LISLE, Ill., Dec. 18, 2018 /PRNewswire/ -- Navistar
International Corporation (NYSE: NAV) today announced fourth
quarter 2018 net income of $188
million, or $1.89 per diluted
share, compared to fourth quarter 2017 net income of $135 million, or $1.36 per diluted share. Navistar reported net
income of $340 million, or
$3.41 per diluted share for fiscal
year 2018, versus net income of $30
million, or $0.32 per diluted
share, for fiscal year 2017.
Fourth quarter 2018 adjusted EBITDA increased 20 percent to
$322 million, versus $268 million one year ago. Fiscal year 2018
adjusted EBITDA increased 42 percent to $826
million, versus $582 million
in 2017. Full-year adjusted EBITDA margins increased to 8.1
percent, up from 6.8 percent for 2017. This marks the company's
sixth consecutive year of annual growth in adjusted EBITDA on both
a dollar and percentage basis.
Revenues in the quarter increased 28 percent, to $3.3 billion, compared to fourth quarter 2017.
The revenue increase was largely driven by a 45-percent increase in
the company's Core volumes, which represent its sales of Class 6-8
trucks and buses in the United
States and Canada. Revenue
for fiscal year 2018 was up 20 percent to $10.25 billion, compared to $8.6 billion in fiscal year 2017, attributable to
annual revenue growth in all four operating segments. Class 8
retail market share grew to 13.5 percent in fiscal year 2018 versus
11.8 percent in fiscal year 2017.
Navistar finished fourth quarter 2018 with $1.42 billion in consolidated cash, cash
equivalents and marketable securities, and with $1.36 billion in manufacturing cash, cash
equivalents and marketable securities. For the year, the company
generated $307 million of
manufacturing free cash flow.
"2018 was a very strong year for the industry, and a breakout
year for Navistar," said Troy
Clarke, Chairman, President and Chief Executive Officer. "We
were the only truck OEM to grow Class 8 share during the year. With
the industry's newest product line-up, superior quality and a
strong focus on customer uptime, we expect to gain market share in
2019 for the third year in a row."
The company finished 2018 with strong momentum across the board.
During the fourth quarter, the company launched the
International® CV™ Series line of Class 4/5
trucks, the only Class 4/5 truck that is designed, distributed and
supported by a manufacturer specializing in commercial vehicles.
Year-over-year growth in heavy retail market share, up 2.5 share
points, was attributable to strong sales of the
International® LT® Series on-highway truck
and the 12.4-liter A26 engine. The company's IC Bus®
school buses, led by alternative-fuel offerings, also improved
retail share by 1.3 share points. Additionally, its medium-duty
International® MV™ Series and vocational
International® HV™ Series built improved
order share resulting in a strong backlog. The company reported a
backlog of 45,400 units in its Core markets, up from 15,600 at the
end of 2017.
Earlier this month, Navistar announced a definitive agreement
under which affiliates of Cerberus Capital Management, L.P. will
acquire a majority interest in Navistar's defense business,
Navistar Defense. Following the close of the transaction, Cerberus
will become a 70 percent owner and Navistar will remain a 30
percent owner. The agreement also includes an exclusive long-term
supply agreement for commercial parts and chassis. The transaction,
subject to regulatory approval, is expected to close in the first
quarter of 2019.
In October, Navistar improved its debt profile by repaying its
4.5% senior subordinated convertible notes issued in October 2013. Repayment of the outstanding
principal of $200 million at maturity
was funded with cash on hand.
The company provided the following 2019 industry and financial
guidance, including the fully consolidated financial impact of
Navistar Defense:
- Industry retail deliveries of Class 6-8 trucks and buses in
the United States and Canada are forecast to be 395,000 to 425,000
units, with Class 8 retail deliveries of 265,000 to 295,000
units.
- Revenues are expected to be between $10.75 billion and $11.25
billion.
- Adjusted EBITDA is expected to be between $850 million and $900
million.
Following the completion of the partial sale of Navistar
Defense, the company will update its 2019 guidance.
"While we expect 2019 to be another strong year for Navistar and
the industry, it's important to recognize that Navistar as an
investment is much more than just a cycle play," Clarke said. "As
our ongoing improvements demonstrate, the company also has strong
opportunities to benefit by recapturing market share, growing parts
revenue, improving margins, generating free cash flow and further
de-risking the balance sheet. For all these reasons, looking
forward the company is well positioned to generate superior
shareholder value."
