Form 8-K NAVISTAR INTERNATIONAL For: Jun 07
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): June 7, 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 June 7, 2016, the Company filed its Quarterly Report on Form 10-Q for the period ended April 30, 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 second quarter financial results on Tuesday, June 7th. 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 No. |
Description | |
99.1 | Press Release. | |
99.2 | Slide Presentation for Second Quarter 2016 Financial Results Web Cast to be held on June 7, 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 the federal securities laws. Such forward-looking statements only speak as of the date of this report and Navistar International Corporation 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 herein 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: |
Walter G. Borst | |
Title: |
Executive Vice President and Chief Financial Officer |
Dated: June 7, 2016
EXHIBIT INDEX
Exhibit No. |
Description | |
99.1 | Press Release. | |
99.2 | Slide Presentation for Second Quarter 2016 Financial Results Web Cast to be held on June 7, 2016. |
Exhibit 99.1
Navistar International Corporation 2701 Navistar Dr. Lisle, IL 60532 USA P: 331-332-5000 W: navistar.com |
Media contact: |
Jim Spangler, [email protected], 331-332-5833 | |
Investor contact: |
Jonathan Peisner, [email protected], 331-332-5699 | |
Web site: |
www.Navistar.com/newsroom |
NAVISTAR REPORTS SECOND QUARTER 2016 RESULTS
| Reports net income of $4 million, or $0.05 per diluted share, on revenues of $2.2 billion |
| Generates $187 million of adjusted EBITDA in the quarter |
| Parts Segment achieves record quarterly profits |
| Ends quarter with $817 million in consolidated cash, cash equivalents and marketable securities and $732 million in manufacturing cash, cash equivalents and marketable securities |
LISLE, Ill. June 7, 2016 Navistar International Corporation (NYSE: NAV) today announced second quarter 2016 net income of $4 million, or $0.05 per diluted share, compared to a second quarter 2015 net loss of $64 million, or $0.78 per diluted share.
Revenues in the quarter were $2.2 billion, down 18 percent compared to $2.7 billion in the second quarter last year. The decline reflects lower volumes in the companys Core U.S. and Canadian markets, due to softer industry conditions and the discontinuation of the companys Blue Diamond Truck (BDT) joint venture in mid-2015, as well as lower engine volumes in Brazil, due to ongoing weak economic conditions in that country. This was partially offset by higher sales in the companys Parts segment.
Second quarter 2016 EBITDA was $135 million, compared to second quarter 2015 EBITDA of $85 million. This years second quarter results included $52 million in adjustments, including $46 million to pre-existing warranty reserves. As a result, second quarter adjusted EBITDA was $187 million, up 83 percent, compared to adjusted EBITDA of $102 million in the comparable period last year. The improvement was driven by continued strong cost management, product cost improvement and record Parts segment profitability.
For the first time since we launched our turnaround more than three years ago, Navistar reported a quarterly profit, said Troy A. Clarke, Navistar president and chief executive officer. Our performance this quarter begins to demonstrate the earnings potential of this company. The fact that we earned a profit despite lower Class 8 truck volumes that impacted the entire industry, underscores the tremendous progress we continue to make in managing our costs effectively and improving our operations.
The company achieved $56 million in structural cost reductions during the second quarter. Year to date, structural cost reductions are at $113 million. When combined with material spend reductions and manufacturing savings, the company is on track to well exceed its total cost reduction goal of $200 million for 2016.
Navistar ended second quarter 2016 with $817 million in consolidated cash, cash equivalents and marketable securities. Manufacturing cash, cash equivalents and marketable securities were $732 million at the end of the quarter.
The company kicked off the second quarter with the launch of its new HX Series of premium vocational trucks. Orders for the HX Series, which is now in production, are already more than 70 percent of what the company expected for the fiscal year. Later in the quarter, the company announced it is adding the Cummins ISL 9-liter engine as an option for its DuraStar and WorkStar models, further expanding its leadership in offering the most comprehensive powertrain options in the industry.
The company also made advances on its connected vehicle leadership during the quarter. OnCommand Connection, Navistars open-architecture remote diagnostics service, surpassed the 200,000 subscriber mark. OnCommand Connection helps customers achieve significantly improved on-road uptime for their trucks and buses, regardless of make.
Navistar also launched the industrys first Over-the-Air Programming service, which enables drivers or fleet managers to utilize a mobile interface to initiate engine programming over a safe, secure Wi-Fi connection. This speeds customer access to updated engine calibrations that will deliver superior fuel efficiency and other benefits. Since the end of the quarter, Navistar also announced that it was the first truck OEM to offer Over-the-Air Programming with Cummins engines, including Cummins engines in vehicles not built by International.
For the second half of 2016, Navistar lowered its industry guidance range by 20,000 units, due to softening Class 8 market conditions. Given this, along with slower than anticipated market share growth domestically, weaker export markets, and the impact of a stronger dollar, the company reduced its full-year revenue and adjusted EBITDA guidance.
While we were net income positive in the second quarter, it will now be difficult for us to be profitable for the entire year given the tougher than anticipated market conditions, primarily due to the lower outlook for Class 8 industry volumes, Clarke said. We are confident we will generate and implement additional performance improvements to partially offset current industry conditions.
