Navistar International Corp. Thursday reported restated financials for the 2003-2005 fiscal years and said it's in talks with General Motors to acquire GM's medium-duty truck business.
The restated financials showed a significant reduction in profits during the period, thanks to $1.12 billion in accounting-related charges. Human error was behind most of the overstatements, the company said, but part of it was due to "intentional misconduct" by employees.
Daniel C. Ustian, Navistar chairman, president and CEO, emphasized the company's commitment to its 2009 financial targets: $15 billion in revenue and $1.5 billion pro forma segment margins.
"The fundamentals of our business have grown stronger throughout the restatement process," Ustian said. "We've developed exciting new products with high-quality launches, maintained strong dealer relationships and expanded our reach into non-traditional areas including military and export markets."
Navistar also announced that it is in discussions with General Motors Corp. about a plan for Navistar to acquire GM's medium-duty truck business, including the rights to manufacture GMC and Chevrolet brand trucks.
Under this proposal, Navistar would sell a competitive line of Chevrolet and GMC medium trucks and service parts through GM's proprietary dealer network in the United States and Canada.
Ustian also detailed the company's third quarter 2007 operating results in an extremely weak North American truck market. The company expects industry volumes of 316,000 medium and heavy trucks and school buses sold in the U.S. and Canada for its fiscal year ending October 31, 2007, a 30 percent overall decline from the record 454,500 units shipped in fiscal 2006.
Navistar's worldwide shipments of school buses, Class 6-7 medium trucks and Class 8 heavy trucks and non-traditional vehicles for the third quarter 2007 were 23,700 units, down 39.5 percent from the 39,200 units delivered in the corresponding quarter one year ago.
Navistar's non-traditional new business is providing a lift to the company's revenues, including military vehicles and parts support. Last week, the U.S. Marine Corp awarded Navistar a contract for an additional 1,000 International MaxxPro mine-resistant ambush-protected (MRAP) vehicles.
Analysts at Bear Stearns said the magnitude of the write-downs was greater than they expected, upwards of $1.9 billion up through fiscal third quarter 2005. This appears to imply roughly $27/share.
Management says it identified a number of weaknesses in Navistar's internal controls over financial reporting. To address these issues, the company has plans to reinforce a culture of ethics within the company; has hired more than 50 additional accounting employees; strengthened its finance and accounting leadership; realigned its finance and accounting reporting structure; and hired a new vice president of internal audit, a new chief accounting officer and a new chief information officer.
An investigation conducted by an independent law firm echoed the findings of management regarding the internal control environment and determined that most of the errors corrected in the restatement were due to lack of proper accounting knowledge. The independent investigation also identified instances of intentional misconduct that resulted in some of the company's smaller, but in some cases material, restatement adjustments. Most of the individuals who were involved in instances of misconduct are no longer employed by the company. In other instances, the independent committee of the board has implemented appropriate remediation plans.
The restated financials showed a significant reduction in profits during the period, thanks to $1.12 billion in accounting-related charges. Human error was behind most of the overstatements, the company said, but part of it was due to "intentional misconduct" by employees.
Daniel C. Ustian, Navistar chairman, president and CEO, emphasized the company's commitment to its 2009 financial targets: $15 billion in revenue and $1.5 billion pro forma segment margins.
"The fundamentals of our business have grown stronger throughout the restatement process," Ustian said. "We've developed exciting new products with high-quality launches, maintained strong dealer relationships and expanded our reach into non-traditional areas including military and export markets."
Navistar also announced that it is in discussions with General Motors Corp. about a plan for Navistar to acquire GM's medium-duty truck business, including the rights to manufacture GMC and Chevrolet brand trucks.
Under this proposal, Navistar would sell a competitive line of Chevrolet and GMC medium trucks and service parts through GM's proprietary dealer network in the United States and Canada.
Ustian also detailed the company's third quarter 2007 operating results in an extremely weak North American truck market. The company expects industry volumes of 316,000 medium and heavy trucks and school buses sold in the U.S. and Canada for its fiscal year ending October 31, 2007, a 30 percent overall decline from the record 454,500 units shipped in fiscal 2006.
Navistar's worldwide shipments of school buses, Class 6-7 medium trucks and Class 8 heavy trucks and non-traditional vehicles for the third quarter 2007 were 23,700 units, down 39.5 percent from the 39,200 units delivered in the corresponding quarter one year ago.
Navistar's non-traditional new business is providing a lift to the company's revenues, including military vehicles and parts support. Last week, the U.S. Marine Corp awarded Navistar a contract for an additional 1,000 International MaxxPro mine-resistant ambush-protected (MRAP) vehicles.
Analysts at Bear Stearns said the magnitude of the write-downs was greater than they expected, upwards of $1.9 billion up through fiscal third quarter 2005. This appears to imply roughly $27/share.
Management says it identified a number of weaknesses in Navistar's internal controls over financial reporting. To address these issues, the company has plans to reinforce a culture of ethics within the company; has hired more than 50 additional accounting employees; strengthened its finance and accounting leadership; realigned its finance and accounting reporting structure; and hired a new vice president of internal audit, a new chief accounting officer and a new chief information officer.
An investigation conducted by an independent law firm echoed the findings of management regarding the internal control environment and determined that most of the errors corrected in the restatement were due to lack of proper accounting knowledge. The independent investigation also identified instances of intentional misconduct that resulted in some of the company's smaller, but in some cases material, restatement adjustments. Most of the individuals who were involved in instances of misconduct are no longer employed by the company. In other instances, the independent committee of the board has implemented appropriate remediation plans.
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