Navistar International Corporation
(NAV) has showed a net loss of $35 million, or 49 cents per share for the third quarter of fiscal 2009 ended Oct. 31, 2009. The results include increased provisions for income taxes and exclude the extraordinary gain from the asset acquisition of the recreational vehicle manufacturing business of Monaco Coach Corporation.

This was worse than the Zacks Consensus Estimate of 66 cents per share. The truck maker had reported a net income $331 million or $4.47 per share in the comparable quarter of the previous year.

Sales for the quarter slashed 37% to $2.51 billion, driven by poor sales at the Truck division. Manufacturing segment profit was $110 million, including the impacts of the Ford settlement (regarding the violation of an exclusive supply agreement), net of related charges, for the quarter compared with $473 million in the year-ago period.

Segment Performance

The Truck segment witnessed a sharp 48% drop in revenue to $1.51 billion. The segment reported a loss of $28 million versus a profit of $417 million in the year-ago quarter, which included major U.S. military sales as part of the company’s Mine Resistant Ambush Protected (MRAP) vehicle program.

The Engine segment revealed a 22% fall in revenue to $633 million. The segment delivered a $45 million profit, including a one-time gain on the change in equity ownership in Blue Diamond Parts, compared with a year-ago profit of $5 million. The impact of the global economic climate limited demand for diesel engines and is being mitigated by actions taken to reduce the segment’s selling, general and administrative expenses.

The Parts segment performed well with an 11% rise in revenue to $491 million. Supported by strong sales to the U.S. military, the segment profit was $93 million, an increase of 82% from $51 million in the year-ago quarter.

The Financial Service segment generated revenue of $92 million, lower by 3% compared to the year-ago period. The segment continues to demonstrate a quarter-over-quarter improvement as it delivered a segment profit of $20 million in the quarter compared with a segment loss of $1 million in the year-ago period.

Financial Position

Navistar reported manufacturing cash balances of $751 million as on July 31, 2009 compared with $594 million in the prior quarter ended April 30, 2009 . Cash flow from operations was positive, as were the net effect of other changes, including working capital, offset by capital investments and the purchase of Monaco.

Navistar had cash and cash equivalents of $821 million as on July 31, 2009 . Long-term debt amounted to $3.14 billion as on that date. The company had stockholders’ deficit of $1.35 billion as on the same date.

In the first half of 2009, Navistar had a net cash flow from operating activities of $899 million. Meanwhile, capital expenditures totaled $120 million during the same period.


Navistar continues to project total truck industry retail sales volume of 165,000–185,000 units for Class 6–8 trucks and school buses in the U.S. and Canada for fiscal 2009. For 2010, the company anticipates the industry volumes to be in the range of 175,000– 215,000 units.

Navistar reiterated its profitability for fiscal 2009 despite reporting losses in the quarter. However, based on projections for increased income tax expenses and its forecast for the remainder of the year, the company has lowered its guidance for net income for fiscal 2009 to $182 million–$207 million or $2.55–$2.85 per share, excluding the Ford settlement and related charges. Including the impact of the Ford settlement, net of related charges, earnings are estimated in the range of $4.95–$5.25 per share.

Navistar affirmed its manufacturing cash balance of $700 million–$800 million for fiscal 2009. We recommend the shares of the company as Neutral.
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