GUIDANCE
Industry
| Reduced its forecast of fiscal year 2016 retail deliveries of Class 6-8 trucks and buses in the United States and Canada to 330,000 - 360,000 units. |
| Reduced its Class 8 market projection to 220,000 - 250,000 units. |
| Maintained its projection that the medium, school bus and severe service segments will grow in 2016 versus 2015. |
Navistar
| Revised 2016 revenue guidance downward to $8.2 billion - $8.6 billion. |
| Reduced 2016 adjusted EBITDA guidance to $550 million - $600 million. |
| Updated total cost reduction guidance to well exceed $200 million. |
| Reduced its end-of-year manufacturing cash guidance to be approximately $800 million. |
2
SEGMENT REVIEW
Summary of Financial Results:
(Unaudited) | ||||||||||||||||
Second Quarter | First Half | |||||||||||||||
(in millions, except per share data) | 2016 | 2015 | 2016 | 2015 | ||||||||||||
Sales and revenues, net |
$ | 2,197 | $ | 2,693 | $ | 3,962 | $ | 5,114 | ||||||||
Segment Results: |
||||||||||||||||
Truck |
$ | (23 | ) | $ | (51 | ) | $ | (74 | ) | $ | (69 | ) | ||||
Parts |
176 | 133 | 326 | 278 | ||||||||||||
Global Operations |
(1 | ) | 1 | (14 | ) | (14 | ) | |||||||||
Financial Services |
25 | 22 | 51 | 46 | ||||||||||||
Income (loss) from continuing operations, net of tax(A) |
$ | 4 | $ | (64 | ) | $ | (29 | ) | $ | (106 | ) | |||||
Net income (loss)(A) |
4 | (64 | ) | (29 | ) | (106 | ) | |||||||||
Diluted income (loss) per share from continuing operations(A) |
$ | 0.05 | $ | (0.78 | ) | $ | (0.35 | ) | $ | (1.30 | ) | |||||
Diluted income (loss) per share(A) |
$ | 0.05 | $ | (0.78 | ) | $ | (0.35 | ) | $ | (1.30 | ) |
(A) | Amounts attributable to Navistar International Corporation. |
Truck Segment Truck segment net sales declined 25 percent to $1.5 billion in second quarter 2016 compared to second quarter 2015, due to lower Core truck volumes as a result of softer industry conditions and the impact of a shift in product mix in our Core markets. Truck chargeouts in the companys Core market were down 15 percent year-over-year. Also, second quarter 2015 revenues included $122 million in Ford sales through the BDT joint venture, which ended May 1, 2015.
The Truck segment loss narrowed to $23 million in second quarter 2016 versus a second quarter 2015 loss of $51 million, driven by lower structural cost, improved mix, lower accelerated depreciation charges and other income, which were partially offset by higher year-over-year adjustments to pre-existing warranties and an increase in used truck reserves.
Parts Segment Parts segment second quarter 2016 net sales were $647 million, up $34 million, or six percent, compared to second quarter 2015, driven by enhanced retail programs in the U.S. market, which was partially offset by unfavorable currency exchange rates and market pressures, primarily in Canada and Mexico.
The Parts segment recorded record quarterly profit of $176 million in second quarter 2016, up 32 percent versus the same period one year ago, primarily due to margin improvements and cost reduction initiatives.
Global Operations Segment Global Operations segment second quarter 2016 net sales decreased 41 percent to $77 million compared to second quarter 2015. This was primarily driven by a decrease in South America
3
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 20 percent for the second quarter of 2016 compared to the same period last year. The continued economic downturn in the Brazil economy contributed to 46 percent lower engine volumes in the second quarter of 2016 compared to the comparable prior year period.
The Global Operations segment recorded a $1 million loss in second quarter 2016 compared to $1 million in profit in the same period one year ago. The slight year-over-year change was due to lower manufacturing and structural costs as a result of prior year restructuring and cost-reduction efforts, which was more than offset by a $10 million net gain in second quarter 2015 related to a customer dispute settlement.
Financial Services Segment Financial Services segment second quarter 2016 net revenues decreased by $2 million, or three percent versus the same period one year ago, 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 $3 million, or 14 percent year-over-year in second quarter 2016, 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.
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 Statement
Information provided and statements contained in this report that are not purely historical are forward-looking statements within the meaning of the federal securities laws. 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 actual financial results or results of
4
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.
5
Navistar International Corporation and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
Three Months Ended April 30, |
Six Months Ended April 30, |
|||||||||||||||
(in millions, except per share data) | 2016 | 2015 | 2016 | 2015 | ||||||||||||
Sales and revenues |
||||||||||||||||
Sales of manufactured products, net |
$ | 2,164 | $ | 2,658 | $ | 3,894 | $ | 5,043 | ||||||||
Finance revenues |
33 | 35 | 68 | 71 | ||||||||||||
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Sales and revenues, net |
2,197 | 2,693 | 3,962 | 5,114 | ||||||||||||
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Costs and expenses |
||||||||||||||||
Costs of products sold |
1,845 | 2,360 | 3,311 | 4,405 | ||||||||||||
Restructuring charges |
3 | 6 | 6 | 9 | ||||||||||||
Asset impairment charges |
3 | 1 | 5 | 8 | ||||||||||||
Selling, general and administrative expenses |
202 | 243 | 407 | 484 | ||||||||||||
Engineering and product development costs |
61 | 76 | 119 | 155 | ||||||||||||
Interest expense |
81 | 75 | 162 | 152 | ||||||||||||
Other income, net |
(25 | ) | (28 | ) | (47 | ) | (31 | ) | ||||||||
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Total costs and expenses |
2,170 | 2,733 | 3,963 | 5,182 | ||||||||||||
Equity in income of non-consolidated affiliates |
2 | 1 | 1 | 3 | ||||||||||||
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|||||||||
Income (loss) from continuing operations before income taxes |
29 | (39 | ) | | (65 | ) | ||||||||||
Income tax expense |
(16 | ) | (18 | ) | (11 | ) | (25 | ) | ||||||||
