LISLE, Ill., June 4, 2019 /PRNewswire/ -- Navistar
International Corporation (NYSE: NAV) today announced second
quarter 2019 net loss of $48 million,
or $0.48 per diluted share, compared
to second quarter 2018 net income of $55
million, or $0.55 per diluted
share. The loss reflected a one-time charge of $159 million to address a legal class action
settlement and related litigation from legacy engines.
Adjusted net income for the second quarter grew 57 percent to
$105 million versus $67 million in the same period one year ago.
Revenues in the quarter were $3
billion, up 24 percent compared to $2.4 billion in the second quarter last year. The
increase primarily reflects higher volumes in the company's Core
(Class 6-8 trucks and buses in the United
States and Canada) market,
where chargeouts were up 35 percent.
Second quarter adjusted EBITDA was up 23 percent to $224 million, compared to adjusted EBITDA of
$182 million in the comparable period
last year.
"In the second quarter, Navistar accelerated market share
growth, demonstrating the success of our new product lineup," said
Troy A. Clarke, Navistar chairman,
president and chief executive officer. "We grew revenue and
adjusted EBITDA, stepped up our Uptime value proposition, and
lowered our risk profile, enabling the company to focus intensely
on the road ahead."
Navistar ended second quarter 2019 with $1.0 billion in consolidated cash, cash
equivalents and marketable securities. Manufacturing cash, cash
equivalents and marketable securities were $950 million at the end of the quarter.
During the quarter, Navistar announced multiple new
initiatives that will improve customer uptime. First, the company
created a new Aftersales function that will manage every facet of
the business after the sale of the truck, including oversight of
parts and service, warranty, and dealer development, in order to
drive improved customer total cost of ownership. In addition, a new
partnership with Love's Travel Stops created the commercial
transportation industry's largest service network with more than
1,000 locations in North America,
increasing customers' repair velocity and their options for
same-day repairs. To expedite parts deliveries, Navistar is
establishing a new Parts Distribution Center (PDC) in Memphis, Tennessee, while also enhancing its
dealer parts inventory management system to increase the breadth of
parts already on its dealers' shelves.
Navistar also took additional actions to further improve its
balance sheet and reduce its risk profile. First, the company
repaid its $411 million in
subordinated convertible notes issued in 2014 with cash on hand.
Additionally, just last week, Navistar Financial Corporation closed
a new five-year, nearly $750 million
credit facility with a syndicate of 15 banks and repaid its
$400 million Term Loan B issued in
July 2018. The new facility provides
additional liquidity at a lower cost of borrowing.
Based on strong industry conditions, the company raised its 2019
full-year industry and financial guidance:
- Industry retail deliveries of Class 6-8 trucks and buses in
the United States and Canada are forecast to be 425,000 to 445,000
units, with Class 8 retail deliveries of 290,000 to 310,000
units.
- Navistar revenues are expected to be between $11.25 billion and $11.75
billion.
- The company's adjusted EBITDA is expected to be between
$875 million and $925 million.
Navistar's 2019 industry and financial guidance does not include
the impact of possible tariffs from goods crossing the Mexican
border. When additional information becomes available, the
company's industry and financial guidance will be reassessed and,
if necessary, adjusted accordingly.
"In the second half, we believe our growth in market share will
translate to improved revenues and gross margins that will generate
higher adjusted EBITDA margins than in the first half," Clarke
said. "Our marketplace progress, which has delivered our strongest
backlog this decade, provides confidence that both 2019 and 2020
will be good years for Navistar."
SEGMENT
REVIEW
|
Summary of
Financial Results:
|
|
|
(Unaudited)
|
|
Three Months
Ended
April 30,
|
|
Six Months
Ended
April 30,
|
(in millions,
except per share data)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Sales and revenues,
net
|
$
|
2,996
|
|
|
$
|
2,422
|
|
|
$
|
5,429
|
|
|
$
|
4,327
|
|
Segment
Results:
|
|
|
|
|
|
|
|
Truck
|
$
|
(74)
|
|
|
$
|
42
|
|
|
$
|
16
|
|
|
$
|
35
|
|
Parts
|
144
|
|
|
132
|
|
|
288
|
|
|
269
|
|
Global
Operations
|
3
|
|
|
1
|
|
|
9
|
|
|
(6)
|
|
Financial
Services
|
32
|
|
|
19
|
|
|
63
|
|
|
39
|
|
Net income
(loss)(A)
|
(48)
|
|
|
55
|
|
|
(37)
|
|
|
(18)
|
|
Diluted income (loss)
per share(A)
|
(0.48)
|
|
|
0.55
|
|
|
(0.37)
|
|
|
(0.18)
|
|
________________
|
|
|
(A)
|
Amounts attributable
to Navistar International Corporation.
