PR Newswire | Sep 9, 2020 06:35AM EDT

09/09 05:34 CDT

Navistar Reports Third Quarter 2020 Results- Reports third quarter 2020 net loss of $37 million, or $0.37 per diluted share, on revenues of $1.7 billion- Generates $104 million of adjusted EBITDA in the third quarter; reports an adjusted net loss of $8 million- Generates $154 million of manufacturing free cash flow- Ends the third quarter with $1.6 billion in manufacturing cash, cash equivalents and marketable securities- Plans additional cost-savings actions towards SG&A target of 7 to 9 percent of revenues- Announces plans to dual-build diesel and electric vehicles in San Antonio LISLE, Ill., Sept. 9, 2020

LISLE, Ill., Sept. 9, 2020 /PRNewswire/ -- Navistar International Corporation (NYSE: NAV) today announced a third quarter 2020 net loss of $37 million, or $0.37 per diluted share, compared to third quarter 2019 net income of $156 million, or $1.56 per diluted share.

Revenues in the quarter were $1.7 billion, down 45 percent from third quarter 2019, and Core (Class 6-8 trucks and buses in the United States and Canada) charge outs were down 53 percent. The decrease was primarily driven by the impact of COVID-19, as well as prior year comparable quarter results that were near the peak of the prior industry cycle.

Third quarter 2020 EBITDA was $73 million, compared to $281 million in third quarter 2019. Adjusted EBITDA in third quarter 2020 was $104 million versus $266 million a year ago. Adjusted net income for the quarter was a loss of $8 million compared to income of $147 million in the third quarter last year.

Navistar finished third quarter 2020 with $1.65 billion in consolidated cash, cash equivalents and marketable securities, including $1.6 billion in manufacturing cash, cash equivalents and marketable securities.

"Our fiscal third quarter opened during the middle of many stay-at-home orders and ended with sections of the economy beginning to reopen, and our results certainly reflect this," said Persio Lisboa, president and chief executive officer, Navistar. "While marketplace uncertainties continue, we are accelerating the pace of progress on our Navistar 4.0 strategy for financial improvement, so we can pull forward its benefits and take full advantage of a stronger industry when it arrives."

The company's Navistar 4.0 strategy lays out a plan to increase the company's EBITDA margins to 12 percent by 2024.

During the quarter, in addition to naming Lisboa president and chief executive officer and Troy Clarke to the new role of executive chairman, the company made several leadership changes aimed at accelerating the pace of the company's Navistar 4.0 progress with a focus on opportunities in advanced technologies. These executive appointments included naming Bob Walsh vice president of Emerging Technologies, Strategy and Planning; appointing Friedrich Baumann president of Sales, Marketing and Aftersales; and adding new global responsibilities to the role of Phil Christman, president of Operations.

Earlier this year, the company took several actions to conserve cash and bolster its liquidity in response to the COVID-19 pandemic. These actions have been successful, as the company ended the third quarter with $1.6 billion of manufacturing cash, allowing it to cease its employee salary deferral program on September 1, several months earlier than initially planned. Additionally, actions taken due to the pandemic drove the company's selling, general and administrative (SG&A) expenses down 29 percent year-over-year, after adjusting for a one-time gain in the prior year. Using learnings gained during COVID-19, the company is pursuing additional sustainable cost savings opportunities.

"We are targeting SG&A costs between 7 percent to 9 percent of revenues," said Walter Borst, chief financial officer, Navistar. "Our focus has moved from temporary cash conservation actions to sustainable cost savings that support our Navistar 4.0 goals and better position us for profitability at all points in the cycle."

With its new leadership, learnings from the COVID-19 pandemic and benefits from previous cost conservation actions in place, the company is redirecting more resources to advanced technologies; leading to several announcements during the quarter.

In autonomous, the company announced a strategic partnership with TuSimple to co-develop SAE Level 4 self-driving trucks targeted for production by 2024. The partnership also includes Navistar taking a minority stake in the company.

