JP Morgan August 13, 2008 Exhibit 99.1 |
2 Safe Harbor 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, Section 21E of the Securities Exchange Act of 1934, and the Private Securities Litigation Reform Act of 1995. 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 Item 1A. Risk Factors included within our Form 10-K for the year ended October 31, 2007, which was filed on May 29, 2008. 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. |
3 Other Cautionary Legends • The financial information herein contains both audited and preliminary/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 without regard to selected historical legacy costs (i.e. pension and other postretirement costs) 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 We expect our strategy will enable us to deliver our 2009 goals FY 2009 Goals • $15+ Billion Revenue • $1.6 Billion Manufacturing Segment Profit • Improve cost structure while developing synergistic niche businesses with richer margins • Improve conversion rate of operating income into net income • Reduce impact of cyclicality – Grow Parts – Non-Traditional/Expansion Markets • Controlling our Destiny Competitive Cost Structure Profitable Growth Great Products Leveraging what we have and what others have built |
5 Great Products Leveraging what we have and what others have built Military Workhorse Cl 3-7 School Bus Commercial Bus 4400 Class 6-7 7700 7700 LoneStar ® 2007 Engines 11L/13L Big Bore |
6 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 – launched in 1st half of 2008 Phase II in place Phase I – 122” Bumper to back of cab (BBC) - Complete |
Positioned for Success 7 |
8 11L / 13L MaxxForce 11L / 13L Engines Industry leading attributes Fuel economy Weight Noise Vibration Harshness (NVH) U.S. production start: Summer 2008 Significant cost savings versus purchased engines at peak production TM |
9 We expect our strategy will enable us to deliver our 2009 goals Competitive Cost Structure Profitable Growth Great Products FY 2009 Goals • $15+ Billion Revenue • $1.6 Billion Manufacturing Segment Profit • Improve cost structure while developing synergistic niche businesses with richer margins • Improve conversion rate of operating income into net income • Reduce impact of cyclicality – Grow Parts – Non-Traditional/Expansion Markets • Controlling our Destiny Leveraging what we have and what others have built |
10 Competitive Cost Structure Key Component of COGS Strategic initiatives ProStar TM MaxxForce TM Big Bore 11L / 13L Scale Strategic Partnerships Mahindra International South America CAT Global Sourcing Performance on track / Volume / Dollar Weakness Overall goal is to continuously seek the needed quality at the best price 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 Postretirement Materials Labor Operating Efficiencies |
11 We expect our strategy will enable us to deliver our 2009 goals Leveraging what we have and what others have built Competitive Cost Structure Profitable Growth Great Products FY 2009 Goals • $15+ Billion Revenue • $1.6 Billion Manufacturing Segment Profit • Improve cost structure while developing synergistic niche businesses with richer margins • Improve conversion rate of operating income into net income • Reduce impact of cyclicality – Grow Parts – Non-Traditional/Expansion Markets • Controlling our Destiny Leveraging what we have and what others have built |
12 Profitable Growth Future Mexico & Export Increase export market share Military Units delivered: FY 2005: ~ 1,300 FY 2006: ~ 2,900 FY 2007: ~ 3,200 Commercial Bus Industry ranges from 9K – 13K CF and Conventional Class 4/5 Industry ranges from 20K – 30K Industry ranges from 45K – 60K Industry ranges from 35K – 45K Workhorse Cl 3-7 Launching |
