3 rd Quarter Earnings Presentation September 4, 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-Q for the period ended July 31, 2008 and our Form 10-K for the year ended October 31, 2007, which were filed on September 3, 2008 and May 29, 2008, respectively. 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 Leveraging what we have and what others have built 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 – $1.6 Billion at 414,000 industry volumes • 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 |
Executing on our strategy 5 Note: We anticipate school bus market share returning to historic norms by Fiscal Year End. Navistar share of shipments data 3Q08 3Q07 Bus (School) 48.2% 59.3% (11.1) ppt Medium (Class 6-7) 39.2% 34.4% 4.8 ppt SSVC 34.4% 26.4% 8.0 ppt Heavy 18.9% 15.3% 3.6 ppt Combined Class 8 (Heavy & Severe Service) 24.6% 19.3% 5.3 ppt Total Navistar 30.3% 27.2% 3.1 ppt Quarter-over-Quarter PPT Change Military business and Severe Service continue to grow ProStar and LoneStar ® are redefining the market Navistar’s MWM and GM announce a 420,000 engine supply agreement We broke ground on our Mahindra joint venture plant; truck development testing underway Navistar and American LaFrance announce a vocational truck joint venture First Big Bore Engine delivered First Student announces potential $1.2 billion purchase agreement with Navistar, Inc.’s IC Bus Caterpillar and Navistar to pursue strategic alliance TM |
23,000 23,500 24,000 24,500 25,000 25,500 26,000 26,500 27,000 27,500 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500 3Q07 3Q08 -$0.50 $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $4.00 3Q07 3Q08 $0 $50 $100 $150 $200 $250 $300 $350 $400 $450 3Q07 3Q08 Q3 2008 Financial Information Consolidated Revenues ($ in billions) 3Q07 $3.0 3Q08 $4.0 Manufacturing Segment Profit ($ in millions) 3Q07 $115 3Q08 $413 Diluted earnings (loss) per share 3Q07 $(.05) 3Q08 $3.68 US & Canada Class 6-8 Retail Industry 6 |
FY 2008 – Q3 impact on Full Year Guidance 7 Manufacturing Segment Profit $950 $1,000 $1,050 $1,100 Corporate Items ($430) ($400) ($385) ($375) Interest Expense ($160) ($140) ($150) ($140) Financial Services Profit $20 $50 $10 $25 Sub total - Below the line range: ($570) ($490) ($525) ($490) Consolidated Income Before Income Tax $380 $510 $525 $610 Tax Expense ($68) ($92) ($58) ($62) Net Income $312 $418 $467 $548 Diluted EPS $4.26 $5.72 $6.35 $7.45 Memo - Professional fees included above in corporate items: ($160) ($140) ($160) ($140) FY 2008 ($Millions) Guidance Guidance FY 2008 ($Millions) Previous Current |
8 Traditional U.S. and Canada Retail Sales Class 6 – 8 Industry Landscape Economic uncertainty about 2009 and 2010: • 2009 no longer the peak and 2010 no longer the trough Reality: • Age of Fleet increasing • Fuel coming down • Tonnage slightly better 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 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 55,000 Combined Class 8 (Heavy & Severe Service) 286,000 258,300 163,700 163,300 159,300 219,300 282,900 316,100 206,000 163,000 168,000 Total Industry Demand 445,800 421,800 287,600 263,400 263,400 344,700 414,300 454,700 319,000 235,000 245,000 FY 08 Historical Information United States and Canadian Class 6-8 Truck Industry - Retail Sales Volume Current Actual Guidance 2nd half of 2009 will determine total industry size Note: Navistar intends to update 2009 Guidance on the 4Q 2008 conference call. Navistar’s fiscal year is 11/1 – 10/31. |
Industry Environment Today 9 AVERAGE AGE: U.S. Class 8 Active Population 1990 - 2008 Forecast 90 92 94 96 98 00 02 04 06 08 4.8 5.0 5.2 5.4 5.6 5.8 6.0 6.2 6.4 6.6 6.8 Avg. Age in Years Source: ACT Research |
