Form 8-K NAVISTAR INTERNATIONAL For: Mar 08
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 8, 2018
NAVISTAR INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware | 1-9618 | 36-3359573 | ||
| (State or other jurisdiction of incorporation or organization) |
(Commission File No.) |
(I.R.S. Employer Identification No.) |
| 2701 Navistar Drive Lisle, Illinois |
60532 | |||
| (Address of principal executive offices) | (Zip Code) | |||
Registrant’s telephone number, including area code (331) 332-5000
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging Growth Company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| ITEM 2.02 | RESULTS OF OPERATIONS AND FINANCIAL CONDITION |
In accordance with General Instruction B.2. to Form 8-K, the following information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.
The information regarding the results of operations and financial condition of Navistar International Corporation (the “Company”) responsive to this Item 2.02, and contained in Exhibit 99.1 filed herewith, is incorporated into this Item 2.02 by reference.
| ITEM 7.01 | REGULATION FD DISCLOSURE |
In accordance with General Instruction B.2. to Form 8-K, the following information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.
On March 8, 2018, Navistar International Corporation (the “Company”) filed its Quarterly Report on Form 10-Q for the period ended January 31, 2018 with the Securities and Exchange Commission. The Company’s press release announcing the filing is attached as Exhibit 99.1 to this Current Report and is incorporated by reference herein.
The Company will present via live web cast its fiscal 2018 first quarter financial results on Thursday, March 8th. A live web cast is scheduled at approximately 9:00 a.m. Eastern (8:00 a.m. Central). Speakers on the web cast will include Troy Clarke, Chairman, President and Chief Executive Officer, Walter Borst, Executive Vice President and Chief Financial Officer, among other company leaders. A copy of the slides containing financial and operating information to be used as part of the web cast are attached as Exhibit 99.2 to this Current Report and are incorporated by reference herein.
The web cast can be accessed through a link on the investor relations page of Company’s web site at http://www.navistar.com/navistar/investors/webcasts. Investors are advised to log on to the website at least 15 minutes prior to the start of the web cast to allow sufficient time to download any necessary software. The web cast will be available for replay at the same address approximately three hours following its conclusion, and will remain available for a limited time.
Navistar International Corporation (NYSE: NAV) is a holding company whose subsidiaries and affiliates produce International® brand commercial and military trucks, proprietary diesel engines, and IC Bus™ brand school and commercial buses. An affiliate also provides truck and diesel engine service parts. Another affiliate offers financing services. Additional information is available at www.Navistar.com.
| ITEM 9.01 | FINANCIAL STATEMENTS AND EXHIBITS |
(d) Exhibits
Forward-Looking Statements
Information provided and statements contained in this report that are not purely historical are forward-looking statements within the meaning of the federal securities laws. Such forward-looking statements only speak as of the date of this report and the company assumes no obligation to update the information included in this report. Such forward-looking statements include information concerning our possible or assumed future results of operations, including descriptions of our business strategy. These statements
often include words such as believe, expect, anticipate, intend, plan, estimate, or similar expressions. These statements are not guarantees of performance or results and they involve risks, uncertainties, and assumptions. For a further description of these factors, see the risk factors set forth in our filings with the Securities and Exchange Commission, including our annual report on Form 10-K for the fiscal year ended October 31, 2017 and our quarterly report on Form 10-Q for the period ended January 31, 2018. 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.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| NAVISTAR INTERNATIONAL CORPORATION | ||
| (Registrant) | ||
| By: | /s/ WALTER G. BORST | |
| Name: | Walter G. Borst | |
| Title: | Executive Vice President and Chief Financial Officer | |
Dated: March 8, 2018
Exhibit 99.1
|
|
Navistar International Corporation |
|||
| 2701 Navistar Dr. |
||||
| Lisle, IL 60532 USA |
||||
| P: 331-332-5000 |
||||
| W: navistar.com |
| Media contact: | Jim Spangler, [email protected], 331-332-5833 | |
| Investor contact: | Marty Ketelaar, [email protected], 331-332-2706 | |
| Web site: | www.Navistar.com/newsroom |
NAVISTAR REPORTS FIRST QUARTER 2018 RESULTS
| • | Grows revenues by 15 percent to $1.9 billion |
| • | Reports first quarter 2018 net loss of $73 million, or 74-cents per share |
| • | Generates $104 million of adjusted EBITDA in the first quarter, up 89 percent year-over-year |
| • | Company raises 2018 full-year guidance |
LISLE, Ill. — March 8, 2018 — Navistar International Corporation (NYSE: NAV) today announced a first quarter 2018 net loss of $73 million, or $0.74 per diluted share, compared to a first quarter 2017 net loss of $62 million, or $0.76 per diluted share. First quarter 2018 results included $46 million of charges as a result of the company’s debt refinancing in November 2017.
Revenues in the quarter were $1.9 billion, a 15-percent increase compared to $1.7 billion in the first quarter last year, driven by a 24-percent increase in the company’s Core (Class 6-8 trucks and buses in the United States and Canada) volumes.
First quarter 2018 EBITDA was $55 million, compared to first quarter 2017 EBITDA of $63 million. First quarter 2018 includes $49 million in net adjustments, including the debt refinancing and other items. Adjusted EBITDA was $104 million versus $55 million in first quarter 2017.
Navistar finished the first quarter 2018 with $975 million in consolidated cash, cash equivalents and marketable securities and $947 million in manufacturing cash, cash equivalents and marketable securities.
“We are off to a strong start in 2018 thanks to our ability to grow Navistar’s position in a strengthening market,” said Troy A. Clarke, Chairman, President and CEO. “We grew our Class 8 market share and improved our margins, on the way to delivering our best first quarter on an adjusted EBITDA basis since 2011.”
