1 2 nd Quarter 2012 Earnings Presentation June 7, 2012 Exhibit 99.2 NYSE: NAV 2 nd Quarter 2012 Earnings Call June 7, 2012 |
2 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, as amended, 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. 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, 2011 and quarterly reports for fiscal 2012. 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. NYSE: NAV 2 nd Quarter 2012 Earnings Call June 7, 2012 |
3 3 Other Cautionary Notes • 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 without regard to selected historical legacy costs (i.e. pension and other postretirement costs). It also excludes financial services and other items that may not be related to the core manufacturing business or underlying results. Measures may also be adjusted to exclude certain adjustments which are not considered to be part of our ongoing business and are not representative of our underlying performance. 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 is in the appendix of this presentation. NYSE: NAV 2 nd Quarter 2012 Earnings Call June 7, 2012 |
4 4 Agenda • 2 nd quarter results • Going forward • Driving integration NYSE: NAV 2 nd Quarter 2012 Earnings Call June 7, 2012 |
NYSE: NAV 2 nd Quarter Results Note: This slide contains non-GAAP information; please see the REG G in appendix for a detailed reconciliation. * Attributable to Navistar International Corporation 2012 Q2 Actual GAAP 2012 Q2 Actual Adjusted Non-GAAP Revenue (Billions) $3.3 $3.3 Manufacturing Segment Profit (Loss) (Millions) $(156) $7 Profit (Loss) Before Tax (Millions) $(295) $(124) Net Income (Loss)* (Millions) $(172) $(137) Diluted Earnings (Loss) Per Share* $(2.50) $(1.99) 5 |
NYSE: NAV Q2 Adjusted Manufacturing Segment Profit Q2 Adj. Mfg Segment Profit Truck & Parts ($Millions) $8 North America ~$43 Global ~($10) Defense ~($5) Other ~($20) Engine & Parts ($1) Adj. Mfg Segment Profit $7 Note: This slide contains non-GAAP information; please see the REG G in appendix for a detailed reconciliation. • Seasonality – South America – Bus – North America • Market adjustments – Defense – BRIC • Investments in the business – Future benefits • Affects of emissions noise ? ? Historically stronger 2H $300M - $400M Revenue $20M margin improvement 6 Q2 Factors |
NYSE: NAV Q2 Income Statement ($ Millions) Note: This slide contains non-GAAP information; please see the REG G in appendix for a detailed reconciliation. (In millions) Adj manufacturing segment profit 7 $ Adjustments: Engineering integration (11) $ Restructuring of NA mfg ops (38) $ Adj to preexisting warranties (104) $ Charges for NCPs (10) $ Mfg segment profit as reported (156) $ NFC 26 $ Corporate items (175) $ Income before income tax excluding income attributable to non-controlling interests (305) $ Income tax valuation allowance release 181 $ Income tax expense (48) $ Net loss (172) $ 7 Q2 |
Additional Warranty Reserves Adjustments for Pre-Existing Warranty EPA10 MF 11/13 Service Contracts Other routine adjustments $ 11M Total Warranty Monthly Spend per Unit in Warranty by Spend Date EPA10 MF11/13 Quality Trend by Build Quarter R/1000 8 NYSE: NAV 64% improvement Q1 Rate Q2 Rate $ 72M $ 21M $104M |
9 9 Q2 Manufacturing Cash Update Note: This slide contains non-GAAP information, please see the Reg G in appendix for detailed reconciliation. Note: Capital Expenditures includes ~$16M related to Integrated Product Development Center. ($ millions) January 31, 2012 ending manufacturing cash and marketable securities¹ 837 $ Adjusted manufacturing EBITDA (168) Change in net working capital² 41 Capital expenditures (71) Intercompany and other 42 April 30, 2012 ending manufacturing cash and marketable securities¹ 681 $ Forecasted October 31, 2012 ending manufacturing cash and marketable securities¹ $750 - $900 1 Includes cash from the consolidation of minority interests 2 NWC = A/R, Inventory, Other Current Assets, A/P & Other Current Liabilities NYSE: NAV 2 nd Quarter 2012 Earnings Call June 7, 2012 |
NYSE: NAV Going Forward Note: This slide contains non-GAAP information; please see the REG G in appendix for a detailed reconciliation. Q2 Adj. Mfg Segment Profit ($Millions) Estimate Second Half 2012 ($Millions) Truck & Parts $8 $425 - $525 North America ~$43 Global ~($10) Defense ~($5) Other ~($20) Engine & Parts ($1) $150 - $200 Adj. Mfg Segment Profit $7 $575 - $725 10 |
11 11 Going Forward Warranty Emissions Building the foundation for our future through integration Development Strategy: Provide time for technology progress EPA rewards providers for cleaning up the environment sooner Advanced EGR provides the Platform to Continued Emissions Improvement The best technology will continue to improve… Electronics and Control Strategies Advanced Fuel Injection Technology Higher injection pressure 3000 bar Proprietary Combustion Bowl Designs More complete burn Twin turbochargers Air-Management Systems Monthly Spend per Unit in Warranty by Spend Date NYSE: NAV 2 nd Quarter 2012 Earnings Call June 7, 2012 |
12 12 2 nd Quarter 2012 Earnings Call June 7, 2012 Q2 2011 36% Q2 2012 36% 2H 2012 Goal 36%-38% Medium Truck Going Forward North America – Market Share Combined Class 8 Truck Q2 2011 45% Q2 2012 48% 2H 2012 Goal 55%-58% Q2 2011 19% Q2 2012 18% 2H 2012 Goal 20%-22% School Bus (U.S. & Canada) Severe Service Heavy NYSE: NAV |
13 13 Going Forward North America • Economic growth • Low interest rates • Age of fleet – maintenance costs versus new truck price • Used truck values to remain good Class 6 – 8 U.S. & Canada Industry • 1 st half at 323,000; Up 46% yr/yr • 2 nd half at 300,000 – 310,000; Up 14% - 18% yr/yr Note: 12 month rolling average 2012 at 300,000 – 310,000 2013 at 325,000 – 345,000 ACT’s CY2013 Class 8 industry is 265,000 Reconciliation to ACT 2012 ACT* 242,500 CY to FY adjustment (1,500) Other misc. specialty vehicles Included in ACT (3,500) Total (ACT comparable Class 8 to Navistar) 237,500 Navistar Industry Retail Deliveries Combined Class 8 Trucks 216,500 Navistar difference from ACT: 21,000 ~10% *Source: ACT N.A. Commercial Vehicle Outlook - May, 2012 U.S. and Canadian Class 8 Truck Sales NYSE: NAV 2 nd Quarter 2012 Earnings Call June 7, 2012 |
NYSE: NAV Going Forward North America – Margin Improvement • SG&A • Product Development • Manufacturing efficiencies • Pricing • Recover commodities • Material cost • Design/Content 3%-4% • Eliminate start-up related costs • Volume growth • Material cost – 2 nd half $1,000 cost per unit improvement – $1,400 Big Bore improvement by year end Second half $60M to $100M run rate improvement Truck Engine Integration Volume 14 1H 2H 23% ~27% Traditional Market Share |
15 15 Going Forward Defense • 32,000+ vehicles • Make MRAP a program of record • Reset & FSR activity • STS / Post design services • FMS – U.K., Iraq, Afghanistan, Singapore, Korea, etc. • ~$425M first half ~40% • ~$675M second half ~60% FSR – Field Service Representative STS – System Technical Support FMS – Foreign Military Sales Sustainment Expanding Capabilities Through Leveraging FY2012 Goal - $1.1B revenue NYSE: NAV 2 nd Quarter 2012 Earnings Call June 7, 2012 |
16 16 Going Forward BRIC Economy Source: Moody’s Analytics & CSI Navistar JAC/NAV Engine JV approved by N.D.R.C. NYSE: NAV 2 nd Quarter 2012 Earnings Call June 7, 2012 |
NYSE: NAV Going Forward Global • BRIC economies recover • Unsold inventory corrected • Improved volumes second half of year - 66% improvement – 1H – 5,600 units – 2H – 9,300 units • Improved margins with increased volume and less launch costs • Material cost maturing • $60M improvement in Global Truck Neobus JV pending 17 |
