LISLE, Ill., March 8, 2018 /PRNewswire/ -- Navistar
International Corporation (NYSE: NAV) today announced a first
quarter 2018 net loss of $73 million,
or $0.74 per diluted share, compared
to a first quarter 2017 net loss of $62
million, or $0.76 per diluted
share. First quarter 2018 results included $46 million of charges as a result of the
company's debt refinancing in November
2017.
Revenues in the quarter were $1.9 billion, a 15-percent
increase compared to $1.7 billion in
the first quarter last year, driven by a 24-percent increase in the
company's Core (Class 6-8 trucks and buses in the United States and Canada) volumes.
First quarter 2018 EBITDA was $55 million, compared to
first quarter 2017 EBITDA of $63 million. First quarter 2018
includes $49 million in net
adjustments, including the debt refinancing and other items.
Adjusted EBITDA was $104 million
versus $55 million in first quarter
2017.
Navistar finished the first quarter 2018 with $975 million in consolidated cash, cash
equivalents and marketable securities and $947 million in manufacturing cash, cash
equivalents and marketable securities.
"We are off to a strong start in 2018 thanks to our ability to
grow Navistar's position in a strengthening market," said
Troy A. Clarke, Chairman, President
and CEO. "We grew our Class 8 market share and improved our
margins, on the way to delivering our best first quarter on an
adjusted EBITDA basis since 2011."
Navistar's first quarter Core chargeouts were up 2,400 units
year-over-year led by Class 8 Heavy, which was up 56 percent
compared to first quarter last year. The company's Class 8 market
share was up 1.2 points versus the same period one year ago. Gross
margin for the quarter was 19.6 percent of revenue, up 2 percentage
points from first quarter 2017.
"Our improvement this year is due largely to the market's
positive reaction to our new products, including the LT Series on
highway tractor and the 13-liter A26 engine," Clarke said. "In
fact, the strong interest in our A26 engine has us nearly doubling
our share of trucks with 13-liter engines in the first quarter of
2018 compared to a year ago."
Continuing its cadence of new product launches, Navistar
unveiled its new International MV Series medium-duty vehicle at the
NTEA Work Truck Show earlier this week. The launch of the MV Series
completes the company's Project Horizon product refresh, and
reflects that program's improved cab design, along with the same
driver-centric enhancements already launched in Class 8
vehicles.
Additionally, the company's alliance with Volkswagen Truck &
Bus is accelerating Navistar's development of future technologies,
including electric powertrains, which are already in development
for school buses and medium duty trucks. The company is currently
testing its first prototype electric school bus, the chargE, which
Navistar will be demonstrating for customers and government
officials starting later this month.
"As a leader in the medium and school bus segments, we know our
customers and the jobs their trucks and buses do, which is why
we're convinced these will be the market segments best suited for
e-powertrains in the near term," Clarke said. "These vehicles
travel shorter distances and typically return to their base
overnight, making the charging infrastructure less complex. And,
perhaps most significantly, they will provide environmental
benefit, especially in urban areas."
Based on stronger industry conditions, the company raised its
2018 full-year guidance:
- Retail deliveries of Class 6-8 trucks and buses in the United States and Canada are forecast to be in the range of
360,000 units to 390,000 units, with Class 8 retail deliveries of
235,000 to 265,000 units.
- Revenues are expected to be between $9.25 billion and $9.75
billion.
- Adjusted EBITDA is expected to be between $700 million and $750
million.
- Year-end manufacturing cash is expected to be about
$1.1 billion.
