Navistar Returns to NYSE; Posts $162 Mln. First-Half Profit

This story appears in the July 7 print edition of Transport Topics.

After a notable hiatus, truck maker Navistar International Corp. has returned both to profitability and to the New York Stock Exchange.

After bringing its financial reporting up to date with a June 27 regulatory filing, Navistar resumed trading on the NYSE on June 30, after a 16-month absence.

Navistar reported it earned a profit of $162 million, or $2.22 a share, for the first half of its fiscal 2008 ended April 30, reversing a loss of $13 million, or 19 cents, in the comparable 2007 period.

“We’re back and stronger than ever,” Daniel Ustian, chief executive officer, said in a statement.

Navistar’s shares opened June 30 at $72.50, but fell to $66.75 on July 2. Prior to last week, Navistar’s last trade on the New York Stock Exchange was in February 2007, when the stock was at $45.38.

Since being delisted, Navistar had been trading on the bulletin board, or “Pink Sheets,” market while the Warrenville, Ill.-based company completed the process of addressing inaccuracies in financial reporting discovered in 2005. As a result of the discrepancies, Navistar fired auditing firm Deloitte & Touche, which was replaced with KPMG LLP.

The profit hiatus dated to fiscal 2006, when net income was $301 million, or $4.12 a share, for the full fiscal year ended Oct. 31. After posting profits in a year that featured strong sales of new equipment, Navistar lost $120 million, or $1.70, for fiscal 2007, as sales of heavy trucks declined. Sales of new tractors have declined for 17 consecutive months.

The 2006 and 2007 results were announced in late May, as Navistar took a major step toward resuming trade on the NYSE, where its stock symbol is NAV and its shares had been listed for 98 years.

“It feels good to be back,” Ustian said. “While we were away, we were busy — introducing new products, building strategic relationships and expanding into new markets. We are returning to the NYSE an even smarter, more efficient and more competitive Navistar.”

Among the new products are a line of military vehicles that have produced a sharp rise in revenue from that business, the introduction of ProStar and TranStar tractors with fleets as the targeted customers, and the companion model, the LoneStar, for the owner-operator segment. In addition, a partnership was formed with Caterpillar Inc. to introduce a new truck by 2010 for the U.S. severe-duty market; the companies also formed a global alliance to sell engines and trucks in China, Western Europe and other markets.

 “In one of the weakest commercial truck markets in recent history, we are set to surpass our $15 billion revenue goal for 2009 a year early and to realize nearly $1 billion in manufacturing segment profit,” Ustian said.

During the first half of 2008, profit from the company’s manufacturing unit — trucks, engines and parts — was $424 million, more than double the $208 million achieved during the first six months of the 2007 financial year.

Revenue for the first half of 2008 rose 13% to $6.9 billion from $6.1 billion. The revenue target of $15 billion for this fiscal year is nearly 20% above the $12.3 billion in sales it reached in 2007. This year’s target also exceeds the prior record revenue of $14.2 billion in fiscal 2006.

The return to profit was achieved in the second quarter, when net income was $215 million, or $2.94 a share, following a loss of $53 million, or 72 cents in the first quarter.

The overall rise in revenue was tied to increased military business that totaled $1.6 billion in the first half of 2008; it was just $107 million during the first six months in 2007.

Navistar is selling MRAP, or mine-resistant, ambush-protected vehicles, to the U.S. Army and U.S. Marine Corps through a series of contracts, including a $707 million award that was announced June 23.

Operating profit for the first half of 2008 jumped to $85 million in the engine segment, from $6 million in last year’s first half, far outpacing a 7% increase in sales to $1.39 billion from $1.29 billion. The truck unit boosted sales 14% to $4.6 billion from $4.04 billion, and operating income nearly doubled to $234 million from $125 billion.

The growth in both revenue and profit from Navistar’s parts business followed a similar pattern, as sales rose 17% to $728 million and operating income climbed 36% to $105 million.

The increased revenue and profit were achieved despite a drop in sales at the truck and engine unit. Truck sales slipped nearly 40% for the first half. Counting both sales to original equipment manufacturers and Navistar’s International truck unit, its engine business rose 8.2% in the second quarter to 102,500, but fell 5.3% in the first half to 188,300. Volume growth for the engine business reflected higher sales to OEMs other than Ford, Navistar said.

With the resumption of NYSE trading, the NAVZ.PK symbol that was used in bulletin board trading has been discontinued. Preferred shares now are trading as NAVPrD.