2014

Navistar Reports Third Quarter Results - Reports third quarter net loss of $247 million

- Ends quarter with $1.09 billion in manufacturing cash

- Sees Class 8 order share jump to more than 20% in the quarter

- Expects Cummins ISB engine to drive medium-duty truck and bus recovery in 2014

- Initiates new cost reduction actions projected to generate $50-$60 million in savings

LISLE, Ill., Sept. 4, 2013 /PRNewswire/ -- Navistar International Corporation (NYSE: NAV) today announced a third quarter 2013 net loss of $247 million, or $3.06 per diluted share, compared to third quarter 2012 net income of $84 million, or $1.22 per diluted share. Excluding discontinued operations, Navistar recorded a third quarter 2013 loss from continuing operations of $237 million, or $2.94 per diluted share, compared to third quarter 2012 income from continuing operations of $80 million, or $1.16 per diluted share. Third quarter 2012 results included an income tax benefit of $188 million that primarily resulted from a change in the company's estimated annual effective tax rate.

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The year-over-year decline was primarily driven by lower volumes in its core North America truck business due to the impact of the company's transition to SCR-based products and weaker industry conditions. This was partially offset by a $36 million reduction in engineering and product development costs and $14 million in lower selling, general and administrative (SG&A) expenses.

Total revenue in the quarter was $2.9 billion, down 12 percent from the third quarter of 2012. The decline reflects lower net sales across all classes of its core truck business, due to the impact of the company's SCR emissions transition for both heavy- and medium-duty vehicles and a nine percent drop in overall industry demand in North America during the quarter. This was partially offset by stronger year-over-year volumes in the South America engine business.

Navistar finished the third quarter 2013 with $1.09 billion in manufacturing cash and marketable securities, delivering at the high end of its cash guidance range of $1.0 billion to $1.1 billion, as a result of strong cash management and working capital performance.

"We were pleased with our strong cash performance in the quarter. We also continued to make solid progress on key elements of our Drive to Deliver turnaround plan, especially the on-time launches of our new Class 8 product offerings, which drove Navistar's order share up to more than 20 percent in the quarter, compared to 12 percent in the second quarter.  We're encouraged by the growing customer acceptance of our new products," said Troy A. Clarke, Navistar's president and chief executive officer. "At the same time, we clearly need to accelerate progress with our financial results, and we are already implementing additional cost reduction and business improvement actions to counter our near-term volume challenges. This includes resizing our company to match our current business environment."

Earlier this month, the company began implementing new cost-reduction initiatives, including an enterprise-wide reduction in force, which will impact a combined 500 salaried employees and long-term contractor positions globally. The company expects to complete nearly all of these job reductions by the end of its 2013 fiscal year, and projects these and related activities will generate an additional $50 to $60 million in annual savings starting in its fiscal year 2014.

"These actions are always difficult, but we are committed to making tough choices to return Navistar to profitability," Clarke added.

The company is also dedicated to moving forward quickly on the next critical product strategy phase in its turnaround—offering selective catalytic reduction (SCR) emissions aftertreatment on its medium-duty vehicles. Just yesterday, Navistar announced plans to expand its medium-duty engine offerings to include the Cummins ISB 6.7-liter engine for International® DuraStar® and IC Bus CE Series vehicles. The company's first saleable units will be built this month and Navistar has set an okay-to-ship date for trucks in late December.

"Adding the Cummins ISB allows us to get medium-duty SCR offerings into the market faster while providing customers with a market-proven engine," said Jack Allen, Navistar's executive vice president and chief operating officer. "We expect it will open the door to new customers, while strengthening demand with existing ones. In fact, a number of customers had already approached us about adding this choice. As a result, we're convinced the ISB will put us on a positive path to recapture medium-duty truck and school bus sales and market share."

As for fourth quarter guidance, the company projects it will finish the year with manufacturing cash and marketable securities in the range of $1.0 billion to $1.1 billion.

