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"We are pleased that we have finished the year strong and delivered
solid fourth quarter results across all segments," said
Reported net income for the fourth quarter ended
Net income for fiscal year 2011 was
In the fourth quarter, the company saw increases in worldwide unit
chargeouts in both its traditional North American and global businesses
while maintaining a strong market share position. The company purchased
2.7 million shares of its stock in the fourth quarter and ended the year
with a manufacturing cash balance of
"We expect the industry to continue its steady recovery," said Ustian. "We will continue to leverage our market leading North American businesses, invest in new products and expand further into global markets, while effectively controlling our costs."
| Summary Financial Results: | |||||||||||||
|
(in millions, except per share data) |
Fourth Quarter | Years Ended | |||||||||||
| 2011 | 2010 | 2011 | 2010 | ||||||||||
| Sales and revenues, net | $ | 4,323 | $ | 3,372 | $ | 13,958 | $ | 12,145 | |||||
| Segment Results: | |||||||||||||
| Truck | $ | 287 | $ | 86 | $ | 336 | $ | 424 | |||||
| Engine | 58 | (17 | ) | 84 | 51 | ||||||||
| Parts | 87 | 77 | 287 | 266 | |||||||||
| Manufacturing segment profit(A) | $ | 432 | $ | 146 | $ | 707 | $ | 741 | |||||
| Income before income taxes | $ | 275 | $ | 56 | $ | 320 | $ | 290 | |||||
|
Net income attributable to |
255 | 44 | 1,723 | 223 | |||||||||
|
Diluted earnings per share attributable to |
3.48 | 0.61 | 22.64 | 3.05 | |||||||||
|
Adjusted income attributable to |
247 | 44 | 402 | 223 | |||||||||
|
Adjusted diluted earnings per share attributable to |
3.37 | 0.61 | 5.28 | 3.05 | |||||||||
|
(A) Non-GAAP measure, see Regulation G Non-GAAP Reconciliation for additional information. |
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Segment Results
Truck — For the fourth quarter 2011, the truck segment recorded
Fiscal 2011 included a full-year revenue increase of 19 percent
supported by record volume in
This was all achieved in a year of lower military revenue, continued global investment, higher commodity costs, and increased product development costs to support future growth.
Engine — For the fourth quarter 2011, the engine segment recorded
Parts — For the fourth quarter 2011, the parts segment recorded
Financial Services — For the fourth quarter 2011, the financial
services segment recorded
Corporate — The impact of higher taxes reduced earnings by
approximately
About
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
|
Consolidated Statements of Operations |
|||||||||||||||||
|
Three Months Ended |
For the Years Ended October 31, |
||||||||||||||||
| 2011 | 2010 | 2011 | 2010 | ||||||||||||||
| Revised(A) | |||||||||||||||||
| (in millions, except per share data) | |||||||||||||||||
| Sales of manufactured products, net | $ | 4,277 |
$ |
3,316 |
$ | 13,758 | $ | 11,926 | |||||||||
| Finance revenues | 46 | 56 | 200 | 219 | |||||||||||||
| Sales and revenues, net | 4,323 | 3,372 | $ | 13,958 | $ | 12,145 | |||||||||||
| Costs of products sold | 3,432 | 2,765 | 11,262 | 9,741 | |||||||||||||
| Restructuring charges (benefit) | 12 | 8 | 92 | (15 | ) | ||||||||||||
| Impairment of property and equipment and intangible assets | — | — | 64 | — | |||||||||||||
| Selling, general and administrative expenses | 428 | 331 | 1,434 | 1,406 | |||||||||||||
| Engineering and product development costs | 125 | 126 | 532 | 464 | |||||||||||||
| Interest expense | 60 | 64 | 247 | 253 | |||||||||||||
| Other expense (income), net | (25 | ) | 4 | (64 | ) | (44 | ) | ||||||||||
| Total costs and expenses | 4,032 | 3,298 | 13,567 | 11,805 | |||||||||||||
| Equity in loss of non-consolidated affiliates | (16 | ) | (18 | ) | (71 | ) | (50 | ) | |||||||||
