Exhibit 99.1
| Navistar International Corporation 2701 Navistar Dr. Lisle, IL 60532 USA P: 331-332-5000 W: navistar.com |
Media contact: Investor contact: Web site: | Steve Schrier, 331-332-2264 Kevin Sadowski, 331-332-2406 www.Navistar.com/newsroom |
NAVISTAR REPORTS FOURTH QUARTER RESULTS
| • | Reports net loss of $72 million, or 88 cents per share, on revenues of $3.0 billion |
| • | Chargeouts in quarter up 23 percent year-over-year; order backlog up 24 percent |
| • | Finishes year with $311 million in structural cost savings |
| • | Ends quarter with $1 billion in manufacturing cash |
| • | Remains on track to achieve 8-10 percent EBITDA margin run rate exiting FY2015 |
LISLE, Ill. — December 16, 2014 —Navistar International Corporation (NYSE: NAV) today announced a fourth quarter 2014 net loss of $72 million, or $0.88 per diluted share, compared to a fourth quarter 2013 net loss of $154 million, or $1.91 per diluted share. Revenues in the quarter were $3.0 billion, up $257 million or 9.3 percent, versus the fourth quarter of 2013.
“Our fourth quarter results—and the results for the entire fiscal year—reflect our continued progress improving business operations across the enterprise and positive trends in the North American industry,” said Troy A. Clarke, Navistar president and chief executive officer. “In 2014, we increased our production, chargeouts and order backlog; continued to reduce warranty spend; and achieved structural cost savings that further lowered our breakeven point.”
Fourth quarter 2014 EBITDA was $66 million versus an EBITDA loss of $227 million in the same period one year ago. This year’s fourth quarter included $60 million of restructuring, impairments and other charges partially offset by a $10 million favorable adjustment in pre-existing warranty. As a result, adjusted fourth quarter 2014 EBITDA was $116 million, which was within the company’s fourth quarter guidance.
Navistar finished the fourth quarter 2014 with $1 billion in manufacturing cash, cash equivalents and marketable securities, which included a $91 million increase in an intercompany loan from Navistar Financial Corporation (NFC), Navistar’s captive finance company, to support used-truck activities.
The company reduced its year-over-year structural costs in the fourth quarter by an additional $66 million, including $48 million in savings from selling, general, and administrative (SG&A) expense and $18 million in reduced engineering costs. Navistar reduced structural costs by $311 million for the year, which exceeded the company’s full year target of $300 million.
Navistar’s warranty spend improved in the fourth quarter, down 22 percent year-over-year. These results were driven by quality performance improvements, lower repair costs and a reduced population of legacy engines still in the warranty periods.
Other fourth quarter highlights included a 23 percent year-over-year increase in chargeouts for Class 6-8 trucks and buses in the United States and Canada. Chargeouts for Class 6-8 trucks were up 12 percent for fiscal year 2014, which included a 21 percent increase in Class 8 heavy trucks compared to 2013. In addition, end-of-year order backlog for Class 6-8 trucks was up 24 percent year-over-year.
The net loss for fiscal year 2014 was $619 million, or $7.60 per diluted share, versus a net loss of $898 million, or $11.17 per diluted share, for fiscal year 2013. Fiscal year 2014 adjusted EBITDA was $294 million versus $89 million adjusted EBITDA for 2013. Revenue for fiscal year 2014 was flat at $10.8 billion compared to fiscal year 2013.
“We continue to make the necessary changes to improve the company and we’re entering 2015 in a much stronger position than we were one year ago,” Clarke added. “We’ve restructured our core North American business, have the right products in place, and established the right leadership team. We are well-positioned to meet our 8-10 percent EBITDA margin run rate target exiting 2015.”
The company provided the following guidance:
| • | Forecasts retail deliveries of Class 6-8 trucks and buses in the United States and Canada will be in the range of 350,000 units to 380,000 units for fiscal year 2015. |
| • | Q1-2015 adjusted EBITDA of $0 to $50 million, excluding pre-existing warranty and one-time items. |
| • | Q1-2015 manufacturing cash, cash equivalents and marketable securities between $700 million – $800 million. |
Navistar will host an Analyst Day February 4 at the company’s headquarters in Lisle, Ill., to share details and plans for fiscal year 2015 and beyond.
