LISLE, Ill., Sept. 4, 2019 /PRNewswire/ -- Navistar
International Corporation (NYSE: NAV) today announced third quarter
2019 net income of $156 million, or
$1.56 per diluted share, compared to
third quarter 2018 net income of $170
million, or $1.71 per diluted
share.
Third quarter 2019 adjusted EBITDA was $266 million, compared to $218 million in the same period one year ago.
Adjusted net income in the quarter grew 55 percent to $147 million, compared to $95 million last year.
Revenues in the quarter were $3
billion, up 17 percent from the same period one year ago,
primarily due to a 28 percent increase in volumes in the company's
Core market (Class 6-8 trucks and buses in the United States and Canada).
"This was another great quarter for Navistar," said
Troy A. Clarke, Navistar chairman,
president and chief executive officer. "Market share increased,
revenues and earnings grew at double-digit rates, and we made
significant investments in our operations and our Uptime
promise."
Navistar ended third quarter 2019 with $1.16 billion in consolidated cash, cash
equivalents and marketable securities. Manufacturing cash, cash
equivalents and marketable securities were $1.11 billion at the end of the quarter. The
company generated $250 million of
manufacturing free cash flow during the quarter largely due to
strong adjusted EBITDA and net working capital performance.
The company had a number of uptime-related highlights during its
third quarter. Navistar's warranty performance and service
partnership agreement with Love's and Speedco, initially announced
in March, is now fully operational, activating the commercial
vehicle industry's largest service network in North America.
Additionally, the company's latest parts distribution center (PDC)
opened late last month near Memphis to help cater to the growing demand
for parts and quicker maintenance turnaround times. Complementing
the new PDC are new enhancements to Navistar's retail inventory
management system, resulting in 50 percent lower emergency parts
orders, further maximizing Uptime for the company's customers.
Also during the quarter, the company announced it would be
making capital investments of approximately $125
million in new and expanded manufacturing facilities at
its Huntsville, Ala. plant to produce next-generation big-bore
powertrains developed with its global alliance partner TRATON.
INDUSTRY AND FINANCIAL GUIDANCE
The company updated
the following 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 435,000 to 455,000
units, with Class 8 retail deliveries of 295,000 to 315,000
units.
- Gross margin is expected to be in the range of 17.75% and
18%.
- Core market share is forecast to be between 18.5% and 19%.
The company reaffirmed the following 2019 full-year financial
guidance:
- 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.
Additionally, the company forecasts the industry's 2020 retail
deliveries of Class 6-8 trucks and buses in the United States and Canada to be in the range of 335,000 to
365,000 units, with Class 8 retail deliveries between 210,000 and
240,000 units.
"We are on course for a strong end to 2019, and we're not
standing still," Clarke said. "The company is recapturing market
share and is growing revenue, EBITDA and cash flow. We remain
focused on setting ourselves up for long-term success."
SEGMENT
REVIEW
|
Summary of
Financial Results:
|
|
|
(Unaudited)
|
|
Three Months
Ended
July 31,
|
|
Nine Months
Ended
July 31,
|
(in millions,
except per share data)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Sales and revenues,
net
|
$
|
3,042
|
|
|
$
|
2,606
|
|
|
$
|
8,471
|
|
|
$
|
6,933
|
|
Segment
Results:
|
|
|
|
|
|
|
|
Truck
|
$
|
167
|
|
|
$
|
165
|
|
|
$
|
183
|
|
|
$
|
200
|
|
Parts
|
149
|
|
|
144
|
|
|
437
|
|
|
413
|
|
Global
Operations
|
1
|
|
|
4
|
|
|
10
|
|
|
(2)
|
|
Financial
Services
|
30
|
|
|
23
|
|
|
93
|
|
|
62
|
|
Net
income(A)
|
156
|
|
|
170
|
|
|
119
|
|
|
152
|
|
Diluted income per
share(A)
|
1.56
|
|
|
1.71
|
|
|
1.20
|
|
|
1.53
|
|
|
|
|
|
|
|
|
|
|
|
(A)
|
Amounts attributable
to Navistar International Corporation.
|
Truck Segment — Truck segment net sales increased 25
percent to $2.4 billion compared to
third quarter 2018. The increase is primarily due to higher volumes
in the company's Core markets, an increase in both Mexico sales and sales of Class 4-5 trucks
manufactured for GM, partially offset by the impact of the sale of
a majority interest in Navistar Defense.
