Navistar International Corp. reported third-quarter net income of $84 million, down significantly from the $1.4 billion it reported a year ago, and helped by an income tax benefit of $196 million. The company said it's accelerating its cost-reduction actions.
Current quarter results included an income tax benefit of $196 million that primarily resulted from a third quarter change in the company's estimated annual effective tax rate, as well as the impact of $16 million in costs related to engineering integration and $10 million in non-conformance penalties for not meeting the Environmental Protection Agency's 2010 emissions regulations.
(The third quarter of 2011 included a $1.48 billion benefit from the release of a portion of the company's income tax valuation allowance.)
If you don't take into account those tax benefits, the company reported a pre-tax loss of $100 million in the third quarter 2012 versus a $54 million loss in the third quarter 2011.
Revenues in the quarter were $3.3 billion, down 6% from the third quarter of 2011. The loss was driven by lower net sales in the company's U.S. and Canada truck and engine segments, primarily due to lower military sales and reduced engine volumes in South America, respectively, according to the company.
In the second quarter, the company reported an after-tax loss of $137 million and a before-tax loss of $172 million.
"Clearly we are not pleased with these results," said Lewis B. Campbell, Navistar's new chairman and chief executive officer. "However, I was satisfied to learn on day one that Troy Clarke [recently named president and chief operating officer] and his team were already working on a plan to deal with many of the important issues we face, most importantly restoring our core North American Truck, Engine and Parts businesses to their market leader positions."
The company announced that it is completing a voluntary separation program and a reduction in force of its salaried workforce. It anticipates these actions will generate $70 million to $80 million in annual savings, which will contribute to Navistar's overall goal to reduce costs by $150 million to $175 million year-over-year, starting in fiscal year 2013. Navistar also says it is increasing efforts to cut discretionary spending and further reduce its material costs.
The company also has launched a review of all of its non-core businesses.
The company also says it is on track to finalize its agreement with Cummins Inc. by the end of October. As part of the agreement, Navistar will offer the Cummins ISX15 engine in certain truck models to meet 2010 emissions standards.
Navistar expects to launch the ISX15 in its ProStar+ model starting with initial customer deliveries in December 2012 and full production in January.
The company also says the agreement with Cummins Emission Solutions is on track to provide their selective catalytic reduction aftertreatment system, which will be combined with Navistar's MaxxForce 11- and 13-liter engines to meet EPA 2010. Navistar plans to begin production of its most popular 13-liter models with the SCR aftertreatment system in April 2013.
Last week, the EPA issued its Final Rule for NCPs for on-highway heavy-duty diesel engines, clearing the way for Navistar to continue to build and ship vehicles during the transition to its clean engine technology products -- albeit with higher fines than it was paying before a court struck down the previous rule.Related Stories8/31/2012 - Navistar Gets to Pay Penalties for Emissions Noncompliance, EPA Rules8/27/2012 - Navistar Names New Chairman, Interim CEO After Ustian Announces Retirement8/23/2012 - Navistar Details Product Changes, Thinking Behind Emissions Strategy Change 7/6/2012 - Navistar Will Add Urea-Based Aftertreatment to Meet Emissions Regulations6/7/2012 - Navistar Makes Management Changes After Worse-Than-Expected Second Quarter Results