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Navistar reports FY2018 net income of $340M vs. $30M in FY 2017

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LISLE, Ill. — Navistar International Corp. had a fourth quarter 2018 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, company officials have revealed.

Navistar 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.

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Navistar reported it was the only OEM to grow its Class 8 market share during its fiscal year that ended September 30, 2018. Pictured is International LT Series Class 8 tractor. (Courtesy: NAVISTAR)

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Navistar said it was the only OEM to show growth in the Class 8 market during its fiscal year which ended September 30, 2018.

Fourth quarter 2018 adjusted earnings before interest, taxes, depreciation and amortization (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.

Revenues in the fourth 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.

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 generated $307 million of manufacturing free cash flow.

“2018 was a very strong year for the industry, and a breakout year for Navistar,” said Troy Clarke, chairman, president and chief executive officer. “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.”

The company finished 2018 with strong momentum across the board, Clarke said.

During the fourth quarter, the company launched the International CV Series line of Class 4/5 trucks, the only Class 4/5 truck that is designed, distributed and supported by a manufacturer specializing in commercial vehicles. Year-over-year growth in heavy retail market share, up 2.5 share points, was attributable to strong sales of the International LT Series on-highway truck and the 12.4-liter A26 engine. The company’s IC Bus school buses, led by alternative-fuel offerings, also improved retail share by 1.3 share points.

Additionally, its medium-duty International MV Series and vocational International HV Series built improved order share resulting in a strong backlog. The company reported a backlog of 45,400 units in its Core markets, up from 15,600 at the end of 2017.

Last 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% 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 provided 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 said. “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.”

 

 

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U.S. Xpress to dispose of investment in U.S.-Mexico operations

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U.S. Xpress President and CEO said his company concluded that the Mexico perations required a comparatively high level of fixed investment per unit of revenue and created lane inefficiency in the U.S., because serving freight to and from the border did not maximize revenue per mile or meet our other network planning priorities. (Courtesy: U.S. XPRESS)

CHATTANOOGA, Tenn. — U.S. Xpress Enterprises says it is planning to exit its U.S.- Mexico cross border investment as part of its ongoing capital allocation and profit improvement initiatives.

When fully implemented, the plan is expected to reduce current and planned invested capital by approximately $40.million, improve the company’s consolidated operating margin, and offer customers continued access to cross border service through a variable cost alternative, according to Eric Fuller, president and CEO.

In connection with this plan, as well as the disposition of its remaining 10 percent equity investment in a former subsidiary, the company expects to record an approximate $12.3 million non-cash, pre-tax loss on equity investments for the fourth quarter of 2018.

These changes mark the latest step in the company’s continued execution of its strategic overhaul designed to drive operational improvement as U.S. Xpress strives to deliver its third consecutive year of margin improvement in 2019, Fuller said, adding that the plan will be executed in stages over the next several months.

“As part of our ongoing initiatives to improve profitability and enhance shareholder returns, we evaluated our aggregate investment in our U.S.-Mexico operations, including investments south of the border, in Laredo, Texas, and in U.S. assets and personnel required to service this business,” Fuller said. “We concluded that these operations required a comparatively high level of fixed investment per unit of revenue and created lane inefficiency in the U.S., because serving freight to and from the border did not maximize revenue per mile or meet our other network planning priorities. During 2018, the combined Mexico and allocated U.S. operations failed to keep pace with improvements in the Company’s U.S. OTR and Dedicated truckload operations. As a result, the decision to exit this operation was identified as a relatively high return, simple execution initiative. This strategic decision reflects the latest step in the company’s transformation as we methodically evaluate our capital allocation, improve our operational execution, and target industry-leading profitability.”

The company’s cross border business consists of 95 percent equity ownership in Xpress Internacional, S.A. de C.V.