In connectivity, the company announced strategic partnerships with fleet management solutions providers Samsara and Geotab to allow International customers to seamlessly add their choice of fleet management solutions without the installation of additional vehicle hardware.

In electric, the company's NEXT eMobility Solutions business unit signed a master services agreement with In-Charge Energy to provide charging infrastructure and consulting services to electric vehicle customers.

The company has been making progress on the construction of its production facility in San Antonio, which is scheduled to open in the spring of 2022. The facility will be capable of building both diesel and fully electric vehicles, and the first vehicle off the line will be an electric truck, entirely built on the main assembly line.

"As a result of the pandemic, we had the opportunity to revisit our investment portfolio and retime noncritical programs, and cancel others," said Lisboa. "By streamlining our investments, we were able to free up significant capacity, which is being redeployed into advanced technology programs and strategic partnerships that accelerate our pace of progress."

SEGMENT REVIEW

Summary of Financial Results:

(Unaudited)

Three Months Ended Nine Months Ended July 31, July 31,

(in millions, except per share data) 2020 2019 2020 2019

Sales and revenues, net $ 1,675 $ 3,042 $ 5,438 $ 8,471

Segment Results:

Truck $ (22) $ 167 $ (131) $ 183

Parts 97 149 319 437

Global Operations 1 1 (12) 10

Financial Services 10 30 51 93

Loss from continuing operations, net of $ (37) $ 156 $ (111) $ 119tax^(A)

Net income(loss)^(A) (37) 156 (111) 119

Diluted (income) per share^(A) (0.37) 1.56 (1.11) 1.20



________________

(A) Amounts attributable to Navistar International Corporation.

Truck Segment - In third quarter 2020, the Truck segment net sales were $1.2 billion, a 50 percent decrease compared to third quarter last year. The year-over-year decrease is primarily due to lower volumes driven by weaker industry conditions resulting in part from the COVID-19 pandemic.

The Truck segment incurred a net loss of $22 million in third quarter 2020 compared to a profit of $167 million in third quarter 2019. The year-over-year decrease was a result of lower volumes and a reversal of a non-recurring legal settlement charge in 2019.

Parts Segment- For third quarter 2020, the Parts segment net sales were $414 million, a 27 percent decrease from third quarter 2019. The decrease is primarily due to lower North America volumes attributable to the COVID-19 impact in the U.S. and Canada and a decrease in Blue Diamond Parts sales.

The Parts segments saw a third quarter profit of $97 million, compared to $149 million in third quarter 2019. The decrease is due to the impact of lower sales volumes, partially offset by lower SG&A expenses.

Global Operations Segment - In third quarter 2020, the Global Operations segment net sales decreased 48 percent to $47 million. The decrease was primarily driven by lower volumes in our South America operations triggered by temporary production stoppages related to COVID-19.

The Global Operation segment recorded a profit of $1 million in the third quarter of 2020 and 2019. The segment benefited from restructuring actions taken earlier this year.

Financial Services Segment - In third quarter 2020, the Financial Services segment net revenues decreased to $49 million, a 34 percent decrease from third quarter 2019. The decrease was primarily driven by lower average yields due to lower interest rates and lower average finance receivables due to lower volumes.

The Financial Services segment recorded a profit of $10 million in the quarter, compared to $30 million in third quarter 2019. The decrease was primarily driven by the impact of lower revenues, partially offset by lower interest expense resulting from lower borrowing requirements.

About NavistarNavistar International Corporation (NYSE: NAV) is a holding company whose subsidiaries and affiliates produce International(r) brand commercial trucks, proprietary diesel engines, and IC Bus(r) brand school and commercial buses. An affiliate also provides truck and diesel engine service parts. Another affiliate offers financing services. Additional information is available at www.Navistar.com.

