Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - NAVISTAR INTERNATIONAL CORP | d8k.htm |
| EX-99.1 - PRESS RELEASE - NAVISTAR INTERNATIONAL CORP | dex991.htm |
 NYSE: NAV
1
4th Quarter 2010 Earnings Presentation
December 22
nd
, 2010
Exhibit 99.2 |
 NYSE: NAV
2
2
Safe Harbor
Statement
Information provided and statements contained in this presentation that are not
purely historical are forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as
amended, Section
21E of the Securities Exchange Act of 1934, as amended, and the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements only
speak as of the date of this presentation and the Company assumes no
obligation to update the information included in this
presentation. 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 Item 1A, Risk Factors,
included within our Form 10-K for the year ended October
31, 2010, which was filed on
December 21, 2010. 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. |
 NYSE: NAV
3
3
Other Cautionary Notes
•
The financial information herein contains audited and unaudited
information and has been prepared by management in good faith
and based on data currently available to the Company.
•
Certain Non-GAAP measures are used in this presentation to assist
the reader in understanding our core manufacturing business.
We
believe this information is useful and relevant to assess and
measure the performance of our core manufacturing business as it
illustrates manufacturing performance without regard to selected
historical legacy costs (i.e. pension and other postretirement costs).
It also excludes financial services and other expenses that may not
be related to the core manufacturing business. Management often
uses this information to assess and measure the performance of our
operating segments.
A reconciliation to the most appropriate GAAP
number is included in the appendix of this presentation.
|
 NYSE: NAV
4
4
Agenda
•
4Q financials
•
Full-year
•
Strategic update
•
Driving shareowner value |
 NYSE: NAV
5
5
What We Said on the 3
rd
Quarter Call
for Full Year 2010
*This
slide
contains
non-GAAP
information,
please
see
the
Reg
G
in
appendix
for
detailed
reconciliation
Guidance
Actual
Truck Industry Units
190,000
to
195,000
191,300
Revenue ($ Billions)
12.2
to
12.5
12.1
($ Millions (excluding EPS))
Mfg. Segment Profit*
750
to
800
741**
Below the line items*
(525)
to
(534)
(495)
Profit Excluding Tax
225
to
266
246
Net Income attributable to NIC
202
to
238
223
Tax Rate
10%
to
11%
9.4%
Diluted EPS attributable to NIC
$2.75
to
$3.25
$3.05**
# of shares
~73.3M
73.2M
**FY2010 includes $10M ($0.14) of cost for UAW agreement
$751
$3.19 |
 NYSE: NAV
4Q Operations
Overall segment margins strong
•
UAW agreement expenses
-
One time items
-
Move production to Escobedo
•
Product development expense
-
4Q 2010 $126M vs. $94M in 4Q 2009
-
Launched
TerraStar™
Australia
India
•
Military Parts revenue
-
4Q 2010 $96M vs. $213M in 4Q2009
Equity in (loss) income of non-
consolidated affiliates
•
JV investment
-
4Q2010 ($18M) vs. ($10M) in 4Q2009
9800
CT630
CT610
40T/49T
31T
9
10
DT
7
11
13
Brazil
2010 emission engines
6 |
 NYSE: NAV
7
75,800
86,900
22,700
24,800
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
FY 2009
FY 2010
Q409
Q410
167,800
215,500
51,300
57,600
101,500
24,900
39,600
0
50,000
100,000
150,000
200,000
250,000
300,000
FY 2009
FY 2010
4Q09
4Q10
4Q2010 and Full Year Information
Consolidated
Revenues
($
in
millions)
Yearly and Quarterly Truck Chargeouts
Yearly and Quarterly Engine Shipments
Q/Q
Chargeouts
increased
~9%
Q/Q
Shipments
decreased
~37%
Y/Y Shipments
decreased ~11%
Y/Y Chargeouts
increased ~15%
-
Ford
269,300
240,400
90,900
$11,569
$12,145
$3,285
$3,372
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
FY 2009
FY 2010
Q409
Q410
Q/Q
Revenues
increased
~3%
Military
Revenues
($
in
millions)
$400
$495
$213
$96
$0
$100
$200
$300
$400
$500
$600
$700
4Q 2009
4Q 2010
Truck
Parts
$613
$591 |
 NYSE: NAV
8
8
2007 Product Offerings
2011 Product Offerings
Well Positioned for Future
Purchased Engines
7
7
DT
DT
9
9
10
10
9900
SCHOOL BUS
9200 / 9400
Global Powertrain
7.2L
9.3L
4.8L
9
10
DT
7
11
13
JAC JV and NEOBUS JV are pending. |
 NYSE: NAV
9
9
Medium
Truck
Great Products –
Market Share
Severe
Service
Truck
Heavy
Truck
FY07
60%
FY08
55%
FY09
61%
FY10
59%
FY07
36%
FY08
36%
FY09
35%
FY10
38%
FY07
25%
FY08
27%
FY09
34%
FY10
33%
FY07
15%
FY08
19%
FY09
25%
FY10
24%
Class 8
School
Bus
(U.S. & Canada)
School Bus & Combined Class 6-8 Market Share –
FY08: ;
FY09: ; FY10:
Note: Market Share based on brand and Severe Service Truck market share
excludes military FY07
18%
FY08
22%
FY09
28%
FY10
26% |
 NYSE: NAV
10
10
2010 U.S. and Canada Heavy Strategy –
Maintain 25% Class 8 Share
MaxxForce
®
13L
•
Successfully transitioning customers to 13L
•
Current run rate up to 110 per day, moving to 200 per day
•
Run rate will increase throughout 2011 to coincide with
industry demand
•
Industry converting to 13L engines
MaxxForce
®
15L
•
Now accepting orders
•
EPA certification has been submitted in October
•
Customer delivery starts in January 2011
•
Additional high volume applications will be phased in
through April 2011 with marketing push at Mid-America
Truck Show
2010 Strategy
•
Convert customers to the
MaxxForce
®
13L
•
Drive customer –
pre/post buy |
 NYSE: NAV
11
11
•
Moving from focused facilities to
flexible manufacturing to minimize
logistics cost
•
School bus: All assembly in Tulsa
•
Huntsville –
ability to produce
V8/I6/DT engines on same line
What’s next?