13 Profitable Growth Mexico/Export – Continued Focus on Growth Delivering profitable growth 20 dealers with more than 85 locations 30% increase in dealer locations Fleet growth • Cemex • Femsa • Lala Russia Australia Grow existing markets • Latin America • South Africa • Middle East Dedicated dealers in all key markets 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 Mexico Market Share 24.0% 25.0% 26.0% 27.0% 28.0% 29.0% 30.0% 31.0% 32.0% FY 2005 FY 2006 FY 2007 1st H FY08 Mexico Export Mahindra Navistar Automotive Limited |
14 Profitable Growth – Navistar Defense Sustainment / Reset / Remanufacturing Tactical 7000 MV AFMTV Afghan Taiwan FMS-Canada FMS-UK FMS-Other Militarized / supporting vehicles 5000 MV Armored Line Haul Tractor TACOM-other urgent requirements MXT MRAP U.S. & Foreign MaxxPro Dash Smaller MaxxPro Future Opportunities FMTV HET M915 JLTV We believe the military business is a $1.5 to $2 Billion sustainable business Navistar Defense Group |
15 Navistar Defense – Delivering on our Commitments We work as if someone’s life depends on it; because it does • ~$1.3 Billion contract awarded April 2008 to provide tactical wheeled vehicles and parts • 7,072 vehicles and parts over three years |
Military – Portfolio of Platforms 16 |
MEAP Integration (Delivered April ’08) MaxxPro MaxxPro MEAP MaxxPro Plus MaxxPro Plus w/ EFP EFP Installation (Delivered May ’08) MaxxPro Evolution - Flexibility 17 |
54’ 54’ TURNING RADIUS 20-30% OFF-ROAD CAPABILITY <5000 LBS. LIGHTER TURNING RADIUS 20-30% OFF-ROAD CAPABILITY <5000 LBS. LIGHTER PRODUCTION-READY PRODUCTION-READY CARRYOVER CARRYOVER SURVIVABILITY SURVIVABILITY 16” shorter height 8”shorter wheelbase INCREASED MOBILITY INCREASED MOBILITY 18 |
0 10,000 20,000 30,000 40,000 50,000 FY2006 FY2007 FY2008 Goal 0 50,000 100,000 150,000 FY2006 FY2007 FY2008 Fcst 0 100,000 200,000 300,000 400,000 500,000 FY2006 FY2007 FY2008 Fcst 19 0 100,000 200,000 300,000 400,000 500,000 600,000 FY2006 FY2007 FY2008 Fcst* 30,000 2008 Guidance 520,000 405,000 340K – 350K U.S. & Canada Truck Industry (Class 6-8 Units) 455,000 319,000 235K – 245K Navistar Expansionary** Shipments 38,000 38,000 126,000 75,000 70K – 80K *midpoint of guidance Navistar U.S. & Canada Shipments (Class 6-8 Units) Flat Flat Navistar Engine Shipments **includes all military shipments |
200,000 300,000 400,000 500,000 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Guidance Est. 2009 U . S . a n d C a n a d a C l a s s 6 - 8 R e t a i l I n d u s t r y $0 $100 $200 $300 $400 $500 FY 2006 1st Half FY 2007 1st Half FY 2008 1st Half FY 2008 Full Year $0 $200 $400 $600 $800 $1,000 $1,200 FY2006 Full Year FY 2007 Full Year FY2008 1st Half FY 2008 Full Year - - - - - - -$15B Goal by FY End 2009 - - - - - 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 FY2006 Full Year FY2007 Full Year FY2008 1st Half FY 2008 Full Year 1 st Half FY 2008 – Actual vs. Guidance Manufacturing Segment Profit ($ in millions) Consolidated Revenues ($ in billions) $14.2 $12.3 1st Half-$6.3 1st Half-$6.1 $15.0+ $838 $426 $950-$1,000 Retail Class 6 - 8 FY 2008 retail class 6-8 annualized through April Guidance $6.7-$6.9 Actual $6.9 Actual $424 Guidance $375-425 $103 $6 20 Actual $171 Guidance $120-$200 $380-$510 Consolidated Pretax Income ($ in millions) 2009 Industry 385,000-414,500 |
21 2008 Guidance – Below the Line Below the Line - Actions Corporate items: • SGA – On Track • Postretirement actions – On Track Interest Expense – On Track NFC – Low End (challenges from lower industry volume, lower spreads, and accounting for derivatives) FY 2007 Target FY 2009 Professional Fees ($224) ($140) ($160) ($20)-($30) Corporate Items (Excluding Professional Fees) ($207) ($260) ($270) ($293)-($393) Interest Expense (Manufacturing Only) ($196) ($140) ($160) ($157)-($177) Financial Services Profit $128 $50 $20 $140-$100 Sub total - Below the line range: ($499) ($490) ($570) ($330)-($500) Full Year ($millions) Target FY 2008 |
