OREANDA-NEWS. Navistar International Corporation (NYSE: NAV) today announced a third quarter 2017 net income of $37 million, or $0.38 per diluted share, compared to a third quarter 2016 net loss of $34 million, or $0.42 per diluted share.

Third quarter 2017 EBITDA was $160 million, versus EBITDA of $96 million in the same period one year earlier. The third quarter of 2017 included $34 million in adjustments, including a $31 million charge for a legacy engine litigation matter, $6 million of pre-existing warranty charges, and $3 million net benefit in asset impairments and restructuring costs. Excluding these items, adjusted EBITDA was $194 million in the third quarter of 2017, compared to $132 million in the same period one year ago.

Revenues in the quarter were $2.2 billion, up 6% from the same period one year ago, primarily due to an increase in Truck segment volumes.

"We returned to profitability this quarter thanks to strong operational performance across the board, highlighted by a 15-percent increase in chargeouts and solid market share gains amid flat industry conditions, and strengthening margins," said Troy A. Clarke, Navistar chairman, president and chief executive officer. "We also moved ahead with new products and solutions that position us well for ongoing growth, while continuing to restructure our business to improve our future competitiveness."

Navistar ended third quarter 2017 with $973 million in consolidated cash, cash equivalents and marketable securities. Manufacturing cash, cash equivalents and marketable securities were $923 million at the end of the quarter.

The company had a number of commercial and product highlights during its third quarter, starting with the first customer shipments of the LT Series and RH Series on-highway products with the company's new A26 12.4-liter engine. Internal testing shows that with this new engine, these vehicles are delivering up to 9 percent in fuel economy improvement over the comparable models built only a year ago.

In the school bus segment, the company moved forward with multiple improvements and innovations that set up future share gains. These include the company's well-received propane model and introduction of the Cummins L9 product in the RE Series bus. IC Bus's gasoline-powered school bus is coming in 2018. The company also announced a strategic relationship with Edulog, a leading provider of student transportation planning and scheduling software solutions. Through integration with our OnCommand Connection telematics system, the resulting new solutions will deliver a powerful combination of uptime and on-time to the school bus market.

During the quarter the company announced that OnCommand Connection (OCC) now provides an all-makes telematics offering. The telematics hardware attaches to the onboard diagnostics port and makes most truck models a part of the OCC services network. The company has shipped several thousand of these units and they can be purchased at International dealers, through HDA Truck Pride, or TA Petro service centers. This Telematics solution is integrated with the company's Advanced Remote Diagnostics and its new Electronic Driver Log, which addresses the federal Hours of Service mandate that takes effect this December.

The company's alliance with Volkswagen Truck & Bus is moving forward as planned. The two companies are finding significant opportunities to leverage their combined scale through their procurement joint venture, while also pursuing technology collaboration on a number of fronts.

The company reiterated its 2017 guidance:

  • Retail deliveries of Class 6-8 trucks and buses in the United States and Canada are forecast to be in the range of 305,000 units to 335,000 units for fiscal year 2017.
  • Full-year 2017 revenues are expected to be similar to 2016.
  • Full-year 2017 adjusted EBITDA is expected to be higher than 2016.
  • Fiscal year end 2017 manufacturing cash is expected to be about $1 billion.

"Looking ahead, I like our position as we enter the prime selling season," Clarke said. "I feel good about the fourth quarter and look forward to finishing the year on a strong note."

SEGMENT REVIEW

Summary of Financial Results:
 
 

(Unaudited)
 

Three Months Ended
July 31,

  

Nine Months Ended
July 31,

(in millions, except per share data)

2017

  

2016

  

2017

  

2016

Sales and revenues, net

$

2,213

    

$

2,086

    

$

5,972

    

$

6,048

  

Segment Results:

              

Truck

$

7

    

$

(54)

    

$

(118)

    

$

(128)

  

Parts

157

    

152

    

459

    

478

  

Global Operations

3

    

(5)

    

(8)

    

(19)

  

Financial Services

23

    

26

    

51

    

77

  

Income (loss) from continuing operations, net of tax(A)

$

36

    

(34)

    

$

(106)

    

$

(63)

  

Net income (loss)(A)

37

    

(34)

    

(105)

    

(63)

  

Diluted income (loss) per share from continuing operations(A)

$

0.37

    

$

(0.42)

    

$

(1.16)

    

$

(0.77)

  

Diluted income (loss) per share(A)

$

0.38

    

$

(0.42)

    

$

(1.15)

    

$

(0.77)

  
                                 

(A)

  Amounts attributable to Navistar International Corporation.