•
Engineering
Competitive Cost Structure
EAP
GAP
CAP
SAP
TBP
HEP
CBP
MPP
Product Development
FY 2009
FY 2010
$433M
$464M
$94M
Q4 2010 product development was
$126M |
 NYSE: NAV
12
12
Competitive Cost Structure
New Labor Agreement/Integrated Product Development Center
Ft. Wayne
Ft. Wayne
Engineering Center
Engineering Center
Melrose Park
Melrose Park
Future
•
Capitalize on integration at lower cost
•
Increase shareowner value
Strategy
•
Labor agreement
•
Leveraging assets
•
Integrated Product Development Center
Past/Present |
 NYSE: NAV
13
13
Navistar Defense
Sustainable Revenue
2008
2009
2010
2011
> $2B
> $2B
> $2B
$1.5-$2.0B
•
U.S. and FMS
$1.3B
Continue at lower rate (-)
•
Foreign Direct
$0.3B
U.K./Canada/26 countries (+/-)
•
Parts & Services
$0.5B
Continue w/more vehicles (+/-)
•
Capability Insertion
$0.1B
Increasing (+)
•
Total
$2.2B
250 MaxxPro
Recovery
Vehicles
175 MaxxPro
Dash w/ DXM
Heavy Truck Tractors New customer –
Navy Seabees
2011 Goal
~$400M in awards within last three months
Recent Wins: |
                     NYSE:
NAV 14
14
Top 15
Countries
International Market
Global Defense Budgets
1.
China
2.
United Kingdom
3.
France
4.
Japan
5.
Saudi Arabia
6.
Germany
7.
India
8.
Italy
9.
Russia
10.
S. Korea
11.
Brazil
12.
Canada
13.
Australia
14.
Spain
15.
Turkey
Iran
Colombia
Israel
Netherlands
Poland
Taiwan
Greece
Singapore
United Arab Emirates
Sweden
Norway
Pakistan
Egypt
Algeria
Belgium
Thailand
Switzerland
Oman
Chile
Denmark
50 Countries (Including US) Define 87% of the Global Defense Marketplace;
13 of top 15 Accessible to US Defense Companies
Domestic US Markets
Accessible International Markets
Excluded International Markets
Copyright ©
Jane’s
Information Group Inc., 2010.
All rights reserved.
Next in
Rank |
 NYSE: NAV
15
15
School Bus
Class 6 and 7
Combined
Class 8
Engines
Class 4 and 5
Existing Platforms + Survivability Solutions = Success
Existing Platforms + Survivability Solutions = Success
Navistar Defense
Leveraging Platforms |
 NYSE: NAV
16
16
India
India
Latin America
Latin America
40T/49T
25T Tipper
31T
South Africa
South Africa
2011 Global Truck
Australia
Australia
CT630
CT610
Brazil
Brazil
9800 |
 NYSE: NAV
17
17
2011 Global Truck |
 NYSE: NAV
18
A. J. Cederoth
–
EVP & CFO
•
Strategy
•
Manufacturing cash
update
•
NFC liquidity remains
strong
•
Driving shareowner value
-
Managing legacy costs
-
Realizing tax value
•
Results will flow with
recovery
•
Thoughts for 2011 |
 NYSE: NAV
19
Strategy -
Leveraging What We Have and What
Others Have Built
Note: This slide contains non-GAAP information, please see the Reg
G in appendix for detailed reconciliation. |
 NYSE: NAV
4Q Manufacturing Cash Update
Note: This slide contains non-GAAP information, please see the Reg
G in appendix for detailed reconciliation.
20
($ millions)
July 31, 2010 ending manufacturing cash
1
$757
Manufacturing EBITDA
$123
Change in net working capital
2
$308
Capital expenditures
($85)
Other cash flows
($3)
October 31, 2010 ending manufacturing cash
1
$1,100
1
Includes marketable securities and cash from the consolidation of
non-controlling minority interests (includes $49 million and $16 million
of cash and cash equivalents at July 31 and October 31, 2010, respectively, from BDP and BDT)
2
NWC = A/R, Inventory, Other Current Assets, A/P & Other Current
Liabilities |
 NYSE: NAV
21
21
Navistar Financial Corporation (NFC) -
Leveraging Assets & Controlling Our Destiny
•
Liquidity is strong: $719M
-
Dealer floor plan structures refinanced with > $529M of liquidity
•
Retail portfolio allied with GE Capital
-
Navistar Capital fully integrated
•
FY 2010 profitability of $95M and leverage has improved (7:1)
Retail Notes
Bank Facility
•
$815M of availability
remaining
–
Funding for retail notes,
wholesale notes, retail
accounts, and dealer open
accounts
–
Matures December 2012
On balance sheet
•
Situation as of Oct 31, 2010
–
~$1.1B funding facility
(NFSC)
–
$529M available
•
NFSC wholesale trust
–
Bank conduit portion renewed
August 2010
–
Public portions mature
January 2012 and October
2012
On balance sheet
•
Broaden product offering
•
Enhanced ability to support
large fleets
Note: $95 million of profitability is for total financial
services |
 NYSE: NAV
22
22
Control Below the Line
•
FY2010 actual expense: $142M
•
FY2011 not expected to be exceed
FY2010 expense
•
Fiscal year pension returns were
17.5%
•
Pension Relief Act benefits funding
•
FY2010 actual expense: $37M
•
Continued dialogue around long term
solution
•
OPEB underfunded balance was
reduced in 2010 by $505M
•
Managed through 2010 product
transition
•
Global strategy will present new
challenges, value of partners
•
2011 opportunities
•
2011 tax rate expected to be between
13% and 18%
•
Long-term outlook -
potential to
consume NOL
•
Value of deferred tax assets will have
positive impact on balance sheet |
 NYSE: NAV
23
Positioned to Take Advantage of
Industry Recovery
Note: This slide contains non-GAAP information, please see the Reg
G in appendix for detailed reconciliation.