10 We expect our strategy will enable us to deliver our 2009 goals Leveraging what we have and what others have built 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 – $1.6 Billion at 414,000 industry volumes • 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 |
11 Delivers on its promise 6.9 mpg Fleet A 7.0 mpg Fleet B 7.2 mpg Fleet C 7.2 mpg Fleet D 7.7 mpg Fleet E At 150,000 to 200,000 miles a year, the saves $8,750- 11,670 a year in fuel! • The average line haul costs $110,000 • Commodities have increased $2,300 per truck • Diesel was at $5 a gallon • has 7% fuel savings |
12 Combined Class 8 Retail Market Share 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 3Q07 3Q08 Great Products: Class 8 Growth |
Outstanding Power Characteristics 13 Competitor A Competitor C Competitor D Competitor B Designed for Payload Best-in-Class Fuel Usage @ Idle 0 0.1 0.2 0.3 0.4 0.5 0.6 MaxxForce 13 Competitor A |
14 Competitive Cost Structure Key Component of COGS Strategic initiatives ProStar MaxxForce 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 Labor Operating Efficiencies Materials TM TM |
Engine: Brazil Based Growth NGD 3.0L NGD 3.0L Acteon 15K Acteon Former Soviet Union China India 50K 100K 40K Acteon North America 15 |
Profitable Growth Strategic Alliance MOU International Branded Mahindra Based COE CAT Branded COE CAT Branded Navistar Based Severe Service Conventional Product Offerings 16 |
Controlling Our Destiny via Leveraging our Assets 17 LCOE Vocational Truck 6,000 Unit Niche Industry MOU with San Marino Integrated Commercial Bus |
18 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 |
Military – Portfolio of Platforms 19 |
MEAP Integration (Delivered April ’08) MaxxPro MaxxPro MEAP MaxxPro Plus MaxxPro Plus w/ EFP EFP Installation (Delivered May ’08) MaxxPro Evolution – Flexibility 20 |
54’ 54’ TURNING RADIUS 20-30% OFF-ROAD CAPABILITY >5000 LBS. LIGHTER TURNING RADIUS 20-30% OFF-ROAD CAPABILITY >5000 LBS. LIGHTER Production–Ready CARRYOVER CARRYOVER SURVIVABILITY SURVIVABILITY 16” shorter height 8”shorter wheelbase INCREASED MOBILITY INCREASED MOBILITY 21 |
$1.4 $1.5 $1.6 $1.8 to $1.9 $2.3 to $2.5 22 Parts Segment Navistar Parts Part Sales ($ in billions) Focus on the Customer • Superior Customer Experience • Pull vs. Push New Proprietary Products • MaxxForce™ 11L / 13L • Only Source Leverage Our Strengths • Largest Dealer Channel • Innovative Customer Solutions Growth Increase Truck Share Military Full Offering • Parts • Kits and Remanufacturing • Services Expansionary and export opportunities |
23 Strategy to sustain and improve 2010 and beyond – EGR versus SCR 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 |
SCR on a Typical Vehicle: Refuse Vocation Urea Tank & Vertical Exhaust Note: Yellow High-Light Denotes SCR Part & Component, Size, and Location Requirements Refuse application – potential issues -Body may move rearward -Wheel Base growth -Weight Distribution -Arm interference with exhaust -Pivot arm position relative to cab Routing challenges -OBD sensors -UREA heater -Hoses Significant WB impacts -AT module -UREA tank -Controls -Weight Distribution Adds ~ 400lbs -Lower payload -Weight distribution 24 |
25 SCR EGR Additional Hardware – $4,000 to $5,000 Urea infrastructure / hassle Payload Penalty – 400 – 500 lbs. Lower Residual Value Training Complicated Technology Launch Quality TEM Impact Committed to Non SCR Solution |
Class 8 Market Share Military MaxxForce TM Expansionary Growth CAT JV Mahindra JV American LaFrance MWM Engine Platforms Parts Growth EGR versus SCR Controlling our Destiny 26 2009 / 2010+ Note: Navistar intends to update 2009 Guidance on the 4Q 2008 conference call. Navistar’s fiscal year is 11/1 – 10/31. |