Truck Segment — Truck segment net sales increased 10% to $1.5 billion compared to third quarter 2016, due to higher volumes in Core markets (Class 6-8 trucks and buses in the United States and Canada), an increase in Mexico truck volumes, and the production ramp up of GM-branded units manufactured at Navistar's Springfield, Ohio plant. Chargeouts in the company's Core markets increased by 15% during the third quarter.

In the third quarter of 2017, Truck segment results improved by $61 million year-over-year. The improvement was primarily driven by the impact of higher volumes in Core markets and Mexico, lower used truck losses, and lower restructuring charges, partially offset by lower other income.

Parts Segment — Parts segment net sales declined $11 million compared to third quarter 2016 due to lower Blue Diamond Parts (BDP) sales and lower North America volumes, partially offset by higher Fleetrite™ all-makes brand and ReNEWed™ remanufactured parts sales in the U.S. and Canada.

For the third quarter 2017, the Parts segment recorded a profit of $157 million, up 3% compared to third quarter 2016, primarily due to income related to the sale of a business line and lower intercompany access fees, which were partially offset by margin declines in BDP and our U.S. market.

Global Operations Segment — Global Operations net sales were flat compared to the prior year.

For the third quarter 2017, the Global Operations segment profit improved by $8 million, primarily due to lower manufacturing and SG&A costs, as a result of our prior year restructuring and cost reduction efforts, and income related to the sale of machinery and equipment.

Financial Services Segment — Financial Services net revenues increased by $2 million to $62 million compared to third quarter 2016, primarily due to higher interest rates in our Mexican portfolio.

For the third quarter 2017, the Financial Services segment recorded a profit of $23 million, down $3 million compared to third quarter 2016. The decline was primarily driven by a lower interest margin resulting from an increase in its average borrowing rate as well as the pay down of certain intercompany loan receivables, partially offset by a decrease in the provision for loan losses in Mexico.

About Navistar
Navistar International Corporation (NYSE: NAV) is a holding company whose subsidiaries and affiliates produce International brand commercial and military trucks, proprietary diesel engines, and IC Bus brand school and commercial buses. An affiliate also provides truck and diesel engine service parts. Another affiliate offers financing services. 

 

Navistar International Corporation and Subsidiaries

Consolidated Statements of Operations

(Unaudited)
 
 

Three Months Ended
July 31,

  

Nine Months Ended
July 31,

(in millions, except per share data)

2017

  

2016

  

2017

  

2016

Sales and revenues

              

Sales of manufactured products, net

$

2,178

    

$

2,052

    

$

5,870

    

$

5,946

  

Finance revenues

35

    

34

    

102

    

102

  

Sales and revenues, net

2,213

    

2,086

    

5,972

    

6,048

  

Costs and expenses

              

Costs of products sold

1,803

    

1,757

    

4,949

    

5,068

  

Restructuring charges

(13)

    

5

    

(4)

    

11

  

Asset impairment charges

6

    

12

    

13

    

17

  

Selling, general and administrative expenses

233

    

197

    

654

    

604

  

Engineering and product development costs

61

    

62

    

189

    

181

  

Interest expense

91

    

84

    

262

    

246

  

Other income, net

(8)

    

(15)

    

(7)

    

(62)

  

Total costs and expenses

2,173

    

2,102

    

6,056

    

6,065

  

Equity in income of non-consolidated affiliates

1

    

2

    

6

    

3

  

Income (loss) from continuing operations before income taxes

41

    

(14)

    

(78)

    

(14)

  

Income tax expense

—

    

(14)

    

(10)

    

(25)

  

Income (loss) from continuing operations

41

    

(28)

    

(88)

    

(39)

  

Income from discontinued operations, net of tax

1

    

—

    

1

    

—

  

Net income (loss)

42

    

(28)

    

(87)

    

(39)

  

Less: Net income attributable to non-controlling interests

5

    

6

    

18

    

24

  

Net income (loss) attributable to Navistar International Corporation

$

37

    

$

(34)

    

$

(105)

    

$

(63)

  
               

Amounts attributable to Navistar International Corporation common shareholders:

 

        