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Income (loss) from continuing operations |
13 | (57 | ) | (11 | ) | (90 | ) | |||||||||
Income (loss) from discontinued operations, net of tax |
| | | | ||||||||||||
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Net income (loss) |
13 | (57 | ) | (11 | ) | (90 | ) | |||||||||
Less: Net income attributable to non-controlling interests |
9 | 7 | 18 | 16 | ||||||||||||
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Net income (loss) attributable to Navistar International Corporation |
$ | 4 | $ | (64 | ) | $ | (29 | ) | $ | (106 | ) | |||||
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Amounts attributable to Navistar International Corporation common shareholders: |
| |||||||||||||||
Income (loss) from continuing operations, net of tax |
$ | 4 | $ | (64 | ) | $ | (29 | ) | $ | (106 | ) | |||||
Income (loss) from discontinued operations, net of tax |
| | | | ||||||||||||
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Net income (loss) |
$ | 4 | $ | (64 | ) | $ | (29 | ) | $ | (106 | ) | |||||
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Income (loss) per share: |
||||||||||||||||
Basic: |
||||||||||||||||
Continuing operations |
$ | 0.05 | $ | (0.78 | ) | $ | (0.35 | ) | $ | (1.30 | ) | |||||
Discontinued operations |
| | | | ||||||||||||
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$ | 0.05 | $ | (0.78 | ) | $ | (0.35 | ) | $ | (1.30 | ) | ||||||
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Diluted: |
||||||||||||||||
Continuing operations |
$ | 0.05 | $ | (0.78 | ) | $ | (0.35 | ) | $ | (1.30 | ) | |||||
Discontinued operations |
| | | | ||||||||||||
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$ | 0.05 | $ | (0.78 | ) | $ | (0.35 | ) | $ | (1.30 | ) | ||||||
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Weighted average shares outstanding: |
||||||||||||||||
Basic |
81.7 | 81.6 | 81.7 | 81.5 | ||||||||||||
Diluted |
82.0 | 81.6 | 81.7 | 81.5 |
6
Navistar International Corporation and Subsidiaries
Consolidated Balance Sheets
April 30, 2016 |
October 31, 2015 |
|||||||
(in millions, except per share data) | (Unaudited) | |||||||
ASSETS |
||||||||
Current assets |
||||||||
Cash and cash equivalents |
$ | 589 | $ | 912 | ||||
Marketable securities |
228 | 159 | ||||||
Trade and other receivables, net |
369 | 429 | ||||||
Finance receivables, net |
1,552 | 1,779 | ||||||
Inventories, net |
1,220 | 1,135 | ||||||
Deferred taxes, net |
| 36 | ||||||
Other current assets |
172 | 172 | ||||||
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|
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|
|||||
Total current assets |
4,130 | 4,622 | ||||||
Restricted cash |
139 | 121 | ||||||
Trade and other receivables, net |
14 | 13 | ||||||
Finance receivables, net |
209 | 216 | ||||||
Investments in non-consolidated affiliates |
66 | 66 | ||||||
Property and equipment (net of accumulated depreciation and amortization of $2,586 and $2,546, respectively) |
1,281 | 1,345 | ||||||
Goodwill |
38 | 38 | ||||||
Intangible assets (net of accumulated amortization of $128 and $120, respectively) |
53 | 57 | ||||||
Deferred taxes, net |
164 | 128 | ||||||
Other noncurrent assets |
94 | 86 | ||||||
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Total assets |
$ | 6,188 | $ | 6,692 | ||||
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LIABILITIES and STOCKHOLDERS DEFICIT |
||||||||
Liabilities |
||||||||
Current liabilities |
||||||||
Notes payable and current maturities of long-term debt |
$ | 1,251 | $ | 1,110 | ||||
Accounts payable |
1,146 | 1,301 | ||||||
Other current liabilities |
1,223 | 1,377 | ||||||
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|||||
Total current liabilities |
3,620 | 3,788 | ||||||
Long-term debt |
3,974 | 4,188 | ||||||
Postretirement benefits liabilities |
2,945 | 2,995 | ||||||
Deferred taxes, net |
| 14 | ||||||
Other noncurrent liabilities |
770 | 867 | ||||||
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|||||
Total liabilities |
11,309 | 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 |
2,498 | 2,499 | ||||||
Accumulated deficit |
(4,895 | ) | (4,866 | ) | ||||
Accumulated other comprehensive loss |
(2,536 | ) | (2,601 | ) | ||||
Common stock held in treasury, at cost (5.2 and 5.3 shares, respectively) |
(206 | ) | (210 | ) | ||||
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|
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Total stockholders deficit attributable to Navistar International Corporation |
(5,128 | ) | (5,167 | ) | ||||
Stockholders equity attributable to non-controlling interests |
7 | 7 | ||||||
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Total stockholders deficit |
(5,121 | ) | (5,160 | ) | ||||
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Total liabilities and stockholders deficit |
$ | 6,188 | $ | 6,692 | ||||
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7
Navistar International Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended April 30, |
||||||||
(in millions) | 2016 | 2015 | ||||||
Cash flows from operating activities |
||||||||
Net loss |
$ | (11 | ) | $ | (90 | ) | ||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
||||||||
Depreciation and amortization |
74 | 118 | ||||||
Depreciation of equipment leased to others |
37 | 35 | ||||||
Deferred taxes, including change in valuation allowance |
(3 | ) | (7 | ) | ||||
Asset impairment charges |
5 | 8 | ||||||
Loss on sales of investments and businesses, net |
2 | | ||||||
Amortization of debt issuance costs and discount |
17 | 19 | ||||||
Stock-based compensation |
7 | 8 | ||||||
Provision for doubtful accounts, net of recoveries |
8 | (3 | ) | |||||
Equity in income of non-consolidated affiliates, net of dividends |
| 5 | ||||||
Other non-cash operating activities |
(8 | ) | (20 | ) | ||||
Changes in other assets and liabilities, exclusive of the effects of businesses disposed |
(232 | ) | (310 | ) | ||||
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Net cash used in operating activities |
(104 | ) | (237 | ) | ||||
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Cash flows from investing activities |
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Purchases of marketable securities |
(283 | ) | (162 | ) | ||||
