Form 8-K NAVISTAR INTERNATIONAL For: Mar 08
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 8, 2016
NAVISTAR INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware | 1-9618 | 36-3359573 | ||
(State or other jurisdiction of incorporation or organization) |
(Commission File No.) |
(I.R.S. Employer Identification No.) |
2701 Navistar Drive Lisle, Illinois |
60532 | |
(Address of principal executive offices) | (Zip Code) |
Registrants telephone number, including area code (331) 332-5000
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
ITEM 2.02 | RESULTS OF OPERATIONS AND FINANCIAL CONDITION |
In accordance with General Instruction B.2. to Form 8-K, the following information shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.
The information regarding the results of operations and financial condition of Navistar International Corporation (the Company) responsive to this Item 2.02, and contained in Exhibit 99.1 filed herewith, is incorporated into this Item 2.02 by reference.
ITEM 7.01 | REGULATION FD DISCLOSURE |
In accordance with General Instruction B.2. to Form 8-K, the following information shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.
On March 8, 2016, the Company filed its Quarterly Report on Form 10-Q for the period ended January 31, 2016 with the Securities and Exchange Commission. The Companys press release announcing the filing is attached as Exhibit 99.1 to this Current Report and is incorporated by reference herein.
The Company, which is one of the largest combined commercial truck, school bus and mid-range diesel engine producers, will present via live web cast its fiscal 2016 first quarter financial results on Tuesday, March 8th. A live web cast is scheduled at approximately 9:00 AM Eastern. Speakers on the web cast will include: Troy Clarke, President and Chief Executive Officer; Walter Borst, Executive Vice President and Chief Financial Officer; and other company leaders. A copy of the slides containing financial and operating information to be used as part of the web cast are attached as Exhibit 99.2 to this Current Report and are incorporated by reference herein.
The web cast can be accessed through a link on the investor relations page of Companys web site at http://www.navistar.com/navistar/investors/webcasts. Investors are advised to log on to the website at least 15 minutes prior to the start of the web cast to allow sufficient time for downloading any necessary software. The web cast will be available for replay at the same address approximately three hours following its conclusion, and will remain available for a period of at least 12 months.
Navistar International Corporation (NYSE: NAV) is a holding company whose subsidiaries and affiliates produce International® brand commercial and military trucks, proprietary diesel engines, and IC Bus brand school and commercial buses. An affiliate also provides truck and diesel engine service parts. Another affiliate offers financing services. Additional information is available at www.Navistar.com.
ITEM 9.01. | FINANCIAL STATEMENTS AND EXHIBITS |
(d) Exhibits.
The following documents are filed herewith:
Exhibit |
Description | |
99.1 | Press Release. | |
99.2 | Slide Presentation for First Quarter 2016 Financial Results Web Cast to be held on March 8, 2016. |
Forward Looking Statements
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, 2015. Although we believe that these forward-looking statements are based on reasonable assumptions, there are many factors that could affect our 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.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
NAVISTAR INTERNATIONAL CORPORATION | ||
(Registrant) | ||
By: | /s/ WALTER G. BORST | |
Name: Title: |
Walter G. Borst Executive Vice President and Chief Financial Officer |
Dated: March 8, 2016
EXHIBIT INDEX
Exhibit |
Description | |
99.1 | Press Release. | |
99.2 | Slide Presentation for First Quarter 2016 Financial Results Web Cast to be held on March 8, 2016. |
Exhibit 99.1
NAVISTAR REPORTS FIRST QUARTER 2016 RESULTS
| Net loss of $33 million, or 40 cents per share, on revenues of $1.8 billion |
| Adjusted EBITDA of $77 million, up 43 percent year-over-year |
| Tightens FY 2016 full-year adjusted EBITDA target to $600 million - $650 million |
LISLE, Ill., March 8, 2016 Navistar International Corporation (NYSE: NAV) today announced a first quarter 2016 net loss of $33 million, or $0.40 per diluted share, an improvement of 21 percent and 23 percent, respectively, compared to a first quarter 2015 net loss of $42 million, or $0.52 per diluted share.
Revenues in the quarter were $1.8 billion, a decline of 27 percent compared to $2.4 billion in the first quarter last year. The decline reflects lower volumes in its Core U.S. and Canadian markets, due to softer industry conditions; lower volumes in Mexico and export markets, reflecting a stronger U.S. dollar; and, lower engine volumes in Brazil, due to ongoing weak economic conditions in that country. Additionally, one-quarter of the year-over-year decline was due to the discontinuation of the companys Blue Diamond Truck joint venture in mid-2015.
First quarter 2016 EBITDA was $82 million, compared to first quarter 2015 EBITDA of $101 million. This years results included a $5 million charge for pre-existing warranties and a net $10 million benefit related to a one-time fee received, partly offset by asset impairment and restructuring costs. As a result, first quarter adjusted EBITDA was $77 million, up 43 percent, compared to adjusted EBITDA of $54 million in the comparable period last year.
Despite a lower revenue base, we continued to unlock value by significantly improving adjusted EBITDA through managing and optimizing our costs, said Troy A. Clarke, Navistar president and chief executive officer. We are encouraged by our Q1 performance and remain on track to achieve our goals of returning to profitability and generating manufacturing free cash flow in 2016.
This was a solid quarter in which we made real progress toward our 2016 targets, said Walter G. Borst, Navistar executive vice president and chief financial officer. We operated within our indicated cash range in what is seasonally our weakest revenue and most cash-intensive quarter, ending the first quarter 2016 with $673 million in manufacturing cash, cash equivalents and marketable securities. We also continued to manage costs out of our business, putting us on track to achieve our annual $200 million cost reduction target.
Significant first quarter items include:
| Achieved $57 million in structural cost reductions. |
| Delivered record Q1 Parts segment profit of $150 million. |
| Used truck inventory increased $50 million to $440 million. |
| Warranty expense, excluding pre-existing adjustments, declined to 2.6 percent of manufacturing revenue, approaching best-in-class quality levels. |
We expect the industrys oversupply of used trucks will continue in the near term, Borst said. While our inventory is higher than we planned, I am confident in our abilities to address this issue and bring these inventories down over time.
On February 1, the company unveiled its new HX Series of premium severe service trucks, returning Navistar to a segment from which it had been largely absent since 2010. One week after the launch, the company had received more than 300 orders for the HX, and customer feedback has been overwhelmingly positive.
