSE: NAV
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
Maximize Profit While Protecting Markets
Balance needs of customers with supplier capacity
As reported on 6/7/2011
in Q2 presentation:
Updated
Outlook:
Combined
Class 8
FY2011
Revised FY2011
Industry
171K -
184K
165K -
175K
Navistar
42K -
46K
38K -
40K
Market Share
~25%
~23% -
24%
Global Truck: Latin America & Caribbean
U.S. and Canada Combined Class 8 Retail Sales
ProStar
®
TranStar
®
WorkStar
®
Mixer
10,000
11,500
3,000
5,000
0
2,000
4,000
6,000
8,000
10,000
12,000
FY 2010
FY 2011 YTD July
FY 2011 FCST
13.0%
18.6%
Market Share
YTD FY2010
YTD FY2011
(This represents retail deliveries) |
20
20
NYSE: NAV
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
Moving from focused facilities to
flexible manufacturing to minimize
logistics cost
School bus: All assembly in Tulsa
Huntsville: Ability to produce V8/I6/DT
engines on same line
Labor agreement
Competitive Cost Structure
Completed Actions
Next Steps to Increase Shareholder Value
Leveraging assets
Integrated Product Development Center
Announced restructuring of truck plants:
Chatham, Monaco & Workhorse
Approximately $200 Million Saved Since FY2009 |
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
NYSE: NAV
21
21
Differentiated Global Distribution
GLOBAL
YTD July
FY 2011
Equity/loss from non-
consolidated affiliates
($55M)
($10M-$15M)
($65M-$70M)
Total Global
including legacy
business
Profitable
Currently 410 branded sales or service points
4 Quarter
th |
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
NYSE: NAV
22
22
Parts Segment Information
(U.S., Canada, Mexico, excludes Military)
Parts
Segment
Three Months Ended July 31:
($ in millions)
2011
2010
$ change
% change
Total Sales
$516
$440
$76
17%
Segment
Profit
$70
$52
$18
35%
North American Parts Sales
Parts Financial Information
ProStar+
®
with
MaxxForce
®
15
LoneStar
®
with
MaxxForce
®
13
MaxxForce
®
15
$0
$500
$1,000
$1,500
$2,000
2009
2010
2011 Fcst |
Navistar Defense
Era of efficiency -
government
will look to industry for:
Higher quality
Lower cost
Quicker development
Sustainment of existing vehicle
fleets will continue (increase)
2008
2009
2010
2011
> $2B
> $2B
> $2B
~$1.9B
School
Bus
Class 6
and 7
Combined
Class 8
Engines
NYSE: NAV
23
23
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd |
NYSE: NAV
24
24
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
Humvee Recap
Recap supports a FY12
Light Tactical Vehicle fleet
decision
Program is complementary
to JLTV and MATV
-
Army: 60,000 units recap
potential beginning in FY13
-
USMC: 3,400 unit potential
beginning in FY13
JLTV
Joint Light Tactical Vehicle
MATV
MRAP (Mine Resistant Ambush Protection)
All-Terrain Vehicle |
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
NYSE: NAV
25
2011 Analyst Day
2011 Analyst Day
Today
Today
2011
Business
Drivers
2011
Business
Drivers
Industry
recovering
(240K
260K)
Industry
(240K
260K)
Heavy
,
Class
6-7
Maintain
Market
Share
Back-end
loaded
Maintain
Market
Share
Back-end
loaded
Military
$1.5B
-
$2.0B
Revenue
Military
~$1.9B Revenue
Global
Investing to profitable
Total
Global
Profitable
15L Launch
15L
Launch
Launched
in
March
Engineering
Slightly up
Engineering
Slightly
up
Engine
segment
profitability
-
~$100M
(back end loaded)
Engine segment profitability -
(back end loaded)
Manufacturing segment margin ~ $1 B
Manufacturing segment margin less than $1B
Adjusted
EPS
-
$5.00
to
$6.00
Adjusted EPS -
$5.00 to $6.00
Manufacturing
Cash
-
$1.2B
-
$1.4B
Manufacturing Cash -
$1.2B -
$1.4B
2011
One-Time
Items
2011
One-Time
Items
Engineering Integration
Engineering
Integration
on
track
Manufacturing
Manufacturing
Chatham,
Monaco
and
Workhorse
Valuation Allowance
Valuation Allowance
What We Said:
-
Convert 15L to 13L
-
Convert all
customers to
proprietary engine
-
Implement EGR
Note: This slide contains non-GAAP information; please see the REG
G in appendix for a detailed reconciliation. 2011 FY Guidance
does not include engineering integration costs, restructuring of
N.A. manufacturing operations, or income tax valuation
allowance release. |
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
NYSE: NAV
26
26
A. J. Cederoth
EVP & CFO
Leveraging Assets/Controlling Destiny
Q3 Balance Sheet
Capital Structure
Summary |
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
NYSE: NAV
27
27
Manufacturing Cash Update
Q3 manufacturing cash=
$1,013M driven by EBITDA &
Working Capital
Q3 2010 $757M
Cash balance forecasted to grow
in Q4
Improved EBITDA
Working Capital
Cash Messages
Manufacturing
Cash
Q3
Only
Full Year Cash Guidance: $1.2B-$1.4B
($ millions)
Consolidated Net Income - Q3 Only
1,400
$
Subtract: VA/Taxes
(1,463)
Subtract: Income from Financial Services
(30)
Add back: Restructuring of N.A. MFG Operations
122
Add back: Depreciation/Amortization
76
Add back: Interest
38
Adjusted MFG EBITDA - Q3 Only
143
$
Change in Net Working Capital
(9)
Capital Expenditures
(106)
Intercompany & Other
(94)
Net Cash Flow - Q3 Only
(66)
$
Beginning MFG Cash Balance - April 30, 2011
1,079
$
Ending MFG Cash Balance - July 31, 2011
1,013
$
Note: This slide contains non-GAAP information; please see the
REG G in appendix for a detailed reconciliation.
|
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
NYSE: NAV
28
28
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
$0
$5
$10
$15
$20
$25
$30
$35
Loss
Loss Percentage
Navistar Financial
Optimizing ROIC
Financial services segment profit
Q3 2011: $30M
July YTD 2011: $102M
Liquidity is strong: $622M total availability
as of 7/31/11
Variable funding facility for dealer financing
renewed to July 2012
Service leverage improving (5:1)
*Repo amounts equal loan value at time of repossession. Jul11 YTD
is annualized. NFC U. S. only.