Sales of marketable securities |
177 | 431 | ||||||
Maturities of marketable securities |
37 | 63 | ||||||
Net change in restricted cash and cash equivalents |
(19 | ) | 53 | |||||
Capital expenditures |
(53 | ) | (45 | ) | ||||
Purchases of equipment leased to others |
(78 | ) | (20 | ) | ||||
Proceeds from sales of property and equipment |
17 | 5 | ||||||
Proceeds from sales of affiliates |
36 | 7 | ||||||
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Net cash provided by (used in) investing activities |
(166 | ) | 332 | |||||
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Cash flows from financing activities |
||||||||
Proceeds from issuance of securitized debt |
75 | 250 | ||||||
Principal payments on securitized debt |
(19 | ) | (199 | ) | ||||
Net change in secured revolving credit facilities |
38 | 30 | ||||||
Proceeds from issuance of non-securitized debt |
110 | 84 | ||||||
Principal payments on non-securitized debt |
(162 | ) | (146 | ) | ||||
Net increase (decrease) in notes and debt outstanding under revolving credit facilities |
(105 | ) | 5 | |||||
Principal payments under financing arrangements and capital lease obligations |
(1 | ) | (1 | ) | ||||
Debt issuance costs |
(1 | ) | (7 | ) | ||||
Proceeds from financed lease obligations |
12 | 20 | ||||||
Proceeds from exercise of stock options |
| 1 | ||||||
Dividends paid by subsidiaries to non-controlling interest |
(19 | ) | (20 | ) | ||||
Other financing activities |
1 | | ||||||
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Net cash provided by (used in) financing activities |
(71 | ) | 17 | |||||
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Effect of exchange rate changes on cash and cash equivalents |
18 | (26 | ) | |||||
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Increase (decrease) in cash and cash equivalents |
(323 | ) | 86 | |||||
Cash and cash equivalents at beginning of the period |
912 | 497 | ||||||
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Cash and cash equivalents at end of the period |
$ | 589 | $ | 583 | ||||
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8
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 April 30, 2016 |
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External sales and revenues, net |
$ | 1,459 | $ | 640 | $ | 64 | $ | 33 | $ | 1 | $ | 2,197 | ||||||||||||
Intersegment sales and revenues |
21 | 7 | 13 | 25 | (66 | ) | | |||||||||||||||||
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Total sales and revenues, net |
$ | 1,480 | $ | 647 | $ | 77 | $ | 58 | $ | (65 | ) | $ | 2,197 | |||||||||||
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Income (loss) from continuing operations attributable to NIC, net of tax |
$ | (23 | ) | $ | 176 | $ | (1 | ) | $ | 25 | $ | (173 | ) | $ | 4 | |||||||||
Income tax expense |
| | | | (16 | ) | (16 | ) | ||||||||||||||||
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Segment profit (loss) |
$ | (23 | ) | $ | 176 | $ | (1 | ) | $ | 25 | $ | (157 | ) | $ | 20 | |||||||||
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Depreciation and amortization |
$ | 29 | $ | 4 | $ | 4 | $ | 12 | $ | 4 | $ | 53 | ||||||||||||
Interest expense |
| | | 19 | 62 | 81 | ||||||||||||||||||
Equity in income of non-consolidated affiliates |
1 | 1 | | | | 2 | ||||||||||||||||||
Capital expenditures(C) |
19 | 1 | 1 | | 3 | 24 |
(in millions) | Truck | Parts | Global Operations |
Financial Services(A) |
Corporate and Eliminations |
Total | ||||||||||||||||||
Three Months Ended April 30, 2015 |
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External sales and revenues, net |
$ | 1,933 | $ | 607 | $ | 115 | $ | 35 | $ | 3 | $ | 2,693 | ||||||||||||
Intersegment sales and revenues(B) |
33 | 6 | 15 | 25 | (79 | ) | | |||||||||||||||||
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Total sales and revenues, net |
$ | 1,966 | $ | 613 | $ | 130 | $ | 60 | $ | (76 | ) | $ | 2,693 | |||||||||||
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Income (loss) from continuing operations attributable to NIC, net of tax |
$ | (51 | ) | $ | 133 | $ | 1 | $ | 22 | $ | (169 | ) | $ | (64 | ) | |||||||||
Income tax expense |
| | | | (18 | ) | (18 | ) | ||||||||||||||||
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Segment profit (loss) |
$ | (51 | ) | $ | 133 | $ | 1 | $ | 22 | $ | (151 | ) | $ | (46 | ) | |||||||||
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Depreciation and amortization |
$ | 47 | $ | 4 | $ | 5 | $ | 12 | $ | 6 | $ | 74 | ||||||||||||
Interest expense |
| | | 18 | 57 | 75 | ||||||||||||||||||
Equity in income (loss) of non-consolidated affiliates |
1 | 1 | (1 | ) | | | 1 | |||||||||||||||||
Capital expenditures(C) |
24 | | 1 | 2 | 1 | 28 |
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(in millions) | Truck | Parts | Global Operations |
Financial Services(A) |
Corporate and Eliminations |
Total | ||||||||||||||||||
Six Months Ended April 30, 2016 |
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External sales and revenues, net |
$ | 2,540 | $ | 1,202 | $ | 148 | $ | 68 | $ | 4 | $ | 3,962 | ||||||||||||
Intersegment sales and revenues |
72 | 15 | 21 | 49 | (157 | ) | | |||||||||||||||||
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Total sales and revenues, net |
$ | 2,612 | $ | 1,217 | $ | 169 | $ | 117 | $ | (153 | ) | $ | 3,962 | |||||||||||
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Income (loss) from continuing operations attributable to NIC, net of tax |
$ | (74 | ) | $ | 326 | $ | (14 | ) | $ | 51 | $ | (318 | ) | $ | (29 | ) | ||||||||
Income tax expense |
| | | | (11 | ) | (11 | ) | ||||||||||||||||
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Segment profit (loss) |
$ | (74 | ) | $ | 326 | $ | (14 | ) | $ | 51 | $ | (307 | ) | $ | (18 | ) | ||||||||
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Depreciation and amortization |
$ | 63 | $ | 7 | $ | 9 | $ | 24 | $ | 8 | $ | 111 | ||||||||||||
Interest expense |
| | | 38 | 124 | 162 | ||||||||||||||||||
Equity in income (loss) of non-consolidated affiliates |
2 | 2 | (3 | ) | | | 1 | |||||||||||||||||
Capital expenditures(C) |
44 | 2 | 2 | | 5 | 53 |
(in millions) | Truck | Parts | Global Operations |
Financial Services(A) |
Corporate and Eliminations |
Total | ||||||||||||||||||