Commodity Challenges 27 Control Costs Recover in marketplace Provide differentiated value to end customer |
28 2008 Liquidity 2007 / 2008 FY ($ millions) Unaudited Mfg. Cash Bal.: 10/31/2007 9 months ended July 31, 2008 Forecast 2008 October 31, 2006 $1,214 October 31, 2007 $722 $722 Approx. Cash Flows: From Operations ($185) $134 large source Dividends from NFC $400 $15 small source From Investing / (Cap Ex) ($254) ($131) large use From Financing / (Debt Paydown) ($453) ($164) large use Mfg. Cash Bal.: October 31, 2007 $722 July 31, 2008 $576 October 31, 2008 Fcst $750 - $850 |
29 NFC’s ability to fund itself largely unaffected by credit crunch • NFC retail activity primarily funded by facilities that do not require refinancing until 2010 • NFC has continued to obtain access to bank conduit markets to fund retail note acquisitions • Over $1 B in retail notes have been financed since the subprime issues began to impact the asset securitization market • We have sufficient credit capacity to absorb refinancing – High portfolio credit quality permits continuing access to bank conduits • Serviced receivables balances tracking to truck market trough Retail Notes Bank Revolver • Current Situation – $0.9 B DFP receivables – $1.0 B Funding Facility (NFSC) • NFSC terms – Libor +49 bp – Renewal process is underway ahead of November maturity Off-balance sheet • $500 million revolving warehouse (TRIP) – Acquired notes sold into TRIP – TRIP warehouses, then securitizes via bank conduits • TRIP terms – Libor +28 bp – Matures 2010 On-balance sheet • $1.4 B Facility – Initial funding of retail note acquisitions – Also funds dealer / customer open accounts • Revolver terms – Libor +225 bp – Matures July 2010 On-balance sheet Dealer Floor Plan (DFP) |
30 Liquidity Summary • Expect truck production to increase slightly in Q4 2008 as dealers restock inventory, truck market improves, and new products debut • Parent company has no need to refinance in near-term – Benefiting from lower Libor interest rate – Refinancing will be opportunistic to stagger maturities • Finance companies will return to public markets shortly – Next significant refinance date is November 2008 for facility that funds dealer-floor plan notes. Refinancing efforts are underway for renewal of this facility. • We have sufficient liquidity / borrowing capacity to execute our strategies |
Controlling our Destiny Class 8 Market Share Military MaxxForce TM Expansionary Growth CAT JV Mahindra JV American LaFrance MWM Engine Platforms Parts Growth EGR versus SCR 31 2009 / 2010+ Note: Navistar intends to update 2009 Guidance on the 4Q 2008 conference call. Navistar’s fiscal year is 11/1 – 10/31. |
32 Summary-Controlling our Destiny 2008 will be a strong year for Navistar despite a weak U.S. and Canadian industry Sustainability actions in place for 2009, 2010, and beyond – Great Products Class 8 market share growth EGR is our technological path – Competitive Cost Structure Global sourcing Competitive labor contract Global footprint – Profitable Growth Growth in Export and Military Cat JV Mahindra JV American LaFrance JV |
33 Appendix |
4Q Changes from 3Q 34 Change from 3Q08 ($ Millions) Military $400 revenue Medium Production $100 revenue Engine – Ford & Medium Volume Impact $150 revenue LoneStar ® & ProStar™ Startup / Stock Options Expense $30 - 40 additional expense |