22 Traditional U.S. and Canada Retail Sales Class 6 – 8 Industry Landscape FY 2008 retail class 6-8 annualized through April Navistar’s fiscal year is 11/1-10/31 2009 Industry 385,000-414,500 200,000 300,000 400,000 500,000 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Guidance Est. 2009 Industry FY99 FY00 FY01 FY02 FY03 FY04 FY 05 FY06 FY 07 School Bus 33,800 33,900 27,900 27,400 29,200 26,200 26,800 28,200 24,500 20,000 to 22,000 Class 6-7 - Medium 126,000 129,600 96,000 72,700 74,900 99,200 104,600 110,400 88,500 52,000 to 55,000 Combined Class 8 (Heavy & Severe Service) 286,000 258,300 163,700 163,300 159,300 219,300 282,900 316,100 206,000 163,000 to 168,000 Total Industry Demand 445,800 421,800 287,600 263,400 263,400 344,700 414,300 454,700 319,000 235,000 to 245,000 FY 08 Actual Revised Guidance Historical Information United States and Canadian Class 6-8 Truck Industry - Retail Sales Volume |
Industry Environment Today 23 0 2,000 4,000 6,000 8,000 10,000 12,000 International Dealer Stock Inventory in units |
24 Challenges Known – Execution of path to $1.6 billion manufacturing segment profit at 414,500 industry Navistar 2010 emissions path Unknown 2009 Industry Cost increases – commodity/precious metal/currency 2010 emissions industry landscape Capital structure cost Ford resolution Execution speed – rest of world strategy |
Commodity Challenges 25 Control Costs Recover in marketplace Provide differentiated value to end customer |
26 • The average line haul is $110,000 • Commodities have increased $2,300 per truck • Diesel is at $5 a gallon • has 7% fuel savings Delivers on its promise 6.9mpg Fleet A 7.0mpg Fleet B 7.2mpg Fleet C 7.2mpg Fleet D 7.7mpg Fleet E At 150,000 to 200,000 miles a year, the saves $8,750-11,670 a year in fuel! |
Outstanding Power Characteristics 27 Competitor A Competitor C Competitor D Competitor B Designed for Payload 6 6.1 6.2 6.3 6.4 6.5 6.6 6.7 MaxxForce 13 Competitor A Competitor B Best-in-Class Best-in-Class 0 0.1 0.2 0.3 0.4 0.5 0.6 MaxxForce 13 Competitor A Fuel Economy Fuel Usage @ Idle |
28 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 EGR has minimal, if any, adverse effects on fuel economy |
29 We expect our strategy will enable us to deliver our 2009 goals and BEYOND Competitive Cost Structure Profitable Growth Great Products FY 2009 Goals • $15+ Billion Revenue • $1.6 Billion Manufacturing Segment Profit • Improve cost structure while developing synergistic niche businesses with richer margins • Improve conversion rate of operating income into net income • Reduce impact of cyclicality – Grow Parts – Non-Traditional/Expansion Markets • Controlling our Destiny Leveraging what we have and what others have built |
Controlling our Destiny Class 8 Market Share Military MaxxForce TM Expansionary Growth CAT JV Mahindra JV American LaFrance Parts Growth 30 2009 Industry 385,000-414,500 FY 2008 retail class 6-8 annualized through April Navistar’s fiscal year is 11/1-10/31 U.S. and Canada Class 6-8 Retail Industry 2009 / 2010+ 200,000 300,000 400,000 500,000 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Guidance Est. 2009 |
31 U.S. and Canada Traditional Market Share Leader in Class 6-8 Trucks and School Bus School Bus Class 6 and 7 Class 8 Ongoing Goal 60% Ongoing Goal 40% RETAIL INDUSTRY FY08 FY07 Change FY08 FY07 Change Bus 25K - 30K 59.3% 63.1% -3.8% 55.8% 60.3% -4.6% Med 75K - 110K 36.0% 36.1% -0.1% 35.3% 35.0% 0.3% SSVC 50K - 75K 43.9% 32.7% 11.2% 35.0% 25.6% 9.4% Heavy 110K - 240K 22.6% 15.0% 7.6% 15.7% 14.4% 1.4% Total 260K - 455K 33.4% 29.9% 3.5% 29.1% 25.1% 4.0% Class 8 160K - 315K 29.3% 21.3% 8.0% 22.7% 17.6% 5.1% YTD JUNE ORDER SHARE YTD JUNE RETAIL SHARE |
