- Reports fourth quarter loss of $2.8 billion, including $2 billion non-cash domestic tax valuation allowance, $149 million in additional pre-existing warranty reserve, on revenue of $3.3 billion
- Manufacturing cash and marketable securities of $1.5 billion exceeds guidance
- Company makes progress on 12-18 month turnaround plan
Navistar International Corporation today announced a fourth quarter 2012 net loss of $2.8 billion, or $40.13 per diluted share, compared to fourth quarter 2011 net income of $255 million, or $3.48 per diluted share. Current quarter results included increased non-cash tax expense of $2 billion, or $28.59 per share, for the increase in deferred tax valuation allowance on U.S. deferred tax assets. Fourth quarter 2012 results also included pre-tax charges of $149 million in additional pre-existing warranty expenses primarily related to EPA 2010 big bore engines, $73 million for cost reduction actions, $16 million in charges for the restructuring of North American manufacturing operations and engineering integration and $14 million in non-conformance penalties (NCPs).
The company reported a pre-tax loss of $566 million in the fourth quarter 2012 versus a $275 million pre-tax profit in the fourth quarter 2011. Revenues in the quarter were $3.3 billion, down 24 percent from the fourth quarter of 2011. The loss was reflective of lower sales, as well as the adjustments to pre-existing warranties and the charges related to the cost-reduction actions.
The company exceeded its fiscal year 2012 guidance with $1.5 billion in manufacturing cash and marketable securities. Contributing factors in the fourth quarter included $363 million improvement in working capital and net proceeds of $192 million from an equity offering.
“We continue to make significant progress on our turnaround and the complexity of this quarter’s results is reflective of the actions necessary during this time of transition,” said Lewis B. Campbell, Navistar chairman and chief executive officer. “The team has delivered numerous successes, including exceeding our cash guidance, launching the ProStar with the ISX 15-liter ahead of schedule and moving forward with several opportunities identified during our ROIC-focused business reviews. Additionally, with the improvement to our manufacturing footprint by closing our Garland, Texas, manufacturing plant and the completion of workforce reductions in North America and South America, we are positioned to exceed our goal of reducing structural costs by $175 million.
“Unfortunately, we saw a spike in warranty spend in late October and early November for the few remaining engine issues and the cost to take the proactive actions to support our customers and fix those items is higher than we anticipated,” Campbell continued. “However, the fact is that customer feedback and positive three- and nine-months-in-service data show today we are delivering the highest quality trucks since the 2010 launch, and quality will continue to be our top priority.”
The net loss for fiscal year 2012 was $3.0 billion, or $43.56 per diluted share, versus net income for fiscal 2011 of $1.7 billion, or $22.64 per diluted share.
Truck — For the fourth quarter 2012, the truck segment recorded a loss of $160 million, compared with a year-ago fourth quarter profit of $287 million. For the fiscal year 2012, the truck segment recorded a loss of $320 million compared with fiscal year 2011 profit of $336 million.
The segment’s 2012 loss was primarily driven by decreased military sales and product mix, higher commodity costs and warranty expense related to extended warranty contracts on 2010 emission engines. The realization of certain benefits from manufacturing cost efficiencies partially offset these factors.
Segment results for fiscal year 2012 included charges of $100 million for the integration of engineering operations, restructuring of North American manufacturing operations and the impact of fourth quarter cost reduction initiatives, compared to $173 million in engineering integration and restructuring charges in fiscal year 2011.
Engine — For the fourth quarter 2012, the engine segment recorded a loss of $287 million, compared with a year-ago fourth quarter profit of $58 million. For the fiscal year 2012, the engine segment posted a loss of $562 million compared to the prior year profit of $84 million. The 2012 loss is predominantly due to increased warranty expense for 2010 emission engines and lower sales at our South American operations.
Segment results for fiscal year 2012 included the company’s non conformance penalty charges of $34 million. SG&A and engineering expense were lower by $48 million and $25 million, respectively.
Parts — For the fourth quarter 2012, the parts segment recorded profit of $76 million, compared with a year-ago fourth quarter profit of $87 million. For the fiscal year 2012, the parts segment realized a profit of $240 million compared to the prior year profit of $287 million. The year-over-year decrease was driven by lower military volume partially offset by increased commercial sales and lower SG&A expense.
Financial Services — For the fourth quarter 2012, the financial services segment recorded profit of $16 million, down from fourth quarter 2011 profit of $27 million. For the fiscal year 2012, the financial services segment recorded a profit of $91 million compared to a year-ago profit of $129 million, primarily due to expected lower portfolio balances.
Corporate — For fiscal year 2012, tax expense was $1.8 billion or $25.76 per share. This included the negative impact of the non-cash U.S. valuation allowance of $2.0 billion and a tax benefit of $189 million related to the release of the Canadian valuation allowance. In fiscal 2011, the company realized a $1.5 billion tax valuation release benefit.