Summary of Financial Results:
| Quarters Ended October 31, | Years Ended October 31, | |||||||||||||||
| (in millions, except per share data) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Sales and revenues, net | $ | 3,008 | $ | 2,751 | $ | 10,806 | $ | 10,775 | ||||||||
Segment Results: | ||||||||||||||||
North America Truck | $ | (55 | ) | $ | (355 | ) | $ | (408 | ) | $ | (902 | ) | ||||
North America Parts | 143 | 147 | 500 | 476 | ||||||||||||
Global Operations | (33 | ) | (6 | ) | (218 | ) | (6 | ) | ||||||||
Financial Services | 26 | 17 | 97 | 81 | ||||||||||||
Loss from continuing operations, net of tax(A) | $ | (72 | ) | $ | (153 | ) | $ | (622 | ) | $ | (857 | ) | ||||
Net loss(A) | (72 | ) | (154 | ) | (619 | ) | (898 | ) | ||||||||
Diluted loss per share from continuing operations(A) | $ | (0.88 | ) | $ | (1.90 | ) | $ | (7.64 | ) | $ | (10.66 | ) | ||||
Diluted loss per share(A) | (0.88 | ) | (1.91 | ) | (7.60 | ) | (11.17 | ) | ||||||||
| (A) | Amounts attributable to Navistar International Corporation. |
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North America Truck —For the fourth quarter 2014, the North America Truck segment recorded a loss of $55 million, compared with a year-ago fourth quarter loss of $355 million. The year-over-year improvement was primarily driven by higher traditional truck volumes, declining warranty expense and structural costs, as well as the non-repeat of certain impairment charges. Chargeouts for traditional markets were up year-over year in the fourth quarter by 23 percent, reflecting a 14 percent increase of Class 8 trucks and a 41 percent increase in Class 6/7 trucks.
Navistar recently announced its plans to close its block and head foundry operations in Indianapolis, resulting in an $11 million charge in the quarter for employee separation benefits, pension and other postretirement contractual termination benefits, inventory reserves and other related costs. As a result, the company expects to reduce operating costs by about $13 million annually.
For the fiscal year 2014, the North America truck segment recorded a loss of $408 million, compared with a fiscal year 2013 loss of $902 million, primarily driven by lower charges for adjustments to pre-existing warranties of $52 million versus $404 million in fiscal year 2013.
North America Parts —For the fourth quarter 2014, the North America Parts segment recorded a profit of $143 million, compared to a year-ago fourth quarter profit of $147 million. The decrease was primarily due to a decline in military and Blue Diamond Parts sales, partially offset by improvements in our commercial markets.
For the fiscal year 2014, the North America Parts segment recorded a profit of $500 million, compared to a fiscal year 2013 profit of $476 million, primarily driven by record sales and lower operating costs in our North American commercial markets.
Global Operations —For the fourth quarter 2014, the Global Operations segment recorded a loss of $33 million compared to a year-ago fourth quarter loss of $6 million. The year-over-year decline was primarily driven by a decline in South American engine volumes as well as charges related to right-sizing actions for the Brazilian truck business.
For the fiscal year 2014, the Global Operations segment recorded a loss of $218 million compared to a year-ago fiscal year loss of $6 million, primarily driven by $178 million of asset impairment charges and the fourth quarter charges recognized by the Brazilian truck business. In addition, the continued economic downturn in the Brazil economy has contributed to lower engine volumes of 22 percent in 2014. Partially offsetting these factors were improvements in the export truck operations.
Financial Services — For the fourth quarter 2014, the Financial Services segment recorded a profit of $26 million compared to fourth quarter 2013 profit of $17 million. The increase was driven by the interest earned on an intercompany loan and an increase in the net financial margin from higher average finance receivables balances during the quarter.
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For the fiscal year 2014, the Financial Services segment recorded a profit of $97 million, compared to a fiscal year 2013 profit of $81 million, primarily driven by higher interest income from intercompany loans and lower structural costs, which more than offset the effects of lower overall retail balances and an increase in the provision for loan losses in Mexico.
