Wednesday, December 24, 2008

Navistar Inventory Mistake

Navistar (NAV) announced today that it will restate its financial results for the nine months ended July 31, 2008. As a result, the company expects to increase reported net income by $50 million to $70 million ($0.68 to $0.95 per diluted share) for the nine months ended July 31, 2008. The need for the restatement relates to overstatement of costs of products sold and the understatement of inventories and accounts payable in Navistar’s Truck segment.

This is truly astounding news. A company like Navistar has made a $50 million dollar mistake and wants the investors to be happy that they have supposedly made more money. The mistake is so great that earnings were increased by over 300%. Management needs to be more forthcoming on financial controls. This time the mistake made a profit. Next time will we see red ink?