For third quarter 2019, the Truck segment recorded a profit of
$167 million, up $2 million compared to the same period one year
ago. The increase was primarily driven by the impact of higher
volumes in the company's Core markets and the release of a
liability recognized in a prior quarter related to certain legacy
engine litigation, offset by a prior year settlement gain relating
to a business economic claim. Excluding these two one-time items,
the segment profit was up $41 million
year-over-year.
Parts Segment — Parts segment net sales decreased
six percent to $571 million, compared
to third quarter 2018, primarily due to the impact of a new revenue
standard and lower Blue Diamond Parts (BDP) sales, offset by higher
sales in the company's North American markets.
For third quarter 2019, the Parts segment recorded a profit of
$149 million, up three percent
compared to third quarter 2018, primarily due to higher U.S.
margins and lower intercompany access fees, partially offset by
lower BDP volumes.
Global Operations Segment — Global Operations net
sales for the quarter were $90
million, comparable to the same period one year ago.
For third quarter 2019, the Global Operations segment profit was
$1 million, down $3 million compared to third quarter 2018,
primarily driven by the impact of a shift in product mix.
Financial Services Segment — Financial Services net
revenues increased 14 percent to $74
million compared to third quarter 2018, primarily due to
higher average portfolio balances in the U.S. and Mexico.
For third quarter 2019, the Financial Services segment recorded
a profit of $30 million, up 30
percent compared to third quarter 2018. The increase was primarily
driven by higher interest margins and higher other income from an
intercompany loan, partially offset by the write-off of debt
issuance costs.
About Navistar
Navistar International Corporation
(NYSE: NAV) is a holding company whose subsidiaries and affiliates
produce International® brand commercial 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
July 31,
|
|
Nine Months
Ended
July 31,
|
(in millions,
except per share data)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Sales and
revenues
|
|
|
|
|
|
|
|
Sales of manufactured
products, net
|
$
|
2,996
|
|
|
$
|
2,566
|
|
|
$
|
8,330
|
|
|
$
|
6,815
|
|
Finance
revenues
|
46
|
|
|
40
|
|
|
141
|
|
|
118
|
|
Sales and revenues,
net
|
3,042
|
|
|
2,606
|
|
|
8,471
|
|
|
6,933
|
|
Costs and
expenses
|
|
|
|
|
|
|
|
Costs of products
sold
|
2,501
|
|
|
2,096
|
|
|
6,973
|
|
|
5,615
|
|
Restructuring
charges
|
—
|
|
|
1
|
|
|
1
|
|
|
(1)
|
|
Asset impairment
charges
|
3
|
|
|
8
|
|
|
6
|
|
|
11
|
|
Selling, general and
administrative expenses
|
167
|
|
|
222
|
|
|
726
|
|
|
613
|
|
Engineering and
product development costs
|
81
|
|
|
72
|
|
|
242
|
|
|
222
|
|
Interest
expense
|
76
|
|
|
82
|
|
|
243
|
|
|
240
|
|
Other expense
