Navistar, Inc. - Navistar 101

Navistar 101

Overview

Navistar International Corporation (NYSE: NAV) is a leading manufacturer of commercial trucks, buses, and engines. We are an international manufacturer of International^® brand commercial trucks, proprietary diesel engines, and IC Bus^® ("IC") brand school and commercial buses, as well as a provider of service parts for trucks and diesel engines. We also provide retail, wholesale, and lease financing services for our trucks and parts.

Our Products and Services

Our principal products and services include:

Trucks

Parts

Financial Services

We manufacture and distribute Class 4 through 8 trucks and buses in the common carrier, private carrier, government, leasing, construction, energy/petroleum, and student and commercial transportation markets under the International^® and IC Bus^® brands. We design and manufacture proprietary diesel engines for our International branded trucks and IC Bus branded buses.

We support our International^® brand commercial trucks, IC Bus^® brand buses, and our proprietary engines, as well as our other product lines, by distributing proprietary products together with a wide selection of other standard truck, trailer, and engine service parts.

We provide and manage retail, wholesale, and lease financing of products sold by the Truck and Parts segments, as well as their dealers, within the U.S., Canada and Mexico.

Our Business

Our Core business is the truck and parts markets for the U.S. and Canada, where we participate primarily in the Class 6 through 8 vehicle markets and in 2019 expanded into the Class 4/5 market with our International^® CV^™ product. With more than a million of our trucks on the road in the U.S. and Canada, one in five Class 6 through 8 vehicles is an International^® truck. Nearly half of all school buses on the road today are our IC Bus^® brand. We have one of the largest commercial vehicle parts distribution networks in the U.S., as well as a captive finance company.

Further, in 2019 we put into operation a partnership with Love’s Travel Stops, expanding our service network in North America through our Dealers and Network Service Partners to over 1,000 locations, one of the largest networks in North America. Outside our Core markets, International^® is one of the leading truck brands in Mexico and much of Latin America. We are the largest independent diesel engine company in Brazil, with our wholly owned subsidiary International Industria Automotiva da America do Sul Ltda. (“IIAA”), formerly MWM International Industria de Motores da America Do Sul Ltda. We also export trucks, buses, and engines to niche markets around the world.

We continue to take actions that we believe will improve our performance and to evaluate additional opportunities to enhance value for our customers.

2019 Accomplishments

We continue to demonstrate the growth of our business, focusing our efforts on becoming the #1 choice in our industry. In 2019, we made several notable advancements on our strategic vision. We believe these actions, coupled with our strategic alliance with the TRATON Group, and our winning culture, anchored by our high-performing cross-functional teams, continue to position us for success.

Customer-Centric

Operational Excellence

Core Business

Business Transformation

Our focus on customer and market segmentation to better align our efforts with customer needs led to the following accomplishments in 2019:

• Opened a new parts distribution center in Olive Branch, Mississippi, near the FedEx World Hub in Memphis, Tennessee, which will provide next-day parts delivery to 95% of our dealer locations
• Expanded to the industry’s largest service network with over 1,000 locations, through our partnership with Love’s Travel Stops
• Enhanced our predictive parts stocking through digitalization

We made improvements to operations as follows:

• Reduced our warranty expense as a percentage of manufacturing revenue from 1.7% in 2018 to 1.4% in 2019
• Announced investments in our manufacturing footprint to expand our capabilities in Huntsville, Alabama, for an integrated powertrain with TRATON Group and to build a benchmark truck manufacturing facility in San Antonio, Texas

We now have the industry’s newest and most comprehensive vehicle lineup, supported by our unique open-architecture all-brands remote diagnostic system, OnCommand Connection ("OCC"). In addition:

• Our core market share improved from 17.5% in 2018 to 18.8% in 2019
• We expanded the footprint of parts availability by adding 5 new Fleetrite retail outlets in the U.S. and Canada

Our strategic transformation has been and will continue to be a crucial element of how we play to win. The following are a few ways we have gained significant momentum during 2019:

• Created a new aftersales function that will manage every facet of the business after the initial sale of the truck, including oversight of parts and service, warranty, and dealer development
• Launched a new business unit, NEXT eMobility Solutions ("NEXT"), to deliver customized electrification solutions in the truck and school bus markets using lean, agile practices. NEXT establishes a comprehensive "four Cs" approach to developing eMobility solutions: Consulting, Constructing, Charging and Connecting
• Additional actions to de-risk the balance sheet through the purchase of a Canadian pension annuity, paying off $411 million in subordinated convertible notes with cash on hand in April, expanding the revolving credit facilities of NFC, and ending the year with $1.4 billion in consolidated cash, cash equivalents and marketable securities
• Selling off non-core business units including a 70% equity interest in our former defense business, ND Holdings, LLC (“Navistar Defense”), and our ownership interest in our former joint venture in China with Anhui Jianghuai Automobile Co., Ltd (“JAC”)

Expectations Going Forward

Moving forward, we will continue our intense focus on costs to fund our growth initiatives, grow our market share and margins, and deliver superior shareholder return.