In addition, to serve the business the company maintains fixed investments in the United States consisting of a trucking terminal in Laredo, Texas, approximately 700 incremental dry van trailers, and tractor capacity allocated toward serving freight to and from the border. Including the allocated cost of the U.S. investments and personnel, the cross-border business generated approximately $50 million in revenue but insignificant operating income in 2018.

Fuller said as part of U.S. Xpress’s ongoing transformation, the carrier made the decision to exit its fixed cost investment in the cross border business and sold its investment in the Mexican entity to the existing managers.

The operational transition is expected to be complete during the second quarter of 2019.

The exit involves the following components, which will be executed over the next several months:

  • Sale of the company’s 95 percent equity ownership of Xpress Internacional S.A de C.V., for an estimated $4.5 million in cash and an additional $8.5 million in cash to be received over 8.5 years. The equity sale has been completed.
  • Closing and sale of the company’s trucking terminal in Laredo, Texas, and disposition of approximately 700 dry van trailers allocated toward the Mexico business as these trailers complete the transition phase. The terminal is valued at an estimated $7 million, and the trailers had been slated for replacement over the next two years at an estimated cost of $20.0 million. This operational transition is anticipated to be completed during 2019.
  • Repositioning approximately 300 domestic tractors from loads to and from the border to more profitable loads through network optimization over a transition period, while continuing to offer customers ongoing access to cross-border service on a variable cost basis through relationships with our former partners, anticipated to be completed in the first half of 2019.

Fuller said U.S. Xpress expects to record a non-cash, pre-tax charge of approximately $12.3 million in the fourth quarter of 2018 to reflect the write down of the total investment in Xpress Internacional, which U.S. Xpress had operated since 2007. In addition, the company expects to incur one-time expenses during the first quarter of 2019 related to the transition plan to shut down its domestic infrastructure that supported the cross-border business, this expense is not expected to exceed $4.0 million on a pre-tax basis.

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Daseke names Chris Easter as chief operating officer

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Chris Easter brings more than 30 years of operational leadership experience to Daseke. (Courtesy: DASEKE)

ADDISON, Texas — Daseke, a flatbed and specialized transportation and logistics provider in North America, has named Chris Easter as the company’s chief operating officer.

Easter brings Daseke more than 30 years of operational leadership serving in key transportation and logistics roles with the United States Army, Walmart and Schneider National.

For the past six years, he served as CEO of Keen Transport, a specialized transportation, warehouse, and logistics company focused on serving the industrial equipment market.

During more than a decade with Walmart, he was responsible for overseeing the transportation of goods from around the world.

Easter graduated from the United States Military Academy at West Point; he then served in the U.S. Army, where he was a leader in heavy machinery logistics.

Easter was awarded the Bronze Star during Operation Desert Storm.

Believing in giving back to the industry, he serves the industry on the Board of Directors for the Specialized Carriers and Rigging Association (SC&RA).

As COO, Easter will be responsible for overseeing the industry-leading scale that Daseke has built over the last decade-plus, according to Don Daseke, chairman and CEO.

His efforts will be geared towards driving organic revenue growth, expanding EBITDA margins and maximizing free cash flow, Daseke said.

“Chris Easter’s in-depth knowledge of flatbed and specialized transportation, broad background in large- scale logistics, and proven ability to build and lead teams gives me great confidence in the bright future for both Chris and Daseke,” Daseke said “He has gained my respect, as we have built our relationship over the past several years. Daseke has the deepest management talent bench in flatbed and specialized transportation. Chris is the right person to lead our operations and develop our people’s talent as we fully leverage the scale we have built.”