FY2008
FY2009
FY2010
Defense Revenues
$3.9B
$2.9B
$2.2B
Engines sold to Ford
(in units)
125K
102K
25K
Post Retirement Benefit
(Costs)
$42M
($233M)
($179M)
JV Investments
(start-up costs)
NA
($20M)
($55M) |
 NYSE: NAV
24
24
Thoughts for FY 2011
Full Year
Timing
North America Industry
+
Recovering Throughout the Year
Market Share
+
Building Experience in 1st Half / Gains in 2nd Half
-
Class 4/5
+
-
Class 6/7
+
-
Class 8
-
/ +
Core Business Performance
+ +
Trends with Volume
Global Growth
+
Volume Growth as Distribution Expands
Military Revenue
-
/ +
$1.5B -
$2.0B
Engine
+
OEM Volume Growth
-
South America
–
/ +
Sustain South America
Parts
+
Continued Growth
Facility Integration
Engineering Integration / Transition
–
Labor
UAW, Chatham |
 NYSE: NAV
25
25
Investor
&
Analyst
Day
-
January
25,
2011
Reservation Required
Navistar’s Investor & Analyst Day
Tuesday, January 25, 2011
Melrose Park Engine Facility
Melrose Park, IL
10:30
a.m.
–
3
p.m.
CST
Lunch, Presentation with Q&A
Plant Tour, Lab Demos & Product Displays
Reservation Required
Please contact Suzanne Sorensen at
Suzanne.Sorensen@Navistar.com to RSVP
JAC JV and NEOBUS JV are pending
7.2L
4.8L
9
10
DT
7
11
13
9.3L |
 NYSE: NAV
26
Appendix |
 NYSE: NAV
27
27
4Q2010 and Full Year Information:
Profitable at all points in the cycle
Quarterly Manufacturing
Segment Profit ($ in millions)
Quarterly Diluted Earnings
(loss) per share
$1.19
$0.54
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
$1.40
4Q09
4Q10
$232
$146
$0.00
$50.00
$100.00
$150.00
$200.00
$250.00
4Q09
4Q10
2009
2010
Military Revenue
$613M
$591M
Truck
$400M
$495M
Parts
$213M
$96M
World Wide Chargeouts
22,800
24,800
Ford Engine Volume (US/Can)
39,600
0
Product Development Cost
$94M
$126M
UAW Agreement Costs
N/A
$10M
2009
2010
Military Revenue
$2,941M
$2,151M
Truck
$2,121M
$1,820M
Parts
$820M
$331M
World Wide Chargeouts
75,800
86,900
Ford Engine volume - full Year (US/Can)
101,500
24,900
Product Development Cost
$433M
$464M
UAW Agreement Costs
N/A
$10M
Full Year
Fourth Quarter |
 NYSE: NAV
28
28
Market Share –
U.S. & Canada School Bus and Class 6-8
Navistar
1st Q
2nd Q
3rd Q
4th Q
Full Year
1st Q
2nd Q
3rd Q
4th Q
Full Year
1st Q
2nd Q
3rd Q
4th Q
Full Year
Bus (School)
57%
57%
48%
58%
55%
56%
60%
61%
66%
61%
60%
63%
52%
59%
59%
Medium (Class 6-7)
34%
35%
39%
35%
36%
30%
39%
33%
39%
35%
33%
44%
36%
37%
38%
Heavy (LH & RH)
16%
15%
19%
25%
19%
24%
23%
29%
24%
25%
23%
22%
30%
20%
24%
Severe Service
28%
26%
26%
29%
27%
32%
36%
33%
33%
34%
34%
35%
35%
29%
33%
Combined Class 8
20%
19%
21%
26%
22%
26%
27%
30%
27%
28%
26%
26%
31%
22%
26%
Combined Market Share
27%
27%
28%
32%
29%
30%
35%
36%
36%
34%
31%
35%
34%
30%
33%
2010
Market Share - U.S. & Canada School Bus and Class 6-8
2008
2009 |
 NYSE: NAV
29
29
Truck Chargeouts
Note: Information shown below is based on Navistar’s fiscal year
Fiscal year 2008
1Q08
2Q08
3Q08
4Q08
Full Year 2008
BUS
3,100
3,300
2,700
4,400
13,500
MEDIUM
3,700
6,300
5,800
4,500
20,300
HEAVY
2,600
3,900
4,500
7,800
18,800
SEVERE
2,400
3,400
3,300
3,700
12,800
TOTAL
11,800
16,900
16,300
20,400
65,400
MILITARY (U.S. & Foreign)
1,600
2,200
2,300
2,600
8,700
EXPANSIONARY
5,900
8,100
8,400
5,700
28,100
WORLD WIDE TRUCK
19,300
27,200
27,000
28,700
102,200
Fiscal year 2009
1Q09
2Q09
3Q09
4Q09
Full Year 2009
BUS
2,700
3,100
3,500
4,500
13,800
MEDIUM
3,200
3,400
2,700
3,700
13,000
HEAVY
6,100
3,200
4,500
5,300
19,100
SEVERE
2,800
2,700
2,800
2,600
10,900
TOTAL
14,800
12,400
13,500
16,100
56,800
MILITARY (U.S. & Foreign)
2,500
2,100
1,200
2,000
7,800
EXPANSIONARY
2,400
1,900
2,300
4,600
11,200
WORLD WIDE TRUCK
19,700
16,400
17,000
22,700
75,800
Fiscal year 2010
1Q10
2Q10
3Q10
4Q10
Full Year 2010
BUS
3,100
3,100
2,300
3,900
12,400
MEDIUM
3,900
5,300
3,900
5,400
18,500
HEAVY
5,200
4,600
6,400
5,400
21,600
SEVERE
3,100
3,000
1,800
2,800
10,700
TOTAL
15,300
16,000
14,400
17,500
63,200
MILITARY (U.S. & Foreign)
900
900
1,600
1,200
4,600
EXPANSIONARY
3,900
4,500
4,600
6,100
19,100
WORLD WIDE TRUCK
20,100
21,400
20,600
24,800
86,900 |
 NYSE: NAV
30
30
World Wide Engine Shipments
Navistar
1st Q
2nd Q
3rd Q
4th Q
Full Year
OEM sales - South America
27,600
33,800
34,500
36,700
132,600
Ford sales - U.S. and Canada
41,400
48,000
18,600
16,500
124,500
