December 20, 2013

Navistar Reports Fourth Quarter Results

- Navistar reports net loss of $154 million on revenues of $2.8 billion
- Operational performance in targeted range
- Meets manufacturing cash guidance for fifth consecutive quarter
- Finishes year with $330 million in structural cost savings
- End-of-year order backlog up 26 percent versus fiscal year-end 2012
- Company unveils new reporting segments

LISLE, Ill., Dec. 20, 2013 /PRNewswire/ -- Navistar International Corporation (NYSE: NAV) today announced a fourth quarter 2013 net loss of $154 million, or $1.91 per diluted share, compared to a fourth quarter 2012 net loss of $2.8 billion, or $40.13 per diluted share.

(Logo:  http://photos.prnewswire.com/prnh/20120127/MM32830LOGO-a)

Current quarter results include an income tax benefit of $220 million related to an intra-period tax allocation, a non-cash charge of $77 million related to a goodwill impairment in its North American operations and $152 million in additional pre-existing warranty reserves. Fourth quarter 2012 results included increased non-cash tax expense of $2 billion for the increase in deferred tax valuation allowance on U.S. deferred tax assets and $149 million in additional pre-existing warranty reserves.

Revenues in the quarter were $2.8 billion, down from $3.2 billion in the fourth quarter of 2012. The decrease reflects lower sales across all business segments, primarily due to weaker industry conditions and lower market share during the company's emissions strategy transition. The company reduced its structural costs by $94 million in the quarter compared to fourth quarter 2012, and finished the full year with reduced structural costs of $330 million versus 2012.

Navistar achieved its fourth quarter cash guidance, finishing the quarter with approximately $1.52 billion in manufacturing cash and marketable securities, which included net proceeds of $196 million from the issuance of new senior subordinated convertible notes and an intercompany loan of $270 million in the quarter. Excluding these transactions, manufacturing cash would have been $1.06 billion, in line with its guidance of $1.0 billion to $1.1 billion.

"Operationally, we hit our plan this quarter, and we ended the year with an order backlog that is up 26 percent compared to this time last year. Those are just two examples of the continued progress we are making on our Drive to Deliver turnaround plan," said Troy A. Clarke, Navistar's president and chief executive officer. "During the quarter, we strengthened our cash position, continued to reduce structural costs, completed our on-highway Class 8 transition to SCR emissions technology, and progressed with our medium-duty product transition launches, resulting in 500 medium duty SCR trucks and buses built this month, as planned.

"Clearly, we are disappointed that our previous engine strategy continues to negatively impact us in the form of additional warranty expense, but we will continue to stand behind our products and manage this issue as these engines work their way through the standard and extended warranty cycles," Clarke said. "We're not letting it overshadow the strong progress we've made to fundamentally change Navistar's operations and culture in 2013. We still have a lot of hard work ahead of us, but we are pleased to be entering 2014 in a much stronger position than we were one year ago."

The net loss for fiscal year 2013 was $898 million, or $11.17 per diluted share, versus a net loss of $3 billion, or $43.56 per diluted share, for fiscal year 2012.

Summary Financial Results:

In connection with Navistar's renewed focus on its primary markets, the company has changed its reporting segments in the fourth quarter. In addition to the Financial Services segment, new segment reporting will now be as follows:

  • North America Truck — primarily consists of core products of Class 4 through 8 trucks, buses and military vehicles along with engine production for the North America markets, including sales in the U.S., Canada and Mexico.
  • North America Parts — primarily consists of proprietary products needed to support International® brand commercial and military trucks, IC Bus brand  buses and MaxxForce engine lines. North America Parts also provides other standard truck, trailer and engine aftermarket parts. The segment also includes operating results of Blue Diamond Parts.
  • Global Operations — primarily consists of MWM engine and truck operations in Brazil and export truck and parts businesses outside of the core North America markets.

Summary of Financial Results:



Quarters Ended

October 31,


Years Ended

October 31,

(in millions, except per share data)

2013


2012


2013


2012

Sales and revenues, net

$

2,751



$

3,179



$

10,775



$

12,695


Segment Results:








North America Truck

$

(355)



$

(396)



$

(902)



$

(736)


North America Parts

147



103



476



343


Global Operations

(6)



(73)



(6)



(168)


Financial Services

17



16



81



91










Loss from continuing operations before income taxes

$

(357)



$

(557)



$

(974)



$

(1,111)


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

(153)



(2,737)



(857)



(2,939)


Net loss(A)

(154)



(2,769)



(898)



(3,010)










Diluted loss per share from continuing operations(A)

$

(1.90)



$

(39.67)



$

(10.66)



$

(42.53)


Diluted loss per share(A)

(1.91)



(40.13)



(11.17)



(43.56)


__________________________________

(A)  

Amounts attributable to Navistar International Corporation.

North America Truck For the fourth quarter 2013, the North America truck segment recorded a loss of $355 million, compared with a year-ago fourth quarter loss of $396 million.  The year-over-year improvement was primarily driven by structural and functional cost reductions, partially offset by the non-cash charge of $77 million in goodwill impairments.

