Form 8-K NAVISTAR INTERNATIONAL For: Sep 09
Tweet
Share
E-mailExhibit 99.1
|
|
Navistar International Corporation 2701 Navistar Dr. Lisle, IL 60532 USA P: 331-332-5000 W: navistar.com |
| Media contact: | Darwin Minnis, [email protected], 331-332-5243 | |
| Investor contact: | Marty Ketelaar, [email protected], 331-332-2706 | |
| Web site: | www.Navistar.com/newsroom |
NAVISTAR REPORTS THIRD QUARTER 2020 RESULTS
| • | Reports third quarter 2020 net loss of $37 million, or $0.37 per diluted share, on revenues of $1.7 billion |
| • | Generates $104 million of adjusted EBITDA in the third quarter; reports an adjusted net loss of $8 million |
| • | Generates $154 million of manufacturing free cash flow |
| • | Ends the third quarter with $1.6 billion in manufacturing cash, cash equivalents and marketable securities |
| • | Plans additional cost-savings actions towards SG&A target of 7 to 9 percent of revenues |
| • | Announces plans to dual-build diesel and electric vehicles in San Antonio |
LISLE, Ill. — September 9, 2020 — Navistar International Corporation (NYSE: NAV) today announced a third quarter 2020 net loss of $37 million, or $0.37 per diluted share, compared to third quarter 2019 net income of $156 million, or $1.56 per diluted share.
Revenues in the quarter were $1.7 billion, down 45 percent from third quarter 2019, and Core (Class 6-8 trucks and buses in the United States and Canada) charge outs were down 53 percent. The decrease was primarily driven by the impact of COVID-19, as well as prior year comparable quarter results that were near the peak of the prior industry cycle.
Third quarter 2020 EBITDA was $73 million, compared to $281 million in third quarter 2019. Adjusted EBITDA in third quarter 2020 was $104 million versus $266 million a year ago. Adjusted net income for the quarter was a loss of $8 million compared to income of $147 million in the third quarter last year.
Navistar finished third quarter 2020 with $1.65 billion in consolidated cash, cash equivalents and marketable securities, including $1.6 billion in manufacturing cash, cash equivalents and marketable securities.
“Our fiscal third quarter opened during the middle of many stay-at-home orders and ended with sections of the economy beginning to reopen, and our results certainly reflect this,” said Persio Lisboa, president and chief executive officer, Navistar. “While marketplace uncertainties continue, we are accelerating the pace of progress on our Navistar 4.0 strategy for financial improvement, so we can pull forward its benefits and take full advantage of a stronger industry when it arrives.”
The company’s Navistar 4.0 strategy lays out a plan to increase the company’s EBITDA margins to 12 percent by 2024.
During the quarter, in addition to naming Lisboa president and chief executive officer and Troy Clarke to the new role of executive chairman, the company made several leadership changes aimed at accelerating the pace of the company’s Navistar 4.0 progress with a focus on opportunities in advanced technologies. These executive appointments included naming Bob Walsh vice president of Emerging Technologies, Strategy and Planning;
1
appointing Friedrich Baumann president of Sales, Marketing and Aftersales; and adding new global responsibilities to the role of Phil Christman, president of Operations.
Earlier this year, the company took several actions to conserve cash and bolster its liquidity in response to the COVID-19 pandemic. These actions have been successful, as the company ended the third quarter with $1.6 billion of manufacturing cash, allowing it to cease its employee salary deferral program on September 1, several months earlier than initially planned. Additionally, actions taken due to the pandemic drove the company’s selling, general and administrative (SG&A) expenses down 29 percent year-over-year, after adjusting for a one-time gain in the prior year. Using learnings gained during COVID-19, the company is pursuing additional sustainable cost savings opportunities.
“We are targeting SG&A costs between 7 percent to 9 percent of revenues,” said Walter Borst, chief financial officer, Navistar. “Our focus has moved from temporary cash conservation actions to sustainable cost savings that support our Navistar 4.0 goals and better position us for profitability at all points in the cycle.”
With its new leadership, learnings from the COVID-19 pandemic and benefits from previous cost conservation actions in place, the company is redirecting more resources to advanced technologies; leading to several announcements during the quarter.
In autonomous, the company announced a strategic partnership with TuSimple to co-develop SAE Level 4 self-driving trucks targeted for production by 2024. The partnership also includes Navistar taking a minority stake in the company.
In connectivity, the company announced strategic partnerships with fleet management solutions providers Samsara and Geotab to allow International customers to seamlessly add their choice of fleet management solutions without the installation of additional vehicle hardware.
In electric, the company’s NEXT eMobility Solutions business unit signed a master services agreement with In-Charge Energy to provide charging infrastructure and consulting services to electric vehicle customers.
The company has been making progress on the construction of its production facility in San Antonio, which is scheduled to open in the spring of 2022. The facility will be capable of building both diesel and fully electric vehicles, and the first vehicle off the line will be an electric truck, entirely built on the main assembly line.
“As a result of the pandemic, we had the opportunity to revisit our investment portfolio and retime noncritical programs, and cancel others,” said Lisboa. “By streamlining our investments, we were able to free up significant capacity, which is being redeployed into advanced technology programs and strategic partnerships that accelerate our pace of progress.”
