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Navistar First Quarter 2019 Results

LISLE, Ill. — Navistar International Corporation (NYSE: NAV) today announced first quarter 2019 net income of $11 million, or $0.11 per diluted share, compared to a first-quarter 2018 net loss of $73 million, or $0.74 per diluted share.

Revenues in the quarter were $2.4 billion, a 28 percent increase compared to $1.9 billion in the first quarter last year. The revenue increase was driven by a 50 percent increase in the company’s Core volumes, which represent its sales of Class 6-8 trucks and buses in the U.S. and Canada.

First-quarter 2019 EBITDA was $96 million, compared to the first quarter 2018 EBITDA of $55 million. Adjusted EBITDA was $173 million versus $104 million in the first-quarter of 2018.

The results were impacted by certain one-time items, including a noncash charge related to a Canadian pension annuity transaction of $142 million (or $104 million after-tax). Also, aggregate gains of $59 million from the sales of 70 percent of the Navistar Defense business and the company’s ownership interest in the JND joint venture.

Navistar finished the first quarter 2019 with $1.24 billion in consolidated cash, cash equivalents, marketable securities, and $1.19 billion in manufacturing cash, cash equivalents and marketable securities.

“We had our best first quarter since 2010 as customer acceptance of our new products translated to extended gains in our Core market share,” said Troy A. Clarke, chairman, president and CEO. “In addition to our ongoing growth in Class 8, our medium-duty market share grew by six points during the quarter, the largest year-over-year medium share gain in the industry.”

The company’s first-quarter featured a number of positive marketplace developments. Continuing its cadence of new product launches, Navistar unveiled its new International CV Series line of Class 4/5 vehicles, the only Class 4/5 truck that is designed, distributed and supported by a manufacturer specializing in commercial vehicles.

Year-over-year growth in the company’s Core market share was up 1.8 points, led by a six-point share increase in Class 6/7, which was attributable to strong sales of the MV Series of medium-duty trucks.

Additionally, the company’s International HX Series and International  HV Series vehicles built improved vocational order share resulting in a strong backlog. The company reported backlog growth of more than 8,000 units in its Core markets, up 18 percent since the end of the fourth quarter 2018.

Also in the quarter, the company completed group annuity transactions with two Canadian insurers that transferred $268 million in pension obligations of defined benefit pension plans in Canada, reducing the company’s nonoperating financial risk and administrative costs.

The company reiterated its 2019 industry guidance and raised the following financial guidance:

  • Industry retail deliveries of Class 6-8 trucks and buses in the U.S. and Canada are forecast to be 395,000 to 425,000 units, with Class 8 retail deliveries of 265,000 to 295,000 units.
  • Revenues are expected to be between $10.75 billion and $11.25 billion.
  • Adjusted EBITDA is expected to be between $850 million and $900 million.

“As our ongoing improvements demonstrate, the company has strong opportunities to benefit from capturing additional market share, growing parts revenue, improving margins and further de-risking the balance sheet,” Clarke said. “Given the progress made in the first quarter, and our positive outlook for the remainder of the year, we are confident that 2019 will move Navistar forward on the path to generate superior shareholder returns compared to the industry.”

Truck Segment

The Truck segment’s first quarter of 2019 net sales increased 44 percent to $1.8 billion, primarily due to higher volumes in the company’s Core markets and an increase in Mexico truck volumes. This was partially offset by lower defense sales, due to the sale of a majority interest in Navistar Defense during the quarter.

The Truck segment profit was $90 million in the first quarter of 2019, versus a loss of $7 million in the same period one year ago. The improvement was primarily driven by the result of higher volumes in the company’s Core markets, which was partially offset by higher material and freight costs, and the impact of the sale of a majority interest in Navistar Defense.

Parts Segment

In the first quarter of 2019, the Parts segment net sales decreased four percent to $548 million, primarily due to the adoption of a new revenue recognition standard and to lower Blue Diamond Parts (BDP) sales. That was partially offset by higher sales in our North American markets. On a comparable basis, revenues grew 1 percent year-over-year.

The Parts segment profit was $144 million, up 5 percent, primarily due to higher U.S. margins and lower intercompany access fees. That was partially offset by lower BDP volumes and higher freight-related expenses.

Global Operations Segment

In the first quarter of 2019, the Global Operations segment net sales decreased slightly to $73 million, primarily driven by the depreciation of the Brazilian real against the U.S. dollar, as the average conversion rate has weakened by 14 percent compared with the prior-year period. This was partially offset by higher volumes in our South America operations.

For the first quarter of 2019, the Global Operations segment profit was $6 million versus a $7 million loss in the first quarter of 2018. The increase was primarily driven by higher volumes, higher other income of $5 million related to the sale of its ownership interest in a joint venture in China and the impact of prior year cost-reduction actions.

Financial Services Segment

In the first quarter of 2019, the Financial Services segment net revenues increased to $74 million, primarily due to higher interest rates and greater average portfolio balances in the U.S. and Mexico.

The Financial Services segment profit increased 55 percent to $31 million, primarily due to a higher interest margin from improved funding strategies and income from an intercompany loan. The increase was partially offset by increased depreciation expense on operating leases.

About Navistar International Corp.

Navistar International Corp. 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.

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