Navistar’s first quarter Core chargeouts were up 2,400 units year-over-year led by Class 8 Heavy, which was up 56 percent compared to first quarter last year. The company’s Class 8 market share was up 1.2 points versus the same period one year ago. Gross margin for the quarter was 19.6 percent of revenue, up 2 percentage points from first quarter 2017.
“Our improvement this year is due largely to the market’s positive reaction to our new products, including the LT Series on highway tractor and the 13-liter A26 engine,” Clarke said. “In fact, the strong interest in our A26 engine has us nearly doubling our share of trucks with 13-liter engines in the first quarter of 2018 compared to a year ago.”
Continuing its cadence of new product launches, Navistar unveiled its new International MV Series medium-duty vehicle at the NTEA Work Truck Show earlier this week. The launch of the MV Series completes the company’s Project Horizon product refresh, and reflects that program’s improved cab design, along with the same driver-centric enhancements already launched in Class 8 vehicles.
Additionally, the company’s alliance with Volkswagen Truck & Bus is accelerating Navistar’s development of future technologies, including electric powertrains, which are already in development for school buses and medium duty trucks. The company is currently testing its first prototype electric school bus, the chargE, which Navistar will be demonstrating for customers and government officials starting later this month.
“As a leader in the medium and school bus segments, we know our customers and the jobs their trucks and buses do, which is why we’re convinced these will be the market segments best suited for e-powertrains in the near term,” Clarke said. “These vehicles travel shorter distances and typically return to their base overnight, making the charging infrastructure less complex. And, perhaps most significantly, they will provide environmental benefit, especially in urban areas.”
Based on stronger industry conditions, the company raised its 2018 full-year guidance:
| • | Retail deliveries of Class 6-8 trucks and buses in the United States and Canada are forecast to be in the range of 360,000 units to 390,000 units, with Class 8 retail deliveries of 235,000 to 265,000 units. |
| • | Revenues are expected to be between $9.25 billion and $9.75 billion. |
| • | Adjusted EBITDA is expected to be between $700 million and $750 million. |
| • | Year-end manufacturing cash is expected to be about $1.1 billion. |
“We expect market conditions to remain robust and we are determined to take advantage of opportunities to grow share while delivering strong margin performance,” Clarke said. “Given the progress made in Q1, and our positive outlook for the remainder of the year, we are confident that 2018 will be the breakout year for Navistar.”
SEGMENT REVIEW
Summary of Financial Results:
| Three Months Ended January 31, |
||||||||
| (in millions, except per share data) | 2018 | 2017 | ||||||
| Sales and revenues, net |
$ | 1,905 | $ | 1,663 | ||||
| Segment Results: |
||||||||
| Truck |
$ | (7 | ) | $ | (69 | ) | ||
| Parts |
137 | 149 | ||||||
| Global Operations |
(7 | ) | (4 | ) | ||||
| Financial Services |
20 | 13 | ||||||
| Net loss(A) |
(73 | ) | (62 | ) | ||||
| Diluted loss per share(A) |
$ | (0.74 | ) | $ | (0.76 | ) | ||
| (A) | Amounts attributable to Navistar International Corporation. |
Truck Segment – Truck segment first quarter 2018 net sales increased to $1.3 billion, primarily due to higher volumes in the company’s Core markets, an increase in military sales, and production of GM-branded units manufactured at Navistar’s Springfield, Ohio plant, which launched in the second quarter of 2017. This was partially offset by a decline in the company’s Mexico and export truck volumes.
The Truck segment loss was $7 million in the first quarter 2018, versus a loss of $69 million in the same period one year ago. The improvement was primarily driven by the impact of higher volumes in the company’s Core markets, a decrease in used truck losses, and an increase in military sales, partially offset by higher structural costs.
Parts Segment – In the first quarter of 2018, the Parts segment net sales were $568 million, slightly lower than the prior year primarily due to the expected runoff in Blue Diamond Parts (BDP) sales, partially offset by higher U.S. and Canada parts sales related to the Fleetrite™ and ReNEWed® brands.
The Parts segment profit was $137 million, down eight percent, primarily due to lower BDP margins and higher freight-related expenses.
Global Operations Segment – In the first quarter of 2018, the Global Operations segment net sales increased 62 percent to $81 million, primarily driven by higher engine volumes in the company’s South America engine operations due to improvement in the Brazilian economy.
For the first quarter 2018, the Global Operations segment loss was $7 million versus a $4 million loss in the first quarter 2017. Higher engine volumes and a benefit recognized as an adjustment to restructuring charges only partially offset a one-time benefit in the first quarter of 2017 of $9 million related to an adjustment to pre-existing warranties.
Financial Services Segment – In the first quarter of 2018, the Financial Services segment net revenues increased to $59 million primarily due to higher portfolio yields, higher overall finance receivable balances in Mexico and favorable movements in foreign currency exchange rates impacting the company’s Mexican portfolio.
The Financial Services segment profit increased to $20 million primarily due to a decrease in the provision for loan losses in Mexico and improved interest margins.
About Navistar
Navistar International Corporation (NYSE: NAV) is a holding company whose subsidiaries and affiliates produce International® brand commercial and military trucks, proprietary diesel engines, and IC Bus™ brand school and commercial buses. An affiliate also provides truck and diesel engine service parts. Another affiliate offers financing services. Additional information is available at www.Navistar.com.