SEGMENT
REVIEW
|
Summary of
Financial Results:
|
|
|
(Unaudited)
|
|
|
|
Quarters Ended
October 31,
|
|
Years Ended
October
31,
|
(in millions,
except per share data)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Sales and revenues,
net
|
$
|
3,317
|
|
|
$
|
2,598
|
|
|
$
|
10,250
|
|
|
$
|
8,570
|
|
Segment
Results:
|
|
|
|
|
|
|
|
Truck
|
$
|
197
|
|
|
$
|
112
|
|
|
$
|
397
|
|
|
$
|
(6)
|
|
Parts
|
156
|
|
|
157
|
|
|
569
|
|
|
616
|
|
Global
Operations
|
4
|
|
|
1
|
|
|
2
|
|
|
(7)
|
|
Financial
Services
|
26
|
|
|
26
|
|
|
88
|
|
|
77
|
|
Income from
continuing operations, net of tax(A)
|
$
|
188
|
|
|
$
|
135
|
|
|
$
|
340
|
|
|
$
|
29
|
|
Net
income(A)
|
188
|
|
|
135
|
|
|
340
|
|
|
30
|
|
Diluted earnings per
share from continuing operations(A)
|
$
|
1.89
|
|
|
$
|
1.36
|
|
|
$
|
3.41
|
|
|
$
|
0.31
|
|
Diluted earnings per
share(A)
|
1.89
|
|
|
1.36
|
|
|
3.41
|
|
|
0.32
|
|
_______________
|
(A)
|
Amounts attributable
to Navistar International Corporation.
|
Truck Segment – For the fourth quarter 2018, the
Truck segment recorded a profit of $197
million, compared with a year-ago fourth quarter profit of
$112 million. The year-over-year
change was primarily due to the impact of higher volume in the
company's Core markets and strong defense results, partially offset
by higher commodity and structural costs, as well as the impact of
supplier constraints.
For the 2018 fiscal year, the Truck segment recorded a profit of
$397 million, compared with a fiscal
year 2017 loss of $6 million. The
improvement was primarily driven by the impact of higher volumes in
our Core markets, higher other income, higher profitability in
defense, and a decline in used truck losses.
Parts Segment — For the fourth quarter 2018, the Parts
segment recorded a profit of $156
million, compared with a year-ago fourth quarter profit of
$157 million. The results were
primarily driven by higher Fleetrite™ brand sales, offset by higher
freight-related expenses and internal allocation of development,
engineering and SG&A expenses.
For the 2018 fiscal year, the Parts segment recorded a profit of
$569 million, compared to a fiscal
year 2017 profit of $616 million. The
eight-percent decrease was primarily driven by lower U.S. margins,
and higher freight-related expenses and internal allocation of
structural costs.
Global Operations Segment — For the fourth quarter 2018,
the Global Operations segment recorded a profit of $4 million, compared to a year-ago fourth quarter
profit of $1 million. The
year-over-year change was driven by higher volumes due to
improvements in the Brazilian economy, and cost reduction benefits
associated with operational restructuring implemented in early
2018.
For the 2018 fiscal year, the Global Operations segment recorded
a profit of $2 million compared to a
year-ago fiscal year loss of $7
million. The Global Operations segment results improvement
was primarily due to the impact of higher engine volumes and lower
manufacturing and SG&A expenses as a result of the company's
cost reduction efforts.
Financial Services Segment— For the fourth quarter 2018,
the Financial Services segment recorded a profit of $26 million, flat compared with fourth quarter
2017. The results were primarily driven by increased financing
revenues driven by higher average portfolio balances, which were
offset by increased borrowing costs driven by higher average
borrowings outstanding and higher interest rates.
For the 2018 fiscal year, the Financial Services segment
recorded a profit of $88 million,
compared to a year-ago fiscal year profit of $77 million. The increase is primarily driven by
higher revenues and is partially offset by higher interest expense,
an increase in the provision for loan losses in Mexico, and higher depreciation expense on
operating leases.