Income (loss) from continuing operations, net of tax

$

36

    

$

(34)

    

$

(106)

    

$

(63)

  

Income from discontinued operations, net of tax

1

    

—

    

1

    

—

  

Net income (loss)

$

37

    

$

(34)

    

$

(105)

    

$

(63)

  
               

Income (loss) per share:

              

Basic:

              

Continuing operations

$

0.37

    

$

(0.42)

    

$

(1.16)

    

$

(0.77)

  

Discontinued operations

0.01

    

—

    

0.01

    

—

  
 

$

0.38

    

$

(0.42)

    

$

(1.15)

    

$

(0.77)

  
               

Diluted:

              

Continuing operations

$

0.37

    

$

(0.42)

    

$

(1.16)

    

$

(0.77)

  

Discontinued operations

0.01

    

—

    

0.01

    

—

  
 

$

0.38

    

$

(0.42)

    

$

(1.15)

    

$

(0.77)

  
               

Weighted average shares outstanding:

              

Basic

98.3

    

81.7

    

91.1

    

81.7

  

Diluted

98.6

    

81.7

    

91.1

    

81.7

  

Navistar International Corporation and Subsidiaries

Consolidated Balance Sheets
 
 

July 31,

  

October 31,

(in millions, except per share data)

2017

  

2016

ASSETS

(Unaudited)

    

Current assets

      

Cash and cash equivalents

$

911

    

$

804

  

Restricted cash and cash equivalents

81

    

64

  

Marketable securities

62

    

46

  

Trade and other receivables, net

311

    

276

  

Finance receivables, net

1,557

    

1,457

  

Inventories, net

979

    

944

  

Other current assets

181

    

168

  

Total current assets

4,082

    

3,759

  

Restricted cash

56

    

48

  

Trade and other receivables, net

18

    

16

  

Finance receivables, net

231

    

220

  

Investments in non-consolidated affiliates

55

    

53

  

Property and equipment (net of accumulated depreciation and amortization of $2,500 and $2,553, respectively)

1,333

    

1,241

  

Goodwill

38

    

38

  

Intangible assets (net of accumulated amortization of $133 and $124, respectively)

44

    

53

  

Deferred taxes, net

141

    

161

  

Other noncurrent assets

82

    

64

  

Total assets

$

6,080

    

$

5,653

  

LIABILITIES and STOCKHOLDERS' DEFICIT

      

Liabilities

      

Current liabilities

      

Notes payable and current maturities of long-term debt

$

965

    

$

907

  

Accounts payable

1,213

    

1,113

  

Other current liabilities

1,137

    

1,183

  

Total current liabilities

3,315

    

3,203

  

Long-term debt

4,255

    

3,997

  

Postretirement benefits liabilities

2,747

    

3,023

  

Other noncurrent liabilities

686

    

723

  

Total liabilities

11,003

    

10,946

  

Stockholders' deficit

      

Series D convertible junior preference stock

2

    

2

  

Common stock (103.1 and 86.8 shares issued, respectively, and $0.10 par value per share and 220 shares authorized at both dates)

10

    

9

  

Additional paid-in capital

2,733

    

2,499

  

Accumulated deficit

(5,068)

    

(4,963)

  

Accumulated other comprehensive loss

(2,412)

    

(2,640)

  

Common stock held in treasury, at cost (4.9 and 5.2 shares, respectively)

(190)

    

(205)

  

Total stockholders' deficit attributable to Navistar International Corporation

(4,925)

    

(5,298)

  

Stockholders' equity attributable to non-controlling interests

2

    

5

  

Total stockholders' deficit

(4,923)

    

(5,293)

  

Total liabilities and stockholders' deficit

$

6,080

    

$

5,653

  

Navistar International Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)
 
 

Nine Months Ended
July 31,

(in millions)

2017

  

2016

Cash flows from operating activities

      

Net loss

$

(87)

    

$

(39)

  

Adjustments to reconcile net loss to net cash used in operating activities:

      

Depreciation and amortization

113

    

111

  

Depreciation of equipment leased to others

56

    

53

  

Deferred taxes, including change in valuation allowance

(16)

    

—

  

Asset impairment charges

13

    

17

  

Loss (gain) on sales of investments and businesses, net

(5)

    

2

  

Amortization of debt issuance costs and discount

36

    

27

  

Stock-based compensation

19

    

9

  