18 18 $- $200 $400 $600 $800 $1,000 $1,200 1H 2011 Actual 2H 2011 Actual 1H 2012 Actual 2H 2012 Goal Going Forward Parts Commercial Parts Revenue Parts Segment Three Months Ended April 30: ($ in millions) 2012 2011 $ change % change Commercial Sales $465 $445 $20 5% ProStar+ ® with MaxxForce ® 15 LoneStar ® with MaxxForce ® 13 Components MaxxForce ® 15 NYSE: NAV 2 nd Quarter 2012 Earnings Call June 7, 2012 |
NYSE: NAV Going Forward Summary Note: This slide contains non-GAAP information; please see the REG G in appendix for a detailed reconciliation. Q2 Adj. Mfg Segment Profit ($Millions) Estimate Second Half 2012 ($Millions) Truck & Parts $8 $425 - $525 North America ~$43 Global ~($10) Defense ~($5) Other ~($20) Engine & Parts ($1) $150 - $200 Adj. Mfg Segment Profit $7 $575 - $725 Full Year Revenue ($Millions) BRIC Economy Brazil ~$200 India ~$200* Diesels - Brazil ~$200 North America Parts ~$100 Defense ~$400 Impact of 1 Half North America $ ?? *non-consolidated st 19 |
NYSE: NAV Guidance Note: This slide contains non-GAAP information; please see the Reg G disclosure in the appendix for a detailed reconciliation. 1 st Half (adjusted non-GAAP) 2nd Half (adjusted non-GAAP) Revised 2012 Guidance (adjusted non-GAAP) Revenue (Billions) $6.4 $7.8 - $8.4 $14.2 - $14.8 Adj. Mfg. Segment Profit (Millions) $27 $575 - $725 $600 - $750 Segment Margin % - 7-8% ~4-5% Adjusted Income/(Loss) Before Tax (Millions) ($200) $235 - $380 $35 - $180 Adjusted Net Income/(Loss) (Millions) ($201) $200 - $340 $0 - $140 Adjusted EPS ($2.90) $2.90 - $4.90 $0.00 - $2.00 20 |
NYSE: NAV Looking Forward Note: This slide contains non-GAAP information; please see the Reg G disclosure in the appendix for a detailed reconciliation. 2 Half (adjusted non-GAAP) Normalized Annual Rate at 300K units (GAAP) Revenue (Billions) $7.8 - $8.4 $15 - $16 Adj. Mfg. Segment Profit (Millions) $575 - $725 $1.2 - $1.4 Segment Margin % 7-8% ~8% Adjusted Income/(Loss) Before Tax (Millions) $235 - $380 $500 - $700 Adjusted Net Income/(Loss) (Millions) $200 - $340 $375 - $525 Adjusted EPS $2.90 - $4.90 $5.35 - $7.50 21 nd |
22 22 2012 Outgoing Run Rate Note: This slide contains non-GAAP information; please see the REG G in appendix for a detailed reconciliation. 2012 Outgoing Run Rate Strategic Target Truck – N.A. w/Parts 8-9% 9-10% Truck – Global w/Parts 2-3% 6-8% Engine – Worldwide w/Parts 7-8% 8-10% Total Manufacturing Margin ~8% ~9% NYSE: NAV 2 nd Quarter 2012 Earnings Call June 7, 2012 |
23 23 • Goal of: $20 billion in Revenue $1.8 billion in Manufacturing Segment Profit at average of cycle Profitable at all points in the cycle • Focus is on reducing impact of cyclicality – Non-traditional/expansion markets – Grow parts Strategy: Leveraging What We Have and What Others Have Built Note: This slide contains non-GAAP information; please see the Reg G in appendix for a detailed reconciliation. • Strategy: Control Our Destiny Global growth Engine • Hard part is over – Marketing – Product launches Integration NYSE: NAV 2 nd Quarter 2012 Earnings Call June 7, 2012 |
24 24 Adjusted Manufacturing Segment Profit Note: This slide contains non-GAAP information; please see the Reg G disclosure in the appendix for a detailed reconciliation. Adjusted Manufacturing Segment Profit (Loss) NYSE: NAV 2 nd Quarter 2012 Earnings Call June 7, 2012 |
25 25 Driving Integration - Leadership Integration and building great future leadership • Jan Allman • Persio Lisboa • Bill Osborne • Bob Walsh Integration Troy Clarke President of Truck & Engine Dan Ustian Chairman, President & CEO A. J. Cederoth EVP & CFO Support Functions Jack Allen President N.A. Truck & Parts Archie Massicotte President Defense & Manufacturing Ramin Younessi Vice President Product Development, Purchasing & Quality Eric Tech President Engine, Global Truck & Parts Effective July 1, 2012 following board of director approval. NYSE: NAV 2 nd Quarter 2012 Earnings Call June 7, 2012 |
26 Appendix NYSE: NAV 2 nd Quarter 2012 Earnings Call June 7, 2012 |
Medium Truck Great Products – Market Share Severe Service Truck Heavy Truck FY10 59% FY11 49% Q2’12 48% YTD ‘12 48% FY10 38% FY11 41% Q2’12 36% YTD ‘12 32% FY10 40% FY11 35% Q2’12 30% YTD ‘12 30% FY10 24% FY11 17% Q2’12 15% YTD ‘12 16% Class 8 School Bus (U.S. & Canada) School Bus & Combined Class 6-8 Market Share – FY10: 34%; FY11: 28%; Q2‘12: 24%; YTD‘12: 23% 18% Market Share Q2’12 Class 4-5 YTD ’12 Industry 22K Navistar 1,395 Market Share ~6% 27 NYSE: NAV 2 nd Quarter 2012 Earnings Call June 7, 2012 |
28 28 Supplemental Information - Truck Worldwide Truck Chargeouts NYSE: NAV 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 Actual Actual Forecast Forecast Q1 Q2 Q3 Q4 Traditional Expansionary Towables We define our “traditional” markets to include U.S. and Canada School bus and Class 6 through 8 medium and heavy truck. We classify militarized commercial vehicles sold to the U.S. and Canadian militaries as Class 8 severe service within our “traditional” markets. Our “traditional” markets include CAT-branded units sold to Caterpillar under our North America supply agreement. |
29 $507 $170 $2,123 $2,384 $725 $744 $- $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 Q2 2011 Q2 2012 Military U.S. & Canada ROW 65,000 50,700 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 Q2 2011 Q2 2012 25,600 28,400 0 5,000 10,000 15,000 20,000 25,000 30,000 Q2 2011 Q2 2012 $390 $139 $117 $31 $- $100 $200 $300 $400 $500 $600 Q2 2011 Q2 2012 Truck Parts Q2 Operational Results Consolidated Revenues ($ in millions) Quarterly Truck Chargeouts Quarterly Engine Shipments Charge outs increased 11% Military Revenues ($ in millions) Engine shipments decreased 22% Truck Revenues decreased 64% Parts Revenues decreased 74% $3,355 $3,298 NYSE: NAV |
30 30 $1.30 $(1.99) -$2.50 -$2.00 -$1.50 -$1.00 -$0.50 $0.00 $0.50 $1.00 $1.50 Q2 2011 Q2 2012 Year over Year Financial Information: Q2 Adj. Manufacturing Segment Profit (Loss) ($ in millions) Q2 Adj. Earnings (Loss) Per Share Q2 Adj. Net Income (Loss) ($ in millions) Note: This slide contains non-GAAP information; please see the REG G in appendix for a detailed reconciliation. $198 $7 $0 $50 $100 $150 $200 $250 Q2 2011 Q2 2012 $102 $(137) -$150.0 -$100.0 -$50.0 $0.0 $50.0 $100.0 $150.0 Q2 2011 Q2 2012 NYSE: NAV 2 nd Quarter 2012 Earnings Call June 7, 2012 |
31 31 Market Share – U.S. & Canada School Bus and Class 6-8 We define our “traditional” markets to include U.S. and Canada School bus and Class 6 through 8 medium and heavy truck. We classify militarized commercial vehicles sold to the U.S. and Canadian militaries as Class 8 severe service within our “traditional” markets. Beginning in 2011, our competitors are reporting certain RV and commercial bus chassis units consistently with how we report these units. Our “traditional” markets include CAT-branded units sold to Caterpillar under our North America supply agreement. Traditional Market Share Q1 Q2 Q3 Q4 Full Year Q1 Q2 Q3 Q4 Full Year Q1 Q2 Q3 Q4 Full Year School buses 60% 63% 53% 61% 59% 49% 45% 47% 53% 49% 48% 48% Class 6 and 7 medium trucks 33% 44% 36% 36% 38% 36% 36% 46% 44% 41% 27% 36% Class 8 heavy trucks 23% 22% 30% 20% 24% 17% 16% 17% 18% 17% 17% 15% Class 8 severe service trucks 40% 41% 38% 40% 40% 33% 32% 36% 37% 35% 31% 30% Combined Class 8 28% 28% 32% 25% 28% 21% 19% 21% 22% 21% 19% 18% Total Traditional Market Share 33% 35% 35% 32% 34% 27% 26% 29% 29% 28% 22% 24% Market Share - U.S. & Canada School Bus and Class 6-8 2010 2011 2012 NYSE: NAV 2 nd Quarter 2012 Earnings Call June 7, 2012 |