|
Truck Segment – Truck segment net sales increased
35 percent to $2.3 billion in second
quarter 2019 compared to second quarter 2018, due to higher volumes
in the company's Core markets, an increase in sales of GM-branded
units manufactured for GM, and an increase in Mexico sales. This was partially offset by the
impact of the sale of a majority interest in Navistar Defense and a
decrease in export sales. Truck chargeouts in the company's Core
market were up 35 percent year-over-year.
The Truck segment recorded a net loss of $74 million in second quarter 2019, versus a
second quarter 2018 profit of $42
million. The change is primarily attributable to charges
related to a MaxxForce Engine EGR class action settlement, higher
volumes and improved pricing. This was partially offset by the
impact of the sale of a majority interest in Navistar Defense and
an increase in material costs related to commodities.
Parts Segment – Parts segment second quarter 2019
net sales were $579 million, down
four percent, compared to second quarter 2018, driven by a new
revenue standard, lower Blue Diamond Parts (BDP) sales, partially
offset by higher sales in North American markets.
The Parts segment recorded a quarterly profit of $144 million in second quarter 2019, up nine
percent versus the same period one year ago, primarily due to
higher U.S. margins and lower intercompany access fees, partially
offset by lower BDP volumes.
Global Operations Segment – Global Operations
segment second quarter 2019 net sales decreased 10 percent to
$87 million compared to second
quarter 2018. This was primarily driven by economic conditions in
the company's South America engine
operations and the depreciation of the Brazilian real against the
U.S. dollar as the average conversion rate weakened by 13 percent
compared with the prior year period.
The Global Operations segment recorded a $3 million profit in second quarter 2019,
relatively flat compared to $1
million in the same period one year ago.
Financial Services Segment – Financial Services
segment second quarter 2019 net revenues increased 24 percent to
$78 million versus the same period
one year ago, primarily driven by higher overall finance receivable
balances in the U.S. and higher operating lease balances in the
U.S. and Mexico.
Financial Services segment recorded a profit of $32 million in second quarter 2019, an increase
of $13 million versus second quarter
2018, primarily due to higher revenues and other income from an
intercompany loan.
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 Section 27A of the Securities Act of 1933, as
amended ("Securities Act"), Section 21E of the Securities Exchange
Act of 1934, as amended ("Exchange Act"), 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, 2018, which was filed on December
18, 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)
|
|
|
Three Months
Ended
April 30,
|
|
Six Months
Ended
April 30,
|
(in millions,
except per share data)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Sales and
revenues
