Form 8-K NAVISTAR INTERNATIONAL For: Jun 08
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E-mailExhibit 99.1
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Navistar International Corporation 2701 Navistar Dr. Lisle, IL 60532 USA P: 331-332-5000 W: navistar.com |
| Media contact: | Breana Whalen, [email protected], 331-332-3056 | |||
| Investor contact: | Marty Ketelaar, [email protected], 331-332-2706 | |||
| Web site: | www.Navistar.com/newsroom |
NAVISTAR REPORTS SECOND QUARTER 2021 RESULTS
| • | Reports second quarter 2021 net income of $163 million, or $1.63 per diluted share, on revenues of $2.2 billion. |
| • | Generates adjusted EBITDA of $198 million and adjusted net income of $72 million in the second quarter. |
| • | Finishes the second quarter with $1.2 billion in manufacturing cash. |
| • | Remains on track to close TRATON merger in mid-2021. |
LISLE, Ill. — June 8, 2021 — Navistar International Corporation (NYSE: NAV) today announced a second quarter 2021 net income of $163 million, or $1.63 per diluted share, compared to second quarter 2020 net loss of $38 million, or $0.38 per diluted share. The results in the second quarter of 2021 included $91 million of tax-effected significant items.
Second quarter 2021 adjusted net income was $72 million compared to a loss of $10 million in second quarter 2020.
Revenues in the quarter were $2.2 billion, compared to $1.9 billion in the second quarter last year.
Chargeouts in the company’s Core (Class 6-8 trucks and buses in the United States and Canada) market
were 13,900 units in the second quarter of 2021.
Second quarter 2021 adjusted EBITDA nearly doubled year-over-year to $198 million, or 9.2% of revenue, versus $88 million, or 4.6% of revenue, a year ago.
Navistar finished second quarter 2021 with $1.2 billion in consolidated cash and cash equivalents, including $1.2 billion in manufacturing cash and cash equivalents.
The company has increased production line rates in all of its vehicle assembly plants, including adding a second shift to its truck assembly plant in Escobedo, Mexico. The pace of the increases has been slower than planned due to supply chain constraints.
“We delivered strong operating results in our second quarter,” said Persio Lisboa, chief executive officer, Navistar. “The strong trucking industry, fueled by robust economic growth, is supporting higher order activity by our customers and our team is working hard to overcome the supply chain challenges to best support their transportation needs.”
The company made progress on its Navistar 4.0 business strategy throughout the quarter. In March, the company launched a new aftermarket product line to provide high-quality aftermarket parts for Class 2-5 diesel engines and engine components called Diamond Advantage Diesel Parts. Diamond Advantage parts will be
distributed through Navistar’s parts distribution centers to warehouse distributors, diesel parts specialists and the International dealer network. The new product line reflects the company’s commitment to supporting customers on the road through an extensive Class 2-8 product offering.
In the connected space, the company announced the upcoming availability of Cummins Connected Software Updates and programmable trim parameters for their X15 engines through Navistar’s OnCommand Connection portal. This integration builds upon the company’s over-the-air capability on the International® A26 engine – making it the first and only OEM to use a single, factory-installed device to equip multiple engine models with remote programming. This is enabled by Navistar’s second-generation telematics devices, which began production in mid-2019.
In electric, the company delivered its first electric school buses to Canada. The 18 electric CE Series school buses were delivered by Western Canada Bus to British Columbia School Districts. The company also announced that it has over 100 orders for its electric CE Series.
The company is also strengthening its manufacturing footprint. Its San Antonio, Texas, manufacturing facility is on schedule to begin production of vehicles in early 2022 and the expansion of its Huntsville, Alabama, engine facility remains on track for completion in the first half of 2023.
The company is also making progress related to its pending merger with TRATON, which remains on track to close in the middle of 2021. The company has announced a conditional call of the 9.5 percent Senior Secured Notes and its 4.75 percent Tax Exempt Bonds upon the closing of the merger.
“Guided by our Navistar 4.0 strategy and fueled by the hard work of our team, Navistar is capitalizing on the strong demand in the industry today,” said Lisboa. “This, together with the many opportunities available to us when our merger with TRATON is complete, leads to a very exciting future for our company, our customers and all of our stakeholders.”
SEGMENT REVIEW
Summary of Financial Results:
| (Unaudited) | ||||||||||||||||
| Three Months Ended April 30, |
Six Months Ended April 30, |
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| (in millions, except per share data) | 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Sales and revenues, net |
$ | 2,162 | $ | 1,925 | $ | 3,974 | $ | 3,763 | ||||||||
| Segment Results: |
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| Truck |
$ | 189 | $ | (51 | ) | $ | 108 | $ | (109 | ) | ||||||
| Parts |
135 | 103 | 246 | 222 | ||||||||||||
| Global Operations |
36 | (13 | ) | 42 | (13 | ) | ||||||||||
| Financial Services |
15 | 24 | 27 | 41 | ||||||||||||
| Income (loss) from continuing operations, net of tax(A) |
$ | 163 | $ | (38 | ) | $ | 81 | $ | (74 | ) | ||||||
| Net income (loss)(A) |
163 | (38 | ) | 82 | (74 | ) | ||||||||||
| Diluted income (loss) per share from continuing operations(A) |
$ | 1.63 | $ | (0.38 | ) | $ | 0.81 | $ | (0.74 | ) | ||||||
| Diluted income (loss) per share(A) |
$ | 1.63 | $ | (0.38 | ) | $ | 0.82 | $ | (0.74 | ) | ||||||
| (A) | Amounts attributable to Navistar International Corporation. |
Truck Segment – In second quarter 2021, Truck segment net sales were $1.5 billion, a 7 percent increase versus second quarter last year. The increase was primarily driven by higher used truck volumes, higher sales of GM branded units and higher Mexico volumes.
The Truck segment reported a net profit of $189 million in second quarter 2021, compared to a loss of $51 million in second quarter 2020. The increase was primarily driven by a gain from an increase in fair value of the equity security investment in TuSimple and higher sales, partially offset by a charge for a tentative legal settlement and higher warranty costs.
Parts Segment – For second quarter 2021, Parts segment net sales were $524 million, an 18 percent increase from second quarter 2020. The increase was primarily driven by higher volumes in the U.S. and Canada.
The Parts segment generated a second quarter profit of $135 million, up 31 percent compared to the second quarter last year. The increase was primarily driven by higher sales.
Global Operations Segment – In second quarter 2021, Global Operations segment net sales increased 171 percent versus second quarter 2020 to $138 million. The increase was primarily driven by higher engine and power generator volumes, the recognition of an estimated benefit related to Brazilian tax credits, and higher parts sales revenues in South American operations.