32 32 Worldwide Truck Chargeouts We define our “traditional” markets to include U.S. and Canada School bus and Class 6 through 8 medium and heavy truck. We classify militarized commercial vehicles sold to the U.S. and Canadian militaries as Class 8 severe service within our “traditional” markets. Our “traditional” markets include CAT- branded units sold to Caterpillar under our North America supply agreement. FISCAL YEAR 2010 Q1 Q2 Q3 Q4 FULL YEAR BUS 3,100 3,000 2,400 3,900 12,400 MEDIUM 3,900 5,300 3,900 5,400 18,500 HEAVY 5,200 4,600 6,400 5,400 21,600 SEVERE 3,900 3,800 2,200 4,100 14,000 TOTAL 16,100 16,700 14,900 18,800 66,500 NON-TRADITIONAL MILITARY 100 200 1,000 100 1,400 EXPANSIONARY 3,900 4,500 4,700 6,000 19,100 WORLDWIDE TRUCK 20,100 21,400 20,600 24,900 87,000 FISCAL YEAR 2011 Q1 Q2 Q3 Q4 FULL YEAR BUS 2,100 2,000 2,200 2,900 9,200 MEDIUM 4,600 7,200 7,400 7,900 27,100 HEAVY 4,700 5,200 6,800 9,000 25,700 SEVERE 2,700 3,200 3,700 3,700 13,300 TOTAL 14,100 17,600 20,100 23,500 75,300 NON-TRADITIONAL MILITARY 100 400 200 700 1,400 EXPANSIONARY 5,300 7,600 8,600 10,200 31,700 WORLDWIDE TRUCK 19,500 25,600 28,900 34,400 108,400 FISCAL YEAR 2012 Q1 Q2 Q3 Q4 FULL YEAR BUS 1,700 2,600 4,300 MEDIUM 4,300 7,100 11,400 HEAVY 8,000 7,200 15,200 SEVERE 3,300 3,600 6,900 TOTAL 17,300 20,500 37,800 NON-TRADITIONAL MILITARY 200 400 600 EXPANSIONARY 7,400 7,500 14,900 WORLDWIDE TRUCK 24,900 28,400 53,300 Worldwide Truck Chargeouts NYSE: NAV 2 nd Quarter 2012 Earnings Call June 7, 2012 |
33 33 Worldwide Engine Shipments Navistar Q1 Q2 Q3 Q4 Full Year OEM sales - South America 30,700 34,600 33,600 33,900 132,800 Ford sales - U.S. and Canada 24,700 200 - - 24,900 Other OEM sales 2,000 3,600 3,700 4,900 14,200 Intercompany sales 16,400 17,700 15,600 18,800 68,500 Total Shipments 73,800 56,100 52,900 57,600 240,400 Navistar Q1 Q2 Q3 Q4 Full Year OEM sales - South America 27,200 37,100 38,200 36,100 138,600 Other OEM sales 4,500 4,400 3,700 3,600 16,200 Intercompany sales 17,300 23,500 22,300 25,700 88,800 Total Shipments 49,000 65,000 64,200 65,400 243,600 Navistar Q1 Q2 Q3 Q4 Full Year OEM sales - South America 24,100 25,300 49,400 Other OEM sales 2,200 2,000 4,200 Intercompany sales 21,600 23,400 45,000 Total Shipments 47,900 50,700 - - 98,600 2011 2010 Worldwide Engine Shipments 2012 NYSE: NAV 2 nd Quarter 2012 Earnings Call June 7, 2012 |
34 34 Order Receipts – U.S. & Canada We define our “traditional” markets to include U.S. and Canada School bus and Class 6 through 8 medium and heavy truck. We classify militarized commercial vehicles sold to the U.S. and Canadian militaries as Class 8 severe service within our “traditional” markets. Our “traditional” markets include CAT-branded units sold to Caterpillar under our North America supply agreement. 2012 2011 Change 3,200 2,100 1,100 6,300 6,800 (500) Class 8 heavy trucks 5,600 9,300 (3,700) Class 8 severe service trucks 3,000 3,600 (600) 18,100 21,800 (3,700) 8,600 12,900 (4,300) Order Receipts: U.S. & Canada (Units) Three Months Ended April 30, Total "Traditional" Markets Combined Class 8 (Heavy and Severe Service) "Traditional" Markets School buses Class 6 and 7 medium trucks NYSE: NAV 2 nd Quarter 2012 Earnings Call June 7, 2012 |
35 35 Navistar Financial Corporation Note: profitability relates to total financial services • Profitability strong in 2012: $26M in Q2, $53M YTD Expected to decline as U.S. retail loan portfolio runs off due to G.E. Capital alliance • Long-term liquidity in place with better terms $466M U.S. availability Consolidating retail securitizations • Service leverage of 4.1 to 1 and declining as GE Capital alliance sources retail originations $1.5B since inception Retail Notes Bank Facility • $840M facility refinanced in December 2011, maturity extended from 2012 to 2016 • Funding for retail notes, wholesale notes, retail accounts, and dealer open accounts • On balance sheet • Situation as of Apr 30, 2012 • $1.1B funding facility (NFSC) • $320M available • NFSC wholesale trust • Variable portion matures July 2012 • Public portions mature October 2012 and October 2013 • On balance sheet • Broader product offering • Enhanced ability to support large fleets • Better access to less expensive capital Leveraging Assets & Controlling Our Destiny NYSE: NAV 2 nd Quarter 2012 Earnings Call June 7, 2012 |
36 36 U.S. and Canada Dealer Stock Inventory* *Includes U.S. and Canada Class 4-8 and school bus inventory, but does not include U.S. IC Bus or Workhorse Custom Chassis inventory. NYSE: NAV 2 nd Quarter 2012 Earnings Call June 7, 2012 |
37 37 Frequently Asked Questions Q1: 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 for company owned dealers. Q2: How many Dealcor dealers did you have as of April 30, 2012? A: Of our 272 primary NAFTA dealers, we have ownership interest in seven DealCor dealers as of April 30, 2012. Q3: How are your dealers doing? A: Our industry leading dealer network continues to improve in nearly all operational and financial aspects of their business. Considerable investments continue in facility upgrades, hours of service, technician training, tooling and inventory as a direct result of our proprietary engine line-up and expansion of our customer base. Additional fixed operations and facility preparedness, concentrated on the increasing focus on CNG and LNG, continues at a rapid pace for many of our domestic and Canadian dealers. Q4: What kind of rates do you charge your dealers and customers? A: Generally, our rates vary (those with higher credit risk have always had to pay higher interest rates) and are usually in line with the market. Q5: How do you fund your wholesale business? A: We primarily finance our wholesale portfolio through NFC, funded with traditional private or public securitizations, and through NFC’s bank facility. Q6: How is your NFC portfolio performing? A: NFC‘s wholesale portfolio performed exceptionally well in 2011 and is continuing to do well in 2012. NFC’s retail notes portfolio in the U.S. is in run-off mode now that Navistar Capital, the new GE Capital retail program, is financing retail customers. Q7: What is your total amount of capacity at NFC? A: As of April 30, 2012, total availability in our U.S. funding facilities is $466 million. NYSE: NAV 2 nd Quarter 2012 Earnings Call June 7, 2012 |
38 38 Frequently Asked Questions Q8: What is the status of the retail financing alliance with GE Capital in the United States? A: Navistar Capital – the alliance we formed with GE Capital in the United States to support the sale of Navistar products – is progressing consistent with expectations. Since its inception in 2010, the alliance has funded more than $1.5 billion in retail financings. Q9: 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. Q10: What is the current Joint Light Tactical Vehicle (JLTV) program status? A: A decision for the Engineering, Manufacturing and Development (EMD) phase is expected by the end of the summer. Q11: How will the changing Department of Defense (DoD) budget affect Navistar in FY 2012? A: The coming year will present challenges, but Navistar’s commercial expertise may be an advantage when the DoD is asked to “do more with less”. In addition, the Company continues to pursue a number of foreign military opportunities, especially in the Middle East, where defense spending is growing. Finally, the Company has a fleet of more than 32,000 vehicles in operation in approximately 26 countries, including more than 9,000 vehicles operating with Afghan Security Forces. These vehicles will require parts and sustainment support throughout their lifecycles. NYSE: NAV 2 nd Quarter 2012 Earnings Call June 7, 2012 |