Historical Portfolio Performance*
**Losses & Percentages are rolling 12 months. NFC U. S. only.
Return on Capital
Loss on Receivables**
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
1.6%
1.8%
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
Repossessions
Past Due Percentage
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
$4.0
$4.5
$5.0
2008
2009
2010
2011 Q3
Serviced Assets |
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
NYSE: NAV
29
29
Manufacturing Strategy
~$200M saved since FY 2009
Chatham
GAAP charges of $85M to $125M, cash charges of $70M to $81M
Lowers future cost by additional $5M to10M per year
Custom Products
Chassis/RV business
GAAP charges of $71M to $81M, cash charges of $11M to $21M
Consolidating
efficiencies across business lines
Streamlining cost structure/leverage existing facilities
Lowers
future
cost
by
$15M
annually
Evaluate opportunities as strategy continues to evolve
|
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
NYSE: NAV
30
30
Valuation Allowance Release
2008-2010 profits at bottom of
cycle
Progress toward our strategic
objectives (FY11)
$1.5B increase in
shareholders equity
Positive shareholder equity
Low cash tax rate through
2013/2014
Note: This slide contains non-GAAP information; please see the REG G
in appendix for a detailed reconciliation. 2008 and 2009 excluded certain
charges, 2011 FY Guidance does not include engineering integration costs,
restructuring of N.A. manufacturing operations, or income tax valuation
allowance release.
100,000
200,000
300,000
400,000
500,000
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
U.S. and Canada Class 6-8 Retail Industry
$(5.00)
$-
$5.00
$10.00
$15.00
$20.00
$25.00
150
200
250
300
350
400
450
500
Traditional Industry Volume (Thousands of Units)
Original segment profit goal assumed a share count of
72.5M shares and a tax rate of 25% .
2009
Actual
2010
Actual
2008
Actual
Original $1.6B Segment
Profit Goal @ 415k units
$1.8B Segment Profit
Goal
@ 350k
units |
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
NYSE: NAV
31
31
Capital Structure
Leveraging Assets/Controlling Destiny |
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
NYSE: NAV
32
32
Investing in the Strategy
At $15 to $20+ Billion Company
(Normal Industry)
At $7 to $8 Billion Company
Total (01
05)
$1,423M
Total (06
10)
$1,103M
*Capital expenditures excluding equity investments |
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
NYSE: NAV
33
33
$175M share repurchase program to be initiated
and executed over the upcoming months
Capital Structure Actions
Expand strategic focus ...
from primarily Investing
to also
Returning
Value
to
our
shareholders
Using excess liquidity to:
Improve shareholder returns
Manage long-term liabilities |
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
NYSE: NAV
34
34
Assumptions for 4Q 2011
FY 2011
July YTD
Full Year
Guidance
Truck Industry Units
182,500
240K
260K
Revenue ($Billions)
$9.6
$13.6
$14.1
Adj. Diluted EPS
Attributable to NIC*
$2.01
$5.00
$6.00
Weighted average shares
outstanding (Diluted)
77.1
77.6
*Excludes
2011 Engineering Integration costs, valuation
allowance release and manufacturing footprint rationalization
costs.
Note: Guidance based off 77.6M shares
FY 2011 EPS Drivers:
Supplier constraints
(-)
Customer mix/Fleets
(-)
Product development
(-)
Manufacturing segment profit change
~($100)M
Financial services
+
Annual incentive compensation
+
Corporate items
~$100M+
Adj. Diluted EPS Attributable to NIC
$5.00 -
$6.00
Note: This slide contains non-GAAP information; please see the REG
G in appendix for a detailed reconciliation. 2011 FY Guidance
does not include engineering integration costs, restructuring of
N.A. manufacturing operations, or income tax valuation
allowance release.
$5.00 -
$6.00 adjusted EPS
Q4 2011
Revenue up ~$1B
Revenue
North America Truck chargeouts
up 30% Q4 2011 over Q3 2011
Latin America increases ~200%
Military will be ~$700 million
Cost
JV investments down
Manufacturing in place
Supplier constraints
Full production rate of Big Bore
engine
Manufacturing segment profit |
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
NYSE: NAV
35
35
Positioned to Succeed
2010
2011
2012
2013+
N. A. Truck
Industry
low
Investing in
integration
Industry low
Focus on
product
acceptance
Industry
recovery
Derivative
products
Continuous
improvement
Military
~$2.0B
~$1.9B
$1.5 to $2.0B with possible
next level of breakthrough
Expansionary
Global
Investment
Breakeven
Profitable
Continuous
growth
Diesel
Engines
Transition
away from
Ford
Focus on
emissions
Investing in
products and
markets
Leveraging core investments
to capture growth opportunities
Parts
Effective
growth
strategy
Improving
channel
execution
Realize benefits of Truck and
Engine strategy
2011 Revenues
Diversified Mfg. Revenue |
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
NYSE: NAV
36
36
Driving Shareholder Value
$(5.00)
$-
$5.00
$10.00
$15.00
$20.00
$25.00
150
200
250
300
350
400
450
500
2009
Actual
2010
Actual
2008
Actual
Original $1.6B Segment
Profit Goal
@ 415kunits
$1.8B Segment Profit
Goal
@ 350k
units
2011 Results
Differentiation
and
leadership
Deliver
customer
value
-
Fuel economy with EGR
-
Convert 15L to 13L
Focus
on
cost
structure
-
Flexible manufacturing
-
Integrated product development
Invest
in
global
growth
Adjusted
EPS
($5.00
to
$6.00)
2012
and
Future
Differentiated product offering
Strong core North America business
Sustainable
military
business
$1.5B
-
$2.0B
Revenue
Growing global truck
Expanded engine and parts business
Note: This slide contains non-GAAP information; please see the REG G
in appendix for a detailed reconciliation. 2008 and 2009 excluded certain
charges, 2011 FY Guidance does not include engineering integration costs,
restructuring of N.A. manufacturing operations, or income tax valuation
allowance release.
Traditional Industry Volume (Thousands of Units)
Original
segment
profit
goal
assumed
a
share
count
of
72.5M shares and a tax rate of 25% . |
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
NYSE: NAV
37
Appendix |
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
NYSE: NAV
38
38
Navistar Financial Corporation
Q3 2011 profitability of $30M, YTD profitability of $102M
Liquidity is strong: $622M total availability as of 7/31/11
Variable funding facility for dealer financing renewed to July 2012
Retail portfolio originations and balances will continue to decline as Navistar
Capital (new GE Capital program) handles new acquisitions
Service leverage improving (5:1)
Note: Profitability relates to total financial services
Leveraging Assets & Controlling Our Destiny
$809M facility
Funding for retail notes,
wholesale notes, retail
accounts, and dealer open
accounts
Matures December 2012
On balance sheet
Situation as of July 31, 2011
$1.1B funding facility (NFSC)
$390M available
NFSC wholesale trust
Variable portion matures July
2012
Public portions mature
January 2012 and October
2012
On balance sheet
Broader product offering
Enhanced ability to support
large fleets
Better access to less
expensive capital
Retail Notes
Bank Facility
Dealer Floor Plan |
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
NYSE: NAV
39
39
2011 Guidance
* FY2010 includes $10M ($0.14) of cost for UAW agreement.
Note: This slide contains non-GAAP information; please see the REG
G in appendix for a detailed reconciliation. 2011 FY Guidance
does not include engineering integration costs, restructuring of
N.A. manufacturing operations, or income tax valuation
allowance release.
