1 Bank of America 2008 Basics/Industrials May 7th, 2008 Other OTC: NAVZ Exhibit 99.1 |
2 Forward Looking Information 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, Section 21E of the 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, including the risk of continued delay in the completion of our financial statements and the consequences thereof, the availability of funds, either through cash on hand or the company’s other liquidity sources, to repay any amounts due should any of the company’s debt become accelerated, and decisions by suppliers and other vendors to restrict or eliminate customary trade and other credit terms for the company’s future orders and other services, which would require the company to pay cash and which could have a material adverse effect on the company’s liquidity position and financial condition. 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. For a further description of these factors, see Item 1A. Risk Factors of our Form 10-K for the fiscal year ended October 31, 2005, which was filed on December 10, 2007. |
3 Other Cautionary Legends • The financial information contained herein is preliminary and unaudited and has been prepared by management in good faith and based on current company data. • Certain Non-GAAP measures are used in this presentation is provided 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 without regard to selected historical legacy cost (i.e. pension cost) and other expenses that may not be related to the core manufacturing business. Management often uses this information to assess and measure the performance of our operating segments. A reconciliation to the most appropriate GAAP number is included in the appendix of this presentation. |
4 U.S. and Canada Traditional Market Share Leader in Class 6-8 Trucks and School Bus School Bus School districts & local municipalities Class 6 and 7 Local & regional delivery/beverage, refrigeration, utilities, towing, municipalities & emergency rescue Class 8 Line-haul, local & regional delivery Heavy (LH & RH) Ongoing Goal 60% March YTD 2008 Order Receipt Share 58.7% Ongoing Goal 40% March YTD 2008 Order Receipt Share 37.7% Combined Class 8 Ongoing Goal 20% March YTD 2008 Order Receipt Share 26.1% Construction, waste management & other on-off highway applications fleets and owner operators |
5 We expect our strategy will enable us to deliver our 2009 goal FY 2009 Goals • $15+ Billion Revenue • $1.6 Billion Pro forma Manufacturing Segment Profit • Improve cost structure while developing synergistic niche businesses with richer margins • Improve conversion rate of operating income into net income • Reduce cyclicality – Grow Parts – Non-Traditional/Expansion Markets Competitive Cost Structure Profitable Growth Great Products Leveraging what we have and what others have built |
6 Traditional U.S. and Canada Retail Sales Class 6 – 8 Industry Landscape Retail Class 6 - 8 Navistar’s fiscal year is 11/1-10/31 Retail Class 6 – 8 Annualized through March 228k 200,000 300,000 400,000 500,000 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Est. 2008 Est. 2009 Industry FY99 FY00 FY01 FY02 FY03 FY04 FY 05 FY06 FY 07 Bus (School) 33,800 33,900 27,900 27,400 29,200 26,200 27,100 28,600 26,100 20,000 24,000 Medium Truck (Class 6-7) 126,000 129,600 96,000 72,700 74,900 99,200 104,500 110,100 89,000 63,000 70,000 Combined Class 8 (Heavy & Severe Service) 286,000 258,300 163,700 163,300 159,300 219,300 282,900 315,800 206,000 175,000 191,000 Total Industry Demand 445,800 421,800 287,600 263,400 263,400 344,700 414,500 454,500 321,100 258,000 285,000 FY 08 Actual |
7 Industry Orders – FY 2008 *Preliminary April Data U.S./Canada Heavy Industry Orders FY 2008 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 Nov Dec Jan Feb Mar Apr* Industry Plan Industry Actual |
8 Economic Indicators 0 Stock Inventory |
9 Great Products Summary Leveraging what we have and what others have built All new product platforms within the last 6 years while staying within the $250-$350 million capital expenditure range Class 6-7 ProStar™ School Bus 4400 11/13 Liter Big Bore Commercial Bus Workhorse Cl 3-7 2007 Engines LoneStar™ Military 7700 |
10 Great Products Finished |
11 |
12 Skyrise 56” Flat Roof 113” BBC Positioned for Success 56” Flat Roof-Targeted for owner operators and fleet customers who haul bulk goods (i.e. coils and liquids). 113” BBC-owner operators and fleet customers that value improved visibility, maneuverability, and weight Sky Rise – targeted to optimize team driving fleets (coast-to-coast) 60% 100% 100% ProStar TM Phase II – Expected to launch in 1st half of 2008 Phase I – 122” Bumper to back of cab (BBC) - Complete |
