32 nd Annual Gabelli & Company Automotive Aftermarket Symposium November 3, 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 FY 2009 Goals • Original Goal was $15+ Billion Revenue -$1.6 Billion Manufacturing Segment Profit at 415,000 Industry • Now-2009 Volumes are unknown • Focus is on reducing impact of cyclicality – Non-Traditional/Expansion Markets – Grow Parts • Improve cost structure while developing synergistic niche businesses with richer margins • Improve conversion rate of operating income into net income • Controlling our Destiny Leveraging What We Have and What Others Have Built |
5 Traditional U.S. and Canada Retail Sales Class 6 – 8 Industry Landscape Economic uncertainty about 2009 and 2010: • 2009 no longer the peak • 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 Former industry thinking Current industry thinking Note: Navistar intends to update 2009 Guidance on the 4Q 2008 conference call. Navistar’s fiscal year is 11/1 – 10/31. |
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 Industry Environment Today 6 0 2,000 4,000 6,000 8,000 10,000 12,000 Lowest point in over 5 years “Today I joined with Senate Republicans and leaders from the trucking industry to once again emphasize the need for the United States Senate to act on bringing down the price of gas at the pump,” Senator Inhofe said. “From transporting goods across the country, to finding ways to pay for our nation’s infrastructure, high gas prices impact every aspect of our lives. Congress can improve both our energy security and our economy by increasing American-based energy production. I will continue to stand with my Republican colleagues to ensure the Senate stays focused on bringing down the price of gas at the pump.” |
School Bus – Goal 60% MRAP Mid-Range Engines Great Products U.S. and Canada Truck Market Share Position 7 Medium – Goal 40% Severe Service – Goal 25% Heavy – Goal 20% #1 #1 #4 #1 #1 #1 ProStar™/LoneStar ® Market Share: 40% Source: ACT and internal reports Mid-Range Engine Manufacturer |
8 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! • Average line haul costs $110,000 • Commodities have increased $2,300 per truck • Diesel was at $5 a gallon • has 7% fuel savings |
9 |
Right Products/Right Time 10 Combined Class 8 Retail Market Share Order Receipt Share |
11 Leadership First to Enter Line Production of Hybrid Vehicles Red Bull Purchases New International ® DuraStar™ Hybrid Delivery Trucks Trucks save 30-40% fuel costs while reducing emissions UPS, EPA, Eaton, Navistar Agree: “Hydraulic Hybrid Vehicles Ready for Prime Time” |
11L/13L Outstanding Power Characteristics 12 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 |
Class 8 Expected Engine and Manufacturer Layout We believe EGR is the best path for customers Navistar engine will be the most “tested” engine available Increased vertical integration We believe SCR is a stranded technology 13 Engines 2007 2010 MaxxForce 11L/13L EGR EGR Cummins ISM EGR N/A MBE 4000 EGR N/A Cat C13 EGR N/A Cummins 13L SCR PACCAR/DAF 12.9L SCR DD13 SCR Volvo/Mack D13/MP8 EGR SCR Volvo/Mack D11/MP7 EGR SCR Series 60 EGR N/A Cat C15 EGR N/A Cummins ISX EGR SCR Volvo D16/MP10 EGR SCR DD15 EGR SCR DD16, post 2010 SCR |
EGR (Simplicity) vs. SCR (Complexity) Making Life Easier For Our Customers 14 EGR SCR What changes in 2010 for the customer? •Fuel economy – neutrality •Lower operating costs vs. SCR •No urea required •No additional hardware •No payload penalty •No additional training •No urea delivery infrastructure required •Fuel economy – slight benefit in certain applications •Urea required – offsets fuel economy benefit •Higher operating costs than EGR •Additional hardware •Payload penalty •Additional training •Urea delivery infrastructure required |
All About Urea Do not fill into the diesel fuel tank! Position of the vehicle’s AdBlue® filler neck may vary. Product information •Store between 23 F (-5 C) and 68 F (20 C) •Protect against direct sunlight •Empty bottle completely into the tank •Avoid contamination while filling •Avoid ongoing storage in the vehicle •Dispose bottle after 2 years from the production date •Do not mix with other substances •Use or store only as directed •Keep out of the reach of children and animals •Avoid contact with skin and eyes •Avoid inhalation or ingestion of the solution and any dried residue 15 Label on back of bottle $19.05 ½ Gallon Bottle |