Truck Industry Units
191,300
240,000
to
260,000
Revenue
($ Billions)
$12.1
$13.6
to
$14.1
($ Millions (excluding EPS))
Adj. Mfg. Segment Profit
$741
$850
to
$950
Fin. Services, Corporate, Elims
$(496)
$(420)
to
$(425)
Adj. Profit Excluding Tax
$246
$430
to
$525
Adj. Net Income attributable to NIC
$223
$388
to
$465
Adj. Tax Rate
9.4%
10%
to
11%
Adj. Diluted EPS attributable to NIC
$3.05*
$5.00
to
$6.00
Number of diluted shares
73.2M
~77.6M
Cash
($ Billions)
$1.1
$1.2
to $1.4 2010
Actual Guidance |
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
NYSE: NAV
40
40
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
YTD
School buses
56%
60%
63%
64%
61%
60%
61%
53%
60%
59%
51%
45%
47%
48%
Class 6 and 7 medium trucks
30%
39%
33%
39%
35%
33%
44%
36%
37%
38%
36%
36%
46%
40%
Class 8 heavy trucks
24%
24%
29%
24%
25%
23%
22%
30%
20%
24%
17%
16%
17%
17%
Class 8 severe service trucks
40%
46%
41%
47%
43%
40%
40%
39%
40%
40%
33%
32%
36%
34%
Combined Class 8
29%
32%
33%
32%
31%
28%
28%
32%
25%
28%
20%
19%
21%
20%
Total Traditional Market Share
32%
37%
37%
38%
36%
32%
35%
35%
32%
34%
27%
26%
29%
27%
2011
Market Share - U.S. & Canada School Bus and Class 6-8
2010
2009
As of Q3 2011 we have changed the methodology of how traditional units are categorized
and prior periods have been restated. We now 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 for consistency with industry reporting.
Additionally, bus industry may include some of our competitors commercial and RV chassis,
which we exclude. |
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
NYSE: NAV
41
41
Worldwide Truck Chargeouts
FISCAL YEAR 2009
Q1
Q2
Q3
Q4
YTD
BUS
2,700
3,100
3,400
4,600
13,800
MEDIUM
3,200
3,300
2,700
3,800
13,000
HEAVY
6,100
3,300
4,500
5,200
19,100
SEVERE
4,200
4,400
3,900
4,700
17,200
TOTAL
16,200
14,100
14,500
18,300
63,100
NON-TRADITIONAL MILITARY
1,100
400
0
100
1,600
EXPANSIONARY
2,400
1,900
2,500
4,300
11,100
WORLD WIDE TRUCK
19,700
16,400
17,000
22,700
75,800
FISCAL YEAR 2010
Q1
Q2
Q3
Q4
YTD
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
WORLD WIDE TRUCK
20,100
21,400
20,600
24,900
87,000
FISCAL YEAR 2011
Q1
Q2
Q3
Q4
YTD
BUS
2,100
2,000
2,200
6,300
MEDIUM
4,600
7,200
7,400
19,200
HEAVY
4,700
5,200
6,800
16,700
SEVERE
2,700
3,200
3,700
9,600
TOTAL
14,100
17,600
20,100
0
51,800
NON-TRADITIONAL MILITARY
100
400
200
700
EXPANSIONARY
5,300
7,600
8,600
21,500
WORLD WIDE TRUCK
19,500
25,600
28,900
0
74,000
As of Q3 2011 we have changed the methodology of how traditional units
are categorized and prior periods have been restated. We now 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 for consistency with industry reporting.
|
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
NYSE: NAV
42
42
World Wide Engine Shipments
Navistar
Q1
Q2
Q3
Q4
YTD
OEM sales - South America
19,400
22,500
26,100
31,200
99,200
Ford sales - U.S. and Canada
12,600
26,400
22,900
39,600
101,500
Other OEM sales
4,500
2,400
1,800
2,600
11,300
Intercompany sales
14,400
12,600
12,800
17,500
57,300
Total Shipments
50,900
63,900
63,600
90,900
269,300
Navistar
Q1
Q2
Q3
Q4
YTD
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
YTD
OEM sales - South America
27,200
37,100
38,200
102,500
Ford sales - U.S. and Canada
-
-
-
-
Other OEM sales
4,500
4,400
3,700
12,600
Intercompany sales
17,300
23,500
22,300
63,100
Total Shipments
49,000
65,000
64,200
-
178,200
2009
2010
2011 |
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
NYSE: NAV
43
43
Order Receipts
U.S. & Canada
As of Q3 2011 we have changed the methodology of how traditional units
are categorized and prior periods have been restated. We now 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 for consistency with industry reporting.
Order Receipts: U.S. & Canada (Units)
Three Months Ended
Nine Months
Ended
July 31,
Percentage
July 31,
Percentage
2011
2010
Change
Change
2011
2010
Change
Change
"Traditional" Markets
School buses
2,700
1,100
1,600
145
6,300
4,600
1,700
37
Class 6 and 7 medium trucks
6,800
3,000
3,800
127
21,200
12,500
8,700
70
Class 8 heavy trucks
6,200
3,000
3,200
107
23,200
16,100
7,100
44
Class 8 severe service trucks
3,100
2,200
900
41
10,000
10,200
(200)
(2)
Total "Traditional" Markets
18,800
9,300
9,500
102
60,700
43,400
17,300
40
Combined Class 8 (Heavy and Severe Service)
9,300
5,200
4,100
79
33,200
26,300
6,900
26 |
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
NYSE: NAV
44
44
Supplemental Information -
Truck
Worldwide Truck Chargeouts
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
Analyst Day
2011 Actuals
Analyst Day
2011 Actuals
Analyst Day
2011 Actuals
Analyst Day
Q1
Q2
Q3
Q4
Traditional
Expansionary
Towables
As of Q3 2011 we have changed the methodology of how traditional units
are categorized and prior periods have been restated. We now 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 for consistency with industry reporting.
|
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
NYSE: NAV
45
45
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 |
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
NYSE: NAV
46
46
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, 2011?
A:
Q3:
How are your dealers doing?
A:
Q4:
What kind of rates do you charge your dealers and customers?
A:
Q5:
How do you fund your wholesale business?
A:
We
primarily
finance
our
wholesale
portfolio
through
traditional
private
or
public
securitizations,
and
through
our
bank
facility.
Q6:
How is your NFC portfolio performing?
A:
Of
our
272
primary
NAFTA
dealers,
we
have
ownership
interest
in
8
DealCor
dealers
as
of
July
31,
2011.
We
expect
to
further
reduce
our number of Dealcor dealers in 4Q 2011.
The
operational
and
financial
strength
of
our
industry
leading
dealer
network
continues
to
improve
in
all
areas
of
the
business,
in
parallel with the overall improvement in the North American truck market. We
continue to add new dealers to the distribution network, attracted by the
breadth of our product lines and significant opportunities in major markets. Considerable investments in facility
upgrades
and
acquisitions
have
also
been
completed
in
the
last
several
months
by
aggressive
and
growth
oriented
existing
dealers;
further strengthening our footprint, service capabilities and accessibility to our
customers. 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. Repossessions,
past
due
accounts
and
losses
peaked
in
2008
and
have
continued
to
show
improvement
since
then.