Forward-Looking Statement
Information provided and statements contained in this report that are not purely historical are forward-looking statements within the meaning of the federal securities laws. Such forward-looking statements only speak as of the date of this report and the company assumes no obligation to update the information included in this report. Such forward-looking statements include market share projections, new product launch dates and information concerning our possible or assumed future results of operations, including the results of our alliance with Volkswagen Truck & Bus and 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, 2017 and our quarterly report on Form 10-Q for the period ended January 31, 2018. 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 January 31, |
||||||||
| (in millions, except per share data) | 2018 | 2017 | ||||||
| Sales and revenues |
||||||||
| Sales of manufactured products, net |
$ | 1,867 | $ | 1,629 | ||||
| Finance revenues |
38 | 34 | ||||||
|
|
|
|
|
|||||
| Sales and revenues, net |
1,905 | 1,663 | ||||||
|
|
|
|
|
|||||
| Costs and expenses |
||||||||
| Costs of products sold |
1,532 | 1,370 | ||||||
| Restructuring charges |
(3 | ) | 7 | |||||
| Asset impairment charges |
2 | 2 | ||||||
| Selling, general and administrative expenses |
222 | 200 | ||||||
| Engineering and product development costs |
75 | 63 | ||||||
| Interest expense |
79 | 82 | ||||||
| Other expense (income), net |
49 | (8 | ) | |||||
|
|
|
|
|
|||||
| Total costs and expenses |
1,956 | 1,716 | ||||||
| Equity in income of non-consolidated affiliates |
— | 3 | ||||||
|
|
|
|
|
|||||
| Loss before income tax |
(51 | ) | (50 | ) | ||||
| Income tax expense |
(15 | ) | (4 | ) | ||||
|
|
|
|
|
|||||
| Net loss |
(66 | ) | (54 | ) | ||||
| Less: Net income attributable to non-controlling interests |
7 | 8 | ||||||
|
|
|
|
|
|||||
| Net loss attributable to Navistar International Corporation |
$ | (73 | ) | $ | (62 | ) | ||
|
|
|
|
|
|||||
| Loss per share attributable to Navistar International Corporation: |
||||||||
| Basic |
$ | (0.74 | ) | $ | (0.76 | ) | ||
| Diluted |
(0.74 | ) | (0.76 | ) | ||||
| Weighted average shares outstanding: |
||||||||
| Basic |
98.6 | 81.8 | ||||||
| Diluted |
98.6 | 81.8 | ||||||
Navistar International Corporation and Subsidiaries
Consolidated Balance Sheets
| January 31, | October 31, | |||||||
| (in millions, except per share data) | 2018 | 2017 | ||||||
| (Unaudited) | ||||||||
| ASSETS |
||||||||
| Current assets |
||||||||
| Cash and cash equivalents |
$ | 699 | $ | 706 | ||||
| Restricted cash and cash equivalents |
36 | 83 | ||||||
| Marketable securities |
276 | 370 | ||||||
| Trade and other receivables, net |
327 | 391 | ||||||
| Finance receivables, net |
1,434 | 1,565 | ||||||
| Inventories, net |
998 | 857 | ||||||
| Other current assets |
188 | 188 | ||||||
|
|
|
|
|
|||||
| Total current assets |
3,958 | 4,160 | ||||||
| Restricted cash |
52 | 51 | ||||||
| Trade and other receivables, net |
13 | 13 | ||||||
| Finance receivables, net |
239 | 220 | ||||||
| Investments in non-consolidated affiliates |
55 | 56 | ||||||
| Property and equipment (net of accumulated depreciation and amortization of $2,491 and $2,474, respectively) |
1,335 | 1,326 | ||||||
| Goodwill |
38 | 38 | ||||||
| Intangible assets (net of accumulated amortization of $138 and $135, respectively) |
38 | 40 | ||||||
| Deferred taxes, net |
129 | 129 | ||||||
| Other noncurrent assets |
112 | 102 | ||||||
|
|
|
|
|
|||||
| Total assets |
$ | 5,969 | $ | 6,135 | ||||
|
|
|
|
|
|||||
| LIABILITIES and STOCKHOLDERS’ DEFICIT |
||||||||
| Liabilities |
||||||||
| Current liabilities |
||||||||
| Notes payable and current maturities of long-term debt |
$ | 953 | $ | 1,169 | ||||
| Accounts payable |
1,140 | 1,292 | ||||||
| Other current liabilities |
1,160 | 1,184 | ||||||
|
|
|
|
|
|||||
| Total current liabilities |
3,253 | 3,645 | ||||||
| Long-term debt |
4,168 | 3,889 | ||||||
| Postretirement benefits liabilities |
2,467 | 2,497 | ||||||
| Other noncurrent liabilities |
664 | 678 | ||||||
|
|
|
|
|
|||||
| Total liabilities |
10,552 | 10,709 | ||||||
| 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 |
2,735 | 2,733 | ||||||
| Accumulated deficit |
(5,006 | ) | (4,933 | ) | ||||
| Accumulated other comprehensive loss |
(2,154 | ) | (2,211 | ) | ||||
| Common stock held in treasury, at cost (4.5 and 4.6 shares, respectively) |
(174 | ) | (179 | ) | ||||
|
|
|
|
|
|||||
| Total stockholders’ deficit attributable to Navistar International Corporation |
(4,587 | ) | (4,578 | ) | ||||
| Stockholders’ equity attributable to non-controlling interests |
4 | 4 | ||||||
|
|
|
|
|
|||||
| Total stockholders’ deficit |
(4,583 | ) | (4,574 | ) | ||||
|
|
|
|
|
|||||
| Total liabilities and stockholders’ deficit |
$ | 5,969 | $ | 6,135 | ||||
|
|
|
|
|
|||||
Navistar International Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Three Months Ended January 31, |
||||||||
| (in millions) | 2018 | 2017 | ||||||
| Cash flows from operating activities |
||||||||
| Net loss |
$ | (66 | ) | $ | (54 | ) | ||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
||||||||
| Depreciation and amortization |
37 | 37 | ||||||
| Depreciation of equipment leased to others |
18 | 22 | ||||||
| Deferred taxes, including change in valuation allowance |
6 | — | ||||||
| Asset impairment charges |
2 | 2 | ||||||
| Amortization of debt issuance costs and discount |
8 | 10 | ||||||
| Stock-based compensation |
9 | 7 | ||||||
| Provision for doubtful accounts |
1 | 4 | ||||||