|
|
|
|
|
|
|
|
Sales of manufactured
products, net
|
$
|
2,948
|
|
|
$
|
2,382
|
|
|
$
|
5,334
|
|
|
$
|
4,249
|
|
Finance
revenues
|
48
|
|
|
40
|
|
|
95
|
|
|
78
|
|
Sales and revenues,
net
|
2,996
|
|
|
2,422
|
|
|
5,429
|
|
|
4,327
|
|
Costs and
expenses
|
|
|
|
|
|
|
|
Costs of products
sold
|
2,493
|
|
|
1,987
|
|
|
4,472
|
|
|
3,519
|
|
Restructuring
charges
|
1
|
|
|
1
|
|
|
1
|
|
|
(2)
|
|
Asset impairment
charges
|
1
|
|
|
1
|
|
|
3
|
|
|
3
|
|
Selling, general and
administrative expenses
|
373
|
|
|
200
|
|
|
559
|
|
|
391
|
|
Engineering and
product development costs
|
75
|
|
|
75
|
|
|
161
|
|
|
150
|
|
Interest
expense
|
82
|
|
|
79
|
|
|
167
|
|
|
158
|
|
Other expense,
net
|
18
|
|
|
11
|
|
|
115
|
|
|
91
|
|
Total costs and
expenses
|
3,043
|
|
|
2,354
|
|
|
5,478
|
|
|
4,310
|
|
Equity in income of
non-consolidated affiliates
|
3
|
|
|
—
|
|
|
3
|
|
|
—
|
|
Income (loss) before
income tax
|
(44)
|
|
|
68
|
|
|
(46)
|
|
|
17
|
|
Income tax benefit
(expense)
|
1
|
|
|
(7)
|
|
|
20
|
|
|
(22)
|
|
Net income
(loss)
|
(43)
|
|
|
61
|
|
|
(26)
|
|
|
(5)
|
|
Less: Net income
attributable to non-controlling interests
|
5
|
|
|
6
|
|
|
11
|
|
|
13
|
|
Net income (loss)
attributable to Navistar International Corporation
|
$
|
(48)
|
|
|
$
|
55
|
|
|
$
|
(37)
|
|
|
$
|
(18)
|
|
|
|
|
|
|
|
|
|
Income (loss) per
share attributable to Navistar International
Corporation:
|
|
|
|
|
|
|
|
Basic:
|
$
|
(0.48)
|
|
|
$
|
0.56
|
|
|
$
|
(0.37)
|
|
|
$
|
(0.18)
|
|
Diluted:
|
$
|
(0.48)
|
|
|
$
|
0.55
|
|
|
$
|
(0.37)
|
|
|
$
|
(0.18)
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding:
|
|
|
|
|
|
|
|
Basic
|
99.2
|
|
|
98.8
|
|
|
99.2
|
|
|
98.7
|
|
Diluted
|
99.2
|
|
|
99.5
|
|
|
99.2
|
|
|
98.7
|
|
Navistar
International Corporation and Subsidiaries
|
Consolidated
Balance Sheets
|
|
|
April
30,
|
|
October
31,
|
(in millions,
except per share data)
|
2019
|
|
2018
|
ASSETS
|
(Unaudited)
|
|
|
Current
assets
|
|
|
|
Cash and cash
equivalents
|
$
|
977
|
|
|
$
|
1,320
|
|
Restricted cash and
cash equivalents
|
165
|
|
|
62
|
|
Marketable
securities
|
23
|
|
|
101
|
|
Trade and other
receivables, net
|
453
|
|
|
456
|
|
Finance receivables,
net
|
2,037
|
|
|
1,898
|
|
Inventories,
net
|
1,164
|
|
|
1,110
|
|
Other current
assets
|
282
|
|
|
189
|
|
Total current
assets
|
5,101
|
|
|
5,136
|
|
Restricted
cash
|
66
|
|
|
63
|
|
Trade and other
receivables, net
|
30
|
|
|
49
|
|
Finance receivables,
net
|
279
|
|
|
260
|
|
Investments in
non-consolidated affiliates
|
32
|
|
|
50
|
|
Property and
equipment (net of accumulated depreciation and amortization of
$2,457 and $2,498, respectively)
|
1,270
|
|
|
1,370
|
|
Goodwill
|
38
|
|
|
38
|
|
Intangible assets
(net of accumulated amortization of $141 and $140,
respectively)
|
27
|
|
|
30
|
|
Deferred taxes,
net
|
121
|
|
|
121
|
|
Other noncurrent
assets
|
102
|
|
|
113
|
|
Total
assets
|
$
|
7,066
|
|
|
$
|
7,230
|
|
LIABILITIES and
STOCKHOLDERS' DEFICIT
|
|
|
|
Liabilities
|
|
|
|
Current
liabilities
|
|
|
|
Notes payable and