NFCs
retail
portfolio in the U.S. is expected to reduce significantly in size now that Navistar
Capital, the new GE Capital retail program, is financing
retail
customers.
Performance
of
this
portfolio
improved
considerably
in
2010
and
throughout
2011. |
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
NYSE: NAV
47
47
Frequently Asked Questions
Q7:
What is your total amount of capacity at NFC?
A:
Total availability in our U.S. funding facilities is more than $622M as of July 31,
2011. 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
to
support
the
sale
of
Navistar
products
is
off
to
a
great
start
and
progressing consistent with expectations.
Q9:
What
is
included
in
Financial
Services
Segment
Profit,
Corporate
and
Eliminations?
A:
Financial Services Segment Profit, Corporate and Eliminations, as presented,
consist of the Finance Services segment and Corporate and Eliminations as
shown in the Segment Reporting footnote of our annual and quarterly reports (10K & 10Q). 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:
What is the status of the Humvee Recap program?
A:
A final request for proposals is expected in the coming weeks. Navistar intends to
respond. Requirements will address vulnerabilities exposed during combat
operations in Iraq and Afghanistan. The program will allow the vehicles to stay battle ready
until Joint Light Tactical Vehicles (JLTV) are fielded.
Q11:
How will the changing DOD budget affect Navistar in FY 2011?
A:
Navistar continues to pursue a number of U.S. and foreign military
opportunities and is confident in its annual $1.5 to $2 billion
revenue
goal.
In
addition,
the
company
now
has
more
than
32,000
vehicles
in
operation
throughout
the
world.
These
vehicles
will
require parts and sustainment support throughout their lifecycles.
Q12:
What are your margins for military vehicles?
A:
We do not break margins out specific to our military vehicles. These numbers are
reported as part of our Truck segment financials. |
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
NYSE: NAV
48
48
Frequently Asked Questions
Q13:
What is the current Joint Light Tactical Vehicle (JLTV) program status?
A:
Navistar and BAE continue to participate in the JLTV program. Proposals for the
Engineering and Manufacturing Development (EMD) stage are expected in
late FY2011. Two teams will then be selected to compete in the EMD phase.
Q14:
How does your Class 8 industry compare to ACT Research?
A:
Q15:
What were the 2010 emissions requirements?
A:
Through the use of credits manufacturers can go to a maximum of 0.50g NOx if they
reduced earlier with advanced technology; manufacturers
need
to
be
at
0.20g
NOx
if
they
chose
not
to
introduce
advanced
technologies
to
reduce
their
emissions
earlier.
For
many
years
Navistar
introduced
cleaner
emission
engines
than
the
EPA
required,
so
we
were
able
to
generate
some
credit
before
we needed to go to the 0.20g NOx standard.
Q16:
What is Navistar doing to meet the 0.20g NOx emissions when its credits are
depleted? A:
Navistar
remains
committed
to
its
strategy
of
providing
solutions
that
let
customers
focus
on
their
business,
not
emissions
regulations.
Our
primary
path
continues
to
be
Advanced
EGR.
This
technology
is
proving
extremely
viable
providing
fuel
economy
and performance on par with the best SCR competitors. Customer acceptance is
excellent with over 60,000 vehicles built at 0.5 grams
NOx
or
better.
As
we
develop
0.20g
NOx
capability
our
goal
of
continuing
to
improve
performance
and
fuel
economy
at
this
emissions
level
is
being
realized.
Reconciliation to ACT
2011
ACT*
205,700
CY to FY adjustment
(20,891)
Other misc. specialty vehicles Included in ACT
(8,500)
Total (ACT comparable Class 8 to Navistar)
176,309
Navistar Industry Retail Deliveries Combined Class 8 Trucks**
170,000**
Navistar difference from ACT:
6,309
3.6%
*Source: ACT N.A. Commercial Vehicle Outlook - Aug, 2011
**See table on bottom of slide 5
U.S. and Canadian Class 8 Truck Sales |
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
NYSE: NAV
49
49
Frequently Asked Questions
Q17:
Why has the Company decided to release a significant portion of its domestic
valuation allowance? A:
The Company has evaluated a variety of criteria, both objective and subjective, and
has concluded that a significant portion of its U.S. valuation allowance
attributable to deferred tax assets should be released in Q3 based on its judgment that (on a more likely
than not basis) it will realize the value of these deferred tax assets in the
future. That judgment considered, among other things, the
Companys ability to deliver profitability in a depressed market, as well as
its confidence in the future profitability of its U.S. operations.
Q18:
What is the current balance of net operating losses as compared to other deferred tax
assets? A:
The Company
has
U.S.
federal
net
operating
losses
(NOLs)
with
an
undiscounted
cash
value
totaling
$161
million as of
October 31, 2010.
In addition, it has state NOLs valued at $85 million and foreign NOLs valued at
$85 million, for a total undiscounted
cash
value
of
$331
million.
In
addition
to
NOLs,
the
Company
has
other
deferred
tax
assets
of
$1.5
billion
resulting in
total
deferred
tax
assets
of
approximately
$1.8
billion.
Q19:
How will the release of $1.5 billion of deferred tax valuation allowance impact
future cash tax payments? A:
The release of $1.5 billion of valuation allowance will have no impact on U.S. cash
tax payments. We expect to continue to take advantage of NOLs and
tax credits through 2013/2014. Q20:
What is our expected tax rate in the future?
A:
Our USGAAP tax rate in 2012 forward assumes a 30%+ effective tax
rate. This may be impacted by discrete events (e.g., settlement of tax
audits) or by future changes in tax legislation. Q21:
How has recent tax legislation affected Navistar?
A:
The Worker, Homeownership, and Business Assistance Act of 2009 provided an
opportunity to carry back alternative minimum tax net operating
losses
from
the
Companys
2010
fiscal
year
and
to
receive
a
refund
of
alternative
minimum
tax
(AMT)
payments.
The
Company received its cash refund of $29 million of AMT credits in fiscal year 2011
as a result of this legislation. The Tax Relief, Unemployment Insurance
Reauthorization, and Job Creation Act of 2010 extended current tax rules in several
areas, which if not
extended,
could
have
adversely
impacted
the
Companys
tax
results.
In
addition,
the
Act
allows
businesses to
fully depreciate qualifying property purchased through the end of 2011 (50% first
year depreciation for purchases in 2012), which will benefit both Navistar
and its customers. |
NYSE: NAV
50
50
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
Frequently Asked Questions
Q22:
How will $1.8 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. Q23:
When do you expect to exhaust your NOLs and tax credits?
A:
We will likely take advantage of NOLs and credits through 2013/2014.
Q24:
How does vertical integration of a big bore engine impact warranty?
