Navistar Reports First Quarter Results

LISLE, Ill., March 8, 2012 /PRNewswire-FirstCall/ -- Navistar International Corporation (NYSE: NAV) today reported a loss of $153 million, or $2.19 per diluted share, for the first quarter ended January 31, 2012, which included a charge for pre-existing warranty expense of $112 million related to legacy and initial-built 2010 engines. After adjustments to exclude engineering integration costs, Navistar's loss for the first quarter 2012 was $145 million, or $2.08 per diluted share.

Traditionally, the first quarter is the weakest period for Navistar due to seasonal downtime in its two largest markets. Additionally, at its analyst day February 1, the company said it expected a first quarter 2012 loss due to a series of factors, including higher year-over-year healthcare costs; the start up of a new foundry operation; a brake supplier issue that interrupted truck shipments; the temporary shutdown of a key OEM customer of its South America operations due to the Thailand floods; and efforts to improve customers' vehicles during a traditionally slow period.

"We proactively addressed these product issues in a low usage period during the first quarter, which we believe will improve long-term customer satisfaction and reduce warranty costs," said Daniel C. Ustian, Navistar chairman, president and chief executive officer. "Strategically, we achieved a number of key milestones in the first quarter, including our submission of a 0.2 NOx engine for EPA certification and the announcement of our development of a full range of natural gas truck offerings."

Based on its first quarter 2012 results, the company updated its guidance for adjusted net income attributable to Navistar International Corporation for fiscal year ending October 31, 2012, to be between $295 and $365 million, or $4.25 to $5.25 adjusted diluted earnings per share. As stated in the company's analyst day news release, this expectation also includes the absorption of approximately $90 million in higher post retirement health care costs compared to last year and an effective tax rate of 25 to 30 percent with cash taxes expected to be below 10 percent. Navistar anticipates that North America truck demand will increase 5 to 18 percent in the fiscal year ending October 31, 2012, to a range of 275,000 to 310,000.

"We remain confident in our ability to deliver strong 2012 profit performance and make continued progress toward our long-term growth goals," Ustian said.  "We are already seeing accelerated synergies from our recent move into our new integrated product development center beyond the $60 million we originally estimated. We now believe this integration of our people will unlock up to $100 million in savings toward our bottom line in 2012."

Consolidated net sales and revenues rose 11 percent in the first quarter of 2012, versus the year-ago first quarter, which is driven by increased truck volumes in traditional and worldwide markets. In the year-ago first quarter, Navistar reported sales and revenues of $2.7 billion and a loss of $6 million, or $0.08 per diluted share. Adjusted to exclude engineering integration costs, the company reported income of $12 million, or $0.16 diluted earnings per share.

Summary Financial Results:



First Quarter



2012


2011

(in millions, except per share data)





Sales and revenues, net                                                                      


$

3,052



$

2,743


Segment Results:





Truck                                                                                 


$

(41)



$

32


Engine                                                                               


(120)



(8)


Parts                                                                                 


50



56


Manufacturing segment profit (loss)(A)                                                          


$

(111)



$

80







Income (loss) before income tax benefit                                                         


$

(221)



$

6


Net loss attributable to Navistar International Corporation                                             


(153)



(6)


Diluted loss per share attributable to Navistar International Corporation                                 


(2.19)



(0.08)







Adjusted net income (loss) attributable to Navistar International Corporation(A)                          


(145)



12


Adjusted diluted earnings (loss) per share attributable to Navistar International Corporation(A)              


(2.08)



0.16









(A)    Non-GAAP measure, see SEC Regulation G Non-GAAP Reconciliation for additional information.



Segment Results

Truck -- For the first quarter 2012, the truck segment recorded a loss of $41 million, compared with a year-ago first quarter profit of $32 million. Results included $30 million in higher commodity and fuel costs, higher product development, as well as the non-repeat of a 2011 commodity hedging gain.

The segment sales increase of 20 percent year-over-year was supported by continued industry recovery in North America and strong volume in Latin America. Traditional and Worldwide chargeouts were up on generally stronger industry volumes.  

Engine -- For the first quarter 2012, the engine segment recorded a loss of $120 million, compared with a year-ago first quarter loss of $8 million. The segment sales increase of 10 percent year-over-year was due to improved intercompany big-bore engine sales. The segment results include $112 million in warranty costs for 2007 inline and initial-built 2010 engines. Also included in the segment results were startup costs for compacted graphite iron production at the company's Pure Power Technologies subsidiary, partially offset by decreased engineering and product development expenses.