Provision for doubtful accounts, net of recoveries

9

    

9

  

Equity in income of non-consolidated affiliates, net of dividends

1

    

5

  

Write-off of debt issuance cost and discount

4

    

—

  

Other non-cash operating activities

(21)

    

(12)

  

Changes in other assets and liabilities, exclusive of the effects of businesses disposed

(290)

    

(196)

  

Net cash used in operating activities

(168)

    

(14)

  

Cash flows from investing activities

      

Purchases of marketable securities

(619)

    

(378)

  

Sales of marketable securities

586

    

358

  

Maturities of marketable securities

17

    

39

  

Net change in restricted cash and cash equivalents

(25)

    

(64)

  

Capital expenditures

(93)

    

(83)

  

Purchases of equipment leased to others

(96)

    

(94)

  

Proceeds from sales of property and equipment

32

    

20

  

Investments in non-consolidated affiliates

(2)

    

(1)

  

Proceeds from sales of affiliates

6

    

36

  

Net cash used in investing activities

(194)

    

(167)

  

Cash flows from financing activities

      

Proceeds from issuance of securitized debt

278

    

72

  

Principal payments on securitized debt

(326)

    

(69)

  

Net change in secured revolving credit facilities

119

    

26

  

Proceeds from issuance of non-securitized debt

491

    

163

  

Principal payments on non-securitized debt

(368)

    

(235)

  

Net change in notes and debt outstanding under revolving credit facilities

23

    

(151)

  

Principal payments under financing arrangements and capital lease obligations

(1)

    

(1)

  

Debt issuance costs

(22)

    

(12)

  

Proceeds from financed lease obligations

49

    

17

  

Issuance of common stock

256

    

—

  

Stock issuance costs

(11)

    

—

  

Proceeds from exercise of stock options

4

    

—

  

Dividends paid by subsidiaries to non-controlling interest

(21)

    

(28)

  

Other financing activities

(3)

    

1

  

Net cash provided by (used in) financing activities

468

    

(217)

  

Effect of exchange rate changes on cash and cash equivalents

1

    

33

  

Increase (decrease) in cash and cash equivalents

107

    

(365)

  

Cash and cash equivalents at beginning of the period

804

    

912

  

Cash and cash equivalents at end of the period

$

911

    

$

547

  

Navistar International Corporation and Subsidiaries

Segment Reporting

(Unaudited)
 

We define segment profit (loss) as net income (loss) from continuing operations attributable to Navistar International Corporation, excluding income tax expense. The following tables present selected financial information for our reporting segments:
     

(in millions)

Truck

  

Parts

  

Global
Operations

  

Financial
Services(A)

  

Corporate
and
Eliminations

  

Total

Three Months Ended July 31, 2017

                      

External sales and revenues, net

$

1,521

    

$

580

    

$

74

    

$

35

    

$

3

    

$

2,213

  

Intersegment sales and revenues

10

    

6

    

10

    

27

    

(53)

    

—

  

Total sales and revenues, net

$

1,531

    

$

586

    

$

84

    

$

62

    

$

(50)

    

$

2,213

  

Income (loss) from continuing operations attributable to NIC, net of tax

$

7

    

$

157

    

$

3

    

$

23

    

$

(154)

    

$

36

  

Income tax expense

—

    

—

    

—

    

—

    

—

    

—

  

Segment profit (loss)

$

7

    

$

157

    

$

3

    

$

23

    

$

(154)

    

$

36

  

Depreciation and amortization

$

35

    

$

3

    

$

3

    

$

13

    

$

3

    

$

57

  

Interest expense

—

    

—

    

—

    

24

    

67

    

91

  

Equity in income (loss) of non-consolidated affiliates

1

    

1

    

(1)

    

—

    

—

    

1

  

Capital expenditures(B)

21

    

1

    

2

    

—

    

3

    

27

  

(in millions)

Truck

  

Parts

  

Global
Operations

  

Financial
Services(A)

  

Corporate
and
Eliminations

  

Total

Three Months Ended July 31, 2016

                      

External sales and revenues, net

$

1,386

    

$

589

    

$

73

    

$

34

    

$

4

    

$

2,086

  

Intersegment sales and revenues

9

    

8

    

12

    

26

    

(55)

    

—

  

Total sales and revenues, net

$

1,395

    

$

597

    

$

85

    

$

60

    

$

(51)

    

