LISLE, Ill., — Navistar International Corporation (NYSE: NAV) today announced a second quarter 2020 net loss of $38 million, or $0.38 per diluted share, compared to second quarter 2019 net loss of $48 million, or $0.48 per diluted share.
Revenues in the quarter were $1.9 billion, down 36 percent from second quarter 2019. The decrease was primarily driven by the impact of COVID-19, resulting in lower volumes in the company’s Core (Class 6-8 trucks and buses in the United States and Canada) market, with chargeouts being down nearly 40 percent compared to the same period one year ago.
Second quarter 2020 EBITDA was $61 million, compared to $55 million in second quarter 2019. Adjusted EBITDA in second quarter 2020 was $88 million versus $224 million a year ago.
Adjusted net income for the quarter was a loss of $10 million compared to income of $105 million in the second quarter last year.
Navistar finished second quarter 2020 with $1.5 billion in consolidated cash, cash equivalents and marketable securities, including $1.5 billion in manufacturing cash, cash equivalents and marketable securities.
“Like a number of businesses, our company has been impacted by the COVID-19 pandemic and that is reflected in our results,” said Troy A. Clarke, Navistar chairman, president and chief executive officer. “Our team has done a tremendous job managing the business throughout this challenging time, and we have taken a number of steps to position the company to weather this crisis.”
During the quarter, the company took several actions to position itself in response to the global pandemic. In April, the company announced a series of actions to conserve over $300 million of cash for the year, without jeopardizing its strategic plans. The actions include savings from provisions of the CARES Act, postponing capital expenditures and spending, and deferring the base salary of U.S. based exempt, non-represented employees. Also in April, the company completed the issuance of $600 million senior secured notes.
“We are focused on preserving cash and reducing cost, but not at the risk of sacrificing our future,” said Walter Borst, Navistar chief financial officer. “We remain steadfast in pursuing Navistar 4.0, and while some programs and expenditures have been delayed, they have not been cancelled. It’s important that we continue to invest in our company, even in these difficult times, to ensure our long-term success.”
Additionally, the company and its facilities have largely remained in operation throughout the quarter. Its production facilities have experienced limited disruptions that can be measured in weeks as opposed to months due mostly to supplier work stoppages. Its parts distribution centers have remained open throughout the quarter with only minor changes to hours of operation. The company’s dealer network has also continued to operate. In maintaining operation, the company has strictly followed CDC recommendations to prevent the spread of COVID-19, taking extensive measures to ensure the health and safety of its employees and their communities.
“As an essential business, we took early actions to protect our people so that we could fulfill our duty to keep our assembly plants running and parts distribution centers in operation to serve our customers and dealers who are keeping the economy moving by delivering essential goods and services to our communities,” said Persio Lisboa, chief operating officer. “Throughout the quarter, we have worked closely with our suppliers to overcome significant disruptions to the flow of parts to our facilities and have been moderately successful in maintaining operations.”
The company also took several actions to support its customers and trucking professionals. Working with its partners, the company provided meals, coupons and personal protective equipment such as masks and hand sanitizer to trucking professionals in need. For its customers, the company launched International Cares, which offered no payments for six months, free access to International 360 and worry-free vehicle service coverage.
“There are several theories as to the shape of economic recovery, but we have plans in place to respond accordingly,” said Clarke. “Recovery will likely be gradual as businesses reassess operating plans to return to a ‘new normal,’ but this ‘new normal’ will still require trucks. The actions we’ve taken over the past few months have us in position to succeed, no matter the shape of recovery.”
Truck Segment – In second quarter 2020, the Truck segment net sales were $1.4 billion, a decrease of $907 million compared to second quarter last year. The year-over-year decrease is primarily due to lower volumes in the company’s Core markets attributable in part to the COVID-19 pandemic, lower Mexico volumes and a decrease in GM-branded units.
The Truck segment incurred a net loss of $51 million in second quarter 2020 compared to a loss of $74 million in second quarter 2019. The year-over-year improvement was due to a non-recurring EGR settlement charge of $159 million recorded in the second quarter of 2019, offset by the impact of lower volumes in the company’s Core markets attributable in part to the COVID-19 pandemic, higher used truck losses and lower Mexico volumes in the second quarter 2020.
Parts Segment – For second quarter 2020, the Parts segment net sales were $443 million, a 23 percent decrease from second quarter 2019. The decrease is primarily due to lower North America volumes due to the impact of COVID-19 and a decrease in Blue Diamond Parts (BDP) sales.
The Parts segments saw a second quarter profit of $103 million, a 28 percent decrease from second quarter 2019. The decrease is primarily due to the impact of lower North America volumes related to COVID-19 and lower BDP sales, partially offset by lower intercompany access fees.
Global Operations Segment – In second quarter 2020, the Global Operations segment net sales decreased $36 million to $51 million. The decrease was primarily driven by a 21 percent year-over-year depreciation of the Brazilian real against the U.S. dollar and lower volumes in our South America operations due to temporary production stoppages related to the COVID-19 pandemic.
The Global Operation segment recorded a loss of $13 million in the second quarter. The higher loss was primarily driven by the recognition of asset impairment charges of $12 million. Excluding this one-time item, results would have been near breakeven.
Financial Services Segment – In second quarter 2020, the Financial Services segment net revenues decreased to $64 million, a $14 million decrease from second quarter 2019. The decrease was primarily driven by lower average finance receivables and a reduction in finance fees.
The Financial Services segment recorded a profit of $24 million in the quarter, an $8 million decrease from second quarter 2019. The decrease was primarily driven by lower revenues, partially offset by the results of an improved funding strategy.
Navistar International Corporation (NYSE: NAV) is a holding company whose subsidiaries and affiliates produce International brand commercial 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.