0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 2003 2004 2005 2006 2007 2008 Goal Future Military All Other Mexico/Export 32 Great Products: Expansionary Growth |
33 Profitable Growth Strategic Alliance MOU Truck Engine Additional Opportunities |
Profitable Growth Strategic Alliance MOU International Branded Mahindra Based COE CAT Branded COE International Branded Navistar Based Conventional Line haul CAT Branded Navistar Based Severe Service Conventional Product Offerings CAT 34 |
Controlling Our Destiny Joint venture with American LaFrance, LLC to develop, manufacture, support and distribute low-cab over engine (LCOE) vocational trucks 6,000 Niche Industry Manufacturing facility in Summerville, SC Builds upon American LaFrance’s engineering platform and Navistar’s engines, which provide a clear advantage heading into the 2010 EPA emission requirements 35 LCOE Vocational Truck |
36 2006 - 2009 Manufacturing Segment Profit $0 $1 $2 2006 We expect our strategy will enable us to deliver our 2009 goal Goal $1.6 Engine Actions/ MaxxForce Operating Efficiencies 10-20% Savings Global Sourcing ProStar +$3K/ Truck Expansionary Growth +15-20K Units Traditional Share +2% Share Parts +$0.5B Revenue Military +$1.5B Revenue 2009 Complete Complete In Progress Complete In Progress In Progress In Progress In Progress Actual $838 454,700 industry 414,500 industry TM TM |
37 Sustainable – 2010 and Beyond Navistar Parts $1,373 $1,516 $1,562 $3,000 Part Sales at Maturity ($ in millions) Other Opportunities Military Expansionary Global Traditional Goal $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 FY 2005 FY 2006 FY 2007 FY 2012 |
38 Continued Diversification North America Traditional Class 6,7 & 8 Expansion Class 4,5, CF, Mexico, Conventional, MXT, RV & Military Future Opportunities GM, CAT Rest of World Today South America, South Africa & Russia Future Opportunities India, Russia, Australia & China |
39 Summary 2008 industry recovery delayed with economy 2008 will be a strong year for Navistar despite a weak U.S. and Canada industry Plans in place for 2009 Great Products Competitive Cost Structure Profitable Growth Growth in Export and Military Changing diesel environment Sustainability 2010 and beyond CONTROLLING OUR DESTINY |
40 SEC Regulation G FY 2006 ($ Billions) FY 2007 ($ Billions) FY 2008 ($ Billions) As Reported As Reported As Reported As Reported Revenues $14 $12 $6.1 $6.9 ($Millions) ($Millions) ($Millions) ($Millions) Manufacturing Segment Profit $838 $426 $1,000 $950 $208 $424 Corporate Items ($398) ($431) ($400) ($430) ($313) ($423) ($190) ($164) Interest Expense ($192) ($196) ($140) ($160) ($157) ($177) ($96) ($83) Financial Services Profit (Loss) $147 $128 $50 $20 $140 $100 $84 ($6) Sub total - Below the line range: ($443) ($499) ($490) ($570) ($330) ($500) ($202) ($253) Consolidated Income Before Income Tax $395 ($73) $510 $380 $1,270 $1,100 $6 $171 Taxes Benefit (Expense) ($94) ($47) ($92) ($68) ($19) ($9) Net Income (Loss) $301 ($120) $418 $312 ($13) $162 Diluted EPS $4.12 ($1.70) $5.72 $4.26 ($0.19) $2.22 Memo - Professional fees included above in corporate items: ($70) ($224) ($140) ($160) ($20) ($30) ($84) ($99) # of 2008 diluted shares 73.1 Million $1,600 $15+ FY 2009 ($ Billions) ($Millions) Goal 1st Half SEC Regulation G FY 2008 ($ Billions) ($Millions) $15+ Full Year FY 2007 ($ Billions) Guidance Based on 414,500 Industry 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 and to provide-an-additional measure of performance. |