Navistar Returns to Profitabilty in Third Quarter as Previously Forecast; Continued Improvements Seen for Fourth Quarter
WARRENVILLE, Ill.--Aug. 1, 20035, 2003--| Cost Reduction Remains On Target With Solid Profit Forecast For 2004; Substantial Pickup In July Industry Medium Truck Orders |
As it previously forecast, Navistar International Corporation , the nation's largest combined commercial truck, school bus and mid-range diesel engine producer, today reported that it returned to profitability in its third fiscal quarter ended July 31, 2003 and said that it is on track to be solidly profitable in the fourth quarter.
Net income from continuing operations for the three months ended July 31, 2003 totaled $19 million, equal to $0.26 per diluted common share, compared with a loss of $16 million or ($0.26) per diluted common share a year ago. The consensus estimate of analysts was a profit of $0.25 cents per share.
Consolidated sales and revenues from manufacturing and financial services operations for the third quarter totaled $1.9 billion, compared with $1.6 billion in the same quarter a year ago.
Daniel C. Ustian, Navistar president and chief executive officer, said that the third quarter profit was achieved despite continued softness in medium truck shipments, but said he was encouraged by strong pickup in new medium truck orders in July.
According to Ustian, preliminary July industry Class 6-7 medium truck orders totaled 7,700 units, up 37 percent over a year ago and the highest monthly total since August 2002. The company, the leader in the Class 6-7 market with year-to-date market share of 42 percent, recorded 3,400 orders in July, or 44 percent of the industry total.
Industry heavy truck orders in July totaled 17,200 units, the third consecutive month of solid order rates. Ustian noted that heavy truck orders are generally considered an early-cycle barometer of overall economic momentum.
"Our focus continues to be on improving our cost structure so that we can be profitable at all points of the business cycle," Ustian said. "We are pleased by the outstanding performances recorded in the third quarter by both our parts and service organization and our finance group. We anticipate we will be solidly profitable in the fourth quarter, with diluted earnings of between $0.65 and $0.75 per share from continuing operations. Despite a strong and profitable second half, based upon our current industry expectations, it will be difficult to overcome the deficit recorded in the first six months of the year."
Turning to the future, Ustian said the company looks for "solid profitability in 2004 as overall economic momentum improves."
Manufacturing gross margins in the third quarter rose to 13.5 percent, up from 12.9 percent in the second quarter and above the 12.2 percent reported in the third quarter last year.
For the first nine months of fiscal 2003, Navistar reported a loss from continuing operations of $91 million, or ($1.35) per diluted common share, compared with a loss of $71 million, or ($1.18) per diluted common share in the first nine months of 2002. Consolidated sales and revenues for the first nine months of fiscal 2003 rose to $5.3 billion from $4.7 billion in the same period in 2002.
Worldwide shipments of International brand heavy and medium trucks and school buses during the third quarter totaled 21,200 units, up from the 19,800 units shipped in the third quarter of 2002. Shipments of mid-range diesel engines to other original equipment manufacturers during the quarter totaled 82,200, compared with 73,400 units in the third quarter last year.
Despite the July industry increase in orders for medium trucks, Ustian said the company has lowered its forecast for North American industry retail sales for Class 6-7 trucks to 72,700 units for the year ending October 31, 2003, down from the previous forecast of 77,300 units and approximately the same as 2002 sales. School bus retail sales forecasts remain unchanged at 27,500 units, as does the forecast for Class 8 heavy trucks at 156,000 units. He explained the July increase in industry orders came too late to improve production and retail sales for the company's fiscal year ending October 31, 2003.
The company also reduced the estimate of mid-range diesel engines that International will produce for its own use and for sale to other manufacturers from 417,000 units to 400,000 units for the year ending October 31, 2003 as the result of the decline in anticipated industry demand for medium trucks and the slight decline for super duty pickup trucks.
Navistar International Corporation is the parent company of International Truck and Engine Corporation. The company produces International(R) brand commercial trucks, mid-range diesel engines and IC brand school buses and is a private label designer and manufacturer of diesel engines for the pickup truck, van and SUV markets. With the broadest distribution network in North America, the company also provides financing for customers and dealers. Additionally, through a joint venture with Ford Motor Company, the company builds medium commercial trucks and sells truck and diesel engine service parts. Additional information is available at www.nav-international.com.
