Attached files
| file | filename |
|---|---|
| EX-99.1 - EX-99.1 - NAVISTAR INTERNATIONAL CORP | d44104dex991.htm |
| 8-K - FORM 8-K - NAVISTAR INTERNATIONAL CORP | d44104d8k.htm |
 Q3 2015 EARNINGS PRESENTATION SEPTEMBER 2, 2015 , Inc. ® is a registered trademark of International
Exhibit 99.2 |
 2 NYSE: NAV Q3 2015 Earnings – 9/2/2015 Safe Harbor Statement and Other Cautionary Notes 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 the risk factors
set forth in our filings with the
Securities and Exchange Commission, including our annual report on Form 10-K for the year ended October 31, 2014 and our quarterly report on Form 10-Q for the quarter ended April 30, 2015.
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. 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. It also excludes financial services and other items that may not be related to the core manufacturing business or underlying results. Management often uses this information to assess and
measure the underlying 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. The
non-GAAP numbers are reconciled to the
most appropriate GAAP number in the appendix of this presentation. |
 3 NYSE: NAV Q3 2015 Earnings – 9/2/2015 Agenda Overview Troy Clarke Financial Results Walter Borst Summary Troy Clarke |
 NYSE: NAV 3 QUARTER 2015 RESULTS Troy Clarke, President & CEO RD |
 5 NYSE: NAV Q3 2015 Earnings – 9/2/2015 • Progress in U.S. and Canada core truck business - On track for full-year market share goals in medium, bus and severe service • Lower revenues outside North America - Brazil engine market - Mexico and Export truck sales 3 rd Quarter Summary |
 6 NYSE: NAV Q3 2015 Earnings – 9/2/2015 Strongest Product Lineup in Years |
 7 NYSE: NAV Q3 2015 Earnings – 9/2/2015 Next Phase Cost Alignments • Three years of strong progress • Actively planning for additional cost improvements
-
Structural costs
-
Material costs
-
Manufacturing efficiencies
• Improved competitiveness - Profitable market share - Support key strategic investments |
 NYSE: NAV FINANCIAL RESULTS Walter Borst, Executive Vice President & CFO |
 9 NYSE: NAV Q3 2015 Earnings – 9/2/2015 Income Statement Summary Note: This slide contains non-GAAP information; please see the
REG G in appendix for a detailed reconciliation.
(A) Includes U.S. and Canada
School bus and Class 6-8 truck.
(B) Amounts attributable to Navistar
International Corporation. $ in millions,
except per share and units Core
Chargeouts (A)
17,100
16,300
Sales and Revenues
$2,538
$2,844
Income (Loss) from Continuing Operations, Net of
Tax ($30)
($3)
Diluted Income (Loss) Per Share from Continuing
Operations ($0.37)
($0.04)
EBITDA
$106
$142
Quarters Ended
July 31
2015
2014
(B)
(B) |
 10 NYSE: NAV Q3 2015 Earnings – 9/2/2015 Q3 2015 Adjusted EBITDA Within Guidance $ in millions Note: This slide contains non-GAAP information; please see the
REG G in appendix for a detailed reconciliation.
* Excludes pre-existing warranty and
one-time items. $106
$129
$3
$20
$0
$50
$100
$150
$200
Q3 2015
Actual EBITDA
One-time Items
Pre-existing Warranty
Adjustment
Q3
Guidance: $125-$175 Q3 2015 Adjusted EBITDA* |
 11 NYSE: NAV Q3 2015 Earnings – 9/2/2015 Revenue Trends: Core Higher, Global Lower $ in millions Global Operations Revenue 12-Month Rolling Average North America Truck & Parts Core Revenue 12-Month Rolling Average • Core revenue is trending higher due to rollout of a full product portfolio of SCR trucks • Economic conditions in Brazil have resulted in a significant decline in Global Operations segment revenues • Mexico and Export truck revenues challenged due to strong U.S. dollar and economic conditions $1,400 $1,500 $1,600 $1,700 4Q14 1Q15 2Q15 3Q15 $100 $150 $200 $250 4Q14 1Q15 2Q15 3Q15 |
 12 NYSE: NAV Q3 2015 Earnings – 9/2/2015 Q3 2015 Segment Results $ in millions Beginning in the first quarter of 2015, the Company realigned its reporting
segments. The segment results have been restated to
reflect this change. Quarters Ended
July 31
Segment Results:
2015
2014
Truck
($36)
($3)
Parts
$151
$137
Global Operations
($26)
($21)
Financial Services
$26
$24 |
 13 Q3 2015 Earnings – 9/2/2015 Progress Continues in the Third Quarter (A) Includes U.S. and Canada School bus and Class 6-8 truck.
