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The U.S. maker of International-brand heavy trucks and school buses, Navistar International Corp (NYSE:NAV), reported a profit for the third quarter, which ended on July 31, after a $196 million tax benefit offset the high costs of its unsuccessful program to develop a new style of diesel engine.

As per the quarterly report, net income for the company declined to $84 million or $1.22 per share from $1.4 billion, or $18.24 per share, a year earlier. Sans the tax benefit of $196 million, the company would have lost $100 million against the loss of $54 million a year ago. Sales for the period were reduced by 6.1 percent to $3.28 billion from $3.49 billion. Apart from the tax benefit, net income also includes $16 million in costs related to engineering integration, and $10 million in costs related to nonconformance penalties. The maker of heavy trucks used more than $550 million in cash in the quarter and free cash flow dropped about $150 million to $96 million from $248 million

“Clearly we are not pleased with these results,” Campbell said in a statement.

Just last week, Navistar International Corp (NYSE:NAV) placed Lewis Campbell in the ousted CEO, Daniel Ustian’s, position, a 37-year veteran of the Lisle, Illinois-based Company. The company also promoted Troy Clarke to the new role of president and chief operating officer. Newly named interim Chief Executive Officer Lewis Campbell, has been in favor of selling operations and slashing headcounts to cut operating costs by $150 million to $175 million next year. As per the company, the plans of layoffs in fourth quarter and staff buyouts completed during its third quarter will help the organization to cut down on annual expenses by $70 million to $80 million.

Unlike the competitors such as Paccar Inc (NASDAQ:PCAR) and AB Volvo (PINK:VOLVY) (PINK:VOLAF), Navistar has been unable to bag the U.S. Environmental Protection Agency approval for its new diesel engine. The new engine was aimed at limiting emissions of the greenhouse gas nitrogen oxide, without using the additive urea. Unable to win the approval, company decided last month to begin selling trucks with engines from Cummins Inc early next year.

Navistar’s shares have lost almost half their value since last year, and also, the company is paying fines of up to $3,755 per noncompliant engine it sells after the EPA ruling last week nearly doubled the penalties it is imposing. Such a plight has aggravated the interest of two activist investors, MHR Fund Management LLC and Icahn Associates Corp, whose stakes are approaching 15 percent- the trigger point for poison-pill defense adopted by the company in June. More than 55 percent of the shares of the company are held by its four largest shareholders, including Franklin Resources Inc and Gabelli Funds.

The company did not guide to FQ4 earnings. However, Navistar expects a FQ4 industrial cash burn in the range of $325MM to $475MM. This is materially worse than consensus expectations.

The company has just announced that it is reviewing its “non-core businesses with the goal of improving its return on invested capital and driving long-term profitability.”

The stock is currently up 6.8% at the time of this writing.