The Global Operations segment recorded a profit of $36 million in the second quarter of 2021, compared to a loss of $13 million in second quarter 2020. The increase was primarily due to higher revenues in 2021 and the recording of asset impairment charges in second quarter 2020.
Financial Services Segment – In second quarter 2021, Financial Services segment reported net revenues of $50 million compared to $64 million in second quarter 2020. The decrease was primarily driven by lower average yields.
The Financial Services segment recorded a profit of $15 million in the quarter, compared to $24 million in second quarter 2020. The decrease was primarily driven by lower revenues partially offset by a decrease in interest expense resulting from lower borrowing requirements and lower borrowing rates.
About Navistar
Navistar International Corporation (NYSE: NAV) is a holding company whose subsidiaries and affiliates produce International® brand commercial 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 Section 27A of the Securities Act of 1933, as amended (“Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”), and the Private Securities Litigation Reform Act of 1995. 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 31,2020 and our quarterly report on Form 10-Q for the period ended April 30, 2021. Although we believe that these forward-looking statements are based on reasonable assumptions, there are many factors that could affect our actual financial results or results of operations and could cause actual results to differ materially from those in the forward-looking statements. All future written and oral forward-looking statements by us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to above. Except for our ongoing obligations to disclose material information as required by the federal securities laws, we do not have any obligations or intention to release publicly any revisions to any forward-looking statements to reflect events or circumstances in the future or to reflect the occurrence of unanticipated events.
Navistar International Corporation and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
| Three Months Ended April 30, |
Six Months Ended April 30, |
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| (in millions, except per share data) | 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Sales and revenues |
| |||||||||||||||
| Sales of manufactured products, net |
$ | 2,121 | $ | 1,877 | $ | 3,890 | $ | 3,671 | ||||||||
| Finance revenues |
41 | 48 | 84 | 92 | ||||||||||||
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| Sales and revenues, net |
2,162 | 1,925 | 3,974 | 3,763 | ||||||||||||
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| Costs and expenses |
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| Costs of products sold |
1,731 | 1,624 | 3,238 | 3,153 | ||||||||||||
| Restructuring charges |
2 | — | 23 | 1 | ||||||||||||
| Asset impairment charges |
4 | 13 | 35 | 13 | ||||||||||||
| Selling, general and administrative expenses |
304 | 170 | 509 | 352 | ||||||||||||
| Engineering and product development costs |
88 | 78 | 172 | 164 | ||||||||||||
| Interest expense |
62 | 63 | 126 | 128 | ||||||||||||
| Other (income) expense, net |
(251 | ) | 2 | (256 | ) | 13 | ||||||||||
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| Total costs and expenses |
1,940 | 1,950 | 3,847 | 3,824 | ||||||||||||
| Equity in loss of non-consolidated affiliates |
(3 | ) | (1 | ) | (4 | ) | (2 | ) | ||||||||
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| Income (loss) before income taxes |
219 | (26 | ) | 123 | (63 | ) | ||||||||||
| Income tax expense |
(51 | ) | (7 | ) | (33 | ) | (2 | ) | ||||||||
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| Income (loss) from continuing operations |
168 | (33 | ) | 90 | (65 | ) | ||||||||||
| Income from discontinued operations, net of tax |
— | — | 1 | — | ||||||||||||
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| Net income (loss) |
168 | (33 | ) | 91 | (65 | ) | ||||||||||
| Less: Net income attributable to non-controlling interests |
5 | 5 | 9 | 9 | ||||||||||||
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| Net income (loss) attributable to Navistar International Corporation |
$ | 163 | $ | (38 | ) | $ | 82 | $ | (74 | ) | ||||||
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| Amounts attributable to Navistar International Corporation common stockholders: |
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| Income (loss) from continuing operations, net of tax |
$ | 163 | $ | (38 | ) | $ | 81 | $ | (74 | ) | ||||||
| Income from discontinued operations, net of tax |
— | — | 1 | — | ||||||||||||
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| Net income (loss) attributable to Navistar International Corporation common stockholders |
$ | 163 | $ | (38 | ) | $ | 82 | $ | (74 | ) | ||||||
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| Income (loss) per share attributable to Navistar International Corporation |
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| Basic: |
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| Continuing operations |
$ | 1.63 | $ | (0.38 | ) | $ | 0.81 | $ | (0.74 | ) | ||||||
| Discontinued operations |
— | — | 0.01 | — | ||||||||||||
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| Basic |
$ | 1.63 | $ | (0.38 | ) | $ | 0.82 | $ | (0.74 | ) | ||||||
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| Diluted: |
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| Continuing operations |
$ | 1.63 | $ | (0.38 | ) | $ | 0.81 | $ | (0.74 | ) | ||||||
| Discontinued operations |
— | — | 0.01 | — | ||||||||||||
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| Diluted |
$ | 1.63 | $ | (0.38 | ) | $ | 0.82 | $ | (0.74 | ) | ||||||
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| Weighted average shares outstanding: |
| |||||||||||||||
| Basic |
99.9 | 99.7 | 99.9 | 99.6 | ||||||||||||
| Diluted |
100.2 | 99.7 | 100.2 | 99.6 | ||||||||||||
Navistar International Corporation and Subsidiaries
Consolidated Balance Sheets
| (in millions, except per share data) | As of April 30, 2021 |
As of October 31, 2020 |
||||||
| (Unaudited) | ||||||||
| ASSETS |
||||||||
| Current assets |
||||||||
| Cash and cash equivalents |
$ | 1,233 | $ | 1,843 | ||||
| Restricted cash and cash equivalents |
402 | 64 | ||||||
| Trade and other receivables, net |
283 | 273 | ||||||
| Finance receivables, net |
1,360 | 1,371 | ||||||
| Inventories, net |