Navistar is bringing to market trucks that customers want to buy and solutions that deliver uptime, support our Parts business, and position our dealer network for success, Clarke said. Over the next few years, the company expects to announce a new product on average every six months, completely refreshing the product line by the end of 2018.
GUIDANCE
Industry
| Continue forecast of fiscal year 2016 retail deliveries of Class 6-8 trucks and buses in the United States and Canada of 350,000 units-380,000 units. |
| Class 8 (heavy) market to be down for the fiscal year, at 240,000-270,000 units versus 279,000 for 2015. |
| Project the medium, school bus and severe service segments to grow in 2016. |
Navistar
| Revised 2016 revenue guidance to $9.0 billion - $9.25 billion. |
| Tightened 2016 adjusted EBITDA guidance to $600 million - $650 million. |
| Maintained total cost reduction guidance of $200 million. |
| Updated its end-of-year manufacturing cash guidance to be $900 million - $1 billion. |
| Reiterated its goal is to achieve profitability and be manufacturing free cash flow positive in 2016. |
SEGMENT REVIEW
Summary of Financial Results:
(Unaudited) | ||||||||
Quarters Ended January 31, |
||||||||
(in millions, except per share data) | 2016 | 2015 | ||||||
Sales and revenues, net |
$ | 1,765 | $ | 2,421 | ||||
Segment Results: |
||||||||
Truck |
$ | (51 | ) | $ | (18 | ) | ||
Parts |
150 | 145 | ||||||
Global Operations |
(13 | ) | (15 | ) | ||||
Financial Services |
26 | 24 | ||||||
Loss from continuing operations, net of tax(A) |
$ | (33 | ) | $ | (42 | ) | ||
Net loss(A) |
(33 | ) | (42 | ) | ||||
Diluted loss per share from continuing operations(A) |
$ | (0.40 | ) | $ | (0.52 | ) | ||
Diluted loss per share(A) |
$ | (0.40 | ) | $ | (0.52 | ) |
(A) | Amounts attributable to Navistar International Corporation. |
Truck Segment Truck segment first quarter 2016 net sales decreased $573 million, or 34 percent, due to lower core truck volumes as a result of softer industry conditions; a decline of $158 million in Ford sales through the BDT joint venture, as production for the JV ceased in mid-2015; and, a decline in export truck markets. Truck chargeouts in the companys Core market were down 19 percent year over year.
The Truck segment loss increased by $33 million in first quarter 2016 versus first quarter 2015. Lower structural and product costs and lower accelerated depreciation charges in first quarter 2016 were more than offset by the impact of lower volumes and an increase in used truck reserves this year, and a benefit for adjustments to pre-existing warranties in the first quarter of 2015 of $55 million.
Parts Segment Parts segment first quarter net sales decreased $56 million, or nine percent, primarily due to lower volumes in North America markets compared to strong North America markets in the previous year; a decline in Blue Diamond Parts due to a decrease of units in operation; and, decreased export parts sales due to economic conditions in export markets.
2
Parts segment profit increased by $5 million, or three percent, primarily due to the impact of cost-reduction initiatives, partially offset by the decline in volumes.
Global Operations Segment Global Operations segment first quarter net sales decreased $60 million, or 39 percent, primarily driven by a decrease in South America engine operations, reflecting lower volumes and unfavorable movements in foreign currency exchange rates, as the average conversion rate of the Brazilian Real to the U.S. dollar weakened by 33 percent for the first quarter of 2016 compared to the same period last year. The continued economic downturn in the Brazil economy contributed to 18 percent lower engine volumes in first quarter 2016 compared to the comparable prior year period.
The Global Operations segment results improved $2 million, to a loss of $13 million, compared with the comparable prior year period, primarily due to lower manufacturing and structural costs as a result of prior year restructuring and cost-reduction efforts.
Financial Services Segment Financial Services segment first quarter net revenues decreased by $1 million, or two percent, primarily driven by a decrease in the average retail notes receivable balances, partially offset by higher revenues from operating leases.
The Financial Services segment profit increased by $2 million, or eight percent, primarily due to an increase in gains on lease terminations, a decrease in the provision for loan losses, and cost reduction initiatives, partially offset by a decrease in revenue and lower interest income from intercompany loans.
About Navistar
Navistar International Corporation (NYSE: NAV) is a holding company whose subsidiaries and affiliates produce International® brand commercial and military trucks, proprietary diesel engines, and IC Bus brand school and commercial buses. An affiliate also provides truck and diesel engine service parts. Another affiliate offers financing services. Additional information is available at www.Navistar.com.
Forward-Looking Statements
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, 2015. Although we believe that these forward-looking statements are based on reasonable assumptions, there are many factors that could affect our 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.