(income), net
|
25
|
|
|
(55)
|
|
|
140
|
|
|
36
|
|
Total costs and
expenses
|
2,853
|
|
|
2,426
|
|
|
8,331
|
|
|
6,736
|
|
Equity in income of
non-consolidated affiliates
|
1
|
|
|
—
|
|
|
4
|
|
|
—
|
|
Income before income
tax
|
190
|
|
|
180
|
|
|
144
|
|
|
197
|
|
Income tax
expense
|
(29)
|
|
|
(3)
|
|
|
(9)
|
|
|
(25)
|
|
Net income
|
161
|
|
|
177
|
|
|
135
|
|
|
172
|
|
Less: Net income
attributable to non-controlling interests
|
5
|
|
|
7
|
|
|
16
|
|
|
20
|
|
Net income
attributable to Navistar International Corporation
|
$
|
156
|
|
|
$
|
170
|
|
|
$
|
119
|
|
|
$
|
152
|
|
|
|
|
|
|
|
|
|
Income per share
attributable to Navistar International Corporation:
|
|
|
|
|
|
|
|
Basic
|
$
|
1.57
|
|
|
$
|
1.72
|
|
|
$
|
1.20
|
|
|
$
|
1.54
|
|
Diluted
|
1.56
|
|
|
1.71
|
|
|
1.20
|
|
|
1.53
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding:
|
|
|
|
|
|
|
|
Basic
|
99.4
|
|
|
99.0
|
|
|
99.2
|
|
|
98.8
|
|
Diluted
|
99.7
|
|
|
99.7
|
|
|
99.5
|
|
|
99.6
|
|
Navistar
International Corporation and Subsidiaries
|
Consolidated
Balance Sheets
|
|
|
As of
July 31,
2019
|
|
As of
October 31,
2018
|
(in millions,
except per share data)
|
|
|
|
ASSETS
|
(Unaudited)
|
|
|
Current
assets
|
|
|
|
Cash and cash
equivalents
|
$
|
1,160
|
|
|
$
|
1,320
|
|
Restricted cash and
cash equivalents
|
79
|
|
|
62
|
|
Marketable
securities
|
3
|
|
|
101
|
|
Trade and other
receivables, net
|
429
|
|
|
456
|
|
Finance receivables,
net
|
2,187
|
|
|
1,898
|
|
Inventories,
net
|
1,195
|
|
|
1,110
|
|
Other current
assets
|
273
|
|
|
189
|
|
Total current
assets
|
5,326
|
|
|
5,136
|
|
Restricted
cash
|
57
|
|
|
63
|
|
Trade and other
receivables, net
|
12
|
|
|
49
|
|
Finance receivables,
net
|
275
|
|
|
260
|
|
Investments in
non-consolidated affiliates
|
33
|
|
|
50
|
|
Property and
equipment (net of accumulated depreciation and amortization of
$2,463 and $2,498, respectively)
|
1,290
|
|
|
1,370
|
|
Goodwill
|
38
|
|
|
38
|
|
Intangible assets
(net of accumulated amortization of $142 and $140,
respectively)
|
27
|
|
|
30
|
|
Deferred taxes,
net
|
124
|
|
|
121
|
|
Other noncurrent
assets
|
112
|
|
|
113
|
|
Total
assets
|
$
|
7,294
|
|
|
$
|
7,230
|
|
LIABILITIES and
STOCKHOLDERS' DEFICIT
|
|
|
|
Liabilities
|
|
|
|
Current
liabilities
|
|
|
|
Notes payable and
current maturities of long-term debt
|
$
|
676
|
|
|
$
|
946
|
|
Accounts
payable
|
1,806
|
|
|
1,606
|
|
Other current
liabilities
|
1,323
|
|
|
1,255
|
|
Total current
liabilities
|
3,805
|
|
|
3,807
|
|
Long-term
debt
|
4,528
|
|
|
4,521
|
|
Postretirement
benefits liabilities
|
1,929
|
|
|
2,097
|
|
Other noncurrent
liabilities
|
692
|
|
|
731
|
|
Total
liabilities
|
10,954
|
|
|
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
|
2,730
|
|
|
2,731
|
|
Accumulated
deficit
|
(4,501)
|
|
|
(4,593)
|
|
Accumulated other
comprehensive loss
|
(1,754)
|
|
|
(1,920)
|
|
Common stock held in