$

2,086

  

Income (loss) from continuing operations attributable to NIC, net of tax

$

(54)

    

$

152

    

$

(5)

    

$

26

    

$

(153)

    

$

(34)

  

Income tax expense

—

    

—

    

—

    

—

    

(14)

    

(14)

  

Segment profit (loss)

$

(54)

    

$

152

    

$

(5)

    

$

26

    

$

(139)

    

$

(20)

  

Depreciation and amortization

$

29

    

$

3

    

$

4

    

$

13

    

$

4

    

$

53

  

Interest expense

—

    

—

    

—

    

21

    

63

    

84

  

Equity in income of non-consolidated affiliates

1

    

1

    

—

    

—

    

—

    

2

  

       Capital expenditures(B)

26

    

—

    

—

    

1

    

3

    

30

  

(in millions)

Truck

  

Parts

  

Global
Operations

  

Financial
Services(A)

  

Corporate
and
Eliminations

  

Total

Nine Months Ended July 31, 2017

                      

External sales and revenues, net

$

3,929

    

$

1,747

    

$

186

    

$

102

    

$

8

    

$

5,972

  

Intersegment sales and revenues

27

    

19

    

18

    

70

    

(134)

    

—

  

Total sales and revenues, net

$

3,956

    

$

1,766

    

$

204

    

$

172

    

$

(126)

    

$

5,972

  

Income (loss) from continuing operations attributable to NIC, net of tax

$

(118)

    

$

459

    

$

(8)

    

$

51

    

$

(490)

    

$

(106)

  

Income tax expense

—

    

—

    

—

    

—

    

(10)

    

(10)

  

Segment profit (loss)

$

(118)

    

$

459

    

$

(8)

    

$

51

    

$

(480)

    

$

(96)

  

Depreciation and amortization

$

103

    

$

9

    

$

10

    

$

38

    

$

9

    

$

169

  

Interest expense

—

    

—

    

—

    

65

    

197

    

262

  

Equity in income of non-consolidated affiliates

3

    

3

    

—

    

—

    

—

    

6

  

       Capital expenditures(B)

78

    

2

    

5

    

1

    

7

    

93

  

(in millions)

Truck

  

Parts

  

Global
Operations

  

Financial
Services(A)

  

Corporate
and
Eliminations

  

Total

Nine Months Ended July 31, 2016

                      

External sales and revenues, net

$

3,926

    

$

1,791

    

$

221

    

$

102

    

$

8

    

$

6,048

  

Intersegment sales and revenues

81

    

23

    

33

    

75

    

(212)

    

—

  

Total sales and revenues, net

$

4,007

    

$

1,814

    

$

254

    

$

177

    

$

(204)

    

$

6,048

  

Income (loss) from continuing operations attributable to NIC, net of tax

$

(128)

    

$

478

    

$

(19)

    

$

77

    

$

(471)

    

$

(63)

  

Income tax expense

—

    

—

    

—

    

—

    

(25)

    

(25)

  

Segment profit (loss)

$

(128)

    

$

478

    

$

(19)

    

$

77

    

$

(446)

    

$

(38)

  

Depreciation and amortization

$

92

    

$

10

    

$

13

    

$

37

    

$

12

    

$

164

  

Interest expense

—

    

—

    

—

    

59

    

187

    

246

  

Equity in income (loss) of non-consolidated affiliates

3

    

3

    

(3)

    

—

    

—

    

3

  

       Capital expenditures(B)

70

    

2

    

2

    

1

    

8

    

83

  

(in millions)

Truck

  

Parts

  

Global Operations

  

Financial

Services

  

Corporate

and

Eliminations

  

Total

Segment assets, as of:

                      

July 31, 2017

$

1,736

    

$

602

    

$

374

    

$

2,237

    

$

1,131

    

$

6,080

  

October 31, 2016

1,520

    

594

    

407

    

2,116

    

1,016

    

5,653

  
                                   

(A)

Total sales and revenues in the Financial Services segment include interest revenues of $45 million and $121 million for the three and nine months ended July 31, 2017, respectively, and $43 million and $127 million for the three and nine months ended July 31, 2016, respectively.

(B)

Exclusive of purchases of equipment leased to others.

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 relating 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.

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 consist of Selling, general and administrative expenses and Engineering and product development costs.

