Navistar International Corp. announced on Tuesday that it is still losing money, but nowhere near as much as it did a year earlier.
In releasing earnings for the three months ending Jan. 31, the truck and engine maker reported a net loss of $42 million, or 52 cents per diluted share, compared to a first quarter 2014 net loss of $248 million, or $3.05 per diluted share, better than many analysts were forecasting. The company attributed the improvement to higher sales and lower warranty costs.
Revenues in the quarter were $2.4 billion, up 10% from a year earlier but slightly less than many analysts were expecting.
"Our first quarter results reflect our continued momentum and ongoing progress in improving the fundamentals of our business," said Troy 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."
Navistar implemented a financial turnaround plan when it began losing market share about three years ago, following problems with its engines meeting federal emissions standards that led to a big decline in sales.
The higher revenues in the quarter were driven by a 17% year-over-year increase in chargeouts (trucks that have been invoiced to customers) for Class 6 through Class 8 trucks and buses in the U.S. and Canada. This included a 42% increase in school buses; a 25% increase in Class 6 and Class 7 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, according to Navistar, 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 6-8 trucks.
In a conference call with investors Tuesday morning, Clarke said 2015 is an important year for Navistar. Company plans call for it to begin with a strong first quarter, which he said it did, with sales momentum building in all of its core truck markets, while achieving cost savings in many areas.
"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 said.
According to Navistar, during the first quarter of 2015, structural costs continued to decrease with cost-reduction initiatives, while productivity improvements helped to further lower its breakeven point.
Navistar previously announced changes in its reporting segments. 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.
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, according to Navistar.
The Parts segment recorded a profit of $145 million, compared to a year-ago first quarter profit of $108 million, a 34% increase.
The Global Operations segment recorded a loss of $15 million compared to a year-ago first quarter loss of $35 million. Navistar said the 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.
For the first quarter 2015, the Financial Services segment recorded a profit of $24 million compared to first quarter 2014 profit of $23 million.