“I’ve watched Don and the Daseke team build an exceptional organization focused on flatbed and specialized transportation and logistics, to where Daseke is uniquely positioned and respected in the marketplace,” Easter said. “I am excited to work with the entire team to enhance our growth while continuing to deliver superior customer service.”  8

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Cass Index: Despite December declines, transportation shows strong economy

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With all of 2018 in the record books, it is clear that 2018 was an extraordinarily strong year for transportation and the economy, Cass Information Systems said in its December report. ©2019 Fotosearch

ST. LOUIS — December was a month of growing uncertainty and severe declines in the U.S. financial markets as equity valuations fell (the Dow Jones fell from 25,826 on December 3 to as low as 21,792 on December 24), most commodity prices continued to be weak (oil, copper, lumber, etc.), and interest rates declined (after peaking at 3.24 percent on November 8, the 10-year Treasury yield fell from 3.01 percent on November 30 to 2.56 percent on January 3).

Large multi-national companies lowered guidance and blamed slowing rates of activity in Europe and — to a lesser extent — Asia. Trade talks with China continued without resolution, and indications that the Chinese economy is beginning to suffer began to leak out.

But despite all the “hand-wringing” on Wall Street, the transportation economy continues to signal economic expansion, according to the December Cass Information Systems Freight Index Report prepared by Donald Broughton, founder and managing partner of Broughton Capital, a deep data-driven quantimental economic and equity research firm.

“The uninfluenced-by-human-emotion hard data of physical goods flow confirms that people are still making things, shipping things and buying/consuming things, perhaps not at the scorching pace attained earlier this year, but still at an above-average pace,” Broughton wrote.

The report said industry stakeholders were not yet alarmed about the volume of shipments going negative for the first time in 24 months (-0.8 percent in the month of December), in part because December 2017 was an all-time high for the month, and in part because of the stabilizing patterns seen in almost all of the underlying freight flows.

“However, we would be negligent if we did not acknowledge as we did in last month’s report two storm clouds on the economic horizon,” Broughton said.

Those are:

  • The tariffs and threats of even higher tariffs with China, the world’s second-largest economy (even though the latest headlines and tweets suggest that there may be a resolution). Tariffs have throttled volumes in some areas of the U.S. economy, most notably agriculture exports and other select raw materials.
  • The decline in WTI crude in December to as low as $42.50 a barrel. “This did not fall below the marginal cost of production for fracked crude in almost all areas of the U.S., but it made it less profitable and significantly lowered the incentive to drill ever more holes, effectively slowing the rate of growth in the industrial economy,” Broughton said, noting that crude’s recent rally (above $52 in mid-January) gives transportation a momentary sigh of relief. “Continued strength in the price of crude makes us more confident in our positive outlook for the U.S. industrial economy and less worried about global demand,” Broughton said.

“With all of 2018 ‘in the record books,’ it is clear that 2018 was an extraordinarily strong year for transportation and the economy,” Broughton said. “Every month from March to October exceeded all levels attained in all months in 2014 (a very strong year), while February was roughly equal to the peak month in 2014 (June 2014 – 1.201 vs February 2018 – 1.198), which is extraordinary.”

The Cass Expenditures Index is signaling continued overall pricing power for those in the marketplace who move freight.

Demand is exceeding capacity in most modes of transportation by a material amount. In turn, pricing power has erupted in those modes to levels that spark overall inflationary concerns in the broader economy.

With the Expenditures Index up 10.0 percent in December, Broughton said, Cass understood the concerns about inflation, but are comforted by four factors:

  1. Almost all modes of transportation are using the current environment of pricing power to create capacity, which will first dampen and eventually kill pricing power
  2. Spot pricing (not including fuel surcharges) in all three modes of truckload freight (dry van, reefer, and flatbed) has already been falling for six months
  3. The cost of fuel (and resulting fuel surcharges) is included in the Expenditures Index, and the cost of diesel was up 6.6 percent in December (but has been steadily falling in recent weeks, suggesting lower fuel surcharges in coming weeks), and
  4. Whether driven by capacity addition/creation or lower fuel surcharges — or a combination of both (our best guess) — the Expenditures Index was sequentially declining, before sequentially improving slightly (up 1.9 percent in December). The November Index was already down 4.9 percent from its peak in September, and down 2.4 percent from October.

To view the full report, click here.

 

 

 

 

 

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