3
Navistar International Corporation and Subsidiaries
Consolidated Statements of Operations
(Unaudited) | ||||||||
Quarters Ended January 31, |
||||||||
(in millions, except per share data) | 2016 | 2015 | ||||||
Sales and revenues |
||||||||
Sales of manufactured products, net |
$ | 1,730 | $ | 2,385 | ||||
Finance revenues |
35 | 36 | ||||||
|
|
|
|
|||||
Sales and revenues, net |
1,765 | 2,421 | ||||||
|
|
|
|
|||||
Costs and expenses |
||||||||
Costs of products sold |
1,466 | 2,045 | ||||||
Restructuring charges |
3 | 3 | ||||||
Asset impairment charges |
2 | 7 | ||||||
Selling, general and administrative expenses |
205 | 241 | ||||||
Engineering and product development costs |
58 | 79 | ||||||
Interest expense |
81 | 77 | ||||||
Other income, net |
(22 | ) | (3 | ) | ||||
|
|
|
|
|||||
Total costs and expenses |
1,793 | 2,449 | ||||||
Equity in income (loss) of non-consolidated affiliates |
(1 | ) | 2 | |||||
|
|
|
|
|||||
Loss from continuing operations before income taxes |
(29 | ) | (26 | ) | ||||
Income tax benefit (expense) |
5 | (7 | ) | |||||
|
|
|
|
|||||
Loss from continuing operations |
(24 | ) | (33 | ) | ||||
Income (loss) from discontinued operations, net of tax |
| | ||||||
|
|
|
|
|||||
Net loss |
(24 | ) | (33 | ) | ||||
Less: Net income attributable to non-controlling interests |
9 | 9 | ||||||
|
|
|
|
|||||
Net loss attributable to Navistar International Corporation |
$ | (33 | ) | $ | (42 | ) | ||
|
|
|
|
|||||
Amounts attributable to Navistar International Corporation common shareholders: |
| |||||||
Loss from continuing operations, net of tax |
$ | (33 | ) | $ | (42 | ) | ||
Income (loss) from discontinued operations, net of tax |
| | ||||||
|
|
|
|
|||||
Net loss |
$ | (33 | ) | $ | (42 | ) | ||
|
|
|
|
|||||
Loss per share: |
||||||||
Basic: |
||||||||
Continuing operations |
$ | (0.40 | ) | $ | (0.52 | ) | ||
Discontinued operations |
| | ||||||
|
|
|
|
|||||
$ | (0.40 | ) | $ | (0.52 | ) | |||
|
|
|
|
|||||
Diluted: |
||||||||
Continuing operations |
$ | (0.40 | ) | $ | (0.52 | ) | ||
Discontinued operations |
| | ||||||
|
|
|
|
|||||
$ | (0.40 | ) | $ | (0.52 | ) | |||
|
|
|
|
|||||
Weighted average shares outstanding: |
||||||||
Basic |
81.7 | 81.5 | ||||||
Diluted |
81.7 | 81.5 |
4
Navistar International Corporation and Subsidiaries
Consolidated Balance Sheets
(in millions, except per share data) | January 31, 2016 |
October 31, 2015 |
||||||
ASSETS |
(Unaudited | ) | ||||||
Current assets |
||||||||
Cash and cash equivalents |
$ | 579 | $ | 912 | ||||
Marketable securities |
152 | 159 | ||||||
Trade and other receivables, net |
340 | 429 | ||||||
Finance receivables, net |
1,431 | 1,779 | ||||||
Inventories, net |
1,269 | 1,135 | ||||||
Deferred taxes, net |
| 36 | ||||||
Other current assets |
168 | 172 | ||||||
|
|
|
|
|||||
Total current assets |
3,939 | 4,622 | ||||||
Restricted cash |
118 | 121 | ||||||
Trade and other receivables, net |
12 | 13 | ||||||
Finance receivables, net |
198 | 216 | ||||||
Investments in non-consolidated affiliates |
64 | 66 | ||||||
Property and equipment (net of accumulated depreciation and amortization of $2,555 and $2,546, respectively) |
1,304 | 1,345 | ||||||
Goodwill |
38 | 38 | ||||||
Intangible assets (net of accumulated amortization of $123 and $120, respectively) |
52 | 57 | ||||||
Deferred taxes, net |
157 | 128 | ||||||
Other noncurrent assets |
98 | 86 | ||||||
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|
|
|||||
Total assets |
$ | 5,980 | $ | 6,692 | ||||
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LIABILITIES and STOCKHOLDERS DEFICIT |
||||||||
Liabilities |
||||||||
Current liabilities |
||||||||
Notes payable and current maturities of long-term debt |
$ | 1,492 | $ | 1,110 | ||||
Accounts payable |
1,031 | 1,301 | ||||||
Other current liabilities |
1,277 | 1,377 | ||||||
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|
|||||
Total current liabilities |
3,800 | 3,788 | ||||||
Long-term debt |
3,607 | 4,188 | ||||||
Postretirement benefits liabilities |
2,966 | 2,995 | ||||||
Deferred taxes, net |
| 14 | ||||||
Other noncurrent liabilities |
797 | 867 | ||||||
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|
|
|||||
Total liabilities |
11,170 | 11,852 | ||||||
Stockholders deficit |
||||||||
Series D convertible junior preference stock |
2 | 2 | ||||||
Common stock (86.8 shares issued, and $0.10 par value per share and 220 shares authorized, all at both dates) |
9 | 9 | ||||||
Additional paid-in capital |
2,501 | 2,499 | ||||||
Accumulated deficit |
(4,899 | ) | (4,866 | ) | ||||
Accumulated other comprehensive loss |
(2,601 | ) | (2,601 | ) | ||||
Common stock held in treasury, at cost (5.3 shares, at both dates) |
(209 | ) | (210 | ) | ||||
|
|
|
|
|||||
Total stockholders deficit attributable to Navistar International Corporation |
(5,197 | ) | (5,167 | ) | ||||
Stockholders equity attributable to non-controlling interests |
7 | 7 | ||||||
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|
|
|||||
Total stockholders deficit |
(5,190 | ) | (5,160 | ) | ||||
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Total liabilities and stockholders deficit |
$ | 5,980 | $ | 6,692 | ||||
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5
Navistar International Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited) | ||||||||
Quarters Ended January 31, |
||||||||
(in millions) | 2016 | 2015 | ||||||
Cash flows from operating activities |
||||||||
Net loss |
$ | (24 | ) | $ | (33 | ) | ||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
||||||||
Depreciation and amortization |
39 | 58 | ||||||
Depreciation of equipment leased to others |
19 | 21 | ||||||
Deferred taxes, including change in valuation allowance |
(18 | ) | (12 | ) | ||||
Asset impairment charges |
2 | 7 | ||||||
Amortization of debt issuance costs and discount |
9 | 9 | ||||||
Stock-based compensation |
1 | 2 | ||||||
Provision for doubtful accounts, net of recoveries |
2 | (3 | ) | |||||
Equity in income of non-consolidated affiliates, net of dividends |
1 | 5 | ||||||
Other non-cash operating activities |
(5 | ) | (11 | ) | ||||
Changes in other assets and liabilities, exclusive of the effects of businesses disposed |
(128 | ) | (254 | ) | ||||
|
|
|
|
|||||
Net cash used in operating activities |
(102 | ) | (211 | ) | ||||
|
|
|
|
