The company recorded in the fourth quarter of 2018 a net income of $188 million, or $1.89 per diluted share, compared to fourth quarter 2017 net income of $135 million, or $1.36 per diluted share. Navistar also reported net income of $340 million, or $3.41 per diluted share for fiscal year 2018, versus net income of $30 million, or $0.32 per diluted share, for fiscal year 2017.
The company adds fourth quarter 2018 adjusted EBITDA increased 20 percent to $322 million, versus $268 million one year ago. Fiscal year 2018 adjusted EBITDA increased 42 percent to $826 million, versus $582 million in 2017. Full-year adjusted EBITDA margins increased to 8.1 percent, up from 6.8 percent for 2017. This marks the company’s sixth consecutive year of annual growth in adjusted EBITDA on both a dollar and percentage basis, the company says.
The fiscal year “was a very strong year for the industry, and a breakout year for Navistar,” says Troy Clarke, chairman, president and CEO. “We were the only truck OEM to grow Class 8 share during the year. With the industry’s newest product line-up, superior quality and a strong focus on customer uptime, we expect to gain market share in 2019 for the third year in a row.”
Revenues in the quarter increased 28 percent, to $3.3 billion, compared to fourth quarter 2017. The revenue increase was largely driven by a 45-percent increase in the company’s core volumes, which represent its sales of Class 6-8 trucks and buses in the United States and Canada. Navistar says revenue for fiscal year 2018 was up 20 percent to $10.25 billion, compared to $8.6 billion in fiscal year 2017, attributable to annual revenue growth in all four operating segments. Class 8 retail market share grew to 13.5 percent in fiscal year 2018 versus 11.8 percent in fiscal year 2017.
Navistar finished fourth quarter 2018 with $1.42 billion in consolidated cash, cash equivalents and marketable securities, and with $1.36 billion in manufacturing cash, cash equivalents and marketable securities. For the year, the company says it generated $307 million of manufacturing free cash flow.
Earlier this month, Navistar announced a definitive agreement under which affiliates of Cerberus Capital Management, L.P. will acquire a majority interest in Navistar’s defense business, Navistar Defense. Following the close of the transaction, Cerberus will become a 70 percent owner and Navistar will remain a 30 percent owner. The agreement also includes an exclusive long-term supply agreement for commercial parts and chassis. The transaction, subject to regulatory approval, is expected to close in the first quarter of 2019.
In October, Navistar improved its debt profile by repaying its 4.5 percent senior subordinated convertible notes issued in October 2013. Repayment of the outstanding principal of $200 million at maturity was funded with cash on hand.
The company provides the following 2019 industry and financial guidance, including the fully consolidated financial impact of Navistar Defense:
- Industry retail deliveries of Class 6-8 trucks and buses in the United States and Canada are forecast to be 395,000 to 425,000 units, with Class 8 retail deliveries of 265,000 to 295,000 units.
- Revenues are expected to be between $10.75 billion and $11.25 billion.
- Adjusted EBITDA is expected to be between $850 million and $900 million.
- Following the completion of the partial sale of Navistar Defense, the company will update its 2019 guidance.
“While we expect 2019 to be another strong year for Navistar and the industry, it’s important to recognize that Navistar as an investment is much more than just a cycle play,” Clarke says. “As our ongoing improvements demonstrate, the company also has strong opportunities to benefit by recapturing market share, growing parts revenue, improving margins, generating free cash flow and further de-risking the balance sheet. For all these reasons, looking forward the company is well positioned to generate superior shareholder value.”