39 39 Frequently Asked Questions Q12: How does your FY 2012 Class 8 industry compare to ACT Research? A: Q13: What were the 2010 emissions requirements? A: Through the use of credits manufacturers can go to a maximum of 0.50g NOx if they reduced emissions earlier with advanced technology; manufacturers need to be at 0.20g NOx if they chose not to introduce advanced technologies to reduce their emissions earlier. For many years Navistar introduced cleaner emission engines than EPA requirements, and we were able to generate some credit before we needed to reach the 0.20g NOx standard. Q14: What is included in your equity in loss of your 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, and is primarily comprised of continued investment and start-up losses associated with our Mahindra joint ventures. Q15: 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. Reconciliation to ACT 2012 ACT* 242,500 CY to FY adjustment (1,500) Other misc. specialty vehicles Included in ACT (3,500) Total (ACT comparable Class 8 to Navistar) 237,500 Navistar Industry Retail Deliveries Combined Class 8 Trucks 216,500 Navistar difference from ACT: 21,000 ~10% *Source: ACT N.A. Commercial Vehicle Outlook - May, 2012 U.S. and Canadian Class 8 Truck Sales NYSE: NAV 2 nd Quarter 2012 Earnings Call June 7, 2012 |
40 40 Frequently Asked Questions Q16: What is your estimate of future effective tax rates? A: We would estimate future effective tax rates to fall in the upper 20% to low 30% range. For FY 2012, we expect our annual ETR to be significantly lower than expectations based on the geographical mix of the jurisdictions recognizing earnings or losses, before the impact of the valuation allowances release during this quarter. Q17: What is your expectation for future cash tax payments? A: Our cash tax payments will remain low in FY 2012 and will gradually increase as we exhaust available NOLs and tax credits over the next few years. Q18: What is the current balance of net operating losses as compared to other deferred tax assets? A: As of October 31, 2011 the Company has U.S. federal net operating losses (NOLs) valued at $126 million, state NOLs valued at $79 million and foreign NOLs valued at $102 million, for a total undiscounted cash value of $307 million. In addition to NOLs, the Company has accumulated tax credits of $208 million and other deferred tax assets of $1.5 billion resulting in net deferred tax assets of approximately $2 billion. Q19: When do you expect to release the remaining balance of valuation allowances? A: We released an additional $181 million during the quarter related to our Canadian deferred tax assets. The Company continues to evaluate various business strategies which would allow us to realize the value of deferred tax assets that are currently subject to a valuation allowance. To the extent these strategies enable us to demonstrate, on a more-likely-than not basis, that we will be able to realize these deferred tax assets in the future, we will then release the associated valuation allowances. Q20: How will $2 billion of deferred tax assets be used to offset future taxable income? A: Simply put, deferred tax assets represent the value of future tax deductions attributable to items that have already been expensed or deducted for book purposes. The most commonly understood component of deferred tax assets is the value of our net operating losses, which will serve to immediately reduce taxable income in the future. In addition, we have several other major components of deferred taxes which will reduce taxable income in the future. For example, the Company has accrued significant OPEB, pension and other employee benefit expenses during prior years based on expected payments to be made in the future. As these payments are made, the Company will realize tax deductions to offset future taxable income. NYSE: NAV 2 nd Quarter 2012 Earnings Call June 7, 2012 |
41 41 Frequently Asked Questions Q21: How would future tax proposals to reduce U.S. tax rates impact Navistar? A: While lower tax rates would favorably impact future tax expense, because of the Company’s large balance of deferred tax assets we would incur a one-time adverse impact to our P&L to reset/reduce our deferred tax balances to the lower statutory rates. We estimate that for every 1% reduction in tax rates, we would incur an immediate, one-time tax increase of $50 million. Q22: What are your expected 2012 and beyond pension funding requirements? A: Current forecasts indicate that we may need to contribute approximately $189 million in 2012 to our U.S. and Canadian pension plans. 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 funding relief currently under consideration. We currently expect that from 2013 through 2015, the Company will be required to contribute at least $210 million per year to the plans, depending on asset performance and discount rates. Q23: What causes the variance between manufacturing cash interest payments and GAAP interest expense? A: The main variance between cash and GAAP interest results from our manufacturing segment’s $1 billion of senior unsecured high yield notes and $570 million of senior subordinated convertible notes. As a result of this issuance, manufacturing interest expense is higher than cash interest payments due to the amortization of debt issuance costs which are amortized over the life of each note, amortization of the original issue discount of the high yield notes and amortization of the embedded call option in the convertible notes. The timing of interest payments also impacts the overall variance on a quarterly basis, but not on a fiscal year basis. Q24: What should we assume for capital expenditures in fiscal 2012? A: We plan to continue capital spending within the traditionally guided range of $250 million to $350 million for products and development. Capital spending related to Engineering Integration is funded through the RZFBs and is not included in that range. NYSE: NAV 2 nd Quarter 2012 Earnings Call June 7, 2012 |
42 42 Frequently Asked Questions Q25: What are the $225 million of RZFBs Series 2010 due October 15, 2040 being used for? A: We are using the proceeds to invest in our product development strategy and our headquarter consolidation. Great products are a key pillar of our three pronged strategy. Streamlining and improving our product development processes will continue to provide competitive advantages for us in the marketplace. The funding from the RZFBs allowed us to consolidate many facilities into a new facility and make necessary renovations to that facility. Additionally we are investing in an existing facility, which includes investments in equipment and technology that will help us create and improve our product development process and thus shareholder value. Q26: Why did you use RZFB financing? A: The RZFBs are a cost effective, long-term form of capital that is complementary to our capital structure. The bonds have a 30 year maturity and a fixed rate coupon of 6.50% per annum. They are callable at par any time after 10 years (October 15, 2020). Issuing bonds in the tax-exempt market gave us exposure to a new source of investors that we wouldn’t otherwise have access to if not for the RZFB program. Q27: What are the differences between the accounting vs. economic dilution on your convertible debt? A: Please see the presentation on the IR website (http://ir.navistar.com/dilution.cfm) entitled Dilution overview resulting from the Convertible Notes issued on October 2009. NYSE: NAV 2 nd Quarter 2012 Earnings Call June 7, 2012 |