About Navistar
Navistar International Corporation (NYSE: NAV) is a holding company whose subsidiaries and affiliates produce International® brand commercial and military trucks, MaxxForce® brand diesel engines, and IC Bus™ brand school and commercial buses. An affiliate also provides truck and diesel engine service parts. Another affiliate offers financing services. The International® ProStar® with Cummins ISX15 and International® TerraStar® 4x4 were named 2014 heavy-duty and medium-duty commercial truck of the year, respectively, by the American Truck Dealers (ATD) association. Additional information is available atwww.Navistar.com.
Forward-Looking 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. 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, 2014. 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.
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4
Navistar International Corporation and Subsidiaries
Consolidated Statements of Operations
| (Unaudited) | ||||||||||||||||
| Quarters Ended October 31, | Years Ended October 31, | |||||||||||||||
| (in millions, except per share data) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Sales and revenues | ||||||||||||||||
Sales of manufactured products, net | $ | 2,970 | $ | 2,712 | $ | 10,653 | $ | 10,617 | ||||||||
Finance revenues | 38 | 39 | 153 | 158 | ||||||||||||
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Sales and revenues, net | 3,008 | 2,751 | 10,806 | 10,775 | ||||||||||||
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Costs and expenses | ||||||||||||||||
Costs of products sold | 2,635 | 2,565 | 9,534 | 9,761 | ||||||||||||
Restructuring charges | 15 | 11 | 42 | 25 | ||||||||||||
Asset impairment charges | 10 | 80 | 183 | 97 | ||||||||||||
Selling, general and administrative expenses | 262 | 310 | 979 | 1,215 | ||||||||||||
Engineering and product development costs | 78 | 96 | 331 | 406 | ||||||||||||
Interest expense | 80 | 81 | 314 | 321 | ||||||||||||
Other income, net | (7 | ) | (30 | ) | (12 | ) | (65 | ) | ||||||||
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Total costs and expenses | 3,073 | 3,113 | 11,371 | 11,760 | ||||||||||||
Equity in income (loss) of non-consolidated affiliates | 4 | 5 | 9 | 11 | ||||||||||||
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Loss from continuing operations before income taxes | (61 | ) | (357 | ) | (556 | ) | (974 | ) | ||||||||
Income tax benefit (expense) | (1 | ) | 224 | (26 | ) | 171 | ||||||||||
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Loss from continuing operations | (62 | ) | (133 | ) | (582 | ) | (803 | ) | ||||||||
Income (loss) from discontinued operations, net of tax | — | (1 | ) | 3 | (41 | ) | ||||||||||
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Net loss | (62 | ) | (134 | ) | (579 | ) | (844 | ) | ||||||||
Less: Net income attributable to non-controlling interests | 10 | 20 | 40 | 54 | ||||||||||||
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Net loss attributable to Navistar International Corporation | $ | (72 | ) | $ | (154 | ) | $ | (619 | ) | $ | (898 | ) | ||||
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Amounts attributable to Navistar International Corporation common shareholders: | ||||||||||||||||
Loss from continuing operations, net of tax | $ | (72 | ) | $ | (153 | ) | $ | (622 | ) | $ | (857 | ) | ||||
Income (loss) from discontinued operations, net of tax | — | (1 | ) | 3 | (41 | ) | ||||||||||
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Net loss | $ | (72 | ) | $ | (154 | ) | $ | (619 | ) | $ | (898 | ) | ||||
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Earnings (loss) per share: | ||||||||||||||||
Basic: | ||||||||||||||||
Continuing operations | $ | (0.88 | ) | $ | (1.90 | ) | $ | (7.64 | ) | $ | (10.66 | ) | ||||
Discontinued operations | — | (0.01 | ) | 0.04 | (0.51 | ) | ||||||||||
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| $ | (0.88 | ) | $ | (1.91 | ) | $ | (7.60 | ) | $ | (11.17 | ) | |||||
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Diluted: | ||||||||||||||||
Continuing operations | $ | (0.88 | ) | $ | (1.90 | ) | $ | (7.64 | ) | $ | (10.66 | ) | ||||
Discontinued operations | — | (0.01 | ) | 0.04 | (0.51 | ) | ||||||||||