current maturities of long-term debt
|
$
|
769
|
|
|
$
|
946
|
|
Accounts
payable
|
1,630
|
|
|
1,606
|
|
Other current
liabilities
|
1,309
|
|
|
1,255
|
|
Total current
liabilities
|
3,708
|
|
|
3,807
|
|
Long-term
debt
|
4,588
|
|
|
4,521
|
|
Postretirement
benefits liabilities
|
1,950
|
|
|
2,097
|
|
Other noncurrent
liabilities
|
672
|
|
|
731
|
|
Total
liabilities
|
10,918
|
|
|
11,156
|
|
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
|
2,728
|
|
|
2,731
|
|
Accumulated
deficit
|
(4,657)
|
|
|
(4,593)
|
|
Accumulated other
comprehensive loss
|
(1,786)
|
|
|
(1,920)
|
|
Common stock held in
treasury, at cost (3.9 and 4.2 shares, respectively)
|
(152)
|
|
|
(161)
|
|
Total stockholders'
deficit attributable to Navistar International
Corporation
|
(3,855)
|
|
|
(3,931)
|
|
Stockholders' equity
attributable to non-controlling interests
|
3
|
|
|
5
|
|
Total
stockholders' deficit
|
(3,852)
|
|
|
(3,926)
|
|
Total liabilities
and stockholders' deficit
|
$
|
7,066
|
|
|
$
|
7,230
|
|
Navistar
International Corporation and Subsidiaries
|
Condensed
Consolidated Statements of Cash Flows
|
(Unaudited)
|
|
|
Six Months Ended
April 30,
|
(in
millions)
|
2019
|
|
2018
|
Cash flows from
operating activities
|
|
|
|
Net loss
|
$
|
(26)
|
|
|
$
|
(5)
|
|
Adjustments to
reconcile net loss to net cash used in operating
activities:
|
|
|
|
Depreciation and
amortization
|
66
|
|
|
73
|
|
Depreciation of
equipment leased to others
|
31
|
|
|
36
|
|
Deferred taxes,
including change in valuation allowance
|
(41)
|
|
|
1
|
|
Asset impairment
charges
|
3
|
|
|
3
|
|
Gain on sales of
investments and businesses, net
|
(59)
|
|
|
—
|
|
Amortization of debt
issuance costs and discount
|
12
|
|
|
15
|
|
Stock-based
compensation
|
14
|
|
|
21
|
|
Provision for
doubtful accounts
|
6
|
|
|
3
|
|
Equity in income of
non-consolidated affiliates, net of dividends
|
(2)
|
|
|
3
|
|
Write-off of debt
issuance costs and discount
|
—
|
|
|
43
|
|
Other non-cash
operating activities
|
(4)
|
|
|
(13)
|
|
Changes in other
assets and liabilities, exclusive of the effects of businesses
disposed
|
(190)
|
|
|
(278)
|
|
Net cash used in
operating activities
|
(190)
|
|
|
(98)
|
|
Cash flows from
investing activities
|
|
|
|
Purchases of
marketable securities
|
—
|
|
|
(148)
|
|
Sales of marketable
securities
|
—
|
|
|
460
|
|
Maturities of
marketable securities
|
79
|
|
|
18
|
|
Capital
expenditures
|
(66)
|
|
|
(53)
|
|
Purchases of
equipment leased to others
|
(76)
|
|
|
(92)
|
|
Proceeds from sales
of property and equipment
|
5
|
|
|
5
|
|
Proceeds from sales
of investments and businesses
|
95
|
|
|
(3)
|
|
Other investing
activities
|
—
|
|
|
1
|
|
Net cash provided
by investing activities
|
37
|
|
|
188
|
|
Cash flows from
financing activities
|
|
|
|
Proceeds from
issuance of securitized debt
|
—
|
|
|
27
|
|
Principal payments on
securitized debt
|
(34)
|
|
|
(34)
|
|
Net change in secured
revolving credit facilities
|
275
|
|
|
5
|
|
Proceeds from
issuance of non-securitized debt
|
73
|
|
|
2,805
|
|
Principal payments on
