LISLE, Ill., June 7, 2016 /PRNewswire/ -- 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."

GUIDANCE

Industry

• Reduced its forecast of fiscal year 2016 retail deliveries of Class 6-8 trucks and buses in the United States and Canada to 330,000 - 360,000 units.
• Reduced its Class 8 market projection to 220,000 - 250,000 units.
• Maintained its projection that the medium, school bus and severe service segments will grow in 2016 versus 2015.

Navistar

• Revised 2016 revenue guidance downward to $8.2 billion - $8.6 billion.
• Reduced 2016 adjusted EBITDA guidance to $550 million - $600 million.
• Updated total cost reduction guidance to well exceed $200 million.
• Reduced its end-of-year manufacturing cash guidance to be approximately $800 million.

Truck Segment – Truck segment net sales declined 25 percent to $1.5 billion in second quarter 2016 compared to second quarter 2015, due to lower Core truck volumes as a result of softer industry conditions and the impact of a shift in product mix in our Core markets.  Truck chargeouts in the company's Core market were down 15 percent year-over-year.  Also, second quarter 2015 revenues included $122 million in Ford sales through the BDT joint venture, which ended May 1, 2015.

The Truck segment loss narrowed to $23 million in second quarter 2016 versus a second quarter 2015 loss of $51 million, driven by lower structural cost, improved mix, lower accelerated depreciation charges and other income, which were partially offset by higher year-over-year adjustments to pre-existing warranties and an increase in used truck reserves.

Parts Segment – Parts segment second quarter 2016 net sales were $647 million, up $34 million, or six percent, compared to second quarter 2015, driven by enhanced retail programs in the U.S. market, which was partially offset by unfavorable currency exchange rates and market pressures, primarily in Canada and Mexico.

The Parts segment recorded record quarterly profit of $176 million in second quarter 2016, up 32 percent versus the same period one year ago, primarily due to margin improvements and cost reduction initiatives.

Global Operations Segment – Global Operations segment second quarter 2016 net sales decreased 41 percent to $77 million compared to second quarter 2015. This was primarily driven by a decrease in South America engine operations, reflecting lower volumes and unfavorable movements in foreign currency exchange rates, as the average conversion rate of the Brazilian Real to the U.S. dollar weakened by 20 percent for the second quarter of 2016 compared to the same period last year.  The continued economic downturn in the Brazil economy contributed to 46-percent lower engine volumes in the second quarter of 2016 compared to the comparable prior year period.

The Global Operations segment recorded a $1 million loss in second quarter 2016 compared to $1 million in profit in the same period one year ago. The slight year-over-year change was due to lower manufacturing and structural costs as a result of prior year restructuring and cost-reduction efforts, which was more than offset by a $10 million net gain in second quarter 2015 related to a customer dispute settlement.

Financial Services Segment – Financial Services segment second quarter 2016 net revenues decreased by $2 million, or three percent versus the same period one year ago, primarily driven by a decrease in the average retail notes receivable balances, partially offset by higher revenues from operating leases. 

The Financial Services segment profit increased by $3 million, or 14 percent year-over-year in second quarter 2016, primarily due to an increase in gains on lease terminations, a decrease in the provision for loan losses, and cost reduction initiatives, partially offset by a decrease in revenue.

Forward-Looking Statement 

Information provided and statements contained in this report that are not purely historical are forward-looking statements within the meaning of the federal securities laws. Such forward-looking statements only speak as of the date of this report and the company assumes no obligation to update the information included in this report. Such forward-looking statements include information concerning our possible or assumed future results of operations, including descriptions of our business strategy. These statements often include words such as believe, expect, anticipate, intend, plan, estimate, or similar expressions. These statements are not guarantees of performance or results and they involve risks, uncertainties, and assumptions. For a further description of these factors, see the risk factors set forth in our filings with the Securities and Exchange Commission, including our annual report on Form 10-K for the fiscal year ended October 31, 2015. Although we believe that these forward-looking statements are based on reasonable assumptions, there are many factors that could affect our actual financial results or results of operations and could cause actual results to differ materially from those in the forward-looking statements. All future written and oral forward-looking statements by us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to above. Except for our ongoing obligations to disclose material information as required by the federal securities laws, we do not have any obligations or intention to release publicly any revisions to any forward looking statements to reflect events or circumstances in the future or to reflect the occurrence of unanticipated events.

SEC Regulation G Non-GAAP Reconciliation

The financial measures presented below are unaudited and not in accordance with, or an alternative for, financial measures presented in accordance with U.S. generally accepted accounting principles ("GAAP"). The non-GAAP financial information presented herein should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP and are reconciled to the most appropriate GAAP number below.

Earnings (loss) Before Interest, Income Taxes, Depreciation, and Amortization ("EBITDA"):

We define EBITDA as our consolidated net income (loss) from continuing operations attributable to Navistar International Corporation, net of tax, plus manufacturing interest expense, income taxes, and depreciation and amortization. We believe EBITDA provides meaningful information to the performance of our business and therefore we use it to supplement our GAAP reporting. We have chosen to provide this supplemental information to investors, analysts and other interested parties to enable them to perform additional analyses of operating results.

Adjusted EBITDA:

We believe that adjusted EBITDA, which excludes certain identified items that we do not consider to be part of our ongoing business, improves the comparability of year to year results, and is representative of our underlying performance. Management uses this information to assess and measure the performance of our operating segments. We have chosen to provide this supplemental information to investors, analysts and other interested parties to enable them to perform additional analyses of operating results, to illustrate the results of operations giving effect to the non-GAAP adjustments shown in the below reconciliations, and to provide an additional measure of performance.

Manufacturing Cash, Cash Equivalents, and Marketable Securities:

Manufacturing cash, cash equivalents, and marketable securities represents the Company's consolidated cash, cash equivalents, and marketable securities excluding cash, cash equivalents, and marketable securities of our financial services operations. We include marketable securities with our cash and cash equivalents when assessing our liquidity position as our investments are highly liquid in nature. We have chosen to provide this supplemental information to investors, analysts and other interested parties to enable them to perform additional analyses of our ability to meet our operating requirements, capital expenditures, equity investments, and financial obligations.