The Road Gets Rougher for Navistar

The NYSE is set to delist the truck maker's shares as the company's 2005 financial statements remain unfinished

Navistar International (NAV) is likely to stop trading on the New York Stock Exchange soon, as CEO Daniel C. Ustian struggles to keep the debt-laden truck maker afloat and clean up its accounting.

The Securities and Exchange Commission has been probing the company's accounting for about a year and Navistar has yet to finish its financial statements for 2005. Now the New York Stock Exchange has advised management that it expects to suspend trading in the company's shares by Dec. 20 and begin the process of delisting its stock.

Navistar plans to contest the actions and has advised the NYSE that it expects to be quoted on the Pink Sheet Electronic Quotation Service following the suspension, according to a press release Dec. 15.

"We are committed to accurate financial statements and we will continue to devote the necessary time and resources to achieve that goal," said Navistar CFO Bill Caton in the statement. Caton says his company has hired more than 50 new employees in the accounting area, while continuing to use Huron Consulting Group as consultants on its accounting management. "The efforts to address our accounting issues and our commitment to accuracy will extend the completion of our 2005 financial statements beyond February 1, 2007, which will then be followed by the completion of our 2006 financial statements," Caton said.

During a conference with investors about the announcement, an analyst asked Ustian if anyone had said anything about taking the company private. "If you've got a lot of money, come over and see us," Ustian said, according to Reuters.

Investors sold the stock nearly 3% to $33.13 in afternoon trading on the New York Stock Exchange Dec. 15.

Noting that the shares have risen nearly 50% since July and now exceed a 12-month target price of $30 per share, Standard & Poor's Equity Research downgraded its opinion on the stock in connection with the Dec. 15 announcement. "Given significant financial leverage, a projected downturn in the medium- and heavy-duty truck markets in calendar 2007, an ongoing SEC investigation, and downside to our target price, we recommend selling the shares," analyst Anthony Fiore said in a research note. (S&P, like BusinessWeek.com, is owned by The McGraw-Hill Companies.)

S&P had predicted in October that Navistar's replacement of auditor Deloitte & Touche with KPMG, announced in April, 2006, was likely to further delay the filing of Navistar's 10-K for fiscal year 2005. Navistar had said in June that it would file its 2006 10-K by the middle of January, 2007, after finishing up its restatement of fiscal year 2002 through July of fiscal year 2005.