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| $ | (0.88 | ) | $ | (1.91 | ) | $ | (7.60 | ) | $ | (11.17 | ) | |||||
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Weighted average shares outstanding: | ||||||||||||||||
Basic | 81.5 | 80.6 | 81.4 | 80.4 | ||||||||||||
Diluted | 81.5 | 80.6 | 81.4 | 80.4 | ||||||||||||
5
Navistar International Corporation and Subsidiaries
Consolidated Balance Sheets
| As of October 31, | ||||||||
| (in millions, except per share data) | 2014 | 2013 | ||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 497 | $ | 755 | ||||
Restricted cash and cash equivalents | 40 | — | ||||||
Marketable securities | 605 | 830 | ||||||
Trade and other receivables, net | 553 | 737 | ||||||
Finance receivables, net | 1,758 | 1,597 | ||||||
Inventories | 1,319 | 1,210 | ||||||
Deferred taxes, net | 55 | 72 | ||||||
Other current assets | 186 | 258 | ||||||
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Total current assets | 5,013 | 5,459 | ||||||
Restricted cash | 131 | 91 | ||||||
Trade and other receivables, net | 25 | 29 | ||||||
Finance receivables, net | 280 | 338 | ||||||
Investments in non-consolidated affiliates | 73 | 77 | ||||||
Property and equipment, net | 1,562 | 1,741 | ||||||
Goodwill | 38 | 184 | ||||||
Intangible assets, net | 90 | 138 | ||||||
Deferred taxes, net | 145 | 159 | ||||||
Other noncurrent assets | 86 | 99 | ||||||
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Total assets | $ | 7,443 | $ | 8,315 | ||||
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LIABILITIES and STOCKHOLDERS’ DEFICIT | ||||||||
Liabilities | ||||||||
Current liabilities | ||||||||
Notes payable and current maturities of long-term debt | $ | 1,295 | $ | 1,163 | ||||
Accounts payable | 1,564 | 1,502 | ||||||
Other current liabilities | 1,372 | 1,596 | ||||||
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Total current liabilities | 4,231 | 4,261 | ||||||
Long-term debt | 3,929 | 3,922 | ||||||
Postretirement benefits liabilities | 2,862 | 2,564 | ||||||
Deferred taxes, net | 14 | 33 | ||||||
Other noncurrent liabilities | 1,025 | 1,136 | ||||||
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Total liabilities | 12,061 | 11,916 | ||||||
Redeemable equity securities | 2 | 4 | ||||||
Stockholders’ deficit | ||||||||
Series D convertible junior preference stock | 3 | 3 | ||||||
Common stock (81.4 and 80.5 shares issued, respectively; and $0.10 par value per share and 220 shares authorized, at both dates) | 9 | 9 | ||||||
Additional paid-in capital | 2,500 | 2,477 | ||||||
Accumulated deficit | (4,682 | ) | (4,063 | ) | ||||
Accumulated other comprehensive loss | (2,263 | ) | (1,824 | ) | ||||
Common stock held in treasury, at cost (5.4 and 6.3 shares, respectively) | (221 | ) | (251 | ) | ||||
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Total stockholders’ deficit attributable to Navistar International Corporation | (4,654 | ) | (3,649 | ) | ||||
Stockholders’ equity attributable to non-controlling interests | 34 | 44 | ||||||
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Total stockholders’ deficit | (4,620 | ) | (3,605 | ) | ||||
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Total liabilities and stockholders’ deficit | $ | 7,443 | $ | 8,315 | ||||
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6
Navistar International Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
| Years Ended October 31, | ||||||||
| (in millions) | 2014 | 2013 | ||||||
Cash flows from operating activities | ||||||||
Net loss | $ | (579 | ) | $ | (844 | ) | ||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
Depreciation and amortization | 227 | 282 | ||||||
Depreciation of equipment leased to others | 105 | 135 | ||||||
Deferred taxes, including change in valuation allowance | (15 | ) | (226 | ) | ||||
Asset impairment charges | 183 | 105 | ||||||
Gain on sales of investments and businesses, net | — | (29 | ) | |||||
Amortization of debt issuance costs and discount | 49 | 57 | ||||||
Stock-based compensation | 16 | 24 | ||||||
Provision for doubtful accounts, net of recoveries | 20 | 20 | ||||||
Equity in income of non-consolidated affiliates, net of dividends | 3 | 2 | ||||||
Write-off of debt issuance cost and discount | 1 | 6 | ||||||
Other non-cash operating activities | (41 | ) | (70 | ) | ||||
