Navistar Reports First Quarter Results
- Navistar reports net loss of $248 million on revenues of $2.2 billion
- Ends quarter with $1.1 billion in manufacturing cash, at high end of guidance
- EBITDA better than guidance, excluding one-time items and pre-existing warranty
- Finishes Q1 with 56 percent backlog increase year-over-year
- Delivers $67 million in additional structural cost savings

LISLE, Ill., March 5, 2014 /PRNewswire/ -- Navistar International Corporation (NYSE: NAV) today announced a first quarter 2014 net loss of $248 million, or $3.05 per diluted share, compared to a first quarter 2013 net loss of $123 million, or $1.53 per diluted share. Revenues in the quarter were $2.2 billion, down from $2.6 billion in the first quarter of 2013. Lower sales volumes, primarily due to the company's medium-duty emissions strategy transition and lower military sales, drove the year-over-year performance decline, which was partially offset by $67 million in reduced structural costs. First quarter 2014 results include an unfavorable impact of $21 million due to fluctuations in foreign exchange rates and $18 million in asset impairment charges.

Navistar Logo.

"We signaled that this would be a tough quarter due to our mid-range product transition, the ongoing reduced sales in our military business, and because the first quarter, historically, represents the weakest operational period of the year for us. Given all this, we are encouraged we hit our cash and adjusted EBITDA guidance," said Troy A. Clarke, Navistar's president and chief executive officer. "Clearly, we have more hard work to do to rebuild our market share and further reduce our costs, but we continue to make progress on our Drive to Deliver, and we feel we're off to a solid start in 2014."

Navistar delivered at the high end of its first quarter manufacturing cash guidance range of $1.0 billion to $1.1 billion, ending the quarter with approximately $1.1 billion in manufacturing cash, cash equivalents and marketable securities. First quarter 2014 EBITDA was a loss of $110 million, which included $52 million in pre-existing warranty adjustments and a net $21 million in one-time items. Adjusted EBITDA was a loss of $37 million, which was better than the company's first quarter guidance of a loss between $50 million to $100 million, excluding pre-existing warranty and one-time items.

First quarter product highlights included the successful launch of the Cummins ISB engine offering in the medium-duty International® DuraStar® and IC Bus™ CE Series school bus. These and other actions helped the company achieve Class 6/7 retail share of 22 percent and Class 8 retail share of 18 percent in January. Both represented the highest monthly retail share performance Navistar has attained in the last six months, and helped offset lower than expected retail performance in the first two months of the quarter. The company finished the quarter with an order backlog 56 percent higher than this time one year ago. 

Also during the quarter, Navistar swept the competition at this year's American Truck Dealers Convention and Exposition in January. Selected based on a number of criteria, including innovation and design, safety and driver and owner satisfaction, the International ProStar® with Cummins ISX15 engine and International TerraStar® 4x4 were named "2014 Heavy-Duty Commercial Truck of the Year" and "2014 Medium-Duty Commercial Truck of the Year," respectively.

Navistar continued engine restructuring efforts last month when it announced plans to consolidate mid-range engine manufacturing into its Melrose Park, Ill., engine plant. Once completed later this summer, these actions – which include idling the Huntsville, Ala., mid-range engine plant – are expected to reduce Navistar's operating costs by more than $22 million annually.

As a next step in its engine business restructuring, the company is announcing it will add selective catalytic reduction (SCR) emissions technology to its high horsepower inline six-cylinder (I-6) engine platforms to complement the recent launch of the Cummins ISB. The company is already taking orders with deliveries scheduled for this summer.

"These actions will help us deliver on one of our biggest opportunities—reclaiming our market position in medium-duty and bus, which historically have been important businesses for us and our dealers," Clarke said. "We're gaining momentum in the marketplace. As we fully launch our mid-range SCR portfolio in the coming months and complete this phase of our engine restructuring, we anticipate we will improve our financial performance throughout 2014 and remain on path to achieving our guidance of an 8 to 10 percent EBITDA margin run rate exiting 2015."

