Summary
This Form 8-K filing by Caterpillar Inc. (CAT) announces the settlement of various lawsuits with Navistar International Corporation (NAV). This resolution is accompanied by the establishment of new, long-term business agreements, including supply agreements for engines, fuel systems, and remanufacturing services. These agreements signify a strategic move to strengthen the business relationship between Caterpillar and Navistar, moving past litigation to foster future growth opportunities. While Caterpillar will incur an after-tax charge of approximately $50 million in the third quarter of 2006 related to the litigation settlement, the company expects the future benefits from these expanded business relationships to more than offset this charge. Investors should note that this charge was not previously factored into Caterpillar's 2006 financial outlook.
Key Highlights
- 1Caterpillar and Navistar International have settled all current and pending lawsuits between the two companies.
- 2New long-term supply agreements have been established for Caterpillar on-highway truck engines, fuel injectors, and remanufacturing services.
- 3Caterpillar Remanufacturing will become International's lead global remanufacturing service provider.
- 4The settlement involves an up-front cash payment and a three-year promissory note from Navistar to Caterpillar.
- 5Caterpillar anticipates an after-tax charge of approximately $50 million in the third quarter of 2006 related to the litigation settlement.
- 6The company expects future incremental benefits from the expanded relationship to exceed the initial charge.
- 7The financial impact of this agreement will be incorporated into Caterpillar's updated 2006 outlook to be released with its third-quarter results.