Navistar International Corporation’s fourth quarter and fiscal year-end results yielded continued positive figures.
Navistar announced the results on Tuesday. Its 2018 fourth-quarter net income came in at $188 million, or $1.89 per diluted share, compared to fourth quarter 2017 net income of $135 million, or $1.36 per diluted share. For the fiscal year 2018, Navistar reported a net income of $340 million, or $3.41 per diluted share vs. net income of $30 million, or $0.32 per diluted share, for the fiscal year 2017.
Fourth-quarter 2018 adjusted EBITDA increased 20 percent to $322 million, vs. $268 million one year ago. The fiscal year 2018 adjusted EBITDA increased 42 percent to $826 million, vs. $582 million in 2017. Full-year adjusted EBITDA margins increased to 8.1 percent, up from 6.8 percent for 2017. This marks the company’s sixth consecutive year of annual growth in adjusted EBITDA on both a dollar and percentage basis.
Revenues in the quarter increased 28 percent, to $3.3 billion, compared to the fourth quarter of 2017. The revenue increase was largely driven by a 45-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.
Revenue for the fiscal year 2018 was up 20 percent to $10.25 billion, compared to $8.6 billion in the fiscal year 2017, attributable to annual revenue growth in all four operating segments. Class 8 retail market share grew to 13.5 percent in the fiscal year 2018 versus 11.8 percent in the fiscal year 2017.
Navistar finished fourth quarter 2018 with $1.42 billion in consolidated cash, cash equivalents, and marketable securities, and with $1.36 billion in manufacturing cash, cash equivalents and marketable securities. For the year, the company generated $307 million of manufacturing free cash flow.
“2018 was a very strong year for the industry, and a breakout year for Navistar,” said Troy Clarke, chairman, president and CEO. “We were the only truck OEM to grow Class 8 share during the year. With the industry’s newest product line-up, superior quality and a strong focus on customer uptime, we expect to gain market share in 2019 for the third year in a row.”
The company finished 2018 with strong momentum across the board. During the fourth quarter, the company launched the International CV Series line of Class 4/5 trucks, the only Class 4/5 truck that is designed, distributed and supported by a manufacturer specializing in commercial vehicles.
Year-over-year growth in heavy retail market share, up 2.5 share points, was attributable to strong sales of the International LT Series on-highway truck and the 12.4-liter A26 engine. The company’s IC Bus school buses, led by alternative-fuel offerings, also improved retail share by 1.3 share points.
Additionally, its medium-duty International MV Series and vocational International HV Series built improved order share resulting in a strong backlog. The company reported a backlog of 45,400 units in its Core markets, up from 15,600 at the end of 2017.
In October, Navistar improved its debt profile by repaying its 4.5 percent senior subordinated convertible notes issued in October 2013. Repayment of the outstanding principle of $200 million at maturity was funded with cash on hand.
Comparison to FY2017
One year ago, Navistar reported its first profitable quarter of the year with a net income of $135 million, a five-fold increase from the loss of $34 million posted for the same period the previous year.
Also, Navistar exceeded its expected revenues for FY2018 of $9 billion to $9.5 billion, by posting revenues of $10.25 billion for FY2018.
For the 2017 full fiscal year, Navistar reported a net income of $30 million compared to a loss of $97 million for FY2016. It was also the first annual profit reported by Navistar since 2011, and the company also set a 52-week high for trading on the New York Stock Exchange.
“Our 2017 was a breakthrough year, as we returned to profitability and grew our market share 1.5 points,” said Clarke one year ago.
Last year, Navistar pointed to its next-generation powertrains with alliance partner Volkswagen Truck & Bus. Those powertrains include big bore diesel and new zero-emissions, medium-duty electric IC Bus school buses that are expected to launch in early 2019.
Navistar provided the following 2019 industry and financial guidance, including the fully consolidated financial impact of Navistar Defense:
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.
- Following the completion of the partial sale of Navistar Defense, the company will update its 2019 guidance.
“While we expect 2019 to be another strong year for Navistar and the industry, it’s important to recognize that Navistar as an investment is much more than just a cycle play,” Clarke said. “As our ongoing improvements demonstrate, the company also has strong opportunities to benefit by recapturing market share, growing parts revenue, improving margins, generating free cash flow and further de-risking the balance sheet. For all these reasons, looking forward, the company is well-positioned to generate superior shareholder value.”
For the fourth quarter of 2018, the Truck segment recorded a profit of $197 million, compared with a year-ago fourth-quarter profit of $112 million. The year-over-year change was primarily due to the impact of higher volume in the company’s Core markets and strong defense results, partially offset by higher commodity and structural costs, as well as the impact of supplier constraints.
For the 2018 fiscal year, the Truck segment recorded a profit of $397 million, compared with a fiscal year 2017 loss of $6 million. The improvement was primarily driven by the impact of higher volumes in our Core markets, higher other income, higher profitability in defense, and a decline in used truck losses.
For the fourth quarter of 2018, the Parts segment recorded a profit of $156 million, compared with a year-ago fourth-quarter profit of $157 million. The results were primarily driven by higher Fleetrite brand sales, offset by higher freight-related expenses and internal allocation of development, engineering and SG&A expenses.
For the 2018 fiscal year, the Parts segment recorded a profit of $569 million, compared to a fiscal year 2017 profit of $616 million. The 8 percent decrease was primarily driven by lower U.S. margins, and higher freight-related expenses and internal allocation of structural costs.
Global Operations Segment
For the fourth quarter of 2018, the Global Operations segment recorded a profit of $4 million, compared to a year-ago fourth-quarter profit of $1 million. The year-over-year change was driven by higher volumes due to improvements in the Brazilian economy, and cost reduction benefits associated with operational restructuring implemented in early 2018.
For the 2018 fiscal year, the Global Operations segment recorded a profit of $2 million compared to a year-ago fiscal year loss of $7 million. The Global Operations segment results improvement was primarily due to the impact of higher engine volumes and lower manufacturing and SG&A expenses as a result of the company’s cost reduction efforts.
Financial Services Segment
For the fourth quarter of 2018, the Financial Services segment recorded a profit of $26 million, flat compared with fourth-quarter 2017. The results were primarily driven by increased financing revenues driven by higher average portfolio balances, which were offset by increased borrowing costs driven by higher average borrowings outstanding and higher interest rates.
For the 2018 fiscal year, the Financial Services segment recorded a profit of $88 million, compared to a year-ago fiscal year profit of $77 million. The increase is primarily driven by higher revenues and is partially offset by higher interest expense, an increase in the provision for loan losses in Mexico, and higher depreciation expense on operating leases.
Navistar International Corporation 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. www.Navistar.com