13 “Navistar’s Fuel-Efficient LoneStar Semi Truck Is Lustworthy, Luxury Showstopper” – Popular Mechanics “If Spiderman hauled freight… this is what he’d drive” –Today’sTrucking Prestige Dealer Engagement Program Launched MaxxPower APU introduction August, 08 LoneStar Launched at MATS |
14 Great Products DuraStar / MaxxForce “Fuel Economy Challenge” $1000 Visa fuel card if not at least 7% better fuel economy |
15 11L / 13L MaxxForce TM 11L / 13L Engines Industry leading attributes Fuel economy Weight Noise Vibration Harshness (NVH) Imported production start: Dec. 2007 U.S. production start: Summer 2008 Significant cost savings versus purchased engines at peak production |
16 Great Products School Bus Class 6 and 7 Combined Class 8 Current - 72/Day May 19 th – up 4% 1 st Q – 65/day Current - 124/Day 91% increase July 28th – up 13% 1 st Q – 165/day Current - 202/Day 22% increase May 19th – up 4% June 16 – up 14% Engines Current Inline - 350/Day V8 – 830/Day Note: All information is based on latest industry assumptions and is subject to change; depending on the facility, days of production varies th |
17 • Fuel Economy And Emissions One Of The First Auxiliary Power Units (APU) To Pass The Stringent 2008 CARB Emissions Standards • Integrated Design & Engineering Diesel Generator Set Rated At 5.2 Kilowatts Of Power • Typical APU is rated at 3.5 Kilowatts Fully Integrated With The Vehicle Electronics Best In Class Fuel Economy Highly Styled For Fit And Aerodynamics • Designed For Long Life 10,000 Hour Durability Life Tested To OEM Specifications (typical competitors 4000 to 8000 hours) • Extreme Quiet Operation Fully Isolated For Noise And Vibration • Long Service & Maintenance Intervals (1,000 Hours) • Factory Installed And Warranted An International Exclusive System International’s MaxxPower Integrated APU Typical Aftermarket APU Product Leadership |
18 We expect our strategy will enable us to deliver our 2009 goal Great Products FY 2009 Goals • $15+ Billion Revenue • $1.6 Billion Pro forma Manufacturing Segment Profit • Improve cost structure while developing synergistic niche businesses with richer margins • Improve conversion rate of operating income into net income • Reduce cyclicality – Grow Parts – Non-Traditional/Expansion Markets Profitable Growth Competitive Cost Structure Leveraging what we have and what others have built |
19 Competitive Cost Structure Key Component of COGS Strategic initiatives Mahindra International South America Scale Strategic Partnerships Global Sourcing Performance on track / Volume / Dollar Weakness Overall goal related to materials is to find the most globally competitive supplier Greater Flexibility Eliminated guaranteed employment Productivity Trades Stewards / Reps Sourcing non-core jobs Improved Manufacturing Cost Structure Wages frozen Healthcare contained New hire package competitive Wages Post-retirement UAW Operating Efficiencies Materials |
20 We expect our strategy will enable us to deliver our 2009 goal FY 2009 Goals • $15+ Billion Revenue • $1.6 Billion Pro forma Manufacturing Segment Profit • Improve cost structure while developing synergistic niche businesses with richer margins • Improve conversion rate of operating income into net income • Reduce cyclicality – Grow Parts – Non-Traditional/Expansion Markets Profitable Growth Competitive Cost Structure Great Products Leveraging what we have and what others have built |
21 Great Products Mexico & Export Increase export market share Military Commercial Bus Units delivered: FY 2005: ~ 1,300 FY 2006: ~ 2,900 FY 2007: ~ 3,200 Industry ranges from 35K – 45K Industry ranges from 20K – 30K Industry ranges from 45K – 60K Industry ranges from 9K – 13K Workhorse Cl 3-7 CF and Conventional Class 4/5 |
22 Mexico/Export – Continued Focus on Growth Mexico Delivering profitable growth 20 dealers with more than 85 locations 30% increase in dealer locations Fleet growth • Cemex • Femsa • Lala Export Russia Australia Grow existing markets • Latin America • South Africa • Middle East Dedicated dealers in all key markets Mahindra International Commercial Growth India and Exports • New full line Class 4-8 in development • New plant for trucks and engines in 2009 • 2011 target volume 40,000 units/year (market 400,000 Class 3-8) India’s first commercial vehicles with electronic common rail diesel engines |
23 Ford Truck North America Growth Ford Truck South America 2007 2003 2012 400,000 Engines 400,000 Engines 500,000+ Engines GM South America China India Truck MID-Range North America Growth Truck Big Bore Other ROW Military Marine Power Gen PU/SUV North American Focus High Volume Customers Low Margins High Fixed Cost Engine Group Diversification Trend Global Growth Diverse Customer Base Improved Margins Variable Cost Structure |