About Navistar
Navistar International Corporation
(NYSE: NAV) is a holding company whose subsidiaries and affiliates
produce International® brand commercial and military
trucks, proprietary 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. 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 the federal
securities laws. 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, 2018. 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 Subsidiaries
|
Consolidated
Statements of Operations
|
|
|
(Unaudited)
|
|
|
|
|
|
For the
Quarters
Ended October 31,
|
|
For the Years
Ended
October 31,
|
(in millions,
except per share data)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Sales and
revenues
|
|
|
|
|
|
|
|
Sales of manufactured
products, net
|
$
|
3,275
|
|
|
$
|
2,558
|
|
|
$
|
10,090
|
|
|
$
|
8,428
|
|
Finance
revenues
|
42
|
|
|
40
|
|
|
160
|
|
|
142
|
|
Sales and revenues,
net
|
3,317
|
|
|
2,598
|
|
|
10,250
|
|
|
8,570
|
|
Costs and
expenses
|
|
|
|
|
|
|
|
Costs of products
sold
|
2,702
|
|
|
2,088
|
|
|
8,317
|
|
|
7,037
|
|
Restructuring
charges
|
—
|
|
|
7
|
|
|
(1)
|
|
|
3
|
|
Asset impairment
charges
|
3
|
|
|
—
|
|
|
14
|
|
|
13
|
|
Selling, general and
administrative expenses
|
236
|
|
|
224
|
|
|
922
|
|
|
878
|
|
Engineering and
product development costs
|
75
|
|
|
62
|
|
|
297
|
|
|
251
|
|
Interest
expense
|
87
|
|
|
89
|
|
|
327
|
|
|
351
|
|
Other income,
net
|
(9)
|
|
|
(14)
|
|
|
(46)
|
|
|
(21)
|
|
Total costs and
expenses
|
3,094
|
|
|
2,456
|
|
|
9,830
|
|
|
8,512
|
|
Equity in income of
non-consolidated affiliates
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
Income from
continuing operations before income taxes
|
223
|
|
|
142
|
|
|
420
|
|
|
64
|
|
Income tax
expense
|
(27)
|
|
|
—
|
|
|
(52)
|
|
|
(10)
|
|
Income from
continuing operations
|
196
|
|
|
142
|
|
|
368
|
|
|
54
|
|
Income from
discontinued operations, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
Net income
|
196
|
|
|
142
|
|
|
368
|
|
|
55
|
|
Less: Net income
attributable to non-controlling interests
|
8
|
|
|
7
|
|
|
28
|
|
|
25
|
|
Net income
attributable to Navistar International Corporation
|
$
|
188
|
|
|
$
|
135
|
|
|
$
|
340
|
|
|
$
|
30
|
|
|
|
|
|
|
|
|
|
Amounts
attributable to Navistar International Corporation common
shareholders:
|
|
|
|
|
|
|
|
|
|
Income from
continuing operations, net of tax
|
$
|
188
|
|
|
$
|
135
|
|
|
$
|
340
|
|
|
$
|
29
|
|
Income from
discontinued operations, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
Net income
|
$
|
188
|
|
|
$
|
135
|
|
|
$
|
340
|
|
|
$
|
30
|
|
|
|
|
|
|
|
|
|
Earnings per
share:
|
|
|
|
|
|
|
|
Basic:
|
|
|
|
|
|
|
|
Continuing
operations
|
$
|
1.90
|
|
|
$
|
1.37
|
|
|
$
|
3.44
|
|
|
$
|
0.31
|
|
Discontinued
operations
|
—
|
|
|
—
|
|
|
—
|
|
|
0.01
|
|
|
$
|
1.90
|
|
|
$
|
1.37
|
|
|
$
|
3.44
|
|
|
$
|
0.32
|
|
|
|
|
|
|
|
|
|
Diluted:
|
|
|
|
|
|
|
|
Continuing
operations
|
$
|
1.89
|
|
|
$
|
1.36
|
|
|
$
|
3.41
|
|
|
$
|
0.31
|
|
Discontinued
operations
|
—
|
|
|
—
|
|
|
—
|
|
|
0.01
|
|
|
$
|
1.89
|
|
|
$
|
1.36
|
|
|
$
|
3.41
|
|
|
$
|
0.32
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding:
|
|
|
|
|
|
|
|
Basic
|
99.1
|
|
|
98.4
|
|
|
98.9
|
|
|
93.0
|
|
Diluted
|
99.7
|
|
|
99.2
|
|
|
99.6
|
|
|
93.5
|
|
Navistar
International Corporation and Subsidiaries
|
Consolidated
Balance Sheets
|
|
|
As of October
31,
|
(in millions,
except per share data)
|
2018
|
|
2017
|
ASSETS
|
|
|
|
Current
assets
|
|
|
|
Cash and cash
equivalents
|
$
|
1,320
|
|
|
$
|
706
|
|
Restricted cash and
cash equivalents
|
62
|
|
|
83
|
|