Changes in other assets and liabilities, exclusive of the effects of businesses disposed: | ||||||||
Trade and other receivables | 55 | 68 | ||||||
Finance receivables | (33 | ) | 187 | |||||
Inventories | (129 | ) | 264 | |||||
Accounts payable | 84 | (121 | ) | |||||
Other assets and liabilities | (282 | ) | 240 | |||||
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Net cash provided by (used in) operating activities | (336 | ) | 100 | |||||
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Cash flows from investing activities | ||||||||
Purchases of marketable securities | (1,812 | ) | (1,779 | ) | ||||
Sales of marketable securities | 1,576 | 1,217 | ||||||
Maturities of marketable securities | 461 | 198 | ||||||
Net change in restricted cash and cash equivalents | (80 | ) | 70 | |||||
Capital expenditures | (88 | ) | (167 | ) | ||||
Purchases of equipment leased to others | (189 | ) | (432 | ) | ||||
Proceeds from sales of property and equipment | 43 | 25 | ||||||
Investments in non-consolidated affiliates | — | (24 | ) | |||||
Proceeds from sales of affiliates | 14 | 82 | ||||||
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Net cash used in investing activities | (75 | ) | (810 | ) | ||||
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Cash flows from financing activities | ||||||||
Proceeds from issuance of securitized debt | 255 | 529 | ||||||
Principal payments on securitized debt | (126 | ) | (773 | ) | ||||
Proceeds from issuance of non-securitized debt | 663 | 641 | ||||||
Principal payments on non-securitized debt | (862 | ) | (475 | ) | ||||
Net increase in notes and debt outstanding under revolving credit facilities | 255 | 274 | ||||||
Principal payments under financing arrangements and capital lease obligations | (20 | ) | (60 | ) | ||||
Debt issuance costs | (15 | ) | (20 | ) | ||||
Proceeds from financed lease obligations | 60 | 294 | ||||||
Issuance of common stock | — | 14 | ||||||
Proceeds from exercise of stock options | 19 | 12 | ||||||
Dividends paid by subsidiaries to non-controlling interest | (50 | ) | (47 | ) | ||||
Other financing activities | — | 4 | ||||||
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Net cash provided by financing activities | 179 | 393 | ||||||
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Effect of exchange rate changes on cash and cash equivalents | (26 | ) | (15 | ) | ||||
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Decrease in cash and cash equivalents | (258 | ) | (332 | ) | ||||
Cash and cash equivalents at beginning of the year | 755 | 1,087 | ||||||
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Cash and cash equivalents at end of the year | $ | 497 | $ | 755 | ||||
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7
Navistar International Corporation and Subsidiaries
Segment Reporting
(Unaudited)
We define segment profit (loss) as net income (loss) from continuing operations attributable to Navistar International Corporation excluding income tax benefit (expense). The following tables present selected financial information for our reporting segments:
| (in millions) | North America Truck | North America Parts | Global Operations | Financial Services(A) | Corporate and Eliminations | Total | ||||||||||||||||||
Quarter Ended October 31, 2014 | ||||||||||||||||||||||||
External sales and revenues, net | $ | 1,902 | $ | 653 | $ | 415 | $ | 38 | $ | — | $ | 3,008 | ||||||||||||
Intersegment sales and revenues | 90 | 13 | 9 | 22 | (134 | ) | — | |||||||||||||||||
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Total sales and revenues, net | $ | 1,992 | $ | 666 | $ | 424 | $ | 60 | $ | (134 | ) | $ | 3,008 | |||||||||||
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Income (loss) from continuing operations attributable to NIC, net of tax | $ | (55 | ) | $ | 143 | $ | (33 | ) | $ | 26 | $ | (153 | ) | $ | (72 | ) | ||||||||
Income tax expense | — | — | — | — | (1 | ) | (1 | ) | ||||||||||||||||
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Segment profit (loss) | $ | (55 | ) | $ | 143 | $ | (33 | ) | $ | 26 | $ | (152 | ) | $ | (71 | ) | ||||||||
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Depreciation and amortization | $ | 44 | $ | 3 | $ | 8 | $ | 13 | $ | 8 | $ | 76 | ||||||||||||