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Cash flows from investing activities |
||||||||
Purchases of marketable securities |
(117 | ) | (140 | ) | ||||
Sales of marketable securities |
115 | 507 | ||||||
Maturities of marketable securities |
9 | 63 | ||||||
Net change in restricted cash and cash equivalents |
(1 | ) | 53 | |||||
Capital expenditures |
(29 | ) | (17 | ) | ||||
Purchases of equipment leased to others |
(49 | ) | (10 | ) | ||||
Proceeds from sales of property and equipment |
14 | 1 | ||||||
Investments in non-consolidated affiliates |
(1 | ) | | |||||
|
|
|
|
|||||
Net cash provided by (used in) investing activities |
(59 | ) | 457 | |||||
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|
|
|||||
Cash flows from financing activities |
||||||||
Proceeds from issuance of securitized debt |
50 | 250 | ||||||
Principal payments on securitized debt |
(8 | ) | (240 | ) | ||||
Net change in secured revolving credit facilities |
(108 | ) | (27 | ) | ||||
Proceeds from issuance of non-securitized debt |
42 | 35 | ||||||
Principal payments on non-securitized debt |
(77 | ) | (78 | ) | ||||
Net decrease in notes and debt outstanding under revolving credit facilities |
(70 | ) | (43 | ) | ||||
Principal payments under financing arrangements and capital lease obligations |
(1 | ) | | |||||
Debt issuance costs |
(1 | ) | (4 | ) | ||||
Proceeds from financed lease obligations |
7 | 10 | ||||||
Dividends paid by subsidiaries to non-controlling interest |
(10 | ) | (12 | ) | ||||
Other financing activities |
1 | | ||||||
|
|
|
|
|||||
Net cash used in financing activities |
(175 | ) | (109 | ) | ||||
|
|
|
|
|||||
Effect of exchange rate changes on cash and cash equivalents |
3 | (14 | ) | |||||
|
|
|
|
|||||
Increase (decrease) in cash and cash equivalents |
(333 | ) | 123 | |||||
Cash and cash equivalents at beginning of the period |
912 | 497 | ||||||
|
|
|
|
|||||
Cash and cash equivalents at end of the period |
$ | 579 | $ | 620 | ||||
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6
Navistar International Corporation and Subsidiaries
Segment Reporting
(Unaudited)
We define segment profit (loss) as net income (loss) from continuing operations attributable to Navistar International Corporation excluding income tax benefit (expense). The following tables present selected financial information for our reporting segments:
(in millions) | Truck | Parts | Global Operations |
Financial Services (A) |
Corporate and Eliminations |
Total | ||||||||||||||||||
Three Months Ended January 31, 2016 |
||||||||||||||||||||||||
External sales and revenues, net |
$ | 1,081 | $ | 562 | $ | 84 | $ | 35 | $ | 3 | $ | 1,765 | ||||||||||||
Intersegment sales and revenues |
51 | 8 | 8 | 24 | (91 | ) | | |||||||||||||||||
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Total sales and revenues, net |
$ | 1,132 | $ | 570 | $ | 92 | $ | 59 | $ | (88 | ) | $ | 1,765 | |||||||||||
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Income (loss) from continuing operations attributable to NIC, net of tax |
$ | (51 | ) | $ | 150 | $ | (13 | ) | $ | 26 | $ | (145 | ) | $ | (33 | ) | ||||||||
Income tax benefit |
| | | | 5 | 5 | ||||||||||||||||||
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Segment profit (loss) |
$ | (51 | ) | $ | 150 | $ | (13 | ) | $ | 26 | $ | (150 | ) | $ | (38 | ) | ||||||||
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Depreciation and amortization |
$ | 34 | $ | 3 | $ | 5 | $ | 12 | $ | 4 | $ | 58 | ||||||||||||
Interest expense |
| | | 19 | 62 | 81 | ||||||||||||||||||
Equity in income (loss) of non-consolidated affiliates |
1 | 1 | (3 | ) | | | (1 | ) | ||||||||||||||||
Capital expenditures(B) |
25 | 1 | 1 | | 2 | 29 |
(in millions) | Truck | Parts | Global Operations |
Financial Services (A) |
Corporate and Eliminations |
Total | ||||||||||||||||||
Three Months Ended January 31, 2015 |
||||||||||||||||||||||||
External sales and revenues, net |
$ | 1,631 | $ | 614 | $ | 138 | $ | 36 | $ | 2 | $ | 2,421 | ||||||||||||
Intersegment sales and revenues |
74 | 12 | 14 | 24 | (124 | ) | | |||||||||||||||||
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|||||||||||||
Total sales and revenues, net |
$ | 1,705 | $ | 626 | $ | 152 | $ | 60 | $ | (122 | ) | $ | 2,421 | |||||||||||
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Income (loss) from continuing operations attributable to NIC, net of tax |
$ | (18 | ) | $ | 145 | $ | (15 | ) | $ | 24 | $ | (178 | ) | $ | (42 | ) | ||||||||
Income tax expense |
| | | | (7 | ) | (7 | ) | ||||||||||||||||
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Segment profit (loss) |
$ | (18 | ) | $ | 145 | $ | (15 | ) | $ | 24 | $ | (171 | ) | $ | (35 | ) | ||||||||
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Depreciation and amortization |
$ | 52 | $ | 3 | $ | 7 | $ | 12 | $ | 5 | $ | 79 | ||||||||||||
Interest expense |
| | | 20 | 57 | 77 | ||||||||||||||||||
Equity in income (loss) of non-consolidated affiliates |
2 | 1 | (1 | ) | | | 2 | |||||||||||||||||
Capital expenditures(B) |
14 | | 2 | | 1 | 17 |
(in millions) | Truck | Parts | Global Operations |
Financial Services |
Corporate and Eliminations |
Total | ||||||||||||||||||
Segment assets, as of: |
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January 31, 2016 |
$ | 1,934 | $ | 623 | $ | 349 | $ | 2,094 | $ | 980 | $ | 5,980 | ||||||||||||
October 31, 2015 |
1,876 | 641 | 409 | 2,455 | 1,311 | 6,692 |
(A) | Total sales and revenues in the Financial Services segment include interest revenues of $42 million and $45 million for the three months ended January 31, 2016 and 2015, respectively. |
(B) | Exclusive of purchases of equipment leased to others. |
7
SEC Regulation G Non-GAAP Reconciliation
The financial measures presented below 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 and are reconciled to the most appropriate GAAP number below.
Earnings (loss) Before Interest, Income Taxes, Depreciation, and Amortization (EBITDA):
We define EBITDA as our consolidated net income (loss) from continuing operations attributable to Navistar International Corporation, net of tax, plus manufacturing interest expense, income taxes, and depreciation and amortization. We believe EBITDA provides meaningful information to the performance of our business and therefore we use it to supplement our GAAP reporting. 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.