A:
With
the
transition
to
100%
MaxxForce
®
engines
we
will
assume
an
increased
responsibility
for
engine
warranty,
which
was
previously
absorbed
by
our
suppliers
and
reflected
in
our
material
costs.
The
impact
of
this
change
will
increase warranty expense
and decrease material costs.
Q25:
Why is your warranty expense higher year over year?
A:
Our warranty costs have been higher than the respective prior year periods
primarily as a result of increased intercompany volumes
due
to
the
use
of
all
MaxxForce
®
engines
in
our
North
America
product
offering.
Through
the
first
three
quarters
of
2011,
we have seen favorable performance on our 2010 emission compliant engines compared
to previous launches and expected performance.
|
51
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NYSE: NAV
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
Frequently Asked Questions
Q26:
What are your expected 2011 and beyond pension funding requirements?
A:
Current forecasts indicate that we may need to contribute approximately $133
million in 2011 to our US and Canadian pension plans
(the
Plan).
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
2012
through 2014, the Company will be required to contribute at least $150 million per
year to the Plan, depending on asset performance and discount rates.
Q27:
What is your expected 2011 pension and OPEB GAAP expense?
A:
Assuming no further containment actions and no further curtailment events, we
anticipate 2011 pension and OPEB GAAP expense will not exceed 2010
levels. Q28:
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
segments $1 billion of senior unsecured high yield
notes
and
$570
million
of
senior
subordinated
convertible
notes.
As
a
result
of
this
issuance,
future
manufacturing
interest
expense will be higher than cash interest payments due to the amortization of debt
issuance costs which are amortized over the life of each note ($36 million),
amortization of the original issue discount of the high yield notes ($37 million) and amortization of the
embedded
call
option
in
the
convertible
notes
($114
million).
The
timing
of
interest
payments
also
impacts
this
variance
on
a
quarterly basis, but not on a fiscal year basis.
Q29:
What are the $225 million of Recovery Zone Facility Bonds (RZFBs) Series 2010 due
October 15, 2040 being used for? A:
We
are
using
the
proceeds
to
invest
in
our
product
development
strategy
and
our
HQ
consolidation.
Great
products
are
a
key
pillar
of our three pronged strategy. Streamlining and improving our product development
processes will continue to provide competitive advantages for us in the
marketplace. The funding from the RZFBs will allow us to consolidate many
facilities into a new facility and
make
necessary
renovations
to
that
facility.
Additionally
we
will
invest
in
an
existing
facility,
which
includes
investments
in
equipment and technology that will help us create and improve our product
development process and thus shareholder value. |
NYSE: NAV
52
52
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
Frequently Asked Questions
Q30:
Why did you use Recovery Zone Facility Bond (RZFB) financing?
A:
The
RZFBs
are
a
cost
effective,
long-term
form
of
capital
that
is
complementary
to
our
capital
structure.
The
bonds
have a
30
year
maturity
and
a
fixed
rate
coupon
of
6.50%
per
annum.
They
are
callable
at
par
any
time
after
10
years
(October
15,
2020).
Issuing
bonds
in
the
tax-exempt
market
gave
us
exposure
to
a
new
source
of
investors
that
we
wouldnt
otherwise have access to if not for the RZFB program.
Q31:
What should we assume for capital expenditures in fiscal 2011?
A:
We
plan
to
continue
capital
spending
within
the
traditionally
guided
range
of
$250
-
$350
million
for
products
and
development.
There
is
capital
spending
related
to
Engineering
Integration
not
included
in
the
range
that
is
funded
through
the RZFBs.
Q32:
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. |
53
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NYSE: NAV
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
Frequently Asked Questions
Q33:
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 Navistars 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. Our fiscal second
quarter ended on April 30, 2011; the conversion price of the notes is $50.274 per
share of Navistars common stock; 130% of the conversion price equals
$65.356 per share of Navistars common stock. Since Navistars 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 has opted to settle the
conversion in cash instead of shares, therefore there is a 40 trading day
observation period to determine the value that will be remitted in cash, so
the note holders will not receive the cash for almost two months after their respective conversion notices
were received.
So far during the various 40 trading day observation periods, Navistars
share price has traded at an average price well below the conversion price
of $50.27, therefore the note holders will receive less than the $1,000 par value per note. If
the average of Navistars share price during the 40 trading day observation
period continues to trade below $50.27, Navistar will retire the debt at
less than the issuance price and record a gain on the extinguishment of debt in the fourth quarter (however, this
gain
will
be
somewhat
offset
by
the
acceleration
of
certain
debt
issuance
costs
that
had
previously
been
amortized
over
the
life
of the notes).
Navistars common stock did not close above $65.356 per share for any 20 day
trading period (consecutive or non-consecutive) during
the
30
day
consecutive
trading
day
period
ending
July
31,
2011,
therefore
the
note
holders
no
longer
have
the
right
to
convert their notes, however that threshold could be triggered once again in the
future. |
54
54
NYSE: NAV
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
Frequently Asked Questions
Q34:
Why
have
the
convertible
notes
that
are
due
in
October
2014
been
reclassified
from
current
debt
to
long-term
debt?
A:
As
mentioned
in
the
question
above,
the
convertible
note
holders
had
the
right
to
convert
their
notes
through
July
31,
2011.
Under
GAAP, since note holders had the right to convert, the debt was required to be
classified as a current liability in the second quarter.
Since the threshold mentioned in the above question was not triggered in the third
quarter ending July 31, 2011, the notes no longer became convertible after
July 31, 2011, therefore the notes were reclassified from current to long-term debt.
Q35:
What is happening with the EPA lawsuit?
A:
We presently have two lawsuits filed against the EPA calling into question the
validity of the EPA certification of SCR systems due to the fact that they
can operate at much higher emissions levels in the real world than is recorded in their test cell results submitted
for certification.
Q36:
Are you ready for the 2013 GHG regulation?
A:
Yes, Navistar will be ready to meet the standards when they go into effect January
2014. As a leader in fuel efficiency and in delivering innovative
technologies, such as hybrids, plug-in hybrids and electric vehicles, our current approach is to consistently
deliver the most fuel-efficient vehicles to our customers. Our
customer-focused approach aligns Navistar with the intent of the new
proposed GHG rule, and provides us with a strong basis for meeting the new
standards. Q37:
How are you addressing the 2014 GHG regulations?
A:
Navistar is currently conducting a more in-depth review of this complex rule to
better understand the specific impacts (i.e., costs of the
product,
how
we
will
implement
it,
etc.)
it
will
have
on
our
customers
and
the
operation
of
our
business.