| Income before income tax | 275 | 56 | 320 | 290 | |||||||||||||
| Income tax benefit (expense) (B) | — | (6 | ) | 1,458 | (23 | ) | |||||||||||
| Net income | 275 | 50 | 1,778 | 267 | |||||||||||||
| Less: Net income attributable to non-controlling interests | 20 | 6 | 55 | 44 | |||||||||||||
|
Net income attributable to |
$ | 255 |
$ |
44 |
$ | 1,723 | $ | 223 | |||||||||
|
Earnings per share attributable to |
|||||||||||||||||
| Basic | $ | 3.52 |
$ |
0.62 |
$ | 23.66 | $ | 3.11 | |||||||||
| Diluted | 3.48 | 0.61 | 22.64 | 3.05 | |||||||||||||
| Weighted average shares outstanding: | |||||||||||||||||
| Basic | 72.5 | 72.2 | 72.8 | 71.7 | |||||||||||||
| Diluted | 73.2 | 73.6 | 76.1 | 73.2 | |||||||||||||
|
|
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|
(A) Starting with the first quarter of 2011, the company changed its method of accruing for certain incentive compensation specifically relating to cash bonuses for interim reporting purposes from a ratable method to a performance-based method. The company believes that the performance-based method is preferable because it links the accrual of incentive compensation with the achievement of performance. We have revised our previously reported Consolidated Statement of Operations for the three months ended October 31, 2010 on a retrospective basis to reflect this change in principle based on information that would have been available as of our previous filing. The change has no impact on our annual financial results. |
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|
(B) In the fourth quarter of 2011, certain out-of-period
adjustments were recorded related to the partial release of the
company's income tax valuation allowance. The adjustments of
approximately |
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|
Consolidated Balance Sheets |
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|
As of |
||||||||
| 2011 | 2010 | |||||||
| (in millions, except per share data) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 539 | $ | 585 | ||||
| Restricted cash and cash equivalents | 100 | — | ||||||
| Marketable securities | 718 | 586 | ||||||
| Trade and other receivables, net | 1,219 | 987 | ||||||
| Finance receivables, net | 2,198 | 1,770 | ||||||
| Inventories | 1,714 | 1,568 | ||||||
| Deferred taxes, net | 474 | 83 | ||||||
| Other current assets | 273 | 256 | ||||||
| Total current assets | 7,235 | 5,835 | ||||||
| Restricted cash and cash equivalents | 227 | 180 | ||||||
| Trade and other receivables, net | 122 | 44 | ||||||
| Finance receivables, net | 715 | 1,145 | ||||||
| Investments in non-consolidated affiliates | 60 | 103 | ||||||
| Property and equipment, net | 1,570 | 1,442 | ||||||
| Goodwill | 319 | 324 | ||||||
| Intangible assets, net | 234 | 262 | ||||||
| Deferred taxes, net | 1,583 | 63 | ||||||
| Other noncurrent assets | 226 | 332 | ||||||
| Total assets | $ | 12,291 | $ | 9,730 | ||||
| LIABILITIES and STOCKHOLDERS' EQUITY (DEFICIT) | ||||||||
| Liabilities | ||||||||
| Current liabilities | ||||||||
| Notes payable and current maturities of long-term debt | $ | 1,379 | $ | 632 | ||||
| Accounts payable | 2,122 | 1,827 | ||||||
| Other current liabilities | 1,297 | 1,130 | ||||||
| Total current liabilities | 4,798 | 3,589 | ||||||
| Long-term debt | 3,477 | 4,238 | ||||||
| Postretirement benefits liabilities | 3,210 | 2,097 | ||||||
| Deferred taxes, net | 59 | 142 | ||||||
| Other noncurrent liabilities | 719 | 588 | ||||||
| Total liabilities | 12,263 | 10,654 | ||||||
| Redeemable equity securities | 5 | 8 | ||||||
| Stockholders' equity (deficit) | ||||||||
| Series D convertible junior preference stock | 3 | 4 | ||||||
|
Common stock ( |
7 | 7 | ||||||
| Additional paid in capital | 2,253 | 2,206 | ||||||
| Accumulated deficit | (155 | ) | (1,878 | ) | ||||