"We expect market conditions to remain robust and we are
determined to take advantage of opportunities to grow share while
delivering strong margin performance," Clarke said. "Given the
progress made in Q1, and our positive outlook for the remainder of
the year, we are confident that 2018 will be the breakout year for
Navistar."
|
SEGMENT
REVIEW
|
|
Summary of
Financial Results:
|
|
|
Three Months
Ended
January 31,
|
|
(in millions,
except per share data)
|
2018
|
|
2017
|
|
Sales and revenues,
net
|
$
|
1,905
|
|
|
$
|
1,663
|
|
|
Segment
Results:
|
|
|
|
|
Truck
|
$
|
(7)
|
|
|
$
|
(69)
|
|
|
Parts
|
137
|
|
|
149
|
|
|
Global
Operations
|
(7)
|
|
|
(4)
|
|
|
Financial
Services
|
20
|
|
|
13
|
|
|
Net
loss(A)
|
(73)
|
|
|
(62)
|
|
|
Diluted loss per
share(A)
|
$
|
(0.74)
|
|
|
$
|
(0.76)
|
|
|
________________
|
|
(A)
|
Amounts attributable
to Navistar International Corporation.
|
Truck Segment – Truck segment first quarter 2018 net
sales increased to $1.3 billion,
primarily due to higher volumes in the company's Core markets, an
increase in military sales, and production of GM-branded units
manufactured at Navistar's Springfield,
Ohio plant, which launched in the second quarter of 2017.
This was partially offset by a decline in the company's
Mexico and export truck volumes.
The Truck segment loss was $7
million in the first quarter 2018, versus a loss of
$69 million in the same period one
year ago. The improvement was primarily driven by the impact of
higher volumes in the company's Core markets, a decrease in used
truck losses, and an increase in military sales, partially offset
by higher structural costs.
Parts Segment – In the first quarter of 2018, the Parts
segment net sales were $568 million,
slightly lower than the prior year primarily due to the expected
runoff in Blue Diamond Parts (BDP) sales, partially offset by
higher U.S. and Canada parts sales
related to the Fleetrite™ and ReNEWed®
brands.
The Parts segment profit was $137
million, down eight percent, primarily due to lower BDP
margins and higher freight-related expenses.
Global Operations Segment – In the first quarter of 2018,
the Global Operations segment net sales increased 62 percent to
$81 million, primarily driven by
higher engine volumes in the company's South America engine operations due to
improvement in the Brazilian economy.
For the first quarter 2018, the Global Operations segment loss
was $7 million versus a $4 million loss in the first quarter 2017. Higher
engine volumes and a benefit recognized as an adjustment to
restructuring charges only partially offset a one-time benefit in
the first quarter of 2017 of $9
million related to an adjustment to pre-existing
warranties.
Financial Services Segment – In the first quarter of
2018, the Financial Services segment net revenues increased to
$59 million primarily due to higher
portfolio yields, higher overall finance receivable balances in
Mexico and favorable movements in
foreign currency exchange rates impacting the company's Mexican
portfolio.
The Financial Services segment profit increased to $20 million primarily due to a decrease in the
provision for loan losses in Mexico and improved interest margins.
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 market share projections, new
product launch dates and information concerning our possible or