2
SEGMENT REVIEW
Summary of Financial Results:
| (Unaudited) | ||||||||||||||||
| Three Months Ended July 31, |
Nine Months Ended July 31, |
|||||||||||||||
| (in millions, except per share data) | 2020 | 2019 | 2020 | 2019 | ||||||||||||
| Sales and revenues, net |
$ | 1,675 | $ | 3,042 | $ | 5,438 | $ | 8,471 | ||||||||
| Segment Results: |
||||||||||||||||
| Truck |
$ | (22 | ) | $ | 167 | $ | (131 | ) | $ | 183 | ||||||
| Parts |
97 | 149 | 319 | 437 | ||||||||||||
| Global Operations |
1 | 1 | (12 | ) | 10 | |||||||||||
| Financial Services |
10 | 30 | 51 | 93 | ||||||||||||
| Income (loss) from continuing operations, net of tax(A) |
$ | (37 | ) | $ | 156 | $ | (111 | ) | $ | 119 | ||||||
| Net Income (loss)(A) |
(37 | ) | 156 | (111 | ) | 119 | ||||||||||
| Diluted income (loss) per share(A) |
(0.37 | ) | 1.56 | (1.11 | ) | 1.20 | ||||||||||
| (A) | Amounts attributable to Navistar International Corporation. |
Truck Segment – In third quarter 2020, the Truck segment net sales were $1.2 billion, a 50 percent decrease compared to third quarter last year. The year-over-year decrease is primarily due to lower volumes driven by weaker industry conditions resulting in part from the COVID-19 pandemic.
The Truck segment incurred a net loss of $22 million in third quarter 2020 compared to a profit of $167 million in third quarter 2019. The year-over-year decrease was a result of lower volumes and a reversal of a non-recurring legal settlement charge in 2019.
Parts Segment – For third quarter 2020, the Parts segment net sales were $414 million, a 27 percent decrease from third quarter 2019. The decrease is primarily due to lower North America volumes attributable to the COVID-19 impact in the U.S. and Canada and a decrease in Blue Diamond Parts sales.
The Parts segments saw a third quarter profit of $97 million, compared to $149 million in third quarter 2019. The decrease is due to the impact of lower sales volumes, partially offset by lower SG&A expenses.
Global Operations Segment – In third quarter 2020, the Global Operations segment net sales decreased 48 percent to $47 million. The decrease was primarily driven by lower volumes in our South America operations triggered by temporary production stoppages related to COVID-19.
The Global Operation segment recorded a profit of $1 million in the third quarter of 2020 and 2019. The segment benefited from restructuring actions taken earlier this year.
3
Financial Services Segment – In third quarter 2020, the Financial Services segment net revenues decreased to $49 million, a 34 percent decrease from third quarter 2019. The decrease was primarily driven by lower average yields due to lower interest rates and lower average finance receivables due to lower volumes.
The Financial Services segment recorded a profit of $10 million in the quarter, compared to $30 million in third quarter 2019. The decrease was primarily driven by the impact of lower revenues, partially offset by lower interest expense resulting from lower borrowing requirements.
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, 2019, which was filed on December 17, 2019, and our Quarterly Report on Form 10-Q for the period ended April 30, 2020. 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.
4
Navistar International Corporation and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
| Three Months Ended July 31, |
Nine Months Ended July 31, |
|||||||||||||||
| (in millions, except per share data) | 2020 | 2019 | 2020 | 2019 | ||||||||||||
| Sales and revenues |
||||||||||||||||
| Sales of manufactured products, net |
$ | 1,639 | $ | 2,996 | $ | 5,310 | $ | 8,330 | ||||||||
| Finance revenues |
36 | 46 | 128 | 141 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Sales and revenues, net |
1,675 | 3,042 | 5,438 | 8,471 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Costs and expenses |
||||||||||||||||
| Costs of products sold |
1,388 | 2,501 | 4,541 | 6,973 | ||||||||||||
| Restructuring charges |
4 | — | 5 | 1 | ||||||||||||
| Asset impairment charges |
12 | 3 | 25 | 6 | ||||||||||||
| Selling, general and administrative expenses |
141 | 167 | 493 | 726 | ||||||||||||
| Engineering and product development costs |
73 | 81 | 237 | 242 | ||||||||||||
| Interest expense |
71 | 76 | 199 | 243 | ||||||||||||
| Other expense, net |
14 | 25 | 27 | 140 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total costs and expenses |
1,703 | 2,853 | 5,527 | 8,331 | ||||||||||||
| Equity in income of non-consolidated affiliates |
2 | 1 | — | 4 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Income (loss) before income taxes |
(26 | ) | 190 | (89 | ) | 144 | ||||||||||
| Income tax expense |
(8 | ) | (29 | ) | (10 | ) | (9 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net income (loss) |
(34 | ) | 161 | (99 | ) | 135 | ||||||||||
| Less: Net income attributable to non-controlling interests |
3 | 5 | 12 | 16 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net income (loss) attributable to Navistar International Corporation |
$ | (37 | ) | $ | 156 | $ | (111 | ) | $ | 119 | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net income (loss) per share attributable to Navistar International Corporation |
||||||||||||||||
| Basic: |
$ | (0.37 | ) | $ | 1.57 | $ | (1.11 | ) | $ | 1.20 | ||||||
| Diluted: |
(0.37 | ) | 1.56 | (1.11 | ) | 1.20 | ||||||||||
| Weighted average shares outstanding: |
||||||||||||||||
| Basic |
99.7 | 99.4 | 99.6 | 99.2 | ||||||||||||
| Diluted |
99.7 | 99.7 | 99.6 | 99.5 | ||||||||||||
5
Navistar International Corporation and Subsidiaries