35 2008 Guidance *Excludes debt of majority-owned dealerships **Represents costs included in both segments and corporate ***However, in general, we are always required to evaluate our valuation allowance position ($ Millions) 2007 2008 Guidance Capital Expenditures $312 $250 - $350 Professional Fees** $234 $150 - $170 Manufacturing Debt* $1,762 ~$1,700 Engineering & Product Development $382 $400 - $430 Manufacturing Cash Balance $722 $700 - $800 Income tax expense $47 ***No U.S. Federal, however, State and AMT taxes. Foreign tax rate ~mid 30’s. Diluted Shares 70.3 million ~73.5 million |
Market Share – US & Canada School Bus and Class 6-8 36 Navistar 1st Q 2nd Q 3rd Q 4th Q Full Year 1st Q 2nd Q 3rd Q 4th Q July YTD Bus (School) 59.6% 60.3% 59.3% 59.1% 59.6% 57.4% 56.9% 48.2% 54.2% Medium (Class 6-7) 36.7% 34.2% 34.4% 37.3% 35.7% 33.6% 35.0% 39.2% 35.9% Heavy (LH & RH) 15.8% 12.2% 15.3% 17.1% 15.0% 15.8% 15.0% 18.9% 16.6% Severe Service 24.0% 27.8% 26.4% 31.6% 27.1% 35.4% 35.9% 34.4% 35.2% Combined Class 8 17.9% 16.7% 19.3% 22.4% 18.7% 22.6% 22.8% 24.6% 23.4% Combined Market Share 24.7% 25.1% 27.2% 30.9% 26.6% 28.7% 29.2% 30.3% 29.4% Severe Service 22.8% 25.9% 24.3% 28.5% 25.1% 28.2% 25.6% 25.7% 26.5% Combined Class 8 17.6% 16.0% 18.5% 21.2% 18.0% 19.8% 18.6% 21.3% 19.9% Combined Market share 24.5% 24.8% 26.7% 30.3% 26.2% 27.1% 26.9% 28.2% 27.4% 2008 Market Share Excluding U.S. Military 2008 2007 2007 Market Share Excluding U.S. Military |
37 Truck Shipments Note: Information shown below is based on Navistar’s fiscal year-end Fiscal Year 2006 1Q06 2Q06 3Q06 4Q06 Full Year 2006 BUS 4,100 4,600 4,600 5,200 18,500 MEDIUM 7,300 11,500 12,100 14,300 45,200 HEAVY 7,900 9,900 10,200 15,400 43,400 SEVERE 3,900 4,500 4,300 6,300 19,000 TOTAL 23,200 30,500 31,200 41,200 126,100 MILITARY (U.S. & Foreign) 400 500 1,200 800 2,900 EXPANSIONARY 5,700 6,500 7,300 6,900 26,400 WORLD WIDE TRUCK 29,300 37,500 39,700 48,900 155,400 Fiscal Year 2007 1Q07 2Q07 3Q07 4Q07 Full Year 2007 BUS 3,400 4,100 3,200 3,900 14,600 MEDIUM 9,700 6,800 5,600 6,600 28,700 HEAVY 7,000 4,500 2,600 3,300 17,400 SEVERE 3,900 3,300 3,500 3,700 14,400 TOTAL 24,000 18,700 14,900 17,500 75,100 MILITARY (U.S. & Foreign) 600 900 700 1,000 3,200 EXPANSIONARY 9,100 8,700 9,000 8,500 35,300 WORLD WIDE TRUCK 33,700 28,300 24,600 27,000 113,600 Fiscal year 2008 1Q08 2Q08 3Q08 4Q08 July YTD FY08 BUS 3,100 3,300 2,700 9,100 MEDIUM 3,700 6,300 5,800 15,800 HEAVY 2,600 3,900 4,500 11,000 SEVERE 2,400 3,400 3,300 9,100 TOTAL 11,800 16,900 16,300 45,000 MILITARY (U.S. & Foreign) 1,600 2,200 2,300 6,100 EXPANSIONARY 5,900 8,100 8,400 22,400 WORLD WIDE TRUCK 19,300 27,200 27,000 73,500 |
38 World Wide Engine Shipments Navistar 1st Q 2nd Q 3rd Q 4th Q Full Year Ford 80,200 92,200 75,200 68,100 315,700 Other OEM's (All Models) 25,300 29,000 26,500 24,100 104,900 Engine Shipments to Truck Group 17,600 24,300 25,100 32,100 99,100 Total Shipments 123,100 145,500 126,800 124,300 519,700 Navistar 1st Q 2nd Q 3rd Q 4th Q Full Year Ford 60,000 56,200 65,400 53,500 235,100 Other OEM's (All Models) 21,000 26,400 29,100 27,700 104,200 Engine Shipments to Truck Group 23,100 12,100 13,700 16,500 65,400 Total Shipments 104,100 94,700 108,200 97,700 404,700 Navistar 1st Q 2nd Q 3rd Q 4th Q July YTD Ford 47,000 55,300 25,200 - 127,500 Other OEM's (All Models) 25,900 31,400 35,100 - 92,400 Engine Shipments to Truck Group 12,900 15,800 19,000 - 47,700 Total Shipments 85,800 102,500 79,300 - 267,600 2008 2007 2006 |