Parts -- For the first quarter 2012, the parts segment recorded $50 million in profit, compared with a year-ago first quarter profit of $56 million. The decrease in profitability year-over-year is driven by a decrease in segment sales and reflects a shift in product mix.

Financial Services -- For the first quarter 2012, the financial services segment recorded $27 million in profit, compared with a year-ago first quarter profit of $32 million. Earnings from the company's financial services segment will slowly decline as the company transitions its U.S. retail portfolio to its strategic alliance with GE Capital. Liquidity remains strong and on better terms than previously available.

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, 2011, which was filed on December 20, 2011, and Part II, Item 1A, Risk Factors, included within our Form 10-Q for the period ended January 31, 2012, which was filed on March 8, 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 January 31,



2012


2011

(in millions, except per share data)





Sales and revenues





Sales of manufactured products, net                                                             


$

3,008



$

2,693


Finance revenues                                                                            


44



50


Sales and revenues, net                                                                  


3,052



2,743


Costs and expenses





Costs of products sold                                                                        


2,698



2,199


Restructuring charges                                                                        


--



22


Selling, general and administrative expenses                                                       


362



318


Engineering and product development costs                                                       


137



129


Interest expense                                                                             


61



63


Other expense (income), net                                                                   


8



(11)


Total costs and expenses                                                                 


3,266



2,720


Equity in loss of non-consolidated affiliates                                                        


(7)



(17)


Income (loss) before income tax benefit                                                           


(221)



6


Income tax benefit                                                                           


81



--


Net income (loss)                                                                           


(140)



6


Less: Net income attributable to non-controlling interests                                             


13



12


Net loss attributable to Navistar International Corporation                                      


$

(153)



$

(6)







Loss per share attributable to Navistar International Corporation:





Basic                                                                                 


$

(2.19)



$

(0.08)


Diluted                                                                                 


(2.19)



(0.08)







Weighted average shares outstanding:





Basic                                                                                 


69.9



72.5


Diluted                                                                                 


69.9



72.5




Navistar International Corporation and Subsidiaries


Consolidated Balance Sheets



January 31,
2012


October 31,
2011

(in millions, except per share data)


(Unaudited)



ASSETS





Current assets





Cash and cash equivalents                                                           


$

488



$

539


Restricted cash                                                                   


--



100


Marketable securities                                                               


439



718


Trade and other receivables, net                                                      


858



1,219


Finance receivables, net                                                             


1,955



2,198


Inventories                                                                       


1,916



1,714


Deferred taxes, net                                                                 


481



474


Other current assets                                                               


322



273


Total current assets                                                                     


6,459



7,235


Restricted cash                                                                        


155



227


Trade and other receivables, net                                                           


120



122


Finance receivables, net                                                                 


661



715


Investments in non-consolidated affiliates                                                   


61



60


Property and equipment (net of accumulated depreciation and amortization of $2,112 and $2,056, at the respective dates)


1,671



1,570


Goodwill                                                                             


312



319


Intangible assets (net of accumulated amortization of $105 and $99, at the respective dates)          


227



234


Deferred taxes, net                                                                     


1,633



1,583


Other noncurrent assets                                                                 


204



226


Total assets                                                                         


$

11,503



$

12,291


LIABILITIES and STOCKHOLDERS' EQUITY (DEFICIT)





Liabilities





Current liabilities





Notes payable and current maturities of long-term debt                                     


$

1,097



$

1,379


Accounts payable                                                                 


1,861



2,122


Other current liabilities                                                               


1,263



1,297


Total current liabilities                                                                   


4,221



4,798


Long-term debt                                                                         


3,436



3,477


Postretirement benefits liabilities                                                           


3,161



3,210


Deferred taxes, net                                                                     


66



59


Other noncurrent liabilities                                                                


809



719


Total liabilities                                                                   


11,693



12,263


Redeemable equity securities                                                         


5



5


Stockholders' equity (deficit)





Series D convertible junior preference stock                                                 


3



3


Common stock ($0.10 par value per share, 220.0 shares authorized, and 75.4 shares issued, at both dates)


8



7


Additional paid in capital                                                                 


2,273



2,253


Accumulated deficit                                                                     


(308)