| Equity in loss of non-consolidated affiliates, net of dividends |
3 | 3 | ||||||
| Write-off of debt issuance costs and discount |
42 | — | ||||||
| Other non-cash operating activities |
(6 | ) | (3 | ) | ||||
| Changes in other assets and liabilities, exclusive of the effects of businesses disposed |
(130 | ) | (6 | ) | ||||
|
|
|
|
|
|||||
| Net cash provided by (used in) operating activities |
(76 | ) | 22 | |||||
|
|
|
|
|
|||||
| Cash flows from investing activities |
||||||||
| Purchases of marketable securities |
(61 | ) | (212 | ) | ||||
| Sales of marketable securities |
150 | 59 | ||||||
| Maturities of marketable securities |
5 | 1 | ||||||
| Net change in restricted cash and cash equivalents |
46 | 15 | ||||||
| Capital expenditures |
(30 | ) | (46 | ) | ||||
| Purchases of equipment leased to others |
(52 | ) | (24 | ) | ||||
| Proceeds from sales of property and equipment |
3 | 2 | ||||||
| Investments in non-consolidated affiliates |
— | (2 | ) | |||||
|
|
|
|
|
|||||
| Net cash provided by (used in) investing activities |
61 | (207 | ) | |||||
|
|
|
|
|
|||||
| Cash flows from financing activities |
||||||||
| Proceeds from issuance of securitized debt |
16 | 5 | ||||||
| Principal payments on securitized debt |
(16 | ) | (27 | ) | ||||
| Net change in secured revolving credit facilities |
(150 | ) | (79 | ) | ||||
| Proceeds from issuance of non-securitized debt |
2,747 | 298 | ||||||
| Principal payments on non-securitized debt |
(2,521 | ) | (200 | ) | ||||
| Net change in notes and debt outstanding under revolving credit facilities |
(38 | ) | (48 | ) | ||||
| Debt issuance costs |
(33 | ) | (5 | ) | ||||
| Proceeds from financed lease obligations |
16 | 8 | ||||||
| Proceeds from exercise of stock options |
4 | 3 | ||||||
| Dividends paid by subsidiaries to non-controlling interest |
(7 | ) | (8 | ) | ||||
| Other financing activities |
(12 | ) | — | |||||
|
|
|
|
|
|||||
| Net cash provided by (used in) financing activities |
6 | (53 | ) | |||||
|
|
|
|
|
|||||
| Effect of exchange rate changes on cash and cash equivalents |
2 | 7 | ||||||
|
|
|
|
|
|||||
| Decrease in cash and cash equivalents |
(7 | ) | (231 | ) | ||||
| Cash and cash equivalents at beginning of the period |
706 | 804 | ||||||
|
|
|
|
|
|||||
| Cash and cash equivalents at end of the period |
$ | 699 | $ | 573 | ||||
|
|
|
|
|
|||||
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 expense. The following tables present selected financial information for our reporting segments:
| (in millions) | Truck | Parts | Global Operations |
Financial Services(A) |
Corporate and Eliminations |
Total | ||||||||||||||||||
| Three Months Ended January 31, 2018 |
||||||||||||||||||||||||
| External sales and revenues, net |
$ | 1,228 | $ | 564 | $ | 72 | $ | 38 | $ | 3 | $ | 1,905 | ||||||||||||
| Intersegment sales and revenues |
23 | 4 | 9 | 21 | (57 | ) | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total sales and revenues, net |
$ | 1,251 | $ | 568 | $ | 81 | $ | 59 | $ | (54 | ) | $ | 1,905 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Income (loss) attributable to NIC, net of tax |
$ | (7 | ) | $ | 137 | $ | (7 | ) | $ | 20 | $ | (216 | ) | $ | (73 | ) | ||||||||
| Income tax expense |
— | — | — | — | (15 | ) | (15 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Segment profit (loss) |
$ | (7 | ) | $ | 137 | $ | (7 | ) | $ | 20 | $ | (201 | ) | $ | (58 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Depreciation and amortization |
$ | 35 | $ | 2 | $ | 3 | $ | 13 | $ | 2 | $ | 55 | ||||||||||||
| Interest expense |
— | — | — | 21 | 58 | 79 | ||||||||||||||||||
| Equity in income (loss) of non-consolidated affiliates |
— | 1 | (1 | ) | — | — | — | |||||||||||||||||
| Capital expenditures(B) |
25 | — | 1 | — | 4 | 30 | ||||||||||||||||||
| (in millions) | Truck | Parts | Global Operations |
Financial Services(A) |
Corporate and Eliminations |
Total | ||||||||||||||||||
| Three Months Ended January 31, 2017 |
||||||||||||||||||||||||
| External sales and revenues, net |
$ | 1,017 | $ | 563 | $ | 46 | $ | 34 | $ | 3 | $ | 1,663 | ||||||||||||
| Intersegment sales and revenues |
10 | 7 | 4 | 20 | (41 | ) | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total sales and revenues, net |
$ | 1,027 | $ | 570 | $ | 50 | $ | 54 | $ | (38 | ) | $ | 1,663 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Income (loss) attributable to NIC, net of tax |
$ | (69 | ) | $ | 149 | $ | (4 | ) | $ | 13 | $ | (151 | ) | $ | (62 | ) | ||||||||
| Income tax expense |
— | — | — | — | (4 | ) | (4 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Segment profit (loss) |
$ | (69 | ) | $ | 149 | $ | (4 | ) | $ | 13 | $ | (147 | ) | $ | (58 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Depreciation and amortization |
$ | 37 | $ | 3 | $ | 3 | $ | 13 | $ | 3 | $ | 59 | ||||||||||||
| Interest expense |
— | — | — | 20 | 62 | 82 | ||||||||||||||||||
| Equity in income of non-consolidated affiliates |
1 | 1 | 1 | — | — | 3 | ||||||||||||||||||
| Capital expenditures(B) |
43 | — | 1 | — | 2 | 46 | ||||||||||||||||||
| (in millions) | Truck | Parts | Global Operations |
Financial Services |
Corporate and Eliminations |
Total | ||||||||||||||||||
| Segment assets, as of: |
||||||||||||||||||||||||
| January 31, 2018 |
$ | 1,710 | $ | 647 | $ | 360 | $ | 2,052 | $ | 1,200 | $ | 5,969 | ||||||||||||
| October 31, 2017 |
1,621 | 632 | 378 | 2,207 | 1,297 | 6,135 | ||||||||||||||||||
| (A) | Total sales and revenues in the Financial Services segment include interest revenues of $41 million and $36 million for the three months ended January 31, 2018 and 2017, respectively. |