Forward-Looking StatementInformation provided and statements contained in this report that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended ("Securities Act"), Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act"), and the Private Securities Litigation Reform Act of 1995. Such forward-looking statements only speak as of the date of this report and Navistar International Corporation assumes no obligation to update the information included in this report. Such forward-looking statements include information concerning our possible or assumed future results of operations, including descriptions of our business strategy. These statements often include words such as "believe," "expect," "anticipate," "intend," "plan," "estimate," or similar expressions. These statements are not guarantees of performance or results and they involve risks, uncertainties, and assumptions. For a further description of these factors, see the risk factors set forth in our filings with the Securities and Exchange Commission, including our annual report on Form 10-K for the fiscal year ended October 31, 2019, which was filed on December 17, 2019, and our Quarterly Report on Form 10-Q for the period ended April 30, 2020. Although we believe that these forward-looking statements are based on reasonable assumptions, there are many factors that could affect our actual financial results or results of operations and could cause actual results to differ materially from those in the forward-looking statements. All future written and oral forward-looking statements by us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to above. Except for our ongoing obligations to disclose material information as required by the federal securities laws, we do not have any obligations or intention to release publicly any revisions to any forward-looking statements to reflect events or circumstances in the future or to reflect the occurrence of unanticipated events.

Navistar International Corporation and Subsidiaries

Consolidated Statements of Operations

(Unaudited)

Three Months Ended Nine Months Ended July 31, July 31,

(in millions, except per share data) 2020 2019 2020 2019

Sales and revenues

Sales of manufactured products, net $ 1,639 $ 2,996 $ 5,310 $ 8,330

Finance revenues 36 46 128 141

Sales and revenues, net 1,675 3,042 5,438 8,471

Costs and expenses

Costs of products sold 1,388 2,501 4,541 6,973

Restructuring charges 4 - 5 1

Asset impairment charges 12 3 25 6

Selling, general and administrative 141 167 493 726expenses

Engineering and product development 73 81 237 242costs

Interest expense 71 76 199 243

Other expense, net 14 25 27 140

Total costs and expenses 1,703 2,853 5,527 8,331

Equity in income of non-consolidated 2 1 - 4affiliates

Income (loss) before income taxes (26) 190 (89) 144

Income tax expense (8) (29) (10) (9)

Net income (loss) (34) 161 (99) 135

Less: Net income attributable to 3 5 12 16non-controlling interests

Net income (loss) attributable to $ (37) $ 156 $ (111) $ 119Navistar International Corporation

Net income (loss) per shareattributable to Navistar InternationalCorporation

Basic: $ (0.37) $ 1.57 $ (1.11) $ 1.20

Diluted: (0.37) 1.56 (1.11) 1.20

Weighted average shares outstanding:

Basic 99.7 99.4 99.6 99.2

Diluted 99.7 99.7 99.6 99.5

Navistar International Corporation and Subsidiaries

Consolidated Balance Sheets

July 31, October 31,

(in millions, except per share data) 2020 2019

ASSETS (Unaudited)

Current assets

Cash and cash equivalents $ 1,648 $ 1,370

Restricted cash and cash equivalents 232 133

Trade and other receivables, net 266 338

Finance receivables, net 1,403 1,923

Inventories, net 896 911

Other current assets 247 277

Total current assets 4,692 4,952

Restricted cash 54 54

Trade and other receivables, net 8 10

Finance receivables, net 250 274

Investments in non-consolidated affiliates 30 31

Property and equipment (net of accumulateddepreciation and amortization of $2,328 and $2,488, 1,241 1,309respectively)

Operating lease right of use assets 119 -

Goodwill 38 38

Intangible assets (net of accumulated amortization of 20 25$139 and $142, respectively)