(155)


Accumulated other comprehensive loss                                                     


(1,934)



(1,944)


Common stock held in treasury, at cost (6.9 and 4.9 shares, at the respective dates)                 


(278)



(191)


Total stockholders' deficit attributable to Navistar International Corporation                     


(236)



(27)


Stockholders' equity attributable to non-controlling interests                                     


41



50


Total stockholders' equity (deficit)                                                


(195)



23


Total liabilities and stockholders' equity (deficit)                                        


$

11,503



$

12,291




Navistar International Corporation and Subsidiaries


Condensed Consolidated Statements of Cash Flows

(Unaudited)



Three Months Ended

January 31,



2012


2011

(in millions)





Cash flows from operating activities





    Net income (loss)                                                                   


$

(140)



$

6


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





        Depreciation and amortization                                                     


68



71


        Depreciation of equipment leased to others                                          


10



9


        Deferred taxes                                                                


(52)



--


        Amortization of debt issuance costs and discount                                     


9



12


        Stock-based compensation                                                       


12



20


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


7



18


        Write-off of debt issuance cost and discount                                         


8



--


        Other non-cash operating activities                                                


1



7


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


196



(138)


        Net cash provided by operating activities


119



5


Cash flows from investing activities





    Purchases of marketable securities                                                     


(459)



(140)


    Sales or maturities of marketable securities                                               


738



316


    Net change in restricted cash and cash equivalents                                       


172



9


    Capital expenditures                                                                 


(103)



(95)


    Purchase of equipment leased to others                                                 


(25)



(14)


    Proceeds from sales of property and equipment                                           


2



14


    Investments in non-consolidated affiliates                                                


(9)



(27)


    Business acquisitions, net of cash received                                              


(3)



--


    Acquisition of intangibles                                                             


(12)



--


        Net cash provided by investing activities                                       


301



63


Cash flows from financing activities





    Proceeds from issuance of securitized debt                                              


232



45


    Principal payments on securitized debt                                                  


(522)



(176)


    Proceeds from issuance of non-securitized debt                                          


479



22


    Principal payments on non-securitized debt                                               


(480)



(48)


    Net decrease in notes and debt outstanding under revolving credit facilities                     


(62)



(50)


    Principal payments under financing arrangements and capital lease obligations                   


(16)



(43)


    Debt issuance costs                                                                 


(15)



(3)


    Purchase of treasury stock                                                           


(70)



--


    Proceeds from exercise of stock options                                                 


1



15


    Dividends paid by subsidiaries to non-controlling interest                                    


(22)



(19)


    Other financing activities                                                             


(3)



--


        Net cash used in financing activities                                           


(478)



(257)


Effect of exchange rate changes on cash and cash equivalents                             


7



3


Decrease in cash and cash equivalents                                                   


(51)



(186)


Cash and cash equivalents at beginning of the period                                     


539



585


Cash and cash equivalents at end of the period                                           


$

488



$

399




Navistar International Corporation and Subsidiaries


Segment Reporting

(Unaudited)

We define segment profit (loss) as net income (loss) attributable to Navistar International Corporation excluding income tax benefit (expense). Our results from interim periods are not necessarily indicative of results for a full year. Selected financial information is as follows:


Truck


Engine


Parts


Financial
Services(A)


Corporate
and
Eliminations


Total

(in millions)












Three Months Ended January 31, 2012


External sales and revenues, net

$

2,154



$

420



$

434



$

44



$

--



$

3,052


Intersegment sales and revenues

11



439



35



24



(509)



--


Total sales and revenues, net

$

2,165



$

859



$

469



$

68



$

(509)



$

3,052


Net income (loss) attributable to NIC

$

(41)



$

(120)



$

50



$

27



$

(69)



$

(153)


Income tax benefit

--



--



--



--



81



81


Segment profit (loss)

$

(41)



$

(120)



$

50



$

27



$

(150)



$

(234)


Depreciation and amortization

$

34



$

29



$

2



$

8



$

5



$

78


Interest expense

--



--



--



25



36



61


Equity in income (loss) of non-consolidated affiliates


(9)



1



1



--



--



(7)


Capital expenditures(B)

16



40



7



1



39



103



Three Months Ended January 31, 2011

























External sales and revenues, net

$

1,800



$

481



$

412



$

50



$

--



$

2,743


Intersegment sales and revenues

--



302



83



23



(408)