| Accumulated other comprehensive loss | (1,944 | ) | (1,196 | ) | ||||
| Common stock held in treasury, at cost (4.9 and 3.6 shares, at the respective dates) | (191 | ) | (124 | ) | ||||
|
Total stockholders' deficit attributable to |
(27 | ) | (981 | ) | ||||
| Stockholders' equity attributable to non-controlling interest | 50 | 49 | ||||||
| Total stockholders' equity (deficit) | 23 | (932 | ) | |||||
| Total liabilities and stockholders' equity (deficit) | $ | 12,291 | $ | 9,730 | ||||
|
Consolidated Statements of Cash Flows |
||||||||
|
For the Years Ended |
||||||||
| 2011 | 2010 | |||||||
| (in millions) | ||||||||
| Cash flows from operating activities | ||||||||
| Net income | $ | 1,778 | $ | 267 | ||||
| Adjustments to reconcile net income to cash provided by operating activities: | ||||||||
| Depreciation and amortization | 290 | 265 | ||||||
| Depreciation of equipment leased to others | 38 | 51 | ||||||
| Deferred taxes, including change in valuation allowance | (1,513 | ) | 17 | |||||
| Impairment of property and equipment and intangible assets | 75 | — | ||||||
| Amortization of debt issuance costs and discounts | 44 | 38 | ||||||
| Stock-based compensation | 36 | 24 | ||||||
| Provision for doubtful accounts, net of recoveries | (6 | ) | 29 | |||||
| Equity in loss of affiliated companies, net of dividends | 75 | 55 | ||||||
| Other non-cash operating activities | (15 | ) | 61 | |||||
| Changes in operating assets and liabilities, exclusive of the effects of businesses acquired and disposed: | ||||||||
| Trade and other receivables | (212 | ) | (136 | ) | ||||
| Finance receivables | 8 | 546 | ||||||
| Inventories | (129 | ) | 122 | |||||
| Accounts payable | 247 | (72 | ) | |||||
| Other assets and liabilities | 164 | (160 | ) | |||||
| Net cash provided by operating activities | 880 | 1,107 | ||||||
| Cash flows from investing activities | ||||||||
| Purchases of marketable securities | (1,562 | ) | (1,876 | ) | ||||
| Sales or maturities of marketable securities | 1,430 | 1,290 | ||||||
| Net change in restricted cash and cash equivalents | (147 | ) | 515 | |||||
| Capital expenditures | (429 | ) | (234 | ) | ||||
| Purchase of equipment leased to others | (71 | ) | (45 | ) | ||||
| Proceeds from sales of property and equipment | 32 | 23 | ||||||
| Investments in and advances to non-consolidated affiliates | (65 | ) | (97 | ) | ||||
| Proceeds from sales of affiliates | 3 | 7 | ||||||
| Acquisition of intangibles | (26 | ) | (15 | ) | ||||
| Business acquisitions, net of escrow received | 12 | (2 | ) | |||||
| Net cash used in investing activities | (823 | ) | (434 | ) | ||||
| Cash flows from financing activities | ||||||||
| Proceeds from issuance of securitized debt | 599 | 1,460 | ||||||
| Principal payments on securitized debt | (708 | ) | (1,579 | ) | ||||
| Proceeds from issuance of non-securitized debt | 214 | 687 | ||||||
| Principal payments on non-securitized debt | (107 | ) | (883 | ) | ||||
| Net increase (decrease) in notes and debt outstanding under revolving credit facilities | 137 | (866 | ) | |||||
| Principal payments under financing arrangements and capital lease obligations | (86 | ) | (62 | ) | ||||
| Debt issuance costs | (11 | ) | (35 | ) | ||||
| Purchases of treasury stock | (125 | ) | — | |||||
| Proceeds from exercise of stock options | 40 | 35 | ||||||
| Dividends paid by subsidiaries to non-controlling interest | (53 | ) | (57 | ) | ||||
| Net cash used in financing activities | (100 | ) | (1,300 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents | (3 | ) | — | |||||
| Decrease in cash and cash equivalents | (46 | ) | (627 | ) | ||||
| Cash and cash equivalents at beginning of the year | 585 | 1,212 | ||||||
| Cash and cash equivalents at end of the year | $ | 539 | $ | 585 | ||||
|
Segment Reporting (Unaudited) |