Other OEM sales
3,200
4,200
4,900
6,500
18,800
Intercompany sales
13,600
16,500
21,200
18,300
69,600
Total Shipments
85,800
102,500
79,200
78,000
345,500
Navistar
1st Q
2nd Q
3rd Q
4th Q
Full Year
OEM sales - South America
19,400
22,500
26,100
31,200
99,200
Ford sales - U.S. and Canada
12,600
26,400
22,900
39,600
101,500
Other OEM sales
4,500
2,400
1,800
2,600
11,300
Intercompany sales
14,400
12,600
12,800
17,500
57,300
Total Shipments
50,900
63,900
63,600
90,900
269,300
Navistar
1st Q
2nd Q
3rd Q
4th Q
Full Year
OEM sales - South America
30,700
34,600
33,600
33,900
132,800
Ford sales - U.S. and Canada
24,700
200
-
-
24,900
Other OEM sales
2,000
3,600
3,700
4,900
14,200
Intercompany sales
16,400
17,700
15,600
18,800
68,500
Total Shipments
73,800
56,100
52,900
57,600
240,400
2010
2008
2009 |
 NYSE: NAV
31
31
Order Receipts –
U.S. & Canada
Percentage
Percentage
2010
2009
Change
Change
2010
2009
Change
Change
3,200
9,100
(5,900)
(65)
7,800
18,300
(10,500)
(57)
5,200
7,100
(1,900)
(27)
17,700
15,100
2,600
17
Class 8 heavy trucks
4,100
7,000
(2,900)
(41)
20,200
19,900
300
2
Class 8 severe service trucks
2,200
3,700
(1,500)
(41)
10,000
11,100
(1,100)
(10)
14,700
26,900
(12,200)
(45)
55,700
64,400
(8,700)
(14)
6,300
10,700
(4,400)
(41)
30,200
31,000
(800)
(3)
The
three
and
twelve
months
ended
October
31,
2009
have
been
recast
to
exclude
200
and
3,000
units,
respectively,
related
to
U.S.
military
contracts
to
reflect
our
new
methodology
for
categorization
of
“traditional”
units.
Total "Traditional" Markets
Combined Class 8 (Heavy and Severe Service)
"Traditional" Markets
School buses
Class 6 and 7 medium trucks
Twelve Months Ended
October 31,
Order Receipts: U.S. & Canada (Units)
Three Months Ended
October 31, |
 NYSE: NAV
32
32
International
Dealer
Stock
Inventory
(Units)
*
U.S. and Canada Dealer Stock Inventory
*Includes U.S. and Canada Class 4-8 and school bus inventory, but does not
include U.S. IC Bus or Workhorse Custom Chassis inventory. |
 NYSE: NAV
33
33
Frequently Asked Questions
Q1:
Why did the Company disclose that it revised its previous financial
statements? A:
In Q4, the Company identified errors that originated in periods prior to 2008. The
errors included: (i) an understatement of our net obligation for pension
benefits of $25 million due to our actuarially computed projected benefit
obligations for pensions not measuring certain benefits,
(ii)
an
understatement
of
our
asbestos
claims
reserve
of
$9
million
for
a
mechanical
error in the actuarial model used to calculate our reserve, and (iii) an
understatement of our reserve for certain disability programs for our
Canadian operations of $16 million due to an error in the application of
the accounting guidance for defined benefits and a related understatement
of our deferred tax assets of $5 million. These errors resulted in the
understatement of our accumulated deficit and accumulated other
comprehensive loss of $29 million and $16 million, respectively, at October
31, 2009. The corrections are not considered material to any previously
reported consolidated financial statements. The 2009 and 2008 impact of
these errors, totaling $10 million, was recognized in our results for 2010
as they were not material to our financial results for 2009 and 2008. We
have revised our previously reported Consolidated Balance Sheet as of October 31,
2009 and Consolidated
Statements
of
Stockholders’
Deficit
for
the
years
ended
October
31,
2009
and
2008 to reflect the correction of errors identified in those statements. The
revisions did not impact the Consolidated Statements of Cash Flows for
those periods. |
 NYSE: NAV
34
34
Frequently Asked Questions
Q2:
How does vertical integration of a big bore engine impact warranty?
A:
With the transition to 100% MaxxForce
engines we will assume an increased responsibility for engine
warranty,
which
was
previously
absorbed
by
our
suppliers
and
reflected
in
our
material
costs.
The
impact of this change will increase warranty expense and decrease material
costs. Q3:
What is the breakdown of your South American engine business in 2010 (broken down by
automotive, agricultural/other, and truck)? What do you expect your breakout
to be in 2012? A:
Q4:
What is in your Dealcor
debt?