--


Total sales and revenues, net

$

1,800



$

783



$

495



$

73



$

(408)



$

2,743


Net income (loss) attributable to NIC

$

32



$

(8)



$

56



$

32



$

(118)



$

(6)


Income tax expense

--



--



--



--



--



--


Segment profit (loss)

$

32



$

(8)



$

56



$

32



$

(118)



$

(6)


Depreciation and amortization

$

37



$

29



$

2



$

7



$

5



$

80


Interest expense

--



--



--



30



33



63


Equity in income (loss) of non-consolidated affiliates


(18)



--



1



--



--



(17)


Capital expenditures(B)

16



32



1



--



46



95














As of January 31, 2012

Segment assets

$

2,634



$

1,893



$

722



$

3,067



$

3,187



$

11,503


As of October 31, 2011

Segment assets

2,771



1,849



700



3,580



3,391



12,291




(A) Total sales and revenues in the Financial Services segment include interest revenues of $67 million and $71 million for three months ended January 31, 2012 and 2011, respectively.

(B) Exclusive of purchases of equipment leased to others.

SEC Regulation G Non-GAAP Reconciliation

The financial measures presented below of adjusted income (loss) and adjusted diluted earnings(loss)  per share attributable to Navistar International Corporation, manufacturing segment profit (loss), and adjusted manufacturing segment profit (loss) 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 (loss), which includes the segment profits(losses) 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 (loss) and adjusted diluted earnings (loss) per share attributable to Navistar International Corporation and manufacturing segment profit (loss) 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 reconciliations below, and to provide an additional measure of performance.

Adjusted net income (loss) and diluted earnings (loss) per share attributable to Navistar International Corporation reconciliation:



Three Months Ended January 31,



2012


2011

(in millions, except per share data)





Loss attributable to Navistar International Corporation                                                


$

(153)



$

(6)


Plus:





Engineering integration costs, net of tax(A)                                                       


8



18


Adjusted net income (loss) attributable to Navistar International Corporation                     


$

(145)



$

12







Diluted loss per share attributable to Navistar International Corporation                                   


$

(2.19)



$

(0.08)


Effect of adjustments on diluted loss per share attributable to Navistar International Corporation               


0.11



0.24


Adjusted diluted earnings (loss) per share attributable to Navistar International Corporation       


$

(2.08)



$

0.16


Diluted weighted shares outstanding(B)                                                           


69.9



75.9




Manufacturing segment profit (loss) and adjusted manufacturing segment profit (loss) reconciliation:




Three Months Ended January 31,



2012


2011

(in millions)





Net loss attributable to Navistar International Corporation                                             


$

(153)



$

(6)


Less:





Financial services segment profit                                                           


27



32


Corporate and eliminations                                                                 


(150)



(118)


Income tax benefit                                                                       


81



--


Manufacturing segment profit (loss)                                                         


$

(111)



$

80


Plus:





Engineering integration costs(A)                                                                 


9



18


Adjusted manufacturing segment profit (loss)                                                


$

(102)



$

98




(A) Engineering integration costs relate to the consolidation of our truck and engine engineering operations, as well as the relocation of our world headquarters. For the three months ended January 31, 2012, the charge included related costs of $12 million, offset by a tax benefit of $4 million. For the three months ended January 31, 2011, all costs were recognized as restructuring charges. Our Manufacturing segment recognized pre-tax costs of $9 million and $18 million relating to these actions, for the three months ended January 31, 2012 and 2011, respectively. The adjustment for the three months ended January 31, 2011 was not adjusted to reflect its income tax effect, as the Company's income tax expense on U.S. and Canadian operations was limited to current state income taxes, alternative minimum tax net of refundable credits, and other discrete items, during the period the adjustment was recorded.

(B) For both the first quarters of 2012 and 2011, on a GAAP basis, no dilutive securities were included in the computation of diluted loss per share because they were anti-dilutive since there was a net loss attributable to Navistar International Corporation. For the first quarter of 2011, the diluted weighted shares outstanding for the computation of adjusted diluted income per share have been adjusted for the impact of dilutive securities.

SOURCE Navistar International Corporation

For further information: Media, Karen Denning, +1-331-332-3535, Investors, Heather Kos, +1-331-332-2406


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