(B) $’s in millions.
(C) Excludes amounts related to
pre-existing warranties.
Note:
This slide contains non-GAAP information; please
see the REG G in appendix for a detailed
reconciliation. 14,500
15,500
16,500
17,500
3Q14
3Q15
Chargeouts
(A)
$250
$300
$350
3Q14
3Q15
Structural Costs
(B)
2.5%
3.0%
3.5%
3Q14
3Q15
Current Warranty Expense
% Manufacturing Revenue (C) 4.0% 4.5% 5.0% 5.5% 3Q14 3Q15 Adjusted EBITDA Margin |
 14 NYSE: NAV Q3 2015 Earnings – 9/2/2015 Used Truck: Inventory Balance Past Peak • Q3 ending gross inventory balance of $350 million, down $25 million • Inventory of MaxxForce EGR trucks may have peaked in the second quarter • Export sales opportunities • Inventory reserve increased by $15 million sequentially Gross Used Truck Inventory $ in millions $320 $365 $375 $350 $0 $100 $200 $300 $400 Q4 2014 Q1 2015 Q2 2015 Q3 2015 |
 15 Q3 2015 Earnings – 9/2/2015 Q3 2015 Manufacturing Cash Update $ in millions Note: This slide contains non-GAAP information; please see the
REG G in appendix for a detailed reconciliation.
Guidance
(A)
Actual
Q2 2015 Manufacturing
Cash Balance
(B)
$784
$784
Consolidated Adjusted EBITDA
(C)
$125 -
$175
$129
Capex/Cash Interest/Pension & OPEB
Funding ($155) -
($145)
($130)
Change in Net
Working Capital/Debt and
Warranty/Other
($4) –
$36
($8)
Q3 2015 Manufacturing Cash Balance
(B)
$750-850
$775
(D)
(A)
Guidance as provided on 6/4/2015.
(B)
Cash balance includes marketable securities.
(C)
Excluding one-time items and pre-existing
warranty. (D)
Reflects repayment of $13 million of the NFC
intercompany loan. |
 16 Q3 2015 Earnings – 9/2/2015 Term Loan Refinancing Transaction $ in millions Note: This slide contains non-GAAP information; please see the
REG G in appendix for a detailed reconciliation.
Debt
Maturity
Profile
(C)
Historical
Manufacturing
Cash
Balances
(A)
$748
• Term Loan Refinancing - Adds liquidity - Extends debt maturity profile - Provides additional financial flexibility • Seeking to reduce leverage over time (B) $1,018 $733 $784 $775 $1,088 $- $250 $500 $750 $1,000 $1,250 Q4
2014
Q1
2015
Q2
2015
Q3
2015
Q3
2015 Pro Forma $100 $100 $54 $227 $421 $1,040 $1,444 $0 $400 $800 $1,200 $1,600 2015 2016 2017 2018 2019 2020 Thereafter (A)
Cash balance includes marketable securities.
(B) Q3 2015 Pro Forma balance reflects the proceeds from the term loan
refinancing net of original issue discount, fees and
expenses. (C) Total manufacturing debt of $2.9B, as of July 31, 2015. |
 17 Q3 2015 Earnings – 9/2/2015 Guidance: Q4 2015 Manufacturing Cash $ in millions (A) Cash balance includes marketable securities. (B) Excluding one-time items and pre-existing warranty.