A:
Dealcor
debt is comprised of wholesale (floor plan) financing and also retail financing on
lease and rental fleets for company owned dealers.
Q5:
How many Dealcor
dealers did you have as of October 31, 2010?
A:
Of our 276 primary NAFTA dealers, we have ownership interest in 11 DealCor
dealers as of
October 31, 2010.
We expect to further reduce our number of Dealcor
dealers in 2011.
Application
2010 FY
2012 FY
Pick-ups & SUVs
35%
30%
Trucks
23%
24%
Tractors
20%
9%
Buses
11%
22%
Industrial
5%
7%
GenSets
5%
6% |
 NYSE: NAV
35
35
Frequently Asked Questions
Q6:
Are there any requirements for NFC leverage?
A:
NFC is compliant with our revolver leverage covenant of 6 to 1. This ratio
calculation excludes qualified retail and lease securitization debt.
Q7:
How do you fund your wholesale business?
A:
We primarily finance our wholesale portfolio in traditional private or public
securitizations, and through our bank facility.
Q8:
How are your dealers doing?
A:
We think our dealers, which have always been one of our strengths, are well
positioned. We traditionally have not had any significant dealer
losses and expect that trend to continue in the future. Q9:
What kind of rates do you charge your dealers and customers?
A:
Generally, our rates vary (those with higher credit risk have always had to pay
higher interest rates) and are usually in line with the market.
Q10:
How is your NFC portfolio performing?
A:
Repossessions, past due accounts and losses peaked in 2008 and have continued to
show improvement.
NFC portfolio performance improved considerably in 2010, which has resulted in a
lower provision for losses. |
 NYSE: NAV
36
36
Frequently Asked Questions
Q11:
What is your total amount of capacity at NFC?
A:
Total availability in our funding facilities is more than $719 million as of
October 31, 2010. Q12:
What is the status of the retail financing alliance with GE Capital in the United
States? A:
Navistar
Capital
–
the
alliance
we
formed
with
GE
Capital
to
support
the
sale
of
Navistar
products
–
is
off to a great start and progressing consistent with expectations.
Q13:
Why have NFC’s wholesale receivables and debt moved onto the balance
sheet? A:
NFC
amended
its
wholesale
securitization
trust
to
allow
NFC
some
control
over
receivables
transferred
to the trust, which is a variable interest entity of which NFC is the primary
beneficiary. Under current accounting rules, the amendment requires
NFC to consolidate the assets and liabilities of the wholesale
securitization trust onto the balance sheet. Q14:
How does the latest Ground Combat Vehicle (GCV) program announcement affect
Navistar? A:
Navistar was not originally part of the GCV program. Recently, the Army
announced it would cancel the contract solicitation and issue a revised
Request for Proposal (RFP). Navistar will evaluate potential
opportunities once the RFP has been issued. Q15:
What is the current Joint Light Tactical Vehicle (JLTV) program status?
A:
As part of the Technology Development (TD) phase, Navistar and BAE delivered
right-hand drive prototypes to Australia on June 21 following delivery
of prototypes to the U.S. in May. |
 NYSE: NAV
37
37
Frequently Asked Questions
Q16:
What
is
the
status
of
any
MaxxPro
®
Dash
rolling
chassis
orders?
A:
At this time, we stand ready to support any needs from the military should they
choose to retrofit the remainder
of
the
MaxxPro
fleet
with
DXM™
independent
suspension.
To
date,
Navistar
has
been
contracted
to
produce
1,305
MaxxPro
Dash
units
with
DXM
independent
suspension
and
is
currently
retrofitting
another
1,222
Dash
units
in
theater
with
the
capability.
Recently,
the
company
also
received
an
order
for
250
of
the
new
MaxxPro
Recovery
MRAP
variant.
Q17:
What are your margins for military vehicles?
A:
We do not break margins out specific to our military vehicles. These numbers are
reported as part of our Truck Group financials.
Q18:
What are the 2010 emissions requirements?
A:
The
rules
allow
manufacturers
to
go
to
a
maximum
of
0.50
NOx
if
they
reduced
earlier
with
advanced
technology;
manufacturers
need
to
be
at
0.20
NOx
if
they
chose
not
to
introduce
advanced
technologies
to
reduce
their
emissions
earlier.
Q19:
What
will
Navistar
do
to
meet
the
0.20
NOx
emissions
when
its
credits
are
depleted?
A:
Navistar remains committed to its strategy of providing solutions that let
customers focus on their business, not emissions regulations.
Solutions under development are multi-pronged and include our
prime
path
of
in-cylinder
solutions
along
with
application-specific
solutions
such
as
the
Amminex
metal
ammine-based
NOx
reductant
delivery
system
which
Navistar
announced
in
December
2009. |
 NYSE: NAV
38
38
Frequently Asked Questions
Q20:
How much net operating losses remain, and why is there still a valuation allowance
against deferred tax assets?
A:
The Company has U.S. federal net operating losses available as of October 31, 2010
with an undiscounted cash value of $161 million.
In addition, we have state NOLs
valued at $85 million and
foreign
NOLs
valued
at
$85,
for
a
total
undiscounted
cash
value
of
$331
million.
(The
$25
million
reduction in our financial statement NOL deferred tax component relates to stock
option accounting.) A
substantial
portion
of
these
NOL
assets
are
subject
to
a
valuation
allowance.
