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Press release from PR Newswire

Navistar Reports Fourth Quarter Results

Wednesday, December 19, 2012

Navistar Reports Fourth Quarter Results07:15 EST Wednesday, December 19, 2012-- Reports fourth quarter loss of $2.8 billion, including $2 billion non-cash domestic tax valuation allowance, $149 million in additional pre-existing warranty reserve, on revenue of $3.3 billion -- Manufacturing cash and marketable securities of $1.5 billion exceeds guidance -- Company makes progress on 12-18 month turnaround planLISLE, Ill., Dec. 19, 2012 /PRNewswire/ -- Navistar International Corporation (NYSE: NAV) today announced a fourth quarter 2012 net loss of $2.8 billion, or $40.13 per diluted share, compared to fourth quarter 2011 net income of $255 million, or $3.48 per diluted share. Current quarter results included increased non-cash tax expense of $2 billion, or $28.59 per share, for the increase in deferred tax valuation allowance on U.S. deferred tax assets. Fourth quarter 2012 results also included pre-tax charges of $149 million in additional pre-existing warranty expenses primarily related to EPA 2010 big bore engines, $73 million for cost reduction actions, $16 million in charges for the restructuring of North American manufacturing operations and engineering integration and $14 million in non-conformance penalties (NCPs). (Logo: http://photos.prnewswire.com/prnh/20120127/MM32830LOGO-a) The company reported a pre-tax loss of $566 million in the fourth quarter 2012 versus a $275 million pre-tax profit in the fourth quarter 2011. Revenues in the quarter were $3.3 billion, down 24 percent from the fourth quarter of 2011. The loss was reflective of lower sales, as well as the adjustments to pre-existing warranties and the charges related to the cost-reduction actions.The company exceeded its fiscal year 2012 guidance with $1.5 billion in manufacturing cash and marketable securities. Contributing factors in the fourth quarter included $363 million improvement in working capital and net proceeds of $192 million from an equity offering."We continue to make significant progress on our turnaround and the complexity of this quarter's results is reflective of the actions necessary during this time of transition," said Lewis B. Campbell, Navistar chairman and chief executive officer.  "The team has delivered numerous successes, including exceeding our cash guidance, launching the ProStar with the ISX 15-liter ahead of schedule and moving forward with several opportunities identified during our ROIC-focused business reviews. Additionally, with the improvement to our manufacturing footprint by closing our Garland, Texas, manufacturing plant and the completion of workforce reductions in North America and South America, we are positioned to exceed our goal of reducing structural costs by $175 million."Unfortunately, we saw a spike in warranty spend in late October and early November for the few remaining engine issues and the cost to take the proactive actions to support our customers and fix those items is higher than we anticipated," Campbell continued.  "However, the fact is that customer feedback and positive three- and nine-months-in-service data show today we are delivering the highest quality trucks since the 2010 launch, and quality will continue to be our top priority."The net loss for fiscal year 2012 was $3.0 billion, or $43.56 per diluted share, versus net income for fiscal 2011 of $1.7 billion, or $22.64 per diluted share. SEGMENT REPORTINGSummary Financial Results:Quarter EndedOctober 31Year EndedOctober 31(in millions, except per share data)2012201120122011Sales and revenues, net$3,279$4,323$12,948$13,958Segment Results:Truck$(160)$287$(320)$336Engine(287)58(562)84Parts7687240287Financial Services162791129Income (loss) before income taxes$(566)$275$(1,182)$320Net income (loss) attributable to Navistar International Corporation(2,769)255(3,010)1,723Diluted earnings (loss) per share attributable to Navistar International Corporation(40.13)3.48(43.56)22.64Truck ? For the fourth quarter 2012, the truck segment recorded a loss of $160 million, compared with a year-ago fourth quarter profit of $287 million. For the fiscal year 2012, the truck segment recorded a loss of $320 million compared with fiscal year 2011 profit of $336 million.The segment's 2012 loss was primarily driven by decreased military sales and product mix, higher commodity costs and warranty expense related to extended warranty contracts on 2010 emission engines.  The realization of certain benefits from manufacturing cost efficiencies partially offset these factors. Segment results for fiscal year 2012 included charges of $100 million for the integration of engineering operations, restructuring of North American manufacturing operations and the impact of fourth quarter cost reduction initiatives, compared to $173 million in engineering integration and restructuring charges in fiscal year 2011. Engine ? For the fourth quarter 2012, the engine segment recorded a loss of $287 million, compared with a year-ago fourth quarter profit of $58 million. For the fiscal year 2012, the engine segment posted a loss of $562 million compared to the prior year profit of $84 million. The 2012 loss is predominantly due to increased warranty expense for 2010 emission engines and lower sales at our South American operations. Segment results for fiscal year 2012 included the company's non conformance penalty charges of $34 million. SG&A and engineering expense were lower by $48 million and $25 million, respectively.Parts ? For the fourth quarter 2012, the parts segment recorded profit of $76 million, compared with a year-ago fourth quarter profit of $87 million.  