For the fiscal year 2013, the North America truck segment recorded a loss of $902 million, compared with a fiscal year 2012 loss of $736 million. In addition to the impairments impact, the year-over-year decline was also driven by lower volumes, due in large part to the company's engine emissions strategy transition, and decreased military sales. Fiscal year 2013 results included charges for adjustments to pre-existing warranties of $404 million versus $400 million in fiscal year 2012.

North America Parts — For the fourth quarter 2013, the North America parts segment recorded a profit of $147 million, compared with a year-ago fourth quarter profit of $103 million, driven primarily by strong margins and structural cost reductions.

These same factors were the primary drivers of the segment's 31-percent improvement in full-year performance, as the North America parts segment posted a profit of $476 million in fiscal year 2013, compared to the prior year profit of $343 million.

Global Operations — For the fourth quarter 2013, global operations recorded a loss of $6 million, compared with a year-ago fourth quarter loss of $73 million.  The year-over-year improvement included the impact of increased margins, primarily related to the company's South American engine business as well as benefits realized from prior year structural cost reduction actions.

For the fiscal year 2013, global operations posted a loss of $6 million, compared to a fiscal year 2012 loss of $168 million, driven by these same operational improvements, as well as the impact of the company's divestiture of its India joint venture earlier in 2013 as part of its ROIC actions.

Financial Services — For the fourth quarter 2013, the financial services segment recorded a profit of $17 million, up slightly from fourth quarter 2012 profit of $16 million, primarily driven by reductions in operating expenses that more than offset lower net interest margin from lower average assets.

For the fiscal year 2013, the financial services segment recorded a profit of $81 million, compared to a year-ago profit of $91 million. The decrease was primarily driven by the lower net financial margin due to the decline in the average finance receivables balances, partially offset by lower U.S. employee-related expenses that resulted from our 2012 cost-reduction initiatives.

2014 Outlook

Navistar is forecasting a Class 8 industry of 220,000 to 230,000 retail sales in the U.S. and Canada for its fiscal year 2014. It expects to generate an additional $175 million in structural cost savings in fiscal year 2014, and projects its capital expenditures will be similar to 2013 spending. The company expects to end first quarter 2014 with manufacturing cash and marketable securities between $1 billion and $1.1 billion.

"Traditionally, our first quarter represents the low period of the year as volumes are lower due to the Thanksgiving and winter break downtimes, which is compounded this year by significantly lower military sales and the late-in-the-quarter ramp up of our Cummins ISB engine offering in our medium-duty trucks and buses," Clarke said. "However, we anticipate stronger year-over-year performance starting in the second quarter, driven by higher volumes in truck, parts and our global operations and slightly improved pricing, coupled with ongoing structural and material cost improvements."

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, 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

 



Quarters Ended

October 31,


Years Ended

October 31,

(in millions, except per share data)

2013


2012


2013


2012

Sales and revenues








Sales of manufactured products, net

$

2,712



$

3,140



$    10,617



$   12,527


Finance revenues

39



39



158



168


Sales and revenues, net

2,751



3,179



10,775



12,695


Costs and expenses








Costs of products sold

2,565



3,051



9,761



11,401


Restructuring charges

11



84



25




107


Asset impairment charges

80



6



97



16


Selling, general and administrative expenses

310



370



1,215



1,419


Engineering and product development costs

96



130



406



532


Interest expense

81



77



321



259


Other expense (income), net

(30)



10



(65)



43


Total costs and expenses

3,113



3,728



11,760



13,777


Equity in income (loss) of non-consolidated affiliates

5



(8)



11



(29)


Loss from continuing operations before income taxes

(357)



(557)



(974)



(1,111)


Income tax benefit (expense)

224



(2,167)



171



(1,780)


Loss from continuing operations

(133)



(2,724)



(803)



(2,891)


Loss from discontinued operations, net of tax

(1)



(32)



(41)



(71)


Net loss

(134)



(2,756)



(844)



(2,962)


Less: Net income attributable to non-controlling interests

20



13



54



48


Net loss attributable to Navistar International Corporation

$

(154)



$

(2,769)



$

(898)



$

(3,010)










Amounts attributable to Navistar International Corporation common shareholders:

Loss from continuing operations, net of tax

$

(153)



$

(2,737)



$

(857)



$

(2,939)


Loss from discontinued operations, net of tax

(1)



(32)



(41)



(71)


Net loss

$

(154)



$

(2,769)



$

(898)



$

(3,010)










Loss per share:








Basic:








Continuing operations

$

(1.90)



$

(39.67)



$

(10.66)



$

(42.53)


Discontinued operations

(0.01)



(0.46)



(0.51)



(1.03)



$

(1.91)



$

(40.13)



$

(11.17)



$

(43.56)


Diluted:








Continuing operations

$

(1.90)



$

(39.67)



$

(10.66)



$

(42.53)


Discontinued operations

(0.01)



(0.46)



(0.51)



(1.03)



$

(1.91)



$

(40.13)



$

(11.17)



$

(43.56)










Weighted average shares outstanding:








Basic

80.6



69.0

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