1,017 | 763 | ||||||
| Other current assets |
356 | 263 | ||||||
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| Total current assets |
4,651 | 4,577 | ||||||
| Restricted cash |
67 | 66 | ||||||
| Trade and other receivables, net |
7 | 7 | ||||||
| Finance receivables, net |
258 | 251 | ||||||
| Investments in non-consolidated affiliates |
26 | 31 | ||||||
| Property and equipment (net of accumulated depreciation and amortization of $2,317 and $2,335, respectively) |
1,263 | 1,298 | ||||||
| Operating lease right of use assets |
123 | 119 | ||||||
| Goodwill |
38 | 38 | ||||||
| Intangible assets (net of accumulated amortization of $139 and $138, respectively) |
18 | 18 | ||||||
| Deferred taxes, net |
121 | 117 | ||||||
| Other noncurrent assets |
512 | 115 | ||||||
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| Total assets |
$ | 7,084 | $ | 6,637 | ||||
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| LIABILITIES and STOCKHOLDERS’ DEFICIT |
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| Liabilities |
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| Current liabilities |
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| Notes payable and current maturities of long-term debt |
$ | 843 | $ | 640 | ||||
| Accounts payable |
1,529 | 1,278 | ||||||
| Other current liabilities |
1,517 | 1,453 | ||||||
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| Total current liabilities |
3,889 | 3,371 | ||||||
| Long-term debt |
4,624 | 4,690 | ||||||
| Postretirement benefits liabilities |
1,439 | 1,705 | ||||||
| Other noncurrent liabilities |
772 | 693 | ||||||
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| Total liabilities |
10,724 | 10,459 | ||||||
| Stockholders’ deficit |
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| Series D convertible junior preference stock |
2 | 2 | ||||||
| Common stock, $0.10 par value per share (103.1 shares issued and 220 shares authorized at both dates) |
10 | 10 | ||||||
| Additional paid-in capital |
2,721 | 2,726 | ||||||
| Accumulated deficit |
(4,491 | ) | (4,566 | ) | ||||
| Accumulated other comprehensive loss |
(1,758 | ) | (1,865 | ) | ||||
| Common stock held in treasury, at cost (3.3 and 3.5 shares, respectively) |
(127 | ) | (133 | ) | ||||
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| Total stockholders’ deficit attributable to Navistar International Corporation |
(3,643 | ) | (3,826 | ) | ||||
| Stockholders’ equity attributable to non-controlling interests |
3 | 4 | ||||||
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| Total stockholders’ deficit |
(3,640 | ) | (3,822 | ) | ||||
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| Total liabilities and stockholders’ deficit |
$ | 7,084 | $ | 6,637 | ||||
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Navistar International Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Six Months Ended April 30, | ||||||||
| (in millions) | 2021 | 2020 | ||||||
| Cash flows from operating activities |
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| Net income (loss) |
$ | 91 | $ | (65 | ) | |||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: |
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| Depreciation and amortization |
68 | 70 | ||||||
| Depreciation of equipment leased to others |
35 | 29 | ||||||
| Deferred taxes, including change in valuation allowance |
7 | (9 | ) | |||||
| Asset impairment charges |
35 | 13 | ||||||
| Amortization of debt issuance costs and discount |
7 | 7 | ||||||
| Stock-based compensation |
12 | 13 | ||||||
| Provision for credit losses |
6 | 9 | ||||||
| Equity in loss of non-consolidated affiliates, net of dividends |
4 | 2 | ||||||
| Other non-cash operating activities |
(7 | ) | (5 | ) | ||||
| Changes in other assets and liabilities |
(290 | ) | (182 | ) | ||||
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| Net cash used in operating activities |
(32 | ) | (118 | ) | ||||
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| Cash flows from investing activities |
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| Capital expenditures |
(137 | ) | (90 | ) | ||||
| Purchases of equipment leased to others |
(76 | ) | (16 | ) | ||||
| Proceeds from sales of property and equipment |
10 | 7 | ||||||
| Purchases of equity investments |
(143 | ) | — | |||||
| Proceeds from sales of investments and businesses |
— | 10 | ||||||
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| Net cash used in investing activities |
(346 | ) | (89 | ) | ||||
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| Cash flows from financing activities |
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| Proceeds from issuance of securitized debt |
26 | 16 | ||||||
| Principal payments on securitized debt |
(28 | ) | (30 | ) | ||||
| Net change in secured revolving credit facilities |
241 | (167 | ) | |||||
| Proceeds from issuance of non-securitized debt |
15 | 620 | ||||||
| Principal payments on non-securitized debt |
(10 | ) | (107 | ) | ||||
| Net change in notes and debt outstanding under revolving credit facilities |
(127 | ) | 24 | |||||
| Debt issuance costs |
(1 | ) | (10 | ) | ||||
| Proceeds from exercise of stock options |
1 | 3 | ||||||
| Dividends paid by subsidiaries to non-controlling interest |
(10 | ) | (10 | ) | ||||
| Other financing activities |
(2 | ) | (2 | ) | ||||
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| Net cash provided by financing activities |
105 | 337 | ||||||
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| Effect of exchange rate changes on cash, cash equivalents and restricted cash |
2 | (9 | ) | |||||
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| Increase (decrease) in cash, cash equivalents and restricted cash |
(271 | ) | 121 | |||||
| Cash, cash equivalents and restricted cash at beginning of the period |
1,973 | 1,557 | ||||||
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| Cash, cash equivalents and restricted cash at end of the period |
$ | 1,702 | $ | 1,678 | ||||
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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, 2021 |
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| External sales and revenues, net |
$ | 1,466 | $ | 523 | $ | 129 | $ | 43 | $ | 1 | $ | 2,162 | ||||||||||||
| Intersegment sales and revenues |
19 | 1 | 9 | 7 | (36 | ) | — | |||||||||||||||||
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| Total sales and revenues, net |