Note:
This slide contains non-GAAP information; please
see the REG G in appendix for a detailed
reconciliation. Q4 2015
Guidance
Q3 2015 Manufacturing
Cash Balance
(A)
$775
Consolidated Adjusted EBITDA
(B)
$175 –
$225
Capex/Cash Interest/Pension & OPEB
Funding ($169) –
($159)
Change in Net Working Capital/Debt and
Warranty/Other $169 –
$209
Q4 2015 Manufacturing Cash Balance
(A)
$950 –
$1,050 |
 18 NYSE: NAV Q3 2015 Earnings – 9/2/2015 Factors Weighing on Adjusted EBITDA Margin 7.9% 5.1% (2.8)% 0% 2% 4% 6% 8% 10% Core North America Truck, Parts and Other Used Truck, Global Operations and Mexico/Export Consolidated Adjusted EBITDA ( • North America core margins improved 220 basis points from Q3 2014 • Used Truck and international businesses hampered Q3 2015 margins • Core margins set up to have strong Q4 Note: This slide contains non-GAAP information; please see the
REG G in appendix for a detailed reconciliation.
|
 19 NYSE: NAV Q3 2015 Earnings – 9/2/2015 Q4 2015: Delivering on our Margin Goals Confident in Q4 plan to hit consolidated adjusted EBITDA guidance… • Core North America Truck and Parts margins to improve • Used Truck reserve adjustments trending lower • Q3 restructuring actions to take hold in Global Operations segment • Mexico and Export truck volumes expected to increase vs. prior quarter Note: This slide contains non-GAAP information; please see the
REG G in appendix for a detailed reconciliation.
Actual
Forecast
Amount indicates mid-point of range
5.1%
8%
1.7%
1.2%
0%
2%
4%
6%
8%
10%
Q3 Consolidated
Adjusted EBITDA
Core N.A Truck,
Parts and Other
Used Truck,
Global Operations
and Mexico/Export
Q4 Forecasted
Consolidated
Adjusted EBITDA |
 20 NYSE: NAV Q3 2015 Earnings – 9/2/2015 Q3 2015 Accomplishments: • Increased Core (A) truck chargeouts year-over-year • Cost reductions on track • Lowered used truck inventory balances And in August… • Completed Term Loan refinancing Summing It Up (A) Includes U.S. and Canada School bus and
Class 6-8 truck.
|
 NYSE: NAV SUMMARY Troy Clarke, President & CEO |
 22 NYSE: NAV Q3 2015 Earnings – 9/2/2015 Cost Reductions in 2016 and Beyond Manufacturing Material Structural Warranty LOWER BREAK-EVEN POINT • Increase manufacturing productivity • Increase capacity utilization • Optimize supply base footprint • Benchmark material costs • Lower engineering and SG&A spend • Drive warranty costs to industry benchmark |
 23 NYSE: NAV Q3 2015 Earnings – 9/2/2015 Strongest Product Lineup in Years Medium Growing share in growing industry Heavy Product gaining strong consideration Severe Service Chargeouts up 22% year-over-year Bus Chargeouts up 13% year-over-year |
 24 NYSE: NAV Q3 2015 Earnings – 9/2/2015 Open Technology Integration • Leading-edge technology • Integrated engineering • Customer choice • Speed to market • Technologies leveraging supplier’s spend Leading supplier technology integration allows Navistar to deliver… |
 25 NYSE: NAV Q3 2015 Earnings – 9/2/2015 Connected Vehicle – Differentiation that Creates Value • 140,000 vehicles connected • Standard offering on International trucks • Integrated support through dealers, parts and service • Drives product consideration OnCommand Connection…
Leading the way
to industry best Uptime |
 26 NYSE: NAV Q3 2015 Earnings – 9/2/2015 • Engine recalibration over Wi-Fi • Lays groundwork for two- way Connected Vehicle Services Over the Air Reprogramming |
 27 NYSE: NAV Q3 2015 Earnings – 9/2/2015 Driving Value • Next phase cost improvements • Increase product consideration • Connected vehicle • Open technology integration |
 NYSE: NAV APPENDIX |
 29 NYSE: NAV Q3 2015 Earnings – 9/2/2015 Navistar Financial Corporation Highlights • Financial Services Segment profit of $26 million for Q3 2015, $72 million YTD