43 43 Frequently Asked Questions Q28: Why are the convertible debt holders no longer able to convert their notes? A: The indenture in our convertible notes contains a provision that allows the note holders to convert anytime during the following fiscal quarter should the price of Navistar’s common stock close 130% above the conversion price for any 20 day period (consecutive or non-consecutive) out of the last 30 consecutive day trading period of each fiscal quarter. The conversion price of the notes is $50.274 per share of Navistar’s common stock and 130% of the conversion price equals $65.356 per share of Navistar’s common stock. Since Navistar’s common stock closed above $65.356 per share for more than 20 trading days during the 30 consecutive trading day period ending on April 30, 2011, the note holders had the right to convert their notes any time from May 2, 2011 through July 31, 2011. A very small minority of note holders chose to convert their notes during the conversion period. Navistar opted to settle the conversion in cash instead of shares, therefore there was a 40 trading day observation period to determine the value that was remitted in cash, so the note holders did not receive the cash for almost two months after their respective conversion notices were received. Navistar’s common stock did not close above $65.356 per share for 20 trading days (consecutive or non-consecutive) during the 30 day consecutive trading day period ending April 30, 2012, therefore the note holders do not have the right to convert their notes, however that threshold could be triggered once again in the future. Q29: Are you ready for the 2013 Greenhouse Gas (GHG) regulation? A: Yes, Navistar is ready to meet the standards when they go into effect January 2014. As a leader in fuel efficiency and in delivering innovative technologies, such as aerodynamics, lighter weight vehicles, fuel efficient engines, hybrids, plug-in hybrids and electric vehicles, our current approach is to consistently deliver the most practical advance technology and fuel-efficient vehicles to our customers. Our customer-focused approach aligns Navistar with the intent of the new proposed GHG rule, and provides us with a strong basis for meeting the new standards. NYSE: NAV 2 nd Quarter 2012 Earnings Call June 7, 2012 |
44 44 Frequently Asked Questions Q30: How are you addressing the 2014 and future GHG regulations? A: Navistar has invested in the development of fuel efficient engines, powertrain optimization, and unmatched vehicle level aerodynamics as well as other vehicle level attributes that result in the lowering fuel consumption or the CO2 of the entire vehicle. Further, our non-SCR engines have an advantage where we do not release any N2O in the environment, which is one of the GHG elements and more potent than CO2. We are planning on meeting the GHG standard through 2016 with no changes to the vehicle. We are now working on 2017 GHG standards and we believe that we will meet these standards with minimum changes. Q31: For the manufacturing debt currently outstanding in your most recent financial statement filings, what are the respective maturity dates and principal amounts outstanding? A: The amounts and maturity dates are as follows (the values shown below are the amounts due and exclude the accounting impact of any OID or bifurcation): 8.25% Senior Notes due November 1, 2021 $900 million 3.0% Senior Subordinated Convertible Notes due October 15, 2014 $570 million Debt of majority owned dealerships (various maturity dates) $84 million Financing arrangements and capital lease obligations (various maturity dates) $137 million Loan Agreement related to the 6.5% Tax Exempt Bonds due October 1, 2040 $225 million Asset-Based Revolving Credit Facility due November 1, 2016 $100 million Promissory Note due September 30, 2015 $36 million Other (various maturity dates) $49 million Total $2,101 million NYSE: NAV 2 nd Quarter 2012 Earnings Call June 7, 2012 |
NYSE: NAV Manufacturing Cash Flow Beginning Mfg. Cash 1 Balance Fiscal 2010 Fiscal 2011 Q1 - 2012 Q2 - 2012 October 31, 2009 $1,152 October 31, 2010 $1,100 October 31, 2011 $1,186 January 31, 2012 $837 Approximate Cash Flows: From Operations $409 $680 ($142) ($72) From Investing / (Cap Ex) ($350) ($485) ($125) ($75) From Financing / (Debt Pay Down) ($110) ($106) ($85) ($2) Exchange Rate Effect ($1) ($3) $3 ($7) Net Cash Flow ($52) $86 ($349) ($156) Ending Mfg. Cash 1 Balance: October 31, 2010 $1,100 October 31, 2011 $1,186 January 31, 2012 $837 April 30, 2012 $681 1 Cash = Cash, Cash Equivalents & Marketable Securities 2 Includes cash from the consolidation of minority interests 45 |
NYSE: NAV Outstanding Debt Balances April 30, 2012 October 31, 2011 (in millions) Manufacturing operations 8.25% Senior Notes, due 2021, net of unamortized discount of $29 and $33, respectively ............... $ 871 $ 967 3.0% Senior Subordinated Convertible Notes, due 2014, net of unamortized discount of $62 and $73, respectively ............................................................................................................................... 508 497 Debt of majority-owned dealerships .................................................................................................. 84 94 Financing arrangements and capital lease obligations ..................................................................... 155 118 Loan Agreement related to 6.5% Tax Exempt Bonds, due 2040 ...................................................... 225 225 Promissory Note ............................................................................................................................... 36 40 Asset-Based Credit Facility ............................................................................................................... 100 — Other ................................................................................................................................................. 49 39 Total manufacturing operations debt......................................................................................... 2,028 1,980 Less: Current portion........................................................................................................................ 230 99 Net long-term manufacturing operations debt ............................................................................ $ 1,798 $ 1,881 Financial Services operations Asset-backed debt issued by consolidated SPEs, at variable rates, due serially through 2018 ........ $ 1,284 $ 1,664 Bank revolvers, at fixed and variable rates, due dates from 2013 through 2017 .............................. 1,060 1,072 Commercial paper, at variable rates, due serially through 2012 ....................................................... 59 70 Borrowings secured by operating and finance leases, at various rates, due serially through 2017 .. 66 70 Total financial services operations debt ..................................................................................... 2,469 2,876 Less: Current portion........................................................................................................................ 1,279 1,280 Net long-term financial services operations debt ....................................................................... $ 1,190 $ 1,596 46 |