$ | 1,485 | $ | 524 | $ | 138 | $ | 50 | $ | (35 | ) | $ | 2,162 | |||||||||||
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| Income (loss) from continuing operations attributable to NIC, net of tax |
$ | 189 | $ | 135 | $ | 36 | $ | 15 | $ | (212 | ) | $ | 163 | |||||||||||
| Income tax expense |
— | — | — | — | (51 | ) | (51 | ) | ||||||||||||||||
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| Segment profit (loss) |
$ | 189 | $ | 135 | $ | 36 | $ | 15 | $ | (161 | ) | $ | 214 | |||||||||||
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| Depreciation and amortization |
$ | 30 | $ | 1 | $ | 1 | $ | 20 | $ | — | $ | 52 | ||||||||||||
| Interest expense |
— | — | — | 11 | 51 | 62 | ||||||||||||||||||
| Equity in loss of non-consolidated affiliates |
(3 | ) | — | — | — | — | (3 | ) | ||||||||||||||||
| Capital expenditures(B) |
60 | 1 | 1 | — | 2 | 64 | ||||||||||||||||||
| (in millions) | Truck | Parts | Global Operations |
Financial Services(A) |
Corporate and Eliminations |
Total | ||||||||||||||||||
| Three Months Ended April 30, 2020 |
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| External sales and revenues, net |
$ | 1,385 | $ | 442 | $ | 47 | $ | 50 | $ | 1 | $ | 1,925 | ||||||||||||
| Intersegment sales and revenues |
4 | 1 | 4 | 14 | (23 | ) | — | |||||||||||||||||
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| Total sales and revenues, net |
$ | 1,389 | $ | 443 | $ | 51 | $ | 64 | $ | (22 | ) | $ | 1,925 | |||||||||||
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| Income (loss) from continuing operations attributable to NIC, net of tax |
$ | (51 | ) | $ | 103 | $ | (13 | ) | $ | 24 | $ | (101 | ) | $ | (38 | ) | ||||||||
| Income tax expense |
— | — | — | — | (7 | ) | (7 | ) | ||||||||||||||||
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| Segment profit (loss) |
$ | (51 | ) | $ | 103 | $ | (13 | ) | $ | 24 | $ | (94 | ) | $ | (31 | ) | ||||||||
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| Depreciation and amortization |
$ | 29 | $ | 2 | $ | 2 | $ | 15 | $ | 1 | $ | 49 | ||||||||||||
| Interest expense |
— | — | — | 20 | 43 | 63 | ||||||||||||||||||
| Equity in income (loss) of non-consolidated affiliates |
(2 | ) | 1 | — | — | — | (1 | ) | ||||||||||||||||
| Capital expenditures(B) |
28 | — | 1 | — | 2 | 31 | ||||||||||||||||||
| (in millions) | Truck | Parts | Global Operations |
Financial Services(A) |
Corporate and Eliminations |
Total | ||||||||||||||||||
| Six Months Ended April 30, 2021 |
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| External sales and revenues, net |
$ | 2,679 | $ | 988 | $ | 218 | $ | 88 | $ | 1 | $ | 3,974 | ||||||||||||
| Intersegment sales and revenues |
43 | 3 | 15 | 13 | (74 | ) | — | |||||||||||||||||
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| Total sales and revenues, net |
$ | 2,722 | $ | 991 | $ | 233 | $ | 101 | $ | (73 | ) | $ | 3,974 | |||||||||||
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| Income (loss) from continuing operations attributable to NIC, net of tax |
$ | 108 | $ | 246 | $ | 42 | $ | 27 | $ | (342 | ) | $ | 81 | |||||||||||
| Income tax expense |
— | — | — | — | (33 | ) | (33 | ) | ||||||||||||||||
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| Segment profit (loss) |
$ | 108 | $ | 246 | $ | 42 | $ | 27 | $ | (309 | ) | $ | 114 | |||||||||||
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| Depreciation and amortization |
$ | 59 | $ | 3 | $ | 2 | $ | 38 | $ | 1 | $ | 103 | ||||||||||||
| Interest expense |
— | — | — | 24 | 102 | 126 | ||||||||||||||||||
| Equity in loss of non-consolidated affiliates |
(4 | ) | — | — | — | — | (4 | ) | ||||||||||||||||
| Capital expenditures(B) |
129 | 1 | 1 | 2 | 4 | 137 | ||||||||||||||||||
| (in millions) | Truck | Parts | Global Operations |
Financial Services(A) |
Corporate and Eliminations |
Total | ||||||||||||||||||
| Six Months Ended April 30, 2020 |
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| External sales and revenues, net |
$ | 2,623 | $ | 934 | $ | 108 | $ | 96 | $ | 2 | $ | 3,763 | ||||||||||||
| Intersegment sales and revenues |
8 | 2 | 11 | 25 | (46 | ) | — | |||||||||||||||||
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| Total sales and revenues, net |
$ | 2,631 | $ | 936 | $ | 119 | $ | 121 | $ | (44 | ) | $ | 3,763 | |||||||||||
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| Income (loss) from continuing operations attributable to NIC, net of tax |
$ | (109 | ) | $ | 222 | $ | (13 | ) | $ | 41 | $ | (215 | ) | $ | (74 | ) | ||||||||
| Income tax expense |
— | — | — | — | (2 | ) | (2 | ) | ||||||||||||||||
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| Segment profit (loss) |
$ | (109 | ) | $ | 222 | $ | (13 | ) | $ | 41 | $ | (213 | ) | $ | (72 | ) | ||||||||
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| Depreciation and amortization |
$ | 56 | $ | 4 | $ | 4 | $ | 32 | $ | 3 | $ | 99 | ||||||||||||
| Interest expense |
— | — | — | 39 | 89 | 128 | ||||||||||||||||||
| Equity in income (loss) of non-consolidated affiliates |
(3 | ) | 1 | — | — | — | (2 | ) | ||||||||||||||||
| Capital expenditures(B) |
75 | 5 | 2 | — | 8 | 90 | ||||||||||||||||||
| (A) | Total sales and revenues in the Financial Services segment include interest revenues of $26 million and $53 million for the three and six months ended April 30, 2021, respectively, and $40 million and $75 million for the three and six months ended April 30, 2020, respectively. |
| (B) | Exclusive of purchases of equipment leased to others. |
| (in millions) | Truck | Parts | Global Operations |
Financial Services |
Corporate and Eliminations |
Total | ||||||||||||||||||
| Segment assets, as of: |
||||||||||||||||||||||||
| April 30, 2021 |
$ | 2,332 | $ | 629 | $ | 282 | $ | 2,493 | $ | 1,348 | $ | 7,084 | ||||||||||||
| October 31, 2020 |
1,619 | 663 | 216 | 2,191 | 1,948 | 6,637 | ||||||||||||||||||
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) 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 and Adjusted Net Income (loss):
We believe that adjusted EBITDA and Adjusted Net Income (loss), 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 and Cash Equivalents:
Manufacturing cash and cash equivalents represent the Company’s consolidated cash and cash equivalents excluding cash and cash equivalents of our financial services operations. 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 consist of Selling, general and administrative expenses and Engineering and product development costs.