Summary of Financial Results:

 

Quarters Ended

January 31,

(in millions, except per share data)

2014

  

2013

Sales and revenues, net

$

2,208

    

$

2,637

  

Segment Results:

      

North America Truck

$

(207)

    

$

(101)

  

North America Parts

104

    

117

  

Global Operations

(33)

    

(10)

  

Financial Services

23

    

22

  
       

Loss from continuing operations, net of tax(A)

$

(249)

    

$

(114)

  

Net loss(A)

(248)

    

(123)

  
       

Diluted loss per share from continuing operations(A)

$

(3.07)

    

$

(1.42)

  

Diluted loss per share(A)

(3.05)

    

(1.53)

  

_________________________

(A) 

Amounts attributable to Navistar International Corporation

 

North America Truck — For the first quarter 2014, the North America truck segment recorded a loss of $207 million, compared with a year-ago first quarter loss of $101 million.  The year-over-year deterioration was driven by an 18 percent drop in net sales due to lower traditional truck volumes, primarily driven by the company's mid-range emissions strategy transition and significantly lower demand for the company's military products due to reduced spending in the tactical wheeled vehicles segment. Reduced SG&A expenses and engineering and product development costs helped partially offset the impact of lower revenues. Additionally, the segment incurred asset impairment charges of $18 million related to the company's ongoing evaluation of certain North American truck portfolio assets and $3 million of charges related to the idling of the Huntsville mid-range engine plant.

North America Parts — For the first quarter 2014, the North America parts segment recorded a profit of $104 million, compared with a year-ago first quarter profit of $117 million. The year-over-year decrease primarily was driven by lower military sales, which partially were offset by lower SG&A expenses resulting from the company's ongoing cost-reduction initiatives.

Global Operations — For the first quarter 2014, global operations recorded a loss of $33 million, compared with a year-ago first quarter loss of $10 million.  The year-over-year decline was driven by lower volumes in Navistar's South America engine operations and unfavorable exchange rate fluctuations, primarily in the Brazilian Real, as well as lower export truck sales.

Financial Services — For the first quarter 2014, the financial services segment recorded a profit of $23 million, comparable to first quarter 2013 profit of $22 million. Financial Service's debt-to-equity ratio stood at 2.4:1 at the end of the first quarter 2014.

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, 2013. 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)
 
 

Quarters Ended

January 31,

(in millions, except per share data)

2014

  

2013

Sales and revenues

      

Sales of manufactured products, net

2,169

    

2,598

  

Finance revenues

39

    

39

  

Sales and revenues, net

2,208

    

2,637

  

Costs and expenses

      

Costs of products sold

2,014

    

2,286

  

Restructuring charges

3

    

$

2

  

Asset impairment charges

18

    

—

  

Selling, general and administrative expenses

239

    

285

  

Engineering and product development costs

90

    

111

  

Interest expense

82

    

74

  

Other expense (income), net

14

    

(38)

  

Total costs and expenses

2,460

    

2,720

  

Equity in loss of non-consolidated affiliates

—

    

(1)

  

Loss from continuing operations before income taxes

(252)

    

(84)

  

Income tax benefit (expense)

12

    

(15)

  

Loss from continuing operations

(240)

    

(99)

  

Income (loss) from discontinued operations, net of tax

1

    

(9)

  

Net loss

(239)

    

(108)

  

Less: Net income attributable to non-controlling interests

9

    

15

  

Net loss attributable to Navistar International Corporation

$

(248)

    

$

(123)

  
       

Amounts attributable to Navistar International Corporation common shareholders:

      

Loss from continuing operations, net of tax

$

(249)

    

$

(114)

  

Income (loss) from discontinued operations, net of tax

1

    

(9)

  

Net loss

$

(248)

    

$

(123)

  
       

Earnings (loss) per share:

      

Basic:

      

Continuing operations

$

(3.07)

    

$

(1.42)

  

Discontinued operations

0.02

    

(0.11)

  
 

$

(3.05)

    

$

(1.53)

  

Diluted:

      

Continuing operations

$

(3.07)

    

$

(1.42)

  

Discontinued operations

0.02

    

(0.11)

  
 

$

(3.05)

    

$

(1.53)

  
       

Weighted average shares outstanding:

      

Basic

81.2

    

80.2

  

Diluted

81.2

    

80.2

  

 

 

Navistar International Corporation and Subsidiaries

Consolidated Balance Sheets
       
 

January 31,

  

October 31,

(in millions, except per share data)

2014

  

2013

ASSETS

(Unaudited)

    

Current assets

      