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. Manufacturing Segment Results: We believe manufacturing segment results, which includes the segment results of our Truck, Engine, and Parts reporting segments, provide meaningful information of our core manufacturing business 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 below reconciliation, and to provide an additional measure of performance. Adjusted Net Income and Diluted Earnings Per Share Attributable To Navistar International Corporation and Adjusted Manufacturing Segment Profit: We believe that adjusted net income, diluted earnings per share attributable to Navistar International Corporation, and adjusted manufacturing segment profit excluding certain adjustments which are not considered to be part of our ongoing business, improve the comparability of year to year results and are representative of our underlying performance. 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. Adjusted Manufacturing Earnings Before Interest, Income Taxes, Depreciation, and Amortization (“EBITDA”): Adjusted manufacturing segment EBITDA is defined as our consolidated net income (loss) from continuing operations minus the net income (loss) from our financial services operations plus interest expense, income taxes, and depreciation and amortization, adjusted to exclude certain items that may not be related to the core manufacturing business. EBITDA is a measure commonly used and is presented to aid in developing an understanding of the ability of our operations to generate cash for debt service and taxes, as well as cash for investments in working capital, capital expenditures, and other liquidity needs. This information is presented as a supplement to the other data provided because it provides information which we believe is useful to investors for additional analysis. EBITDA should not be considered in isolation or as a substitute for net income, cash flows from operating activities or other consolidated operations, or cash flow statement data prepared in accordance with GAAP, or as a measure of our profitability or liquidity as determined in accordance with GAAP. Manufacturing Cash Flow and Manufacturing Cash, Cash Equivalents, and Marketable Securities: Manufacturing cash flow is used and is presented to aid in developing an understanding of the ability of our operations to generate cash for debt service and taxes, as well as cash for investments in working capital, capital expenditures and other liquidity needs. This information is presented as a supplement to the other data provided because it provides information which we believe is useful to investors for additional analysis. Our manufacturing cash flow is prepared with marketable securities being treated as a cash equivalent. 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 operating results, to illustrate the results of operations giving effect to the non-GAAP adjustments shown in the below reconciliation, and to provide an additional measure of performance. 47 |
48 48 SEC Regulation G – Adjusted Manufacturing EBITDA Three Months Ended April 30, 2012 ($ millions) Net loss attributable to NIC (172) $ Less income tax benefit (143) Add back impairment and restructuring of N.A. MFG Operations 49 Loss before income tax benefit (266) $ Less equity income from financial service operations (18) Loss before income tax benefit and equity income from financial service operations (284) $ Add back manufacturing interest expense 42 Manufacturing EBIT (242) $ Add back manufacturing depreciation and amortization¹ 74 Adjusted manufacturing EBITDA (168) $ 1 Includes depreciation of equipment leased to others and excludes debt issuance cost/discount amortization Navistar International Corporation (Manufacturing operations with financial services operations on a pre-tax equity basis) NYSE: NAV 2 nd Quarter 2012 Earnings Call June 7, 2012 |
49 49 SEC Regulation G – Manufacturing Cash Fiscal Year Comparison Manufacturing cash, cash equivalents, and marketable securities reconciliation: (Dollars in Millions) April 30, 2012 October 31, 2011 October 31, 2010 October 31, 2009 Manufacturing segment cash and cash equivalents 364 $ 488 $ 534 $ 1,152 $ Financial services segment cash and cash equivalents 36 51 51 60 Consolidated cash and cash equivalents 400 $ 539 $ 585 $ 1,212 $ Manufacturing marketable securities 317 $ 698 $ 566 $ - $ Financial services segment marketable securities 20 20 20 - Consolidated marketable securities 337 $ 718 $ 586 $ - $ Manufacturing segment cash and cash equivalents 364 $ 488 $ 534 $ 1,152 $ Manufacturing marketable securities 317 698 566 - Manufacturing segment cash, cash equivalents and marketable securities 681 $ 1,186 $ 1,100 $ 1,152 $ NYSE: NAV 2 nd Quarter 2012 Earnings Call June 7, 2012 |
50 50 SEC Regulation G – Manufacturing Cash NYSE: NAV 2 nd Quarter 2012 Earnings Call June 7, 2012 Manufacturing Operations Financial Services Operations Adjustments Condensed Consolidated Cash Flows ($ in Millions) For the year ended October 31, 2011 Cash flows from operations 680 200 - 880 Cash flows from investing / capital expenditures: (485) (206) (132) (823) Cash flows from financing / debt pay down (106) 6 - (100) Effect of exchange rate changes (3) - - (3) Net cash flows 86 - (132) (46) Beginning cash, cash equivalents and marketable securities balance 1,100 71 (586) 585 Ending cash, cash equivalents and marketable securities balance 1,186 71 (718) 539 Manufacturing segment cash flow reconciliation: Manufacturing Operations Financial Services Operations Adjustments Condensed Consolidated Cash Flows ($ in Millions) For the year ended October 31, 2010 Cash flows from operations 409 698 - 1,107 Cash flows from investing / capital expenditures: (350) 492 (576) (434) Cash flows from financing / debt pay down (110) (1,180) (10) (1,300) Effect of exchange rate changes (1) 1 - - Net cash flows (52) 11 (586) (627) Beginning cash, cash equivalents and marketable securities balance 1,152 60 - 1,212 Ending cash, cash equivalents and marketable securities balance 1,100 71 (586) 585 Manufacturing segment cash flow reconciliation: |
51 51 SEC Regulation G – Manufacturing Cash NYSE: NAV 2 nd Quarter 2012 Earnings Call June 7, 2012 Manufacturing Operations Financial Services Operations Adjustments Condensed Consolidated Cash Flows ($ in Millions) For the six months ended April 30, 2012 Cash flows from operations (214) 263 - 49 Cash flows from investing / capital expenditures: (200) 144 381 325 Cash flows from financing / debt pay down (87) (423) - (510) Effect of exchange rate changes (4) 1 - (3) Net cash flows (505) (15) 381 (139) Beginning cash, cash equivalents and marketable securities balance 1,186 71 (718) 539 Ending cash, cash equivalents and marketable securities balance 681 56 (337) 400 Manufacturing segment cash flow reconciliation: Manufacturing Operations Financial Services Operations Adjustments Condensed Consolidated Cash Flows ($ in Millions) For the three months ended April 30, 2012 Cash flows from operations (72) 2 - (70) Cash flows from investing / capital expenditures: (75) (3) 102 24 Cash flows from financing / debt pay down (2) (30) (32) Effect of exchange rate changes (7) (3) - (10) Net cash flows (156) (34) 102 (88) Beginning cash, cash equivalents and marketable securities balance 837 90 (439) 488 Ending cash, cash equivalents and marketable securities balance 681 56 (337) 400 Manufacturing segment cash flow reconciliation: |