39 Order Receipts – U.S. & Canada Navistar (Order receipt data) 1st Q 2nd Q 3rd Q 4th Q Full Year Bus (School) 2,700 2,800 3,400 2,700 11,600 Medium (Class 6-7) 4,300 3,100 6,100 5,300 18,800 Combined Class 8 (Heavy & Severe Service) 5,200 4,600 8,300 5,800 23,900 Total Navistar 12,200 10,500 17,800 13,800 54,300 Industry (Order receipt data) 1st Q 2nd Q 3rd Q 4th Q Full Year Bus (School) 4,500 4,100 5,500 5,300 19,400 Medium (Class 6-7) 14,000 10,900 12,200 13,300 50,400 Combined Class 8 (Heavy & Severe Service) 31,000 20,400 28,100 27,900 107,400 Total Industry 49,500 35,400 45,800 46,500 177,200 Navistar (Order receipt data) 1st Q 2nd Q 3rd Q 4th Q July YTD Bus (School) 2,400 2,800 3,900 - 9,100 Medium (Class 6-7) 5,300 5,600 3,800 - 14,700 Combined Class 8 (Heavy & Severe Service) 11,000 11,300 14,200 - 36,500 Total Navistar 18,700 19,700 21,900 - 60,300 Industry (Order receipt data) 1st Q 2nd Q 3rd Q 4th Q July YTD Bus (School) 3,900 5,000 6,600 - 15,500 Medium (Class 6-7) 14,200 16,200 11,300 - 41,700 Combined Class 8 (Heavy & Severe Service) 44,300 39,800 40,300 - 124,400 Total Industry 62,400 61,000 58,200 - 181,600 2008 2008 Order receipts: U.S. & Canada (Units) 2007 2007 Order receipts: U.S. & Canada (Units) |
0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 FY2007 FY2008 Goal 0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000 FY2007 FY2008 Fcst* 0 25,000 50,000 75,000 100,000 FY2007 FY2008 Fcst* 40 2008 Shipment Guidance Total - 404,700 340K – 350K 38,000 38,000 Total - 76,800 65K – 75K *midpoint of guidance Navistar Engine Shipments **includes all military shipments Navistar U.S. & Canada Shipments (Class 6-8 Units) Navistar Expansionary** Shipments Q4 – 18,100 Q4 – 19,900 July YTD 58,700 July YTD 50,100 Q4 – 97,700 Q4 – 77,000 July YTD 307,000 July YTD 267,600 Q4 – 9,000 Q4 – 9,500 July YTD 29,000 July YTD 28,500 |
0 2,000 4,000 6,000 8,000 10,000 12,000 Lowest point in over 5 years Dealer Stock Inventory – Lowest point in over 5 years 41 |
42 Options Outstanding and Exercisable (Unaudited) Options Outstanding Options Exercisable Range of prices Number Outstanding Weighted Avg (in thousands) Remaining Contractual Life (in years) Weighted Avg Exercise Price Number Exercisable Weighted Avg (in thousands) Remaining Contractual Life (in years) Weighted Avg Exercise Price $21.22 - $31.81 2,345 5.2 $ 25.70 1,986 4.9 $ 25.61 $32.18 - $41.53 2,296 3.9 39.74 2,296 3.9 39.74 $42.48 - $51.75 1,032 5.0 43.08 1,032 5.0 43.08 Total 5,673 4.6 $ 34.55 5,314 4.5 $ 35.11 Note: Information as of July 31, 2008. Basic average shares outstanding for the nine months ended July 31, 2008 were approximately 70.5 million. |
Class 8 Reconciliation 43 Actual Actual Forecast 2006 2007 2008 Navistar (Fiscal year) 316,100 206,000 165,500 Wards Data (Calendar year) 322,500 173,500 Not Available Difference due to CY to FY adjustment (6,400) 32,500 Not Available ACT Research (July 2008 Outlook Report) 329,200 182,400 165,420 CY to FY adjustment (6,400) 32,500 (2,121) Other misc. Class 8 OEMS/Military (8,600) (5,500) (1,000) Total (ACT Comparable Class 8 to Navistar) 314,200 209,400 162,299 Reconciliation to Wards Reconciliation to ACT U.S. and Canada Retail Unit Sales - Class 8 Reconciliation |
44 SEC Regulation G DEBT YE 2005 YE 2006 YE 2007 2007 - 3Q 2008 - 3Q (in millions) Manufacturing operations January 2007 Loan Facility (Libor + 325) - $ - $ 1,330 $ 1,445 $ 1,330 $ Bridge Loan Facility (Libor + 500) - 1,500 - - - Financing arrangements and capital lease obligations 408 401 369 376 313 6.25% Senior Notes 400 - - - - 9.375% Senior Notes 393 - - - 7.5% Senior Notes 249 15 15 15 15 Majority owned dealership debt 245 484 267 326 184 4.75% Subordinated Exchangeable Notes, due 2009 202 1 1 2.5% Senior Convertible Notes 190 - - - - 9.95% Senior Notes 13 11 8 9 6 Other 24 61 40 47 35 Total manufacturing operations debt 2,124 2,472 2,029 2,219 1,884 Financial services operations Borrowing secured by asset-backed