Consolidated Balance Sheets
| July 31, | October 31, | |||||||
| (in millions, except per share data) | 2020 | 2019 | ||||||
| (Unaudited) | ||||||||
| ASSETS |
||||||||
| Current assets |
||||||||
| Cash and cash equivalents |
$ | 1,648 | $ | 1,370 | ||||
| Restricted cash and cash equivalents |
232 | 133 | ||||||
| Trade and other receivables, net |
266 | 338 | ||||||
| Finance receivables, net |
1,403 | 1,923 | ||||||
| Inventories, net |
896 | 911 | ||||||
| Other current assets |
247 | 277 | ||||||
|
|
|
|
|
|||||
| Total current assets |
4,692 | 4,952 | ||||||
| Restricted cash |
54 | 54 | ||||||
| Trade and other receivables, net |
8 | 10 | ||||||
| Finance receivables, net |
250 | 274 | ||||||
| Investments in non-consolidated affiliates |
30 | 31 | ||||||
| Property and equipment (net of accumulated depreciation and amortization of $2,328 and $2,488, respectively) |
1,241 | 1,309 | ||||||
| Operating lease right of use assets |
119 | — | ||||||
| Goodwill |
38 | 38 | ||||||
| Intangible assets (net of accumulated amortization of $139 and $142, respectively) |
20 | 25 | ||||||
| Deferred taxes, net |
115 | 117 | ||||||
| Other noncurrent assets |
108 | 107 | ||||||
|
|
|
|
|
|||||
| Total assets |
$ | 6,675 | $ | 6,917 | ||||
|
|
|
|
|
|||||
| LIABILITIES and STOCKHOLDERS’ DEFICIT |
||||||||
| Liabilities |
||||||||
| Current liabilities |
||||||||
| Notes payable and current maturities of long-term debt |
$ | 865 | $ | 871 | ||||
| Accounts payable |
1,154 | 1,341 | ||||||
| Other current liabilities |
1,096 | 1,363 | ||||||
|
|
|
|
|
|||||
| Total current liabilities |
3,115 | 3,575 | ||||||
| Long-term debt |
4,694 | 4,317 | ||||||
| Postretirement benefits liabilities |
2,013 | 2,103 | ||||||
| Other noncurrent liabilities |
681 | 645 | ||||||
|
|
|
|
|
|||||
| Total liabilities |
10,503 | 10,640 | ||||||
| Stockholders’ deficit |
||||||||
| 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 |
2,726 | 2,730 | ||||||
| Accumulated deficit |
(4,333 | ) | (4,409 | ) | ||||
| Accumulated other comprehensive loss |
(2,100 | ) | (1,912 | ) | ||||
| Common stock held in treasury, at cost (3.6 and 3.9 shares, respectively) |
(135 | ) | (147 | ) | ||||
|
|
|
|
|
|||||
| Total stockholders’ deficit attributable to Navistar International Corporation |
(3,830 | ) | (3,726 | ) | ||||
| Stockholders’ equity attributable to non-controlling interests |
2 | 3 | ||||||
|
|
|
|
|
|||||
| Total stockholders’ deficit |
(3,828 | ) | (3,723 | ) | ||||
|
|
|
|
|
|||||
| Total liabilities and stockholders’ deficit |
$ | 6,675 | $ | 6,917 | ||||
|
|
|
|
|
|||||
6
Navistar International Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Nine Months Ended July 31, | ||||||||
| (in millions) | 2020 | 2019 | ||||||
| Cash flows from operating activities |
||||||||
| Net income (loss) |
$ | (99 | ) | $ | 135 | |||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
103 | 99 | ||||||
| Depreciation of equipment leased to others |
43 | 45 | ||||||
| Deferred taxes, including change in valuation allowance |
(5 | ) | (41 | ) | ||||
| Asset impairment charges |
25 | 6 | ||||||
| Gain on sales of investments and businesses, net |
— | (56 | ) | |||||
| Amortization of debt issuance costs and discount |
11 | 15 | ||||||
| Stock-based compensation |
14 | 20 | ||||||
| Provision for doubtful accounts |
13 | 8 | ||||||
| Equity in (income) loss of non-consolidated affiliates, net of dividends |
— | (3 | ) | |||||
| Write-off of debt issuance costs and discount |
— | 6 | ||||||
| Other non-cash operating activities |
(9 | ) | (6 | ) | ||||
| Changes in other assets and liabilities, exclusive of the effects of businesses disposed |
36 | (124 | ) | |||||
|
|
|
|
|
|||||
| Net cash provided by operating activities |
132 | 104 | ||||||
|
|
|
|
|
|||||
| Cash flows from investing activities |
||||||||
| Maturities of marketable securities |
— | 98 | ||||||
| Capital expenditures |
(115 | ) | (90 | ) | ||||
| Purchases of equipment leased to others |
(69 | ) | (130 | ) | ||||
| Proceeds from sales of property and equipment |
11 | 12 | ||||||
| Proceeds from sales of investments and businesses |
10 | 100 | ||||||
| Other investing activities |
(4 | ) | 1 | |||||
|
|
|
|
|
|||||
| Net cash used in investing activities |
(167 | ) | (9 | ) | ||||
|
|
|
|
|
|||||
| Cash flows from financing activities |
||||||||
| Proceeds from issuance of securitized debt |
316 | 331 | ||||||
| Principal payments on securitized debt |
(45 | ) | (300 | ) | ||||
| Net change in secured revolving credit facilities |
(241 | ) | 120 | |||||
| Proceeds from issuance of non-securitized debt |
622 | 144 | ||||||
| Principal payments on non-securitized debt |
(108 | ) | (988 | ) | ||||
| Net change in notes and debt outstanding under revolving credit facilities |
(90 | ) | 469 | |||||
| Debt issuance costs |
(17 | ) | (9 | ) | ||||
| Proceeds from financed lease obligations |
— | 13 | ||||||
| Proceeds from exercise of stock options |
3 | 3 | ||||||
| Dividends paid by subsidiaries to non-controlling interest |
(13 | ) | (18 | ) | ||||
| Other financing activities |
(2 | ) | (2 | ) | ||||
|
|
|
|
|
|||||
| Net cash provided by (used in) financing activities |
425 | (237 | ) | |||||
|
|
|
|
|
|||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash |
(13 | ) | (7 | ) | ||||
|
|
|
|
|
|||||
| Increase (decrease) in cash, cash equivalents and restricted cash |
377 | (149 | ) | |||||
| Cash, cash equivalents and restricted cash at beginning of the period |
1,557 | 1,445 | ||||||
|
|
|
|
|
|||||
