Navistar Reports Second Quarter, First Half Results
WARRENVILLE, Ill., May 16 Navistar International Corporation, the nation's largest commercial truck and mid-range diesel engine producer, today reported a loss of $4 million, equal to ($0.07) per diluted common share, for the three months ended April 30, 2002, compared with earnings of $3 million or $0.05 per diluted common share a year earlier. The consensus estimate of security analysts was for a ($0.11) per share loss.
Consolidated sales and revenues from manufacturing and financial services operations for the second quarter of 2002 totaled $1.7 billion, compared with the $1.8 billion reported in the second quarter of 2001. Aided by on-going programs to strengthen the company and reduce costs, manufacturing gross margin for the second quarter improved to 14.3 percent from 10.7 percent in the first quarter and 13.9 percent in the second quarter a year ago. The margin improvement was achieved despite materially lower truck production than in the second quarter a year ago.
For the first six months of fiscal 2002, Navistar reported a loss of $60 million, or ($1.00) per diluted common share, compared with a loss of $32 million, or ($0.53) per diluted common share in the first six months a year ago. Consolidated first half sales and revenues amounted to $3.2 billion, compared with $3.3 billion in the first six months of 2001.
John R. Horne, Navistar chairman and chief executive officer, said that the company's return to profitability was hindered by continued weakness in demand for Class 6-7 medium trucks where the company is the market leader with a 40+ percent share and school buses where the company has a 60 percent share.
"The current downturn, which has been the worst in memory, has impacted all market segments, and we have again adjusted our forecast for total industry volume in fiscal 2002," Horne said.
The company has lowered its forecast for medium trucks to 101,500, including 79,000 Class 6-7 trucks, down from a previous forecast of 112,500 units, including 87,500 Class 6-7 trucks. School bus demand, as a reflection of lower than anticipated tax receipts and government spending has been lowered by 2,000 units to 26,000 units. The forecast for Class 8 heavy truck volume has been raised by 12,000 units to 156,000 units, to reflect a pre-buy of trucks before new emissions standards go into effect on October 1, 2002, as well as some renewed confidence in the economy.
"The recent increase in industry orders for heavy trucks is being driven both by so called pre-buying in advance of the new emissions standards for big bore engines and demand strengthened by the economy," Horne said. "The continued softness in the Class 6-7 and school bus markets, which represent our more profitable core businesses, makes the earnings situation for the year significantly more challenging. Medium truck retail demand is running below our current forecast which requires an improvement in the market for the rest of the year."
Horne emphasized that the company continues to manage through the current downturn by balancing truck production with industry demand and the need to replenish low dealer inventories. Effective June 3, output at the company's Springfield, Ohio, assembly plant will be increased to 193 units per day from the present 159 units per day.
As part of its program to manage through the downturn and build for the future, Horne said the company will complete the launch of its New High Performance Trucks (4000, 7000 and 8000 Series) as well as its new V8 engine by the end of October, thereby reducing the associated start up costs with those products. In addition, a new V8 engine for Ford will go into production at Indianapolis later this year.
Worldwide shipments of International brand medium and heavy trucks and school buses during the second quarter totaled 20,900 units, compared with 16,700 units in the first quarter and 25,100 units in the second quarter of 2001.
Shipments of mid-range diesel engines to other original equipment manufacturers during the quarter totaled 78,900 units, compared with 78,000 units in the first quarter and 85,300 units in the second quarter of 2001.
Navistar International Corporation (NYSE: NAV - News) is the parent company of International Truck and Engine Corporation, a leading producer of mid-range diesel engines, medium trucks, heavy trucks, severe service vehicles, and a provider of parts and service sold under the International® brand. IC Corporation, a wholly owned subsidiary, produces school buses. The company also is a private label designer and manufacturer of diesel engines for the pickup truck, van and SUV markets. Additionally, through a joint venture with Ford Motor Company, the company will build medium commercial trucks and currently sells truck and diesel engine services parts. International Truck and Engine has the broadest distribution network in the industry. Financing for customers and dealers is provided through a wholly owned subsidiary.
NAVISTAR INTERNATIONAL CORPORATION
AND CONSOLIDATED SUBSIDIARIES
STATEMENT OF INCOME (UNAUDITED)
(Millions of dollars, except per share data)
Three Months Ended Six Months Ended
April 30 April 30
2002 2001 2002 2001
Sales and Revenues
Sales of manufactured
products $1,602 $1,709 $2,991 $3,142
Finance and insurance
revenue 72 78 149 154
Other income 4 17 10 24
Total sales
and revenues 1,678 1,804 3,150 3,320
Costs and expenses
Cost of products and
services sold $1,388 $1,495 $2,644 $2,780
Restructuring adjustment - - (1) -
Postretirement benefits
expense 58 47 116 93
Engineering and research
expense 65 65 129 130
Sales, general and
administrative expense 129 137 263 258
Interest expense 38 42 78 83
Other expense 7 13 18 27
Total costs
and expenses 1,685 1,799 3,247 3,371
Income (loss) before
income taxes (7) 5 (97) (51)
Income tax expense
(benefit) (3) 2 (37) (19)
Net income (loss) $(4) $3 $(60) $(32)
Earnings (loss) per
share
Basic $(0.07) $0.05 $(1.00) $(0.53)
Diluted $(0.07) $0.05 $(1.00) $(0.53)
Average shares
outstanding (millions)
Basic 60.4 59.5 60.1 59.5
Diluted 60.4 59.9 60.1 59.5
The Statement of Income includes the consolidated financial results of the company's manufacturing operations with its wholly owned financial services operations.
NAVISTAR INTERNATIONAL CORPORATION
AND CONSOLIDATED SUBSIDIARIES
STATEMENT OF FINANCIAL CONDITION (UNAUDITED)
(Millions of dollars)
AS OF APRIL 30
2002 2001
ASSETS
Cash and cash equivalents $558 $428
Marketable securities 565 519
1,123 947
Receivables, net 1,661 1,668
Inventories 644 718
Property and equipment, net 1,676 1,843
Investments and other assets 334 342
Prepaid and intangible pension assets 277 305
Deferred tax asset, net 1,020 892
Total assets $6,735 $6,715
LIABILITIES AND SHAREOWNERS' EQUITY
Liabilities
Accounts payable, principally trade $946 $1,064
Debt: Manufacturing operations 940 641
Financial services operations 1,788 1,888
Postretirement benefits liability 1,105 817
Other liabilities 864 1,026
Total liabilities 5,643 5,436
Commitments and contingencies
Shareowners' equity
Series D convertible junior preference stock 4 4
Common stock (75.3 million shares issued) 2,139 2,139
Retained earnings (deficit) (244) (176)
Accumulated other comprehensive loss (333) (179)
Common stock held in treasury, at cost (474) (509)
Total shareowners' equity 1,092 1,279
Total liabilities and shareowners' equity $6,735 $6,715
The Statement of Financial Condition includes the consolidated financial results of the company's manufacturing operations with its wholly owned financial services operations.