Deferred taxes, net 115 117

Other noncurrent assets 108 107

Total assets $ 6,675 $ 6,917

LIABILITIES and STOCKHOLDERS' DEFICIT

Liabilities

Current liabilities

Notes payable and current maturities of long-term debt $ 865 $ 871

Accounts payable 1,154 1,341

Other current liabilities 1,096 1,363

Total current liabilities 3,115 3,575

Long-term debt 4,694 4,317

Postretirement benefits liabilities 2,013 2,103

Other noncurrent liabilities 681 645

Total liabilities 10,503 10,640

Stockholders' deficit

Series D convertible junior preference stock 2 2

Common stock, $0.10 par value per share (103.1 shares 10 10issued and 220 shares authorized at both dates)

Additional paid-in capital 2,726 2,730

Accumulated deficit (4,333) (4,409)

Accumulated other comprehensive loss (2,100) (1,912)

Common stock held in treasury, at cost (3.6 and 3.9 (135) (147)shares, respectively)

Total stockholders' deficit attributable to Navistar (3,830) (3,726)International Corporation

Stockholders' equity attributable to non-controlling 2 3interests

Total stockholders' deficit (3,828) (3,723)

Total liabilities and stockholders' deficit $ 6,675 $ 6,917

Navistar International Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

Nine Months Ended July 31,

(in millions) 2020 2019

Cash flows from operating activities

Net income (loss) $ (99) $ 135

Adjustments to reconcile net income (loss) to net cashprovided by operating activities:

Depreciation and amortization 103 99

Depreciation of equipment leased to others 43 45

Deferred taxes, including change in valuation allowance (5) (41)

Asset impairment charges 25 6

Gain on sales of investments and businesses, net - (56)

Amortization of debt issuance costs and discount 11 15

Stock-based compensation 14 20

Provision for doubtful accounts 13 8

Equity in (income) loss of non-consolidated affiliates, net - (3)of dividends

Write-off of debt issuance costs and discount - 6

Other non-cash operating activities (9) (6)

Changes in other assets and liabilities, exclusive of the 36 (124)effects of businesses disposed

Net cash provided by operating activities 132 104

Cash flows from investing activities

Maturities of marketable securities - 98

Capital expenditures (115) (90)

Purchases of equipment leased to others (69) (130)

Proceeds from sales of property and equipment 11 12

Proceeds from sales of investments and businesses 10 100

Other investing activities (4) 1

Net cash used in investing activities (167) (9)

Cash flows from financing activities

Proceeds from issuance of securitized debt 316 331

Principal payments on securitized debt (45) (300)

Net change in secured revolving credit facilities (241) 120

Proceeds from issuance of non-securitized debt 622 144

Principal payments on non-securitized debt (108) (988)

Net change in notes and debt outstanding under revolving (90) 469credit facilities

Debt issuance costs (17) (9)

Proceeds from financed lease obligations - 13

Proceeds from exercise of stock options 3 3

Dividends paid by subsidiaries to non-controlling interest (13) (18)

Other financing activities (2) (2)

Net cash provided by (used in) financing activities 425 (237)

Effect of exchange rate changes on cash, cash equivalents (13) (7)and restricted cash

Increase (decrease) in cash, cash equivalents and 377 (149)restricted cash

Cash, cash equivalents and restricted cash at beginning of 1,557 1,445the period

Cash, cash equivalents and restricted cash at end of the $ 1,934 $ 1,296period

Navistar International Corporation and SubsidiariesSegment Reporting(Unaudited)

We define segment profit (loss) as net income (loss) attributable to Navistar International Corporation, excluding income tax benefit (expense). The following tables present selected financial information for our reporting segments:

Global Financial Corporate(in millions) Truck Parts Operations Services^(A) and Total Eliminations

Three Months Ended July 31, 2020

External sales and revenues, net $ 1,177 $ 413 $ 46 $ 39 $ - $ 1,675

Intersegment sales and revenues 26 1 1 10 (38) -

Total sales and revenues, net $ 1,203 $ 414 $ 47 $ 49 $ (38) $ 1,675

Net income (loss) attributable to NIC $ (22) $ 97 $ 1 $ 10 $ (123) $ (37)