| (B) | Exclusive of purchases of equipment leased to others. |
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:
We believe that adjusted EBITDA, which excludes certain identified items that we do not consider to be part of our ongoing business, improves the comparability of year to year results, and is representative of our underlying performance. Management uses this information to assess and measure the performance of our operating segments. We have chosen to provide this supplemental information to investors, analysts and other interested parties to enable them to perform additional analyses of operating results, to illustrate the results of operations giving effect to the non-GAAP adjustments shown in the below reconciliations, and to provide an additional measure of performance.
Manufacturing Cash, Cash Equivalents, and Marketable Securities:
Manufacturing cash, cash equivalents, and marketable securities represent the Company’s consolidated cash, cash equivalents, and marketable securities excluding cash, cash equivalents, and marketable securities of our financial services operations. We include marketable securities with our cash and cash equivalents when assessing our liquidity position as our investments are highly liquid in nature. We have chosen to provide this supplemental information to investors, analysts and other interested parties to enable them to perform additional analyses of our ability to meet our operating requirements, capital expenditures, equity investments, and financial obligations.
Structural costs consists of Selling, general and administrative expenses and Engineering and product development costs.
Gross Margin consists of Sales and revenues, net, less Costs of products sold.
Free Cash Flow consists of Net cash from operating activities and Capital Expenditures.
EBITDA reconciliation:
| Three Months Ended January 31, |
||||||||
| (in millions) | 2018 | 2017 | ||||||
| Loss attributable to NIC, net of tax |
$ | (73 | ) | $ | (62 | ) | ||
| Plus: |
||||||||
| Depreciation and amortization expense |
55 | 59 | ||||||
| Manufacturing interest expense(A) |
58 | 62 | ||||||
| Less: |
||||||||
| Income tax expense |
(15 | ) | (4 | ) | ||||
|
|
|
|
|
|||||
| EBITDA |
$ | 55 | $ | 63 | ||||
|
|
|
|
|
|||||
| (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: |
9
| Three Months Ended January 31, |
||||||||
| (in millions) | 2018 | 2017 | ||||||
| Interest expense |
$ | 79 | $ | 82 | ||||
| Less: Financial services interest expense |
21 | 20 | ||||||
|
|
|
|
|
|||||
| Manufacturing interest expense |
$ | 58 | $ | 62 | ||||
|
|
|
|
|
|||||
Adjusted EBITDA Reconciliation:
| Three Months Ended January 31, |
||||||||
| (in millions) | 2018 | 2017 | ||||||
| EBITDA (reconciled above) |
$ | 55 | $ | 63 | ||||
|
|
|
|
|
|||||
| Adjustments for significant items of: |
||||||||
| Adjustments to pre-existing warranties(A) |
(6 | ) | (17 | ) | ||||
| Asset impairment charges(B) |
2 | 2 | ||||||
| Restructuring of manufacturing operations(C) |
(3 | ) | 7 | |||||
| EGR product litigation(D) |
1 | — | ||||||
| Debt refinancing charges(E) |
46 | — | ||||||
| Pension settlement(F) |
9 | — | ||||||
|
|
|
|
|
|||||
| Total adjustments |
49 | (8 | ) | |||||
|
|
|
|
|
|||||
| Adjusted EBITDA |
$ | 104 | $ | 55 | ||||
|
|
|
|
|
|||||
| (A) | Adjustments to pre-existing warranties reflect changes in our estimate of warranty costs for products sold in prior periods. Such adjustments typically occur when claims experience deviates from historic and expected trends. Our warranty liability is generally affected by component failure rates, repair costs, and the timing of failures. Future events and circumstances related to these factors could materially change our estimates and require adjustments to our liability. In addition, new product launches require a greater use of judgment in developing estimates until historical experience becomes available. |
| (B) | In the first quarter of 2018, we recorded $2 million of impairment charges related to the sale of our railcar business in Cherokee, Alabama. In the first quarter of 2017, we recorded $2 million of asset impairment charges related to certain long-lived assets in our Truck segment. |
| (C) | In the first quarter of 2018, we recorded benefits of $3 million related to adjustments for restructuring in our Truck and Global Operations segments. In the first quarter of 2017, we recorded $7 million of restructuring charges related to the 2011 closure of our Chatham, Ontario plant. |
| (D) | In the first quarter of 2018, we recognized an additional charge of $1 million for a jury verdict related to the Milan Maxxforce engine EGR product litigation in our Truck segment. |
| (E) | In the first quarter of 2018, we recorded a charge of $46 million for the write off of debt issuance costs and discounts associated with the repurchase of our 8.25% Senior Notes and the refinancing of our previously existing Term Loan. |
| (F) | In the first quarter of 2018, we purchased a group annuity contract for certain retired pension plan participants resulting in a plan remeasurement. As a result, we recorded a pension settlement accounting charge of $9 million in SG&A expenses. |
10
Manufacturing segment cash, cash equivalents, and marketable securities reconciliation:
| As of January 31, 2018 | ||||||||||||
| (in millions) | Manufacturing Operations |
Financial Services Operations |
Consolidated Balance Sheet |
|||||||||
| Assets |
||||||||||||
| Cash and cash equivalents |
