Navistar's first quarter results show year-over-year improvements

Navistar reports a net loss for the first quarter of 2015 though profits were up 10% compared to the same period last year, indicating the company's continued year-over-year improvements.

Navistar International Corporation has announced a first quarter 2015 net loss of $42 million, or $0.52 per diluted share, compared to a first quarter 2014 net loss of $248 million, or $3.05 per diluted share. Revenues in the quarter were $2.4 billion, up $213 million or 10%, versus the first quarter of 2014.

"Our first quarter results reflect our continued momentum and on-going progress in improving the fundamentals of our business," says Troy A. Clarke, Navistar President and Chief Executive Officer. "In the first quarter, we once again increased our production, chargeouts and order backlog. Our improved product quality is driving reduced warranty spend and we continue to lower our breakeven point."

First quarter 2015 EBITDA was $101 million versus an EBITDA loss of $110 million in the same period one year ago. The $211 million year-over-year improvement reflects the increase in sales and favorable product mix in core markets as well as the continuation of lower warranty expense and reduced operational and structural costs.

First quarter 2015 adjusted EBITDA was $54 million. The first quarter included $7 million of asset impairment charges and $3 million in restructuring charges, which were more than offset by a $57 million favorable adjustment in pre-existing warranties. The first quarter of 2014 included $52 million in unfavorable pre-existing warranty charges.

The company finished the first quarter 2015 with $733 million in manufacturing cash, cash equivalents and marketable securities.

The higher revenues in the quarter were driven by a 17% year-over-year increase in chargeouts for Class 6 to 8 trucks and buses in the United States and Canada. This included a 42% increase in school buses; a 25% increase in Class 6/7 medium trucks; a 7% increase in Class 8 heavy trucks; and a 5% increase in Class 8 severe service trucks. Higher sales in the company's export truck operations also contributed to the increase, partially offset by a decrease in used truck sales. The company finished the first quarter with a 27% year-over-year increase in order backlog for Class 6 to 8 trucks.

In the first quarter of 2015, structural costs continued to decrease with cost-reduction initiatives and productivity improvements helping to further lower the breakeven point.

"We increased our sales across every product line in the first quarter, and we were especially pleased with our strong year-over-year gains in the medium truck and school bus markets, two key areas of strategic focus that will deliver profitable market share gains," Clarke adds. "We expect to build on this momentum throughout the year as we produce vehicles featuring leading-edge technologies that our customers want and need for their success. Our 'best-in-class' integration combined with our extensive dealer service and support network positions us well to realize our mission to become the Uptime leader in the industry."

The company provided the following guidance for the second quarter:

  • Q2-2015 adjusted EBITDA of $100 million – $150 million, excluding pre-existing warranty and one-time items.
  • Q2-2015 manufacturing cash, cash equivalents and marketable securities between $700 million – $800 million.

The company reiterated its forecast for retail deliveries of Class 6 to 8 trucks and buses in the United States and Canada to be in the range of 350,000 to 380,000 units for fiscal year 2015. It also announced that it remains on track to achieve its goal of an 8 to 10% adjusted EBITDA margin run rate exiting fiscal year 2015.

Reporting Segments

In November 2014, the company announced changes in its leadership team and in its organizational and reporting structures. As a result, it is also changing its reporting segments beginning in the first quarter 2015. The export truck and parts operations, formerly in the Global Operations segment, are now included within the results of the Truck and Parts segments, respectively. Parts required to support military trucks, formerly within the Parts segment, are now included with the rest of Navistar Defense operations and recorded in the results of the Truck segment.

Summary of Financial Results:

  • Truck Segment — For the first quarter 2015, the Truck segment recorded a loss of $18 million, compared with a year-ago first quarter loss of $208 million. The Truck segment's year-over-year improvement was driven by a shift in product mix toward medium trucks and school buses as well as a $55 million benefit for adjustments to pre-existing warranties.
  • Parts Segment — For the first quarter 2015, the Parts segment recorded a profit of $145 million, compared to a year-ago first quarter profit of $108 million. The 34% increase in the Parts segment profit was primarily due to higher revenues and margin improvements.
  • Global Operations Segment — For the first quarter 2015, the Global Operations segment recorded a loss of $15 million compared to a year-ago first quarter loss of $35 million. The year-over-year improvement was due to lower manufacturing and structural costs as a result of restructuring and cost-reduction efforts in the company's South American operations, and lower foreign exchange losses.
  • Financial Services Segment — For the first quarter 2015, the Financial Services segment recorded a profit of $24 million compared to first quarter 2014 profit of $23 million, as the increase in the average wholesale notes receivable balance more than offset a decline in the average retail notes receivable balance.