non-securitized debt
|
(508)
|
|
|
(2,589)
|
|
Net change in notes
and debt outstanding under revolving credit facilities
|
126
|
|
|
74
|
|
Debt issuance
costs
|
(2)
|
|
|
(33)
|
|
Proceeds from
financed lease obligations
|
9
|
|
|
38
|
|
Proceeds from
exercise of stock options
|
2
|
|
|
5
|
|
Dividends paid by
subsidiaries to non-controlling interest
|
(13)
|
|
|
(14)
|
|
Other financing
activities
|
(2)
|
|
|
(15)
|
|
Net cash provided
by financing activities
|
(74)
|
|
|
269
|
|
Effect of exchange
rate changes on cash, cash equivalents and restricted
cash
|
(10)
|
|
|
(7)
|
|
Increase
(decrease) in cash, cash equivalents and restricted
cash
|
(237)
|
|
|
352
|
|
Cash, cash
equivalents and restricted cash at beginning of the
period
|
1,445
|
|
|
840
|
|
Cash, cash
equivalents and restricted cash at end of the period
|
$
|
1,208
|
|
|
$
|
1,192
|
|
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 benefit (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
April 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
External sales and
revenues, net
|
$
|
2,287
|
|
|
$
|
578
|
|
|
$
|
80
|
|
|
$
|
48
|
|
|
$
|
3
|
|
|
$
|
2,996
|
|
Intersegment sales
and revenues
|
9
|
|
|
1
|
|
|
7
|
|
|
30
|
|
|
(47)
|
|
|
—
|
|
Total sales and
revenues, net
|
$
|
2,296
|
|
|
$
|
579
|
|
|
$
|
87
|
|
|
$
|
78
|
|
|
$
|
(44)
|
|
|
$
|
2,996
|
|
Net income (loss)
attributable to NIC
|
$
|
(74)
|
|
|
$
|
144
|
|
|
$
|
3
|
|
|
$
|
32
|
|
|
$
|
(153)
|
|
|
$
|
(48)
|
|
Income tax
benefit
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
Segment profit
(loss)
|
$
|
(74)
|
|
|
$
|
144
|
|
|
$
|
3
|
|
|
$
|
32
|
|
|
$
|
(154)
|
|
|
$
|
(49)
|
|
Depreciation and
amortization
|
$
|
26
|
|
|
$
|
2
|
|
|
$
|
2
|
|
|
$
|
16
|
|
|
$
|
3
|
|
|
$
|
49
|
|
Interest
expense
|
—
|
|
|
—
|
|
|
—
|
|
|
27
|
|
|
55
|
|
|
82
|
|
Equity in income
(loss) of non-consolidated affiliates
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
3
|
|
Capital
expenditures(B)
|
21
|
|
|
(1)
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
22
|
|
|
(in
millions)
|
Truck
|
|
Parts
|
|
Global
Operations
|
|
Financial
Services(A)
|
|
Corporate and Eliminations
|
|
Total
|
Three Months Ended
April 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
External sales and
revenues, net
|
$
|
1,688
|
|
|
$
|
601
|
|
|
$
|
89
|
|
|
$
|
40
|
|
|
$
|
4
|
|
|
$
|
2,422
|
|
Intersegment sales
and revenues
|
16
|
|
|
—
|
|
|
8
|
|
|
23
|
|
|
(47)
|
|
|
—
|
|
Total sales and
revenues, net
|
$
|
1,704
|
|
|
$
|
601
|
|
|
$
|
97
|
|
|
$
|
63
|
|
|
$
|
(43)
|
|
|
$
|
2,422
|
|
Net income (loss)
attributable to NIC
|
$
|
42
|
|
|
$
|
132
|
|
|
$
|
1
|
|
|
$
|
19
|
|
|
$
|
(139)
|
|
|
$
|
55
|
|
Income tax
expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7)
|
|
|
(7)
|
|
Segment profit
(loss)
|
$
|
42
|
|
|
$
|
132
|
|
|
$
|
1
|
|
|
$
|
19
|
|
|
$
|
(132)
|
|
|
$
|
62
|
|
Depreciation and
amortization
|
$
|
34
|
|
|
$
|
1
|
|
|
$
|
2
|
|
|
$
|
14
|
|
|
$
|
3
|
|
|
$
|
54
|
|
Interest
expense
|
—
|
|
|
—
|
|
|
—
|
|
|
21
|
|
|
58
|
