LISLE, Ill. — Navistar International Corporation (NYSE: NAV) today announced a third quarter 2017 net income of $37 million, or $0.38 per diluted share, compared to a third quarter 2016 net loss of $34 million, or $0.42 per diluted share.
Third quarter 2017 EBITDA was $160 million, versus EBITDA of $96 million in the same period one year earlier. The third quarter of 2017 included $34 million in adjustments, including a $31 million charge for a legacy engine litigation matter, $6 million of pre-existing warranty charges, and $3 million net benefit in asset impairments and restructuring costs. Excluding these items, adjusted EBITDA was $194 million in the third quarter of 2017, compared to $132 million in the same period one year ago.
Revenues in the quarter were $2.2 billion, up 6% from the same period one year ago, primarily due to an increase in Truck segment volumes.
“We returned to profitability this quarter thanks to strong operational performance across the board, highlighted by a 15-percent increase in chargeouts and solid market share gains amid flat industry conditions, and strengthening margins,” said Troy A. Clarke, Navistar chairman, president and chief executive officer. “We also moved ahead with new products and solutions that position us well for ongoing growth, while continuing to restructure our business to improve our future competitiveness.”
Navistar ended third quarter 2017 with $973 million in consolidated cash, cash equivalents and marketable securities. Manufacturing cash, cash equivalents and marketable securities were $923 million at the end of the quarter.
The company had a number of commercial and product highlights during its third quarter, starting with the first customer shipments of the LT Series and RH Series on-highway products with the company’s new A26
12.4-liter engine. Internal testing shows that with this new engine, these vehicles are delivering up to 9 percent in fuel economy improvement over the comparable models built only a year ago.
In the school bus segment, the company moved forward with multiple improvements and innovations that set up future share gains. These include the company’s well-received propane model and introduction of the Cummins L9 product in the RE Series bus. IC Bus’s gasoline-powered school bus is coming in 2018. The company also announced a strategic relationship with Edulog, a leading provider of student transportation planning and scheduling software solutions. Through integration with our OnCommand Connection telematics system, the resulting new solutions will deliver a powerful combination of uptime and on-time to the school bus market.
During the quarter the company announced that OnCommand Connection (OCC) now provides an all-makes telematics offering. The telematics hardware attaches to the onboard diagnostics port and makes most truck models a part of the OCC services network. The company has shipped several thousand of these units and they can be purchased at International dealers, through HDA Truck Pride, or TA Petro service centers. This Telematics solution is integrated with the company’s Advanced Remote Diagnostics and its new Electronic Driver Log, which addresses the federal Hours of Service mandate that takes effect this December.
The company’s alliance with Volkswagen Truck & Bus is moving forward as planned. The two companies are finding significant opportunities to leverage their combined scale through their procurement joint venture, while also pursuing technology collaboration on a number of fronts.
The company reiterated 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 expected to be about $1 billion.
“Looking ahead, I like our position as we enter the prime selling season,” Clarke said. “I feel good about the fourth quarter and look forward to finishing the year on a strong note.”
Truck Segment — Truck segment net sales increased 10% to $1.5 billion compared to third quarter 2016, due to higher volumes in Core markets (Class 6-8 trucks and buses in the United States and Canada), an increase in Mexico truck volumes, and the production ramp up of GM-branded units manufactured at Navistar’s Springfield, Ohio plant. Chargeouts in the company’s Core markets increased by 15% during the third quarter.
In the third quarter of 2017, Truck segment results improved by $61 million year-over-year. The improvement was primarily driven by the impact of higher volumes in Core markets and Mexico, lower used truck losses, and lower restructuring charges, partially offset by lower other income.
Parts Segment — Parts segment net sales declined $11 million compared to third quarter 2016 due to lower Blue Diamond Parts (BDP) sales and lower North America volumes, partially offset by higher Fleetrite™ all-makes brand and ReNEWed™ remanufactured parts sales in the U.S. and Canada.
For the third quarter 2017, the Parts segment recorded a profit of $157 million, up 3% compared to third quarter 2016, primarily due to income related to the sale of a business line and lower intercompany access fees, which were partially offset by margin declines in BDP and our U.S. market.
Global Operations Segment — Global Operations net sales were flat compared to the prior year.
For the third quarter 2017, the Global Operations segment profit improved by $8 million, primarily due to lower manufacturing and SG&A costs, as a result of our prior year restructuring and cost reduction efforts, and income related to the sale of machinery and equipment.
Financial Services Segment — Financial Services net revenues increased by $2 million to $62 million compared to third quarter 2016, primarily due to higher interest rates in our Mexican portfolio.
For the third quarter 2017, the Financial Services segment recorded a profit of $23 million, down $3 million compared to third quarter 2016. The decline was primarily driven by a lower interest margin resulting from an increase in its average borrowing rate as well as the pay down of certain intercompany loan receivables, partially offset by a decrease in the provision for loan losses in Mexico.
Navistar International Corporation (NYSE: NAV) is a holding company whose subsidiaries and affiliates produce International brand commercial and military trucks, proprietary diesel engines, and IC Bus brand school and commercial buses. An affiliate also provides truck and diesel engine service parts. Another affiliate offers financing services. Additional information is available at www.Navistar.com.
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