treasury, at cost (3.9 and 4.2 shares, respectively)
|
(150)
|
|
|
(161)
|
|
Total stockholders'
deficit attributable to Navistar International
Corporation
|
(3,663)
|
|
|
(3,931)
|
|
Stockholders' equity
attributable to non-controlling interests
|
3
|
|
|
5
|
|
Total
stockholders' deficit
|
(3,660)
|
|
|
(3,926)
|
|
Total liabilities
and stockholders' deficit
|
$
|
7,294
|
|
|
$
|
7,230
|
|
Navistar
International Corporation and Subsidiaries
|
Condensed
Consolidated Statements of Cash Flows
|
(Unaudited)
|
|
|
Nine Months Ended
July 31,
|
(in
millions)
|
2019
|
|
2018
|
Cash flows from
operating activities
|
|
|
|
Net income
|
$
|
135
|
|
|
$
|
172
|
|
Adjustments to
reconcile net income to net cash provided by (used in) operating
activities:
|
|
|
|
Depreciation and
amortization
|
99
|
|
|
107
|
|
Depreciation of
equipment leased to others
|
45
|
|
|
53
|
|
Deferred taxes,
including change in valuation allowance
|
(41)
|
|
|
(3)
|
|
Asset impairment
charges
|
6
|
|
|
11
|
|
Gain on sales of
investments and businesses, net
|
(56)
|
|
|
—
|
|
Amortization of debt
issuance costs and discount
|
15
|
|
|
23
|
|
Stock-based
compensation
|
20
|
|
|
27
|
|
Provision for
doubtful accounts
|
8
|
|
|
6
|
|
Equity in income of
non-consolidated affiliates, net of dividends
|
(3)
|
|
|
4
|
|
Write-off of debt
issuance costs and discount
|
6
|
|
|
43
|
|
Other non-cash
operating activities
|
(6)
|
|
|
(17)
|
|
Changes in other
assets and liabilities, exclusive of the effects of businesses
disposed
|
(124)
|
|
|
(606)
|
|
Net cash provided
by (used in) operating activities
|
104
|
|
|
(180)
|
|
Cash flows from
investing activities
|
|
|
|
Purchases of
marketable securities
|
—
|
|
|
(214)
|
|
Sales of marketable
securities
|
—
|
|
|
460
|
|
Maturities of
marketable securities
|
98
|
|
|
29
|
|
Capital
expenditures
|
(90)
|
|
|
(79)
|
|
Purchases of
equipment leased to others
|
(130)
|
|
|
(142)
|
|
Proceeds from sales
of property and equipment
|
12
|
|
|
9
|
|
Proceeds from sales
of investments and businesses
|
100
|
|
|
(3)
|
|
Other investing
activities
|
1
|
|
|
—
|
|
Net cash provided
by (used in) investing activities
|
(9)
|
|
|
60
|
|
Cash flows from
financing activities
|
|
|
|
Proceeds from
issuance of securitized debt
|
331
|
|
|
32
|
|
Principal payments on
securitized debt
|
(300)
|
|
|
(50)
|
|
Net change in secured
revolving credit facilities
|
120
|
|
|
64
|
|
Proceeds from
issuance of non-securitized debt
|
144
|
|
|
3,210
|
|
Principal payments on
non-securitized debt
|
(988)
|
|
|
(2,669)
|
|
Net change in notes
and debt outstanding under revolving credit facilities
|
469
|
|
|
(52)
|
|
Debt issuance
costs
|
(9)
|
|
|
(36)
|
|
Proceeds from
financed lease obligations
|
13
|
|
|
48
|
|
Proceeds from
exercise of stock options
|
3
|
|
|
7
|
|
Dividends paid by
subsidiaries to non-controlling interest
|
(18)
|
|
|
(19)
|
|
Other financing
activities