Adjusted EBITDA:
We believe that adjusted EBITDA, which excludes certain identified items that we do not consider to be part of our ongoing business, improves the comparability of year to year results, and is representative of our underlying performance. Management uses this information to assess and measure the performance of our operating segments. 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 reconciliations, and to provide an additional measure of performance.
Adjusted EBITDA margin:
We define Adjusted EBITDA margin as a percentage of the Companys consolidated sales and revenues. 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 reconciliations, and to provide an additional measure of performance.
Manufacturing Cash, Cash Equivalents, and Marketable Securities:
Manufacturing cash, cash equivalents, and marketable securities represents the Companys consolidated cash, cash equivalents, and marketable securities excluding cash, cash equivalents, and marketable securities of our financial services operations. We include marketable securities with our cash and cash equivalents when assessing our liquidity position as our investments are highly liquid in nature. We have chosen to provide this supplemental information to investors, analysts and other interested parties to enable them to perform additional analyses of our ability to meet our operating requirements, capital expenditures, equity investments, and financial obligations.
Structural costs consists of Selling, general and administrative expenses and Engineering and product development costs.
8
EBITDA reconciliation:
(in millions) | Three Months Ended January 31, |
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2016 | 2015 | |||||||
Loss from continuing operations attributable to NIC, net of tax |
$ | (33 | ) | $ | (42 | ) | ||
Plus: |
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Depreciation and amortization expense |
58 | 79 | ||||||
Manufacturing interest expense(A) |
62 | 57 | ||||||
Less: |
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Income tax benefit (expense) |
5 | (7 | ) | |||||
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|||||
EBITDA |
$ | 82 | $ | 101 | ||||
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(A) | Manufacturing interest expense is the net interest expense primarily generated for borrowings that support the manufacturing and corporate operations, adjusted to eliminate intercompany interest expense with our Financial Services segment. The following table reconciles Manufacturing interest expense to the consolidated interest expense: |
Three Months Ended January 31, |
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(in millions) | 2016 | 2015 | ||||||
Interest expense |
$ | 81 | $ | 77 | ||||
Less: Financial services interest expense |
19 | 20 | ||||||
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Manufacturing interest expense |
$ | 62 | $ | 57 | ||||
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Adjusted EBITDA reconciliation:
Three Months Ended January 31, |
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(in millions) | 2016 | 2015 | ||||||
EBITDA (reconciled above) |
$ | 82 | $ | 101 | ||||
Less significant items of: |
||||||||
Adjustments to pre-existing warranties(A) |
5 | (57 | ) | |||||
North America asset impairment charges(B) |
2 | 7 | ||||||
Cost reduction and other strategic initiatives |
3 | 3 | ||||||
One-time fee received(C) |
(15 | ) | | |||||
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Total adjustments |
(5 | ) | (47 | ) | ||||
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Adjusted EBITDA |
$ | 77 | $ | 54 | ||||
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Adjusted EBITDA margin |
4.4 | % | 2.2 | % |
(A) | Adjustments to pre-existing warranties reflect changes in our estimate of warranty costs for products sold in prior periods. Such adjustments typically occur when claims experience deviates from historic and expected trends. Our warranty liability is generally affected by component failure rates, repair costs, and the timing of failures. Future events and circumstances related to these factors could materially change our estimates and require adjustments to our liability. In addition, new product launches require a greater use of judgment in developing estimates until historical experience becomes available. |
(B) | In the first quarter of 2016, the Truck segment recorded $2 million of asset impairment charges relating to certain long lived assets. In the first quarter of 2015, the Truck segment recorded $7 million of asset impairment charges relating to certain operating leases. |
(C) | In the first quarter of 2016, we received a $15 million one-time fee from a third party which was recognized in Other income, net. |
9
Manufacturing segment cash and cash equivalents and marketable securities reconciliation:
As of January 31, 2016 | ||||||||||||
(in millions) | Manufacturing Operations |
Financial Services Operations |
Consolidated Balance Sheet |
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Assets |
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Cash and cash equivalents |
$ | 544 | $ | 35 | $ | 579 | ||||||
Marketable securities |
129 | 23 | 152 | |||||||||
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Total Cash and cash equivalents and Marketable securities |
$ | 673 | $ | 58 | $ | 731 | ||||||
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10
Q1 2016 earnings presentation March 8, 2016 Exhibit 99.2
Safe Harbor Statement and Other Cautionary Notes Information provided and statements contained in this presentation 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 presentation and the Company assumes no obligation to update the information included in this presentation. 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 year ended October 31, 2015. Although we believe that these forward-looking statements are based on reasonable assumptions, there are many factors that could affect our 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. The financial information herein contains audited and unaudited information and has been prepared by management in good faith and based on data currently available to the Company. Certain non-GAAP measures are used in this presentation to assist the reader in understanding our core manufacturing business. We believe this information is useful and relevant to assess and measure the performance of our core manufacturing business as it illustrates manufacturing performance. It also excludes financial services and other items that may not be related to the core manufacturing business or underlying results. Management often uses this information to assess and measure the underlying performance of our operating segments. 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. The non-GAAP numbers are reconciled to the most appropriate GAAP number in the appendix of this presentation.
Agenda Overview Troy Clarke Financial Results Walter Borst Summary Troy Clarke
1st QUARTER 2016 RESULTS Troy Clarke, President & CEO
Adjusted EBITDA up 43%, to $77 million, on lower revenue Ongoing cost management Progress towards 2016 operating and financial goals Q1 2016 Overview Note:This slide contains non-GAAP information; please see the REG G in appendix for a detailed reconciliation.