In
addition
to
the
deferred
tax assets attributable to the NOLs, we have other deferred tax assets arising from
temporary book- tax differences subject to a valuation allowance, for a
total balance of deferred tax assets subject to a valuation allowance of
$1.8 billion. Under U.S. GAAP rules, when the Company is able to
demonstrate sufficient earnings (both historically and in the future) to absorb
these future deductions, the Company will release its valuation
allowances. If U.S. operations continue to improve, we believe it is
reasonably possible that the Company may release all or a portion of its
U.S. valuation allowance in the next twelve months. When we release the valuation
allowance, $49 million would favorably impact paid in capital and the balance would
favorably impact net income. |
 NYSE: NAV
39
39
Frequently Asked Questions
Q21:
How has recent tax legislation affected Navistar?
A:
The Worker, Homeownership, and Business Assistance Act of 2009 provided an
opportunity to carry back alternative minimum tax net operating losses from
the Company’s 2010 fiscal year and to receive a
refund
of
alternative
minimum
tax
(AMT)
payments
made
in
the
prior
five
fiscal
years.
The
Company
expects
to
receive
a
refund
of
$29
million
of
AMT
credits
as
a
result
of
this
legislation.
The
Tax
Relief,
Unemployment
Insurance
Reauthorization,
and
Job
Creation
Act
of
2010
(the
Tax
Relief
Act)
extends
current
tax
rules
in
several
areas,
which
if
not
extended,
could
have
adversely
impacted
the
Company’s
tax
results.
In
addition,
the
Act
provides
the
opportunity
for
businesses
to
fully
depreciate
qualifying
property
purchased
through
the
end
of
2011
(50%
first
year
depreciation
for
purchases
in
2012), which could benefit both Navistar and its customers.
Q22:
What makes up our consolidated tax expense?
A:
Our pre-tax operating profits reflect our worldwide operations; similarly our
consolidated tax expense reflects the impact of differing tax positions
throughout the world. In general, we currently have full valuation
allowances
against
the
deferred
tax
assets
of
our
U.S.
and
Canadian
operations.
Consequently, our tax expense in those jurisdictions is generally limited to
current state or local taxes and the impact of alternative minimum
taxes. In 2010 we reported a refund of $29 million in AMT
credits which we expect to receive in 2011. Our Brazilian and Mexican
operations are profitable and as a result we accrue taxes in those
jurisdictions. This combination of factors contributes to our low
overall consolidated effective tax rate.
Q23:
What contributed to the $14 million decrease in income tax expense as compared to
2009? A:
The decrease in tax expense was primarily driven by the $29 million refund of U.S.
alternative minimum tax, offset by increases in our foreign taxes as a
result of higher foreign income. |
 NYSE: NAV
40
40
Frequently Asked Questions
Q24:
Your
tax
footnote
in
the
10K
discloses
gross
deferred
tax
assets
of
$1.9
billion.
How
will
those
assets
be
used
to
offset
future
taxable
income?
A:
Simply put, deferred tax assets represent the value of future tax deductions
attributable to items that have already been expensed or deducted for book
purposes. The most commonly understood
component of deferred tax assets is the value of our net operating losses, which
will serve to reduce taxable
income
in
the
future.
In
addition,
we
have
several
other
major
components
of
deferred
taxes
which will reduce taxable income in the future.
For example, the Company has accrued significant
OPEB, pension and other employee benefit expenses during prior years based on
expected payments to be made in the future.
As these payments are made, the Company will realize tax deductions to the
extent of its future taxable income.
Q25:
What is your expected 2010 pension and OPEB GAAP expense?
A:
Assuming no further containment actions and no curtailment events, we anticipate
2011 pension and OPEB GAAP expense will not exceed 2010 levels.
Q26:
What are your expected 2011 and beyond pension funding requirements?
A:
Current forecasts indicate that we may need to contribute approximately $180
million in 2011. We believe the recently enacted pension funding relief
legislation Preservation of Access to Care for Medicare Beneficiaries and
Pension Relief Act of 2010 will materially reduce the amount of required
cash
contributions
into
our
major
US
defined
benefit
plans
over
the
next
five
years.
Although
certain
specific
regulations
related
to
funding
relief
have
not
yet
been
defined,
we
anticipate
that
minimum
required cash contributions will be reduced between $300 and $400 million for the
year 2012 through 2014 compared with our estimate of minimum required cash
contributions before funding relief. |
 NYSE: NAV
41
41
Frequently Asked Questions
Q27:
What causes the variance between manufacturing cash interest payments and GAAP
interest expense?
A:
The
main
variance
between
cash
and
GAAP
interest
results
from
the
recent
issuance
of
new
manufacturing
debt.
In
October
2009,
our
manufacturing
company
issued
$1
billion
of
senior
unsecured
high
yield
notes
and
$570
million
of
senior
subordinated
convertible
notes.
As
a
result
of
this
issuance,
future
manufacturing
interest
expense
will
be
higher
than
cash
interest
payments
due
to
the
amortization
of
debt
issuance
costs
which
are
amortized
over
the
life
of
each
note
($36
million),
amortization
of
the
original
issue
discount
of
the
high
yield
notes
($37
million)
and
amortization
of
the
embedded
call
option
in
the
convertible
notes
($114
million).
In
FY
2010,
this
variance
is
much
larger
due
to
the
timing
of
interest
payments
on
the
high
yield
notes.
Interest
payment
dates
are
in
May
and
November
starting
in
May
2010.
Therefore,
we
had
only
one
cash
payment
this
fiscal
year
even
though
expense
will
show
the
full
year
amount.
As
a
result
of
this
and
other
non-cash
interest
expense,
FY
2010
shows
a
variance
of
approximately
$79
million
between
cash
and
GAAP
interest.
Q28:
What are the $225 million of Recovery Zone Facility Revenue Bonds (RZFB) Series 2010
due October 15, 2040 being used for?
A:
We
are
using
the
proceeds
to
invest
in
our
product
development
strategy
and
our
HQ
consolidation.
Great
products
are
a
key
pillar
of
our
three
pronged
strategy.