EBITDA reconciliation:
| Three Months Ended April 30, |
Six Months Ended April 30, |
|||||||||||||||
| (in millions) | 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Net income (loss) attributable to NIC |
$ | 163 | $ | (38 | ) | $ | 82 | $ | (74 | ) | ||||||
| Plus: |
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| Depreciation and amortization expense |
52 | 49 | 103 | 99 | ||||||||||||
| Manufacturing interest expense(A) |
51 | 43 | 102 | 89 | ||||||||||||
| Less: |
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| Income tax expense |
(51 | ) | (7 | ) | (33 | ) | (2 | ) | ||||||||
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| EBITDA |
$ | 317 | $ | 61 | $ | 320 | $ | 116 | ||||||||
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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, |
Six Months Ended April 30, |
|||||||||||||||
| (in millions) | 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Interest expense |
$ | 62 | $ | 63 | $ | 126 | $ | 128 | ||||||||
| Less: Financial services interest expense |
11 | 20 | 24 | 39 | ||||||||||||
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| Manufacturing interest expense |
$ | 51 | $ | 43 | $ | 102 | $ | 89 | ||||||||
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Adjusted EBITDA Reconciliation:
| Three Months Ended April 30, |
Six Months Ended April 30, |
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| (in millions) | 2021 | 2020 | 2021 | 2020 | ||||||||||||
| EBITDA (reconciled above) |
$ | 317 | $ | 61 | $ | 320 | $ | 116 | ||||||||
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| Adjusted for significant items of: |
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| Adjustments to pre-existing warranties(A) |
31 | 13 | 80 | 17 | ||||||||||||
| Asset impairment charges(B) |
4 | 13 | 35 | 13 | ||||||||||||
| Restructuring of manufacturing operations(C) |
2 | — | 23 | 1 | ||||||||||||
| MaxxForce Advanced EGR engine lawsuits(D) |
1 | 1 | 1 | 1 | ||||||||||||
| TRATON merger costs(E) |
6 | — | 16 | — | ||||||||||||
| Shy profit-sharing accrual(F) |
2 | — | 4 | — | ||||||||||||
| TuSimple fair value adjustment(G) |
(242 | ) | — | (246 | ) | — | ||||||||||
| EPA settlement(H) |
77 | — | 77 | — | ||||||||||||
| Settlement gain(I) |
— | — | — | (1 | ) | |||||||||||
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| Total adjustments |
(119 | ) | 27 | (10 | ) | 31 | ||||||||||
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| Adjusted EBITDA |
$ | 198 | $ | 88 | $ | 310 | $ | 147 | ||||||||
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Adjusted Net Income (Loss) attributable to NIC:
| Three Months Ended April 30, |
Six Months Ended April 30, |
|||||||||||||||
| (in millions) | 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Net income (loss) attributable to NIC |
$ | 163 | $ | (38 | ) | $ | 82 | $ | (74 | ) | ||||||
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| Adjusted for significant items of: |
||||||||||||||||
| Adjustments to pre-existing warranties(A) |
31 | 13 | 80 | 17 | ||||||||||||
| Asset impairment charges(B) |
4 | 13 | 35 | 13 | ||||||||||||
| Restructuring of manufacturing operations(C) |
2 | — | 23 | 1 | ||||||||||||
| MaxxForce Advanced EGR engine lawsuits (D) |
1 | 1 | 1 | 1 | ||||||||||||
| TRATON merger costs(E) |
6 | — | 16 | — | ||||||||||||
| Shy profit-sharing accrual(F) |
2 | — | 4 | — | ||||||||||||
| TuSimple fair value adjustment(G) |
(242 | ) | — | (246 | ) | — | ||||||||||
| EPA settlement(H) |
77 | — | 77 | — | ||||||||||||
| Settlement gain(I) |
— | — | — | (1 | ) | |||||||||||
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| Total adjustments |
(119 | ) | 27 | (10 | ) | 31 | ||||||||||
| Tax effect (J) |
28 | 1 | 1 | — | ||||||||||||
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| Adjusted net income (loss) attributable to NIC |
$ | 72 | $ | (10 | ) | $ | 73 | $ | (43 | ) | ||||||
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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 and first half of 2021, we recorded $4 million and $35 million, respectively, of asset impairment charges in our Truck segment. The charges for the second quarter of 2021 include $3 million related to the Melrose Park Facility disposition and $1 million related to certain assets under operating leases. The charges for the first half of 2021 include $28 million related to the Melrose Park Facility disposition and $7 million related to certain assets under operating leases. In the second quarter and first half of 2020, we recorded $13 million of asset impairment charges comprised of $12 million of asset impairment charges related to long-lived assets in our Brazil asset group in our Global Operations segment and $1 million of asset impairment charges related to certain assets under operating leases in our Truck segment. |
| (C) | In the second quarter and first half of 2021, we recorded restructuring charges of $2 million and $23 million, respectively, in our Truck segment, related to the Melrose Park Facility disposition. In the first half of 2020, we recorded a restructuring charge of $1 million in our Truck segment. |
| (D) | In the second quarter and first half of 2021 and 2020, we recorded a charge of $1 million related to the MaxxForce Advanced EGR engine class action settlement and related litigation in our Truck segment. |
| (E) | In the second quarter and first half of 2021, we incurred $6 million and $16 million, respectively, of costs related to the proposed TRATON merger. |
| (F) | In the second quarter and first half of 2021, we recorded a $2 million and $4 million charge, respectively, related to the Shy profit-sharing litigation accrual. |
| (G) | In the second quarter and first half of 2021, we recorded a gain of $242 million and $246 million, respectively, related to a gain from an increase in fair value of our equity security investment in TuSimple. |
| (H) | In the second quarter and first half of 2021, we recorded a charge of $77 million related to a tentative EPA settlement in our Truck segment. |
| (I) | In the first half of 2020, we recorded interest income of $1 million, in Other expense, net derived from the prior year settlement of a business economic loss claim relating to our former Alabama engine manufacturing facility in Corporate. |
| (J) | Tax effect is calculated by excluding the impact of the non-GAAP adjustments from the interim period tax provision calculations. |
Manufacturing segment cash and cash equivalents reconciliation:
| As of April 30, 2021 | ||||||||||||
| (in millions) | Manufacturing Operations |
Financial Services Operations |
Consolidated Balance Sheet |
|||||||||
| Total cash and cash equivalents |
$ | 1,197 | $ | 36 | $ | 1,233 | ||||||
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Q2 2021 EARNINGS PRESENTATION June 8, 2021 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 ("Securities Act"), Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act"), 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 fiscal year ended October 31, 2020 and our quarterly report on Form 10-Q for the period ended April 30, 2021. Although we believe that these forward-looking statements are based on reasonable assumptions, there are many factors that could affect our actual financial results or results of operations and could cause actual results to differ materially from those in the forward-looking statements. All future written and oral forward-looking statements by us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to above. Except for our ongoing obligations to disclose material information as required by the federal securities laws, we do not have any obligations or intention to release publicly any revisions to any forward-looking statements to reflect events or circumstances in the future or to reflect the occurrence of unanticipated events. 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.
Second Quarter 2021 Summary Q2 revenue increased 12% to $2.2 billion reflecting higher sales in all manufacturing segments Q2 net income of $163 million included significant items of $91 million (tax-effected); adjusted net income of $72 million Q2 adjusted EBITDA of $198 million, or 9.2% of revenues, up from $88 million, or 4.6% of revenues, in the prior year Generated $129 million of manufacturing free cash flow in Q2, and ending the period with $1.2 billion of manufacturing cash Launched Diamond Advantage Diesel Parts product line to serve class 2-5 diesel engines and engine components Announced over-the-air calibrations on Cummins X15 engines through the OnCommand Connection portal Note: This slide contains non-GAAP information; please see the REG G in appendix for a detailed reconciliation.
