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Navistar International Corp NAV
Q3 2013 Earnings Call Transcript

Transcript Call Date 09/04/2013

Slide 8, summarizing our results. Our EBITDA was less than we hoped for in the quarter. I consider the challenges that impacted our performance to fall in three buckets. First, we continue to experience one-time costs and charges related to our ROIC divestitures and restructuring efforts. Second, we encountered some significant reversals and our results in Brazil and Latin America due to social issues that developed during the quarter. Third, we fell short of our sales volumes, primarily due to medium-duty market share erosion.

Positives for the quarter include, our cash performance was in the top of our guidance. The four straight quarters, we have delivered this goal. As you know cash management and working capital reduction remains a major focus of our efforts during this turnaround year. Two, we continue to overachieve in our efforts to reduce structural costs and example of this is our targeted reductions in SG&A. On the last call, we stated we would like to achieve over $200 million in year-over-year savings up from $175 million we talked about before. And despite a few one-time unexpected items this quarter, we showed $236 million improvement year-to-date. Just this week, we took more actions based on our best-in-class benchmarking initiatives to further reduce costs and Jack will talk to you later about these actions, which will benefit 2014. Point three, Class 8 order receipts increased from 12% of the industry in Q2 to 20% in Q3. Customer feedback continues to be excellent on our new products.

Fourth, just yesterday we announced another key initiative in accelerating our turn-around; the 2014 product strategy that focuses on bringing SCR offerings to our medium duty vehicles as quickly as possible. We announced that we will now offer the Cummins ISB 6.7-liter engine for International DuraStar and IC Bus CE Series vehicles. IC engine will provide customers with an expanded engine offering and an additional engine choice. Importantly it will allow us to get an SCR offering into our medium duty truck segment faster than we had previously indicated. We're taking truck orders now and we're going to begin shipments in December.

The last we continue to work through our non-core assets that don't provide an appropriate return on meaningful cash flow. These are smaller initiatives now and some of the true-ups and charges impacted our quarter. But there are right thing to do as we focus on our core non-America truck business. So, while we're pleased with the progress we're making we fell short in our traditional and global volume assumptions, so let me come back to this.

Our Class 8 market share continues to show improvement, but not as quickly as we had hoped. That being said we are encouraged by its substantial uptick in orders and this will eventually materialize into retail sales in the next few quarters. Our medium share situation however has become similar to what we experienced on Class 8. As we are switching technologies some folks are waiting in the side line. So we felt we needed to take action as quickly as possible and by launching the Cummins ISB into our medium duty products we believe we can more quickly grow our market share.

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