Interest expense | — | — | — | 19 | 61 | 80 | ||||||||||||||||||
Equity in income of non-consolidated affiliates | 2 | 1 | 1 | — | — | 4 | ||||||||||||||||||
Capital expenditures(B) | 23 | 1 | 2 | — | 5 | 31 | ||||||||||||||||||
| (in millions) | North America Truck | North America Parts | Global Operations | Financial Services(A) | Corporate and Eliminations | Total | ||||||||||||||||||
Quarter Ended October 31, 2013 | ||||||||||||||||||||||||
External sales and revenues, net | $ | 1,618 | $ | 685 | $ | 409 | $ | 39 | $ | — | $ | 2,751 | ||||||||||||
Intersegment sales and revenues | 104 | 12 | 18 | 16 | (150 | ) | — | |||||||||||||||||
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Total sales and revenues, net | $ | 1,722 | $ | 697 | $ | 427 | $ | 55 | $ | (150 | ) | $ | 2,751 | |||||||||||
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Income (loss) from continuing operations attributable to NIC, net of tax | $ | (355 | ) | $ | 147 | $ | (6 | ) | $ | 17 | $ | 44 | $ | (153 | ) | |||||||||
Income tax expense | — | — | — | — | 224 | 224 | ||||||||||||||||||
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Segment profit (loss) | $ | (355 | ) | $ | 147 | $ | (6 | ) | $ | 17 | $ | (180 | ) | $ | (377 | ) | ||||||||
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Depreciation and amortization | $ | 61 | $ | 4 | $ | 5 | $ | 11 | $ | 6 | $ | 87 | ||||||||||||
Interest expense | — | — | — | 18 | 63 | 81 | ||||||||||||||||||
Equity in income (loss) of non-consolidated affiliates | 3 | 2 | — | — | — | 5 | ||||||||||||||||||
Capital expenditures(B) | 29 | — | (2 | ) | 1 | 3 | 31 | |||||||||||||||||
8
| (in millions) | North America Truck | North America Parts | Global Operations | Financial Services(A) | Corporate and Eliminations | Total | ||||||||||||||||||
Year Ended October 31, 2014 | ||||||||||||||||||||||||
External sales and revenues, net | $ | 6,660 | $ | 2,471 | $ | 1,522 | $ | 153 | $ | — | $ | 10,806 | ||||||||||||
Intersegment sales and revenues | 420 | 46 | 35 | 79 | (580 | ) | — | |||||||||||||||||
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Total sales and revenues, net | $ | 7,080 | $ | 2,517 | $ | 1,557 | $ | 232 | $ | (580 | ) | $ | 10,806 | |||||||||||
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Income (loss) from continuing operations attributable to NIC, net of tax | $ | (408 | ) | $ | 500 | $ | (218 | ) | $ | 97 | $ | (593 | ) | $ | (622 | ) | ||||||||
Income tax expense | — | — | — | — | (26 | ) | (26 | ) | ||||||||||||||||
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Segment profit (loss) | $ | (408 | ) | $ | 500 | $ | (218 | ) | $ | 97 | $ | (567 | ) | $ | (596 | ) | ||||||||
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Depreciation and amortization | $ | 212 | $ | 15 | $ | 32 | $ | 46 | $ | 27 | $ | 332 | ||||||||||||
Interest expense | — | — | — | 71 | 243 | 314 | ||||||||||||||||||
Equity in income (loss) of non-consolidated affiliates | 5 | 4 | — | — | — | 9 | ||||||||||||||||||
Capital expenditures(B) | 65 | 6 | 8 | 1 | 8 | 88 | ||||||||||||||||||
| (in millions) | North America Truck | North America Parts | Global Operations | Financial Services(A) | Corporate and Eliminations | Total | ||||||||||||||||||
Year Ended October 31, 2013 | ||||||||||||||||||||||||
External sales and revenues, net | $ | 6,312 | $ | 2,558 | $ | 1,747 | $ | 158 | $ | — | $ | 10,775 | ||||||||||||
Intersegment sales and revenues | 486 | 57 | 78 | 75 | (696 | ) | — | |||||||||||||||||
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Total sales and revenues, net | $ | 6,798 | $ | 2,615 | $ | 1,825 | $ | 233 | $ | (696 | ) | $ | 10,775 | |||||||||||
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Income (loss) from continuing operations attributable to NIC, net of tax | $ | (902 | ) | $ | 476 | $ | (6 | ) | $ | 81 | $ | (506 | ) | $ | (857 | ) | ||||||||
Income tax benefit | — | — | — | — | 171 | 171 | ||||||||||||||||||
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Segment profit (loss) | $ | (902 | ) | $ | 476 | $ | (6 | ) | $ | 81 | $ | (677 | ) | $ | (1,028 | ) | ||||||||
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Depreciation and amortization | $ | 305 | $ | 17 | $ | 32 | $ | 40 | $ | 23 | $ | 417 | ||||||||||||
Interest expense | — | — | — | 70 | 251 | 321 | ||||||||||||||||||