Navistar Defense helps address traditional industry cyclicality |
25 Delivering on our Commitments Tactical Vehicles for security and rebuilding in Afghanistan and Iraq • ~$1.3 Billion contract awarded April 2008 to provide tactical vehicles and parts • 7,072 vehicles and parts over three years |
26 Navistar Defense Growth Tactical 7000 MV AFMTV Taiwan FMS Militarized / supporting vehicles 5000 MV Armored Line Haul Tractor TACOM-other urgent requirements MXT MRAP US & Foreign Future Opportunities Foreign Military Sales • Canada • UK • Poland, etc FMTV M915 JLTV TACOM – IRAQ / Afghanistan reconstruction and support We believe the military business is a $1.5 to $2 Billion sustainable business Navistar Defense Group |
27 2009 Goal Growth • Contain post-retirement • Scale • Attracting people Utilization of Assets • Manufacturing • Product development Result • $15+ Billion Revenue • We expect $1.6 Billion Pro Forma Manufacturing Segment Profit by end of FY 2009 • We expect to position the company for continued success in 2010 and beyond *Note: Interest income of $31 million has been reclassified out of interest expense and into Corporate Items. Debt Amortization expense of $6 million has been reclassified out of Corporate Items and into the interest expense category. FY 2009 ($ Billions) Revenues $15+ ($Millions) Pro Forma Manufacturing Segment Profit $1,600 Corporate Items ($313)-($423) Interest Expense ($157)-($177) Financial Services Profit $140 - $100 Sub total - Below the line range: ($330)-($500) Consolidated Income Before Income Tax $1,270 - $1,100 * * |
28 *Pro Forma segment margin has been revised from $1.5 B to $1.6 B due to the movement of post 1986 retirement costs out of segment margins into corporate SG&A We expect our strategy will enable us to deliver our 2009 goal |
29 Strategy to sustain and improve 2010 and beyond Why we choose EGR vs. SCR? • We believe SCR is a transitional-stop gap approach • SCR forces the burden of compliance on the customer • EGR builds on technologies we are using today without ongoing customer cost, complexity, and inconvenience • Minimal, if any, effect on fuel economy |
30 Sustainable – 2010 and Beyond GM Opportunity Average revenue = $1.5B + Mahindra International • New plant for trucks and engines in 2009 • 2011 target volume 40,000 units/year (Market 400,000 Class 3-8) Navistar Defense Group Average revenue = $1.5B+ Export and Expansionary Markets Average Revenue Up $3.5B - $5.2B Total Opportunity $0.5B - $0.7B Adjacent Opportunities $0.5B - $1B Expansionary - Military $0.5B - $1B Expansionary - Global $2.0 – $2.5 B Traditional Parts Sales At Maturity Parts Area Navistar Parts |
31 Continued Diversification North America Traditional Class 6,7,8 & Mexico Expansion Class 4,5, CF, Conventional, MXT, RV, Military Future Opportunities GM Rest of World Today South America and Russia Future Opportunities India, Russia, Australia & China |
32 Summary • 2008 industry recovery delayed with economy • Plans in place for 2009 targets-$15+ Billion with $1.6 Billion Segment Margins – Great Products – Competitive Cost Structure – Profitable Growth • Growth in Export and Military • Changing Diesel environment • Sustainability 2010 and beyond |
33 Appendix |
34 SEC Regulation G The above non-GAAP financial measures are unaudited and reflect a 2007 change in segment reporting methodology. This presentation is not in accordance with, or an alternative for, U.S. generally accepted accounting principles (GAAP). The non-GAAP financial information presented herein should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. However, we believe that non-GAAP reporting, giving effect to the adjustments shown in the reconciliation above, provides meaningful information and therefore we use it to supplement our GAAP reporting by identifying items that may not be related to the core manufacturing business. Management often uses this information to assess and measure the performance of our operating segments. We have chosen to provide this supplemental information to investors, analysts and other interested parties to enable them to perform additional analyses of operating results, to illustrate the results of operations giving effect to the non-GAAP adjustments shown in the above reconciliations, to provide an additional measure of performance. FY 2006 ($ Billions) FY 2009 ($ Billions) Revenues $14 $15+ ($Millions) ($Millions) Pro Forma Manufacturing Segment Profit $838 $1,600 Corporate Items ($398) ($313)-($423) Interest Expense ($192) ($157)-($177) Financial Services Profit $147 $140 - $100 Sub total - Below the line range: ($443) ($330)-($500) Consolidated Income Before Income Tax $395 $1,270 - $1,100 (Non-GAAP) |