Six Months Ended April 30, 2015 |
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External sales and revenues, net |
$ | 3,564 | $ | 1,221 | $ | 253 | $ | 71 | $ | 5 | $ | 5,114 | ||||||||||||
Intersegment sales and revenues(B) |
72 | 18 | 29 | 49 | (168 | ) | | |||||||||||||||||
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Total sales and revenues, net |
$ | 3,636 | $ | 1,239 | $ | 282 | $ | 120 | $ | (163 | ) | $ | 5,114 | |||||||||||
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Income (loss) from continuing operations attributable to NIC, net of tax |
$ | (69 | ) | $ | 278 | $ | (14 | ) | $ | 46 | $ | (347 | ) | $ | (106 | ) | ||||||||
Income tax expense |
| | | | (25 | ) | (25 | ) | ||||||||||||||||
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Segment profit (loss) |
$ | (69 | ) | $ | 278 | $ | (14 | ) | $ | 46 | $ | (322 | ) | $ | (81 | ) | ||||||||
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Depreciation and amortization |
$ | 99 | $ | 7 | $ | 12 | $ | 24 | $ | 11 | $ | 153 | ||||||||||||
Interest expense |
| | | 38 | 114 | 152 | ||||||||||||||||||
Equity in income (loss) of non-consolidated affiliates |
3 | 2 | (2 | ) | | | 3 | |||||||||||||||||
Capital expenditures(C) |
38 | | 3 | 2 | 2 | 45 |
(in millions) | Truck | Parts | Global Operations |
Financial Services |
Corporate and Eliminations |
Total | ||||||||||||||||||
Segment assets, as of: |
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April 30, 2016 |
$ | 1,887 | $ | 645 | $ | 370 | $ | 2,284 | $ | 1,002 | $ | 6,188 | ||||||||||||
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 $84 million for the three and six months ended April 30, 2016, respectively, and $44 million and $89 million for the three and six months ended April 30, 2015, respectively. |
(B) | During the second quarter of 2015, we identified a $35 million adjustment related to the first quarter of 2015 Intersegment sales and revenues. As a result, the Truck segment and Corporate and Eliminations should have reported Intersegment sales and revenues of $39 million and $(89) million, respectively, and reported Total sales and revenues, net, of $1,670 million and $(87) million, respectively, for the three months ended January 31, 2015. The adjustment did not impact the consolidated results for the first or second quarter of 2015. |
(C) | Exclusive of purchases of equipment leased to others. |
10
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.
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.
EBITDA reconciliation:
Three Months Ended April 30, |
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(in millions) | 2016 | 2015 | ||||||
Income (loss) from continuing operations attributable to NIC, net of tax |
$ | 4 | $ | (64 | ) | |||
Plus: |
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Depreciation and amortization expense |
53 | 74 | ||||||
Manufacturing interest expense(A) |
62 | 57 | ||||||
Less: |
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Income tax expense |
(16 | ) | (18 | ) | ||||
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EBITDA |
$ | 135 | $ | 85 | ||||
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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 April 30, |
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(in millions) | 2016 | 2015 | ||||||
Interest expense |
$ | 81 | $ | 75 | ||||
Less: Financial services interest expense |
19 | 18 | ||||||
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Manufacturing interest expense |
$ | 62 | $ | 57 | ||||
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Adjusted EBITDA Reconciliation:
Three Months Ended April 30, |
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(in millions) | 2016 | 2015 | ||||||
EBITDA (reconciled above) |
$ | 135 | $ | 85 | ||||
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Less significant items of: |
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Adjustments to pre-existing warranties(A) |
46 | 18 | ||||||
North America asset impairment charges(B) |
3 | 1 | ||||||
Cost reduction and other strategic initiatives(C) |
3 | 2 | ||||||
Gain on settlement(D) |
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Brazil truck business actions(E) |
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Total adjustments |
52 | 17 | ||||||
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Adjusted EBITDA |
$ | 187 | $ | 102 | ||||
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(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 second quarter of 2016, the Truck segment recorded $3 million, of asset impairment charges relating to certain long lived assets. |
(C) | Cost reduction and other strategic initiatives relates to costs associated with the divestiture of non-core facilities and efforts to optimize our cost structure. |
(D) | In the second quarter of 2015, the Global Operations segment recognized a $10 million net gain related to the settlement of a customer dispute. The $10 million net gain for the settlement included restructuring charges of $4 million. |
(E) | In the second quarter of 2015 our Global Operations segment recorded $6 million in inventory charges to right size the Brazil Truck business. |
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Manufacturing segment cash and cash equivalents and marketable securities reconciliation:
As of April 30, 2016 | ||||||||||||
(in millions) | Manufacturing Operations |
Financial Services Operations |
Consolidated Balance Sheet |
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Assets |
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Cash and cash equivalents |
$ | 527 | $ | 62 | $ | 589 | ||||||
Marketable securities |
205 | 23 | 228 | |||||||||
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Total Cash and cash equivalents and Marketable securities |
$ | 732 | $ | 85 | $ | 817 | ||||||
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13
Q2 2016 earnings presentation June 7, 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 the federal securities laws. Such forward-looking statements only speak as of the date of this presentation and Navistar International Corporation 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 herein 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.