Equity in income (loss) of non-consolidated affiliates | 10 | 6 | (5 | ) | — | — | 11 | |||||||||||||||||
Capital expenditures(B) | 142 | 2 | 9 | 2 | 12 | 167 | ||||||||||||||||||
| (in millions) | North America Truck | North America Parts | Global Operations | Financial Services | Corporate and Eliminations | Total | ||||||||||||||||||
Segment assets, as of: | ||||||||||||||||||||||||
October 31, 2014 | $ | 2,145 | $ | 682 | $ | 749 | $ | 2,598 | $ | 1,269 | $ | 7,443 | ||||||||||||
October 31, 2013 | 2,250 | 716 | 1,162 | 2,355 | 1,832 | 8,315 | ||||||||||||||||||
| (A) | Total sales and revenues in the Financial Services segment include interest revenues of $44 and $41 million for quarters ended October 31, 2014 and 2013, respectively and $170 million and $181 million for the years ended October 31, 2014 and 2013, respectively. |
| (B) | Exclusive of purchases of equipment leased to others. |
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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 and are reconciled to the most appropriate GAAP number below.
Earnings (loss) Before Interest, Income Taxes, Depreciation, and Amortization (“EBITDA”):
We define EBITDA as our consolidated net income (loss) from continuing operations attributable to Navistar International Corporation, net of tax, plus manufacturing interest expense, income taxes, and depreciation and amortization. We believe EBITDA provides meaningful information to the performance of our business and therefore we use it to supplement our GAAP reporting. 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.
Adjusted EBITDA:
We believe that adjusted EBITDA, which excludes certain identified items that we do not consider to be part of our ongoing business, improves the comparability of year to year results, and is representative of our underlying performance. Management 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 reconciliations, and to provide an additional measure of performance.
Manufacturing Cash, Cash Equivalents, and Marketable Securities:
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 our ability to meet our operating requirements, capital expenditures, equity investments, and financial obligations.
Structural costs consists of Selling, general and administrative expenses and Engineering and product development costs.
EBITDA reconciliation:
| Quarters Ended October 31, | Years Ended October 31, | |||||||||||||||
| (in millions) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Loss from continuing operations attributable to NIC, net of tax | $ | (72 | ) | $ | (153 | ) | $ | (622 | ) | $ | (857 | ) | ||||
Plus: | ||||||||||||||||
Depreciation and amortization expense | 76 | 87 | 332 | 417 | ||||||||||||
Manufacturing interest expense(A) | 61 | 63 | 243 | 251 | ||||||||||||
Less: | ||||||||||||||||
Income tax benefit (expense) | (1 | ) | 224 | (26 | ) | 171 | ||||||||||
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EBITDA | $ | 66 | $ | (227 | ) | $ | (21 | ) | $ | (360 | ) | |||||
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| (A) | Manufacturing interest expense is the net interest expense primarily generated for borrowings that support the manufacturing and corporate operations, adjusted to eliminate intercompany interest expense with our Financial Services segment. The following table reconciles Manufacturing interest expense to the consolidated interest expense: |
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| Quarters Ended October 31, | Years Ended October 31, | |||||||||||||||
| (in millions) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Interest expense | $ | 80 | $ | 81 | $ | 314 | $ | 321 | ||||||||
Less: Financial services interest expense | 19 | 18 | 71 | 70 | ||||||||||||
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Manufacturing interest expense | $ | 61 | $ | 63 | $ | 243 | $ | 251 | ||||||||
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Adjusted EBITDA reconciliation:
| Quarter Ended October 31, 2014 | For the Years Ended October 31, | |||||||||||
| (in millions) | 2014 | 2013 | ||||||||||
EBITDA(reconciled above) | $ | 66 | $ | (21 | ) | $ | (360 | ) | ||||
Less significant items of: | ||||||||||||
Adjustments to pre-existing warranties(A) | (10 | ) | 55 | 404 | ||||||||
