Navistar International Corporation (NYSE: NAV) today announced second quarter 2016 net income of $4 million, or $0.05 per diluted share, compared to a second quarter 2015 net loss of$64 million, or $0.78 per diluted share.
Revenues in the quarter were $2.2 billion, down 18 percent compared to $2.7 billion in the second quarter last year. The decline reflects lower volumes in the company’s Core U.S. and Canadian markets, due to softer industry conditions and the discontinuation of the company’s Blue Diamond Truck (BDT) joint venture in mid-2015, as well as lower engine volumes in Brazil, due to ongoing weak economic conditions in that country. This was partially offset by higher sales in the company’s Parts segment.
Second quarter 2016 EBITDA was $135 million, compared to second quarter 2015 EBITDA of $85 million. This year’s second quarter results included $52 million in adjustments, including $46 million to pre-existing warranty reserves. As a result, second quarter adjusted EBITDA was $187 million, up 83 percent, compared to adjusted EBITDA of $102 million in the comparable period last year. The improvement was driven by continued strong cost management, product cost improvement and record Parts segment profitability.
“For the first time since we launched our turnaround more than three years ago, Navistar reported a quarterly profit,” said Troy A. Clarke, Navistar president and chief executive officer. “Our performance this quarter begins to demonstrate the earnings potential of this company. The fact that we earned a profit despite lower Class 8 truck volumes that impacted the entire industry, underscores the tremendous progress we continue to make in managing our costs effectively and improving our operations.”
The company achieved $56 million in structural cost reductions during the second quarter. Year to date, structural cost reductions are at $113 million. When combined with material spend reductions and manufacturing savings, the company is on track to well exceed its total cost reduction goal of $200 million for 2016.
Navistar ended second quarter 2016 with $817 million in consolidated cash, cash equivalents and marketable securities. Manufacturing cash, cash equivalents and marketable securities were $732 million at the end of the quarter.
The company kicked off the second quarter with the launch of its new HX™ Series of premium vocational trucks. Orders for the HX Series, which is now in production, are already more than 70 percent of what the company expected for the fiscal year. Later in the quarter, the company announced it is adding the Cummins ISL 9-liter engine as an option for its DuraStar and WorkStar models, further expanding its leadership in offering the most comprehensive powertrain options in the industry.
The company also made advances on its connected vehicle leadership during the quarter. OnCommand™ Connection, Navistar’s open-architecture remote diagnostics service, surpassed the 200,000 subscriber mark. OnCommand Connection helps customers achieve significantly improved on-road uptime for their trucks and buses, regardless of make.
Navistar also launched the industry’s first Over-the-Air Programming service, which enables drivers or fleet managers to utilize a mobile interface to initiate engine programming over a safe, secure Wi-Fi connection. This speeds customer access to updated engine calibrations that will deliver superior fuel efficiency and other benefits. Since the end of the quarter, Navistar also announced that it was the first truck OEM to offer Over-the-Air Programming with Cummins engines, including Cummins engines in vehicles not built by International.
For the second half of 2016, Navistar lowered its industry guidance range by 20,000 units, due to softening Class 8 market conditions. Given this, along with slower than anticipated market share growth domestically, weaker export markets, and the impact of a stronger dollar, the company reduced its full-year revenue and adjusted EBITDA guidance.
“While we were net income positive in the second quarter, it will now be difficult for us to be profitable for the entire year given the tougher than anticipated market conditions, primarily due to the lower outlook for Class 8 industry volumes,” Clarke said. “We are confident we will generate and implement additional performance improvements to partially offset current industry conditions.”