Cash and cash equivalents

$

549

    

$

755

  

Marketable securities

630

    

830

  

Trade and other receivables, net

553

    

737

  

Finance receivables, net

1,461

    

1,597

  

Inventories

1,382

    

1,210

  

Deferred taxes, net

74

    

72

  

Other current assets

249

    

258

  

Total current assets

4,898

    

5,459

  

Restricted cash

115

    

91

  

Trade and other receivables, net

28

    

29

  

Finance receivables, net

303

    

338

  

Investments in non-consolidated affiliates

75

    

77

  

Property and equipment (net of accumulated depreciation and amortization of $2,465 and $2,440, respectively)

1,700

    

1,741

  

Goodwill

170

    

184

  

Intangible assets (net of accumulated amortization of $100 and $97, respectively)

112

    

138

  

Deferred taxes, net

155

    

159

  

Other noncurrent assets

98

    

99

  

Total assets

$

7,654

    

$

8,315

  

LIABILITIES and STOCKHOLDERS' DEFICIT

      

Liabilities

      

Current liabilities

      

Notes payable and current maturities of long-term debt

$

1,259

    

$

1,163

  

Accounts payable

1,430

    

1,502

  

Other current liabilities

1,564

    

1,596

  

Total current liabilities

4,253

    

4,261

  

Long-term debt

3,605

    

3,922

  

Postretirement benefits liabilities

2,531

    

2,564

  

Deferred taxes, net

25

    

33

  

Other noncurrent liabilities

1,117

    

1,136

  

Total liabilities

11,531

    

11,916

  

Redeemable equity securities

2

    

4

  

Stockholders' deficit

      

Series D convertible junior preference stock

3

    

3

  

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

9

    

9

  

Additional paid in capital

2,478

    

2,477

  

Accumulated deficit

(4,311)

    

(4,063)

  

Accumulated other comprehensive loss

(1,861)

    

(1,824)

  

Common stock held in treasury, at cost (5.6 and 6.3 shares, respectively)

(230)

    

(251)

  

Total stockholders' deficit attributable to Navistar International Corporation

(3,912)

    

(3,649)

  

Stockholders' equity attributable to non-controlling interests

33

    

44

  

Total stockholders' deficit

(3,879)

    

(3,605)

  

Total liabilities and stockholders' deficit

$

7,654

    

$

8,315

  

 

 

Navistar International Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)
 
 

Quarter Ended

January 31,

(in millions)

2014

  

2013

Cash flows from operating activities

      

Net loss

$

(239)

    

$

(108)

  

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

      

Depreciation and amortization

55

    

89

  

Depreciation of equipment leased to others

31

    

11

  

Deferred taxes, including change in valuation allowance

(18)

    

(9)

  

Asset impairment charges

18

    

—

  

Amortization of debt issuance costs and discount

14

    

16

  

Stock-based compensation

5

    

5

  

Provision for doubtful accounts, net of recoveries

2

    

1

  

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

2

    

3

  

Other non-cash operating activities

(9)

    

—

  

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

46

    

58

  

Net cash provided by (used in) operating activities

(93)

    

66

  

Cash flows from investing activities

      

Purchases of marketable securities

(378)

    

(482)

  

Sales or maturities of marketable securities

578

    

177

  

Net change in restricted cash and cash equivalents

(24)

    

59

  

Capital expenditures

(21)

    

(72)

  

Purchases of equipment leased to others

(49)

    

(32)

  

Proceeds from sales of property and equipment

10

    

3

  

Investments in non-consolidated affiliates

(2)

    

—

  

Net cash provided by (used in) investing activities

114

    

(347)

  

Cash flows from financing activities

      

Proceeds from issuance of securitized debt

82

    

—

  

Principal payments on securitized debt

(94)

    

(190)

  

Proceeds from issuance of non-securitized debt

47

    

25

  

Principal payments on non-securitized debt

(53)

    

(60)

  

Net decrease in notes and debt outstanding under revolving credit facilities

(197)

    

(32)

  

Principal payments under financing arrangements and capital lease obligations

(4)

    

(47)

  

Debt issuance costs

(3)

    

(1)

  

Proceeds from financed lease obligations

20

    

—

  

Issuance of common stock

—

    

14

  

Proceeds from exercise of stock options

16

    

