Slump Continues For Navistar
Navistar International Corp. announced a fourth quarter 2012 net loss of $2.8 billion compared to fourth quarter 2011 net income of $255 million. The current results included increased non-cash tax expense of $2 billion for the increase in deferred tax valuation allowance on U.S. deferred tax assets. The fourth quarter 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% 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.
Navistar said it 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 L 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."
The net loss for fiscal year 2012 was $3.0 billion versus net income for fiscal 2011 of $1.7 billion. The truck and engine segments both reported losses in the fourth quarter. 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.
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. Also included were NCP charges of $34 million.