SCR on a Typical Vehicle: Refuse Vocation Urea Tank and Vertical Exhaust Note: Yellow highlight denotes SCR part and 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 16 |
17 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 Labor Operating Efficiencies Materials |
18 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 Launched |
Military – Portfolio of Platforms 19 |
Military Opportunities • 2009 military orders are ~ $2 billion, which includes $500 million of military parts orders • Foreign military opportunities identified in over 20 countries – Netherlands – United Kingdom – Romania – Saudi Arabia – Australia – Polish Land Force MTV • Navistar Defense – contract manufacturer (FMTV, MRAP reset/recap) • Contract logistic support / integrated logistic support revenue streams 20 - Canada - Turkey - Mexico - Taiwan - UAE |
21 2013 Projected Global Truck Market Note: Includes Medium and Heavy Trucks >6T only Source: JD Power; External Research Analysis South Africa China Russia Mercosur Other LA Mexico Middle East North America Australia Turkey India |
Dealer Distribution Network-Rest of World CONFIDENTIAL and Proprietary to Navistar 22 |
• 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) 23 Profitable Growth Continued Focus on Global Growth • CAT JV • Commercial Bus • Russia • China • Australia • Grow existing markets -Latin America -South Africa -Middle East • Dedicated dealers in all key markets Rest of World-Truck India Rest of World-Engine • Russia • India • China • Grow existing markets -Latin America -South America |
North America Commercial Bus Aerodynamics Fuel Economy Customer Relationship Safety 24 IC Bus utilizes the extensive aerodynamic design capabilities within Navistar®. The corporation’s latest highway tractor is 7% more fuel- efficient than the competition, and similar improvements are expected for our motorcoach. The MaxxForce™ 13 is a quiet, fuel-efficient 13 liter engine designed to meet 2010 emissions without added weight, without increased mechanical complexity and without adding urea. We know passenger safety is important, and potential federal regulations could lead to big changes. IC Bus has a long history of protecting passengers, and we’re well equipped to meet future legislation. Parts/Service Network IC Bus, LLC, is part of the Navistar family of companies. We’re the largest manufacturer of school buses and a leader in commercial buses for shuttle and transit applications. Specifications, descriptions, and illustrative material in this literature are as accurate as known at the time of publication, but are subject to change without notice. Illustrations may include optional equipment and accessories, and may not include all standard equipment. IC Bus and the IC Bus Shield are registered trademarks of IC Bus, LLC ©2008 IC Bus, LLC, Warrenville, IL 60555 AD48AD06011 |
Controlling our Destiny Class 8 Market Share Military MaxxForce TM 11L / 13L Expansionary Growth CAT JV China Mahindra JV American LaFrance MWM Engine Platforms Parts growth EGR versus SCR Commodities 25 2009 / 2010+ Note: Navistar intends to update 2009 Guidance on the 4Q 2008 conference call. Navistar’s fiscal year is 11/1 – 10/31. Former industry thinking Current industry thinking |
Financial Information Consolidated Revenues ($ in billions) FY 2006 $14B Manufacturing Segment Profit ($ in millions) FY 2006 $838 FY 2008 $1,050 - $1,100 Diluted Earnings Per Share U.S. & Canada Class 6-8 Retail Industry 26 FY 2008 $~15B FY 2006 $4.12 FY 2008 $6.35 - $7.45 * * * Charts reflect midpoint of Guidance Former industry thinking Current industry thinking |
Parts |
28 Parts Leveraging What We Have and What Others Have Built Our product is customer service Provides year-over-year growth Global sourcing Integrated execution Worldwide scale – Truck and Engine Grow with Navistar Truck & Engine Vehicle uptime to sell more trucks Double digit segment margins Great Products Competitive Cost Structure Profitable Growth |
U.S. & Canada Parts Landscape 29 Source: MacKay • FY 2006 Peak Industry FY 2008 Trough Industry • Lower Truck Production – Fewer Vehicles to Service • Lower New Production – Fewer Vehicles to service – Average Age Increases • Class 8 Truck Utilization Down – 2007: 87.4% vs. 2008: 84.1% • Parts Cycle – Typically 42 months lag from production |