NYSE: NAV SEC Regulation G – Adjusted Net Income, Diluted EPS and Manufacturing Segment Profit – Three and Six Months Ended April 30, 2012 and 2011 52 Adjusted net income (loss) attributable to Navistar International Corporation reconciliation: 2012 2011 2012 2011 ($ in millions, except per share data) Net loss attributable to Navistar International Corporation $ (172) $ 74 $ (325) $ 68 Plus: Engineering integration costs, net of tax (A) 31 4 39 23 Restructuring of North American manufacturing operations, net of tax (B) 37 - 37 - Adjustments to pre-existing warranties, net of tax (C) 138 24 219 32 Charges for non-conformance penalties, net of tax (D) 10 - 10 - Less: Net impact of valuation allowance release (E) 181 - 181 - Adjusted net income (loss) attributable to Navistar International Corporation $ (137) $ 102 $ (201) $ 123 Diluted loss per share attributable to Navistar International Corporation $ (2.50) $ 0.93 $(4.69) $ 0.87 Effect of adjustments on diluted loss per share attributable to Navistar International Corporation 0.51 0.37 1.79 0.72 Adjusted diluted earnings (loss) per share attributable to Navistar International Corporation $ (1.99) $ 1.30 $(2.90) $ 1.59 Diluted weighted shares outstanding 68.7 78.6 69.3 77.3 Manufacturing segment profit (loss) and adjusted manufacturing segment profit (loss) reconciliation: 2012 2011 2012 2011 ($ in millions) Net loss attributable to Navistar International Corporation $ (172) $ 74 $ (325) $ 68 Less: Financial services segment profit 26 40 53 72 Corporate and eliminations (175) (129) (325) (247) Income tax benefit (expense) 133 (5) 214 (5) Manufacturing segment profit (loss) (156) 168 (267) 248 Plus: Engineering integration costs (A) 11 3 19 21 Restructuring of North American manufacturing operations (B) 38 - 38 - Adjustments to pre-existing warranties (C) 104 27 227 36 Charges for non-conformance penalties (D) 10 - 10 - Adjusted manufacturing segment profit (loss) $ 7 $ 198 $ 27 $ 305 Three Months Ended April 30, Three Months Ended April 30, Six Months Ended April 30, Six Months Ended April 30, See notes at slide #57. |
NYSE: NAV SEC Regulation G – Adjusted Profit Before Tax – Three and Six Months Ended April 30, 2012 Profit (loss) before tax and adjusted profit (loss) before tax reconciliation: ($ in millions) Profit (loss) before tax Plus tax adjustments for: Engineering integration costs (A) Restructuring of North American manufacturing operations (B) Adjustments to pre-existing warranties (C) Charges for non-conformance penalties (D) Adjusted profit (loss) before tax $ (114) $ (295) 29 38 104 10 Three Months Ended April 30,2012 53 See notes at slide #57. |
NYSE: NAV SEC Regulation G – Q2 Adjusted Manufacturing Segment Profit and Second Half of 2012 Manufacturing Segment Profit Second Half 2012 Manufacturing Segment Profit: Lower Truck Engine Parts Total Truck w/ Parts 300 $ 125 $ 425 $ Engine w/ Parts 100 $ 50 150 Manufacturing Segment Profit 300 $ 100 $ 175 $ 575 $ Upper Truck Engine Parts Total Truck w/ Parts 375 $ 150 $ 525 $ Engine w/ Parts 150 $ 50 200 Manufacturing Segment Profit 375 $ 150 $ 200 $ 725 $ 54 2012 Q2 Adjusted Manufacturing Segment Profit: Truck Engine Parts Total Q2 Manufacturing Segment Profit (89) $ (108) $ 41 $ (156) $ Plus: Engineering integration costs (A) 9 2 11 Restructuring of North American manufacturing operations (B) 28 10 38 Adjustments to pre-existing warranties (C) 26 78 104 Charges for non-conformance penalties (D) 10 10 Q2 Adjusted Manufacturing Segment Profit (26) $ (18) $ 51 $ 7 $ Truck w/ Parts (26) $ 34 $ 8 $ Engine w/ Parts (18) $ 17 (1) Q2 Adjusted Manufacturing Segment Profit (26) $ (18) $ 51 $ 7 $ See notes at slide #57. |
SEC Regulation G – Second Half of 2012 Guidance 55 Adjusted net income and diluted earnings per share attributable to Navistar International Corporation reconciliation: Lower Upper ($ in millions, except per share data) Net income attributable to Navistar International Corporation $ 125 $ 265 Plus: Engineering integration costs, net of tax (A) 47 47 Charges for non-conformance penalties, net of tax (D) 29 29 Adjusted net income attributable to Navistar International Corporation $ 200 $ 340 Diluted earnings per share attributable to Navistar International Corporation $ 1.80 $ 3.85 Effect of adjustments on diluted earnings per share attributable to Navistar International Corporation 1.10 1.05 Adjusted diluted earnings per share attributable to Navistar International Corporation $ 2.90 $ 4.90 Approximate diluted average weighted shares outstanding 68.7 68.7 Manufacturing segment profit and adjusted manufacturing segment profit reconciliation: Lower Upper ($ in millions) Net income attributable to Navistar International Corporation $ 125 $ 265 Less: Financial services segment profit, Corporate and eliminations, and income taxes (375) (385) Manufacturing segment profit 500 650 Plus: Engineering integration costs (A) 45 45 Charges for non-conformance penalties (D) 30 30 Adjusted manufacturing segment profit $ 575 $ 725 Income (loss) before tax and adjusted income (loss) before tax reconciliation: Lower Upper ($ in millions) Income (loss) before tax $ 155 $ 300 Plus: Engineering integration costs (A) 50 50 Charges for non-conformance penalties (D) 30 30 Adjusted income (loss) before tax $ 235 $ 380 Second Half 2012 Guidance Second Half 2012 Guidance Revised 2012 Guidance NYSE: NAV See notes at slide #57. |
NYSE: NAV SEC Regulation G – Revised 2012 Guidance 56 Adjusted net income and diluted earnings per share attributable to Navistar International Corporation reconciliation: Lower Upper ($ in millions, except per share data) Net income attributable to Navistar International Corporation $ 125 $ 265 Plus: Engineering integration costs, net of tax (A) 47 47 Charges for non-conformance penalties, net of tax (D) 29 29 Adjusted net income attributable to Navistar International Corporation $ 200 $ 340 Diluted earnings per share attributable to Navistar International Corporation $ 1.80 $ 3.85 Effect of adjustments on diluted earnings per share attributable to Navistar International Corporation 1.10 1.05 Adjusted diluted earnings per share attributable to Navistar International Corporation $ 2.90 $ 4.90 Approximate diluted average weighted shares outstanding 68.7 68.7 Manufacturing segment profit and adjusted manufacturing segment profit reconciliation: Lower Upper ($ in millions) Net income attributable to Navistar International Corporation $ 125 $ 265 Less: Financial services segment profit, Corporate and eliminations, and income taxes (375) (385) Manufacturing segment profit 500 650 Plus: Engineering integration costs (A) 45 45 Charges for non-conformance penalties (D) 30 30 Adjusted manufacturing segment profit $ 575 $ 725 Income (loss) before tax and adjusted income (loss) before tax reconciliation: Lower Upper ($ in millions) Income (loss) before tax $ 155 $ 300 Plus: Engineering integration costs (A) 50 50 Charges for non-conformance penalties (D) 30 30 Adjusted income (loss) before tax $ 235 $ 380 Second Half 2012 Guidance Second Half 2012 Guidance Revised 2012 Guidance See notes at slide #57. |