Summary of Financial Results:



Third Quarter


First Nine Months

(in millions, except per share data)

2013


2012


2013


2012

Sales and revenues, net

$

2,861


$

3,246


$

8,024


$

9,516

Segment Results:








Truck

$

(58)


$

(26)


$

(225)


$

(98)

Engine

(86)


(47)


(251)


(275)

Parts

76


73


253


164

Financial Services

23


22


64


75









Loss from continuing operations before income taxes

$

(211)


$

(96)


$

(617)


$

(554)

Income (loss) from continuing operations, net of tax(A)

(237)


80


(704)


(202)

Net loss(A)

(247)


84


(744)


(241)









Diluted loss per share from continuing operations(A)

$

(2.94)


$

1.16


$

(8.76)


$

(2.92)

Diluted loss per share(A)

(3.06)


1.22


(9.25)


(3.49)






(A)

Amounts attributable to Navistar International Corporation.

SEGMENT REPORTING
Truck – For the third quarter 2013, the truck segment reported a loss of $58 million, compared with a $26 million loss for the same period one year ago, on lower net sales of $1.92 billion, a 15 percent decrease year-over-year. The segment's loss was primarily driven by a decline in traditional truck volumes due to lower industry conditions and the impact of the company's emissions transition, as well as lower military volumes and service revenue. The loss was partially offset by lower engineering and product development costs and lower SG&A expenses.

Engine – For the third quarter 2013, the engine segment reported a loss of $86 million, compared to a $47 million loss in third quarter 2012. Net sales were 14 percent lower year-over-year at $723 million. The loss was driven by lower volumes in the United States and higher adjustments to pre-existing warranties and partially offset by reduced engineering and product development costs.

Parts – For the third quarter 2013, the parts segment reported a profit of $76 million, a four percent improvement versus third quarter 2012, despite a nine percent decline ($51 million) in net sales year-over-year. Lower SG&A expenses more than offset the impact of lower military parts sales. 

Financial Services – For the third quarter 2013, the financial services segment profit was $23 million, up slightly versus third quarter 2012, despite net revenues being down five percent year-over-year, as a result of the ongoing transition of retail loans to GE Capital. Overhead cost reductions more than offset the lower net interest margin amount.

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, and IC Bus brand school and commercial buses. The company also provides truck and diesel engine service parts. Another affiliate offers financing services. Additional information is available at www.Navistar.com.

Forward-Looking Statement
Information provided and statements contained in this report that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Such forward-looking statements only speak as of the date of this report and the company assumes no obligation to update the information included in this report. Such forward-looking statements include information concerning our possible or assumed future results of operations, including descriptions of our business strategy. These statements often include words such as "believe," "expect," "anticipate," "intend," "plan," "estimate," or similar expressions. These statements are not guarantees of performance or results and they involve risks, uncertainties, and assumptions. For a further description of these factors, see the risk factors set forth in our filings with the Securities and Exchange Commission, including our annual report on Form 10-K for the fiscal year ended October 31, 2012. Although we believe that these forward-looking statements are based on reasonable assumptions, there are many factors that could affect our actual financial results or results of operations and could cause actual results to differ materially from those in the forward-looking statements. All future written and oral forward-looking statements by us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to above. Except for our ongoing obligations to disclose material information as required by the federal securities laws, we do not have any obligations or intention to release publicly any revisions to any forward-looking statements to reflect events or circumstances in the future or to reflect the occurrence of unanticipated events.


 

 

 


Navistar International Corporation and Subsidiaries

 

Consolidated Statements of Operations

(Unaudited)



Three Months Ended
July 31,


Nine Months Ended
July 31,

(in millions, except per share data)

2013


2012


2013


2012

Sales and revenues








Sales of manufactured products, net

$

2,820


$

3,204


$

7,905


$

9,387

Finance revenues

41


42


119


129

       Sales and revenues, net

2,861


3,246


8,024


9,516

Costs and expenses








Costs of products sold

2,547


2,800


7,196


8,350

Restructuring charges

6


4


14


23

Asset impairment charges

17



17


10

Selling, general and administrative expenses

308


322


905


1,049

Engineering and product development costs

99


135


310


402

Interest expense

76


59


240


182

Other expense (income), net

22


12


(35)


33

       Total costs and expenses

3,075


3,332


8,647


10,049

Equity in income (loss) of non-consolidated affiliates

3


(10)


6


(21)