assumed future results of operations, including the results of our
alliance with Volkswagen Truck & Bus and 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, 2017 and our quarterly
report on Form 10-Q for the period ended January 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)
|
|
|
Three Months
Ended
January 31,
|
|
(in millions,
except per share data)
|
2018
|
|
2017
|
|
Sales and
revenues
|
|
|
|
|
Sales of manufactured
products, net
|
$
|
1,867
|
|
|
$
|
1,629
|
|
|
Finance
revenues
|
38
|
|
|
34
|
|
|
Sales and revenues,
net
|
1,905
|
|
|
1,663
|
|
|
Costs and
expenses
|
|
|
|
|
Costs of products
sold
|
1,532
|
|
|
1,370
|
|
|
Restructuring
charges
|
(3)
|
|
|
7
|
|
|
Asset impairment
charges
|
2
|
|
|
2
|
|
|
Selling, general and
administrative expenses
|
222
|
|
|
200
|
|
|
Engineering and
product development costs
|
75
|
|
|
63
|
|
|
Interest
expense
|
79
|
|
|
82
|
|
|
Other expense
(income), net
|
49
|
|
|
(8)
|
|
|
Total costs and
expenses
|
1,956
|
|
|
1,716
|
|
|
Equity in income of
non-consolidated affiliates
|
—
|
|
|
3
|
|
|
Loss before income
tax
|
(51)
|
|
|
(50)
|
|
|
Income tax
expense
|
(15)
|
|
|
(4)
|
|
|
Net loss
|
(66)
|
|
|
(54)
|
|
|
Less: Net income
attributable to non-controlling interests
|
7
|
|
|
8
|
|
|
Net loss
attributable to Navistar International Corporation
|
$
|
(73)
|
|
|
$
|
(62)
|
|
|
|
|
|
|
Loss per share
attributable to Navistar International Corporation:
|
|
|
|
|
Basic
|
$
|
(0.74)
|
|
|
$
|
(0.76)
|
|
|
Diluted
|
(0.74)
|
|
|
(0.76)
|
|
|
|
|
|
|
Weighted average
shares outstanding:
|
|
|
|
|
Basic
|
98.6
|
|
|
81.8
|
|
|
Diluted
|
98.6
|
|
|
81.8
|
|
|
Navistar
International Corporation and Subsidiaries
|
|
Consolidated
Balance Sheets
|
|
|
January
31,
|
|
October
31,
|
|
(in millions,
except per share data)
|
2018
|
|
2017
|
|
ASSETS
|
(Unaudited)
|
|
|
|
Current
assets
|
|
|
|
|
Cash and cash
equivalents
|
$
|
699
|
|
|
$
|
706
|
|
|
Restricted cash and
cash equivalents
|
36
|
|
|
83
|
|
|
Marketable
securities
|
276
|
|
|
370
|
|
|
Trade and other
receivables, net
|
327
|
|
|
391
|
|
|
Finance receivables,
net
|
1,434
|
|
|
1,565
|
|
|
Inventories,
net
|
998
|
|
|
857
|
|
|
Other current
assets
|
188
|
|
|
188
|
|
|
Total current
assets
|
3,958
|
|
|
4,160
|
|
|
Restricted
cash
|
52
|
|
|
51
|
|
|
Trade and other
receivables, net
|
13
|
|
|
13
|
|
|
Finance receivables,
net
|
239
|
|
|
220
|
|
|
Investments in
non-consolidated affiliates
|
55
|
|
|
56
|
|
|
Property and
equipment (net of accumulated depreciation and amortization of
$2,491 and $2,474, respectively)
|
1,335
|
|
|
1,326
|
|
|
Goodwill
|
38
|
|
|
38
|
|
|
Intangible assets
(net of accumulated amortization of $138 and $135,
respectively)
|
38
|
|
|
40
|
|
|
Deferred taxes,
net
|
129
|
|
|
129
|
|
|
Other noncurrent
assets
|
112
|
|
|
102
|
|
|
Total
assets
|
$
|
5,969
|
|
|
$
|
6,135
|
|
|
LIABILITIES and
STOCKHOLDERS' DEFICIT
|
|
|
|
|
Liabilities
|
|
|
|
|
Current
liabilities
|
|
|
|
|
Notes payable and
current maturities of long-term debt
|
$
|
953
|
|
|
$
|
1,169
|
|
|
Accounts
payable
|
1,140
|
|
|
1,292
|
|
|
Other current
liabilities
|
1,160
|
|
|
1,184
|
|
|
Total current
liabilities
|
3,253
|
|
|
3,645
|
|
|
Long-term
debt
|
4,168
|
|
|
3,889
|
|
|
Postretirement
benefits liabilities
|
2,467
|
|
|
2,497
|
|
|
Other noncurrent