| Cash, cash equivalents and restricted cash at end of the period |
$ | 1,934 | $ | 1,296 | ||||
|
|
|
|
|
|||||
7
Navistar International Corporation and Subsidiaries
Segment Reporting
(Unaudited)
We define segment profit (loss) as net income (loss) 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 July 31, 2020 |
||||||||||||||||||||||||
| External sales and revenues, net |
$ | 1,177 | $ | 413 | $ | 46 | $ | 39 | $ | — | $ | 1,675 | ||||||||||||
| Intersegment sales and revenues |
26 | 1 | 1 | 10 | (38 | ) | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total sales and revenues, net |
$ | 1,203 | $ | 414 | $ | 47 | $ | 49 | $ | (38 | ) | $ | 1,675 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net income (loss) attributable to NIC |
$ | (22 | ) | $ | 97 | $ | 1 | $ | 10 | $ | (123 | ) | $ | (37 | ) | |||||||||
| Income tax expense |
— | — | — | — | (8 | ) | (8 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Segment profit (loss) |
$ | (22 | ) | $ | 97 | $ | 1 | $ | 10 | $ | (115 | ) | $ | (29 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Depreciation and amortization |
$ | 27 | $ | 1 | $ | 1 | $ | 16 | $ | 2 | $ | 47 | ||||||||||||
| Interest expense |
— | — | — | 16 | 55 | 71 | ||||||||||||||||||
| Equity in income of non-consolidated affiliates |
2 | — | — | — | — | 2 | ||||||||||||||||||
| Capital expenditures(B) |
18 | 1 | 1 | — | 5 | 25 | ||||||||||||||||||
| (in millions) | Truck | Parts | Global Operations |
Financial Services(A) |
Corporate and Eliminations |
Total | ||||||||||||||||||
| Three Months Ended July 31, 2019 |
||||||||||||||||||||||||
| External sales and revenues, net |
$ | 2,342 | $ | 569 | $ | 82 | $ | 46 | $ | 3 | $ | 3,042 | ||||||||||||
| Intersegment sales and revenues |
45 | 2 | 8 | 28 | (83 | ) | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total sales and revenues, net |
$ | 2,387 | $ | 571 | $ | 90 | $ | 74 | $ | (80 | ) | $ | 3,042 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net income (loss) attributable NIC |
$ | 167 | $ | 149 | $ | 1 | $ | 30 | $ | (191 | ) | $ | 156 | |||||||||||
| Income tax expense |
— | — | — | — | (29 | ) | (29 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Segment profit (loss) |
$ | 167 | $ | 149 | $ | 1 | $ | 30 | $ | (162 | ) | $ | 185 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Depreciation and amortization |
$ | 26 | $ | 1 | $ | 3 | $ | 16 | $ | 1 | $ | 47 | ||||||||||||
| Interest expense |
— | — | — | 27 | 49 | 76 | ||||||||||||||||||
| Equity in income of non-consolidated affiliates |
— | 1 | — | — | — | 1 | ||||||||||||||||||
| Capital expenditures(B) |
17 | 2 | 1 | — | 4 | 24 | ||||||||||||||||||
8
| (in millions) | Truck | Parts | Global Operations |
Financial Services(A) |
Corporate and Eliminations |
Total | ||||||||||||||||||
| Nine Months Ended July 31, 2020 |
||||||||||||||||||||||||
| External sales and revenues, net |
$ | 3,800 | $ | 1,347 | $ | 154 | $ | 135 | $ | 2 | $ | 5,438 | ||||||||||||
| Intersegment sales and revenues |
34 | 3 | 12 | 35 | (84 | ) | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total sales and revenues, net |
$ | 3,834 | $ | 1,350 | $ | 166 | $ | 170 | $ | (82 | ) | $ | 5,438 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net income (loss) attributable to NIC |
$ | (131 | ) | $ | 319 | $ | (12 | ) | $ | 51 | $ | (338 | ) | $ | (111 | ) | ||||||||
| Income tax expense |
— | — | — | — | (10 | ) | (10 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Segment profit (loss) |
$ | (131 | ) | $ | 319 | $ | (12 | ) | $ | 51 | $ | (328 | ) | $ | (101 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Depreciation and amortization |
$ | 83 | $ | 5 | $ | 5 | $ | 48 | $ | 5 | $ | 146 | ||||||||||||
| Interest expense |
— | — | — | 55 | 144 | 199 | ||||||||||||||||||
| Equity in income (loss) of non-consolidated affiliates |
(1 | ) | 1 | — | — | — | — | |||||||||||||||||
| Capital expenditures(B) |
93 | 6 | 3 | — | 13 | 115 | ||||||||||||||||||
| (in millions) | Truck | Parts | Global Operations |
Financial Services(A) |
Corporate and Eliminations |
Total | ||||||||||||||||||
| Nine Months Ended July 31, 2019 |
||||||||||||||||||||||||
| External sales and revenues, net |
$ | 6,405 | $ | 1,693 | $ | 223 | $ | 141 | $ | 9 | $ | 8,471 | ||||||||||||
| Intersegment sales and revenues |
75 | 5 | 27 | 85 | (192 | ) | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total sales and revenues, net |
$ | 6,480 | $ | 1,698 | $ | 250 | $ | 226 | $ | (183 | ) | $ | 8,471 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net income (loss) attributable to NIC |
$ | 183 | $ | 437 | $ | 10 | $ | 93 | $ | (604 | ) | $ | 119 | |||||||||||
| Income tax expense |
— | — | — | — | (9 | ) | (9 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Segment profit (loss) |
$ | 183 | $ | 437 | $ | 10 | $ | 93 | $ | (595 | ) | $ | 128 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Depreciation and amortization |
$ | 78 | $ | 4 | $ | 7 | $ | 48 | $ | 7 | $ | 144 | ||||||||||||
| Interest expense |
— | — | — | 83 | 160 | 243 | ||||||||||||||||||
| Equity in income (loss) of non-consolidated affiliates |
3 | 2 | (1 | ) | — | — | 4 | |||||||||||||||||
| Capital expenditures(B) |
69 | 3 | 2 | 2 | 14 | 90 | ||||||||||||||||||
| (A) | Total sales and revenues in the Financial Services segment include interest revenues of $29 million and $103 million for the three and nine months ended July 31, 2020, respectively, and $53 million and $161 million for the three and nine months ended July 31, 2019, 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: |