As
such,
it
is
too
early
in
that review to provide specifics around how we will address the 2014 GHG
regulations. What we can say is that Navistar is always investing in new
technologies designed to achieve maximum fuel economy for our customers. So these new GHG standards will not
change our standard way of operating our business. |
55
55
NYSE: NAV
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
Outstanding Debt Balances
July
31,
2011
October 31,
2010
(in millions)
Manufacturing operations
8.25% Senior Notes, due 2021, net of unamortized discount of $33 million and $35 million at
the respective dates
$
967
$
965
3.0% Senior Subordinated Convertible Notes, due 2014, net of unamortized discount of $79
million and $94 million at the respective dates
491
476
Debt of majority-owned dealerships
109
66
Financing arrangements and capital lease obligations
123
221
Loan Agreement related to 6.5% Tax Exempt Bonds, due 2040
225
225
Other
41
33
Total manufacturing operations debt
1,956
1,986
Less: Current portion
102
145
Net long-term manufacturing operations debt
$
1,854
$
1,841
Financial services operations
Asset-backed debt issued by consolidated SPEs, at variable rates, due serially through 2018
$
1,553
$
1,731
Bank revolvers, at fixed and variable rates, due dates from 2012 through 2018
876
974
Commercial paper, at variable rates, due serially through 2012
91
67
Borrowings secured by operating and finance leases, at various rates, due serially through
2017
79
112
Total financial services operations debt
2,599
2,884
Less: Current portion
652
487
Net long-term financial services operations debt
$
1,947
$
2,397 |
56
56
NYSE: NAV
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
SEC Regulation G Non-GAAP
Reconciliation
We believe manufacturing segment results, which includes the segment results of
our Truck, Engine, and Parts reporting 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.
Manufacturing Segment Results:
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.
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.
Adjusted Net Income and Diluted Earnings Per Share Attributable To Navistar
International Corporation and Adjusted Manufacturing Segment Profit: |
57
57
NYSE: NAV
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
SEC Regulation G Non-GAAP
Reconciliation
Adjusted Manufacturing Earnings Before Interest, Income Taxes, Depreciation, and
Amortization (EBITDA): Adjusted manufacturing segment EBITDA is
defined as our 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, adjusted to exclude certain
items that may not be related to the core manufacturing business. 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: Manufacturing
cash flow is 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. Our manufacturing cash flow is prepared with manufacturing marketable securities
being treated as a cash equivalent. Manufacturing cash, cash equivalents, and
marketable securities represents the Companys 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.
|
58
58
NYSE: NAV
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
SEC Regulation G
EPS vs. Traditional Industry
(A)
Revised
Target
sales
and
revenues,
net
Projections
based
on
$17-18B
of
GAAP
revenue
and
$2-3B
of
Non-GAAP
revenue
related
to
Navistar's
share
of
non-consolidated
affiliates.
Original
Target
Revised
Target
U.S. & Canada Industry
414,500
350,000
Sales and Revenues, Net
(A)
$15 +
$20 +
Diluted earnings per share attributable to Navistar International
Corporation $ 11.46
$ 12.31
Approximate diluted weighted shares outstanding
~ 72.5
~ 72.5
(Dollars in Millions)
Net income (loss) attributable to Navistar International Corporation
$ 825
$ 892
Less: Financial services segment profit, Corporate and eliminations,
and income taxes (775)
(888)
Manufacturing segment profit
$ 1,600
$ 1,780 |
59
59
NYSE: NAV
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
SEC Regulation G
1
Navistar International Corporation (Manufacturing operations with
financial services operations on a pre-tax equity basis)
Three Months Ended July 31, 2011
($ millions)
Net income (loss) attributable to NIC
$ 1,400
Less income tax benefit
(1,463)
Add back restructuring of N.A. MFG Operations
122
Income before income tax benefit and restructuring charges
$ 59
Less equity income from financial service operations
(30)
Income before income tax benefit, restructuring charges, and equity income from
financial service operations
$ 29
Add back manufacturing interest expense
38
Manufacturing EBIT
$ 67
Add back manufacturing depreciation and amortization
76
Adjusted manufacturing EBITDA
$ 143
Includes
depreciation
of
equipment
leased
to
others
and
excludes
debt
issuance
cost/discount
amortization
1 |
60
60
NYSE: NAV
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
SEC Regulation G
2011 Guidance
(A)
Engineering integration costs relate to the
consolidation of our truck and engine engineering
operations as well as the move of our world
headquarters. We continue to develop plans for
efficient transitions related to these activities and
the optimization of our operations and
management structure. We expect to incur
approximately $77 million of engineering
integration costs in fiscal 2011 with approximately
$67 million of the costs to be recognized by our
manufacturing segment and approximately $10
million of corporate charges.
(B)
Restructuring of North American
manufacturing operations are charges primarily
related to our plans to close our Chatham, Ontario
heavy truck plant and Workhorse 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. We expect to incur $100
million to $140 million of restructuring, impairment
and related charges in fiscal 2011 with
approximately $3 million of corporate charges and
the remainder of the costs to be recognized by our
manufacturing segments.
(C)
In the third quarter of 2011, the Company
recognized an income tax benefit of $1.476 billion
from the release of a portion of our income tax
valuation allowance.
(D)
Adjusted income tax expense excludes the
income tax benefit from the release of a portion of
our income tax valuation allowance and
incremental income taxes that may result from this
partial release of the income tax valuation
allowance.
(E)
Approximate diluted weighted shares
outstanding based on assumed average share
price of $65 per share during the period.
Lower
Upper
(in millions, except per share data)
Net income attributable to Navistar International Corporation
1,647
1,764
Plus:
Engineering
integration
costs
(A)
77
77
Restructuring
of
North
American
manufacturing
operations
(B)
140
100
Less:
Income
tax
valuation
allowance
release
(C)
1,476
1,476
Adjusted net income attributable to Navistar International Corporation
$ 388
$ 465
Plus:
Adjusted
income
tax
expense
(D)
42
60
Adjusted Profit Excluding Tax
$ 430
$ 525
Diluted earnings per share attributable to Navistar International Corporation
$ 21.13
$ 22.13
Effect
of
adjustments
on
diluted
earnings
per
share
attributable
to
Navistar
International
Corporation
(16.13)
(16.13)
Adjusted diluted earnings per share attributable to Navistar International Corporation
$ 5.00
$ 6.00
Approximate
diluted
weighted
shares
outstanding
(E)
77.6
77.6
Lower
Upper
(in millions)
Net income (loss) attributable to Navistar International Corporation
$ 1,647
$ 1,764
Less: Financial services segment profit, Corporate and eliminations, and income taxes
1,004
981
Manufacturing segment profit
643
783
Engineering
integration
costs
(A)
67
67
Restructuring
of
North
American
manufacturing
operations
(B)
137
100
Adjusted manufacturing segment profit
$ 847
$ 950
Fiscal 2011 guidance: adjusted net income and diluted earnings per share attributable to Navistar
International Corporation reconciliation:
Fiscal 2011 guidance: manufacturing segment profit and adjusted manufacturing segment profit
reconciliation: |
3
Quarter 2011 Earnings Call Sept. 7, 2011
rd
NYSE: NAV
61
61
SEC Regulation G
Fiscal Year Comparison
2009
2008
(Dollars in Millions, except per share data)
Net income (loss) attributable to Navistar International Corporation
$ 320
$
134 Plus:
Ford
settlement,
restructuring
and
related
charges
(benefits)
(A)
(157)
36
Impairment
of
property,
plant,
and
equipment
(B)
31
358
Write-off
of
debt
issuance
costs
(C)
11
-
Adjusted net income attributable to Navistar International Corporation
$ 205
$
528 Adjusted diluted earnings per share attributable to Navistar
International Corporation
$ 2.86
$ 7.21
Diluted weighted shares outstanding
71.8
73.2
2010
2009
2008
(Dollars in Millions, except per share data)
Net income attributable to Navistar International Corporation
$ 223
$ 320
$ 134
Less: Income taxes
(23)
(37)
(57)
Profit Excluding Tax
$ 246
$ 357
$ 191
Less:
Financial services segment profit (loss)
95
40
(24)
Corporate and eliminations
(590)
(519)
(478)
Manufacturing segment profit
741
836
693
Plus:
Fordsettlement,
restructuring
and
related
charges
(benefits)
(A)
-
(160)
37
Impairment
of
property,
plant,
and
equipment
(B)
-
31
358
Adjusted manufacturing segment profit
$ 741
$ 707
$ 1,088
Adjusted net income and diluted earnings per share attributable to
Navistar International Corporation reconciliation: Manufacturing
segment profit and adjusted manufacturing segment profit reconciliation:
(A)
Ford settlement, restructuring and related charges (benefits) include the impact of our settlement
with Ford in 2009 as well as charges and benefits recognized related to restructuring activity
at our Indianapolis Casting Corporation and Indianapolis Engine Plant. The charges and benefits were recognized in our Engine segment with the
exception of $3 million of income tax expense and $1 million of income tax benefit related to the
settlement in 2009 and 2008 respectively.
