Navistar International Corporation (NAV)

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Navistar International (NAV)

Q1 2011 Earnings Call

March 09, 2011 10:00 am ET

Executives

Heather Kos - Vice President of Investor Relations

Daniel Ustian - Chairman of the Board, Chief Executive Officer, President, Member of Executive Council, Chairman of Executive Committee, Chairman of International Truck & Engine Corporation, Chief Executive Officer of International Truck & Engine Corporation and President of International Truck & Engine Corporation

Andrew Cederoth - Chief Financial Officer and Executive Vice President

Analysts

Ann Duignan - JP Morgan Chase & Co

Jerry Revich - Goldman Sachs Group Inc.

Walter Liptak - Barrington Research Associates, Inc.

David Leiker - Robert W. Baird & Co. Incorporated

Seth Weber - RBC Capital Markets, LLC

Eric Crawford - UBS

Timothy Denoyer

Chris Edwards - J.P. Morgan

Presentation

Operator

Good morning, and welcome, everyone to the Navistar International Corporation First Quarter Earnings Release Conference Call. [Operator Instructions] And for opening remarks and introductions, I would now like to turn the program over to the Vice President of Investor Relations and Financial Communications, Heather Kos. Please go ahead.

Heather Kos

Good morning. Thanks for participating in our first quarter earnings call. Before we begin, I'd like to cover a few items. A copy of this morning's press release and the presentation slides that we'll be using today have been posted on our Investor Relations website for your reference. The financial results presented here are on a GAAP basis, and in some cases on a non-GAAP basis. The non-GAAP financial measures discussed in this call are reconciled to the U.S. GAAP equivalent as part of the appendix in the slide deck. Finally, today's presentation includes some forward-looking statements about our expectations for future performance. Actual results could differ materially from those suggested by our comments made here. For additional information concerning factors that could cause actual results to differ materially from those projected in today's presentation, please refer to our most recent report on Form 10-K and 10-Q and our other SEC filings. We would also refer you to the forward-looking statements and other cautionary note disclaimers presented in today's material for more information on this subject. And now, I'll turn over to Dan Ustian.

Daniel Ustian

Thanks, Heather. Maybe at a high level, if you could follow us through the slides here but we'll start with the overall statement and that is, we came in January and outlined the map for 2011 and beyond and we said that we should expect to see somewhere between $5 and $6 per share in 2011, depending on how things shaped up in the overall markets and clearly they are strong. North America, you've all seen how the economy is getting better. We said $2.40 to $2.60 was the industry level that we anticipated and that seems to be now on the high side of that.

On our global business side, that's taking shape and again, we should be strong on the global business side going out of this year and into 2012. On the diesel engine side, we said we were going to make $100 million for this year and we have a path to do that. On the parts business, we've had 10% growth in that business sector for several years now and we see 2011, that continues. On the military side, we said we would be $1.5 billion to $2 billion business this year, again, and we see a line of sight to achieve on the high side of that as well.

One of the challenges that the industry faces, you see it all over the industry, is on the commodity side and we're going to talk about how we're containing that. So the end results is that we expect to be on the high side of the $5 to $6 per share results for the year.

A couple of slides, Page 5 is just information. The trucking industry, while it's strong in the back half of the year, you could still see it's 52,000 units as an industry in the first quarter data on this chart you can follow. I would like to point out that typically for us, the first quarter is one of the lowest quarters and part of that is because of the operating days are lower than any other quarter in the year, and partly because of the holiday schedule of Thanksgiving and Christmas.

So if you look at Page 6, nothing earth shaking here. The volumes are about what we expected. You can see trucks sales are basically the same as last year, engine if you take out the Ford business, it's about the same, and so is revenue and military business was $333 million with the revenue in the quarter. But if you turn to Page 7, there's a lot on Page 7 that I think shows where we think 2011 is shaping up. And let's start with the industry. We believe that total year is 260,000 units. So let's read the chart here. The first quarter and the total year and then what it will take in the next three quarters to get to the total year. So we're not saying this is going to be even. We're saying this is what is going to take to reach those industry levels. So you can see, we expect the North American industry to recover quite dramatically, and the first quarter of this year was 52,000 units. To get to the 260,000, which we feel good about, it's going to take 70,000 units in the next three quarters on an average basis. That's how you read the chart.

In our Class 8 market share, we were 19%. We're a little more than 19% in the quarter. We expect to be at 25%. That means we'll need to average 27% in the last three quarters. We've launched our 15 liter now, so that will help us achieve that objective. And the OEM Diesel Engine business, we expect that to be strong, 160,000 units a year. We only shipped 28,000 in the first quarter. So 44,000 on an average basis for the rest of the year. We do believe this equates to the $100 million-plus that we have in profit for the Engine business. So you saw a segment profit in the first quarter of negative $8 million. I'll go through some of the reasons for that later but we're confident in the $100 million plus for the year on the engine segment profits.

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