Loss from continuing operations before income taxes

(211)


(96)


(617)


(554)

Income tax benefit (expense)

(16)


188


(53)


387

Income (loss) from continuing operations

(227)


92


(670)


(167)

Income (loss) from discontinued operations, net of tax

(10)


4


(40)


(39)

Net income (loss)

(237)


96


(710)


(206)

Less: Net income attributable to non-controlling interests

10


12


34


35

Net income (loss) attributable to Navistar International Corporation

$

(247)


$

84


$

(744)


$

(241)









Amounts attributable to Navistar International Corporation common shareholders:









Income (loss) from continuing operations, net of tax

$

(237)


$

80


$

(704)


$

(202)

Income (loss) from discontinued operations, net of tax

(10)


4


(40)


(39)

Net income (loss)

$

(247)


$

84


$

(744)


$

(241)










Earnings (loss) per share:








Basic:








       Continuing operations

$

(2.94)


$

1.16


$

(8.76)


$

(2.92)

       Discontinued operations

(0.12)


0.06


(0.49)


(0.57)


$

(3.06)


$

1.22


$

(9.25)


$

(3.49)

Diluted:









       Continuing operations

$

(2.94)


$

1.16


$

(8.76)


$

(2.92)

       Discontinued operations

(0.12)


0.06


(0.49)


(0.57)


$

(3.06)


$

1.22


$

(9.25)


$

(3.49)









Weighted average shares outstanding:








       Basic

80.6


68.7


80.4


69.1

       Diluted

80.6


68.9


80.4


69.1






Navistar International Corporation and Subsidiaries

 

Consolidated Balance Sheets


(in millions, except per share data)

July 31,
2013


October 31,
2012

ASSETS

(Unaudited)



Current assets




Cash and cash equivalents

$

425


$

1,087

Restricted cash and cash equivalents

78


Marketable securities

708


466

Trade and other receivables, net

777


749

Finance receivables, net

1,590


1,663

Inventories

1,336


1,537

Deferred taxes, net

77


74

Other current assets

273


261

       Total current assets

5,264


5,837

Restricted cash

92


161

Trade and other receivables, net

30


94

Finance receivables, net

381


486

Investments in non-consolidated affiliates

80


62

Property and equipment (net of accumulated depreciation and amortization of $2,393 and $2,228)

1,714


1,660

Goodwill

255


280

Intangible assets (net of accumulated amortization of $91 and $78)

143


171

Deferred taxes, net

172


189

Other noncurrent assets

110


162

Total assets

$

8,241


$

9,102

LIABILITIES and STOCKHOLDERS' DEFICIT




Liabilities




Current liabilities




Notes payable and current maturities of long-term debt

$

820


$

1,205

Accounts payable

1,546


1,686

Other current liabilities

1,569


1,462

       Total current liabilities

3,935


4,353

Long-term debt

3,904


3,566

Postretirement benefits liabilities

3,285


3,405

Deferred taxes, net

38


42

Other noncurrent liabilities

1,012


996

Total liabilities

12,174


12,362

Redeemable equity securities

4


5

Stockholders' deficit




Series D convertible junior preference stock

3


3

Common stock (86.8 and 86.0 shares issued, respectively; and $0.10 par value per share and 220 shares authorized, at both dates)

9


9

Additional paid in capital

2,459


2,440

Accumulated deficit

(3,909)


(3,165)

Accumulated other comprehensive loss

(2,279)


(2,325)

Common stock held in treasury, at cost (6.4 and 6.8 shares, respectively)

(255)


(272)

Total stockholders' deficit attributable to Navistar International Corporation

(3,972)


(3,310)

Stockholders' equity attributable to non-controlling interests

35


45

Total stockholders' deficit

(3,937)


(3,265)

Total liabilities and stockholders' deficit

$

8,241


$

9,102











Navistar International Corporation and Subsidiaries

 

Condensed Consolidated Statements of Cash Flows

(Unaudited)



Nine Months Ended
July 31,

(in millions)

2013


2012

Cash flows from operating activities




Net loss

$

(710)


$

(206)

Adjustments to reconcile net loss to cash provided by operating activities:




       Depreciation and amortization

225


209

       Depreciation of equipment leased to others

105


37

       Deferred taxes, including change in valuation allowance

19


(405)

       Impairment of property and equipment and intangible assets

25


38

       Gain on sales of investments and businesses, net

(13)


       Amortization of debt issuance costs and discount

43


31

       Stock-based compensation

19


16

       Provision for doubtful accounts, net of recoveries

16


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

5


27

       Write-off of debt issuance cost and discount

6


8

       Other non-cash operating activities

(60)


5

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

354


586

            Net cash provided by operating activities

34


346

Cash flows from investing activities




Purchases of marketable securities

(1,070)


(672)

Sales or maturities of marketable securities

828


1,230

Net change in restricted cash and cash equivalents

(9)


48

Capital expenditures

(136)


(250)

Purchases of equipment leased to others

(351)


(49)

Proceeds from sales of property and equipment

22


12

Investments in non-consolidated affiliates

(25)


(18)

Business acquisitions, net of cash received


(12)

Proceeds from sales of affiliates

50


1

Acquisition of intangibles


(14)

            Net cash provided by (used in) investing activities

(691)


276

Cash flows from financing activities




Proceeds from issuance of securitized debt

279


1,155

Principal payments on securitized debt

(501)


(1,532)

Proceeds from issuance of non-securitized debt

390


717

Principal payments on non-securitized debt

(438)


(582)

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

87


(195)

Principal payments under financing arrangements and capital lease obligations

(55)


(30)

Debt issuance costs

(16)


(20)

Proceeds from financed lease obligations

276


Issuance of common stock

14


Purchase of treasury stock


(75)

Proceeds from exercise of stock options

9


2

Dividends paid by subsidiaries to non-controlling interest

(35)


(44)

Other financing activities

4


(3)

            Net cash provided by (used in) financing activities

14


(607)

Effect of exchange rate changes on cash and cash equivalents

(19)


(7)

Increase (decrease) in cash and cash equivalents

(662)


8

Cash and cash equivalents at beginning of the period

1,087


539

Cash and cash equivalents at end of the period

$

425


$

547

 

Navistar International Corporation and Subsidiaries

Segment Reporting
(Unaudited)

We define segment profit (loss) as net income (loss) from continuing operations attributable to Navistar International Corporation excluding income tax benefit (expense). Operating results for interim reporting periods are not necessarily indicative of annual operating results.

Beginning in the first quarter of 2013, the Company began reporting the operating results of WCC and certain operating results of Monaco as discontinued operations in the Company's consolidated statements of operations. The 2012 selected financial information has been restated to reflect this change.

The following tables present selected financial information for our reporting segments:

(in millions)

Truck


Engine


Parts


Financial

Services(A)


Corporate

and

Eliminations


Total

Three Months Ended July 31, 2013












External sales and revenues, net

$

1,909


$

439


$

472


$

41


$


$

2,861

Intersegment sales and revenues

15


284


19


20


(338)


       Total sales and revenues, net

$

1,924


$

723


$

491


$

61


$

(338)


$

2,861













Income (loss) from continuing operations attributable to NIC, net of tax

$

(58)


$

(86)


$

76


$

23


$

(192)


$

(237)

Income tax expense





(16)


(16)

       Segment profit (loss)

$

(58)


$

(86)


$

76


$

23


$

(176)


$

(221)













Depreciation and amortization(B)

$

40


$

30


$

3


$

10


$

5


$

88

Interest expense




17


59


76

Equity in income of non-consolidated affiliates


3





3

Capital expenditures(B)(C)

16


8


1



4


29

 


(in millions)

Truck


Engine


Parts


Financial

Services(A)


Corporate

and

Eliminations


Total

Three Months Ended July 31, 2012












External sales and revenues, net

$

2,250


$

441


$

513


$

42


$


$

3,246

Intersegment sales and revenues

13


399


29


22


(463)


       Total sales and revenues, net

$

2,263


$

840


$

542


$

64


$

(463)


$

3,246













Income (loss) from continuing operations attributable to NIC, net of tax

$

(26)


$

(47)


$

73


$

22


$

58


$

80

Income tax benefit





188


188

       Segment profit (loss)