• U.S. financing availability of $316 million as of July 31, 2015 • Financial Services Debt/Equity Leverage of 3.9:1 • Issued $250 million of two-year dealer floor plan notes in July 2015
• GE intends to sell assets of GE Capital which include Navistar Capital
Retail Notes
Bank Facility
Dealer Floor Plan
• $755 million facility balance ($500 million revolver and $255 million term loan matures in December 2016) – Funding for retail notes, wholesale notes, retail accounts, and dealer open accounts • On balance sheet • NFSC wholesale trust as of July 2015 – $1.2 billion funding facility – Variable portion matures January 2016 – Term portions mature Sep. 2015, Oct. 2016 and Jun. 2017 • On balance sheet • Broader product offering • Enhanced ability to support large fleets • Better access to less expensive capital |
 30 NYSE: NAV Q3 2015 Earnings – 9/2/2015 Retail Market Share in Commercial Vehicle Segments
Class 6/7
Medium-Duty
Class 8
Severe Service
Class 8
Heavy
Three Months Ended
July 31,
April 30,
January 31,
October 31,
July 31,
2015
2015
2015
2014
2014
Core Markets (U.S. and Canada)
Class 6 and 7 medium trucks
................................................ 24% 27% 21% 19% 20% Class 8 heavy trucks .............................................................
12%
12%
10%
15%
14%
Class 8 severe service trucks
................................................ 15% 15% 14% 14% 15% Combined class 8 trucks .......................................................
13%
13%
11%
15%
14% |
 31 NYSE: NAV Q3 2015 Earnings – 9/2/2015 Worldwide Truck Chargeouts Three Months Ended July 31, % Change Nine Months Ended July 31, % Change (in units) 2015 2014 Change 2015 2014 Change Core Markets (U.S. and Canada) School buses .......................................
3,500
3,100
400
13 %
8,500
7,700
800
10 %
Class 6 and 7 medium trucks...............
3,800
3,600
200
6 %
14,500
12,200
2,300
19 %
Class 8 heavy trucks
..........................
7,000
7,300
(300)
(4)%
19,100
18,600
500
3 %
Class 8 severe service trucks .............
2,800
2,300
500
22 %
7,100
6,200
900
15 %
Total Core Markets............................... 17,100 16,300 800 5 % 49,200 44,700 4,500 10 % Non "core" military ............................
100
—
100
—
%
100
100
—
—
%
Other markets
(A)
..................................
2,900
7,600
(4,700)
(62)%
15,300
19,800
(4,500)
(23)%
Total worldwide unit............................. 20,100 23,900 (3,800) (16)% 64,600 64,600 — — % Combined class 8 trucks..................... 9,800 9,600 200 2 % 26,200 24,800 1,400 6 % We define chargeouts as trucks that have been invoiced to customers. The units held in dealer inventory represent
the principal difference between retail
deliveries and chargeouts. This table summarizes our approximate worldwide chargeouts from our continuing operations. We define our Core markets to include U.S. and Canada School bus and Class 6 through 8 medium and heavy
truck. Our Core markets include
CAT-branded units sold to Caterpillar under our
North America supply agreement. (A) Other markets primarily consist of Export Truck and Mexico and also includes chargeouts related to BDT of 3,100
units during the three months ended July
31, 2014, and 6,000 and 7,600 during the nine months ended July 31, 2015 and 2014. There were no third party chargeouts related to BDT during the three months ended July 31, 2015.
|
 32 NYSE: NAV Q3 2015 Earnings – 9/2/2015 Worldwide Engine Shipments Three Months Ended July 31, % Change Nine Months Ended July 31, % Change (in units) 2015 2014 Change 2015 2014 Change OEM sales-South America.................. 11,400 21,400 (10,000) (47)% 38,700 65,700 (27,000) (41)% Intercompany sales..............................
