February 16, 2001

Navistar Reports First Quarter Results as Truck Market Remains Soft; Lowers Forecast of 2001 Total Industry Demand to 280,000 Units

CHICAGO, Feb. 16 -- In line with analyst expectations, Navistar International Corporation (NYSE: NAV), producer of International® brand trucks, school buses and engines, today reported a first quarter loss as industry demand for new trucks remained soft.

(Photo: NewsCom: http://www.newscom.com/cgi-bin/prnh/19991207/CGTU007 )

The company said it lost $35 million, or $0.58 per diluted common share for the quarter ended January 31, 2001, compared with record earnings of $70 million, or $1.10 per diluted common share in the first quarter a year ago. The consensus estimate of Wall Street security analysts was that the company would lose $0.61 cents per share.

Consolidated sales and revenues from the company's manufacturing and financial services operations for the first quarter totaled $1.5 billion, compared with $2.2 billion in the first quarter of 2000.

John R. Horne, Navistar chairman, president and chief executive officer, said that continued weak, new and used truck pricing and lower new truck shipments impacted results in the first quarter.

"While we have made fundamental changes in the way we do business and we look for further productivity improvements in our core businesses, first quarter results were influenced by challenges that are beyond the industry," Horne said. "Extremely low used truck values, record high diesel fuel prices and high interest rates caused many truck buyers to defer purchases."

Horne said that until dealer inventory is at levels that reflect current demand, the company intends to keep production levels below retail sales demand. He added that dealer inventory adjustments should be completed by the end of the second quarter or into the third quarter.

Horne said that the company has lowered its forecast for total truck industry volume in fiscal 2001 in the United States and Canada to 280,000 units, down from the 321,600 units it forecast last December. Demand for medium trucks is unchanged at 108,000 units but demand for heavy trucks should decline to 144,000 units, down from the previous forecast of 181,600 units, and school bus demand is forecast at 28,000 units, down from 32,000 units.

"While leading indicators such as truck tonnage seem to be stabilizing, the year will still be challenging with real improvement expected in the fourth quarter," Horne said.

Turning to the future, Horne said two major events announced within the last week overshadow first quarter results and more accurately reflect the promising long-term outlook for the company.

"Within a period of seven days, we announced the most significant joint venture in our history and we held the biggest new product introduction in the past 25 years" Horne said.

On February 12, Navistar and Ford announced that they intend to form a joint venture to build commercial trucks in Mexico and distribute service parts. The two companies also will explore opportunities for greater cooperation in diesel engines for potential applications in Ford's full range of truck products.

"This new alliance with our largest customer will yield tremendous benefits of scale necessary to compete in today's consolidating marketplace." Horne said. "It gives us the opportunity to provide our dealers and customers with a broader array of products and services."

On February 13, the company introduced the industry's first High Performance truck before 2,500 customers, dealers and financial analysts.

"With these trucks, International will set a new benchmark in delivering to customers the lowest operating and maintenance costs and highest resale value," Horne said. "Our new lineup are designed and built to perform on a higher level and the initial reaction from our dealers and customers is extremely gratifying."

The high performance medium truck will be available to customers in April.

Navistar International Corporation (NYSE: NAV) is a leading producer of medium trucks, school buses, heavy trucks, severe service vehicles and mid- range diesel engines sold under the International® brand. The company is also a private label designer and manufacturer of diesel engines for the truck, van and SUV markets. With world headquarters in Chicago, Navistar had sales and revenues of $8.5 billion in 2000. Additional information can be found on the company's web site at www.navistar.com .

Forward Looking Statements

Statements contained in this news release that are not purely historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding the company's expectations, hopes, beliefs and intentions on strategies regarding the future. It is important to note that the company's actual future results could differ materially from those projected in such forward-looking statements because of a number of factors, including but not limited to general economic, business and financing conditions, labor relations, governmental action, competitor pricing activity, expense volatility, and other risks detailed from time to time in Navistar's Securities and Exchange Commission filings. Navistar assumes no obligation to update the information included in this release.

The company's conference call with security analysts to discuss the earnings report will be webcast at 10 a.m. CST today. The webcast can be accessed through Navistar's website at http://www.nav- international.com/investor/ and connecting to the link to the conference call. Additional financial information can be found at http://www.nav- international.com/investor, via the Financial and Investor Information link to the Overview page.

(Millions of dollars, except per share data)

                                                        Three Months Ended
                                                            January 31

                                                        2001           2000
    Sales and Revenues
    Sales of manufactured products                    $1,433         $2,086
    Finance and insurance revenue                         79             69
    Other income                                          10             11
    Total sales and revenues                           1,522          2,166

    Costs and expenses
    Cost of products and services sold                $1,276         $1,748
    Postretirement benefits                               46             48
    Engineering and research expense                      65             71
    Sales, general and administrative expense            121            124
    Interest expense                                      41             35
    Other expense                                         29             27
    Total costs and expenses                           1,578          2,053

    Income/(loss) before income taxes                    (56)           113
    Income tax benefit/(expense)                          21            (43)

    Net income (loss)                                   $(35)           $70

    Earnings/(loss) per share
      Basic                                          $(0.58)          $1.12
      Diluted                                        $(0.58)          $1.10

    Average shares outstanding (millions)
      Basic                                             59.5           62.6
      Diluted                                           59.5           63.7

The Statement of Income includes the consolidated financial results of the

company's manufacturing operations with its wholly owned financial

services operations.

(Millions of dollars)

                                                         AS OF JANUARY 31
                                                        2001           2000
    Cash and cash equivalents                           $432           $461
    Marketable securities                                127            216
                                                         559            677

    Receivables, net                                   1,762          2,339
    Inventories                                          705            711
    Property and equipment, net                        1,816          1,518
    Investments and other assets                         271            219
    Restricted cash                                      406             47
    Prepaid and intangible pension assets                304            284
    Deferred tax asset, net                              911            800

    Total assets                                      $6,734         $6,595

    Accounts payable, principally trade                 $993         $1,257
    Debt: Manufacturing operations                       645            492
    Financial services operations                      1,881          1,813
    Postretirement benefits liability                    793            795
    Other liabilities                                  1,142            921
    Total liabilities                                  5,454          5,278

    Commitments and contingencies

    Shareowners' equity
    Series D convertible junior preference stock           4              4
    Common stock (75.3 million shares issued)          2,139          2,139
    Retained earnings (deficit)                         (178)          (234)
    Accumulated other comprehensive loss                (176)          (192)
    Common stock held in treasury, at cost              (509)          (400)
    Total shareowners' equity                          1,280          1,317

    Total liabilities and shareowners' equity         $6,734         $6,595

The Statement of Financial Condition includes the consolidated financial

results of the company's manufacturing operations with its wholly owned

financial services operations. SOURCE Navistar International Corporation

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