On track to well exceed $200 million cost management goal Parts – Record profits Fleetrite double digit growth Distribution centers recognized by Carlisle & Co. Connected vehicle leadership OnCommand Connection supports over 200,000 registered VINs Received CIO 100 award from CIO Magazine Global Operations – Breakeven on 41% lower sales Q2 Accomplishments – First Profitable Quarter Since Q3 2012
HX premium vocation truck launch Received over 70% of planned 2016 orders Added Cummins ISL engine offering Renewing entire product portfolio by end of 2018 First to market with Over the Air (“OTA”) engine programming First to offer OTA with Cummins’ engines New Product Launches Every 4 to 6 Months
2016 Challenges and Action Plans Challenges Action Plans • Class 8 Heavy industry softening • Exceed cost reduction goals • Heavy market share • New product offerings • Pre-existing warranty adjustments • Proactively address legacy issues and reduce repair costs • Used truck inventory • Manage trade receipts and pursue export and domestic sales opportunities • Brazil economic condition • Complete consolidation of business operations
2016 – Higher Profitability on Lower Revenues 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 April 30 Six Months Ended April 30 2016 2015 2016 2015 Chargeouts(A) 15,800 18,600 26,800 32,100 Sales and Revenues $2,197 $2,693 $3,962 $5,114 Net Income (Loss)(B) $4 $-64 $-29 $-,106 Diluted Earnings (Loss) Per Share(B) $0.05 $-0.78 $-0.35 $-1.3 Adjusted EBITDA $187 $102 $264 $156
Cost Savings and Parts Segment Drive Profit Improvement Note:This slide contains non-GAAP information; please see the REG G in appendix for a detailed reconciliation. $ in millions Net Income (Loss)(A) Adjusted EBITDA (A) Amounts attributable to Navistar International Corporation.
Q2 2016 Segment Results $ in millions Sales and Revenues Segment Profit Quarters Ended April 30 Quarters Ended April 30 2016 2015 2016 2015 Truck $1,480 $1,966 $-23 $-51 Parts $647 $613 $176 $133 Global Operations $77 $130 $-1 $1 Financial Services $58 $60 $25 $22
1st Half Segment Results $ in millions Sales and Revenues Segment Profit Six Months Ended April 30 Six Months Ended April 30 2016 2015 2016 2015 Truck $2,612 $3,636 $-74 $-69 Parts $1,217 $1,239 $326 $278 Global Operations $169 $282 $-14 $-14 Financial Services $117 $120 $51 $46
Used Truck Inventory Stabilized in Q2 2016 Ending gross inventory balance: $448 million Inventory reserve adjustment: $23 million Ending net inventory balance: $280 million Manage trade receipts Export and domestic sales opportunities Gross and Net Used Truck Inventory $ in millions
Cash balance includes marketable securities. Excluding one-time items and pre-existing warranty. Manufacturing includes intercompany activities, please see slide #21 in appendix for additional information. Q2 2016 Cash Update $ in millions Note:This slide contains non-GAAP information; please see the REG G in appendix for a detailed reconciliation. Historical Q2 Cash Balances(A) $1,060 $718 $1,128 $737 $1,238 $1,128 $856 $683 Consolidated Manufacturing Q1 2016 Cash Balance(A) $731 $673 Consolidated Adjusted EBITDA(B) $187 $187 Capex/Cash Interest/Pension & OPEB Funding $-,124 $-,108 Change in Net Working Capital/Debt and Warranty/Other(C) $23 $-20 Q2 2016 Cash Balance(A) $817 $732
2016 Guidance Summary Class 8 Industry Core Markets Industry Revenue Cost Reductions Adjusted EBITDA Manufacturing Cash Current 220-250K 330-360K $8.2-$8.6B > $200M $550-$600M ~$800M Prior 240-270K 350-380K $9.0-$9.25B > $200M $600-$650M $900M-$1.0B
Navistar – Well Positioned with Future Opportunities Grow Parts business New product offerings Reduce warranty spend Grow OnCommand Connection Gain market share Engaged dealer network Expand Partnerships
Appendix
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.