6,600
9,800
(3,200)
(33)%
20,200
30,400
(10,200)
(34)%
Other OEM sales.................................
1,800
2,900
(1,100)
(38)%
7,300
8,500
(1,200)
(14)%
Total
sales.....................................
19,800
34,100
(14,300)
(42)%
66,200
104,600
(38,400)
(37)% |
 33 NYSE: NAV Q3 2015 Earnings – 9/2/2015 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.
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
11,000 |
 34 NYSE: NAV Q3 2015 Earnings – 9/2/2015 Frequently Asked Questions Q1: What is included in Corporate and Eliminations? A: The primary drivers of Corporate and Eliminations are Corporate SG&A, pension and OPEB expense (excluding
amounts allocated to the segments), annual
incentive, manufacturing interest expense, and the elimination of intercompany sales and profit between segments. Q2: What is included in your equity in loss of non-consolidated affiliates?
A:
Equity in loss of non-consolidated affiliates is
derived from our ownership interests in partially-owned affiliates that are not consolidated. Q3: What is your net income attributable to non-controlling interests?
A:
Net income attributable to non-controlling interests
is the result of the consolidation of subsidiaries in which we do not own 100%, and is primarily comprised of Ford's non-controlling interest in our Blue Diamond Parts joint
venture. Q4:
What are your expected 2015 and beyond pension funding
requirements? A:
Future contributions are dependent upon a number of
factors, principally the changes in values of plan assets, changes in interest rates and the impact of any funding relief currently under consideration. For the three and nine months ended July
31, 2015, we contributed $11 million and
$73 million, respectively, to our U.S. and Canadian pension plans (the “Plans”) to meet the minimum required contributions for all plans. We currently anticipate additional contributions of approximately $40
million to the Plans during the remainder
of 2015. Future contributions are dependent upon a number of factors, principally the changes in values of plan assets, changes in interest rates, the impact of any future funding relief, and the impact of funding resulting from the closure of our Chatham plant. We currently expect that from 2016 through 2018, the Company will be required to contribute at least $100
million per year to the Plans, depending on
asset performance and discount rates. |
 35 NYSE: NAV Q3 2015 Earnings – 9/2/2015 Frequently Asked Questions Q5: What is your expectation for future cash tax payments?
A:
Our cash tax payments are expected to remain low in 2015
and will gradually increase as we utilize available net operating losses (NOLs) and tax credits in future years. Q6: What is the current balance of net operating losses as compared to other deferred tax assets?
A:
Q7:
How does your FY 2015 Class 8 industry outlook compare to
ACT Research? A:
U.S. and Canadian Class 8 Truck Sales
Reconciliation
to
ACT
-
Retail
Sales
2015
ACT*
301,400
CY to FY adjustment
(8,045)
Total (ACT comparable Class 8 to Navistar)
293,355
Navistar Industry Retail Deliveries Combined Class 8
Trucks 250,000
280,000
Navistar difference from ACT
43,355
13,355
*Source:
ACT
N.A.
Commercial
Vehicle
Outlook
-
August
2015
4.6%
14.8%
As of October 31, 2014 the Company has deferred tax
assets for U.S. federal NOLs valued at $870 million, state NOLs valued at $144 million, and foreign NOLs valued at $199 million, for a total undiscounted cash value of $1.2
billion. In addition to NOLs, the
Company has deferred tax assets for accumulated tax credits of $256 million and other deferred tax assets of $1.9 billion resulting in net deferred tax assets before valuation allowances of approximately $3.4
billion. Of this amount, $3.2 billion is
subject to a valuation allowance at the end of FY2014. |
 36 NYSE: NAV Q3 2015 Earnings – 9/2/2015 Frequently Asked Questions Q8: What is your manufacturing interest expense for Fiscal Year 2015?