(B)
Impairment of property, plant, and equipment in 2008 are related to impairments to the asset groups in
the Engine segments VEE Business Unit. The 2009 impairments relate to charges recognized
by the Truck segment for impairments related to asset groups at our Chatham and Conway facilities
(C)
The write-off of debt issuance costs in 2009 relate to charges related to the Companys
refinancing.
|
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
NYSE: NAV
62
62
Manufacturing marketable securities SEC
Regulation G Manufacturing Cash Fiscal Year Comparison
Manufacturing cash, cash equivalents, and marketable securities
reconciliation: (Dollars in Millions)
July 31, 2011
October 31,
2010
October 31,
2009
October 31,
2008
Manufacturing segment cash and cash equivalents
$ 413
$ 534
$ 1,152
$ 775
Financial services segment cash and cash equivalents
31
51
60
86
Consolidated cash and cash equivalents
$ 444
$ 585
$ 1,212
$ 861
$ 600
$ 566
$ -
$ 2
Financial services segment marketable securities
20
20
-
-
Consolidated marketale securities
$ 620
$ 586
$ -
$ 2
Manufacturing segment cash and cash equivalents
$ 413
$ 534
$ 1,152
$ 775
Manfuacturing marketable securities
600
566
-
2
Manufacturing segment cash, cash equivalents and marketable securities
$ 1,013
$ 1,100
$ 1,152
$ 777
(A)
Manufacturing
marketable
securities
as
of
October
31,
2008
of
$2
million
were
included
in
Other
current
assets
for
financial
reporting.
(A) |
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
NYSE: NAV
63
63
SEC Regulation G
Manufacturing Cash
Manufacturing
Operations
Financial
Services
Operations
Adjustments
Condensed
Consolidated
Cash Flows
(Dollars in Millions)
For the year ended October 31, 2009
Cash flows from operations
534
704
-
1,238
Cash flows from investing / capital expenditures
(284)
50
22
(212)
Cash flows from financing / debt pay down
36
(780)
(20)
(764)
Effect of exchange rate changes
9
-
-
9
Net cash flows
295
(26)
2
271
Blue Diamond Consolidation
80
-
-
80
Beginning cash, cash equivalents and marketable securities balance
777
86
(2)
861
Ending cash, cash equivalents and marketable securities balance
1,152
60
-
1,212
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)
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 segment cash flow reconciliation:
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$ |
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
NYSE: NAV
64
64
SEC Regulation G
Manufacturing Cash
Manufacturing segment cash flow reconciliation:
Manufacturing
Operations
Financial
Services
Operations
Adjustments
Condensed
Consolidated
Cash Flows
(Dollars in Millions)
For the nine months ended July 31, 2011
Cash flows from operations
$
236
$
303
$
-
$
539 Cash flows from investing / capital expenditures
(325)
(11)
(34)
(370)
Cash flows from financing / debt pay down
(5)
(312)
-
(317)
Effect of exchange rate changes
7
-
-
7
Net cash flows
$
(87)
$
(20)
$
(34)
$
(141) Blue Diamond Consolidation
-
-
-
-
Beginning cash, cash equivalents and marketable securities balance
1,100
71
(586)
585
Ending cash, cash equivalents and marketable securities balance
$ 1,013
$
51
$
(620)
$
444 Manufacturing segment cash flow reconciliation:
Manufacturing
Operations
Financial
Services
Operations
Adjustments
Condensed
Consolidated
Cash Flows
(Dollars in Millions)
For the three months ended July 31, 2011
Cash flows from operations
$
64
$
249
$
-
$
313 Cash flows from investing / capital expenditures:
(129)
15
118
4
Cash flows from financing / debt pay down
-
(259)
-
(259)
Effect of exchange rate changes
(1)
(3)
-
(4)
Net cash flows
$
(66)
$
2
$
118
$
54 Blue Diamond Consolidation
-
-
-
-
Beginning cash, cash equivalents and marketable securities balance
1,079
49
(738)
390
Ending cash, cash equivalents and marketable securities balance
$ 1,013
$
51
$
(620)
$
444 |
3
Quarter 2011 Earnings Call Sept. 7, 2011
rd
NYSE: NAV
65
65
SEC Regulation G
Three and nine months ended July 31, 2011 and 2010
See following slide for explanation of adjustments.
2011
2010
2011
2010
Revised
(A)
Revised
(A)
(in millions, except per share data)
Net income (loss) attributable to Navistar International Corporation
$ 1,400
$ 117
$ 1,468
$ 179
Plus:
Engineering
integration
costs
(B)
15
-
41
-
Restructuring
of
North
American
manufacturing
operations
(C)
122
-
122
-
Ford
restructuring
and
related
charges
(benefits)
(D)
-
(10)
-
(27)
Less:
Income
tax
valuation
allowance
release
(E)
1,476
-
1,476
-
Adjusted net income attributable to Navistar International Corporation
$ 61
$ 107
$ 155
$ 152
2011
2010
2011
2010
Revised
(A)
Revised
(A)
(in millions)
Diluted earnings (loss) per share attributable to Navistar International Corporation
$ 18.24
$ 1.56
$ 19.04
$ 2.44
Effect
of
adjustments
on
diluted
earnings
per
share
attributable
to
Navistar
International
Corporation
(17.45)
(0.12)
(17.03)
(0.36)
Adjusted diluted earnings per share attributable to Navistar International Corporation
$ 0.79
$ 1.44
$ 2.01
$ 2.08
Diluted weighted shares outstanding
76.8
74.3
77.1
73.1
Adjusted net income attributable to Navistar International Corporation reconciliation:
Adjusted diluted earnings per share attributable to Navistar International Corporation
reconciliation: Three Months Ended
July 31,
Nine Months Ended
July 31,
Three Months Ended
July 31,
Nine Months Ended
July 31, |
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
NYSE: NAV
66
66
SEC Regulation G
Three and nine months ended July 31, 2011 and 2010
(Continued)
(A)
Net income attributable to Navistar International Corporation has been revised to
reflect a retrospective change in accounting principle. See Note 1,
Summary of significant accounting policies of our Form 10Q for additional information.
