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Earnings Watch: Navistar Ends Fiscal Year with $97 Million Loss

Navistar reported losses for both its fiscal fourth quarter and full year. But it's optimistic about the future with its pending strategic alliance with Volkswagen Truck & Bus, which has received U.S. antitrust approval.

Evan Lockridge
Evan LockridgeFormer Business Contributing Editor
December 20, 2016
Earnings Watch: Navistar Ends Fiscal Year with $97 Million Loss

 

4 min to read


Truck and engine maker Navistar International Corp. (NYSE:NAV) on Tuesday reported losses for both its fiscal fourth quarter and full year. But it's optimistic about the future with its pending strategic alliance with Volkswagen Truck & Bus, which has received U.S. antitrust approval.

The Illinois manufacturer had a net loss of $34 million for the quarter ending on Oct. 31, or 42 cents per share, compared will a fourth quarter 2015 net loss of $50 million or 61 cents per share.

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This was short of expectations. The average estimate of seven analysts surveyed by Zacks Investment Research had forecast net income of 24 cents per share.

Revenue in the most recent quarter fell 17% from a year earlier to $2.06 billion, also missing analysts’ expectations. The drop was largely driven by an 18% decline for charge-outs (typically trucks that have been invoiced to customers with units held in dealer inventory) in the company's Class 6-8 trucks and buses in the United States and Canada. Those charge-outs totaled 13,000 units, and largely reflected continued softening of Class 8 industry volumes in the U.S. and Canadian markets, according to the company.

Fourth quarter 2016 earnings before interest, taxes, depreciation and amortization (EBITDA) was $95 million versus $86 million in the same period a year ago. This year's fourth quarter included $9 million in net charges for asset impairments and restructurings, and $8 million in pre-existing warranty adjustments. As a result, adjusted fourth quarter 2016 EBITDA was $112 million.

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For all of fiscal 2016, Navistar reported a net loss of $97 million, or $1.19 per share, versus a net loss of $184 million, or $2.25 per share, for fiscal year 2015. Revenue for fiscal 2016 was $8.1 billion compared to $10.1 billion in fiscal year 2015.

Fiscal year 2016 adjusted EBITDA was $508 million, versus $494 million adjusted EBITDA for 2015. Full-year adjusted EBITDA margins increased 140 basis points to 6.3%

Despite the losses, Troy Clarke, president and CEO, said the company was able to lower its break-even point and improve operations, in the fourth quarter and throughout the year.

"We recorded our fourth consecutive year of adjusted EBITDA improvement and significantly improved our adjusted EBITDA margin year on year, despite a substantial decline in revenues primarily due to the challenging conditions in the Class 8 market,” he said.

According to Clarke, Navistar had its third straight year of record profits in its parts business, totaling $640 million, while it “saw solid truck and bus order share performance, which positions us for higher retail market share in the future.”

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Update on VW alliance

During the most recent fiscal quarter, Navistar announced plans for a wide-ranging strategic alliance with Volkswagen Truck & Bus, which includes an equity investment in Navistar, strategic technology and supply collaboration and a procurement joint venture.

In providing an update on its status, Navistar said that all appropriate regulatory filings have been made, and that it has already received antitrust approvals in the U.S. and Poland.

Meantime, other regulatory approvals are pending, and other agreements between the parties that constitute closing conditions remain on track, including final terms for the procurement joint venture and the companies' first powertrain collaboration, details of which will be announced soon after the closure of the alliance.

The company expects the transaction to close in the first quarter of calendar year 2017.

"Although we expect tough industry conditions to continue through the first half of 2017, we see further opportunities to continue to reduce our break-even point, including leveraging some early cost synergies from the Volkswagen Truck & Bus alliance," Clarke said. "The alliance announcement has been positively received by our customers, which when combined with our ongoing cadence of new product offerings, confirms our confidence in our improving standing in the market."

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More earnings details

Navistar’s truck segment reported a loss of $189 million for fiscal 2016, compared with a fiscal year 2015 loss of $141 million.

Its global operations segment recorded a loss of $21 million compared to a year-ago fiscal year loss of $67 million.

Its financial services segment recorded a fiscal 2016 profit of $100 million, slightly higher than in fiscal year 2015.

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