Marketable
securities
|
101
|
|
|
370
|
|
Trade and other
receivables, net
|
456
|
|
|
391
|
|
Finance receivables,
net
|
1,898
|
|
|
1,565
|
|
Inventories,
net
|
1,110
|
|
|
857
|
|
Other current
assets
|
189
|
|
|
188
|
|
Total current
assets
|
5,136
|
|
|
4,160
|
|
Restricted
cash
|
63
|
|
|
51
|
|
Trade and other
receivables, net
|
49
|
|
|
13
|
|
Finance receivables,
net
|
260
|
|
|
220
|
|
Investments in
non-consolidated affiliates
|
50
|
|
|
56
|
|
Property and
equipment, net
|
1,370
|
|
|
1,326
|
|
Goodwill
|
38
|
|
|
38
|
|
Intangible assets,
net
|
30
|
|
|
40
|
|
Deferred taxes,
net
|
121
|
|
|
129
|
|
Other noncurrent
assets
|
113
|
|
|
102
|
|
Total
assets
|
$
|
7,230
|
|
|
$
|
6,135
|
|
LIABILITIES and
STOCKHOLDERS' DEFICIT
|
|
|
|
Liabilities
|
|
|
|
Current
liabilities
|
|
|
|
Notes payable and
current maturities of long-term debt
|
$
|
946
|
|
|
$
|
1,169
|
|
Accounts
payable
|
1,606
|
|
|
1,292
|
|
Other current
liabilities
|
1,255
|
|
|
1,184
|
|
Total current
liabilities
|
3,807
|
|
|
3,645
|
|
Long-term
debt
|
4,521
|
|
|
3,889
|
|
Postretirement
benefits liabilities
|
2,097
|
|
|
2,497
|
|
Other noncurrent
liabilities
|
731
|
|
|
678
|
|
Total
liabilities
|
11,156
|
|
|
10,709
|
|
Stockholders'
deficit
|
|
|
|
Series D
convertible junior preference stock
|
2
|
|
|
2
|
|
Common stock, $0.10
par value per share (103.1 shares issued and 220 shares authorized
at both dates)
|
10
|
|
|
10
|
|
Additional paid-in
capital
|
2,731
|
|
|
2,733
|
|
Accumulated
deficit
|
(4,593)
|
|
|
(4,933)
|
|
Accumulated other
comprehensive loss
|
(1,920)
|
|
|
(2,211)
|
|
Common stock held in
treasury, at cost (4.2 and 4.6 shares, respectively)
|
(161)
|
|
|
(179)
|
|
Total stockholders'
deficit attributable to Navistar International
Corporation
|
(3,931)
|
|
|
(4,578)
|
|
Stockholders' equity
attributable to non-controlling interests
|
5
|
|
|
4
|
|
Total
stockholders' deficit
|
(3,926)
|
|
|
(4,574)
|
|
Total liabilities
and stockholders' deficit
|
$
|
7,230
|
|
|
$
|
6,135
|
|
Navistar
International Corporation and Subsidiaries
|
Condensed
Consolidated Statements of Cash Flows
|
|
|
For the Years
Ended
October 31,
|
(in
millions)
|
2018
|
|
2017
|
Cash flows from
operating activities
|
|
|
|
Net income
|
$
|
368
|
|
|
$
|
55
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
140
|
|
|
150
|
|
Depreciation of
equipment leased to others
|
71
|
|
|
73
|
|
Deferred taxes,
including change in valuation allowance
|
4
|
|
|
(6)
|
|
Asset impairment
charges
|
14
|
|
|
13
|
|
Gain on sales of
investments and businesses, net
|
—
|
|
|
(5)
|
|
Amortization of debt
issuance costs and discount
|
31
|
|
|
49
|
|
Stock-based
compensation
|
32
|
|
|
28
|
|
Provision for
doubtful accounts, net of recoveries
|
10
|
|
|
7
|
|
Equity in income of
non-consolidated affiliates, net of dividends
|
7
|
|
|
1
|
|
Write-off of debt
issuance costs and discount
|
43
|
|
|
5
|
|
Other non-cash
operating activities
|
(23)
|
|
|
(28)
|
|
Changes in other
assets and liabilities, exclusive of the effects of businesses
disposed
|
|
|
|
Trade and other
receivables
|
(109)
|
|
|
(125)
|
|
Finance
receivables
|
(405)
|
|
|
(123)
|
|
Inventories
|
(257)
|
|
|
82
|
|
Accounts
payable
|
317
|
|
|
159
|
|
Other assets and
liabilities
|
26
|
|
|
(226)
|
|
Net cash provided
by operating activities
|
269
|
|
|
109
|
|
Cash flows from
investing activities
|
|
|
|
Purchases of
marketable securities
|
(251)
|
|
|
(1,011)
|
|
Sales of marketable
securities
|
460
|
|
|
659
|
|
Maturities of
marketable securities
|
60
|
|
|
28
|
|
Net change in
restricted cash and cash equivalents