|
|
79
|
|
Equity in income
(loss) of non-consolidated affiliates
|
1
|
|
|
—
|
|
|
(1)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Capital
expenditures(B)
|
30
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
(8)
|
|
|
23
|
|
|
(in
millions)
|
Truck
|
|
Parts
|
|
Global
Operations
|
|
Financial
Services(A)
|
|
Corporate and Eliminations
|
|
Total
|
Six Months Ended
April 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
External sales and
revenues, net
|
$
|
4,063
|
|
|
$
|
1,124
|
|
|
$
|
141
|
|
|
$
|
95
|
|
|
$
|
6
|
|
|
$
|
5,429
|
|
Intersegment sales
and revenues
|
30
|
|
|
3
|
|
|
19
|
|
|
57
|
|
|
(109)
|
|
|
—
|
|
Total sales and
revenues, net
|
$
|
4,093
|
|
|
$
|
1,127
|
|
|
$
|
160
|
|
|
$
|
152
|
|
|
$
|
(103)
|
|
|
$
|
5,429
|
|
Net income (loss)
attributable to NIC
|
$
|
16
|
|
|
$
|
288
|
|
|
$
|
9
|
|
|
$
|
63
|
|
|
$
|
(413)
|
|
|
$
|
(37)
|
|
Income tax
benefit
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
20
|
|
|
20
|
|
Segment profit
(loss)
|
$
|
16
|
|
|
$
|
288
|
|
|
$
|
9
|
|
|
$
|
63
|
|
|
$
|
(433)
|
|
|
$
|
(57)
|
|
Depreciation and
amortization
|
$
|
52
|
|
|
$
|
3
|
|
|
$
|
4
|
|
|
$
|
32
|
|
|
$
|
6
|
|
|
$
|
97
|
|
Interest
expense
|
—
|
|
|
—
|
|
|
—
|
|
|
56
|
|
|
111
|
|
|
167
|
|
Equity in income
(loss) of non-consolidated affiliates
|
3
|
|
|
1
|
|
|
(1)
|
|
|
—
|
|
|
—
|
|
|
3
|
|
Capital
expenditures(B)
|
52
|
|
|
1
|
|
|
1
|
|
|
2
|
|
|
10
|
|
|
66
|
|
|
(in
millions)
|
Truck
|
|
Parts
|
|
Global
Operations
|
|
Financial
Services(A)
|
|
Corporate and Eliminations
|
|
Total
|
Six Months Ended
April 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
External sales and
revenues, net
|
$
|
2,916
|
|
|
$
|
1,165
|
|
|
$
|
161
|
|
|
$
|
78
|
|
|
$
|
7
|
|
|
$
|
4,327
|
|
Intersegment sales
and revenues
|
39
|
|
|
4
|
|
|
17
|
|
|
44
|
|
|
(104)
|
|
|
—
|
|
Total sales and
revenues, net
|
$
|
2,955
|
|
|
$
|
1,169
|
|
|
$
|
178
|
|
|
$
|
122
|
|
|
$
|
(97)
|
|
|
$
|
4,327
|
|
Net income (loss)
attributable to NIC
|
$
|
35
|
|
|
$
|
269
|
|
|
$
|
(6)
|
|
|
$
|
39
|
|
|
$
|
(355)
|
|
|
$
|
(18)
|
|
Income tax
expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(22)
|
|
|
(22)
|
|
Segment profit
(loss)
|
$
|
35
|
|
|
$
|
269
|
|
|
$
|
(6)
|
|
|
$
|
39
|
|
|
$
|
(333)
|
|
|
$
|
4
|
|
Depreciation and
amortization
|
$
|
69
|
|
|
$
|
3
|
|
|
$
|
5
|
|
|
$
|
27
|
|
|
$
|
5
|
|
|
$
|
109
|
|
Interest
expense
|
—
|
|
|
—
|
|
|
—
|
|
|
42
|
|
|
116
|
|
|
158
|
|
Equity in income of
non-consolidated affiliates
|
1
|
|
|
1
|
|
|
(2)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Capital
expenditures(B)
|
55
|
|
|
1
|
|
|
1
|
|
|
—
|
|
|
(4)
|
|
|
53
|
|
_________________________
|
|
|
(A)
|
Total sales and
revenues in the Financial Services segment include interest
revenues of $55 million and $108 million for the three and six
months ended April 30, 2019, respectively, and $44 million and $85
million for the three and six months ended April 30, 2018,
respectively.
|
|
|
(B)
|
Exclusive of
purchases of equipment leased to others.