Strong Financial Improvement Year-Over-Year ($ in millions, except per share and units) Note: This slide contains non-GAAP information; please see the REG G in appendix for a detailed reconciliation. Includes U.S. and Canada School buses and Class 6-8 trucks. Amounts attributable to Navistar International Corporation. Quarters Ended April 30, 2021 2020 Chargeouts(A) 13,900 14,200 Sales and Revenues $ 2,162 $ 1,925 Net Income (Loss)(B) $ 163 $ -38 Diluted Income (Loss) Per Share(B) $ 1.63 $ -0.38 Adjusted Net Income (Loss)(B) $ 72 $ -10 Adjusted EBITDA $ 198 $ 88 Adjusted EBITDA Margin 9.2% 4.6%
Second Quarter 2021 Segment Results ($ in millions) Includes a gain of $242 million related to an increase in fair value of our equity security investment in TuSimple, a charge of $77 million related to a tentative EPA settlement, and a charge of $31 million related to adjustments to pre-existing warranties. (A) Sales and Revenues Segment Profit (Loss) Quarters Ended April 30, Quarters Ended April 30, 2021 2020 2021 2020 Truck $1,485 $1,389 $189 $-51 Parts 524 443 135 103 Global Operations 138 51 36 -13 Financial Services 50 64 15 24
Strong Cash Balance with No Near-Term Manufacturing Debt Maturities ($ in millions) Manufacturing Cash Balance(A) Manufacturing Debt Maturities(B) 9.5% Senior Secured Notes Senior Secured Term Loan $2,148 Note: This slide contains non-GAAP information; please see the REG G in appendix for a detailed reconciliation. Amounts include manufacturing cash and cash equivalents. Q2 2021 ending consolidated equivalent cash balance was $1.2 billion. Amounts do not include restricted cash. Total manufacturing debt of $3.5 billion as of April 30, 2021. Graph does not include financed lease obligations and other, totaling $42 million. The company has announced a conditional call of the 9.5% Senior Secured Notes and the 4.75% Tax Exempt Bonds upon the closing of the merger. Conditionally called(C)
Merger with TRATON Tracking to Expectations The merger proposal was approved at Navistar’s annual stockholder meeting on March 2nd. HSR antitrust waiting period expired February 12th. Subject to regulatory approvals and the satisfaction of customary closing conditions. Targeting to complete transaction mid-2021(3) Navistar shareholder vote Approved(1) Regulatory and jurisdictional approvals All filings made Hart-Scott-Rodino (HSR) Antitrust waiting period Expired(2)
Appendix
Days Sales Inventory On-Hand Includes US and Canada Class 6-8 company and dealer truck inventory, but does not include IC Bus *Calculation is based on the 3-month rolling average of inventory-to-retail sales ratio 87 Days Normal range is 80-120 days inventory on hand
Retail Market Share in Commercial Vehicle Segments Class 6/7 Medium-Duty Class 8 Severe Service Class 8 HeavyThree Months EndedApril 30, 2021January 31, 2021October 31, 2020July 31, 2020April 30, 2020Core Markets (U.S. and Canada)Class 6 and 7 medium trucks23.6%21.7%19.0%22.1%22.9%Class 8 heavy trucks9.6%8.7%10.4%10.6%11.6%Class 8 severe service trucks13.4%15.0%18.9%16.5%14.6%Combined class 8 trucks10.6%10.4%12.5%12.6%12.5%Total class 6-8 trucks13.8%13.4%14.0%15.3%15.4%
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. The above table summarizes our approximate worldwide chargeouts. We define our Core markets to include U.S. and Canada School bus and Class 6 through 8 trucks. Other markets primarily consist of Class 4/5 vehicles, Export Truck, Mexico, and post-sale Navistar Defense. Other markets include certain Class 4/5 vehicle chargeouts of 1,900 and 1,100 GM-branded units sold to GM during the three months ended April 30, 2021 and 2020, respectively. Three Months Ended April 30, % 2021 2020 Change Change Core Markets (U.S. and Canada) School buses 2,200 3,100 -,900 (29%) Class 6 and 7 medium trucks 5,000 4,900 100 0.02 Class 8 heavy trucks 4,900 3,700 1,200 0.32 Class 8 severe service trucks 1,800 2,500 -,700 (28%) Total Core markets 13,900 14,200 -,300 (2%) Other markets(A) 3,900 3,200 700 0.22 Total worldwide units 17,800 17,400 400 0.02 Combined Class 8 trucks 6,700 6,200 500 0.08
Financial Services Segment Highlights Financial Services segment profit of $15M for Q2 2021 compared to $24M Q2 2020 Segment financing availability of $700M as of April 30, 2021 Financial Services debt/equity leverage of 2.9:1 as of April 30, 2021 Renewal of $350M wholesale variable funding facility in April 2021 Repaid $300M wholesale term investor notes upon maturity in May 2021 Retail Notes Bank Facilities Dealer Floor Plan Bank revolver capacity of $748M matures May 2024 Funding for retail notes, wholesale notes, retail accounts, and dealer open accounts Retail accounts facility of $200M On balance sheet NFSC wholesale trust as of April 30, 2021 $950M funding facility Variable portion matures April 2022 Term portions mature May 2021 and July 2022 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 NFC(1) Facilities 1 Navistar Financial Corporation (NFC) is the U.S. financial entity of Navistar’s Financial Services segment.
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 and profit sharing, manufacturing interest expense, and the elimination of intercompany sales and profit between segments. Q2: What is included in your equity in income (loss) of non-consolidated affiliates? A:Equity in income of non-consolidated affiliates is derived from the ownership interests in partially-owned affiliates that are not consolidated. Q3: What is your net income (loss) attributable to non-controlling interests? A:Net income attributable to non-controlling interests is the result of the consolidation of subsidiaries in which the company does 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 2021 and beyond pension funding requirements? A:For the six months ended April 30, 2021, we contributed $191 million to our pension plans to meet regulatory funding requirements. The 2021 contributions include the $157 million of contributions we deferred in 2020 under the provisions of the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"). We expect to contribute approximately $2 million to our pension plans during the remainder of 2021, as our previously expected remaining 2021 contributions of $129 million have been reduced under funding relief provisions in the American Rescue Plan Act ("ARPA"), enacted March 11, 2021. 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 future funding relief. We currently expect that we will be required to contribute approximately $20 million in each of 2022, 2023 and 2024, depending on asset performance, discount rates, and current pension legislation. Future expected contribution amounts for 2022, 2023 and 2024 are also reduced from previously expected amounts under funding relief provisions in ARPA.