Brazil truck business actions(B) | 29 | 29 | — | |||||||||
Foundry actions(C) | 27 | 27 | — | |||||||||
Continental Mixer asset impairment(D) | — | 19 | — | |||||||||
Canadian FSCO Tribunal Ruling(E) | — | 14 | — | |||||||||
Other Restructuring charges and strategic initiatives(F) | 4 | 22 | 25 | |||||||||
Brazil engine impairments(G) | — | 149 | — | |||||||||
North America asset impairments(H) | — | — | 97 | |||||||||
Bison divestiture(I) | — | — | (16 | ) | ||||||||
Mahindra joint venture divestiture(J) | — | — | (26 | ) | ||||||||
Legal settlement(K) | — | — | (35 | ) | ||||||||
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| 50 | 315 | 449 | ||||||||||
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Adjusted EBITDA | $ | 116 | $ | 294 | $ | 89 | ||||||
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| (A) | Adjustments to pre-existing warranties reflect changes in our estimate of warranty costs for products sold in prior periods. |
| (B) | In the fourth quarter of 2014, the Global operations segment recorded $29 million in charges related to actions to right-size the Brazil Truck business. These charge primarily related to inventory. |
| (C) | In the fourth quarter of 2014 the North America Truck segment recorded $11 million of charges related to our anticipated exit from our Indianapolis, Indiana foundry facility and certain assets in our Waukesha, Wisconsin foundry operations which were impaired and certain other charges were recorded. The charges included $13 million of restructuring charges, $7 million of fixed asset impairment charges and $7 million of charges for inventory reserves. |
| (D) | In 2014, the North America Truck segment recorded impairment charges related to certain amortizing intangible assets which were determined to be fully impaired. |
| (E) | In the third quarter of 2014, the North America Truck segment recorded $14 million of charges related to the 2011 closure of its Chatham, Ontario plant, based on a ruling from the Financial Services Tribunal in Ontario Canada. |
| (F) | In 2014, the Company recorded restructuring charges related to cost reduction actions that included a reduction-in-force in the U.S and Brazil. In 2013, the Company recorded restructuring charges related to cost reduction actions that included a reduction in force in the U.S. |
| (G) | In the second quarter of 2014, the Global Operations segment recorded asset impairment charges of $149 million for the impairment of certain intangible assets of our Brazilian engine reporting unit. |
| (H) | In 2013, the North America Truck segment recognized asset impairment charges consisting of: $77 million related to the impairment of the North America Truck segment’s entire goodwill balance, which was recorded in the fourth quarter of 2013, and $20 million which were primarily the result of our ongoing evaluation of our portfolio of assets to validate their strategic and financial fit, which led to the discontinuation of certain engineering programs related to products that were determined to be outside of our core operations or not performing to our expectations. |
| (I) | In the fourth quarter of 2013, as a result of the divestiture of Bison the company recognized a gain of $16 million. |
| (J) | In the second quarter of 2013, the Company sold its stake in the Mahindra Joint Ventures to Mahindra for $33 million and the Global Operations segment recognized a gain of $26 million. |
| (K) | In the first quarter of 2013 as a result of the legal settlement with Deloitte and Touche LLP, the Company received cash proceeds of $35 million. |
The above items did not have a material impact on taxes due to the valuation allowances on our U.S. and Brazil deferred tax assets.
11
Manufacturing segment cash and cash equivalents and marketable securities reconciliation:
| As of October 31, 2014 | ||||||||||||
| (in millions) | Manufacturing Operations | Financial Services Operations | Consolidated Balance Sheet | |||||||||
Assets | ||||||||||||
Cash and cash equivalents | $ | 440 | $ | 57 | $ | 497 | ||||||
Marketable securities | 578 | 27 | 605 | |||||||||
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Total Cash and cash equivalents and Marketable securities | $ | 1,018 | $ | 84 | $ | 1,102 | ||||||
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