Income tax expense - - - - (8) (8)

Segment profit (loss) $ (22) $ 97 $ 1 $ 10 $ (115) $ (29)

Depreciation and amortization $ 27 $ 1 $ 1 $ 16 $ 2 $ 47

Interest expense - - - 16 55 71

Equity in income of non-consolidated 2 - - - - 2affiliates

Capital expenditures^(B) 18 1 1 - 5 25

Global Financial Corporate(in millions) Truck Parts Operations Services^(A) and Total Eliminations

Three Months Ended July 31, 2019

External sales and revenues, net $ 2,342 $ 569 $ 82 $ 46 $ 3 $ 3,042

Intersegment sales and revenues 45 2 8 28 (83) -

Total sales and revenues, net $ 2,387 $ 571 $ 90 $ 74 $ (80) $ 3,042

Net income (loss) attributable NIC $ 167 $ 149 $ 1 $ 30 $ (191) $ 156

Income tax expense - - - - (29) (29)

Segment profit (loss) $ 167 $ 149 $ 1 $ 30 $ (162) $ 185

Depreciation and amortization $ 26 $ 1 $ 3 $ 16 $ 1 $ 47

Interest expense - - - 27 49 76

Equity in income of non-consolidated - 1 - - - 1affiliates

Capital expenditures^(B) 17 2 1 - 4 24

Global Financial Corporate(in millions) Truck Parts Operations Services^(A) and Total Eliminations

Nine Months Ended July 31, 2020

External sales and revenues, net $ 3,800 $ 1,347 $ 154 $ 135 $ 2 $ 5,438

Intersegment sales and revenues 34 3 12 35 (84) -

Total sales and revenues, net $ 3,834 $ 1,350 $ 166 $ 170 $ (82) $ 5,438

Net income (loss) attributable to NIC $ (131) $ 319 $ (12) $ 51 $ (338) $ (111)

Income tax expense - - - - (10) (10)

Segment profit (loss) $ (131) $ 319 $ (12) $ 51 $ (328) $ (101)

Depreciation and amortization $ 83 $ 5 $ 5 $ 48 $ 5 $ 146

Interest expense - - - 55 144 199

Equity in income (loss) of (1) 1 - - - -non-consolidated affiliates

Capital expenditures^(B) 93 6 3 - 13 115

Global Financial Corporate(in millions) Truck Parts Operations Services^(A) and Total Eliminations

Nine Months Ended July 31, 2019

External sales and revenues, net $ 6,405 $ 1,693 $ 223 $ 141 $ 9 $ 8,471

Intersegment sales and revenues 75 5 27 85 (192) -

Total sales and revenues, net $ 6,480 $ 1,698 $ 250 $ 226 $ (183) $ 8,471

Net income (loss) attributable to NIC $ 183 $ 437 $ 10 $ 93 $ (604) $ 119

Income tax expense - - - - (9) (9)

Segment profit (loss) $ 183 $ 437 $ 10 $ 93 $ (595) $ 128

Depreciation and amortization $ 78 $ 4 $ 7 $ 48 $ 7 $ 144

Interest expense - - - 83 160 243

Equity in income (loss) of 3 2 (1) - - 4non-consolidated affiliates

Capital expenditures^(B) 69 3 2 2 14 90

_________________________

(A) Total sales and revenues in the Financial Services segment includeinterest revenues of $29 million and $103 million for the three and nine monthsended July 31, 2020, respectively, and $53 million and $161 million for thethree and nine months ended July 31, 2019, respectively.

(B) Exclusive of purchases of equipment leased to others.