|
9
|
|
|
(22)
|
|
Capital
expenditures
|
(113)
|
|
|
(102)
|
|
Purchases of
equipment leased to others
|
(232)
|
|
|
(137)
|
|
Proceeds from sales
of property and equipment
|
11
|
|
|
35
|
|
Investments in
non-consolidated affiliates
|
—
|
|
|
(1)
|
|
Proceeds from
(payments for) sales of affiliates
|
(3)
|
|
|
9
|
|
Net cash used in
investing activities
|
(59)
|
|
|
(542)
|
|
Cash flows from
financing activities
|
|
|
|
Proceeds from
issuance of securitized debt
|
339
|
|
|
322
|
|
Principal payments on
securitized debt
|
(364)
|
|
|
(336)
|
|
Net change in secured
revolving credit facilities
|
135
|
|
|
111
|
|
Proceeds from
issuance of non-securitized debt
|
3,248
|
|
|
582
|
|
Principal payments on
non-securitized debt
|
(2,920)
|
|
|
(489)
|
|
Net change in notes
and debt outstanding under revolving credit facilities
|
(10)
|
|
|
(112)
|
|
Debt issuance
costs
|
(41)
|
|
|
(29)
|
|
Proceeds from
financed lease obligations
|
63
|
|
|
61
|
|
Issuance of common
stock
|
—
|
|
|
256
|
|
Stock issuance
costs
|
—
|
|
|
(11)
|
|
Proceeds from
exercise of stock options
|
8
|
|
|
12
|
|
Dividends paid by
subsidiaries to non-controlling interest
|
(27)
|
|
|
(26)
|
|
Other financing
activities
|
(17)
|
|
|
(3)
|
|
Net cash provided
by financing activities
|
414
|
|
|
338
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
(10)
|
|
|
(3)
|
|
Increase
(decrease) in cash and cash equivalents
|
614
|
|
|
(98)
|
|
Cash and cash
equivalents at beginning of the year
|
706
|
|
|
804
|
|
Cash and cash
equivalents at end of the year
|
$
|
1,320
|
|
|
$
|
706
|
|
Navistar International Corporation and
Subsidiaries
Segment
Reporting
(Unaudited)
We define segment profit (loss) as net income (loss)
attributable to Navistar International Corporation, excluding
income tax expense. The following tables present selected financial
information for our reporting segments:
(in
millions)
|
Truck
|
|
Parts
|
|
Global
Operations
|
|
Financial
Services(A)
|
|
Corporate
and
Eliminations
|
|
Total
|
Three Months Ended
October 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
External sales and
revenues, net
|
$
|
2,576
|
|
|
$
|
631
|
|
|
$
|
76
|
|
|
$
|
42
|
|
|
$
|
(8)
|
|
|
$
|
3,317
|
|
Intersegment sales and
revenues
|
43
|
|
|
2
|
|
|
17
|
|
|
28
|
|
|
(90)
|
|
|
—
|
|
Total sales and
revenues, net
|
$
|
2,619
|
|
|
$
|
633
|
|
|
$
|
93
|
|
|
$
|
70
|
|
|
$
|
(98)
|
|
|
$
|
3,317
|
|
Income (loss) from
continuing operations attributable to NIC, net of tax
|
$
|
197
|
|
|
$
|
156
|
|
|
$
|
4
|
|
|
$
|
26
|
|
|
$
|
(195)
|
|
|
$
|
188
|
|
Income tax
expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(27)
|
|
|
(27)
|
|
Segment profit
(loss)
|
$
|
197
|
|
|
$
|
156
|
|
|
$
|
4
|
|
|
$
|
26
|
|
|
$
|
(168)
|
|
|
$
|
215
|
|
Depreciation and
amortization
|
$
|
30
|
|
|
$
|
1
|
|
|
$
|
2
|
|
|
$
|
14
|
|
|
$
|
4
|
|
|
$
|
51
|
|
Interest
expense
|
—
|
|
|
—
|
|
|
—
|
|
|
28
|
|
|
59
|
|
|
87
|
|
Equity in income
(loss) of non-consolidated affiliates
|
—
|
|
|
1
|
|
|
(1)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Capital
expenditures(B)
|
25
|
|
|
1
|
|
|
1
|
|
|
—
|
|
|
7
|
|
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
millions)
|
Truck
|
|
Parts
|
|
Global
Operations
|
|
Financial
Services(A)
|
|
Corporate
and
Eliminations
|
|
Total
|
Three Months Ended
October 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
External sales and
revenues, net
|
$
|
1,841
|
|
|
$
|
622
|
|
|
$
|
93
|
|
|
$
|
40
|
|
|
$
|
2
|
|
|
$
|
2,598
|
|
Intersegment sales and
revenues
|
12
|
|
|
4
|
|
|
12
|
|
|
23
|
|
|
(51)
|
|
|
—
|