Streamlining
and
improving
our
product
development
processes
will
continue
to
provide
competitive
advantages
for
us
in
the
marketplace.
The
funding
from
RZFB
will
allow
us
to
consolidate
many
facilities
into
a
new
facility
and
make
necessary
renovations
to
that
facility.
Additionally
we
will
invest
in
an
existing
facility,
which
includes
investments
in
equipment
and
technology
that
will
help
us
create
and
improve
our
product
development
process
and
thus
shareholder
value. |
 NYSE: NAV
Frequently Asked Questions
Q29:
Why did you use RZFB financing?
A:
The recovery zone facility bonds are a cost effective, long-term form of
capital that is complementary to our capital structure.
The bonds have a 30 year maturity and a fixed rate coupon of 6.50% per
annum.
They are callable at par any time after 10 years (October 15, 2020).
Issuing
bonds
in
the
tax-exempt
market
gave
us
exposure
to
a
new
source
of
investors
that
we
wouldn’t
otherwise
have
access
to
if
not
for
the
Recovery
Zone
Facility
Bond
program.
Q30:
What should we assume for capital expenditures in fiscal 2011?
A:
We
plan
to
continue
capital
spending
within
the
traditionally
guided
range
of
$250
-
$350
million
for
products and development.
There is capital spending related to Product Development Consolidation
not included in the range that is fully funded through Recovery Zone Bonds.
Q31:
How do you think about accounting vs. economic dilution on your convertible
debt? A:
Please
see
the
presentation
on
the
IR
website
(http://ir.navistar.com/dilution.cfm
) entitled
Dilution
overview
resulting
from
the
Convertible
Notes
issued
on
October
2009.
Q32:
How does your Class 8 industry compare to A:
ACT Research?
Reconciliation to ACT
ACT*
199,737
199,737
CY to FY adjustment
(20,000)
(16,000)
Other misc. specialty vehicles Included in ACT
(8,500)
(5,000)
Total (ACT comparable Class 8 to Navistar)
171,237
178,737
Navistar Industry Retail Deliveries Combined Class 8 Trucks
160,000
172,000
Navistar difference from ACT:
11,237
6,737
*Source: ACT N.A. Commercial Vehicle Outlook - December 10th, 2010
* * Navistar will update this number at the January 25th Analyst Day
U.S. and Canadian Class 8 Truck Sales
2011
42 |
 NYSE: NAV
($ in millions)
Note: This slide contains non-GAAP information, please see the Reg G in
appendix for detailed reconciliation FYTD Manufacturing Cash Flow
Beginning Mfg. Cash¹ Balance
Fiscal 2007
Fiscal 2008
Fiscal 2009
YTD - FY 2010
October 31, 2006
$1,214
October 31, 2007
$722
October 31, 2008
$777
October 31, 2009
$1,152
Approximate Cash Flows:
From Operations
($231)
$414
$514
$409
Dividends from NFC
$400
$15
$0
$0
From Investing / (Cap Ex)
($200)
($220)
($284)
($350)
From Financing / (Debt Pay Down)
($480)
($133)
$56
($110)
Exchange Rate Effect
$19
($21)
$9
($1)
Net Cash Flow
($492)
$55
$295
($52)
Blue Diamond Consolidation
$0
$0
$80
$0
Ending Mfg. Cash¹ Balance:
October 31, 2007
$722
October 31, 2008
$777
October 31, 2009²
$1,152
April 30, 2010²
$1,100
1
Cash = Cash, Cash Equivalents & Marketable Securities
2
Includes cash from the consolidation of non-contolling minority interests
43 |
 NYSE: NAV
44
44
SEC Regulation G
This
presentation
is
not
in
accordance
with,
or
an
alternative
for,
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.
However,
we
believe
that
non-GAAP
reporting,
giving
effect
to
the
adjustments
shown
in
the
reconciliation
above,
provides
meaningful
information
and
therefore
we
use
it
to
supplement
our
GAAP
reporting
by
identifying
items
that
may
not
be
related
to
the
core
manufacturing
business.
Management
often
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
above
reconciliations
and
to
provide
an
additional
measure
of
performance.
DEBT
October 31,
2010
October 31,
2009
(in millions)
Manufacturing operations
8.25% Senior Notes, due 2021, net of unamortized discount of $35 and $37 million at the
respective dates
965
$
963
$
3.0% Senior Subordinated Convertible Notes, due 2014, net of unamortized discount of $99
and $114 at the respective dates
476
456
Debt of majority owned dealership
66
148
Financing arrangements and capital lease obligations
221
271
Loan Agreement related to 6.5% Tax Exempt Bonds, due 2040
225
Other
33
23
Total manufacturing operations debt
1,986
$
1,861
$
Less: Current portion
(145)
(191)
Net long-term manufacturing operations debt
1,841
$
1,670
$
Financial services operations
Asset-backed debt issued by consolidated SPEs, at variable rates, due serially through 2018
1,731
$
1,227
$
Bank revolvers, at fixed and variable rates, due dates from 2010 through 2016
974
1,518
Revolving retail warehouse facility, at variable rates, due 2010
-
500
Commercial Paper, at variable rates, due serially through 2011
67
52
Borrowing secured by operating and finance leases, at various rate, due serially through
2017 112
134
Total financial services operations debt
2,884
$
3,431
$
Less: Current portion
(487)
(945)
Net long-term financial services operations debt
2,397
$
2,486
$
Cash & Cash Equivalents
October 31,
2010
October 31,
2009
Manufacturing non-GAAP (Unaudited)
534
$
1,152
$
*
Financial Services non-GAAP (Unaudited)
51
60
Consolidated US GAAP (Audited)
585
$
1,212
$
Manufacturing Cash & Cash Equivalents non-GAAP (Unaudited)
534
$
1,152
$
*
Manufacturing Marketable Securities non-GAAP (Unaudited)
566
-
Manufacturing Cash, Cash Equivalents & Marketable Securities non-GAAP
(Unaudited) 1,100
$
1,152
$
*Includes cash and cash equivalents from consolidating Blue Diamond Truck and Blue
Diamond Parts |
 NYSE: NAV
45
45
SEC Regulation G
Three Months Ended October 31, 2010
($ millions)
Net income (loss) attributable to NIC
39
$
Add back income taxes
6
Income before income taxes
45
$
Less equity income from financial service operations
(33)
Income before income taxes and equity income from financial service operations
12
$
Add back manufacturing interest expense
38
Manufacturing EBIT
50
$
Add back manufacturing depreciation and amortization
1
73
Adjusted manufacturing EBITDA
123
$
1
Includes
depreciation
of
equipment
leased
to
others
and
excludes
debt
issuance
cost/discount
amortization |
 NYSE: NAV
46
46
SEC Regulation G –
Fiscal Year Comparison
Manufacturing
Segment
Profit
is
not
in
accordance
with,
or
an
alternative
for,
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.