EBITDA reconciliation:
 
   

Three Months
Ended July 31,

  

Nine Months
Ended July 31,

(in millions)

2017

  

2016

  

2017

  

2016

Income (loss) from continuing operations attributable to NIC, net of tax

$

36

    

$

(34)

    

$

(106)

    

$

(63)

  

Plus:

              

Depreciation and amortization expense

57

    

53

    

169

    

164

  

Manufacturing interest expense(A)

67

    

63

    

197

    

187

  

Less:

              

Income tax expense

—

    

(14)

    

(10)

    

(25)

  

EBITDA

$

160

    

$

96

    

$

270

    

$

313

  
                       

(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:
 

Three Months
Ended July 31,

  

Nine Months
Ended July 31,

(in millions)

2017

  

2016

  

2017

  

2016

Interest expense

$

91

    

$

84

    

$

262

    

$

246

  

Less:  Financial services interest expense

24

    

21

    

65

    

59

  

Manufacturing interest expense

$

67

    

$

63

    

$

197

    

$

187

  

Adjusted EBITDA Reconciliation:
 
 

Three Months
Ended July 31,

  

Nine Months
Ended July 31,

(in millions)

2017

  

2016

  

2017

  

2016

EBITDA (reconciled above)

$

160

    

$

96

    

$

270

    

$

313

  

Less significant items of:

              

Adjustments to pre-existing warranties(A)

6

    

19

    

(4)

    

70

  

Asset impairment charges(B)

6

    

12

    

13

    

17

  

Restructuring of North American manufacturing operations(C)

(3)

    

—

    

6

    

—

  

Cost reduction and other strategic initiatives

—

    

5

    

—

    

11

  

EGR product litigation(D)

31

    

—

    

31

    

—

  

Gain on sale(E)

(6)

    

—

    

(6)

    

—

  

Debt refinancing charges(F)

—

    

—

    

4

    

—

  

One-time fee(G)

—

    

—

    

—

    

(15)

  

Total adjustments

34

    

36

    

44

    

83

  

Adjusted EBITDA

$

194

    

$

132

    

$

314

    

$

396

  
                                 

(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 and first nine months of 2017, we recorded $6 million and $13 million, respectively, of asset impairment charges in our Truck segment relating to assets held for the sale of our Conway, Arkansas fabrication business and for certain assets under operating leases. In the third quarter and first nine months of 2016, we recorded $11 million and $16 million, respectively, of asset impairment charges related to certain long lived assets in our Truck segment. In the third quarter of 2016, we recorded $1 million of asset impairment charges related to certain intangible assets in our Global operations segment.

(C)

In the third quarter and first nine months of 2017, we recorded a benefit of $3 million and charges of $6 million for restructuring in our Truck segment. In the third quarter of 2017, we recorded $41 million of charges related to the cessation of production at our Melrose Park Facility and a net benefit of $43 million related to the execution of the closing agreement for our Chatham, Ontario plant which were recognized in Restructuring Charges and Costs of Products Sold. The first nine months of 2017 were also impacted by $7 million of restructuring charges related to the closure of the Chatham, Ontario plant and $2 million of Corporate restructuring charges.

(D)

In the third quarter of 2017, we recognized a charge of $31 million for a jury verdict related to Maxxforce engine EGR litigation in our Truck segment.

(E)

In the third quarter of 2017, we recognized a gain of $6 million related to the sale of a business line in our Parts segment.

(F)

In the second quarter of 2017, we recorded a charge of $4 million related to third party fees and debt issuance costs associated with the repricing of our Term Loan.

(G)

In the first quarter of 2016, we received a $15 million one-time fee from a third party which was recognized in Other income, net.

Manufacturing segment cash, cash equivalents, and marketable securities reconciliation:
 
 

As of July 31, 2017

(in millions)

Manufacturing
Operations

  

Financial
Services
Operations

  

Consolidated
Balance Sheet

Assets

          

Cash and cash equivalents

$

868

    

$

43

    

$

911

  

Marketable securities

55

    

7

    

62

  

Total cash, cash equivalents, and marketable securities

$

923

    

$

50

    

$

973

  

SOURCE Navistar International Corporation

For further information: Media contact: Jim Spangler, Jim.Spangler@Navistar.com, 331-332-5833 or Investor contact: Marty Ketelaar, Marty.Ketelaar@Navistar.com, 331-332-2706, Web site: www.Navistar.com/newsroom