Maintain FY2016 industry outlook of 350,000-380,000 trucks and buses Navistar’s market share improved throughout the quarter Improved order share Industry Outlook, Navistar Share
Used truck inventory increased in Q1 Reflects industry-wide oversupply and slowdown in Navistar used sales More than halfway through expected MaxxForce receipts Project 2016 and 2017 receipts will be lower than 2014 and 2015 Used Truck Inventory
Entire product line-up renewed by the end of 2018 Launched HX premium severe service trucks Announced Cummins ISL9 engine Uptime improvement Warranty expense at 2.6% of revenue(A) More than 180,000 OnCommand Connection subscribers First to market with Over-the-Air Reprogramming Investments to Drive Future Market Share (A) Excludes pre-existing warranty
FINANCIAL RESULTS Walter Borst, Executive Vice President & CFO
Financial Summary…Good Start to 2016 Note:This slide contains non-GAAP information; please see the REG G in appendix for a detailed reconciliation. (A) Includes U.S. and Canada School bus and Class 6-8 truck. (B) Amounts attributable to Navistar International Corporation. $ in millions, except per share and units Quarters Ended January 31 2016 2015 Chargeouts(A) 11,000 13,500 Sales and Revenues $1,765 $2,421 Income (Loss) from Continuing Operations, Net of Tax(B) $-33 $-42 Diluted Loss Per Share from Continuing Operations(B) $-0.4 $-0.52 Adjusted EBITDA $77 $54
Q1 2016 Adjusted EBITDA $ in millions Note:This slide contains non-GAAP information; please see the REG G in appendix for a detailed reconciliation. * Excludes pre-existing warranty and one-time items.
Q1 2016 Segment Results $ in millions Sales and Revenues Segment Profit Quarters Ended January 31 Quarters Ended January 31 2016 2015 2016 2015 Truck $1,132 $1,705 $-51 $-18 Parts $570 $626 $150 $145 Global Operations $92 $152 $-13 $-15 Financial Services $59 $60 $26 $24
Used Truck Inventory Update Q1 ending gross inventory balance increased $50 million due to softening of domestic and export markets Inventory reserve adjustment of $35 million ~$300 million net used truck inventory on balance sheet Gross and Net Used Truck Inventory $ in millions
Navistar’s EGR Trade Receipts Expected to Decline Navistar receipts of EGR trucks total 16,500; more than 50% of total expected receipts Balancing new truck sales, working capital impact and residual values EGR Trade Receipts Actual Forecast Units Graph depicts the timing of Navistar’s expected volumes of trade receipts of EGR on-highway trucks in the U.S.
Q1 2016 Manufacturing Cash $ in millions Note:This slide contains non-GAAP information; please see the REG G in appendix for a detailed reconciliation. Cash balance includes marketable securities. Excluding one-time items and pre-existing warranty. Includes $50 million of incremental NFC intercompany loan. Actual Q4 2015 Manufacturing Cash Balance(A) $1,013 Consolidated Adjusted EBITDA(B) $77 Capex/Cash Interest/Pension & OPEB Funding ($127) Change in Net Working Capital/Debt and Warranty/Other(C) ($290) Q1 2016 Manufacturing Cash Balance(A) $673
Guidance Summary Cost Reductions Adjusted EBITDA $9.0–$9.25B Updated 2016 $600–$650M > $200M ~$900 M to $1 B Revenue Manufacturing Cash $9.5–10B $600–$700M > $200M ~$1.0B Prior 2016
Summary Troy Clarke, President & CEO
Summary Demonstrated ability to… Manage and optimize costs Bring exciting products to market Improve Parts business Strengthen our dealer network Well-positioned to achieve 2016 full-year profitability and positive manufacturing free cash flow
Appendix
Navistar Financial Corporation Highlights Financial Services segment profit of $26 million for Q1 2016 U.S. financing availability of $406 million as of January 31, 2016 Financial Services debt/equity leverage of 3.0:1 BMO Navistar Capital transition completed, program performing as expected In February, the dealer note variable funding facility increased from $375 million to $500 million Retail Notes Bank Facility Dealer Floor Plan $738 million facility, matures in December 2016 Funding for retail notes, wholesale notes, retail accounts, and dealer open accounts On balance sheet NFSC wholesale trust as of January 2016 $875 million funding facility Variable portion matures October 2016 Term portions mature October 2016 and June 2017 On balance sheet Program management continuity Broad product offering Ability to support large fleets Access to less expensive capital C A P I T A L Funded by BMO Financial Group
Retail Market Share in Commercial Vehicle Segments Class 6/7 Medium-Duty Class 8 Severe Service Class 8 Heavy Three Months Ended January 31, October 31, July 31, April 30, January 31, 2016 2015 2015 2015 2015 Core Markets (U.S. and Canada) Class 6 and 7 medium trucks ................................................. 20% 19% 24% 27% 21% Class 8 heavy trucks ............................................................. 10% 11% 12% 12% 10% Class 8 severe service trucks ................................................. 16% 15% 15% 15% 14% Combined class 8 trucks ....................................................... 11% 12% 13% 13% 11%
Worldwide Truck Chargeouts We define chargeouts as trucks that have been invoiced to customers. The units held in dealer inventory represent the principal difference between retail deliveries and chargeouts. This table summarizes our approximate worldwide chargeouts from our continuing operations. We define our Core markets to include U.S. and Canada School bus and Class 6 through 8 medium and heavy truck. Our Core markets include CAT-branded units sold to Caterpillar under our North America supply agreement. Other markets primarily consist of Export Truck and Mexico and also include chargeouts related to BDT of 3,400 units during the first quarter of 2015. There were no third party chargeouts related to BDT during the three months ended January 31, 2016 as Ford no longer purchases from BDT. Three Months Ended January 31, % Change (in units) 2016 2015 Change Core Markets (U.S. and Canada) School buses ......................................... 1,800 2,700 (900 ) (33)% Class 6 and 7 medium trucks................. 3,900 4,000 (100 ) (3)% Class 8 heavy trucks ............................. 3,600 4,800 (1,200 ) (25)% Class 8 severe service trucks ................ 1,700 2,000 (300 ) (15)% Total Core Markets.................................. 11,000 13,500 (2,500 ) (19)% Other markets(A)..................................... 1,700 7,000 (5,300 ) (76)% Total worldwide unit................................ 12,700 20,500 (7,800 ) (38)% Combined class 8 trucks........................ 5,300 6,800 (1,500 ) (22)%
U.S. and Canada Dealer Stock Inventory* *Includes U.S. and Canada Class 4-8 and school bus inventory, but does not include U.S. IC Bus.