||||||||||||||||||||||||
| July 31, 2020 |
$ | 1,721 | $ | 641 | $ | 202 | $ | 2,285 | $ | 1,826 | $ | 6,675 | ||||||||||||
| October 31, 2019 |
1,705 | 688 | 296 | 2,774 | 1,454 | 6,917 | ||||||||||||||||||
9
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 July 31, |
Nine Months Ended July 31, |
|||||||||||||||
| (in millions) | 2020 | 2019 | 2020 | 2019 | ||||||||||||
| Net income (loss) attributable to NIC |
$ | (37 | ) | $ | 156 | $ | (111 | ) | $ | 119 | ||||||
| Plus: |
||||||||||||||||
| Depreciation and amortization expense |
47 | 47 | 146 | 144 | ||||||||||||
| Manufacturing interest expense(A) |
55 | 49 | 144 | 160 | ||||||||||||
| Adjusted for: |
||||||||||||||||
| Income tax (expense) benefit |
(8 | ) | (29 | ) | (10 | ) | (9 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| EBITDA |
$ | 73 | $ | 281 | $ | 189 | $ | 432 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (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 July 31, |
Nine Months Ended July 31, |
|||||||||||||||
| (in millions) | 2020 | 2019 | 2020 | 2019 | ||||||||||||
| Interest expense |
$ | 71 | $ | 76 | $ | 199 | $ | 243 | ||||||||
| Less: Financial services interest expense |
16 | 27 | 55 | 83 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Manufacturing interest expense |
$ | 55 | $ | 49 | $ | 144 | $ | 160 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
10
Adjusted EBITDA Reconciliation:
| Three Months Ended July 31, |
Nine Months Ended July 31, |
|||||||||||||||
| (in millions) | 2020 | 2019 | 2020 | 2019 | ||||||||||||
| EBITDA (reconciled above) |
$ | 73 | $ | 281 | $ | 189 | $ | 432 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Adjusted for significant items of: |
||||||||||||||||
| Adjustments to pre-existing warranties(A) |
9 | 5 | 26 | 7 | ||||||||||||
| Asset impairment charges(B) |
12 | 3 | 25 | 6 | ||||||||||||
| Restructuring of manufacturing operations(C) |
4 | — | 5 | 1 | ||||||||||||
| MaxxForce Advanced EGR engine lawsuits(D) |
(1 | ) | (31 | ) | — | 128 | ||||||||||
| (Gain) loss on sales(E) |
— | 3 | — | (56 | ) | |||||||||||
| Debt refinancing charges(F) |
— | 6 | — | 6 | ||||||||||||
| Pension settlement(G) |
7 | — | 7 | 142 | ||||||||||||
| Settlement gain(H) |
— | (1 | ) | (1 | ) | (3 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total adjustments |
31 | (15 | ) | 62 | 231 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Adjusted EBITDA |
$ | 104 | $ | 266 | $ | 251 | $ | 663 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
Adjusted Net Income (Loss) attributable to NIC:
| Three Months Ended July 31, |
Nine Months Ended July 31, |
|||||||||||||||
| (in millions) | 2020 | 2019 | 2020 | 2019 | ||||||||||||
| Net income (loss) attributable to NIC |
$ | (37 | ) | $ | 156 | $ | (111 | ) | $ | 119 | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Adjusted for significant items of: |
||||||||||||||||
| Adjustments to pre-existing warranties(A) |
9 | 5 | 26 | 7 | ||||||||||||
| Asset impairment charges(B) |
12 | 3 | 25 | 6 | ||||||||||||
| Restructuring of manufacturing operations(C) |
4 | — | 5 | 1 | ||||||||||||
| MaxxForce Advanced EGR engine lawsuits(D) |
(1 | ) | (31 | ) | — | 128 | ||||||||||
| (Gain) loss on sales(E) |
— | 3 | — | (56 | ) | |||||||||||
| Debt refinancing charges(F) |
— | 6 | — | 6 | ||||||||||||
| Pension settlement(G) |
7 | — | 7 | 142 | ||||||||||||
| Settlement gain(H) |
— | (1 | ) | (1 | ) | (3 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total adjustments |
31 | (15 | ) | 62 | 231 | |||||||||||
| Tax effect (I) |
(2 | ) | 6 | (2 | ) | (41 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Adjusted net income (loss) attributable to NIC |
$ | (8 | ) | $ | 147 | $ | (51 | ) | $ | 309 | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (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 nine months of 2020, we recorded $12 million of asset impairment charges related to long lived assets in our Brazil asset group in our Global Operations segment. In the third quarter and first nine months of 2020, we recorded $12 million and $13 million of asset impairment charges related to certain assets under operating leases in our Truck segment. In the third quarter and first nine months of 2019 we recorded $3 million and $6 million, respectively, of asset impairment charges related to certain assets under operating leases in our Truck segment. |
| (C) | In the third quarter and first nine months of 2020, we recorded restructuring charges of $4 million and $5 million, respectively, due to restructuring activity throughout the organization. In the first nine months of 2019 we recorded a restructuring charge of $1 million in our Truck segment. |
| (D) | In the third quarter of 2020 and 2019, we recognized a net benefit of $1 million and $31 million, respectively, related to the MaxxForce Advanced EGR engine class action settlement and related litigation in our Truck Segment. In the first nine months of 2019, we recognized a charge of $128 million related to the MaxxForce Advanced EGR engine class action settlement and related litigation in our Truck Segment. |
11
| (E) | In the third quarter of 2019 we recognized a charge of $3 million in our Truck segment for adjustments to the purchase price of the sale of a majority interest in the Navistar Defense business. In the first nine months of 2019, we recognized a gain of $51 million related to the sale of a majority interest in the Navistar Defense business in our Truck segment, and a gain of $5 million related to the sale of our joint venture in China with JAC in our Global Operations segment. |