|
(2)
|
|
|
(17)
|
|
Net cash provided
by (used in) financing activities
|
(237)
|
|
|
518
|
|
Effect of exchange
rate changes on cash, cash equivalents and restricted
cash
|
(7)
|
|
|
(16)
|
|
Increase
(decrease) in cash, cash equivalents and restricted
cash
|
(149)
|
|
|
382
|
|
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
|
$
|
1,296
|
|
|
$
|
1,222
|
|
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
July 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
External sales and
revenues, net
|
$
|
2,342
|
|
|
$
|
569
|
|
|
$
|
82
|
|
|
$
|
46
|
|
|
$
|
3
|
|
|
$
|
3,042
|
|
Intersegment sales
and revenues
|
45
|
|
|
2
|
|
|
8
|
|
|
28
|
|
|
(83)
|
|
|
—
|
|
Total sales and
revenues, net
|
$
|
2,387
|
|
|
$
|
571
|
|
|
$
|
90
|
|
|
$
|
74
|
|
|
$
|
(80)
|
|
|
$
|
3,042
|
|
Net income (loss)
attributable to NIC
|
$
|
167
|
|
|
$
|
149
|
|
|
$
|
1
|
|
|
$
|
30
|
|
|
$
|
(191)
|
|
|
$
|
156
|
|
Income tax
expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(29)
|
|
|
(29)
|
|
Segment profit
(loss)
|
$
|
167
|
|
|
$
|
149
|
|
|
$
|
1
|
|
|
$
|
30
|
|
|
$
|
(162)
|
|
|
$
|
185
|
|
Depreciation and
amortization
|
$
|
26
|
|
|
$
|
1
|
|
|
$
|
3
|
|
|
$
|
16
|
|
|
$
|
1
|
|
|
$
|
47
|
|
Interest
expense
|
—
|
|
|
—
|
|
|
—
|
|
|
27
|
|
|
49
|
|
|
76
|
|
Equity in income of
non-consolidated affiliates
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
Capital
expenditures(B)
|
17
|
|
|
2
|
|
|
1
|
|
|
—
|
|
|
4
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
millions)
|
Truck
|
|
Parts
|
|
Global
Operations
|
|
Financial
Services(A)
|
|
Corporate
and
Eliminations
|
|
Total
|
Three Months Ended
July 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
External sales and
revenues, net
|
$
|
1,894
|
|
|
$
|
603
|
|
|
$
|
68
|
|
|
$
|
40
|
|
|
$
|
1
|
|
|
$
|
2,606
|
|
Intersegment sales
and revenues
|
22
|
|
|
2
|
|
|
21
|
|
|
25
|
|
|
(70)
|
|
|
—
|
|
Total sales and
revenues, net
|
$
|
1,916
|
|
|
$
|
605
|
|
|
$
|
89
|
|
|
$
|
65
|
|
|
$
|
(69)
|
|
|
$
|
2,606
|
|
Net income (loss)
attributable to NIC
|
$
|
165
|
|
|
$
|
144
|
|
|
$
|
4
|
|
|
$
|
23
|
|
|
$
|
(166)
|
|
|
$
|
170
|
|
Income tax
expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3)
|
|
|
(3)
|
|
Segment profit
(loss)
|
$
|
165
|
|
|
$
|
144
|
|
|
$
|
4
|
|
|
$
|
23
|
|
|
$
|
(163)
|
|
|
$
|
173
|
|
Depreciation and
amortization
|
$
|
31
|
|
|
$
|
2
|
|
|
$
|
3
|
|
|
$
|
14
|
|
|
$
|
1
|
|
|
$
|
51
|
|
Interest
expense
|
—
|
|
|
—
|
|
|
—
|
|
|
22
|
|
|
60
|
|
|
82
|
|
Equity in income
(loss) of non-consolidated affiliates
|
1
|
|
|
1
|
|
|
(2)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Capital
expenditures(B)
|
19
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
5
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
millions)
|
Truck
|
|
Parts
|
|
Global
Operations
|
|
Financial
Services(A)
|
|
Corporate
and
Eliminations
|
|
Total
|
