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Navistar delivers massive quarter

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Navistar has a massive quarter

Navistar International Corporation (NYSE: NAV) today announced a fourth quarter 2017 net income of $135 million, or $1.36 per diluted share, compared to a fourth quarter 2016 net loss of $34 million, or $0.42 per diluted share. Navistar reported net income of $30 million, or $0.32 per diluted share for fiscal year 2017, versus a net loss of $97 million, or $1.19 per diluted share, for fiscal year 2016.

Fourth quarter 2017 adjusted EBITDA was $268 million, which included $11 million of adjustments. Adjusted EBITDA margins increased to 10.3 percent. Fiscal year 2017 adjusted EBITDA was $582 million, versus $508 million adjusted EBITDA for 2016. Full-year adjusted EBITDA margins increased to 6.8 percent.

Revenues in the quarter increased 26 percent, to $2.6 billion, compared to fourth quarter 2016. The revenue increase was largely driven by a 31-percent increase in the company's Core (Class 6-8 trucks and buses in the United States and Canada) volumes. Revenue for fiscal year 2017 was up six percent to $8.6 billion, compared to $8.1 billion in fiscal year 2016.

Navistar finished the fourth quarter 2017 with $1.1 billion in consolidated cash, cash equivalents and marketable securities including $1.0 billion in manufacturing cash, cash equivalents and marketable securities.

"Our 2017 was a breakthrough year, as we returned to profitability and grew our market share 1.5 points," said Troy A. Clarke, chairman, president and CEO. "These results were driven by stronger sales, our steady investment in the industry's newest product lineup, early results from our strategic alliance with Volkswagen Truck & Bus and our ongoing focus on cost."

The company finished 2017 with strong momentum across the board. During the quarter, the company launched the International® HV™ Series line of vocational trucks. The HV Series, in addition to the HX Series premium vocational truck lineup, now has the option of being powered by the International A26 engine. The company also announced plans for its next-generation powertrains with alliance partner Volkswagen Truck & Bus, including big bore diesel, as well as electric medium-duty and electric bus platforms launching as early as 2019.

Also during the fourth quarter, Navistar and Volkswagen Truck & Bus announced their intention to converge their connected vehicle activities – OnCommand® Connection and RIO, Volkswagen Truck & Bus's digital brand. OnCommand Connection now has an industry leading 370,000 connected vehicles.

Navistar refinanced its manufacturing debt in early November, which improved its debt profile and provided greater financial flexibility. The transaction yielded $200 million of additional liquidity and extended the company's debt maturities by four years. Additionally, it will save approximately $25 million in annualized interest in 2018 and $34 millionin 2019, following the repayment of convertible debt that comes due in 2018.

The company provided the following 2018 fiscal year guidance:

  • Retail deliveries of Class 6-8 trucks and buses in the United Statesand Canada are forecast to be in the range of 345,000 units to 375,000 units.
  • Revenues are expected to be between $9 billion and $9.5 billion.
  • Adjusted EBITDA is expected to be between $675 million and $725 million.
  • Year-end manufacturing cash is expected to be about $1 billion.

"We think 2018 is shaping up to be one of the strongest industry years this decade, and we're positioned to make it a breakout year for Navistar," Clarke said. "We'll drive even greater customer consideration with our commitment to uptime and our ongoing cadence of new product launches, which will include the introduction of our new medium-duty vehicle, as well as new IC Bus offerings. At the same time, we will build on our alliance with Volkswagen Truck & Bus by investing in and collaborating on the major technologies that are reshaping our industry, including electric, connectivity and autonomous."

Truck Segment– For the fourth quarter 2017, the Truck segment recorded a profit of $112 million, compared with a year-ago fourth quarter loss of $61 million. The year-over-year change was primarily due to the impact of higher volume in the company's Core markets and a decrease in used truck losses.

For the 2017 fiscal year, the Truck segment recorded a loss of $6 million, compared with a fiscal year 2016 loss of $189 million. The improvement was primarily driven by the impact of higher volumes in the company's Core markets and Mexico and a decrease in used truck losses, partially offset by market pressures and charges related to EGR product litigation.

Parts Segment — For the fourth quarter 2017, the Parts segment recorded a profit of $157 million, down slightly from year-ago fourth quarter, primarily driven by the gradual runoff of the Blue Diamond Parts business, partially offset by double digit revenue growth from its Fleetrite and the remanufactured parts businesses.

For the 2017 fiscal year, the Parts segment recorded its second-largest profit ever at $616 million, compared to a fiscal year 2016 profit of $640 million. The four-percent decrease was primarily driven by margin declines in Blue Diamond Parts, partially offset by a slight year-over-year increase in North America Core market volumes.

Global Operations Segment — For the fourth quarter 2017, the Global Operations segment recorded a profit of $1 million, compared to a year-ago fourth quarter loss of $2 million. The year-over-year change was driven by higher volumes due to improvements in the Brazilian economy, offset by restructuring charges.

For the 2017 fiscal year, the Global Operations segment recorded a loss of $7 million compared to a year-ago fiscal year loss of $21 million. The Global Operations segment results improvement was primarily due to lower manufacturing and SG&A expenses as a result of the company's cost reduction efforts and a one-time benefit of $9 million recognized as an adjustment to pre-existing warranties, partially offset by restructuring charges.

Financial Services Segment — For the fourth quarter 2017, the Financial Services segment recorded a profit of $26 million, compared with fourth quarter 2016 profit of $23 million. The year-over-year change was primarily driven by higher receivable balances and a lower provision for losses in the company's Mexico portfolio.

For the 2017 fiscal year, the Financial Services segment recorded a profit of $77 million, compared to a year-ago fiscal year profit of $100 million. The decrease is primarily driven by the paydown of certain intercompany loan receivables and lower interest margin resulting from an increase in the company's average borrowing rate.

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