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|
We define segment profit (loss) as net income attributable to
|
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| Truck(A) | Engine(B) | Parts |
Financial Services(C) |
Corporate and Eliminations |
Total | |||||||||||||||||
| (in millions) | ||||||||||||||||||||||
|
|
||||||||||||||||||||||
| External sales and revenues, net | $ | 9,690 | $ | 2,101 | $ | 1,967 | $ | 200 | $ | — | $ | 13,958 | ||||||||||
| Intersegment sales and revenues | 48 | 1,690 | 188 | 91 | (2,017 | ) | — | |||||||||||||||
| Total sales and revenues, net | $ | 9,738 | $ | 3,791 | $ | 2,155 | $ | 291 | $ | (2,017 | ) | $ | 13,958 | |||||||||
| Net income attributable to NIC | $ | 336 | $ | 84 | $ | 287 | $ | 129 | $ | 887 | $ | 1,723 | ||||||||||
| Income tax benefit | — | — | — | — | 1,458 | 1,458 | ||||||||||||||||
| Segment profit (loss)(D)(E)(F) | $ | 336 | $ | 84 | $ | 287 | $ | 129 | $ | (571 | ) | $ | 265 | |||||||||
| Depreciation and amortization | $ | 151 | $ | 120 | $ | 9 | $ | 28 | $ | 20 | $ | 328 | ||||||||||
| Interest expense | — | — | — | 109 | 138 | 247 | ||||||||||||||||
| Equity in (loss) income of non-consolidated affiliates | (73 | ) | (4 | ) | 6 | — | — | (71 | ) | |||||||||||||
| Segment assets | 2,771 | 1,849 | 700 | 3,580 | 3,391 | 12,291 | ||||||||||||||||
| Capital expenditures(G) | 83 | 172 | 19 | 2 | 153 | 429 | ||||||||||||||||
|
|
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| External sales and revenues, net | $ | 8,205 | $ | 2,031 | $ | 1,690 | $ | 219 | $ | — | $ | 12,145 | ||||||||||
| Intersegment sales and revenues | 2 | 955 | 195 | 90 | (1,242 | ) | — | |||||||||||||||
| Total sales and revenues, net | $ | 8,207 | $ | 2,986 | $ | 1,885 | $ | 309 | $ | (1,242 | ) | $ | 12,145 | |||||||||
| Net income attributable to NIC | $ | 424 | $ | 51 | $ | 266 | $ | 95 | $ | (613 | ) | $ | 223 | |||||||||
| Income tax expense | — | — | — | — | (23 | ) | (23 | ) | ||||||||||||||
| Segment profit (loss) | $ | 424 | $ | 51 | $ | 266 | $ | 95 | $ | (590 | ) | $ | 246 | |||||||||
| Depreciation and amortization | $ | 160 | $ | 106 | $ | 7 | $ | 28 | $ | 15 | $ | 316 | ||||||||||
| Interest expense | — | — | — | 113 | 140 | 253 | ||||||||||||||||
| Equity in (loss) income of non-consolidated affiliates | (51 | ) | (2 | ) | 3 | — | — | (50 | ) | |||||||||||||
| Segment assets | 2,457 | 1,715 | 811 | 3,497 | 1,250 | 9,730 | ||||||||||||||||
| Capital expenditures(G) | 82 | 116 | 8 | 2 | 26 | 234 | ||||||||||||||||
(A) In 2011, the Truck segment profit included
(B) In 2011, the Engine segment recognized a
(C) Total sales and revenues in the Financial Services segment include interest revenues of $285 million, and $270 million for 2011 and 2010, respectively.
(D) Beginning in the second quarter of 2011, certain purchases from the Engine segment by the Parts segment are recorded at market-based pricing. All other intersegment purchases from the Truck and Engine segments by the Parts segment continue to be recorded at standard production cost. The effect of this change did not have a material impact on our segment reporting.
(E) In the first quarter of 2011, we began allocating gains and losses on commodities derivatives to the segments to which the underlying commodities relate. Previously, the impacts of commodities derivatives were not material and were recorded within Corporate.
(F) Effective with the fourth quarter of 2011, the company's master
intercompany agreement was amended to provide the ability to adjust fees
and rates paid by the Truck and Parts segment to the Financial Services
segment for changes in the Financial Services segments capital
structure. In the fourth quarter of 2011 as a result of the amendment,
the Financial Services segment refunded the Truck and Parts segments
(G) Exclusive of purchases of equipment leased to others.