Nine Months Ended
July 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
External sales and
revenues, net
|
$
|
6,405
|
|
|
$
|
1,693
|
|
|
$
|
223
|
|
|
$
|
141
|
|
|
$
|
9
|
|
|
$
|
8,471
|
|
Intersegment sales
and revenues
|
75
|
|
|
5
|
|
|
27
|
|
|
85
|
|
|
(192)
|
|
|
—
|
|
Total sales and
revenues, net
|
$
|
6,480
|
|
|
$
|
1,698
|
|
|
$
|
250
|
|
|
$
|
226
|
|
|
$
|
(183)
|
|
|
$
|
8,471
|
|
Net income (loss)
attributable to NIC
|
$
|
183
|
|
|
$
|
437
|
|
|
$
|
10
|
|
|
$
|
93
|
|
|
$
|
(604)
|
|
|
$
|
119
|
|
Income tax
expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(9)
|
|
|
(9)
|
|
Segment profit
(loss)
|
$
|
183
|
|
|
$
|
437
|
|
|
$
|
10
|
|
|
$
|
93
|
|
|
$
|
(595)
|
|
|
$
|
128
|
|
Depreciation and
amortization
|
$
|
78
|
|
|
$
|
4
|
|
|
$
|
7
|
|
|
$
|
48
|
|
|
$
|
7
|
|
|
$
|
144
|
|
Interest
expense
|
—
|
|
|
—
|
|
|
—
|
|
|
83
|
|
|
160
|
|
|
243
|
|
Equity in income
(loss) of non-consolidated affiliates
|
3
|
|
|
2
|
|
|
(1)
|
|
|
—
|
|
|
—
|
|
|
4
|
|
Capital
expenditures(B)
|
69
|
|
|
3
|
|
|
2
|
|
|
2
|
|
|
14
|
|
|
90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
millions)
|
Truck
|
|
Parts
|
|
Global
Operations
|
|
Financial
Services(A)
|
|
Corporate
and
Eliminations
|
|
Total
|
Nine Months Ended
July 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
External sales and
revenues, net
|
$
|
4,810
|
|
|
$
|
1,768
|
|
|
$
|
229
|
|
|
$
|
118
|
|
|
$
|
8
|
|
|
$
|
6,933
|
|
Intersegment sales
and revenues
|
61
|
|
|
6
|
|
|
38
|
|
|
69
|
|
|
(174)
|
|
|
—
|
|
Total sales and
revenues, net
|
$
|
4,871
|
|
|
$
|
1,774
|
|
|
$
|
267
|
|
|
$
|
187
|
|
|
$
|
(166)
|
|
|
$
|
6,933
|
|
Net income (loss)
attributable to NIC
|
$
|
200
|
|
|
$
|
413
|
|
|
$
|
(2)
|
|
|
$
|
62
|
|
|
$
|
(521)
|
|
|
$
|
152
|
|
Income tax
expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(25)
|
|
|
(25)
|
|
Segment profit
(loss)
|
$
|
200
|
|
|
$
|
413
|
|
|
$
|
(2)
|
|
|
$
|
62
|
|
|
$
|
(496)
|
|
|
$
|
177
|
|
Depreciation and
amortization
|
$
|
100
|
|
|
$
|
5
|
|
|
$
|
8
|
|
|
$
|
41
|
|
|
$
|
6
|
|
|
$
|
160
|
|
Interest
expense
|
—
|
|
|
—
|
|
|
—
|
|
|
64
|
|
|
176
|
|
|
240
|
|
Equity in income
(loss) of non-consolidated affiliates
|
2
|
|
|
2
|
|
|
(4)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Capital
expenditures(B)
|
74
|
|
|
1
|
|
|
2
|
|
|
1
|
|
|
1
|
|
|
79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A)
|
Total sales and
revenues in the Financial Services segment include interest
revenues of $53 million and $161 million for the three and nine
months ended July 31, 2019, respectively, and $46 million and $131
million for the three and nine months ended July 31, 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:
|
|
|
|
|
|
|
|
|
|
|
|
July 31,
2019
|
$
|
1,942
|
|
|
$
|
686
|
|
|
$
|
322
|
|
|
$
|
3,010
|
|
|
$
|
1,334
|
|
|
$
|
7,294
|
|
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.