1

  

Dividends paid by subsidiaries to non-controlling interest

(20)

    

(13)

  

Net cash used in financing activities

(206)

    

(303)

  

Effect of exchange rate changes on cash and cash equivalents

(21)

    

(6)

  

Decrease in cash and cash equivalents

(206)

    

(590)

  

Cash and cash equivalents at beginning of the period

755

    

1,087

  

Cash and cash equivalents at end of the period

$

549

    

$

497

  

 

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

(in millions)

North America Truck

  

North America Parts

  

Global Operations

  

Financial

Services(A)

  

Corporate

and

Eliminations

  

Total

Three Months Ended January 31, 2014

                      

External sales and revenues, net

$

1,277

    

$

597

    

$

295

    

$

39

    

$

—

    

$

2,208

  

Intersegment sales and revenues

88

    

10

    

8

    

16

    

(122)

    

—

  

Total sales and revenues, net

$

1,365

    

$

607

    

$

303

    

$

55

    

$

(122)

    

$

2,208

  

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

$

(207)

    

$

104

    

$

(33)

    

$

23

    

$

(136)

    

$

(249)

  

Income tax benefit

—

    

—

    

—

    

—

    

12

    

12

  

Segment profit (loss)

$

(207)

    

$

104

    

$

(33)

    

$

23

    

$

(148)

    

$

(261)

  

Depreciation and amortization

$

58

    

$

4

    

$

8

    

$

10

    

$

6

    

$

86

  

Interest expense

—

    

—

    

—

    

17

    

65

    

82

  

Equity in income (loss) of non-consolidated affiliates

1

    

1

    

(2)

    

—

    

—

    

—

  

Capital expenditures(B)

12

    

4

    

3

    

1

    

1

    

21

  

 

(in millions)

North America Truck

  

North America Parts

  

Global Operations

  

Financial

Services(A)

  

Corporate

and

Eliminations

  

Total

Three Months Ended January 31, 2013

                      

External sales and revenues, net

$

1,538

    

$

669

    

$

391

    

$

39

    

$

—

    

$

2,637

  

Intersegment sales and revenues

127

    

18

    

15

    

20

    

(180)

    

—

  

Total sales and revenues, net

$

1,665

    

$

687

    

$

406

    

$

59

    

$

(180)

    

$

2,637

  

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

$

(101)

    

$

117

    

$

(10)

    

$

22

    

$

(142)

    

$

(114)

  

Income tax expense

—

    

—

    

—

    

—

    

(15)

    

(15)

  

Segment profit (loss)

$

(101)

    

$

117

    

$

(10)

    

$

22

    

$

(127)

    

$

(99)

  

Depreciation and amortization

$

71

    

$

4

    

$

9

    

$

9

    

$

7

    

$

100

  

Interest expense

—

    

—

    

—

    

18

    

56

    

74

  

Equity in income (loss) of non-consolidated affiliates

2

    

1

    

(4)

    

—

    

—

    

(1)

  

Capital expenditures(B)

65

    

1

    

3

    

—

    

3

    

72

  

 

(in millions)

North America Truck

  

North America Parts

  

Global Operations

  

Financial

Services

  

Corporate

and

Eliminations

  

Total

Segment assets, as of:

                      

January 31,

2014

$

2,309

    

$

701

    

$

994

    

$

2,243

    

$

1,407

    

$

7,654

  

October 31, 2013

2,250

    

716

    

1,162

    

2,355

    

1,832

    

8,315

  

_________________________ 

 

(A)  

Total sales and revenues in the Financial Services segment include interest revenues of $40 million and $47 million for the three months ended January 31, 2014 and 2013 , respectively.

(B)  

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 and are reconciled to the most appropriate GAAP number below.

Manufacturing Cash, Cash Equivalents, and Marketable Securities:

Manufacturing cash, cash equivalents, and marketable securities represents the Company's consolidated cash, cash equivalents, and marketable securities excluding cash, cash equivalents, and marketable securities of our financial services operations. We include marketable securities with our cash and cash equivalents when assessing our liquidity position as our investments are highly liquid in nature. We have chosen to provide this supplemental information to investors, analysts and other interested parties to enable them to perform additional analyses of operating results, to illustrate the results of operations giving effect to the non-GAAP adjustments shown in the below reconciliation, and to provide an additional measure of performance.