$ | 671 | $ | 28 | $ | 699 | ||||||
| Marketable securities |
276 | — | 276 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total cash, cash equivalents, and marketable securities |
$ | 947 | $ | 28 | $ | 975 | ||||||
|
|
|
|
|
|
|
|||||||
11
Q1 2018 EARNINGS PRESENTATION March 8, 2018 Exhibit 99.2
Safe Harbor Statement and Other Cautionary Notes Information provided and statements contained in this presentation that are not purely historical are forward-looking statements within the meaning of the federal securities laws. Such forward-looking statements only speak as of the date of this presentation and Navistar International Corporation assumes no obligation to update the information included in this presentation. Such forward-looking statements include information concerning our possible or assumed future results of operations, including the results of our alliance with Volkswagen Truck & Bus and descriptions of our business strategy. These statements often include words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” or similar expressions. These statements are not guarantees of performance or results and they involve risks, uncertainties, and assumptions. For a further description of these factors, see the risk factors set forth in our filings with the Securities and Exchange Commission, including our annual report on Form 10-K for the year ended October 31, 2017 and our quarterly report on Form 10-Q for the period ended January 31, 2018. Although we believe that these forward-looking statements are based on reasonable assumptions, there are many factors that could affect our results of operations and could cause actual results to differ materially from those in the forward-looking statements. All future written and oral forward-looking statements by us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained herein or referred to above. Except for our ongoing obligations to disclose material information as required by the federal securities laws, we do not have any obligations or intention to release publicly any revisions to any forward-looking statements to reflect events or circumstances in the future or to reflect the occurrence of unanticipated events. The financial information herein contains audited and unaudited information and has been prepared by management in good faith and based on data currently available to the company. Certain non-GAAP measures are used in this presentation to assist the reader in understanding our core manufacturing business. We believe this information is useful and relevant to assess and measure the performance of our core manufacturing business as it illustrates manufacturing performance. It also excludes financial services and other items that may not be related to the core manufacturing business or underlying results. Management often uses this information to assess and measure the underlying performance of our operating segments. We have chosen to provide this supplemental information to investors, analysts, and other interested parties to enable them to perform additional analyses of operating results. The non-GAAP numbers are reconciled to the most appropriate GAAP number in the appendix of this presentation.
Revenues up 15% from Q1 2017 Adjusted EBITDA up 89% to $104 million Strong Core market conditions Higher backlogs driving increased Class 8 production rates Unveiled International’s MV (medium-duty vocational), HV (heavy vocational) mid-range diesel models, and IC Bus's RE type D school bus Strong collaboration with Volkswagen Truck & Bus (VW T&B) First Quarter 2018 Highlights Note:This slide contains non-GAAP information; please see the REG G in appendix for a detailed reconciliation.
New Product Portfolio Driving Market Share Growth Highest first quarter Class 8 market share since 2014 Class 8 Market Share Up 1.2 pts
Stronger Q1 Results ($ 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. (A) Includes U.S. and Canada School buses and Class 6-8 trucks. Amounts attributable to Navistar International Corporation, net of tax. Amounts inclusive of $46 million debt refinancing charges.
Robust Truck Sales Driving Financial Improvements ($ in millions)
Strong Liquidity Position 2018 Q1 cash balance Consolidated cash: $975 million(A) Manufacturing cash: $947 million(A) Manufacturing Cash(A) ($ in millions) Amounts include manufacturing cash, cash equivalents, and marketable securities. Note:This slide contains non-GAAP information; please see the REG G in appendix for a detailed reconciliation. Solid cash position
2018 Guidance Revised Upwards Note:This slide contains non-GAAP information; please see the REG G in appendix for a detailed reconciliation. (A) 2018 manufacturing cash guidance reflects expected repayment of 2018 convertible debt.
Significant Cash Flow Drivers 2018 Actuals Guidance Manufacturing interest expense $269M $230M Capital expenditures $102M $200M Warranty spend greater than expense $184M $125M Pension/OPEB contributions greater than expense $75M $100M
Appendix
U.S. and Canada Dealer Stock Inventory* *Includes U.S. and Canada Class 4-8 truck inventory, but does not include U.S. IC Bus.
Retail Market Share in Commercial Vehicle Segments Class 6/7 Medium-Duty Class 8 Severe Service Class 8 Heavy
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. Our Core markets include CAT-branded units sold to Caterpillar under our North America supply agreement during 2016. The School bus chargeouts include buses classified as B, C, and D and are being reported on a one-month lag. Other markets primarily consist of Export Truck and Mexico.