Manufacturing free cash flow consists of Net
cash from operating activities and Capital Expenditures, all from
our Manufacturing operations.
EBITDA
reconciliation:
|
|
|
Three Months
Ended
July 31,
|
|
Nine Months
Ended
July 31,
|
(in
millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Net income
attributable to NIC
|
$
|
156
|
|
|
$
|
170
|
|
|
$
|
119
|
|
|
$
|
152
|
|
Plus:
|
|
|
|
|
|
|
|
Depreciation and
amortization expense
|
47
|
|
|
51
|
|
|
144
|
|
|
160
|
|
Manufacturing
interest expense(A)
|
49
|
|
|
60
|
|
|
160
|
|
|
176
|
|
Adjusted
for:
|
|
|
|
|
|
|
|
Income tax
expense
|
(29)
|
|
|
(3)
|
|
|
(9)
|
|
|
(25)
|
|
EBITDA
|
$
|
281
|
|
|
$
|
284
|
|
|
$
|
432
|
|
|
$
|
513
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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
July 31,
|
|
Nine Months
Ended
July 31,
|
(in
millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Interest
expense
|
$
|
76
|
|
|
$
|
82
|
|
|
$
|
243
|
|
|
$
|
240
|
|
Less: Financial
services interest expense
|
27
|
|
|
22
|
|
|
83
|
|
|
64
|
|
Manufacturing
interest expense
|
$
|
49
|
|
|
$
|
60
|
|
|
$
|
160
|
|
|
$
|
176
|
|
Adjusted EBITDA
Reconciliation:
|
|
|
Three Months
Ended
July 31,
|
|
Nine Months
Ended
July 31,
|
(in
millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
EBITDA (reconciled
above)
|
$
|
281
|
|
|
$
|
284
|
|
|
$
|
432
|
|
|
$
|
513
|
|
Adjusted for
significant items of:
|
|
|
|
|
|
|
|
Adjustments to
pre-existing warranties(A)
|
5
|
|
|
(4)
|
|
|
7
|
|
|
(4)
|
|
Asset impairment
charges(B)
|
3
|
|
|
8
|
|
|
6
|
|
|
11
|
|
Restructuring of
manufacturing operations(C)
|
—
|
|
|
1
|
|
|
1
|
|
|
(1)
|
|
MaxxForce Advanced
EGR engine lawsuits(D)
|
(31)
|
|
|
—
|
|
|
128
|
|
|
1
|
|
Gain on
sales(E)
|
3
|
|
|
—
|
|
|
(56)
|
|
|
—
|
|
Debt refinancing
charges(F)
|
6
|
|
|
—
|
|
|
6
|
|
|
46
|
|
Pension
settlement(G)
|
—
|
|
|
—
|
|
|
142
|
|
|
9
|
|
Settlement
gain(H)
|
(1)
|
|
|
(71)
|
|
|
(3)
|
|
|
(71)
|
|
Total
adjustments
|
(15)
|
|
|
(66)
|
|
|
231
|
|
|
(9)
|
|
Adjusted
EBITDA
|
$
|
266
|
|
|
$
|
218
|
|
|
$
|
663
|
|
|
$
|
504
|
|
Adjusted Net
Income attributable to NIC:
|
|
|
Three Months
Ended
July 31,
|
|
Nine Months
Ended
July 31,
|
(in
millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Net income
attributable to NIC
|
$
|
156
|
|
|
$
|
170
|
|
|
$
|
119
|
|
|
$
|
152
|
|
Adjusted for
significant items of:
|
|
|
|
|
|
|
|
Adjustments to
pre-existing warranties(A)
|
5
|
|
|
(4)
|
|
|
7
|
|
|
(4)
|
|
Asset impairment
charges(B)
|
3
|
|
|
8
|
|
|
6
|
|
|
11
|
|
Restructuring of
manufacturing operations(C)
|
—
|
|
|
1
|
|
|
1
|
|
|
(1)
|
|
MaxxForce Advanced
EGR engine lawsuits(D)
|
(31)
|
|
|
—
|
|
|
128
|
|
|
1
|
|
Gain on
sales(E)
|
3
|
|
|
—
|
|
|
(56)
|
|
|
—
|
|
Debt refinancing
charges(F)
|
6
|
|
|
—
|
|
|
6
|
|
|
46
|
|
Pension
settlement(G)
|
—
|
|
|
—
|
|
|
142
|
|
|
9
|
|
Settlement
gain(H)
|
(1)
|
|
|
(71)
|
|
|
(3)
|
|
|
(71)
|
|
Total
adjustments
|
(15)
|
|
|
(66)
|
|
|
231
|
|
|
(9)
|
|
Tax effect
(I)
|
6
|
|
|
(9)
|
|
|
(41)
|
|
|
(5)
|
|
Adjusted Net
income attributable to NIC
|
$
|
147
|
|
|
$
|
95
|
|
|
$
|
309
|
|
|
$
|