(B)
Engineering
integration
costs
relate
to
the
consolidation
of
our
truck
and
engine
engineering
operations
as
well
as
the
move
of
our
world
headquarters. These costs include restructuring charges for activities at our Fort
Wayne facility of $4 million and $23 million for the three and nine months
ended July 31, 2011, respectively. The restructuring charges recorded are based on restructuring plans that have been committed to by
management and are based upon management's best estimates of future events. Changes
to the estimates may require future adjustments to the restructuring
liabilities. We also incurred an additional $11 million and $18 million of other related costs for the three and nine months ended July 31,
2011, respectively. Our manufacturing segment recognized $12 million and $33
million of the engineering integration costs for the three and nine months
ended July 31, 2011, respectively. For the remainder of 2011, we expect to incur approximately $36 million of additional charges related to
these activities and between $80 million and $110 million of additional charges in
2012.We continue to develop plans for efficient transitions related to these
activities and the optimization of our operations and management structure.
(C)
Restructuring of North American manufacturing operations are charges primarily
related to our plans to close our Chatham, Ontario heavy truck plant
and
Workhorse
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. These costs include
restructuring charges of $53 million and related charges of $5 million for
the three and nine months ended July 31, 2011. The restructuring and related charges recorded are based on restructuring plans that have been
committed
to
by
management
and
are
based
upon
management's
best
estimates
of
future
events.
Changes
to
the
estimates
may
require
future
adjustments to the restructuring liabilities. In addition, the Company recognized
$64 million of impairment charges related to certain intangible assets and
property plant and equipment primarily related to these facilities. The Truck segment recognized $119 million of restructuring of North American
manufacturing
operation
charges
for
the
three
and
nine
months
ended
July
31,
2011.
We
expect
to
incur
$40
million
to
$90
million
of
additional
charges in future periods related to these activities.
(D)
Ford
restructuring
and
related
charges
(benefits)
are
charges
and
benefits
recognized
in
2010
related
to
restructuring
activity
at
our
Indianapolis
Casting Corporation and Indianapolis Engine Plant. The net benefits were included
in Restructuring charges in our Engine segment. (E)
In the third quarter of 2011, the Company recognized an income tax benefit of
$1.476 billion from the release of a portion of our income tax valuation
allowance. Adjustments included in the above schedule have not been adjusted
to reflect their income tax effect as the adjustments are intended to represent the
impact on the Companys consolidated statement of operations without the
incremental income tax effect that would result from the release of the
income tax valuation allowance. The charges related to our Canadian operations
would not be impacted as a full income tax valuation allowance remains for
Canada. In addition, on a non-GAAP basis no incremental income tax for the three and nine months ended July 31, 2011 is presented
because the cumulative impact from the increased effective tax rate was offset by
the tax benefit from restructuring and impairment charges in the
quarter. |
3 Quarter 2011 Earnings Call
Sept. 7, 2011
rd
NYSE: NAV
67
67
SEC Regulation G
Manufacturing Segment Profit Three and nine months ended July 31,
2011 and 2010
(A)
Net income attributable to Navistar International Corporation has been revised to
reflect a retrospective change in accounting principle. See Note 1, Summary of significant accounting policies of our Form 10Q for
additional information.
(B)
Engineering integration costs
relate
to
the
consolidation
of
our
truck
and
engine
engineering
operations
as
well
as
the
move
of
our
world
headquarters.
These
costs
include
restructuring
charges
for
activities
at
our
Fort
Wayne
facility
of
$4
million
and
$23
million
for
the
three
and
nine
months
ended
July
31,
2011,
respectively.
The
restructuring
charges
recorded
are
based
on
restructuring
plans
that
have
been
committed
to by
management and are based upon management's best estimates of future events. Changes
to the estimates may require future adjustments to the restructuring liabilities. We also incurred an additional $11 million and $18
million of other related costs for the three and nine months ended July 31, 2011,
respectively. Our manufacturing segment recognized $12 million and $33 million of the engineering integration costs for the three and nine
months ended July 31, 2011, respectively. For the remainder of 2011, we expect to
incur approximately $36 million of additional charges related to these activities and between $80 million and $110 million of additional
charges in 2012.We continue to develop plans for efficient transitions related to
these activities and the optimization of our operations and management structure.
(C)
Restructuring of North American manufacturing operations are charges primarily
related to our plans to close our Chatham, Ontario heavy truck plant and Workhorse 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. These costs include restructuring charges of $53 million and related charges of
$5 million for the three and nine months ended July 31, 2011. The restructuring and
related charges recorded are based on restructuring plans that have been committed to by management and are based upon
management's best estimates of future events. Changes to the estimates may require
future adjustments to the restructuring liabilities. In addition, the Company recognized $64 million of impairment charges related to
certain intangible assets and property plant and equipment primarily related to
these facilities. The Truck segment recognized $119 million of restructuring of North American manufacturing operation charges for the three
and nine months ended July 31, 2011. We expect to incur $40 million to $90 million
of additional charges in future periods related to these activities. (D)
Ford restructuring
and
related
charges
(benefits)
are
charges
and
benefits
recognized
in
2010
related
to
restructuring
activity
at
our
Indianapolis
Casting
Corporation
and
Indianapolis
Engine
Plant.
The
net
benefits
were included in Restructuring charges in our Engine segment.
Manufacturing segment profit and adjusted manufacturing segment profit
2011
2010
2011
2010
Revised
(A)
Revised
(A)
(in millions)
Net income (loss) attributable to Navistar International Corporation
$ 1,400
$ 117
$ 1,468
$ 179
Less:
Financial services segment profit
30
33
102
61
Corporate and eliminations
(120)
(175)
(367)
(460)
Income tax benefit (expense)
1,463
(19)
1,458
(17)
Manufacturing segment profit
$ 27
$ 278
$ 275
$ 595
Plus:
Engineering integration costs
(B)
12
-
33
-
Restructuring of North American manufacturing operations
(C)
119
-
119
-
Ford restructuring and related charges (benefits)
(D)
-
(10)
-
(17)
Adjusted manufacturing segment profit
$ 158
$ 268
$ 427
$ 578
Three Months Ended July 31,
Nine Months Ended July 31, |
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