We are focused on our Navistar 4.0 playing to win strategy, which is based on three critical elements:

People

Performance

#1 Choice

Driving high-performing, cross-functional teams while recruiting and developing key leadership roles by:

Expanding on our lean culture through visual management, agile approaches, and a focus on execution
Developing our best resources and redeploying resources to focus on our growth initiatives, and
Leveraging our strong values

Creating a sustainable long-term performance advantage within our products and services by investing in those areas with the greatest impact on our margins and overall financial performance. These areas include the following:

Enterprise platform strategy: A shared platform strategy for all key vehicle systems
Advanced modular architecture: Optimizing parts used in our vehicles to be able to deliver a customized solution to customers with the least amount of engineering work. This creates the potential to significantly improve productivity in engineering and research & development and provides us more flexibility to invest in new products and technologies
Integrated manufacturing: Investments that will allow us to optimize our manufacturing network by having a strong supplier footprint, and to achieve mutually beneficial relationships with our suppliers
Aftersales acceleration: Builds on our commitment to organically grow the parts business by helping our dealers improve their parts sales through enhanced training, data analysis and market knowledge
Integrated powertrains: Joint effort between Navistar and TRATON Group to incorporate the requirements we need for the North American market into TRATON's next generation of products, which, when combined with our investment in our Huntsville, Alabama, facility for localizing the next-generation big-bore diesel powertrain, will provide significant growth and margin opportunities

Identifying and focusing on key markets where we have a differentiated value, defining how we will operate in that market, and how to prove to our customers that we are their #1 choice by:

Following a Listen - Understand - Deliver approach to provide our customers what they truly need to succeed
Understanding our customers better than our competitors, ensuring that our products and services provide value to our customers, and by organizing to be aligned with our customers
Ensuring our products and services provide leading uptime and low total cost of ownership
Strengthening our brand and residual values to capture more of the 2nd and 3rd owner markets, and
Strengthening our dealers and building stronger partnerships with them through our Vision 2025 strategy

We believe Navistar 4.0 is built upon the right vision and the right strategy. We are confident that success will result in “the best team,” an operating performance advantage, and a brand preference that will result in our leadership in key markets and continued improvement in our financial performance.

Alliance with TRATON Group

Navistar and TRATON Group have a similar vision for the role of technology, including the importance of driver-focused open-architecture solutions. We expect the alliance will be a source of powertrain options and other high-value technologies, including advanced driver assistance systems, connected vehicle solutions and autonomous technologies, electric vehicles, and cab and chassis subsystems. We expect to have a fully integrated proprietary powertrain and to launch an electric medium-duty truck and electric school bus based on TRATON Group's technology. In addition, our procurement joint venture with TRATON Group will deliver further material cost savings in the years to come.

For Navistar

Procurement Joint Venture

$500 million in first five years
Annual run rate of $200 million
Achieved $225 million savings in first 2 ½ years*

Technology and Supply Partnership

More efficient engineering spend
Proprietary parts opportunities
Accelerate speed to market

*As of September 2019

For Traton

Pivotal Role in TRATON “Global Champion” Strategy

Economies of scale
Leading powertrain technology
Broad sales/service network

Equity investment

Strategic technology
and supply cooperation

Procurement
joint venture

Governance

TRATON Group holds a ~17% equity stake in Navistar

The two companies entered into definitive agreements to collaborate on technology for powertrain systems, as well as other advanced technologies

The two companies formed a procurement joint venture to pursue joint global sourcing opportunities

Navistar added two TRATON Group representatives to its Board of Directors. Furthermore, the parties formed a joint Alliance Board to oversee alliance arrangements

Financial Snapshot

	YEAR ENDED OCTOBER 31
($ in millions, except units)	2019	2018	2017
Chargeouts^(A)	87,200	73,900	57,300
Sales and Revenue	$11,251	$10,250	$8,750
Income/(Loss) from Continuing Operations, Net of Tax^(B)	$221	$340	$30
Adjusted EBITDA	$882	$826	$582
Adjusted EBITDA Margin	7.8%	8.1%	6.7%
Debt to Adjusted EBITDA^(C)	3.3x	4.1x	5.9x

(A) Only includes U.S. and Canada School buses and Class 6-8 trucks.
(B) Amounts attributable to Navistar International Corporation, net of tax.
(C) Excludes post retirement benefit liabilities and Financial Services debt.
Non-GAAP financial measures - please refer to financial statements and Earnings Release materials for description and reconciliation of non-GAAP financial measures.

Site Search

Navistar 101

Overview

Our Products and Services

Our principal products and services include:

Trucks

Parts

Financial Services

Our Business

2019 Accomplishments

Customer-Centric

Operational Excellence

Core Business

Business Transformation

Expectations Going Forward

People

Performance

#1 Choice

Alliance with TRATON Group

For Navistar

Procurement Joint Venture

Technology and Supply Partnership

For Traton

Pivotal Role in TRATON “Global Champion” Strategy

Equity investment

Strategic technology
and supply cooperation

Procurement
joint venture

Governance

Financial Snapshot

IR Contact

Corporate Headquarters

Transfer Agent

Company

Products

Support

Shop

Contact us

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Site Search

Navistar 101

Overview

Our Products and Services

Our principal products and services include:

Trucks

Parts

Financial Services

Our Business

2019 Accomplishments

Customer-Centric

Operational Excellence

Core Business

Business Transformation

Expectations Going Forward

People

Performance

#1 Choice

Alliance with TRATON Group

For Navistar

Procurement Joint Venture

Technology and Supply Partnership

For Traton

Pivotal Role in TRATON “Global Champion” Strategy

Equity investment

Strategic technology and supply cooperation

Procurement joint venture

Governance

Financial Snapshot

Company

Products

Support

Shop

Contact us

Information for

Stay connected

Strategic technology
and supply cooperation

Procurement
joint venture