138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 third quarter
and first nine months of 2019, we recorded $3 million and $6
million, respectively, of asset impairment charges relating to
certain assets under operating leases in our Truck segment. In the
third quarter and first nine months of 2018, we recorded $8 million
and $11 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 third quarter
and first nine months of 2019, we recorded a restructuring charge
of zero and $1 million, respectively, in our Truck segment. In the
third quarter and first nine months of 2018, we recorded a charge
of $1 million and a benefit of $1 million, respectively, related to
adjustments for restructuring in our Truck, Global Operations and
Corporate segments.
|
(D)
|
In the third quarter
and first nine months of 2019, we recognized a net benefit of $31
million related to the MaxxForce engine EGR product litigation
recorded during the third quarter of 2017 and a charge of $128
million related to MaxxForce Advanced EGR engine class action
settlement and related litigation in our Truck segment. In the nine
months ended July 31, 2018, we recognized a charge of $1 million
for a jury verdict related to one of the MaxxForce Advanced EGR
engine lawsuits in our Truck segment.
|
(E)
|
In three months ended
July 31, 2019, we recognized a charge of $3 million in
our Truck segment for adjustments to the purchase price of the sale
of a majority interest in the Navistar Defense business. In the
first nine months of 2019, we recognized a gain of $51 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 third quarter
and first nine months of 2019, we recorded a charge of $6 million
for the write off of debt issuance costs and discounts associated
with NFC Term Loan. In the first nine months 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 nine
months 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 income, net in Corporate.
|
(H)
|
In the third quarter
and first nine months of 2019, we recorded interest income of $1
million and $3 million, respectively, in Other income,
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 July 31,
2019
|
(in
millions)
|
Manufacturing
Operations
|
|
Financial
Services
Operations
|
|
Consolidated
Balance Sheet
|
Assets
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
1,112
|
|
|
$
|
48
|
|
|
$
|
1,160
|
|
Marketable
securities
|
3
|
|
|
—
|
|
|
$
|
3
|
|
Total cash, cash
equivalents, and marketable securities
|
$
|
1,115
|
|
|
$
|
48
|
|
|
$
|
1,163
|
|
Manufacturing free
cash flow reconciliation:
|
|
(in
millions)
|
July 31,
2019
|
Consolidated net cash
from operating activities
|
|
$
|
294
|
|
Less: net cash from
Financial Services Operations
|
|
20
|
|
Net cash from
Manufacturing Operations(A)
|
|
274
|
|
Plus: manufacturing
Capital Expenditures
|
|
(24)
|
|
Manufacturing free
cash flow
|
|
$
|
250
|
|
|
|
|
|
|
|
|
|
|
|
|
(A)
|
Net of adjustments
required to eliminate certain intercompany transactions between
Manufacturing operations and Financial Services
operations.
|
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SOURCE Navistar International Corporation