Earnings (loss) Before Interest, Income Taxes, Depreciation, and Amortization ("EBITDA"):

We define EBITDA as our consolidated net income (loss) from continuing operations attributable to Navistar International Corporation, net of tax, plus manufacturing interest expense, income taxes, and depreciation and amortization. We believe EBITDA provides meaningful information to the performance of our business and therefore we use it to supplement our GAAP reporting. 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.

Adjusted EBITDA:
We believe that adjusted EBITDA, which excludes certain identified items that we do not considered to be part of our ongoing business, improves the comparability of year to year results, and is representative of our underlying performance. Management 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 reconciliations, and  to provide an additional measure of performance.

Structural costs consists of Selling, general and administrative expenses and Engineering and product development costs.

 

Manufacturing segment cash and cash equivalents and marketable securities reconciliation:
 
 

As of January 31, 2014

(in millions)

Manufacturing Operations

  

Financial Services Operations

  

Consolidated Balance Sheet

Assets

          

Cash and cash equivalents

$

503

    

$

46

    

$

549

  

Marketable securities

596

    

34

    

630

  

Total Cash and cash equivalents and Marketable securities

$

1,099

    

$

80

    

$

1,179

  

 

EBITDA reconciliation:
 

(in millions)

Quarter Ended

January 31, 2014

Loss from continuing operations attributable to NIC, net of tax

(249)

  

Plus:

  

Depreciation and amortization expense

86

  

Manufacturing interest expense(A)

65

  

Less:

  

Income tax benefit (expense)

12

  

EBITDA

$

(110)

  
       

_________________________ 

(A)  

Manufacturing interest expense is the net interest expense primarily generated for borrowings that support the manufacturing and corporate operations, adjusted to eliminate intercompany interest expense with our Financial Services segment. The following table reconciles Manufacturing interest expense to the consolidated interest expense:

 

(in millions)

Quarter Ended

January 31, 2014

Interest expense

$

82

  

Less:  Financial services interest expense

17

  

Manufacturing interest expense

$

65

  
 

Adjusted EBITDA reconciliation:
   

(in millions)

Quarter Ended

January 31, 2014

EBITDA (reconciled above)

$

(110)

  

Less significant items of:

  

Adjustments to pre-existing warranties(A)

$

52

  

Significant items:

  

Asset impairments charges(B)

18

  

Restructuring charges

3

  
 

73

  
   

Adjusted EBITDA

$

(37)

  

______________________ 

(A) 

Adjustments to pre-existing warranties reflect changes in our estimate of warranty costs for products sold in prior periods. Such adjustments typically occur when claims experience deviates from historic and expected trends. Our warranty liability is generally affected by component failure rates, repair costs, and the timing of failures. Future events and circumstances related to these factors could materially change our estimates and require adjustments to our liability. In addition, new product launches require a greater use of judgment in developing estimates until historical experience becomes available.
   

(B) 

In the first quarter of 2014, the Company concluded it had a triggering event related to potential sales of assets requiring assessment of impairment for certain intangible and long-lived assets in the North America Truck segment. As a result, the North America Truck segment recognized asset impairment charges of $18 million.
   

 

The above items did not have a material impact on taxes due to the valuation allowances on our U.S. deferred tax assets, which was established in the fourth quarter of 2012.

 

ABOUT INTERNATIONAL

Based in Lisle, Illinois, International Motors, LLC* creates solutions that deliver greater uptime and productivity to our customers throughout the full operation of our commercial vehicles. We build International® trucks and engines and IC Bus® school and commercial buses that are as tough and as smart as the people who drive them. We also develop Fleetrite®aftermarket parts. In everything we do, our vision is to accelerate the impact of sustainable mobility to create the cleaner, safer world we all deserve. As of 2021, we joined Scania, MAN and Volkswagen Truck & Bus in TRATON GROUP, a global champion of the truck and transport services industry. To learn more, visit www.International.com.

Media contact:
Nick Smith
nick.smith@navistar.com
480-398-6511

Investor contact: 
Marvin Kalberlah
marvin.kalberlah@navistar.com
630-432-5179
 

*International Motors, LLC is d/b/a International Motors USA LLC in Illinois, Missouri, New Jersey, Ohio, Texas, and Utah.