For the fiscal year 2012, the parts segment realized a profit of $240 million compared to the prior year profit of $287 million. The year-over-year decrease was driven by lower military volume partially offset by increased commercial sales and lower SG&A expense. Financial Services ? For the fourth quarter 2012, the financial services segment recorded profit of $16 million, down from fourth quarter 2011 profit of $27 million. For the fiscal year 2012, the financial services segment recorded a profit of $91 million compared to a year-ago profit of $129 million, primarily due to expected lower portfolio balances.  Corporate ? For fiscal year 2012, tax expense was $1.8 billion or $25.76 per share. This included the negative impact of the non-cash U.S. valuation allowance of $2.0 billion and a tax benefit of $189 million related to the release of the Canadian valuation allowance.  In fiscal 2011, the company realized a $1.5 billion tax valuation release benefit.About NavistarNavistar International Corporation (NYSE: NAV) is a holding company whose subsidiaries and affiliates produce International® brand commercial and military trucks, MaxxForce® brand diesel engines, IC Bus? brand school and commercial buses and Navistar RV brands of recreational vehicles. It also is a private-label designer and manufacturer of diesel engines for the pickup truck, van and SUV markets. The company also provides truck and diesel engine service parts. Another affiliate offers financing services. Additional information is available at www.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, 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. Navistar International Corporation and SubsidiariesConsolidated Statements of OperationsQuarter EndedOctober 31Year EndedOctober 312012201120122011(in millions, except per share data)Sales and revenuesSales of manufactured products, net$3,240$4,277$12,780$13,758Finance revenues3946168200Sales and revenues, net3,2794,32312,94813,958Costs and expensesCosts of products sold3,1523,43211,67011,262Restructuring charges841210892Impairment of property and equipment and intangible assets6?4464Selling, general and administrative expenses3764281,4441,434Engineering and product development costs131125539532Interest expense7760259247Other expense (income), net11(25)37(64)Total costs and expenses3,8374,03214,10113,567Equity in loss of non-consolidated affiliates(8)(16)(29)(71)Income (loss) before income taxes(566)275(1,182)320Income tax benefit (expense)(2,190)?(1,780)1,458Net income (loss)(2,756)275(2,962)1,778Less: Net income attributable to non-controlling interests13204855Net income (loss) attributable to Navistar International Corporation$(2,769)$255$(3,010)$1,723Earnings (loss) per share attributable to Navistar International Corporation:Basic$(40.13)$3.52$(43.56)$23.66Diluted$(40.13)$3.48$(43.56)$22.64Weighted average shares outstanding:Basic69.072.569.172.8Diluted69.073.269.176.1  Navistar International Corporation and SubsidiariesConsolidated Balance Sheets(in millions, except per share data)October 31,2012October 31,2011ASSETSCurrent assetsCash and cash equivalents$1,087$539Restricted cash?100Marketable securities466718Trade and other receivables, net7491,219Finance receivables, net1,6632,198Inventories1,5371,714Deferred taxes, net74474Other current assets261273Total current assets5,8377,235Restricted cash161227Trade and other receivables, net94122Finance receivables, net486715Investments in non-consolidated affiliates6260Property and equipment, net1,6601,570Goodwill280319Intangible assets, net171234Deferred taxes, net1891,583Other noncurrent assets162226Total assets$9,102$12,291LIABILITIES and STOCKHOLDERS' EQUITY (DEFICIT)LiabilitiesCurrent liabilitiesNotes payable and current maturities of long-term debt$1,205$1,379Accounts payable1,6862,122Other current liabilities1,4621,297Total current liabilities4,3534,798Long-term debt3,5663,477Postretirement benefits liabilities3,4053,210Deferred taxes, net4259Other noncurrent liabilities996719Total liabilities12,36212,263Redeemable equity securities55Stockholders' equity (deficit)Series D convertible junior preference stock33Common stock (86.0 and 75.4 shares issued, respectively; and $.10 par value per share and 220.0 shares authorized at both dates)97Additional paid in capital2,4402,253Accumulated deficit(3,165)(155)Accumulated other comprehensive loss(2,325)(1,944)Common stock held in treasury, at cost (6.8 and 4.9 shares, respectively)(272)(191)Total stockholders' deficit attributable to Navistar International Corporation(3,310)(27)Stockholders' equity attributable to non-controlling interests4550Total stockholders' equity (deficit)(3,265)23Total liabilities and stockholders' equity (deficit)$9,102$12,291  Navistar International Corporation and SubsidiariesCondensed Consolidated Statements of Cash FlowsYear Ended October 31(in millions)20122011Net income (loss)$(2,962)$1,778Adjustments to reconcile net income (loss) to cash provided by operating activities:Depreciation and amortization277290Depreciation of equipment leased to others4638Deferred taxes, including change in valuation allowance1,778(1,513)Impairment