A:
For the three and nine months ended July 31, 2015,
Manufacturing interest was $56 million and $170 million, respectively. Annual manufacturing interest for 2015 is forecasted to be down approximately 5% compared to 2014. For reference,
interest expense was $243 million and $251
million for FY 2014 and 2013, respectively.
Q9:
What should we assume for capital expenditures in Fiscal
Year 2015? A:
For the three and nine months ended July 31, 2015,
capital expenditures were $27 million and $72 million, respectively. Annual Capital expenditures for 2015 is forecasted to be between $125 - 150 million. In comparison, capital expenditures were $88 million and $167 million for FY 2014 and 2013, respectively. |
 37 NYSE: NAV Q3 2015 Earnings – 9/2/2015 Outstanding Debt Balances July 31, October 31, (in millions) 2015 2014 Manufacturing operations Senior Secured Term Loan Credit Facility, as amended, due 2017, net of unamortized discount of
$2 and $3,
respectively…….…………………………………………………………………………
$
695
$
694
8.25% Senior Notes, due 2021, net of unamortized
discount of $18 and $20, respectively………… 1,182 1,180 4.50% Senior Subordinated Convertible Notes, due 2018, net of unamortized discount of $16 and
$19,
respectively……………………………………………………………………………………...
184
181
4.75% Senior Subordinated Convertible Notes, due 2019,
net of unamortized discount of $34 and
$40,
respectively…………………………………………………………………………..………….
377
371
Debt of majority-owned
dealerships…………………………………………………………………. 26 30 Financing arrangements and capital lease
obligations………………………………………………. 48 54 Loan Agreement related to 6.5% Tax Exempt Bonds, due
2040…………………………….……… 225 225 Promissory
Note……………………………………………………………………………...………
3
10
Financed lease
obligations……………………………………………………………………………
129
184
Other…………………….......................…………………………………..........................................
19
29
Total Manufacturing operations
debt……………. ……………………………............................. 2,888 2,958 Less: Current Portion……………………………………………………………………………........
100
100
Net long-term Manufacturing operations
debt…………………………………………………..... $ 2,788 $ 2,858 July 31, October 31, (in millions) 2015 2014 Financial Services operations Asset-backed debt issued by consolidated SPEs, at fixed and variable rates, due serially through
2018…………………………………………………………………………………………………..
$
1,135
$
914
Bank revolvers, at fixed and variable rates, due dates
from 2015 through 2020……………………. 1,147 1,242 Commercial paper, at variable rates, program matures in
2017……………………………………... 90 74 Borrowings secured by operating and finance leases, at various rates, due serially through 2018….
26
36
Total Financial Services operations debt
………………………………………………………… 2,398 2,266 Less: Current portion
………………………………………………………………………………...