SEC Regulation G Non-GAAP Reconciliation
The financial measures presented below of adjusted income and
adjusted diluted earnings per share attributable to
We believe manufacturing segment profit, which includes the segment profits 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 and adjusted diluted
earnings per share attributable to
Adjustments included in the following schedules have not been
adjusted to reflect their income tax effect as the adjustments are
intended to represent the impact on the company's consolidated statement
of operations without the incremental income tax effect that would
result from the release of the income tax valuation allowance. The
charges related to our Canadian operations would not be impacted as a
full income tax valuation allowance remains for
|
Adjusted net income attributable to |
||||||
|
|
||||||
|
(in millions) |
Three |
Years |
||||
|
Net income attributable to |
$ | 255 | $ | 1,723 | ||
| Plus: | ||||||
| Engineering integration costs(A) | 23 | 64 | ||||
| Restructuring of North American manufacturing operations(B) | 5 | 127 | ||||
|
|
15 | 15 | ||||
| Less: | ||||||
| Income tax valuation allowance release(D) | 51 | $ | 1,527 | |||
|
Adjusted income attributable to |
$ | 247 | $ | 402 | ||
|
Adjusted diluted earnings per share attributable to |
||||||||
|
|
||||||||
|
(in millions, except per share data) |
Three |
Years |
||||||
|
Diluted earnings per share attributable to |
$ | 3.48 | $ | 22.64 | ||||
|
Effect of adjustments on diluted earnings per share attributable to
|
(0.11 | ) | (17.36 | ) | ||||
|
Adjusted income attributable to |
$ | 3.37 | $ | 5.28 | ||||
| Diluted weighted shares outstanding | 73.2 | 76.1 | ||||||
| Manufacturing segment profit and adjusted manufacturing segment profit reconciliation: | ||||||||||||||||
|
Three Months Ended |
Years Ended |
|||||||||||||||
| (in millions) | 2011 | 2010 | 2011 | 2010 | ||||||||||||
| Revised(E) | ||||||||||||||||
|
Net income attributable to |
$ | 255 | $ | 44 | $ | 1,723 | $ | 223 | ||||||||
| Less: | ||||||||||||||||
| Financial services segment profit | 27 | 34 | 129 | 95 | ||||||||||||
| Corporate and eliminations | (204 | ) | (130 | ) | (571 | ) | (590 | ) | ||||||||
| Income tax benefit (expense) | — | (6 | ) | 1,458 | (23 | ) | ||||||||||
| Manufacturing segment profit | $ | 432 | $ | 146 | $ | 707 | $ | 741 | ||||||||
| Plus: | ||||||||||||||||
| Engineering integration costs(A) | 18 | — | 51 | — | ||||||||||||
|
Restructuring of North American manufacturing operations(B) |
5 | — | 124 | — | ||||||||||||
| Adjusted manufacturing segment profit | $ | 455 | $ | 146 | $ | 882 | $ | 741 | ||||||||
| Adjusted Truck segment profit reconciliation: | |||
| (in millions) |
Year Ended |
||
| Truck segment profit | $ | 336 | |
| Plus: | |||
| Engineering integration costs(A) | 49 | ||
|
Restructuring of North American manufacturing operations(B) |
124 | ||
| Adjusted Truck segment profit | $ | 509 | |
(A) Engineering integration costs relate to the consolidation of our
truck and engine engineering operations as well as the move of our world
headquarters. These costs include restructuring charges for activities
at our
(B) Restructuring of North American manufacturing operations are charges
primarily related to our plans to close our
(C) In the fourth quarter of 2011, the company had an unfavorable ruling
related to a 2010 administrative change the company made to the
prescription drug program under the OPEB plan affecting plan
participants who are
(D) In the third quarter of 2011, we recognized an income tax benefit of
(E) Starting with the first quarter of 2011, the company changed its method of accruing for certain incentive compensation, specifically relating to cash bonuses, for interim reporting purposes from a ratable method to a performance-based method. This change did not have an impact on our annual financial results. We have revised our previously reported Quarterly Condensed Consolidated Statements of Operations and Financial Data on a retrospective basis to reflect this change in principle based on information that would have been available as of our previous filing.
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