Frequently Asked Questions Q1: What is included in Corporate and Eliminations? A:The primary drivers of Corporate and Eliminations are Corporate SG&A, pension and OPEB expense (excluding amounts allocated to the segments), annual incentive, manufacturing interest expense, and the elimination of intercompany sales and profit between segments. Q2: What is included in your equity in loss of non-consolidated affiliates? A:Equity in loss of non-consolidated affiliates is derived from our ownership interests in partially-owned affiliates that are not consolidated. Q3: What is your net income attributable to non-controlling interests? A:Net income attributable to non-controlling interests is the result of the consolidation of subsidiaries in which we do not own 100%, and is primarily comprised of Ford's non-controlling interest in our Blue Diamond Parts joint venture. Q4:What are your expected 2016 and beyond pension funding requirements? A:Future contributions are dependent upon a number of factors, principally the changes in values of plan assets, changes in interest rates and the impact of any funding relief currently under consideration. For the quarter ended January 31, 2016 and 2015, we contributed $19 million and $30 million, respectively, to our U.S. and Canadian post-retirement pension plans (the "Plans") to meet regulatory minimum funding requirements. We currently anticipate additional contributions of approximately $80 million during the remainder of 2016. We currently expect that from 2017 through 2019, we will be required to contribute $100 million to $200 million per year to the Plans, depending on asset performance and discount rates.
Frequently Asked Questions Q5:What is your expectation for future cash tax payments? A:Our cash tax payments are expected to remain low in 2016 and will gradually increase as we utilize available net operating losses (NOLs) and tax credits in future years. Q6:What is the current balance of net operating losses as compared to other deferred tax assets? A: As of October 31, 2015 the Company had deferred tax assets for U.S. federal NOLs valued at $840 million, state NOLs valued at $145 million, and foreign NOLs valued at $176 million, for a total undiscounted cash value of $1.2 billion. In addition to NOLs, the Company had deferred tax assets for accumulated tax credits of $266 million and other deferred tax assets of $2.0 billion resulting in net deferred tax assets before valuation allowances of approximately $3.5 billion. Of this amount, $3.3 billion was subject to a valuation allowance at the end of FY2015. Q7:How does your FY 2016 Class 8 industry outlook compare to ACT Research? A: U.S. and Canadian Class 8 Truck Sales Reconciliation to ACT - Retail Sales 2016 2016 2016 2016CY 2015CY 2014CY ACT* 241200 244500 244500 ,244,500 ,288,000 ,253,129 CY to FY adjustment 6201 9324 9324 Total (ACT comparable Class 8 to Navistar) 247401 253824 253824 Navistar Industry Retail Deliveries Combined Class 8 Trucks 240000 270000 240000 270000 240000 270000 Navistar difference from ACT -7401 22599 -13824 16176 -13824 16176 *Source: ACT N.A. Commercial Vehicle Outlook - February 2016 -0.03 9.0999999999999998 -5.4% 6.4% -5.4% 6.4%
Frequently Asked Questions Q8: What is your manufacturing interest expense for Fiscal Year 2016? A: For the three months ended January 31, 2016, Manufacturing interest was $62 million. Annual manufacturing interest for 2016 is forecasted to be ~$240 million. For reference, manufacturing interest expense was $233 million and $243 million for FY 2015 and 2014, respectively. Q9:What should we assume for capital expenditures in Fiscal Year 2016? A: For the three months ended January 31, 2016, capital expenditures were $29 million. Annual Capital expenditures for 2016 is forecasted to be ~$125 million. In comparison, capital expenditures were $115 million and $88 million for FY 2015 and 2014, respectively. Q9: How do you define manufacturing free cash flow? A: Quarter Ended January 31, 2016 Manufacturing Cash Activities Net Cash from Operations Activities $-,275 Capital Expenditures -29 Manufacturing Free Cash Flow $-,304
Outstanding Debt Balances January 31, October 31, (in millions) 2016 2015 Manufacturing operations Senior Secured Term Loan Credit Facility, as amended, due 2020, net of unamortized discount of $16 and $17, respectively……………………………………………..…………………………… $ 1,024 $ 1,023 8.25% Senior Notes, due 2021, net of unamortized discount of $17 and $28, respectively………… 1,183 1,182 4.50% Senior Subordinated Convertible Notes, due 2018, net of unamortized discount of $13 and $14, respectively……………………………………………………………………………………... 187 186 4.75% Senior Subordinated Convertible Notes, due 2019, net of unamortized discount of $30 and $32, respectively…………………………………………………………………………..…………. 381 379 Debt of majority-owned dealerships…………………………………………………………………. 20 28 Financing arrangements and capital lease obligations………………………………………………. 46 49 Loan Agreement related to 6.5% Tax Exempt Bonds, due 2040…………………………….……… 225 225 Financed lease obligations…………………………………………………………………………… 91 111 Other…………………….......................…………………………………………………………….. 15 15 Total Manufacturing operations debt……………………………………………………………... 3,172 3,198 Less: Current Portion……………………………………………………………………………........ 87 103 Net long-term Manufacturing operations debt…………………………………………………..... $ 3,085 $ 3,095 January 31, October 31, (in millions) 2016 2015 Financial Services operations Asset-backed debt issued by consolidated SPEs, at fixed and variable rates, due serially through 2021………………………………………………………………………………………………….. $ 784 $ 870 Bank revolvers, at fixed and variable rates, due dates from 2016 through 2020……………………. 981 1,063 Commercial paper, at variable rates, program matures in 2017……………………………………... 74 86 Borrowings secured by operating and finance leases, at various rates, due serially through 2020…. 88 81 Total Financial Services operations debt ………………………………………………………… 1,927 2,100 Less: Current portion ………………………………………………………………………………... 1,405 1,007 Net long-term Financial Services operations debt………………………………………………... $ 522 $ 1,093
SEC Regulation G Non-GAAP Reconciliation SEC Regulation G Non-GAAP Reconciliation The financial measures presented below 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 and are reconciled to the most appropriate GAAP number below Earnings (loss) Before Interest, Income Taxes, Depreciation, and Amortization (“EBITDA”): We define EBITDA as our consolidated net income (loss) from continuing operations attributable to Navistar International Corporation, net of tax, plus manufacturing interest expense, income taxes, and depreciation and amortization. We believe EBITDA provides meaningful information to the performance of our business and therefore we use it to supplement our GAAP reporting. 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.. Adjusted EBITDA: We believe that adjusted EBITDA, which excludes certain identified items that we do not consider to be part of our ongoing business, improves the comparability of year to year results, and is representative of our underlying performance. Management uses this information to assess and measure the performance of our operating segments. 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 reconciliations, and to provide an additional measure of performance. Adjusted EBITDA margin: We define Adjusted EBITDA margin as a percentage of the Company's consolidated sales and revenues. 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 reconciliations, and to provide an additional measure of performance. Manufacturing Cash, Cash Equivalents, and Marketable Securities: Manufacturing cash, cash equivalents, and marketable securities represents the Company’s consolidated cash, cash equivalents, and marketable securities excluding cash, cash equivalents, and marketable securities of our financial services operations. We include marketable securities with our cash and cash equivalents when assessing our liquidity position as our investments are highly liquid in nature. We have chosen to provide this supplemental information to investors, analysts and other interested parties to enable them to perform additional analyses of our ability to meet our operating requirements, capital expenditures, equity investments, and financial obligations. Structural costs consists of Selling, general and administrative expenses and Engineering and product development costs. Free Cash Flow consists of Net cash from operating activities and Capital Expenditures.