High Competition for Share 30 • High competition for share • Buying pattern is different for new versus used owners • As trucks age, customers leave the truck dealers Class 5 = 5.1 Yrs Class 6 = 6.7 Yrs Class 7 = 7.4 Yrs Class 8 = 6.2 Yrs 2007 New Trucks (0-6 Yrs) 50% of Population 2007 Used Trucks (7-15 Yrs) 50% of Population Source: MacKay Source: MacKay Source: MacKay 6% 9% 44% 29% 7% 5% 6% 13% 41% 28% 7% 5% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% Auto Parts Independent Garage OEM HDD/ Specialist Engine Distributor Other 2002 2007 Truck Dealers, 46% HDD/Specialist, 27% Independent Garage, 9% Engine Distributors, 8% Other, 6% Auto Parts, 4% Truck Dealers, 35% HDD/Specialist, 28% Independent Garage, 19% Engine Distributors, 5% Other, 5% Auto Parts, 8% |
31 U.S. and Canada 6-8 Parts Industry Landscape 2008 U.S. and Canada Wholesale Share 2013 U.S. and Canada Wholesale Share New Proprietary Products •MaxxForce™ 11L / 13L •Only source New Markets and Products Customer Uptime-Leverage Our Strengths •Product reliability •Accessibility and capabilities of repair facilities and personnel •Parts availability •Proper maintenance and repairs by the owner Truck OEM’s 41% Rest of Industry 59% Truck OEM’s 44% Rest of Industry 56% Controlling our Destiny |
32 Customer Purchase Decisions 32 Maximum vehicle “uptime” Accessibility to parts and service Value Technical expertise New and used owner requirements are identical: difference is in importance of value Used owners perception: OEM dealers services to be higher cost Relationships still play a key role in purchase decisions Trust and confidence just as important Customer Needs: |
Dealer Distribution Network 33 Superior Customer Experience Large Parts and Service Footprint Leveraging Capabilities New Opportunities Largest Distribution Network Largest Distribution Network Innovative Customer Solutions Innovative Customer Solutions |
34 Parts Profitable Growth – Double Digit Segment Margins Future Increase export market share Units delivered: FY 2005: ~ 1,300 FY 2006: ~ 2,900 FY 2007: ~ 3,200 Industry ranges from 9K – 13K Industry ranges from 20K – 30K Industry ranges from 45K – 60K Industry ranges from 35K – 45K Launched Workhorse Cl 3-7 CF and Conventional Class 4/5 Commercial Bus Military Mexico & Export |
35 Military Parts Business Customer experience Leverage our capabilities Full offering – parts, kits, remanufacturing, services |
36 Maintain best operational readiness scores Leverage commercial solutions: provide an advantage Anticipate needs and build confidence Support through a 25+ year vehicle life cycle: all wheeled vehicles Military – Customer Experience: Mission Readiness |
37 Global Parts Opportunities • U.S. & Canada Class 6-8 truck industry ranges from 230,000 to 455,000 annually • Rest of world truck industry opportunity is > 1,000,000 • Parts revenue opportunity is substantial |
Parts Delivers Non-Cyclical Results Great Products Provides year-over-year growth Competitive Cost Structure Worldwide scale –Truck and Engine Profitable Growth Double digit segment margin Success Drivers: 38 |
Parts Delivers Non-Cyclical Results 39 FY 2008 Parts Sales FY 2013 Parts Sales Growth & Diversification FY 2008 Fcst ~$1.85 Billion sales FY 2013 Goal $3.0 Billion sales |
40 Parts Leveraging What We Have and What Others Have Built Our product is customer service Provides year-over-year growth Global sourcing Integrated execution Worldwide scale – Truck and Engine Grow with Navistar Truck & Engine Vehicle uptime to sell more trucks Double digit segment margins Great Products Competitive Cost Structure Profitable Growth |
Summary • Strategic direction of corporation and actions are on track • 2009 and 2010 industry uncertain • Actions to offset include: – Products (market share) • Fuel economy • LoneStar ® /ProStar ™ /WorkStar ™ • EGR vs. SCR – Cost • Accelerate sourcing/design cost take out • Manufacturing • SG&A – Growth (additional) • CAT Impact • Diesels - Rest of World • Commercial bus 41 • China • Military • LCOE and Waste segment of market • Parts |
Opening Bell at NYSE – October 15, 2008 42 |
44 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 and to provide an additional measure of performance. 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 *Navistar intends to update on 4Q08 earnings call * This guidance excludes non-recurring charges associated with any loss of, or a significant reduction in, business from Ford or the early termination or non-renewal of our agreement with Ford. Management is currently reviewing these matters. See Item 1A Risk Factors of the 3 rd quarter Form 10-Q for more information with respect to Ford. |