NYSE: NAV SEC Regulation G – Notes 57 (A) Engineering integration costs relate to the consolidation of our truck and engine engineering operations, as well as the relocation of our world headquarters. For the three months ended April 30, 2012, the charges included restructuring charges of $20 million and other related costs of $9 million. The tax impact of the second quarter adjustments was income tax expense of $2 million. For the six months ended April 30, 2012, the charges included restructuring charges of $20 million and other related costs of $21 million. The tax impact of the first half adjustments was income tax benefit of $2 million. For the three and six months ended April 30, 2011, the charges included restructuring charges of $1 million and $19 million, respectively, and other related costs of $5 million and $7 million, respectively. For the three and six months ended April 30, 2011, the tax impact of the adjustments was income tax benefits of $2 million and $3 million, respectively. Our manufacturing operations, primarily our Truck segment, recognized charges of $11 million and $19 million relating to these actions in the three and six months ended April 30, 2012, respectively, compared to $3 million and $21 million in the three and six months ended April 30, 2011, respectively. (B) Restructuring of North American manufacturing operations are charges primarily related to our ongoing restructuring plans related to our plans to close our Chatham, Ontario heavy truck plant and WCC chassis plant in Union City, Indiana, and to significantly scale back operations at our Monaco recreational vehicle headquarters and motor coach manufacturing plant in Coburg, Oregon. In the three and six months ended April 30, 2012, the charges included impairments of certain intangible assets of $38 million. The tax impact of the adjustments was an income tax benefit of $1 million. The Truck and Parts segments recognized charges of $28 million and $10 million, respectively. During the three and six months ended April 30, 2012, the Company incurred charges of $104 million and $227 million, respectively, for adjustments to pre-existing warranties. (C) During the three and six months ended April 30, 2012, the Company incurred charges of $104 million and $227 million, respectively, for adjustments to pre-existing warranties. For the three and six months ended April 30, 2012, the tax impact of the adjustments was income tax expense of $34 million and income tax benefit of $8 million, respectively. During the three and six months ended April 30, 2011, the Company incurred charges of $27 million and $36 million, respectively. For the three and six months ended April 30, 2011, the tax impact of the adjustments was income tax benefits of $3 million and $4 million, respectively. (D) In the three months ended April 30, 2012, the Company recorded charges totaling $10 million for NCPs for certain 13L engine sales that did not comply with emission standards, recognized in the Engine segment. The adjustment did not have a material impact on income taxes. (E) In the three months ended April 30, 2012, we recognized an income tax benefit of $181 million from the release of a significant portion of our income tax valuation allowance on our Canadian deferred tax assets. The above charges, A through D, have been adjusted to reflect the impact of income taxes which are calculated based on the respective period's estimated annual effective tax rate. The income tax impact of the second quarter adjustments reflects the impact of a change in the quarter to the Company's estimated annual effective tax rate. The change is the result of updates to the forecasted earnings and the jurisdictional mix. The tax impact of the adjustments may be adjusted for future changes in the estimated annual effective tax rate. |
NYSE: NAV SEC Regulation G – Normalized Annual Rate at 300K Units 58 Manufacturing segment profit and adjusted manufacturing segment profit reconciliation: Lower Upper (in millions) Net income (loss) attributable to Navistar International Corporation $ 375 $ 525 Less: Financial services segment profit, Corporate and eliminations, and income taxes (825) (875) Manufacturing segment profit $ 1,200 $ 1,400 Normalized Annual Rate at 300K Units |
NYSE: NAV 59 SEC Regulation G – Adjusted Manufacturing Segment Profit – 2003-2011 2011 2010 2009 2008 2007 2006 2005 2004 2003 (in millions) Net income (loss) attributable to Navistar International Corporation $ 1,723 $ 223 $ 320 $ 134 $ (120) $ 301 $ 139 $ (44) $ (333) Less: Financial services segment profit (loss) 129 95 40 (24) 127 147 136 132 87 Corporate and eliminations (571) (590) (519) (478) (662) (590) (412) (178) (310) Income tax benefit (expense) 1,458 (23) (37) (57) (47) (94) (6) (9) (17) Manufacturing segment profit $ 707 $ 741 $ 836 $ 693 $ 462 $ 838 $ 421 $ 11 $ (93) Plus: Ford settlement, restructuring and related charges (benefits) (A) - - (160) 37 - - - - - Impairment of property, plant, and equipment (B) - - 31 358 - - - - - Engineering integration costs (C) 51 - - - - - - - - Restructuring of North American manufacturing operations (D) 124 - - - - - - - - Adjusted manufacturing segment profit $ 882 $ 741 $ 707 $ 1,088 $ 462 $ 838 $ 421 $ 11 $ (93) (B) Impairment of property, plant, and equipment in 2008 are related to impairments to the asset groups in the Engine segment’s VEE Business Unit. The 2009 impairments relate to charges recognized by the Truck segment for impairments related to asset groups at our Chatham and Conway facilities. (C) Engineering integration costs relate to the consolidation of our truck and engine engineering operations, as well as the move of our world headquarters. These costs include restructuring charges for activities at our Fort Wayne facility and other related costs, including $51 million of engineering integration costs recognized by our manufacturing segment. (D) Restructuring of North American manufacturing operations are charges primarily related to our plans to close our Chatham, Ontario heavy truck plant and Workhorse chassis plant in Union City, Indiana, and to significantly scale back operations at our Monaco recreational vehicle headquarters and motor coach manufacturing plant in Coburg, Oregon. These costs include restructuring charges, as well as impairment charges related to certain intangible assets and property plant and equipment primarily related to these facilities, recognized by our Truck segment. Manufacturing segment profit and adjusted manufacturing segment profit reconciliation: (A) Ford settlement, restructuring and related charges (benefits) include the impact of our settlement with Ford in 2009 as well as charges and benefits recognized related to restructuring activity at our Indianapolis Casting Corporation and Indianapolis Engine Plant. The charges and benefits were recognized in our Engine segment. |
NYSE: NAV 60 SEC Regulation G – Margin Expansion Approx. Truck Engine Parts Total Truck Engine Parts Total Range Truck - N.A. w/Parts 11,500 $ 1,450 $ 12,950 $ 865 $ 250 $ 1,115 $ 8-9% Truck - Global w/Parts 1,400 150 1,550 15 30 45 2-3% Engine - Worldwide w/Parts 3,000 $ 850 3,850 150 $ 150 300 7-8% Total Consolidated 12,900 $ 3,000 $ 2,450 $ 18,350 $ 880 $ 150 $ 430 $ 1,460 $ ~8% Approx. Truck Engine Parts Total Truck Engine Parts Total Range Truck - N.A. w/Parts 12,225 $ 1,450 $ 13,675 $ 1,060 $ 265 $ 1,325 $ 9-10% Truck - Global w/Parts 1,800 160 1,960 85 30 115 6-8% Engine - Worldwide w/Parts 3,475 $ 880 4,355 200 $ 160 360 8-10% Total Consolidated 14,025 $ 3,475 $ 2,490 $ 19,990 $ 1,145 $ 200 $ 455 $ 1,800 $ ~9% 2012 Annualized Outgoing Run Rate Sales Segment Profit Strategic Target Sales Segment Profit |