|
(in
millions)
|
Truck
|
|
Parts
|
|
Global
Operations
|
|
Financial
Services
|
|
Corporate
and
Eliminations
|
|
Total
|
Segment assets, as
of:
|
|
|
|
|
|
|
|
|
|
|
|
April 30,
2019
|
$
|
2,120
|
|
|
$
|
650
|
|
|
$
|
306
|
|
|
$
|
2,930
|
|
|
$
|
1,060
|
|
|
$
|
7,066
|
|
October 31,
2018
|
2,085
|
|
|
636
|
|
|
331
|
|
|
2,648
|
|
|
1,530
|
|
|
7,230
|
|
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, 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 and Adjusted Net Income (loss)
attributable to NIC:
We believe that adjusted EBITDA and adjusted Net Income
(loss) attributable to NIC, 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:
|
|
|
Three Months
Ended
April 30,
|
|
Six Months
Ended
April 30,
|
(in
millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Net income (loss)
attributable to NIC
|
$
|
(48)
|
|
|
$
|
55
|
|
|
$
|
(37)
|
|
|
$
|
(18)
|
|
Plus:
|
|
|
|
|
|
|
|
Depreciation and
amortization expense
|
49
|
|
|
54
|
|
|
97
|
|
|
109
|
|
Manufacturing
interest expense(A)
|
55
|
|
|
58
|
|
|
111
|
|
|
116
|
|
Adjusted
for:
|
|
|
|
|
|
|
|
Income tax benefit
(expense)
|
1
|
|
|
(7)
|
|
|
20
|
|
|
(22)
|
|
EBITDA
|
$
|
55
|
|
|
$
|
174
|
|
|
$
|
151
|
|
|
$
|
229
|
|
______________________
|
|
|
(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:
|
|
Three Months
Ended
April 30,
|
|
Six Months
Ended
April 30,
|
(in
millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Interest
expense
|
$
|
82
|
|
|
$
|
79
|
|
|
$
|
167
|
|
|
$
|
158
|
|
Less: Financial
services interest expense
|
27
|
|
|
21
|
|
|
56
|
|
|
42
|
|
Manufacturing
interest expense
|
$
|
55
|
|
|
$
|
58
|
|
|
$
|
111
|
|
|
$
|
116
|
|
|
|
|
|
|
|
Adjusted EBITDA
Reconciliation:
|
|
|
|
|
|
|
Three Months
Ended
April 30,
|
|
Six Months
Ended
April 30,
|
(in
millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
EBITDA (reconciled
above)
|
$
|
55
|
|
|
$
|
174
|
|
|
$
|
151
|
|
|
$
|
229
|
|
Adjusted for
significant items of:
|
|
|
|
|
|
|
|
Adjustments to
pre-existing warranties(A)
|
9
|
|
|
6
|
|
|
2
|
|
|
—
|
|
Asset impairment
charges(B)
|
1
|
|
|
1
|
|
|
3
|
|
|
3
|
|
Restructuring of
manufacturing operations(C)
|
1
|
|
|
1
|
|
|
1
|
|
|
(2)
|
|
MaxxForce Advanced
EGR engine lawsuits(D)
|
159
|
|
|
—
|
|
|
159
|
|
|
1
|
|
Gain on
sales(E)
|
—
|
|
|
—
|
|
|
(59)
|
|
|
—
|
|
Debt refinancing
charges(F)
|
—
|
|
|
—
|
|
|
—
|
|
|
46
|
|
Pension
settlement(G)
|
—
|
|
|
—
|
|
|
142
|
|
|
9
|
|
Settlement
gain(H)
|
(1)
|
|
|
—
|
|
|
(2)
|
|
|
—
|
|
Total
adjustments
|
169
|
|
|
8
|
|
|
246
|
|
|
57
|
|
Adjusted
EBITDA
|
$
|
224
|
|
|
$
|
182
|
|
|
$
|
397
|
|
|
$
|
286
|
|
|
|
Adjusted Net
Income (loss) attributable to NIC:
|
|
|
Three Months
Ended
April 30,
|
|
Six Months
Ended
April 30,
|
(in
millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Net income
(loss) attributable to NIC
|
$
|
(48)
|
|
|
$
|
55
|
|
|
$
|
(37)
|
|
|
$
|
(18)
|
|
Adjusted for
significant items of:
|
|
|
|
|
|
|
|
Adjustments to
pre-existing warranties(A)
|
9
|
|
|
6
|
|
|
2
|
|
|
—
|
|
Asset impairment
charges(B)
|
1
|
|
|
1
|
|
|
3
|
|
|
3
|
|
Restructuring of
manufacturing operations(C)
|
1
|
|
|
1
|
|
|
1
|
|
|
(2)
|
|
MaxxForce Advanced
EGR engine lawsuits(D)
|
159
|
|
|
—
|
|
|
159
|
|
|
1
|
|
Gain on
sales(E)
|
—
|
|
|
—
|
|
|
(59)
|
|
|
—
|
|
Debt refinancing
charges(F)
|
—
|
|
|
—
|
|
|
—
|
|
|
46
|
|
Pension
settlement(G)
|
—
|
|
|
—
|
|
|
142
|
|
|
9
|
|
Settlement
gain(H)
|
(1)
|
|
|
