Navistar Narrows Loss, Proposes SEC Settlement
Navistar International Corp. reported lower net losses for its fourth quarter and the 2015 fiscal year ended Oct. 31 and forecast it would improve on those trends and turn cash flow positive and profitable in 2016.
The company also said it has offered to pay a fine to settle a Securities and Exchange Commission investigation into the company’s disclosures about the departure of CEO Dan Ustian in 2012 and its strategy for reducing engine emissions. The company did not disclose details about the proposed settlement.
Meanwhile, Navistar lost $50 million, or 61 cents a share, for the quarter, compared with a loss of $72 million, or 88 cents, a year earlier.
Quarterly revenue fell to $2.5 billion, down from $3 billion a year earlier.
For the year, Navistar lost $184 million or $2.25 per share compared with a loss of $619 million or $7.60 in the 2014 period.
Revenue for the year slipped to $10.1 billion from $10.8 billion a year earlier.
Navistar said its U.S. and Canadian retail deliveries of Classes 6-8 trucks and buses in 2015 rose to 62,200 units, up about 5% from 59,800 in 2014.
It said it had a 12% market share for Class 8 trucks in North America, down from 14% a year earlier, while its medium-duty share rose to 23% from 21%.
Current CEO Troy Clarke said during a conference call the company with its Class 8 vehicles “was seeing a higher share of the wallet,” meaning customers it identifies “who may have bought 25 trucks now are buying 300 or 400.”
He also said there was increased interest in its 13-liter engine “in the orders we have been collecting since the July and August timeframe.”
The company said it has made strong inroads with important fleet customers, suppliers and leasing and rental customers.
“For the last six months, our order share has been greater than our market share for Class 6, 7 and 8. Simply, we are quoting and winning more deals than we were at this time last year,” Clarke said.
“The improvement program at Navistar appears set to continue in 2016 despite the Class 8 downturn,” Steve Volkmann, an analyst with Jefferies Securities, wrote in a note to clients.
Navistar said it expects to launch a new HX Series, the PayStar replacement, in early 2016 for the construction and vocational markets. Also, over the next three years, it will continue to update its entire product line, including the introduction of its ProStar replacement, the new LT series.
Sales of its used trucks slowed, in part, as export markets weakened, the company said, and sales are expected to remain around current levels in 2016.
Clarke said the company still had an inventory of 60,000 used trucks but expected that number to be down by at least 50% a year from now.
Bill Kozek, president of its truck and parts business, said that “with the capability we have with our dealers and us, we expect to have a pretty good year in used truck sales.”
The company report said that warranty costs as a percentage of manufacturing revenue were about 3% in 2015, down from 7.78% in 2013 and down from 2014, too.
It also said it “recognized adjustments to pre-existing warranties [for its engines introduced to meet 2010 emissions standards and since recalled] of $1 million in 2015 compared to adjustments of $55 million in 2014 and $404 million in 2013.”
Navistar said it expects to lower its costs by $200 million over the coming year, with the majority expected to come from reductions in materials costs and improved manufacturing efficiencies.
Also in the fourth quarter, the company said, it reduced salaried staff further “that will yield additional savings once complete,” Chief Financial Officer Walter Borst said.
However, additional investments in the business and pension issues will offset these savings, he said.
“Finally, with efforts related to our SCR transition coming to a close, we will have less associated engine-related product development activity. As a result, we foresee lower engineering spend in 2016,” Borst said.