| (F) | In the third quarter and first nine months of 2019, we recorded a charge of $6 million for the write off of debt issuance costs and discounts associated with NFC Term Loan. |
| (G) | In the third quarter and first nine months of 2020, we recorded pension settlement accounting charges of $7 million in Other expense, net in Corporate. In the first nine months of 2019, we purchased group annuity contracts for certain retired pension plan participants resulting in plan remeasurements. As a result, we recorded pension settlement accounting charges of $142 million in Other expense, net in Corporate. |
| (H) | In the first nine months 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. For the same claim, we recorded interest income in Other expense, net of $1 million and $3 million, for the third quarter and first nine months of 2019, respectively. |
| (I) | Tax effect is calculated by excluding the impact of the non-GAAP adjustments from the interim period tax provision calculations. |
12
Manufacturing segment cash and cash equivalents reconciliation:
| As of July 31, 2020 | ||||||||||||
| (in millions) | Manufacturing Operations |
Financial Services Operations |
Consolidated Balance Sheet |
|||||||||
| Total cash, cash equivalents, and marketable securities |
$ | 1,610 | $ | 38 | $ | 1,648 | ||||||
|
|
|
|
|
|
|
|||||||
13
Q3 2020 EARNINGS PRESENTATION September 9, 2020 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, 2019 and our quarterly report on Form 10-Q for the period ended April 30, 2020. 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.
Third Quarter 2020 Summary Note:This slide contains non-GAAP information; please see the REG G in appendix for a detailed reconciliation. Persio Lisboa appointed President and CEO Q3 results lower YoY due to weaker industry conditions and COVID-19 Ended Q3 with strong manufacturing cash balance of $1.6 billion Generated $154 million of manufacturing free cash flow Actions underway to further improve cost structure $225 million recovery zone bonds refinanced in August, lowering interest rate by 2 full points New San Antonio plant will be capable of building both diesel and electric trucks Multiple strategic partnerships announced related to advanced technologies in autonomous and electric vehicles and in the area of connectivity
Impact of COVID-19 Pandemic Safety measures enhanced to protect our employees, communities and operations Navistar 4.0 strategy remains focus Industry recovery underway following easing of states’ restrictions Navistar facilities remained open as an essential business Supply chain disruptions easing Parts distribution centers and dealer bodies fully operational April cash conservation activities successful Salary deferral program ended September 1st Focus shifted to additional sustainable cost savings actions Evaluating facility footprint Pursuing outsourcing opportunities Flattening organizational structure Reducing third-party supplier expenses SG&A goal of 7% to 9% of revenues Learnings from the Pandemic Business Update
Third Quarter 2020 Consolidated Results ($ in millions, except per share and units) Includes U.S. and Canada School buses and Class 6-8 trucks. Amounts attributable to Navistar International Corporation. Non-GAAP information; please see the REG G in appendix for a detailed reconciliation. Quarters Ended July 31 2020 2019 Chargeouts(A) 11,400 24,400 Sales and Revenues $ 1,675 $ 3,042 Net Income (Loss)(B) $ -37 $ 156 Diluted Income per Share (Loss)(B) $ -0.37 $ 1.56 Adjusted Net Income (Loss)(C) $ -8 $ 147 Adjusted EBITDA(C) $ 104 $ 266 Adjusted EBITDA Margin(C) 6.2% 8.7%
Third Quarter 2020 Segments Results ($ in millions) Sales and Revenues Segment Profit (Loss) Quarters Ended July 31 Quarters Ended July 31 2020 2019 2020 2019 Truck $1,203 $2,387 $-22 $167 Parts 414 571 97 149 Global Operations 47 90 1 1 Financial Services 49 74 10 30
Strong Cash Balance, No Near-Term Manufacturing Debt Maturities Manufacturing Cash Balance(A) Note: This slide contains non-GAAP information; please see the REG G in appendix for a detailed reconciliation. Amounts include manufacturing cash, cash equivalents, and marketable securities. Q3 2020 consolidated equivalent cash balance was $1.6 billion. Amounts exclude restricted cash. Total manufacturing debt of $3.5 billion as of July 31, 2020. Graph does not include financed lease obligations and other, totaling $89 million. Manufacturing Debt Maturities(B) ($ in millions) $2,150 August refinancing of recovery zone bonds April offering of senior secured notes
Appendix
Normal range is 80-120 days 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 140 Days Days Sales Inventory On-Hand
Retail Market Share in Commercial Vehicle Segments Class 6/7 Medium-Duty Class 8 Severe Service Class 8 HeavyThree Months EndedJuly 31, 2020April 30, 2020January 31, 2020October 31, 2019July 31, 2019Core Markets (U.S. and Canada)Class 6 and 7 medium trucks22.1%22.9%20.3%25.9%26.8%Class 8 heavy trucks10.6%11.6%6.1%14.3%13.8%Class 8 severe service trucks16.5%14.6%14.0%19.7%14.1%Combined class 8 trucks12.6%12.5%8.5%15.7%13.9%
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 1,500 and 3,300 GM-branded units sold to GM during the three months ended July 31, 2020 and 2019, respectively. (in units) Three Months Ended July 31, % 2020 2019 Change Change Core Markets (U.S. and Canada) School Buses 3,100 3,900 -,800 -0.20512820512820512 Class 6 and 7 Medium Trucks 3,000 8,400 -5,400 -0.6428571428571429 Class 8 Heavy Trucks 3,000 9,400 -6,400 -0.68085106382978722 Class 8 Severe Service Trucks 2,300 2,700 -,400 -0.14814814814814814 Total Core Markets 11,400 24,400 ,-13,000 -0.53278688524590168 Other Markets(A) 3,500 7,000 -3,500 -0.5 Total Worldwide Units 14,900 31,400 ,-16,500 -0.52547770700636942 Combined Class 8 Trucks 5,300 12,100 -6,800 -0.56198347107438018