securities, at variable rates, due serially through 2011 2,779 $ 3,104 $ 2,748 $ 2,899 $ 2,371 $ Bank revolvers, variable rates, due 2010 838 1,426 1,354 1,224 1,401 Revolving retail warehouse facility, variable rates, due 2010 500 500 500 500 500 Commercial Paper - 28 117 115 249 Borrowing secured by operating and finance leases 148 116 133 139 127 Total financial services operations debt 4,265 $ 5,174 $ 4,852 $ 4,877 $ 4,648 $ Cash & Marketable Securities YE 2005 YE 2006 YE 2007 2007 - 3Q 2008 - 3Q Manufacturing non-GAAP (Unaudited) 867 $ 1,214 $ 722 $ 607 $ 576 $ Financial Services non-GAAP (Unaudited) 53 79 61 72 120 Consolidated US GAAP 920 $ 1,293 $ 783 $ 679 $ 696 $ (Audited) (Audited) (Unaudited) (Unaudited) |
45 SEC Regulation G Based on 414,500 Industry FY 2006 ($ Billions) FY 2007 ($ Billions) FY 2008 ($ Billions) As Reported As Reported As Reported As Reported Revenues $14 $12 $9.1 $10.9 ($Millions) ($Millions) ($Millions) ($Millions) Manufacturing Segment Profit $838 $426 $1,050 $1,100 $323 $837 Corporate Items ($398) ($431) ($385) ($375) ($423) ($313) ($289) ($265) Interest Expense ($192) ($196) ($150) ($140) ($177) ($157) ($147) ($114) Financial Services Profit $147 $128 $10 $25 $100 $140 $124 ($7) Sub total - Below the line range: ($443) ($499) ($525) ($490) ($500) ($330) ($312) ($386) Consolidated Income Before Income Tax $395 ($73) $525 $610 $1,100 $1,270 $11 $451 Taxes Benefit (Expense) ($94) ($47) ($58) ($62) ($28) ($17) Net Income (Loss) $301 ($120) $467 $548 ($17) $434 Diluted EPS $4.12 ($1.70) $6.35 $7.45 ($0.24) $5.92 Memo - Professional fees included above in corporate items: ($70) ($224) ($160) ($140) ($30) ($20) ($136) ($129) 2008 Full year estimate number of diluted shares 73.5 Million $1,600 $15+ FY 2009 ($ Billions) ($Millions) SEC Regulation G FY 2008 ($ Billions) ($Millions) ~$15 Full Year FY 2007 ($ Billions) Guidance Goal 9 months ended July 31 |
46 Frequently Asked Questions Q1: What should we assume as the total on capital expenditures for 2008? A: For 2008, excluding our NFC and Dealcor acquisition of vehicles for leasing, we expect our capital expenditures to be within the $250 million to $350 million range. We continue to fund our strategic programs. Q2: What is in your Dealcor debt? A: Dealcor debt is comprised of wholesale (floor plan) financing and also retail financing on lease and rental fleets that is securitized (owned by) third party financing sources. Q3: How many Dealcor dealers did you have as of July 31, 2008? A: Of our 301 primary NAFTA dealers, 20 were Dealcor dealers as of July 31, 2008. We expect to have 20 Dealcor dealers on October 31, 2008. Q4: What percentage of Navistar’s parts revenue is proprietary versus all makes? A: Approximately 40% of part’s revenue is proprietary. Q5: What do you finance at Navistar Finance Corporation (NFC)? A: NFC is a commercial financing organization that provides wholesale, retail and lease financing for sales of new and used trucks sold by the company. NFC also finances the company’s wholesale accounts and selected retail accounts receivable. Sales of new truck related equipment (including trailers) of other manufacturers are also financed. |