Forward Looking Statements
NAVISTAR INTERNATIONAL CORPORATION
AND CONSOLIDATED SUBSIDIARIES
STATEMENT OF INCOME (UNAUDITED)
(Millions of dollars, except per share data)
Three Months Nine Months
Ended Ended
July 31 July 31
-------------------------------
2003 2002 2003 2002
------- ------- ------- -------
Sales and revenues
Sales of manufactured products $1,810 $1,524 $5,097 $4,502
Finance and insurance revenue 81 61 226 210
Other income 3 6 13 16
------- ------- ------- -------
Total sales and revenues 1,894 1,591 5,336 4,728
------- ------- ------- -------
Costs and expenses
Cost of products and services sold 1,579 1,355 4,587 3,985
Postretirement benefits expense 71 58 225 174
Engineering and research expense 57 61 175 190
Selling, general and administrative
expense 120 115 366 376
Interest expense 33 39 104 115
Other expense 2 2 20 19
------- ------- ------- -------
Total costs and expenses 1,862 1,630 5,477 4,859
------- ------- ------- -------
Income (loss) from continuing
operations before
income taxes 32 (39) (141) (131)
Income tax expense (benefit) 13 (23) (50) (60)
------- ------- ------- -------
Income (loss) from continuing
operations 19 (16) (91) (71)
Loss from discontinued operations (1) - (4) (5)
------- ------- ------- -------
Net income (loss) $18 $(16) $(95) $(76)
======= ======= ======= =======
----------------------------------------------------------------------
Basic earnings (loss) per share
Continuing operations $0.27 $(0.26) $(1.35) $(1.18)
Discontinued operations (0.01) (0.01) (0.06) (0.09)
------- ------- ------- -------
Net income (loss) $0.26 $(0.27) $(1.41) $(1.27)
======= ======= ======= =======
Diluted earnings (loss) per share
Continuing operations $0.26 $(0.26) $(1.35) $(1.18)
Discontinued operations (0.01) (0.01) (0.06) (0.09)
------- ------- ------- -------
Net income (loss) $0.25 $(0.27) $(1.41) $(1.27)
======= ======= ======= =======
Average shares outstanding (millions)
Basic 68.5 60.6 67.7 60.2
Diluted 74.8 60.6 67.7 60.2
----------------------------------------------------------------------
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 July 31
----------------------------------------------------------------------
2003 2002
-----------------
ASSETS
Current assets
Cash and cash equivalents $187 $547
Marketable securities 125 10
Receivables, net 869 622
Inventories 536 714
Deferred tax asset, net 256 154
Other assets 188 152
-----------------
Total current assets 2,161 2,199
-----------------
Marketable securities 439 256
Finance and other receivables, net 957 1,267
Property and equipment, net 1,304 1,514
Investments and other assets 328 210
Prepaid and intangible pension assets 59 277
Deferred tax asset, net 1,346 851
-----------------
Total assets $6,594 $6,574
=================
LIABILITIES AND SHAREOWNERS' EQUITY
Liabilities
Current liabilities
Notes payable and current maturities of long-
term debt $229 $399
Accounts payable, principally trade 892 932
Other liabilities 1,012 708
-----------------
Total current liabilities 2,133 2,039
-----------------
Debt:Manufacturing operations 871 789
Financial services operations 1,418 1,417
Postretirement benefits liability 1,362 915
Other liabilities 517 366
-----------------
Total liabilities 6,301 5,526
-----------------
Commitments and contingencies
Shareowners' equity
Series D convertible junior preference stock 4 4
Common stock and additional paid in capital
(75.3 million shares issued) 2,121 2,139
Retained earnings (deficit) (890) (261)
Accumulated other comprehensive loss (725) (361)
Common stock held in treasury, at cost (217) (473)
-----------------
Total shareowners' equity 293 1,048
-----------------
Total liabilities and shareowners' equity $6,594 $6,574
=================
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The Statement of Financial Condition includes the consolidated
financial results of the company's manufacturing operations with its
wholly owned financial services operations.