|
Total sales and
revenues, net
|
$
|
1,853
|
|
|
$
|
626
|
|
|
$
|
105
|
|
|
$
|
63
|
|
|
$
|
(49)
|
|
|
$
|
2,598
|
|
Income (loss) from
continuing operations attributable to NIC, net of tax
|
$
|
112
|
|
|
$
|
157
|
|
|
$
|
1
|
|
|
$
|
26
|
|
|
$
|
(161)
|
|
|
$
|
135
|
|
Income tax
expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Segment profit
(loss)
|
$
|
112
|
|
|
$
|
157
|
|
|
$
|
1
|
|
|
$
|
26
|
|
|
$
|
(161)
|
|
|
$
|
135
|
|
Depreciation and
amortization
|
$
|
34
|
|
|
$
|
2
|
|
|
$
|
3
|
|
|
$
|
13
|
|
|
$
|
2
|
|
|
$
|
54
|
|
Interest
expense
|
—
|
|
|
—
|
|
|
—
|
|
|
21
|
|
|
68
|
|
|
89
|
|
Equity in income
(loss) of non-consolidated affiliates
|
1
|
|
|
—
|
|
|
(1)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Capital
expenditures(B)
|
4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
millions)
|
Truck
|
|
Parts
|
|
Global
Operations
|
|
Financial
Services(A)
|
|
Corporate
and
Eliminations
|
|
Total
|
Year Ended October
31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
External sales and
revenues, net
|
$
|
7,386
|
|
|
$
|
2,399
|
|
|
$
|
305
|
|
|
$
|
160
|
|
|
$
|
—
|
|
|
$
|
10,250
|
|
Intersegment sales and
revenues
|
104
|
|
|
8
|
|
|
55
|
|
|
97
|
|
|
(264)
|
|
|
—
|
|
Total sales and
revenues, net
|
$
|
7,490
|
|
|
$
|
2,407
|
|
|
$
|
360
|
|
|
$
|
257
|
|
|
$
|
(264)
|
|
|
$
|
10,250
|
|
Income (loss) from
continuing operations attributable to NIC, net of tax
|
$
|
397
|
|
|
$
|
569
|
|
|
$
|
2
|
|
|
$
|
88
|
|
|
$
|
(716)
|
|
|
$
|
340
|
|
Income tax
expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(52)
|
|
|
(52)
|
|
Segment profit
(loss)
|
$
|
397
|
|
|
$
|
569
|
|
|
$
|
2
|
|
|
$
|
88
|
|
|
$
|
(664)
|
|
|
$
|
392
|
|
Depreciation and
amortization
|
$
|
130
|
|
|
$
|
6
|
|
|
$
|
10
|
|
|
$
|
55
|
|
|
$
|
10
|
|
|
$
|
211
|
|
Interest
expense
|
—
|
|
|
—
|
|
|
—
|
|
|
92
|
|
|
235
|
|
|
327
|
|
Equity in income
(loss) of non-consolidated affiliates
|
2
|
|
|
3
|
|
|
(5)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Capital
expenditures(B)
|
99
|
|
|
2
|
|
|
3
|
|
|
1
|
|
|
8
|
|
|
113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
millions)
|
Truck
|
|
Parts
|
|
Global
Operations
|
|
Financial
Services(A)
|
|
Corporate
and
Eliminations
|
|
Total
|
Year Ended October
31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
External sales and
revenues, net
|
$
|
5,770
|
|
|
$
|
2,369
|
|
|
$
|
279
|
|
|
$
|
142
|
|
|
$
|
10
|
|
|
$
|
8,570
|
|
Intersegment sales and
revenues
|
39
|
|
|
23
|
|
|
30
|
|
|
93
|
|
|
(185)
|
|
|
—
|
|
Total sales and
revenues, net
|
$
|
5,809
|
|
|
$
|
2,392
|
|
|
$
|
309
|
|
|
$
|
235
|
|
|
$
|
(175)
|
|
|
$
|
8,570
|
|
Income (loss) from
continuing operations attributable to NIC, net of tax
|
$
|
(6)
|
|
|
$
|
616
|
|
|
$
|
(7)
|
|
|
$
|
77
|
|
|
$
|
(651)
|
|
|
$
|
29
|
|
Income tax
expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(10)
|
|
|
(10)
|
|
Segment profit
(loss)
|
$
|
(6)
|
|
|
$
|
616
|
|
|
$
|
(7)
|
|
|
$
|
77
|
|
|
$
|
(641)
|
|
|
$
|
39
|
|
Depreciation and
amortization
|
$
|
137
|
|
|
$
|
11
|
|
|
$
|
13
|
|
|
$
|
51
|
|
|
$
|
11
|
|
|
$
|
223
|
|
Interest
expense
|
—
|
|
|
—
|
|
|
—
|
|
|
86
|
|
|
265
|
|
|
351
|
|
Equity in income
(loss) of non-consolidated affiliates
|
4
|
|
|
3
|
|
|
(1)
|
|
|
—
|
|
|
—
|
|
|
6
|
|
Capital
expenditures(B)
|
82
|
|
|
2
|
|
|
5
|
|
|
1
|
|
|
12
|
|
|
102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
millions)
|
Truck
|
|
Parts
|
|
Global
Operations
|
|
Financial
Services
|
|
Corporate
and
Eliminations
|
|
Total
|
Segment assets, as
of:
|
|
|
|
|
|
|
|
|
|
|