Frequently Asked Questions Q5:What is your expectation for future cash tax payments? A:Cash tax payments are expected to remain low in 2021 and could gradually increase as the company utilizes 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, 2020, the Company had deferred tax assets for U.S. federal NOLs valued at $495 million, state NOLs valued at $165 million, and foreign NOLs valued at $141 million, for a total undiscounted cash value of $801 million. In addition to NOLs, the Company had deferred tax assets for accumulated tax credits of $183 million and other deferred tax assets of $1.2 billion resulting in net deferred tax assets before valuation allowances of approximately $2.2 billion. Of this amount, $2.0 billion was subject to a valuation allowance at the end of FY2020. Q7:What adjustments do you make to the ACT forecast to align with company’s presentation? A: Q8:Please discuss the process from an order to a retail delivery? A: Orders* are customers’ written commitments to purchase vehicles. 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 do not represent guarantees of purchases and are subject to cancellation. Reconciliation to ACT – Retail Sales 2021 ACT* 285,500 CY to FY adjustment (9,700) “Other Specialty OEMs” included in ACT’s forecast; we do not include these specialty OEMs in our forecast or in our internal/external reports (4,500) Total (ACT comparable Class 8 Navistar) 271,300
Q10: What is your revenue by product type(A)? A: ___________________________ Includes other markets primarily consisting of Bus, Export Truck and Mexico. Retail financing revenues in the Financial Services segment include interest revenue of $15 for the three months ended April 30, 2021. Wholesale financing revenues in the Financial Services segment include interest revenue of $5 million for the three months ended April 30, 2021. Frequently Asked Questions Q9: How do you define manufacturing free cash flow? A: ___________________________ Net of adjustments required to eliminate certain intercompany transactions between Manufacturing operations and Financial Services operations. Quarters Ended Qtr Ended Qtr Ended ($ in millions) Apr. 30, 2021 Jan. 31, 2021 Oct. 31, 2020 Jul. 31, 2020 Apr 30, 2020 Oct. 31, 2016 Jul. 31, 2016 Consolidated Net Cash from Operating Activities $98 $-,130 $342 $250 $-,217 $346 $281 $90 Less: Net Cash from Financial Services Operations -95 278 80 71 -17 142 -3 95 Net Cash from Manufacturing Operations(A) ....................... 193 -,408 262 179 -,200 204 284 -5 Less: Capital Expenditures 64 71 33 25 31 44 -32 -29 Manufacturing Free Cash Flow $129 $-,479 $229 $154 $-,231 $160 $252 $-34 ($ in millions) Truck Parts Global Operations Financial Services Corporate and Eliminations Total Three Months Ended April 30, 2021 Truck products and services(A) $ 1240 $ — $ — $ — $ 3 $ 1243 Truck contract manufacturing 97 — — — — 97 Used trucks 102 — — — — 102 Engines — 59 114 — — 173 Parts 1 464 15 — — 480 Extended warranty contracts 26 — — — — 26 Sales of manufactured products, net 1466 523 129 — 3 2121 Retail financing(B) — — — 38 -2 36 Wholesale financing(B) — — — 5 — 5 Financial revenues — — — 43 -2 41 Sales and revenues, net $ 1466 $ 523 $ 129 $ 43 $ 1 $ 2162
Outstanding Debt Balances
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) attributable to Navistar International Corporation plus manufacturing interest expense, income taxes, and depreciation and amortization. We believe EBITDA provides meaningful information as 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 Net Income and Adjusted EBITDA: We believe that adjusted net income and 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. Gross Margin consists of Sales and revenues, net, less Costs of products sold. Structural Cost consists of Selling, general and administrative expenses and Engineering and product development costs. Manufacturing Free Cash Flow consists of Net cash from operating activities and Capital expenditures, all from our Manufacturing operations. Adjusted EBITDA margin is calculated by dividing adjusted EBITDA by Sales and revenues, net.
SEC Regulation G Non-GAAP Reconciliation Manufacturing Operations Cash and Cash Equivalents Reconciliation: Manufacturing Cash and Cash Equivalents: Manufacturing cash and cash equivalents, and free cash flow represents the Company’s consolidated cash and cash equivalents, excluding cash and cash equivalents of our Financial Services operations. 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. Apr. 30, Jan. 31, Oct. 31, Jul. 31, Apr. 30, ($ in millions) 2021 2021 2020 2020 2020 Manufacturing Cash and Cash Equivalents $ 1,197 $ 1,179 $ 1,749 $ 1,610 $ 1,497 733 Financial Services Cash and Cash Equivalents $ 36 $ 82 $ 94 $ 38 $ 50 62 Consolidated Cash and Cash Equivalents $ 1,233 $ 1,261 $ 1,843 $ 1,648 $ 1,547 795 Cash and cash equivalents……………………………………………………… $ 28 $ 28 $ 28 $ 51 Marketable securities…………………………………………………………… 20 20 20 20 Financial Services Cash and cash equivalents and Marketable securities…… $ 48 $ 48 $ 48 $ 71 Consolidated Balance Sheet: Cash and cash equivalents……………………………………………………… $ 1225 $ 1207 $ 1638 $ 51 Marketable securities…………………………………………………………… 276 276 276 20 Consolidated Cash and cash equivalents and Marketable securities………… $ 1,501 $ 1,483 $ 1,914 $ 71
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 interest expense of 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 20. Quarters Ended April 30, (in millions) 2021 2020 2013 Net income (loss) attributable to NIC $ 163 $ -38 $ Plus: Depreciation and amortization expense 52 49 Manufacturing interest expense (A) 51 43 Adjusted for: Income tax expense -51 -7 EBITDA $ 317 $ 61 $ Quarters Ended April 30, (in millions) 2015 Interest expense ……………………………………………………………….. 75 Less: Financial services interest expense ………………………………….. 18 Manufacturing interest expense ……………………..……………………… 57 Quarters Ended April 30, (in millions) 2015 EBITDA (reconciled above) …......…………………………………… $85 Less significant items of: Adjustments to pre-existing warranties(A) ………………………...... 18 Restructuring charges(D) ………………………………...….………… 2 Asset impairment charges(C) ………...……………………………….. 1 Gain on settlement(E) ………………………………………………….. -10 Brazil truck business actions(F) …….....……………………………… 6 match below Total adjustments 17 Adjusted EBITDA …......………………………………………….....