- Reports net loss of $2 million, or 2-cents per share, on revenues of $2.8 billion
- Achieves quarterly income from continuing operations before income taxes for first time since 2011
- Exceeds EBITDA guidance, excluding one-time items and pre-existing warranty expense
- Increases chargeouts for Class 6-8 trucks and buses in U.S. and Canada by 10 percent year-over-year
- Finishes quarter with 54 percent increase in order backlog year-over-year
- Reduces structural costs by additional $86 million
- Ends quarter with $1.1 billion in manufacturing cash
Navistar International Corporation (NYSE: NAV) today announced a third quarter 2014 net loss of $2 million, or $0.02 per diluted share, compared to a third quarter 2013 net loss of $247 million, or $3.06 per diluted share. Revenues in the quarter were $2.8 billion, essentially flat versus the third quarter of 2013.
“Our third quarter results reflect a number of positive trends including increased production, improvements in warranty charges, cost reductions that further lowered our breakeven point and our continued efforts to manage cash,” said Troy A. Clarke, Navistar president and chief executive officer. “While we have work ahead of us to grow the business, improve our market share and further reduce our cost of doing business, we do take some satisfaction in achieving positive income from continuing operations before taxes—an important financial milestone we’ve not realized in our quarterly performance since 2011.”
The company reported $21 million in income from continuing operations before income taxes in the third quarter 2014, compared to a $211 million loss from continuing operations before income taxes for the same period one year ago. Third quarter 2014 EBITDA was $142 million versus an EBITDA loss of $74 million in the same period one year ago. This year’s third quarter included a $29 million benefit in pre-existing warranty adjustments, partially offset by $20 million in restructuring and impairment charges. As a result, adjusted third quarter 2014 EBITDA was $133 million, which exceeded the company’s third quarter guidance of between $75 million and $125 million, excluding pre-existing warranty and one-time items.
Navistar finished the third quarter 2014 with $1.1 billion in manufacturing cash, cash equivalents and marketable securities. Excluding a $90 million intercompany loan from NFC, Navistar’s captive finance company, manufacturing cash ended the quarter at $1.01 billion, at the midpoint of the guidance range, as the loan was not included in the guidance.
The company reduced its year-over-year structural costs in the third quarter by an additional $86 million, including $67 million in savings from selling, general, and administrative (SG&A) expense and $19 million in reduced engineering costs. Year-to-date, Navistar has reduced structural costs by $245 million.
Navistar’s warranty spend improved in the third quarter, down 22 percent year-over-year. These results were driven by significant quality performance improvements, lower repair costs and a reduced population of trucks still in the warranty periods.
Third quarter highlights included a 10 percent year-over-year increase in chargeouts for Class 6-8 trucks and buses in the United States and Canada, as well as ending the quarter with a 54 percent increase in order backlog year-over-year. Also, in July, Navistar launched its line of severe service trucks powered by the company’s 9/10 SCR engines.
“Regaining market share remains a top priority and while we still have work to do, we are excited by the favorable feedback we receive from those customers who have bought and experienced our new trucks,” Clarke added. “With additional offerings for medium-duty and severe service applications, we’re very encouraged with our future prospects.”
The company provided the following guidance updates:
- Raised Class 8 industry forecast for FY2014 (U.S./Canada) to 235,000-240,000;
- Expects to finish FY2014 with $300 million in structural cost savings;
- Projects Q4 EBITDA of $115 million to $165 million, excluding pre-existing warranty and one-time items; and
- Projects between $1.0 billion and $1.1 billion in manufacturing cash, cash equivalents and marketable securities at the end of Q4 after repaying the remaining $166 million of the company’s 3% senior subordinated convertible notes maturing in October.
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Summary of Financial Results: |
|||||||||||
|
Third Quarter |
First Nine Months |
||||||||||
|
(in millions, except per share data) |
2014 |
2013 |
2014 |
2013 |
|||||||
|
Sales and revenues, net |
$ |
2,844 |
$ |
2,861 |
$ |
7,798 |
$ |
8,024 |
|||
|
Segment Results: |
|||||||||||
|
North America Truck |
$ |
(12) |
$ |
(143) |
$ |
(353) |
$ |
(547) |
|||
|
North America Parts |
127 |
98 |
357 |
329 |
|||||||
|
Global Operations |
(2) |
(22) |
(185) |
— |
|||||||
|
Financial Services |
24 |
23 |
71 |
64 |
|||||||
|
Loss from continuing operations, net of tax(A) |
$ |
(3) |
$ |
(237) |
$ |
(550) |
$ |
(704) |
|||
|
Net loss(A) |
(2) |
(247) |
(547) |
(744) |
|||||||
|
Diluted loss per share from continuing operations(A) |
$ |
(0.04) |
$ |
(2.94) |
$ |
(6.77) |
$ |
(8.76) |
|||
|
Diluted loss per share(A) |
(0.02) |
(3.06) |
(6.73) |
(9.25) |
|||||||
|
________________ |
|
|
(A) |
Amounts attributable to Navistar International Corporation. |
North America Truck — For the third quarter 2014, the North America Truck segment recorded a loss of $12 million, compared with a year-ago third quarter loss of $143 million. The year-over-year improvement was primarily driven by lower charges for adjustments related to pre-existing warranties and additional structural cost savings. Chargeouts for traditional markets were up 10 percent, reflecting a 24 percent increase of Class 8 heavy-duty trucks and a 6 percent increase in Class 6/7 medium-duty trucks, partially offset by an 18 percent decrease in Class 8 severe service trucks.
North America Parts — For the third quarter 2014, the North America Parts segment recorded a profit of $127 million, compared to a year-ago third quarter profit of $98 million. Parts revenues in the quarter improved by 4 percent due to improvements in commercial markets, partially offset by lower military sales. Profit improved by 30 percent year-over-year driven by stronger performance in commercial markets.
Global Operations — For the third quarter 2014, global operations recorded a loss of $2 million compared to a year-ago third quarter loss of $22 million. The year-over-year improvement was primarily driven by geographic mix from its export truck operations, lower foreign exchange losses and lower SG&A expenses resulting from the company’s cost-reduction initiatives, partially offset by a decline in South America engine volumes.
Financial Services — For the third quarter 2014, the financial services segment recorded a profit of $24 million compared to third quarter 2013 profit of $23 million. Financial results improved due to lower structural costs and interest income from an intercompany loan, which more than offset the effects of lower overall retail balances.