$

(26)


$

(47)


$

73


$

22


$

(130)


$

(108)













Depreciation and amortization(B)

$

41


$

28


$

2


$

9


$

6


$

86

Interest expense




20


39


59

Equity in income (loss) of non-consolidated affiliates

(12)


1


1




(10)

Capital expenditures(B)(C)

21


39


6


1


7


74

 

 

(in millions)

Truck


Engine


Parts


Financial

Services(A)


Corporate
and
Eliminations


Total

Nine Months Ended July 31, 2013












External sales and revenues, net

$

5,080


$

1,309


$

1,516


$

119


$


$

8,024

Intersegment sales and revenues

41


898


57


59


(1,055)


       Total sales and revenues, net

$

5,121


$

2,207


$

1,573


$

178


$

(1,055)


$

8,024













Income (loss) from continuing operations attributable to NIC, net of tax

$

(225)


$

(251)


$

253


$

64


$

(545)


$

(704)

Income tax expense





(53)


(53)

       Segment profit (loss)

$

(225)


$

(251)


$

253


$

64


$

(492)


$

(651)













Depreciation and amortization(B)

$

174


$

102


$

8


$

29


$

17


$

330

Interest expense




52


188


240

Equity in income of non-consolidated affiliates


2


4




6

Capital expenditures(B)(C)

47


77


2


1


9


136

 

(in millions)

Truck


Engine


Parts


Financial

Services(A)


Corporate
and
Eliminations


Total

Nine Months Ended July 31, 2012













External sales and revenues, net

$

6,677


$

1,301


$

1,409


$

129


$


$

9,516

Intersegment sales and revenues

26


1,292


98


70


(1,486)


       Total sales and revenues, net

$

6,703


$

2,593


$

1,507


$

199



$

(1,486)


$

9,516













Income (loss) from continuing operations attributable to NIC, net of tax

$

(98)


$

(275)


$

164


$

75


$

(68)


$

(202)

Income tax benefit





387


387

       Segment profit (loss)

$

(98)


$

(275)


$

164


$

75


$

(455)


$

(589)













Depreciation and amortization(B)

$

111


$

87


$

8


$

25


$

15


$

246

Interest expense




67


115


182

Equity in income (loss) of non-consolidated affiliates

(27)


2


4




(21)

Capital expenditures(B)(C)

53


116


18


2


61


250

 


(in millions)

Truck(B)


Engine


Parts


Financial

Services


Corporate

and

Eliminations


Total

Segment assets, as of:












July 31, 2013

$

2,052


$

1,581


$

657


$

2,444


$

1,507


$

8,241

October 31, 2012

2,118


1,777


707


2,563


1,937


$

9,102







(A)

Total sales and revenues in the Financial Services segment include interest revenues of $47 million and $140 million for the three and nine months ended July 31, 2013, respectively, and $53 million and $168 million for three and nine months ended July 31, 2012, respectively.

(B)

The segment assets as of October 31, 2012 includes amounts related to discontinued operations.

(C)

Exclusive of purchases of equipment leased to others.

SEC Regulation G Non-GAAP Reconciliation
The financial measures presented below are unaudited and not in accordance with, or an alternative for, financial measures presented in accordance with U.S. generally accepted accounting principles ("GAAP"). The non-GAAP financial information presented herein should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.

Manufacturing cash, cash equivalents, and marketable securities represents the Company's consolidated cash, cash equivalents, and marketable securities excluding cash, cash equivalents, and marketable securities of our financial services operations. We include marketable securities with our cash and cash equivalents when assessing our liquidity position as our investments are highly liquid in nature.

Manufacturing revenue represents the Sales of manufactured products, net, from the Company's consolidated statements of operations.

Manufacturing segment cash and cash equivalents and marketable securities reconciliation:


As of July 31, 2013

(in millions)

Manufacturing Operations


Financial Services Operations


Consolidated Balance Sheet

Assets






Cash and cash equivalents

$

413


$

12


$

425

Marketable securities

674


34


708

Total Cash and cash equivalents and Marketable securities

$

1,087


$

46


$

1,133

 

SOURCE Navistar International Corporation



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