liabilities
|
664
|
|
|
678
|
|
|
Total
liabilities
|
10,552
|
|
|
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
|
2,735
|
|
|
2,733
|
|
|
Accumulated
deficit
|
(5,006)
|
|
|
(4,933)
|
|
|
Accumulated other
comprehensive loss
|
(2,154)
|
|
|
(2,211)
|
|
|
Common stock held in
treasury, at cost (4.5 and 4.6 shares, respectively)
|
(174)
|
|
|
(179)
|
|
|
Total stockholders'
deficit attributable to Navistar International
Corporation
|
(4,587)
|
|
|
(4,578)
|
|
|
Stockholders' equity
attributable to non-controlling interests
|
4
|
|
|
4
|
|
|
Total
stockholders' deficit
|
(4,583)
|
|
|
(4,574)
|
|
|
Total liabilities
and stockholders' deficit
|
$
|
5,969
|
|
|
$
|
6,135
|
|
|
Navistar
International Corporation and Subsidiaries
|
|
Condensed
Consolidated Statements of Cash Flows
|
|
(Unaudited)
|
|
|
Three Months
Ended
January 31,
|
|
(in
millions)
|
2018
|
|
2017
|
|
Cash flows from
operating activities
|
|
|
|
|
Net loss
|
$
|
(66)
|
|
|
$
|
(54)
|
|
|
Adjustments to
reconcile net loss to net cash provided by (used in) operating
activities:
|
|
|
|
|
Depreciation and
amortization
|
37
|
|
|
37
|
|
|
Depreciation of
equipment leased to others
|
18
|
|
|
22
|
|
|
Deferred taxes,
including change in valuation allowance
|
6
|
|
|
—
|
|
|
Asset impairment
charges
|
2
|
|
|
2
|
|
|
Amortization of debt
issuance costs and discount
|
8
|
|
|
10
|
|
|
Stock-based
compensation
|
9
|
|
|
7
|
|
|
Provision for
doubtful accounts
|
1
|
|
|
4
|
|
|
Equity in loss of
non-consolidated affiliates, net of dividends
|
3
|
|
|
3
|
|
|
Write-off of debt
issuance costs and discount
|
42
|
|
|
—
|
|
|
Other non-cash
operating activities
|
(6)
|
|
|
(3)
|
|
|
Changes in other
assets and liabilities, exclusive of the effects of businesses
disposed
|
(130)
|
|
|
(6)
|
|
|
Net cash provided
by (used in) operating activities
|
(76)
|
|
|
22
|
|
|
Cash flows from
investing activities
|
|
|
|
|
Purchases of
marketable securities
|
(61)
|
|
|
(212)
|
|
|
Sales of marketable
securities
|
150
|
|
|
59
|
|
|
Maturities of
marketable securities
|
5
|
|
|
1
|
|
|
Net change in
restricted cash and cash equivalents
|
46
|
|
|
15
|
|
|
Capital
expenditures
|
(30)
|
|
|
(46)
|
|
|
Purchases of
equipment leased to others
|
(52)
|
|
|
(24)
|
|
|
Proceeds from sales
of property and equipment
|
3
|
|
|
2
|
|
|
Investments in
non-consolidated affiliates
|
—
|
|
|
(2)
|
|
|
Net cash provided
by (used in) investing activities
|
61
|
|
|
(207)
|
|
|
Cash flows from
financing activities
|
|
|
|
|
Proceeds from
issuance of securitized debt
|
16
|
|
|
5
|
|
|
Principal payments on
securitized debt
|
(16)
|
|
|
(27)
|
|
|
Net change in secured
revolving credit facilities
|
(150)
|
|
|
(79)
|
|
|
Proceeds from
issuance of non-securitized debt
|
2,747
|
|
|
298
|
|
|
Principal payments on
non-securitized debt
|
(2,521)
|
|
|
(200)
|
|
|
Net change in notes
and debt outstanding under revolving credit facilities
|
(38)
|
|
|
(48)
|
|
|
Debt issuance
costs
|
(330
|
|
|
(5)
|
|
|
Proceeds from
financed lease obligations
|
16
|
|
|
8
|
|
|
Proceeds from
exercise of stock options
|
4
|
|
|
3
|
|
|
Dividends paid by
subsidiaries to non-controlling interest
|
(7)
|
|
|
(8)
|
|
|
Other financing
activities
|
(12)
|
|
|
—
|
|
|
Net cash provided
by (used in) financing activities
|
6
|
|
|
(53)
|
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
