Navistar Reports 2019 Fourth Quarter And Full Year Results

Reports fourth quarter 2019 net income of $102 million, adjusted EBITDA of $219 million

Navistar International Corporation (NYSE: NAV) today announced fourth quarter 2019 net income of $102 million, or $1.02 per diluted share, compared to fourth quarter 2018 net income of $188 million, or $1.89 per diluted share. Navistar reported net income of $221 million, or $2.22 per diluted share for fiscal year 2019, versus net income of $340 million, or $3.41 per diluted share, for fiscal year 2018.

Adjusted net income for the fourth quarter was $114 million versus $189 million in the same period one year ago. Adjusted net income for fiscal year 2019 increased 29 percent to $423 million versus $327 million in 2018.

Fourth quarter 2019 adjusted EBITDA was $219 million versus $322 million one year ago. Fiscal year 2019 adjusted EBITDA increased seven percent to $882 million, versus $826 million in 2018. This marks the company’s seventh consecutive year of annual growth in adjusted EBITDA.

Revenues in the quarter were $2.8 billion, down 16 percent compared to fourth quarter 2018. The revenue decrease was largely driven by very strong fourth quarter 2018 vehicle chargeouts following supplier production constraints in the third quarter of that year, the impact of the sale of Navistar Defense in December 2018, and lower industry demand in the quarter. Revenue for fiscal year 2019 was up 10 percent to $11.25 billion, led by a 26 percent increase in worldwide chargeouts to 106,500 units for the year. During the year, Navistar’s Core market share grew by 1.3 points, to 18.8 percent. The company increased its school bus market share to 35.8 percent, where it is once again the industry leader, increased its Class 6-7 medium duty market share to 27 percent, as well as increased its Class 8 market share to 14.1 percent. This marks the company’s third consecutive year of Core market share growth.

Navistar finished fourth quarter 2019 with $1.4 billion in consolidated cash, cash equivalents and marketable securities, and with $1.3 billion in manufacturing cash, cash equivalents and marketable securities.  For the year, the company generated $263 million of manufacturing free cash flow.

“During 2019, we grew adjusted EBITDA and adjusted net income while growing our Core market share to 19 percent, for a total of three points of share gain in the last three years,” said Troy A. Clarke, Navistar chairman, president and CEO. “Our Navistar 4.0 strategy builds on this performance and incorporates major investments in the business that will deliver strong benefits for both customers and shareholders.”

Navistar 4.0, the company’s five-year improvement strategy which was presented at the company’s Investor Day in September, lays out a plan to increase the company’s EBITDA margins to 12 percent by the end of 2024. The plan commits to advanced operational approaches, including a unified enterprise platform strategy, advanced modular architecture and the most capable manufacturing network in the industry. The company also announced it plans a capital investment of more than $250 million in a new industry benchmark manufacturing facility in San Antonio, Texas, which will have best-in-class lean processes and will be Industry 4.0 ready. This is in addition to the company’s June announcement of investing $125 million in its Huntsville, Alabama manufacturing facilities to produce next-generation, big-bore powertrains being developed with Navistar’s global alliance partner TRATON GROUP.

In October, Navistar launched NEXT eMobility Solutions, a business unit that is dedicating a world-class, lean engineering team to develop the best products in the electric vehicle space, using a unique consultative philosophy that embraces the full range of customers’ needs. Navistar also unveiled a prototype electric version of the International^® MV^™ Series medium-duty vehicle. Additionally, the company launched International^® 360, a groundbreaking service communications and fleet management platform that delivers seamless, transparent communications with the International^® service network.

2020 INDUSTRY AND FINANCIAL GUIDANCE

The company reiterated its 2020 industry guidance and updated the following full-year financial guidance:

• Industry retail deliveries of Class 6-8 trucks and buses in the United States and Canada are forecasted to be in the range of 335,000 to 365,000 units, with Class 8 retail deliveries between 210,000 and 240,000 units. 
• Revenues are expected to be in the range of $9.25 billion to $9.75 billion.
• Adjusted EBITDA is expected to be in the range of $700 million to $750 million.

“With a proven track record of managing costs and improving operating results, Navistar is in a much better position than in the past to do well even during cyclical downturns,” Clarke said. “We are taking actions to adjust our business to current market conditions, including reducing production rates and SG&A expenses while restructuring our global and export operations. Building on the strong gains achieved over the last several years, Navistar has a clear roadmap in place for sustained growth that will set it apart from the industry.”

Truck Segment – For the fourth quarter 2019, the Truck segment recorded a profit of $86 million, compared with a year-ago fourth quarter profit of $197 million. The year-over-year decline was primarily due to an 18 percent decline in the company’s Core chargeouts, as well as the impact of the sale of a majority interest in the Navistar Defense business.

For the 2019 fiscal year, the Truck segment recorded a profit of $269 million, compared with a fiscal year 2018 profit of $397 million. The decrease was primarily driven by charges related to a legacy engine class action settlement and the impact of the sale of a majority interest in Navistar Defense. These items were partially offset by higher volumes in the company’s Core markets.

Parts Segment — For the fourth quarter 2019, the Parts segment recorded a profit of $161 million, compared with a year-ago fourth quarter profit of $156 million. For the 2019 fiscal year, the Parts segment recorded a profit of $598 million, compared to a fiscal year 2018 profit of $569 million. The results were primarily driven by improved North American operating results, reflecting the company’s growing private label business, partially offset by lower Blue Diamond Parts volumes.

Global Operations Segment — For the fourth quarter 2019, the Global Operations segment recorded a loss of $10 million, compared to a year-ago fourth quarter profit of $4 million. The year-over-year change was driven largely by a $14 million restructuring charge related to cost reduction actions, including ceasing production at the company’s MWM Argentina engine plant and restructuring activities in Brazil.

For the 2019 fiscal year, the Global Operations segment operated at breakeven compared to a year-ago fiscal year profit of $2 million. The Global Operations segment results decrease was primarily driven by the impact of product mix and an increase in restructuring charges related to cost reduction actions, partially offset by lower SG&A expenses and the impact of the sale of the company’s former joint venture in China with JAC.

Financial Services Segment— For the fourth quarter 2019, the Financial Services segment recorded a profit of $30 million, up slightly compared with fourth quarter 2018. The results were primarily driven by lower interest expense due to the payoff of the company’s $400 million Term Loan in May.

For the 2019 fiscal year, the Financial Services segment recorded a profit of $123 million, compared to a year-ago fiscal year profit of $88 million. The increase is primarily driven by higher revenue, an improved funding strategy to manage borrowing costs, and higher income from an intercompany loan.

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