Financial Services Segment 1 Navistar Financial Corporation (NFC) is the U.S. financial entity of Navistar’s Financial Services segment. Highlights Financial Services segment profit of $10M for Q3 2020 and $51M YTD 2020 Segment financing availability of $802M as of July 31, 2020 Financial Services debt/equity leverage of 3.1:1 as of July 31, 2020 Issued $300M of two-year dealer funding notes in July 2020 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 $200M TRAC facility extended to June 2021 On balance sheet NFSC wholesale trust as of July 31, 2020 $1,250M funding facility Variable portion matures May 2021 Term portions mature Sept. 2020, 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
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 income 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 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 2020 and beyond pension funding requirements? A: For the nine months ended July 31, 2020 and 2019, we contributed $30 million and $140 million, respectively, to our pension plans to meet regulatory funding requirements. We expect to contribute $5 million to our pension plans during the remainder of 2020. During the nine months ended July 31, 2020, under provisions of the Coronavirus Aid, Relief, and Economic Security Act, our previously expected remaining 2020 pension contributions of $157 million are deferred until the first quarter of 2021. During the first quarter of 2019, we accelerated the payment of a substantial portion of our 2019 minimum required funding. 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 to our pension plans in 2021 approximately $325 million, and in 2022 and 2023 approximately $185 million and $175 million per year, respectively, depending on asset performance and discount rates. Q5:What is your expectation for future cash tax payments? A:Cash tax payments are expected to remain low in 2020 and could gradually increase as the company utilizes 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, 2019, the Company had deferred tax assets for U.S. federal NOLs valued at $465 million, state NOLs valued at $166 million, and foreign NOLs valued at $151 million, for a total undiscounted cash value of $782 million. In addition to NOLs, the Company had deferred tax assets for accumulated tax credits of $196 million and other deferred tax assets of $1.2 billion resulting in net deferred tax assets before valuation allowances of approximately $2.1 billion. Of this amount, $2.0 billion was subject to a valuation allowance at the end of FY2019. 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. 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. Reconciliation to ACT - Retail Sales 2020 ACT* 194300 CY to FY Adjustment 15000 "Other Specialty OEMs" included in ACT's forecast; we do not include these specialty OEMs in our forecast or in our internal/external reports -5000 Total (ACT comparable Class 8 Navistar) 204300 *Source: ACT N.A. Commercial Vehicle Outlook - August 2020
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 $13 million for the three months ended July 31, 2020, and $15 million for the three months ended July 31, 2019. Wholesale financing revenues in the Financial Services segment include interest revenue of $6 million for the three months ended July 31, 2020, and $11 million for the three months ended July 31, 2019. Frequently Asked Questions Q9: How do you define manufacturing free cash flow? A: ___________________________ Net of adjustments required to eliminate certain intercompany transactions between Manufacturing operations and Financial Services operations. Quarters Ended Qtr Ended Qtr Ended ($ in millions) Jul. 31, 2020 Apr. 30, 2020 Jan. 31, 2020 Oct. 31, 2019 Jul. 31, 2019 Oct. 31, 2016 Jul. 31, 2016 Consolidated Net Cash from Operating Activities $250 $-,217 $99 $346 $294 $281 $90 Less: Net Cash from Financial Services Operations 71 -17 410 142 20 -3 95 Net Cash from Manufacturing Operations(A) ....................... 179 -,200 -,311 204 274 284 -5 Less: Capital Expenditures 25 31 59 44 24 -32 -29 Manufacturing Free Cash Flow $154 $-,231 $-,370 $160 $250 $252 $-34
Outstanding Debt Balances($ in millions)July 31, 2020October 31, 2019Manufacturing operationsSenior Secured Term Loan Credit Agreement, due 2025, net of unamortized discount of $5 and $6, respectively, and unamortized debt issuance costs of $8 and $10, respectively$1,547$1,5569.5% Senior Secured Notes, due 2025, net of unamortized debt issuance costs of $11589-6.625% Senior Notes, due 2026, net of unamortized debt issuance costs of $13 and $15, respectively1,0871,085Loan Agreement related to 6.75% Tax Exempt Bonds, due 2040, net of unamortized debt issuance costs of $5 at both dates220220Financed lease obligations4860Other4111Total Manufacturing operations debt……………………………………………………………………………………….3,5322,932Less: Current portion7332Net long-term Manufacturing operations debt………………………………………………………………………..$3,459$2,900($ in millions)July 31, 2020October 31, 2019Financial Services operationsAsset-backed debt issued by consolidated SPEs, at fixed and variable rates, due serially through 2022, net of unamortized debt issuance costs of $4, at both dates$ 1,008$991Bank credit facilities, at fixed and variable rates, due dates from 2020 through 2025, net of unamortized debt issuance costs of less than $1 and $1 respectively9141,059Commercial paper, at variable rates, program matures in 2022-84Borrowings secured by operating and finance leases, at various rates, due serially through 2024105122Total Financial Services operations debt……………………………………………………………………………….….2,0272,256Less: Current portion792839Net long-term Financial Services operations debt……………………………………………………………….…..$1,235$1,417