…… $102 Quarters Ended April 30, (in millions) 2015 Expense (income): Adjustments to pre-existing warranties(A) $18 Accelerated depreciation(B) 12 Asset impairment charges(C) 1 Other restructuring charges and strategic initiatives(D) 2 Gain on settlement(E) -10 Brazil truck business actions(F) 6 Brazilian tax adjustments(G) — (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 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 the foundry facilities. (C) In the second quarter and first half of 2015, the Company concluded it had a triggering event related to certain operating leases, as a result, the Truck segment recorded $1 million and $7 million, respectively, of asset impairment charges. In the second quarter of 2014, we recognized a non-cash charge of $149 million for the impairment of certain intangible assets of our Brazilian engine reporting unit. Due to slower than expected growth in the Brazilian economy causing declines in actual and forecasted results, we tested the goodwill of our Brazilian engine reporting unit and trademark for potential impairment. As a result, we determined that the entire $142 million balance of goodwill and $7 million of trademark were impaired. Additionally, in the first quarter of 2014, the Company concluded it had a triggering event related to potential sales of assets requiring assessment of impairment for certain intangible and long-lived assets in the Truck segment. As a result, the Truck segment recognized asset impairment charges of $18 million. (D) In the second quarter of 2014, we incurred restructuring charges of $8 million related to cost reduction actions that included a reduction-in-force in the U.S. (E) In the second quarter of 2015, the Global Operations segment recognized a $10 million gain resulting from a customer settlement, which includes an offsetting restructuring charge of $4 million. (F) In the second quarter and first half of 2015 our Global Operations segment recorded $6 million in inventory charges to right size the Brazil Truck business. (G) During the second quarter of 2014, our evaluation of the realizability of our Brazilian deferred tax assets resulted in a determination that a valuation allowance was required, due to a deterioration of operating performance in Brazil, an increase in net operating loss carryforwards, and the impairment of certain Brazilian intangible assets. As a result, we recorded a net expense of $29 million related to establishment of the valuation allowance and tax impact from the impairment of certain intangible assets. 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. Quarters Ended April 30, (in millions) 2015 Loss from continuing operations attributable to NIC, net of tax ………… $ -64 Plus: Depreciation and amortization expense ……………………………….. 74 Manufacturing interest expense(A) ………………………………….…. 57 Less: Income tax benefit (expense) …………………………………………… -18 EBITDA ………………………………………………………………………… $ 85 Quarters Ended April 30, (in millions) 2021 2020 Interest expense $ 62 $ 63 Less: Financial services interest expense 11 20 Manufacturing interest expense $ 51 $ 43 Quarters Ended April 30, (in millions) 2015 EBITDA (reconciled above) …......…………………………………… $85 Less significant items of: Adjustments to pre-existing warranties(A) ………………………...... 18 Restructuring charges(D) ………………………………...….………… 2 Asset impairment charges(C) ………...……………………………….. 1 Gain on settlement(E) ………………………………………………….. -10 Brazil truck business actions(F) …….....……………………………… 6 Total adjustments 17 Adjusted EBITDA …......………………………………………….....…… $102 Quarters Ended April 30, (in millions) 2015 Expense (income): Adjustments to pre-existing warranties(A) $18 Accelerated depreciation(B) 12 Asset impairment charges(C) 1 Other restructuring charges and strategic initiatives(D) 2 Gain on settlement(E) -10 Brazil truck business actions(F) 6 Brazilian tax adjustments(G) — (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 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 the foundry facilities. (C) In the second quarter and first half of 2015, the Company concluded it had a triggering event related to certain operating leases, as a result, the Truck segment recorded $1 million and $7 million, respectively, of asset impairment charges. In the second quarter of 2014, we recognized a non-cash charge of $149 million for the impairment of certain intangible assets of our Brazilian engine reporting unit. Due to slower than expected growth in the Brazilian economy causing declines in actual and forecasted results, we tested the goodwill of our Brazilian engine reporting unit and trademark for potential impairment. As a result, we determined that the entire $142 million balance of goodwill and $7 million of trademark were impaired. Additionally, in the first quarter of 2014, the Company concluded it had a triggering event related to potential sales of assets requiring assessment of impairment for certain intangible and long-lived assets in the Truck segment. As a result, the Truck segment recognized asset impairment charges of $18 million. (D) In the second quarter of 2014, we incurred restructuring charges of $8 million related to cost reduction actions that included a reduction-in-force in the U.S. (E) In the second quarter of 2015, the Global Operations segment recognized a $10 million gain resulting from a customer settlement, which includes an offsetting restructuring charge of $4 million. (F) In the second quarter and first half of 2015 our Global Operations segment recorded $6 million in inventory charges to right size the Brazil Truck business. (G) During the second quarter of 2014, our evaluation of the realizability of our Brazilian deferred tax assets resulted in a determination that a valuation allowance was required, due to a deterioration of operating performance in Brazil, an increase in net operating loss carryforwards, and the impairment of certain Brazilian intangible assets. As a result, we recorded a net expense of $29 million related to establishment of the valuation allowance and tax impact from the impairment of certain intangible assets. 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.
SEC Regulation G Non-GAAP Reconciliation Adjusted Net Income Reconciliation: ____________________ Footnotes to significant items: 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 second quarter of 2021, we recorded $4 million of asset impairment charges in our Truck segment. The charges for the second quarter of 2021 include $3 million related to the Melrose Park Facility disposition and $1 million related to certain assets under operating leases. In the second quarter of 2020, we recorded $13 million of asset impairment charges comprised of $12 million of asset impairment charges related to long-lived assets in our Brazil asset group in our Global Operations segment and $1 million of asset impairment charges related to certain assets under operating leases in our Truck segment. In the second quarter of 2021, we recorded restructuring charges of $2 million in our Truck segment, related to the Melrose Park Facility disposition. In the second quarter of 2021 and 2020, we recorded a charge of $1 million related to the MaxxForce Advanced EGR engine class action settlement and related litigation in our Truck segment. In the second quarter of 2021, we incurred $6 million of costs related to the proposed TRATON merger. In the second quarter of 2021, we recorded a $2 million charge related to the Shy profit-sharing litigation accrual. In the second quarter of 2021, we recorded a gain of $242 million related to an increase in fair value of our equity security investment in TuSimple. In the second quarter of 2021, we recorded a charge of $77 million related to a tentative EPA settlement in our Truck segment. Tax effect is calculated by excluding the impact of the non-GAAP adjustments from the interim period tax provision calculations.
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