|
October 31,
2018
|
$
|
2,085
|
|
|
$
|
636
|
|
|
$
|
331
|
|
|
$
|
2,648
|
|
|
$
|
1,530
|
|
|
$
|
7,230
|
|
October 31,
2017
|
1,621
|
|
|
632
|
|
|
378
|
|
|
2,207
|
|
|
1,297
|
|
|
6,135
|
|
_________________________
|
(A)
|
Total sales and
revenues in the Financial Services segment include interest
revenues of $51 million and $182 million for the three months and
year ended October 31, 2018, respectively, and $44 million and $165
million for the three months and year ended October 31, 2017,
respectively.
|
|
|
(B)
|
Exclusive of
purchases of equipment leased to others.
|
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)
attributable to Navistar International Corporation, net of tax,
plus manufacturing interest expense, income taxes, and depreciation
and amortization. We believe EBITDA provides meaningful information
regarding 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 represent 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 consist of Selling, general
and administrative expenses and Engineering and product development
costs.
EBITDA
reconciliation:
|
|
|
(Unaudited)
|
|
|
|
|
|
For the
Quarters
Ended October 31,
|
|
For the Years
Ended
October 31,
|
(in
millions)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Income from
continuing operations attributable to NIC, net of tax
|
$
|
188
|
|
|
$
|
135
|
|
|
$
|
340
|
|
|
$
|
29
|
|
Plus:
|
|
|
|
|
|
|
|
Depreciation and
amortization expense
|
51
|
|
|
54
|
|
|
211
|
|
|
223
|
|
Manufacturing
interest expense(A)
|
59
|
|
|
68
|
|
|
235
|
|
|
265
|
|
Adjusted
for:
|
|
|
|
|
|
|
|
Income tax
expense
|
(27)
|
|
|
—
|
|
|
(52)
|
|
|
(10)
|
|
EBITDA
|
$
|
325
|
|
|
$
|
257
|
|
|
$
|
838
|
|
|
$
|
527
|
|
______________________
|
(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:
|
|
(Unaudited)
|
|
|
|
|
|
For the
Quarters
Ended October 31,
|
|
For the Years
Ended
October 31,
|
(in
millions)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Interest
expense
|
$
|
87
|
|
|
$
|
89
|
|
|
$
|
327
|
|
|
$
|
351
|
|
Less: Financial
services interest expense
|
28
|
|
|
21
|
|
|
92
|
|
|
86
|
|
Manufacturing
interest expense
|
$
|
59
|
|
|
$
|
68
|
|
|
$
|
235
|
|
|
$
|
265
|
|
Adjusted EBITDA
Reconciliation:
|
|
|
(Unaudited)
|
|
|
|
|
|
For the
Quarters
Ended October 31,
|
|
For the Years
Ended
October 31,
|
(in
millions)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
EBITDA
(reconciled above)
|
$
|
325
|
|
|
$
|
257
|
|
|
$
|
838
|
|
|
$
|
527
|
|
Adjusted for
significant items of:
|
|
|
|
|
|
|
|
Adjustments to
pre-existing warranties(A)
|
(5)
|
|
|
3
|
|
|
(9)
|
|
|
(1)
|
|
Asset impairment
charges(B)
|
3
|
|
|
—
|
|
|
14
|
|
|
13
|
|
Restructuring of
manufacturing operations(C)
|
—
|
|
|
7
|
|
|
(1)
|
|
|
13
|
|
EGR product
litigation(D)
|
—
|
|
|
—
|
|
|
1
|
|
|
31
|
|
Gain on
sale(E)
|
—
|
|
|
—
|
|
|
—
|
|
|
(6)
|
|
Debt refinancing
charges(F)
|
—
|
|
|
1
|
|
|
46
|
|
|
5
|
|
Pension
settlement(G)
|
—
|
|
|
—
|
|
|
9
|
|
|
—
|
|
Settlement
gain(H)
|
(1)
|
|
|
—
|
|
|
(72)
|
|
|
—
|
|
Total
adjustments
|
(3)
|
|
|
11
|
|
|
(12)
|
|
|
55
|
|
Adjusted
EBITDA
|
$
|
322
|
|
|
$
|
268
|
|
|
$
|
826
|
|
|
$
|
582
|
|
_____________________
|
(A)
|
Adjustments to
pre-existing warranties reflect changes in our estimate of warranty
costs for products sold in prior periods. Such adjustments
typically occur when claims experience deviates from historical and
expected trends. Our warranty liability is generally affected by
component failure rates, repair costs, and the timing of
failures. Future events and circumstances related to these