However,we
believe
that
non-GAAP
reporting,
giving
effect
to
the
adjustments
shown
in
the
reconciliation
above,
provides
meaningful
information
and
therefore
we
use
it
to
supplement
our
GAAP
reporting
by
identifying
items
that
may
not
be
related
to
the
core
manufacturing
business.
Management
often
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
above
reconciliations
and
to
provide
an
additional
measure
of
performance.
Future
2009
U.S. and Canada Industry
414,500
350,000
($billions)
Sales and revenues, net
$ 15 +
$ 20 +
($millions)
Manufacturing segment profit*
$ 1,600
Below the line items
Income excluding income tax
Income tax expense
(298)
Net Income attributable to Navistar International Corporation (NIC)
Diluted earnings per share ($'s) attributable to NIC
$12.31
Weighted average shares outstanding: diluted (millions)
Original Target
@ 414.5k Industry
Revised Target
@ 350k Industry
$ 1,780
(590)
~ 72.5
$892
~ 72.5
(500)
1,100
(275)
$825
$11.46
1,190 |
 NYSE: NAV
SEC Regulation G –
Fiscal Year Comparison
This
presentation
is
not
in
accordance
with,
or
an
alternative
for,
U.S.
generally
accepted
accounting
principles
(GAAP).
The
non-GAAP
financial
information
presented
herein
should
be
considered
supplemental
to,
and
not
as
a
substitute
for,
or
superior
to,
financial
measures
calculated
in
accordance
with
GAAP.
However,
we
believe
that
non-GAAP
reporting,
giving
effect
to
the
adjustments
shown
in
the
reconciliation
above,
provides
meaningful
information
and
therefore
we
use
it
to
supplement
our
GAAP
reporting
by
identifying
items
that
may
not
be
related
to
the
core
manufacturing
business.
Management
often
uses
this
information
to
assess
and
measure
the
performance
of
our
operating
segments.
We
have
chosen
to
provide
this
supplemental
information
to
investors,
analysts
and
other
interested
parties
to
enable
them
to
perform
additional
analyses
of
operating
results,
to
illustrate
the
results
of
operations
giving
effect
to
the
non-GAAP
adjustments
shown
in
the
above
reconciliations
and
to
provide
an
additional
measure
of
performance.
2009
2008
Non GAAP
Non GAAP
Non GAAP
Non GAAP
As Reported
Non GAAP
Non GAAP
As Reported
Non GAAP
Non GAAP
As Reported
Without All
Impacts
Other
Impacts
Without UAW
Impacts
UAW
Impacts
With Impacts
Without
Impacts
Impacts
With Impacts
Without
Impacts
Impacts
With Impacts
U.S. and Canada Industry
191,300
181,800
244,100
($billions)
Sales and revenues, net
12.1
$
11.6
$
14.7
$
($millions)
Manufacturing segment profit *
(excluding items listed below)
725
$
-
$
725
$
-
$
725
$
707
$
-
$
707
$
1,088
$
-
$
1,088
$
Ford settlement net of related charges
-
27
27
-
27
-
160
160
-
(37)
(37)
UAW Expenses
-
-
-
(11)
(11)
-
-
-
-
-
-
Impairment of property, plant and equipment
-
-
-
-
-
-
(31)
(31)
-
(358)
(358)
Manufacturing segment profit
725
27
752
(11)
741
707
129
836
1,088
(395)
693
Below the line items
(excluding items listed below)
(496)
$
-
$
(496)
$
-
$
(496)
$
(468)
-
(468)
(502)
-
(502)
UAW Expenses
-
-
-
1
1
-
-
-
-
-
-
Write-off of debt issuance cost
-
-
-
-
-
-
(11)
(11)
-
-
-
Below the line items
(496)
-
(496)
1
(495)
(468)
(11)
(479)
(502)
-
(502)
Income (loss) excluding income tax
229
27
256
(10)
246
239
118
357
586
(395)
191
Income tax benefit (expense)
(23)
-
(23)
-
(23)
(34)
(3)
(37)
(58)
1
(57)
Net Income (loss) attributable to Navistar International Corporation
206
$
27
$
233
$
(10)
$
223
$
205
$
115
$
320
$
528
$
(394)
$
134
$
Diluted earnings (loss) per share ($'s) attributable to Navistar International Corporation
2.82
$
0.37
$
3.19
$
(0.14)
$
3.05
$
2.86
$
1.60
$
4.46
$
7.21
$
(5.39)
$
1.82
$
Weighted average shares outstanding: diluted (millions)
73.2
73.2
73.2
73.2
73.2
71.8
71.8
73.2
73.2
* Includes: non-controlling minority interest in net income of subsidiaries net of tax;
extraordinary gain net of tax 2010
47 |