Navistar International reports first-quarter loss

WARRENVILLE, Ill. (Feb. 15, 2002) — Navistar International, which produces trucks and engines under the International brand, today reported a loss of $56 million US, or 93 cents per diluted common share, for the quarter ended Jan. 31, 2002.

The consensus estimate of Wall Street security analysts was a loss of 94 cents per share. The company lost $35 million, or 58 cents a share, in the first quarter a year ago.

Consolidated sales and revenues from the company’s manufacturing and financial services operations for the first quarter totaled $1.5 billion, approximately the same as in the first quarter of 2001.

John R. Horne, Navistar chairman, president and chief executive officer, said the company has not changed its earnings outlook for the year, but with the company’s reduced forecast for heavy truck industry retail demand and the softness of the medium-truck market, “the challenge for the second quarter and the year has increased.”

Horne emphasized that first quarter results belie the fundamental changes the company has made to enhance its product development process, reduce fixed overhead, and develop the ability to adjust variable costs throughout the cycle. He said that by the end of 2002 when all of the company’s new truck models will have been introduced, the company will have much lower manufacturing costs and that the next phase of its truck strategy will be to lower fixed costs and implement a more flexible cost structure.

Horne said new and used truck pricing remained weak during the first quarter, but appears to have stabilized which may be an indication that the market bottomed out in the first quarter. The company’s used truck inventories declined slightly during the quarter.

According to Horne, while leading truck industry indicators such as pricing, used truck inventories and truck tonnage have stabilized, the demand for new trucks is lower than when the company completed its business plan for 2002, which occurred before the events of Sept. 11. As a result, the company is lowering its forecast for total truck industry volume in fiscal 2002 in the United States and Canada by 10,000 units to 284,500 units.

Navistar is forecasting demand for heavy trucks for its year ending Oct. 31, 2002, at 144,000 units, down from the previous forecast of 154,000 units. Demand for medium trucks remains unchanged at 112,500 units, including 87,500 Class 6-7 trucks. School bus demand remains at 28,000 units. The company’s truck shipments in the second quarter ending April 30, 2002, will be approximately 8% lower than a year ago, the company said.

Worldwide shipments of medium and heavy trucks and school buses during the first quarter totaled 16,700 units, compared with 19,800 units in the first quarter of 2001. Overall estimated market share in the first quarter rose to 26.3% from 25.1% a year earlier.

Significantly, Class 6-7 market share, where the company’s new International brand high performance truck currently competes, rose to 42.6% from 40.7% a year ago. The first medium class high performance truck was introduced in the second quarter last year. Additional new medium high performance models were introduced in December and February. And new model introductions will continue throughout the year with five more new models ranging from the new V-8 medium truck to the new Class 8 day cab with 11 to 12 liter engines.

Shipments of V-8 diesel engines to other original equipment manufacturers during the quarter totaled 69,000 units, up from 67,500 units in the first quarter of 2001.