LISLE, Ill., March 7, 2017 /PRNewswire/ -- Navistar International Corporation (NYSE: NAV) today announced a first quarter 2017 net loss of $62 million, or $0.76 per diluted share, compared to a first quarter 2016 net loss of $33 million, or $0.40 per diluted share.  Revenues in the quarter were $1.7 billion, a decline of six percent compared to $1.8 billion in the first quarter last year. The decrease primarily reflects lower truck volumes due to soft Class 8 heavy industry conditions and lower global sales.

First quarter 2017 EBITDA was $63 million, compared to first quarter 2016 EBITDA of $82 million. This year's first quarter EBITDA included favorable net adjustments of $8 million, primarily resulting from a reversal of pre-existing warranty accruals. Excluding this benefit, adjusted first quarter 2017 EBITDA was $55 million.

"Our results are on track with our plan for the year, and demonstrate our ability to effectively manage costs at a time of persistent Class 8 industry headwinds," said Troy A. Clarke, chairman, president and CEO. "Our order share continues to outpace our market share, which confirms our confidence in the retail share improvement to come. At the same time, we are rolling out a steady stream of new product introductions that are helping us generate new sales opportunities, and position us to take advantage of the anticipated Class 8 rebound in the second half."

Navistar finished the first quarter 2017 with $771 million in consolidated cash, cash equivalents and marketable securities and $697 million in manufacturing cash, cash equivalents and marketable securities. The company took advantage of strong conditions in the capital markets and generated greater financial flexibility through a $250 million senior note tack-on in the first quarter, while also completing a transaction in February to re-price its existing term loan in order to lower future interest expense.

The company made progress in all three areas of its business strategy -- driving operational excellence, growing the core business and building new sources of revenue.

In the first quarter, Navistar began customer deliveries of its new International LT Series Class 8, long-haul truck featuring advanced technologies that deliver unrivaled fuel efficiency, best-in-class uptime and unparalleled driver appeal. The company continued its cadence of new product offerings with the unveiling last week of its new International^® A26 engine, which it expects will be the catalyst that drives improved share in the 13-liter segment, when it is launched mid-year in the LT Series. Built from the proven MAN D26 engine platform, this new 12.4-liter engine is designed to deliver superior fuel efficiency and provide industry-leading uptime.

Navistar plans to continue to introduce new products every four to six months through the end of 2018, refreshing its entire product portfolio, while also expanding it with its re-entry into Class 4/5 vehicles through its collaboration with General Motors. Last month, the company went into production on its other major project with this automaker, when it began manufacturing General Motors' cutaway G van at its Springfield, Ohio plant. In addition to generating additional revenues, it will also help enhance the company's manufacturing capacity utilization.

Another major growth opportunity is OnCommand Connection, Navistar's industry-leading telematics system, which surpassed 270,000 subscribers at the end of February, and continues to add new features and services.

Navistar announced last week the closing of its wide-ranging strategic alliance with Volkswagen Truck & Bus, which included a $256 million equity investment in Navistar by that company and the creation of a procurement joint venture and a strategic technology and supply collaboration, both of which are already up and running. The company reiterated it expects the alliance to be accretive beginning in the first full year, and for cumulative synergies for Navistar to ramp up to at least $500 million over the first five years. By year five, it expects the alliance will generate annual synergies of at least $200 million, and for the annual run rate to grow materially thereafter.

"Now that the transaction has closed, we can start collaborating with Volkswagen Truck & Bus to increase our global scale, strengthen our competitiveness, and provide our customers with expanded access to cutting-edge products, technology and services," Clarke said. "This marks an exciting new chapter in Navistar's history, and another step in our journey to becoming a stronger, more profitable company."

The company reiterated and updated its 2017 guidance:

• Retail deliveries of Class 6-8 trucks and buses in the United States and Canada are forecast to be in the range of 305,000 units to 335,000 units for fiscal year 2017.
• Full-year 2017 revenues are expected to be similar to 2016.
• Full-year 2017 adjusted EBITDA is expected to be higher than 2016.
• Fiscal year end 2017 manufacturing cash is now expected to be about $1 billion, including the capital injection from Volkswagen Truck & Bus and a $250 million senior note tack-on completed in the first quarter 2017.

 

Truck Segment – Truck segment first quarter 2017 net sales decreased $105 million, or nine percent, primarily due to lower Core (Class 6-8 trucks and buses in the United States and Canada) truck volumes as a result of softer industry conditions, the end of CAT-branded units sold to Caterpillar, and the sale of Pure Power Technologies, both of which occurred in the second quarter of 2016.     

The Truck segment loss increased to $69 million in the first quarter 2017 versus a loss of $51 million in the same period one year ago. This was primarily driven by market pressures, the impact of lower Core market volumes, and a decrease in other income due to the receipt of a one-time fee from a third party last year, partially offset by lower used truck losses, improved material costs and lower adjustments to pre-existing warranties.

Parts Segment – In the first quarter of 2017, the Parts segment net sales were comparable to the prior year primarily due to higher U.S. and Canada parts sales related to Fleetrite™ brand and remanufactured parts sales, offset by lower volumes in export and Mexico.

Global Operations Segment – In the first quarter of 2017, the Global Operations segment net sales decreased $42 million, or 46 percent, driven by lower volumes in its South America engine operations. Engine volumes declined 69% compared to the prior year period, due to the end of a customer contract early in the second quarter 2016 and as a result of the ongoing economic downturn in the Brazilian economy. The decrease in volume was partially offset by favorable movements in foreign currency exchange rates, as the average conversion rate of the Brazilian real to the U.S. dollar has strengthened by 15%.  

For the first quarter 2017, the Global Operations segment results improved by $9 million, or 69 percent, to a loss of $4 million, primarily due to lower manufacturing and SG&A costs as a result of prior year restructuring and cost reduction efforts, as well as the favorable impact of a one-time benefit recognized as an adjustment to pre-existing warranties.

Financial Services Segment – In the first quarter of 2017, the Financial Services segment net revenues decreased by $5 million, or eight percent. The decrease is primarily driven by lower overall finance receivable balances and unfavorable movements in foreign currency exchange rates impacting its Mexican portfolio, partially offset by higher revenues from operating leases. 

The Financial Services segment profit decreased by $13 million, or 50 percent. The decrease is primarily driven by lower interest margins, a decline in other revenue due to lower interest income from certain intercompany loans and an increase in the provision for loan losses in Mexico.

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 the results of our alliance with Volkswagen Truck & Bus and 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, 2016. 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.

 

 

 

 

 

 

 

Navistar International Corporation and Subsidiaries
Segment Reporting
(Unaudited)

We define segment profit (loss) as net income (loss) from continuing operations attributable to Navistar International Corporation, excluding income tax expense. The following tables present selected financial information for our reporting segments:

 

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.

Structural costs consists of Selling, general and administrative expenses and Engineering and product development costs.