2
|
|
|
7
|
|
|
Decrease in cash
and cash equivalents
|
(7)
|
|
|
(231)
|
|
|
Cash and cash
equivalents at beginning of the period
|
706
|
|
|
804
|
|
|
Cash and cash
equivalents at end of the period
|
$
|
699
|
|
|
$
|
573
|
|
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
January 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
External sales and
revenues, net
|
$
|
1,228
|
|
|
$
|
564
|
|
|
$
|
72
|
|
|
$
|
38
|
|
|
$
|
3
|
|
|
$
|
1,905
|
|
|
Intersegment sales
and revenues
|
23
|
|
|
4
|
|
|
9
|
|
|
21
|
|
|
(57)
|
|
|
—
|
|
|
Total sales and
revenues, net
|
$
|
1,251
|
|
|
$
|
568
|
|
|
$
|
81
|
|
|
$
|
59
|
|
|
$
|
(54)
|
|
|
$
|
1,905
|
|
|
Income (loss)
attributable to NIC, net of tax
|
$
|
(7)
|
|
|
$
|
137
|
|
|
$
|
(7)
|
|
|
$
|
20
|
|
|
$
|
(216)
|
|
|
$
|
(73)
|
|
|
Income tax
expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(15)
|
|
|
(15)
|
|
|
Segment profit
(loss)
|
$
|
(7)
|
|
|
$
|
137
|
|
|
$
|
(7)
|
|
|
$
|
20
|
|
|
$
|
(201)
|
|
|
$
|
(58)
|
|
|
Depreciation and
amortization
|
$
|
35
|
|
|
$
|
2
|
|
|
$
|
3
|
|
|
$
|
13
|
|
|
$
|
2
|
|
|
$
|
55
|
|
|
Interest
expense
|
—
|
|
|
—
|
|
|
—
|
|
|
21
|
|
|
58
|
|
|
79
|
|
|
Equity in income
(loss) of non-consolidated affiliates
|
—
|
|
|
1
|
|
|
(1)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Capital
expenditures(B)
|
25
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
4
|
|
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
millions)
|
Truck
|
|
Parts
|
|
Global
Operations
|
|
Financial
Services(A)
|
|
Corporate
and
Eliminations
|
|
Total
|
|
Three Months Ended
January 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
External sales and
revenues, net
|
$
|
1,017
|
|
|
$
|
563
|
|
|
$
|
46
|
|
|
$
|
34
|
|
|
$
|
3
|
|
|
$
|
1,663
|
|
|
Intersegment sales
and revenues
|
10
|
|
|
7
|
|
|
4
|
|
|
20
|
|
|
(41)
|
|
|
—
|
|
|
Total sales and
revenues, net
|
$
|
1,027
|
|
|
$
|
570
|
|
|
$
|
50
|
|
|
$
|
54
|
|
|
$
|
(38)
|
|
|
$
|
1,663
|
|
|
Income (loss)
attributable to NIC, net of tax
|
$
|
(69)
|
|
|
$
|
149
|
|
|
$
|
(4)
|
|
|
$
|
13
|
|
|
$
|
(151)
|
|
|
$
|
(62)
|
|
|
Income tax
expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4)
|
|
|
(4)
|
|
|
Segment profit
(loss)
|
$
|
(69)
|
|
|
$
|
149
|
|
|
$
|
(4)
|
|
|
$
|
13
|
|
|
$
|
(147)
|
|
|
$
|
(58)
|
|
|
Depreciation and
amortization
|
$
|
37
|
|
|
$
|
3
|
|
|
$
|
3
|
|
|
$
|
13
|
|
|
$
|
3
|
|
|
$
|
59
|
|
|
Interest
expense
|
—
|
|
|
—
|
|
|
—
|
|
|
20
|
|
|
62
|
|
|
82
|
|
|
Equity in income of
non-consolidated affiliates
|
1
|
|
|
1
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
Capital
expenditures(B)
|
43
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
2
|
|
|
46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
millions)
|
Truck
|
|
Parts
|
|
Global
Operations
|
|
Financial
Services
|
|
Corporate
and
Eliminations
|
|
Total
|
|
Segment assets, as
of:
|
|
|
|
|
|
|
|
|
|
|
|
|
January 31,
2018
|
$
|
1,710
|
|
|
$
|
647
|
|
|
$
|
360
|
|
|
$
|
2,052
|
|
|
$
|
1,200
|
|
|
$
|
5,969
|
|
|
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 $41 million and $36 million for the three months ended
January 31, 2018 and 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 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 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.