Corporate Global Financial(in millions) Truck Parts and Total Operations Services Eliminations

Segment assets, as of:

July 31, 2020 $ 1,721 $ 641 $ 202 $ 2,285 $ 1,826 $ 6,675

October 31, 2019 1,705 688 296 2,774 1,454 6,917

SEC Regulation G Non-GAAP ReconciliationThe financial measures presented below are unaudited and not in accordance with, or an alternative for, financial measures presented in accordance with U.S. generally accepted accounting principles ("GAAP"). The non-GAAP financial information presented herein should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP and are reconciled to the most appropriate GAAP number below.

Earnings (loss) Before Interest, Income Taxes, Depreciation, and Amortization ("EBITDA"):We define EBITDA as our consolidated net income (loss) attributable to Navistar International Corporation, net of tax, plus manufacturing interest expense, income taxes, and depreciation and amortization. We believe EBITDA provides meaningful information to the performance of our business and therefore we use it to supplement our GAAP reporting. We have chosen to provide this supplemental information to investors, analysts and other interested parties to enable them to perform additional analyses of operating results.

Adjusted EBITDA and Adjusted Net Income (loss):We believe that adjusted EBITDA and Adjusted Net Income (loss), which excludes certain identified items that we do not consider to be part of our ongoing business, improves the comparability of year to year results, and is representative of our underlying performance. Management uses this information to assess and measure the performance of our operating segments. We have chosen to provide this supplemental information to investors, analysts and other interested parties to enable them to perform additional analyses of operating results, to illustrate the results of operations giving effect to the non-GAAP adjustments shown in the below reconciliations, and to provide an additional measure of performance.

Manufacturing Cash and Cash Equivalents:Manufacturing cash and cash equivalents represent the Company's consolidated cash and, cash equivalents excluding cash and cash equivalents of our financial services operations. We have chosen to provide this supplemental information to investors, analysts and other interested parties to enable them to perform additional analyses of our ability to meet our operating requirements, capital expenditures, equity investments, and financial obligations.

Structural costsconsist of Selling, general and administrative expenses and Engineering and product development costs.

EBITDA reconciliation:

Three Months Ended Nine Months Ended July 31, July 31,

(in millions) 2020 2019 2020 2019

Net income(loss) attributable to NIC $ (37) $ 156 $ (111) $ 119

Plus:

Depreciation and amortization expense 47 47 146 144

Manufacturing interest expense^(A) 55 49 144 160

Adjusted for:

Income tax (expense) benefit (8) (29) (10) (9)

EBITDA $ 73 $ 281 $ 189 $ 432

______________________

(A) Manufacturing interest expense is the net interest expense primarilygenerated for borrowings that support the manufacturing and corporateoperations, adjusted to eliminate intercompany interest expense with ourFinancial Services segment. The following table reconciles Manufacturinginterest expense to the consolidated interest expense:

Three Months Ended Nine Months Ended July 31, July 31,

(in millions) 2020 2019 2020 2019

Interest expense $ 71 $ 76 $ 199 $ 243

Less: Financial services interest 16 27 55 83expense

Manufacturing interest expense $ 55 $ 49 $ 144 $ 160

Adjusted EBITDA Reconciliation:

Three Months Ended Nine Months Ended July 31, July 31,

(in millions) 2020 2019 2020 2019

EBITDA (reconciled above) $ 73 $ 281 $ 189 $ 432

Adjusted for significant items of:

Adjustments to pre-existing warranties^ 9 5 26 7(A)

Asset impairment charges^(B) 12 3 25 6

Restructuring of manufacturing operations 4 - 5 1^(C)

MaxxForce Advanced EGR engine lawsuits^ (1) (31) - 128(D)

Gain (loss) on sales^(E) - 3 - (56)

Debt refinancing charges^(F) - 6 - 6

Pension settlement^(G) 7 - 7 142

Settlement gain^(H) - (1) (1) (3)

Total adjustments 31 (15) 62 231

Adjusted EBITDA $ 104 $ 266 $ 251 $ 663

Adjusted Net Income (Loss) attributable to NIC:

Three Months Ended Nine Months Ended July 31, July 31,

(in millions) 2020 2019 2020 2019

Net income (loss) attributable to NIC $ (37) $ 156 $ (111) $ 119

Adjusted for significant items of:

Adjustments to pre-existing warranties^ 9 5 26 7(A)

Asset impairment charges^(B) 12 3 25 6

Restructuring of manufacturing operations 4 - 5 1^(C)

MaxxForce Advanced EGR engine lawsuits^ (1) (31) - 128(D)

Gain (loss) on sales^(E) - 3 - (56)

Debt refinancing charges^(F) - 6 - 6

Pension settlement^(G) 7 - 7 142

Settlement gain^(H) - (1) (1) (3)

Total adjustments 31 (15) 62 231

Tax effect^ (I) (2) 6 (2) (41)

Adjusted net income (loss) attributable $ (8) $ 147 $ (51) $ 309to NIC





_____________________

Adjustments to pre-existing warranties reflect changes in our estimate of warranty costs for products sold in prior periods. Such adjustments typically occur when claims experience deviates from historic and (A)expected trends. Our warranty liability is generally affected by component failure rates, repair costs, and the timing of failures. Future events and circumstances related to these factors could materially change our estimates and require adjustments to our liability. In addition, new product launches require a greater use of judgment in developing estimates until historical experience becomes available.

In the first nine months of 2020, we recorded $12 million of asset impairment charges related to long lived assets in our Brazil asset group in our Global Operations segment. In the third quarter and first nine months of 2020, we recorded $12 million and $13 million of asset (B)impairment charges related to certain assets under operating leases in our Truck segment. In the third quarter and first nine months of 2019 we recorded $3 million and $6 million, respectively, of asset impairment charges related to certain assets under operating leases in our Truck segment.

In the third quarter of 2020, we recorded restructuring charges of $4 (C)million and $5 million, respectively, due to restructuring activity throughout the organization. In the first nine months of 2019 we recorded a restructuring charge of $1 million in our Truck segment.

In the third quarter and first nine months of 2020 and 2019, we recognized a net benefit of $1 million and $31 million, respectively, (D)related to the MaxxForce Advanced EGR engine class action settlement and related litigation in our Truck Segment. In the first nine months of 2019, we recognized a charge of $128 million related to the MaxxForce Advanced EGR engine class action settlement and related litigation in our Truck Segment.

In the third quarter of 2019, we recognized a charge of $3 million in our Truck segment for adjustments to the purchase price of the sale of a majority interest in the Navistar Defense business. In the first nine (E)months of 2019, we recognized a gain of $51 million related to the sale of a majority interest in the Navistar Defense business in our Truck segment, and a gain of $5 million related to the sale of our joint venture in China with JAC in our Global Operations segment.

(F)In the third quarter and first nine months of 2019, we recorded a charge of $6 million for the write off of debt issuance costs and discounts associated with NFC Term Loan.

In the third quarter and first nine months of 2020, we recorded pension settlement accounting charges of $7 million in Other expense, net in (G)Corporate. In the first nine months of 2019, we purchased group annuity contracts for certain retired pension plan participants resulting in plan remeasurements. As a result, we recorded pension settlement accounting charges of $142 million in Other expense, net in Corporate.

In the first nine months of 2020, we recorded interest income of $1 million, in Other expense, net derived from the prior year settlement of (H)a business economic loss claim relating to our former Alabama engine manufacturing facility in Corporate. For the same claim, we recorded interest income in Other expense, net of $1 million and $3 million, for the third quarter and first nine months of 2019, respectively.

(I)Tax effect is calculated by excluding the impact of the non-GAAP adjustments from the interim period tax provision calculations.

Manufacturing segment cash and cash equivalents reconciliation:

As of July 31, 2020

Manufacturing Financial Consolidated(in millions) Operations Services Balance Sheet Operations

Total cash, cash equivalents, and $ 1,610 $ 38 $ 1,648marketable securities

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SOURCE Navistar International Corporation