Navistar International Corp. (NAV) contends that the Q4 ’14 financial results it released today are indicative of the company’s “continued progress,” viewed in light of both its year-over-year and fiscal-year performance.
However, analysts polled by Thomson Reuters reportedly were expecting a 15-cent per-share profit to be reported instead of a quarterly loss that had declined from a year ago.
As of this posting, Navistar’s stock price stood at 31.15-- down 3.90 or 11.13% from yesterday.
According to Navistar, it incurred a Q4 “net loss of $72 million, or $0.88 per diluted share, compared to a fourth-quarter 2013 net loss of $154 million, or $1.91 per diluted share. Revenues in the quarter were $3.0 billion, up $257 million or 9.3%, versus the fourth quarter of 2013.”
The company also reported a net loss for fiscal year 2014 of $619 million, or $7.60 per diluted share, vs. a net loss of $898 million, or $11.17 per diluted share, for fiscal year 2013.
Per Navistar, fiscal year 2014 adjusted EBITDA was $294 million vs. $89 million adjusted EBITDA for 2013. The company also reported that revenue for fiscal year 2014 was “flat at $10.8 billion compared to fiscal year 2013.”
"Our fourth quarter results— and the results for the entire fiscal year— reflect our continued progress improving business operations across the enterprise and positive trends in the North American industry," said Troy A. Clarke, Navistar’s president & CEO, in a statement.
"In 2014, we increased our production, chargeouts and order backlog; continued to reduce warranty spend; and achieved structural cost savings that further lowered our breakeven point,” he added.
The company stated that Q4 ‘14 EBITDA was $66 million vs. an EBITDA loss of $227 million in the same period a year ago. It noted that this year's fourth quarter included $60 million of restructuring, impairments and other charges partially offset by a $10 million favorable adjustment in pre-existing warranty. As a result, stated Navistar, adjusted Q4 EBITDA was $116 million, “which was within the company's fourth quarter guidance.”
Navistar reported that it finished Q4 with $1 billion in manufacturing cash, cash equivalents and marketable securities, including a $91 million increase in an intercompany loan from Navistar Financial Corporation (NFC), its captive finance arm “to support used-truck activities.”
The company also said it reduced its year-over-year structural costs in Q4 by an additional $66 million, including $48 million in savings from selling, general, and administrative (SG&A) expense and $18 million in reduced engineering costs. Navistar added that it reduced structural costs by $311 million for the year, which it said “exceeded the company's full year target of $300 million.”
In addition, Navistar pointed out that its “warranty spend improved in the fourth quarter, down 22% year-over-year. These results were driven by quality performance improvements, lower repair costs and a reduced population of legacy engines still in the warranty periods.”
In Q4, the company also saw a 23% year-over-year increase in chargeouts for Class 6-8 trucks and buses in the U.S. and Canada. “Chargeouts for Class 6-8 trucks were up 12% for fiscal year 2014, which included a 21% increase in Class 8 heavy trucks compared to 2013,” Navistar stated. “In addition, end-of-year order backlog for Class 6-8 trucks was up 24% year-over-year.”
"We continue to make the necessary changes to improve the company and we're entering 2015 in a much stronger position than we were one year ago," Clarke stated.
"We've restructured our core North American business, have the right products in place, and established the right leadership team,” he added. “We are well-positioned to meet our 8-10 percent EBITDA margin run rate target exiting 2015."
As per Navistar, details released on the performance of specific business units include:
North America Truck
For Q4, “the North America Truck segment recorded a loss of $55 million, compared with a year-ago fourth quarter loss of $355 million. The year-over-year improvement was primarily driven by higher traditional truck volumes, declining warranty expense and structural costs, as well as the non-repeat of certain impairment charges. Chargeouts for traditional markets were up year over year in the fourth quarter by 23%, reflecting a 14% increase of Class 8 trucks and a 41% increase in Class 6/7 trucks.”
Navistar noted that it has announced plans to close its block and head foundry operations in Indianapolis, “resulting in an $11 million charge in the quarter for employee separation benefits, pension and other postretirement contractual termination benefits, inventory reserves and other related costs.” As a result, the company said it “expects to reduce operating costs by about $13 million annually.”
For fiscal year 2014, the segment “recorded a loss of $408 million, compared with a fiscal year 2013 loss of $902 million, primarily driven by lower charges for adjustments to pre-existing warranties of $52 million versus $404 million in fiscal year 2013.”
North America Parts
For Q4, “the North America Parts segment recorded a profit of $143 million, compared to a year-ago fourth quarter profit of $147 million. The decrease was primarily due to a decline in military and Blue Diamond Parts sales, partially offset by improvements in our commercial markets.”
For fiscal year 2014, the segment “recorded a profit of $500 million, compared to a fiscal year 2013 profit of $476 million, primarily driven by record sales and lower operating costs in our North American commercial markets.”
Global Operations
For Q4, “the Global Operations segment recorded a loss of $33 million compared to a year-ago fourth quarter loss of $6 million. The year-over-year decline was primarily driven by a decline in South American engine volumes as well as charges related to right-sizing actions for the Brazilian truck business.”
For fiscal year 2014, the segment “recorded a loss of $218 million compared to a year-ago fiscal year loss of $6 million, primarily driven by $178 million of asset impairment charges and the fourth quarter charges recognized by the Brazilian truck business. In addition, the continued economic downturn in the Brazil economy has contributed to lower engine volumes of 22% in 2014. Partially offsetting these factors were improvements in the export truck operations.”
Financial Services
For Q4, “the Financial Services segment recorded a profit of $26 million compared to fourth quarter 2013 profit of $17 million. The increase was driven by the interest earned on an intercompany loan and an increase in the net financial margin from higher average finance receivables balances during the quarter.”
For fiscal year 2014, the segment “recorded a profit of $97 million, compared to a fiscal year 2013 profit of $81 million, primarily driven by higher interest income from intercompany loans and lower structural costs, which more than offset the effects of lower overall retail balances and an increase in the provision for loan losses in Mexico.”