47 Frequently Asked Questions Q6: Have you seen any year-over-year steel, precious metals and resin cost increases in 2008? A: Steel and Other Commodities — Commodity price increases, particularly for aluminum, copper, precious metals, resins, and steel have contributed to substantial cost pressures in the industry as well as from our suppliers. Cost increases related to steel, precious metals, resins, and petroleum products totaled approximately $184 million, $178 million, $86 million, and $42 million for 2005, 2006, 2007, and the nine months of 2008, respectively, as compared to the corresponding prior year period. Generally, we have been able to mitigate the effects of these cost increases via a combination of design changes, material substitution, resourcing, global sourcing efforts, and pricing performance, although we do not specifically identify these items on customer invoices. In addition, although the terms of supplier contracts and special pricing arrangements can vary, generally a time lag exists between when we incur increased costs and when we might recoup them through increased pricing. This time lag can span several quarters or years, depending on the specific situation. Q7: What is the status of your hybrid program? A: We were the first manufacturer to bring this technology to on line production for Class 6 &7 and currently are producing our DuraStar™ hybrid trucks well as a hybrid version of our industry-leading IC Bus-brand school bus. To date, we have built and fielded over 200 units covering medium truck, bus, and package car applications. We have over 2.0 million miles of validation testing and are in the process of training our entire dealer organization on selling and servicing this new product. Certification tests are showing improvements of up to 70% in fuel economy and 40% in CO2 emissions. |
48 Frequently Asked Questions Q8: The future of diesel transportation is being impacted by environmental and energy issues such as fuel efficiency, climate change and clean air. How is Navistar responding to these growing influences? A: Navistar and its production units are fully engaged and are offering solutions on multiple fronts to the commercial truck industry. Aerodynamic efficiency is the single most important issue to address to improve the fuel economy of on-highway trucks. International ProStar™ is the industry's most aerodynamic and fuel efficient Class 8 truck. We do extensive development in wind tunnels and work hard to achieve industry-leading aero-efficiency. And our recently introduced International® LoneStar™ , the first ever owner/operator product that is SmartWay certified, is setting a whole new standard of aero- efficiency among premium Class 8 trucks. Another significant reduction in both fuel consumption and emissions can be achieved by reducing idle time of on-highway trucks. Navistar will be the first manufacturer to offer a fully integrated Alternate Power Unit (APU) when the MaxxPower™ APU is launched later this year. The MaxxPower™ APU allows drivers to operate the truck HVAC system and other "hotel" loads while consuming 80% less fuel than idling the main engine. We also believe hybrid technology will be a large part of the national response to climate change and fuel use and we are raising our role as a contributor to energy efficient transportation solutions in the commercial truck, commercial bus and school bus businesses. We are leveraging the natural fuel efficiency of diesel engines and vehicles in several key moves. We are building on our record as the leader in Green Diesel Technology, where Navistar set the pace for the industry in achieving this year’s historically low emission requirements. We have advanced the standard of efficiency with our new ProStar™ truck. And we are well into the important wave of customer interest in hydraulic and electric hybrids which will have a substantial impact on the reduction in green house gas emissions. Navistar was recognized for leadership in the development of hybrid advanced technology in California, receiving the Blue Sky Award for 2007 from WestStart-CALSTART. |