Retail Market Share in Commercial Vehicle Segments Class 6/7 Medium-Duty Class 8 Severe Service Class 8 Heavy Three Months Ended April 30, January 31, October 31, July 31, April 30, 2016 2016 2015 2015 2015 Core Markets (U.S. and Canada) Class 6 and 7 medium trucks ................................................. 27% 20% 19% 24% 27% Class 8 heavy trucks ............................................................. 11% 10% 11% 12% 12% Class 8 severe service trucks ................................................. 11% 16% 15% 15% 15% Combined class 8 trucks ....................................................... 11% 11% 12% 13% 13%
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 2,600 and 6,000 units during the three and six months ended April 30, 2015, respectively. There were no third party chargeouts related to BDT during the three and six months ended April 30, 2016 as Ford no longer purchases from BDT. Three Months Ended April 30, % Change Six Months Ended April 30, % Change (in units) 2016 2015 Change 2016 2015 Change Core Markets (U.S. and Canada) School buses ......................................... 2,800 2,300 500 22 % 4,600 5,000 (400) (8)% Class 6 and 7 medium trucks................. 6,200 6,700 (500) (7)% 10,100 10,700 (600) (6)% Class 8 heavy trucks .............................. 4,900 7,300 (2,400) (33)% 8,500 12,100 (3,600) (30)% Class 8 severe service trucks ................ 1,900 2,300 (400) (17)% 3,600 4,300 (700) (16)% Total Core Markets.................................. 15,800 18,600 (2,800) (15)% 26,800 32,100 (5,300) (17)% Non "core" military ............................... 200 — 200 — % 200 — 200 — % Other markets(A)..................................... 1,400 5,400 (4,000) (74)% 3,100 12,400 (9,300) (75)% Total worldwide units................................ 17,400 24,000 (6,600) (28)% 30,100 44,500 (14,400) (32)% Combined class 8 trucks........................ 6,800 9,600 (2,800) (29)% 12,100 16,400 (4,300) (26)%
Navistar Financial Corporation Highlights Financial Services segment profit of $25 million for Q2 2016, $51 million YTD U.S. financing availability of $463 million as of April 30, 2016 Financial Services debt/equity leverage of 3.3:1 In May, the NFC bank credit facility was amended and extended to June 2018 In May, the dealer note variable funding facility was extended to May 2017 Retail Notes Bank Facility Dealer Floor Plan $630 million facility reduces to $357 million by December 2016 Option to increase up to $700 million based on commitments Funding for retail notes, wholesale notes, retail accounts, and dealer open accounts On balance sheet NFSC wholesale trust as of April 2016 $1 billion funding facility Variable portion matures May 2017 Term portions mature Oct. 2016 and Jun. 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
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 three and six months ended April 30, 2016, we contributed $21 million and $40 million, respectively, and for the three and six months ended April 30, 2015, we contributed $32 million and $62 million, respectively, to our U.S. and Canadian pension plans (the "Plans") to meet regulatory minimum funding requirements. We currently anticipate additional contributions of approximately $57 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. 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.
Frequently Asked Questions 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: Q8: Please discuss the process from an order to a retail delivery? A: Orders* are customers’ written commitments to purchase vehicles. Order backlogs* are orders yet to be built as of the end of a period. Chargeouts are vehicles that have been invoiced to customers. Retail deliveries occur when customers take possession and register the vehicle. Units held in dealer inventory represent the principal difference between retail deliveries and chargeouts. _______________________________________ * Orders and units in backlog do not represent guarantees of purchases and are subject to cancellation. U.S. and Canadian Class 8 Truck Sales Reconciliation to ACT - Retail Sales 2016 2016 2016 2016CY 2015CY 2014CY ACT* 228200 244500 244500 ,244,500 ,288,000 ,253,129 CY to FY adjustment 7111 9324 9324 Total (ACT comparable Class 8 to Navistar) 235311 253824 253824 Navistar Industry Retail Deliveries Combined Class 8 Trucks 220000 250000 240000 270000 240000 270000 Navistar difference from ACT -15311 14689 -13824 16176 -13824 16176 *Source: ACT N.A. Commercial Vehicle Outlook - February 2016 -6.5% 6.2% -5.4% 6.4% -5.4% 6.4%
Frequently Asked Questions Q9: What is your manufacturing interest expense for Fiscal Year 2016? A: For the three and six months ended April 30, 2016, manufacturing interest was $62 million and $124 million, respectively. 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. Q10:What should we assume for capital expenditures in Fiscal Year 2016? A: For the three and six months ended April 30, 2016, capital expenditures were $24 million and $53 million, respectively. 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. Q11: How do you define manufacturing free cash flow? A: Q12: What were your Worldwide Engine Shipments in the period? A: Three Months Ended April 30, % Change Six Months Ended April 30, % Change (in units) 2016 2015 Change 2016 2015 Change OEM sales-South America........... 6,200 11,600 (5,400) (47)% 19,500 27,300 (7,800) (29)% Intercompany sales....................... 4,900 7,000 (2,100) (30)% 8,700 13,600 (4,900) (36)% Other OEM sales.......................... 900 2,600 (1,700) (65)% 2,200 5,500 (3,300) (60)% Total sales................................ 12,000 21,200 (9,200) (43)% 30,400 46,400 (16,000) (34)% ______________________ Amounts include intercompany activities from our Financial Services operations. During the quarter ended April 30, 2016, the Manufacturing operations received $30 million in dividends from Navistar Financial Corporation. Also, our Financial Services operations in Mexico advanced $34 million to our Mexican manufacturing operations. Additionally, our Manufacturing operations partially repaid $17 million under the Intercompany Used Truck Loan. Six Months Ended April 30, 2016 Three Months Ended Three Months Ended Manufacturing Cash Activities January 31, 2016 April 30, 2016 Q1-15 Q2-15 Net Cash from Operations Activities (A) $-,275 $52 $-,223 $-,143 $111 $-32 Capital Expenditures -29 -24 -53 -17 -26 -43 Manufacturing Free Cash Flow $-,304 $28 $-,276 $-,160 $85 $-75