—
|
|
|
(2)
|
|
|
—
|
|
Total
adjustments
|
169
|
|
|
8
|
|
|
246
|
|
|
57
|
|
Tax effect
(I)
|
(16)
|
|
|
4
|
|
|
(47)
|
|
|
4
|
|
Adjusted Net
income (loss) attributable to NIC
|
$
|
105
|
|
|
$
|
67
|
|
|
$
|
162
|
|
|
$
|
43
|
|
_____________________
|
|
|
(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 historic 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)
|
In the second quarter
and first half of 2019, we recorded $1 million and $3 million,
respectively, of asset impairment charges relating to certain
assets under operating leases in our Truck segment. In the second
quarter and first half of 2018, we recorded $1 million and $3
million, respectively, of asset impairment charges related to the
sale of our railcar business in Cherokee, Alabama and certain
assets under operating leases in our Truck segment.
|
|
|
(C)
|
In the second quarter
and first half of 2019, we recorded a restructuring charge of $1
million in our Truck segment. In the second quarter and first half
of 2018, we recorded a charge of $1 million and a benefit of $2
million, respectively, related to adjustments for
restructuring in our Truck, Global Operations and Corporate
segments.
|
|
|
(D)
|
In the second quarter
and first half of 2019, we recognized a charge of $159 million
related to MaxxForce Advanced EGR engine class action settlement
and related litigation in our Truck segment. In the first half of
2018, we recognized a charge of $1 million for a jury verdict
related to the MaxxForce Advanced EGR engine lawsuits in our Truck
segment.
|
|
|
(E)
|
In the first half of
2019, we recognized a gain of $54 million related to the sale of a
majority interest in the Navistar Defense business in our Truck
segment, and a gain of $5 million related to the sale of our joint
venture in China with JAC in our Global Operations
segment.
|
|
|
(F)
|
In the first half of
2018, we recorded a charge of $46 million for the write off of debt
issuance costs and discounts associated with the repurchase of our
previously existing 8.25% Senior Notes and the refinancing of our
previously existing Term Loan in Corporate.
|
|
|
(G)
|
In the first half of
2019 and 2018, we purchased group annuity contracts for certain
retired pension plan participants resulting in plan
remeasurements. As a result, we recorded pension settlement
accounting charges of $142 million and $9 million, respectively, in
Other expense, net in Corporate.
|
|
|
(H)
|
In the second quarter
and first half of 2019, we recorded interest income of $1 million
and $2 million, respectively, in Other expense, net
derived from the prior year settlement of a business economic loss
claim relating to our former Alabama engine manufacturing facility
in Corporate.
|
|
|
(I)
|
Tax effect is
calculated by excluding the impact of the non-GAAP adjustments from
the interim period tax provision calculations.
|
Manufacturing
segment cash, cash equivalents, and marketable securities
reconciliation:
|
|
|
As of April 30,
2019
|
(in
millions)
|
Manufacturing
Operations
|
|
Financial
Services
Operations
|
|
Consolidated
Balance Sheet
|
Assets
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
927
|
|
|
$
|
50
|
|
|
$
|
977
|
|
Marketable
securities
|
23
|
|
|
—
|
|
|
23
|
|
Total cash, cash
equivalents, and marketable securities
|
$
|
950
|
|
|
$
|
50
|
|
|
$
|
1,000
|
|
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SOURCE Navistar International Corporation