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. Manufacturing Cash, Cash Equivalents, and Marketable Securities: Manufacturing cash, cash equivalents, and marketable securities, and free cash flow 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. 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, Cash Equivalents, and Marketable Securities Reconciliation: Jul. 31, Apr. 30, Jan. 31, Oct. 31, Jul. 31, ($ in millions) 2020 2020 2020 2019 2019 Manufacturing Operations: Cash and Cash Equivalents……………………………………………………… $ 1610 $ 1497 $ 977 $ 1328 $ 1112 583 Marketable Securities…………………………………………………………… 0 0 0 0 3 Manufacturing Cash, Cash Equivalents, and Marketable securities.. $ 1,610 $ 1,497 $ 977 $ 1,328 $ 1,115 733 Financial Services Operations: Cash and Cash Equivalents……………………………………………………… $ 38 $ 50 $ 23 $ 42 $ 48 37 Marketable Securities…………………………………………………………… 0 0 0 0 0 Financial Services Cash, Cash Equivalents, and Marketable securities…… $ 38 $ 50 $ 23 $ 42 $ 48 62 Consolidated Balance Sheet: Cash and Cash Equivalents……………………………………………………… $ 1648 $ 1547 $ 1000 $ 1370 $ 1160 $620 Marketable Securities…………………………………………………………… 0 0 0 0 3 Consolidated Cash, Cash Equivalents, and Marketable securities………… $ 1,648 $ 1,547 $ 1,000 $ 1,370 $ 1,163 795 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……………………………………………………… $ 1638 $ 1525 $ 1356 $ 51 Marketable securities…………………………………………………………… 276 276 276 20 Consolidated Cash and cash equivalents and Marketable securities………… $ 1,914 $ 1,801 $ 1,632 $ 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 21. Quarters Ended July 31, ($ in millions) 2020 2019 2013 Net Income (loss) Attributable to NIC $ -37 $ 156 $ Plus: Depreciation and Amortization Expense 47 47 Manufacturing Interest Expense (A) 55 49 Adjusted for: Income Tax Expense -8 -29 EBITDA $ 73 $ 281 $ 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 July 31, ($ in millions) 2020 2019 Interest Expense $ 71 $ 76 Less: Financial Services Interest Expense 16 27 Manufacturing Interest Expense $ 55 $ 49 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 $29 million related to establishment of the valuation allowance and tax impact from the impairment of certain intangible assets. The above items, except for the Brazilian tax adjustments, did not have a material impact on taxes due to the valuation allowances on our U.S. deferred tax assets, which was established in the fourth quarter of 2012.
SEC Regulation G Non-GAAP Reconciliation Adjusted Income Reconciliation: ____________________ For more detail on the items noted, please see the footnotes on slide 21. Quarters Ended July 31, ($ in millions) 2020 2019 Net income (loss) attributable to NIC $ -37 $ 156 Adjusted for significant items of: Adjustments to pre-existing warranties (A) 9 5 Asset impairment charges (B) 12 3 Restructuring of manufacturing operations (C) 4 — MaxxForce Advanced EGR engine lawsuits (D) -1 -31 Gain (Loss) on sales (E) — 3 Debt refinancing charges (F) — 6 Pension settlement (G) 7 — Settlement gain (H) — -1 Total adjustments 31 -15 Tax effect (I) -2 6 Adjusted net income (loss) attributable to NIC $ -8 $ 147
(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 third quarter of 2020, we recorded $12 million of asset impairment charges related to certain assets under operating leases in our Truck segment. In the third quarter of 2019 we recorded $3 million, of asset impairment charges related to certain assets under operating leases in our Truck segment. (C) In the third quarter of 2020, we recorded restructuring charges of $4 million, in our Truck segment. (D) In the third quarter of 2020 and 2019, we recognized a net benefit of $1 million and $31 million, respectively, related to the MaxxForce Advanced EGR engine class action settlement and related litigation in our Truck Segment. (E) In the third quarter of 2019, we recognized a charge of $3 million in our Truck segment for adjustments to the purchase price of the sale of a majority interest in the Navistar Defense business in our Truck segment. (F) In the third quarter of 2019, we recorded a charge of $6 million for the write off of debt issuance costs and discounts associated with NFC Term Loan. (G) In the third quarter of 2020, we recorded pension settlement accounting charges of $7 million in Other expense, net in Corporate. (H) In the third quarter of 2019, 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. (I) Tax effect is calculated by excluding the impact of the non-GAAP adjustments from the interim period tax provision calculations. SEC Regulation G Non-GAAP Reconciliation
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- NUU Introduces the All-New X10 5G: Fully Unlocked. Nationwide 5G. Exceptional Value.
- Ethereum Price Prediction: $1,800 Reclaim Could Wake ETH as AlphaPepe Buyers Hunt the Next PEPE Before the Chart
- New Crypto Coins Worth Watching, Led by a Presale That Sold Out Its First Rung
Create E-mail Alert Related Categories
SEC FilingsSign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!