of property and equipment and intangible assets4475Amortization of debt issuance costs and discount4644Stock-based compensation1936Provision for doubtful accounts, net of recoveries14(6)Equity in loss of non-consolidated affiliates, net of dividends3675Other non-cash operating activities20(15)Changes in other assets and liabilities, exclusive of the effects of businesses acquired and disposed:Trade and other receivables454(212)Finance receivables7418Inventories76(129)Accounts payable(399)247Other assets and liabilities420164Net cash provided by operating activities610880Cash flows from investing activitiesPurchases of marketable securities(1,209)(1,562)Sales or maturities of marketable securities1,4611,430Net change in restricted cash and cash equivalents165(147)Capital expenditures(309)(429)Purchase of equipment leased to others(61)(71)Proceeds from sales of property and equipment1832Investments in non-consolidated affiliates(42)(65)Proceeds from sales of affiliates13Business acquisitions, net of cash received(12)12Acquisition of intangibles(14)(26)Net cash used in investing activities(2)(823)Cash flows from financing activitiesProceeds from issuance of securitized debt1,313599Principal payments on securitized debt(1,976)(708)Proceeds from issuance of non-securitized debt1,517214Principal payments on non-securitized debt(616)(107)Net increase (decrease) in notes and debt outstanding under revolving credit facilities(269)137Principal payments under financing arrangements and capital lease obligations(35)(86)Debt issuance costs(57)(11)Issuance of common stock192?Purchase of treasury stock(75)(125)Proceeds from exercise of stock options240Dividends paid by subsidiaries to non-controlling interest(56)(53)Other financing activities(3)?Net cash used in financing activities(63)(100)Effect of exchange rate changes on cash and cash equivalents3(3)Increase (decrease) in cash and cash equivalents548(46)Cash and cash equivalents at beginning of the year539585Cash and cash equivalents at end of the year$1,087$539  Navistar International Corporation and SubsidiariesSegment Reporting(Unaudited)We define segment profit (loss) as net income (loss) attributable to Navistar International Corporation excluding income tax benefit (expense). Our results from interim periods are not necessarily indicative of results for a full year. Selected financial information is as follows:(in millions)TruckEnginePartsFinancialServices(B)CorporateandEliminationsTotalQuarter Ended October 31, 2012External sales and revenues, net$2,204$454$582$39$?$3,279Intersegment sales and revenues93473021(407)?Total sales and revenues, net$2,213$801$612$60$(407)$3,279Net income (loss) attributable to NIC(A)$(160)$(287)$76$16$(2,414)$(2,769)Income tax expense????(2,190)(2,190)Segment profit (loss)(A)$(160)$(287)$76$16$(224)$(579)Depreciation and amortization$29$31$2$8$7$77Interest expense???215677Equity in income (loss) of non-consolidated affiliates(1)(9)2??(8)Capital expenditures(C)223231159Quarter Ended October 31, 2011External sales and revenues, net$3,180$575$522$46$?$4,323Intersegment sales and revenues305106016(616)?Total sales and revenues, net$3,210$1,085$582$62$(616)$4,323Net income (loss) attributable to NIC(A)$287$58$87$27$(204)$255Income tax benefit (expense)??????Segment profit (loss)(A)$287$58$87$27$(204)$255Depreciation and amortization$39$29$2$7$6$83Interest expense???253560Equity in income (loss) of non-consolidated affiliates(16)(1)1??(16)Capital expenditures(C)30418158138Year Ended October 31, 2012External sales and revenues, net$9,034$1,755$1,991$168$?$12,948Intersegment sales and revenues351,63912891(1,893)?Total sales and revenues, net$9,069$3,394$2,119$259$(1,893)$12,948Net income (loss) attributable to NIC(A)$(320)$(562)$240$91$(2,459)$(3,010)Income tax expense????(1,780)(1,780)Segment profit (loss)(A)$(320)$(562)$240$91$(679)$(1,230)Depreciation and amortization$140$118$10$33$22$323Interest expense???88171259Equity in income (loss) of non-consolidated affiliates(28)(7)6??(29)Capital expenditures(C)7514821362309(in millions)TruckEnginePartsFinancialServices(B)CorporateandEliminationsTotalYear Ended October 31, 2011External sales and revenues, net$9,690$2,101$1,967$200$?$13,958Intersegment sales and revenues481,69018891(2,017)?Total sales and revenues, net$9,738$3,791$2,155$291$(2,017)$13,958Net income (loss) attributable to NIC(A)$336$84$287$129$887$1,723Income tax benefit????1,4581,458Segment profit (loss)(A)$336$84$287$129$(571)$265Depreciation and amortization$151$120$9$28$20$328Interest expense???109138247Equity in income (loss) of non-consolidated affiliates(73)(4)6??(71)Capital expenditures(C)83172192153429As of October 31, 2012Segment assets$2,118$1,777$707$2,563$1,937$9,102As of October 31, 2011Segment assets$2,771$1,849$700$3,580$3,391$12,291(A)   See Note 2, Restructurings and Impairments, of the 2012 Annual Report on Form 10-K for further discussion. (B)   Total sales and revenues in the Financial Services segment include interest revenues of $59 million and $60 million for the quarters ended October 31, 2012 and 2011, respectively, and $254 million, and $285 million for the years ended October 31, 2012 and 2011, respectively. (C)   Exclusive of purchases of equipment leased to others.SOURCE Navistar International CorporationFor further information: Media, Karen Denning, +1-331-332-3535, or Investor, Heather Kos, +1-331-332-2406, www.Navistar.com/newsroom