Gross Margin consists of Sales and revenues, net,
less Costs of products sold.
Free Cash Flow consists of Net cash from
operating activities and Capital Expenditures.
|
EBITDA
reconciliation:
|
|
|
Three Months
Ended January 31,
|
|
(in
millions)
|
2018
|
|
2017
|
|
Loss attributable to
NIC, net of tax
|
$
|
(73)
|
|
|
$
|
(62)
|
|
|
Plus:
|
|
|
|
|
Depreciation and
amortization expense
|
55
|
|
|
59
|
|
|
Manufacturing
interest expense(A)
|
58
|
|
|
62
|
|
|
Less:
|
|
|
|
|
Income tax
expense
|
(15)
|
|
|
(4)
|
|
|
EBITDA
|
$
|
55
|
|
|
$
|
63
|
|
|
______________________
|
|
(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
January 31,
|
|
(in
millions)
|
2018
|
|
2017
|
|
Interest
expense
|
$
|
79
|
|
|
$
|
82
|
|
|
Less: Financial
services interest expense
|
21
|
|
|
20
|
|
|
Manufacturing
interest expense
|
$
|
58
|
|
|
$
|
62
|
|
|
Adjusted EBITDA
Reconciliation:
|
|
|
Three Months
Ended January 31,
|
|
(in
millions)
|
2018
|
|
2017
|
|
EBITDA
(reconciled above)
|
$
|
55
|
|
|
$
|
63
|
|
|
Adjustments for
significant items of:
|
|
|
|
|
Adjustments to
pre-existing warranties(A)
|
(6)
|
|
|
(17)
|
|
|
Asset impairment
charges(B)
|
2
|
|
|
2
|
|
|
Restructuring of
manufacturing operations(C)
|
(3)
|
|
|
7
|
|
|
EGR product
litigation(D)
|
1
|
|
|
—
|
|
|
Debt refinancing
charges(E)
|
46
|
|
|
—
|
|
|
Pension
settlement(F)
|
9
|
|
|
—
|
|
|
Total
adjustments
|
49
|
|
|
(8)
|
|
|
Adjusted
EBITDA
|
$
|
104
|
|
|
$
|
55
|
|
|
_____________________
|
|
(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 first quarter
of 2018, we recorded $2 million of impairment charges related to
the sale of our railcar business in Cherokee, Alabama. In the first
quarter of 2017, we recorded $2 million of asset impairment charges
related to certain long-lived assets in our Truck
segment.
|
|
(C)
|
In the first quarter
of 2018, we recorded benefits of $3 million related to adjustments
for restructuring in our Truck and Global Operations segments. In
the first quarter of 2017, we recorded $7 million of
restructuring charges related to the 2011 closure of our Chatham,
Ontario plant.
|
|
(D)
|
In the first quarter
of 2018, we recognized an additional charge of $1 million for a
jury verdict related to the Milan Maxxforce engine EGR product
litigation in our Truck segment.
|
|
(E)
|
In the first quarter
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 8.25% Senior Notes and the refinancing of our previously
existing Term Loan.
|
|
(F)
|
In the first quarter
of 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.
|
|
Manufacturing
segment cash, cash equivalents, and marketable securities
reconciliation:
|
|
|
As of January 31,
2018
|
|
(in
millions)
|
Manufacturing
Operations
|
|
Financial
Services
Operations
|
|
Consolidated
Balance Sheet
|
|
Assets
|
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
671
|
|
|
$
|
28
|
|
|
$
|
699
|
|
|
Marketable
securities
|
276
|
|
|
—
|
|
|
276
|
|
|
Total cash, cash
equivalents, and marketable securities
|
$
|
947
|
|
|
$
|
28
|
|
|
$
|
975
|
|
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SOURCE Navistar International Corporation