Highlights Financial Services segment profit of $20 million for Q1 2018, $13 million for Q1 2017 U.S. financing availability of $516 million as of January 31, 2018 Financial Services debt/equity leverage of 2.7:1 as of January 31, 2018 Renewal of $350 million dealer floor plan variable funding facility Renewal of $100 million retail accounts funding facility Navistar Financial Corporation Retail Notes Bank Facility Dealer Floor Plan Revolver capacity of $269M extended to September 2021, term portion of $74M matures June 2018 Funding for retail notes, wholesale notes, retail accounts, and dealer open accounts On balance sheet NFSC wholesale trust as of January 31, 2018 $900M funding facility Variable portion matures December 2018 Term portions mature September 2018 and June 2019 On balance sheet Program management continuity Broad product offering Ability to support large fleets Access to less expensive capital C A P I T A L Funded by BMO Financial Group
Frequently Asked Questions Q1: What is included in Corporate and Eliminations? A:The primary drivers of Corporate and Eliminations are Corporate SG&A, pension and OPEB expense (excluding amounts allocated to the segments), annual incentive, manufacturing interest expense, and the elimination of intercompany sales and profit between segments. Q2: What is included in your equity in loss of non-consolidated affiliates? A:Equity in loss of non-consolidated affiliates is derived from our ownership interests in partially-owned affiliates that are not consolidated. Q3: What is your net income attributable to non-controlling interests? A:Net income attributable to non-controlling interests is the result of the consolidation of subsidiaries in which we do not own 100%, and is primarily comprised of Ford's non-controlling interest in our Blue Diamond Parts joint venture. Q4:What are your expected 2018 and beyond pension funding requirements? A: For the three months ended January 31, 2018 and 2017, we contributed $21 million and $22 million respectively, to our U.S. and Canadian pension plans (the "Plans") to meet regulatory minimum funding requirements. We currently anticipate additional contributions of approximately $113 million during the remainder of 2018. 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 from 2019 through 2021, we will be required to contribute $140 million to $190 million per year to the Plans, depending on asset performance and discount rates. Q5:What is your expectation for future cash tax payments? A:Our cash tax payments are expected to remain low in 2018 and will gradually increase as we utilize available net operating losses (NOLs) and tax credits in future years.
Frequently Asked Questions Q6:What is the current balance of net operating losses as compared to other deferred tax assets? A: The deferred tax assets were remeasured as of December 22, 2017 as a result of the new US tax legislation. After the remeasurement, the Company had deferred tax assets for U.S. federal NOLs valued at $660 million, state NOLs valued at $196 million, and foreign NOLs valued at $243 million, for a total undiscounted cash value of $1.1 billion. In addition to NOLs, the Company had deferred tax assets for accumulated tax credits of $264 million and other deferred tax assets of $1.2 billion resulting in net deferred tax assets before valuation allowances of approximately $2.5 billion. Of this amount, $2.4 billion was subject to a valuation allowance as of December 22, 2017. Q7:How does your FY 2018 Class 8 industry outlook compare to ACT Research? A: Q8:Please discuss the process from an order to a retail delivery? A: Orders* are customers’ written commitments to purchase vehicles. Order backlogs* are orders yet to be built as of the end of a period. Chargeouts are vehicles that have been invoiced to customers. Retail deliveries occur when customers take possession and register the vehicle. Units held in dealer inventory represent the principal difference between retail deliveries and chargeouts. * Orders and units in backlog do not represent guarantees of purchases and are subject to cancellation. Reconciliation to ACT - Retail Sales 2018 ACT* 284000 CY to FY Adjustment (5,586) "Other Specialty OEMs" included in ACT's forecast; we do not include these specialty OEMs in our forecast or in our internal/external reports (6,000) Total (ACT comparable Class 8 Navistar) 272414 Navistar Industry Retail Deliveries Combined Class 8 Trucks** 235000 265000 Navistar Difference from ACT -37414 -7414 *Source: ACT N.A. Commercial Vehicle Outlook - February 2018 -0.13734242733486532 -2.7% **December 2017 Earnings Call range was 220k-250k
Frequently Asked Questions Q9: How do you define manufacturing free cash flow? A: _____________________________ Net of adjustments. Q10: What were your Worldwide Engine Shipments in the period? A: Quarters Ended Qtr Ended Qtr Ended (in millions) Jan. 31, 2018 Oct. 31, 2017 July 31, 2017 Apr. 30, 2017 Jan. 31, 2017 Oct. 31, 2016 Jul. 31, 2016 Consolidated Net Cash from Operating Activities $-76 $277 $-61 $-,129 $22 $281 $90 Less: Net Cash from Financial Services Operations 161 87 -95 -,136 251 -3 95 Net Cash from Manufacturing Operations (A) ....................... -,237 190 34 7 -,229 284 -5 Capital Expenditures -30 -9 -27 -20 -46 -32 -29 Manufacturing Free Cash Flow $-,267 $181 $7 $-13 $-,275 $252 $-34 Three Months Ended January 31, % 2018 2017 Change Change (in units) OEM sales-South America 5,800 3,400 2,400 0.70588235294117652 Intercompany sales 2,400 2,400 0 N/A Other OEM sales 500 500 0 N/A Total Core Markets 8,700 6,300 2,400 0.38095238095238093
Outstanding Debt Balances (in millions) January 31 , 201 8 October 31, 201 7 Manufacturing operations Senior Secured Term Loan Credit Facility , due 2025 , ne t of unamortized discount of $ 8 and unamortized debt issuance costs of $ 12 ..................................................................................... $ 1, 580 $ — Senior Secured Term Loan Credit Facility , as amended, due 2020 , ne t of unamortized discount of $7 and unamortized debt issuance costs of $9 ...................................................... — 1,003 6.625% Senior Notes, due 2026, net of unamortized debt issuance costs of $18 ..................... 1,082 — 8.25% Senior Notes, due 2022 ne t of unamortized discount of $1 3 , respectively , and unamor tized debt issuance costs of $14 ................................................................................... — 1,42 3 4.50% Senior Subordinated Convertible Notes, due 2018, n et of unamortized discount of $ 4 and $ 5 , respectively, and unamortized debt issuance costs of less than $1 and $1, respectively ................................................................................................................................. 