Outstanding Debt Balances April 30, October 31, (in millions) 2016 2015 Manufacturing operations Senior Secured Term Loan Credit Facility, as amended, due 2020, net of unamortized discount of $15 and $17, respectively……………………………………………..……………………………… $ 1,022 $ 1,023 8.25% Senior Notes, due 2022, net of unamortized discount of $17 and $18, respectively………… 1,183 1,182 4.50% Senior Subordinated Convertible Notes, due 2018, net of unamortized discount of $12 and $14, respectively……………………………………………………………………………………… 188 186 4.75% Senior Subordinated Convertible Notes, due 2019, net of unamortized discount of $28 and $32, respectively…………………………………………………………………………..………….. 383 379 Debt of majority-owned dealerships…………………………………………………………………. 13 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…………………………………………………………………………… 75 111 Other…………………….......................…………………………………………………………….. 16 15 Total Manufacturing operations debt……………………………………………………………... 3,151 3,198 Less: Current Portion……………………………………………………………………………........ 83 103 Net long-term Manufacturing operations debt…………………………………………………..... $ 3,068 $ 3,095 April 30, 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………………………………………………………………………………………………….. $ 933 $ 870 Bank revolvers, at fixed and variable rates, due dates from 2016 through 2021……………………. 947 1,063 Commercial paper, at variable rates, program matures in 2017……………………………………... 88 86 Borrowings secured by operating and finance leases, at various rates, due serially through 2021…. 106 81 Total Financial Services operations debt ………………………………………………………… 2,074 2,100 Less: Current portion ………………………………………………………………………………... 1,168 1,007 Net long-term Financial Services operations debt………………………………………………... $ 906 $ 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: (in millions) Manufacturing Operations: Cash and cash equivalents……………………………………………………… $ 527 $ 544 $ 536 $ 563 $ 465 Marketable securities…………………………………………………………… Manufacturing Cash and cash equivalents and Marketable securities ..……….. $ 732 $ 673 $ 784 $ 1,060 $ 1,164 Financial Services Operations: Cash and cash equivalents……………………………………………………… $ 62 $ 35 $ 47 $ 31 $ 40 Marketable securities…………………………………………………………… Financial Services Cash and cash equivalents and Marketable securities ……… $ 85 $ 58 $ 72 $ 68 $ 74 Consolidated Balance Sheet: Cash and cash equivalents……………………………………………………… $ 589 $ 579 $ 583 $ 594 $ 505 Marketable securities…………………………………………………………… Consolidated Cash and cash equivalents and Marketable securities …………… $ 817 $ 731 $ 856 $ 1,128 $ 1,238 Manufacturing Operations: Cash and cash equivalents……………………………………………………… $ 364 $ 361 $ 455 $ 594 Marketable securities…………………………………………………………… Manufacturing Cash and cash equivalents and Marketable securities ……..….. $ 681 $ 1,079 $ 630 $ 594 Financial Services Operations: Cash and cash equivalents……………………………………………………… $ 36 $ 29 $ 53 $ 124 Marketable securities…………………………………………………………… Financial Services Cash and cash equivalents and Marketable securities …..… $ 56 $ 49 $ 53 $ 124 Consolidated Balance Sheet: Cash and cash equivalents……………………………………………………… $ 400 $ 390 $ 508 $ 718 Marketable securities…………………………………………………………… Consolidated Cash and cash equivalents and Marketable securities …………… $ 737 $ 1,128 $ 683 $ 718 - April 30, 2009 - 337 738 April 30, 2010 175 - 175 20 20 317 718 April 30, April 30, 2012 2011 733 534 23 228 152 25 April 30, 2013 699 37 April 30, 2014 497 34 129 April 30, 2015 April 30, 2016 205 23 January 31, 2016 248 273 -
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 26. (in millions) Income (loss) from continuing operations attributable to NIC, net of tax................. $ 4 $ (64) $ (29) $ (106) Plus: Depreciation and amortization expense.............................................................. 53 74 111 153 Manufacturing interest expense (A).................................................................... 62 57 124 114 Less: Income tax expense........................................................................................ (16) (18) (11) (25) EBITDA..................................................................................................................... $ 135 $ 85 $ 217 $ 186 Quarters Ended April 30, Six Months Ended April 30, 2015 2015 2016 2016 (in millions) Interest expense................................................................................................. $ 81 $ 75 $ 162 $ 152 Less: Financial services interest expense......................................................... 19 18 38 38 Manufacturing interest expense......................................................................... $ 62 $ 57 $ 124 $ 114 2015 2015 2016 Quarters Ended April 30, Six Months Ended April 30, 2016 (in millions) EBITDA (reconciled above)..................................................................................... $ 135 $ 85 $ 217 $ 186 Less significant items of: Adjustments to pre-existing warranties (A)............................................................ 46 18 51 (39) Cost reduction and other strategic initiative and assets (B).................................... 3 2 6 5 Asset impairment charges (C)................................................................................. 3 1 5 8 Gain on settlement (D)............................................................................................ — (10) — (10) Brazil truck business actions (E)............................................................................. — 6 — 6 One-time fee received (F)....................................................................................... — — (15) — Total adjustments......................................................................................................... 52 17 47 (30) Adjusted EBITDA...................................................................................................... $ 187 $ 102 $ 264 $ 156 Adjusted EBITDA Margin........................................................................................... 8.5% 3.8% 6.7% 3.1% Quarters Ended April 30, 2016 2015 2015 2016 Six Months Ended April 30,
Significant Items Included Within Our Results ______________________ 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. Cost reduction and other strategic initiatives relates to costs associated with the divestiture of non-core facilities and efforts to optimize our cost structure. In the first and second quarters of 2016, the Truck segment recorded $2 million and $3 million, respectively, 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 second quarter of 2015, the Global Operations segment recognized a $10 million net gain related to a settlement of a customer dispute. The $10 million net gain for the settlement included restructuring charges of $4 million. In the second quarter of 2015 our Global Operations segment recorded $6 million in inventory charges to right size the Brazil Truck business. 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. In the first and second quarter of 2015, the Truck segment recognized charges of $13 million and $12 million, respectively, for the acceleration of depreciation of certain assets related to foundry and engine facilities. (in millions) Expense (income): 2016 2015 2016 2015 Adjustments to pre-existing warranties (A) 46 $ 18 $ 51 $ (39) $ Cost reduction and other strategic initiatives (B) 3 2 6 5 North America asset impairment charges (C) 3 1 5 8 Gain on Settlement (D) (10) (10) Brazil truck business actions (E) 6 6 One-time fee received (F) (15) Accelerated depreciation 12 2 25 Quarter Ended April 30, Six Months Ended April 30, (G)
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