factors could materially change our estimates and require
adjustments to our liability. In addition, new product
launches require a greater use of judgment in developing estimates
until historical experience becomes available.
|
|
|
(B)
|
During 2018, we
recorded $14 million of impairment charges related to the exit of
our railcar business in Cherokee, Alabama, certain long-lived
assets and certain assets under operating leases in our Truck and
Financial Services segments. During 2017, we recorded $13 million
of asset impairment charges in our Truck segment relating to assets
held for sale of our Conway, Arkansas fabrication business and for
certain assets under operating leases.
|
|
|
(C)
|
During 2018, we
recognized a benefit of $1 million related to adjustments for
restructuring in our Truck, Global Operations and Corporate
segments. During 2017, we recorded charges of $13 million
primarily attributable to $41 million of charges related to our
plan to cease production at our Melrose Park Facility, a net
benefit of $36 million related to the resolution of the closing
agreement and wind up charges for our Chatham, Ontario plant, and
the release of $1 million in other postemployment benefits
liabilities in connection with the sale of our fabrication business
in Conway, Arkansas. We also recorded $6 million of restructuring
charges in Brazil related to cost reduction actions consisting of
personnel costs for employee separation and related
benefits.
|
|
|
(D)
|
During 2018, we
recognized an additional charge of $1 million for a jury verdict
related to the MaxxForce engine EGR product litigation in our Truck
segment. During 2017, we recognized a charge of $31 million related
to that same jury verdict in our Truck segment.
|
|
|
(E)
|
During 2017, we
recognized a gain of $6 million related to the sale of a business
line in our Parts segment.
|
|
|
(F)
|
During 2018, we
recorded a charge of $46 million for the write off of debt issuance
costs and discounts associated with the repurchase of our 8.25%
Senior Notes and the refinancing of our previously existing Term
Loan. During 2017, we recorded a charge of $5 million related to
third party fees and debt issuance costs associated with the
replacement of our Term Loan with our Term Loan Credit Agreement
and the refinancing of the revolving portion of the NFC bank credit
facility in our Financial Services segment.
|
|
|
(G)
|
During 2018, we
purchased a group annuity contract for certain retired pension plan
participants resulting in a plan remeasurement. As a result, we
recorded a pension settlement accounting charge of $9 million in
SG&A expenses.
|
|
|
(H)
|
During 2018, we
settled a business economic loss claim relating to our Alabama
engine manufacturing facility in which we will receive a net
present value of $70 million, net of our fees and costs, from the
Deepwater Horizon Settlement Program. We recorded the $70 million
net present value of the settlement and related interest income of
$2 million in Other Income, net.
|
Manufacturing
segment cash, cash equivalents, and marketable securities
reconciliation:
|
|
|
As of October 31,
2018
|
(in
millions)
|
Manufacturing
Operations
|
|
Financial
Services
Operations
|
|
Consolidated
Balance Sheet
|
Assets
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
1,261
|
|
|
$
|
59
|
|
|
$
|
1,320
|
|
Marketable
securities
|
101
|
|
|
—
|
|
|
101
|
|
Total cash, cash
equivalents, and marketable securities
|
$
|
1,362
|
|
|
$
|
59
|
|
|
$
|
1,421
|
|
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SOURCE Navistar International Corporation