19 6 194 4.75% Senior Subordinated Convertible Notes, due 2019, ne t of unamortized discount of $1 2 and $ 1 4, respectively, and unamortized debt issuance costs of $3 at both dates ...................... 39 6 394 Loan Agreement related to 6.75% Tax Exempt Bonds, due 2040, net of unamortized debt issuance costs of $5 at both dates ............................................................................................. 220 220 Financed lease obligations ........................................................................................................... 1 35 130 Other ............................................................................................................................................ 40 43 Total Manufacturing operations debt .................................................................................. 3,649 3,407 Less: Current portion ................................................................................................................. 288 286 Net long - term Manufacturing operations debt .................................................................... $ 3,361 $ 3,121 (in millions)January 31, 2018October 31, 2017Financial Services operationsAsset-backed debt issued by consolidated SPEs, at fixed and variable rates, due serially through 2023, net of unamortized debt issuance costs of $5 at both dates$ 691$849Bank credit facilities, at fixed and variable rates, due dates from 201 8 through 2023, net of unamortized debt issuance costs of $1 and $2, respectively 583616Commercial paper, at variable rates, program matures in 2022 9392Borrowings secured by operating and finance leases, at various rates, due serially through 2023 10594Total Financial Services operations debt 1,4721,651Less: Current portion 665883Net long-term Financial Services operations debt$ 807$768
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, net of tax, plus manufacturing interest expense, income taxes, and depreciation and amortization. We believe EBITDA provides meaningful information to the performance of our business and therefore we use it to supplement our GAAP reporting. We have chosen to provide this supplemental information to investors, analysts and other interested parties to enable them to perform additional analyses of operating results. Adjusted EBITDA: We believe that adjusted EBITDA, which excludes certain identified items that we do not consider to be part of our ongoing business, improves the comparability of year to year results, and is representative of our underlying performance. Management uses this information to assess and measure the performance of our operating segments. We have chosen to provide this supplemental information to investors, analysts and other interested parties to enable them to perform additional analyses of operating results, to illustrate the results of operations giving effect to the non-GAAP adjustments shown in the below reconciliations, and to provide an additional measure of performance. Manufacturing Cash, Cash Equivalents, and Marketable Securities: Manufacturing cash, cash equivalents, and marketable securities represents the 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. Free Cash Flow consists of Net cash from operating activities and Capital Expenditures.
SEC Regulation G Non-GAAP Reconciliation Manufacturing segment cash, Cash equivalents, and Marketable securities reconciliation: , Jan. 31 Oct. 31, Jul. 31, Apr. 30, Jan. 31, (in millions) 2018 2017 2017 2017 2017 Manufacturing Operations: Cash and cash equivalents……………………………………………………… $ 671 $ 666 $ 868 $ 747 $ 506 583 Marketable securities…………………………………………………………… 276 370 55 171 191 Manufacturing Cash, Cash equivalents, and Marketable securities.. $ 947 $ 1,036 $ 923 $ 918 $ 697 733 Financial Services Operations: Cash and cash equivalents……………………………………………………… $ 28 $ 40 $ 43 $ 24 $ 67 37 Marketable securities…………………………………………………………… 0 0 7 7 7 Financial Services Cash, Cash equivalents, and Marketable securities…… $ 28 $ 40 $ 50 $ 31 $ 74 62 Consolidated Balance Sheet: Cash and cash equivalents……………………………………………………… $ 699 $ 706 $ 911 $ 771 $ 573 620 Marketable securities…………………………………………………………… 276 370 62 178 198 Consolidated Cash, Cash equivalents, and Marketable securities………… $ 975 $ 1,076 $ 973 $ 949 $ 771 795 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……………………………………………………… $ 975 $ 1064 $ 946 $ 51 Marketable securities…………………………………………………………… 276 276 276 20 Consolidated Cash and cash equivalents and Marketable securities………… $ 1,251 $ 1,340 $ 1,222 $ 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 22.
Significant Items Included Within Our Results ______________________ Adjustments to pre-existing warranties reflect changes in our estimate of warranty costs for products sold in prior periods. Such adjustments typically occur when claims experience deviates from historic and expected trends. Our warranty liability is generally affected by component failure rates, repair costs, and the timing of failures. Future events and circumstances related to these factors could materially change our estimates and require adjustments to our liability. In addition, new product launches require a greater use of judgment in developing estimates until historical experience becomes available. In the first quarter of 2018, we recorded $2 million of impairment charges related to the sale of our railcar business in Cherokee, Alabama. In the first quarter of 2017, we recorded $2 million of asset impairment charges related to certain long-lived assets in our Truck segment. In the first quarter of 2018, we recorded benefits of $3 million related to adjustments for restructuring in our Truck and Global Operations segments. In the first quarter of 2017, we recorded $7 million of restructuring charges related to the 2011 closure of our Chatham, Ontario plant. In the first quarter of 2018, we recognized an additional charge of $1 million for a judgement related to the Milan Maxxforce engine EGR product litigation in our Truck segment. In the first quarter of 2018, we recorded a charge of $46 million for the write off of debt issuance costs and discounts associated with the repurchase of our 8.25% Senior Notes and the refinancing of our previously existing Term Loan. In the first quarter of 2018, we purchased a group annuity contract for certain retired pension plan participants resulting in a plan remeasurement. As a result, we recorded a pension settlement accounting charge of $9 million in SG&A expenses. $ $ Quarters Ended January 31, (in millions) 2018 2017 Expense (income): Adjustments to pre-existing warranties (A) -6 -17 Asset impairment charges (B) 2 2 Restructuring of manufacturing operations (C) -3 7 EGR product litigation (D) 1 — Debt refinancing charges (E) 46 — Pension settlement (F) 9 —