990
1,195
Net long-term Financial Services operations
debt………………………………………………... $ 1,408 $ 1,071 |
 38 NYSE: NAV Q3 2015 Earnings – 9/2/2015 SEC Regulation G Non-GAAP Reconciliation 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) from continuing operations 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. Adjusted EBITDA margin:
We define Adjusted EBITDA margin as a percentage of the
Company's consolidated sales and revenues. 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 represents 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 consists of Selling, general and administrative expenses and Engineering and product development costs. |
 39 NYSE: NAV Q3 2015 Earnings – 9/2/2015 SEC Regulation G Non-GAAP Reconciliations Manufacturing segment cash and cash equivalents and marketable securities reconciliation:
(in millions)
Manufacturing Operations:
Cash and cash
equivalents……………………………………………………… $ 507 $ 536 $ 583 $ 440 Marketable
securities…………………………………………………………… Manufacturing Cash and cash equivalents and Marketable securities……….. $ 775 $ 784 $ 733 $ 1,018 Financial Services Operations: Cash and cash
equivalents……………………………………………………… $ 40 $ 47 $ 37 $ 57 Marketable
securities…………………………………………………………… Financial Services Cash and cash equivalents and Marketable securities…… $ 65 $ 72 $ 62 $ 84 Consolidated Balance Sheet: Cash and cash
equivalents……………………………………………………… $ 547 $ 583 $ 620 $ 497 Marketable
securities…………………………………………………………… Consolidated Cash and cash equivalents and Marketable securities………… $ 840 $ 856 $ 795 $ 1,102 July 31, April 30, 2015 2015 268 248 293 273 January 31, 2015 150 25 25 25 605 175 October 31, 2014 578 27 |
 40 NYSE: NAV Q3 2015 Earnings – 9/2/2015 SEC Regulation G Non-GAAP Reconciliations Earnings (loss) before interest, taxes, depreciation, and amortization ("EBITDA")
reconciliation
______________________
(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: ______________________ * For more detail on the items noted, please see slide 41 footnotes (A), (C) and (D).
(in millions)
EBITDA (reconciled
above) …......………………………………… 106 $ 142 Less significant items of: Adjustments to pre-existing warranties (A) ………………………..
3
(29)
Asset impairment charges
(C)
………...……………………………
7
4
Restructuring charges
(D)
………..……....…………………………
13
16
Total adjustments
23
(9)
Adjusted EBITDA
…......………………………………………….....
$
129
$
133
Adjusted EBITDA Margin
…......…………………………………..... 5.1% 4.7% Quarters Ended July 31, 2015 July 31, 2014 (in millions) Loss from continuing operations attributable to NIC, net of tax………..
$
(30)
$
(3)
Plus:
Depreciation and amortization
expense…………………………… 68 71 Manufacturing interest expense (A) …………………………………
56
60
Less:
Income tax benefit
(expense)……………………………………… (12) (14) EBITDA …………………………………………………………………
$
106
$
142
Quarters Ended
July 31, 2015
July 31, 2014
(in millions)
Interest expense
………………………………………………… $ 75 $ 78 Less: Financial services interest expense
……………………… 19 18 Manufacturing interest expense
……………………..………….. $ 56 $ 60 July 31, 2014 July 31, 2015 Quarters Ended |
 41 NYSE: NAV Q3 2015 Earnings – 9/2/2015 Significant Items Included Within Our Results ______________________ (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 of 2015, the Truck segment recognized charges of $3 million for the acceleration of
depreciation of certain assets related to the foundry facilities. (C) In the third quarter of 2015, as a result of the economic downturn in Brazil causing declines in actual and
forecasted results, we tested the indefinite-lived intangible asset of our Brazilian engine reporting unit for potential impairment. As a result, we determined that
$3 million of trademark asset carrying
value
was
impaired.
In
addition,
during
the
third
quarter
of
2015,
the
Company
concluded
it
had
a
triggering
event
related
to
certain
long-lived
assets in
the Truck segment. As a result, certain
long-lived assets were determined to be impaired, resulting in a charge of $3 million. (D) In the third quarter of 2015, we incurred restructuring charges of $13 million related to cost reduction actions,
including a reduction-in-force in the U.S. and Brazil. In the third quarter of 2014, the Company recognized charges of $14 million related to the 2011
closure of its Chatham, Ontario plant, based on a ruling received from the Financial Services Tribunal in Ontario, Canada.
Quarter Ended
July 31,
(in millions)
Expense (income):
2015
2014
Adjustments to pre-existing
warranties
(A)
………………………………………………………………
$
3
$
(29
)
Accelerated depreciation
(B)
………………………………………………………….............................
3
2
Asset impairment charges
(C)
……………………………………………………………………………
7
4
Other restructuring charges and strategic
initiatives (D)
…………………………………………………
13
16 |