SEC Regulation G Non-GAAP Reconciliations Manufacturing segment cash and cash equivalents and marketable securities reconciliation: January 31, October 31, April 30, January 31, October 31, (in millions) 2016 2015 2015 2015 2014 Manufacturing Operations: Cash and cash equivalents……………………………………………………… $ 544 $ 877 $ 536 $ 583 $ 440 Marketable securities…………………………………………………………… 129 136 248 150 578 Manufacturing Cash and cash equivalents and Marketable securities……….. $ 673 $ 1,013 $ 784 $ 733 $ 1,018 Financial Services Operations: Cash and cash equivalents……………………………………………………… $ 35 $ 35 $ 47 $ 37 $ 57 Marketable securities…………………………………………………………… 23 23 25 25 27 Financial Services Cash and cash equivalents and Marketable securities…… $ 58 $ 58 $ 72 $ 62 $ 84 Consolidated Balance Sheet: Cash and cash equivalents……………………………………………………… $ 579 $ 912 $ 583 $ 620 $ 497 Marketable securities…………………………………………………………… 152 159 273 175 605 Consolidated Cash and cash equivalents and Marketable securities………… $ 731 $ 1,071 $ 856 $ 795 $ 1,102
SEC Regulation G Non-GAAP Reconciliations Earnings (loss) before interest, taxes, depreciation, and amortization ("EBITDA") reconciliation ______________________ (A) Manufacturing interest expense is the net interest expense primarily generated for borrowings that support the manufacturing and corporate operations, adjusted to eliminate intercompany interest expense with our Financial Services segment. The following table reconciles Manufacturing interest expense to the consolidated interest expense: ______________________ * For more detail on the items noted, please see the footnotes on slide 31. (in millions) Loss from continuing operations attributable to NIC, net of tax................................................ $ (33) $ (42) Plus: Depreciation and amortization expense.............................................................................. 58 79 Manufacturing interest expense (A)..................................................................................... 62 57 Less: Income tax benefit (expense)............................................................................................. 5 (7) EBITDA..................................................................................................................................... $ 82 $ 101 Quarters Ended January 31 2016 2015 (in millions) EBITDA (reconciled above)....................................................................................................... $ 82 $ 101 Less significant items of: Adjustments to pre-existing warranties (A).............................................................................. 5 (57) Cost reduction and other strategic charges............................................................................. 3 3 Asset impairment charges (B).................................................................................................. 2 7 One-time fee received (C)....................................................................................................... (15) — Total adjustments......................................................................................................................... (5) (47) Adjusted EBITDA...................................................................................................................... $ 77 $ 54 Adjusted EBITDA Margin........................................................................................................... 4.4% 2.2% Quarters Ended January 31 2016 2015 (in millions) 2014 Loss from continuing operations attributable to NIC, net of tax ………… $ -298 Plus: Depreciation and amortization expense ……………………………….. 99 Manufacturing interest expense(A) ………………………………….…. 57 Less: Income tax benefit (expense) …………………………………………… -23 EBITDA ………………………………………………………………………… $ $-,119 Quarters Ended January 31 (in millions) 2016 2015 2013 Interest expense $ 81 $ 77 $ 81 Less: Financial services interest expense 19 20 18 Manufacturing interest expense $ 62 $ 57 $ 63 (in millions) 2014 EBITDA (reconciled above) …......…………………………………… $-,119 Less significant items of: Adjustments to pre-existing warranties(A) ………………………...... 42 Restructuring charges(D) ………………………………...….………… 8 Asset impairment charges(C) ………...……………………………….. 151 Gain on settlement(E) ………………………………………………….. — Brazil truck business actions(F) …….....……………………………… — match below Total adjustments 201 Adjusted EBITDA …......………………………………………….....…… $82 (in millions) 2014 Expense (income): Adjustments to pre-existing warranties(A) $42 Accelerated depreciation(B) — Asset impairment charges(C) 151 Other restructuring charges and strategic initiatives(D) 8 Gain on settlement(E) — Brazil truck business actions(F) — Brazilian tax adjustments(G) 29 (A) (B) (C) (D) (E) (F) (G) The above items, except for the Brazilian tax adjustments, did not have a material impact on taxes due to the valuation allowances on our U.S. deferred tax assets, which was established in the fourth quarter of 2012.
Significant Items Included Within Our Results Quarter Ended January 31 (in millions) Expense (income): 2016 2015 Adjustments to pre-existing warranties(A)……………………………………………………………………. $ 5 $ (57) Restructuring charges and other strategic initiatives………………………………………………………… 3 3 Asset impairment charges(B) …………………………………………………………………………………. 2 7 Accelerated depreciation …………………………………………………………………………………….. 2 13 One-time fee(C) ……………………………………………………………………………………… (15 ) — ______________________ Adjustments to pre-existing warranties reflect changes in our estimate of warranty costs for products sold in prior periods. Such adjustments typically occur when claims experience deviates from historic and expected trends. Our warranty liability is generally affected by component failure rates, repair costs, and the timing of failures. Future events and circumstances related to these factors could materially change our estimates and require adjustments to our liability. In addition, new product launches require a greater use of judgment in developing estimates until historical experience becomes available. In the first quarter of 2016, the Truck segment recorded $2 million of asset impairment charges relating to certain long lived assets. In the first quarter of 2015, the Truck segment recorded $7 million of asset impairment charges relating to certain operating leases. In the first quarter of 2016, we received a $15 million one-time fee from a third party which was recognized in Other income, net, recorded in the Truck segment.
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