Navistar International Corporation has announced a fourth quarter 2015 net loss of $50 million, or $0.61 per diluted share, compared to a fourth quarter 2014 net loss of $72 million, or $0.88 per diluted share. Revenues in the quarter were $2.5 billion.
Fourth quarter 2015 EBITDA was $86 million versus EBITDA of $66 million in the same period one year ago. This year's fourth quarter included $69 million in restructuring-related and impairment charges; $40 million in pre-existing warranty adjustments; and $14 million in debt refinancing fees and costs. As a result, adjusted fourth quarter 2015 EBITDA was $209 million, equating to a fourth quarter adjusted EBITDA margin of 8.4%.
Revenues in the quarter declined 17% compared to fourth quarter 2014. Higher Class 6/7 medium and bus chargeouts in the company's core (U.S. and Canada) market were more than offset by reduced volumes in the company's export and global operations, lower Class 8 truck chargeouts in its core market, and Navistar's exit earlier this year from the Blue Diamond Truck joint venture.
"We delivered on our adjusted EBITDA end-of year run rate target of 8% or better, thanks to a favorable mix of truck sales and record parts profitability in our core North America market in the fourth quarter," says Troy A. Clarke, Navistar President and Chief Executive Officer. "We also benefited from our continued focus on cost management across our operations, marked by a $74 million improvement in structural costs in the quarter."
Navistar finished the fourth quarter 2015 with $1.01 billion in manufacturing cash, cash equivalents and marketable securities.
During the quarter, the company announced a long-term agreement with General Motors Co. (GM) to develop and assemble medium-duty, conventional cab Class 4/5 commercial vehicles, allowing Navistar to strengthen its product lineup. The trucks, which are scheduled to go into production in 2018 and will be built at Navistar's Springfield, OH plant, will be jointly developed using Navistar's expertise in commercial vehicles and manufacturing capabilities, and GM's commercial components and engines.
As for full-year 2015 results, Navistar reported a net loss of $184 million, or $2.25 per diluted share, versus a net loss of $619 million, or $7.60 per diluted share, for fiscal year 2014. Fiscal year 2015 adjusted EBITDA was $494 million versus $306 million adjusted EBITDA for 2014. Revenue for fiscal year 2015 was $10.1 billion, compared to $10.8 billion in fiscal year 2014.
Chargeouts in the company's core North America market increased by 3,500 units, or 6%, in 2015, reflecting an 18% increase in Class 6/7 medium trucks, a 10% increase in school buses, and a 7% increase in Class 8 severe service, partially offset by a 4% decline in Class 8 heavy truck. Total market share for Class 6 to 8 and bus for the year was 16%. Operationally, the company reduced its total costs by more than $300 million in 2015, including $114 million in structural cost reductions, with the remainder coming from reduced material and logistics spending and lower manufacturing costs.
"For the third consecutive year, we generated around $200 million in adjusted EBITDA improvement, and we expect this improvement trend to continue in 2016," Clarke says. "We are building the best products we've ever built, and we are winning back customers. We have identified and begun implementing actions to further lower our material spend and structural costs, while driving greater efficiencies in our manufacturing operations. As a result, we expect to build on our 2015 progress, and our goal is to achieve profitability and be free cash flow positive in 2016."
The company provided the following guidance:
- Forecasts retail deliveries of Class 6 to 8 trucks and buses in the United States and Canada will be in the range of 350,000 units to 380,000 units for fiscal year 2016.
- Full-year 2016 revenues to be between $9.5 and $10.0 billion.
- Full-year 2016 adjusted EBITDA of $600 and $700 million.
Truck Segment – For the fourth quarter 2015, the Truck segment recorded a loss of $36 million, compared with a year-ago fourth quarter loss of $40 million. This year's fourth quarter results also reflect $26 million in restructuring charges, primarily related to reduction-in-force initiatives initiated at the end of the quarter, as well as $40 million in pre-existing warranty charges, while last year's results included $27 million in restructuring related charges and $11 million in pre-existing warranty benefits. The year-over-year improvement was driven by cost management activities, favorable mix in its core market, and improved margins, which more than offset the lower chargeouts in its core market.
For the fiscal year 2015, the Truck segment recorded a loss of $141 million, compared with a fiscal year 2014 loss of $380 million. The year-over-year improvement was primarily driven by a favorable shift in product mix in the core market, improved margins and lower structural costs, partially offset by an increase in used truck reserves and higher accelerated depreciation charges related to the company's exit of the foundry business.
Parts Segment — For the fourth quarter 2015, the Parts segment recorded record profits of $163 million, compared to a year-ago fourth quarter profit of $150 million. The increase was primarily due to stronger margins in its core commercial markets.
For the fiscal year 2015, the Parts segment recorded record profits of $592 million, compared to a fiscal year 2014 profit of $528 million. The 12% increase was primarily driven by higher revenues, margin improvements in its commercial markets and cost-reduction initiatives, partially offset by the performance decline in its Blue Diamond Parts business due to the decrease of serviceable units in operation.
Global Operations Segment — For the fourth quarter 2015, the Global Operations segment recorded a loss of $27 million, compared to a year-ago fourth quarter loss of $56 million. The year-over-year improvement was primarily driven by ongoing actions to lower the company's cost structure in its South American engine business, to offset the impact of the ongoing downturn in Brazil's economy.
For the 2015 fiscal year, the Global Operations segment recorded a loss of $67 million compared to a year-ago fiscal year loss of $274 million. Excluding the impact of the prior year impairments of $149 million and current year restructuring costs increase of $16 million, the Global Operations segment improved year-over-year performance by $74 million, primarily due to lower year-over-year manufacturing and structural costs.
Financial Services Segment— For the fourth quarter 2015, the Financial Services segment recorded a profit of $26 million, equal to fourth quarter 2014 profit of $26 million.
For the fiscal year 2015, the Financial Services segment recorded a profit of $98 million, comparable to a fiscal year 2014 profit of $97 million, as an increase in revenue and a decrease in the provision for loan losses were offset by lower interest income from intercompany loans.
