-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EbGw+ldBBLjOVSMEahJaIXO2iuaRyltNOORd55LWRsTR0Ebmr429nEgii0jL5XZ4 ZMiau61oR4xRk6vMWGmJXw== 0000808450-97-000006.txt : 19970616 0000808450-97-000006.hdr.sgml : 19970616 ACCESSION NUMBER: 0000808450-97-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970430 FILED AS OF DATE: 19970613 SROS: CSE SROS: NASD SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NAVISTAR INTERNATIONAL CORP /DE/NEW CENTRAL INDEX KEY: 0000808450 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLES & PASSENGER CAR BODIES [3711] IRS NUMBER: 363359573 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09618 FILM NUMBER: 97623726 BUSINESS ADDRESS: STREET 1: 455 N CITYFRONT PLAZA DR CITY: CHICAGO STATE: IL ZIP: 60611 BUSINESS PHONE: 3128362032 MAIL ADDRESS: STREET 2: 455 N CITYFRONT PLAZA DRIVE CITY: CHICAGO STATE: IL ZIP: 60611 FORMER COMPANY: FORMER CONFORMED NAME: NAVISTAR HOLDING INC DATE OF NAME CHANGE: 19870528 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 30, 1997 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-9618 NAVISTAR INTERNATIONAL CORPORATION ------------------------------------ (Exact name of registrant as specified in its charter) Delaware 36-3359573 ------------------------------ ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 455 North Cityfront Plaza Drive, Chicago, Illinois 60611 - -------------------------------------------------- --------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (312) 836-2000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes No ----- ----- APPLICABLE ONLY TO CORPORATE ISSUERS: As of June 9, 1997, the number of shares outstanding of the registrant's common stock was 49,335,410 and the Class B Common was 23,674,846. NAVISTAR INTERNATIONAL CORPORATION AND CONSOLIDATED SUBSIDIARIES ----------------------------- INDEX ----- Page Reference --------- Part I. Financial Information: Item 1. Financial Statements: Statement of Income -- Three Months and Six Months Ended April 30, 1997 and 1996 ...................... 3 Statement of Financial Condition -- April 30, 1997, October 31, 1996 and April 30, 1996. 4 Statement of Cash Flow -- Six Months Ended April 30, 1997 and 1996 ........... 5 Notes to Financial Statements .......................... 6 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 12 Part II. Other Information: Item 1. Legal Proceedings .............................. 18 Item 6. Exhibits and Reports on Form 8-K ............... 18 Signature ............................................... 19 Exhibit 11 ................................................ E-1 PART I - FINANCIAL INFORMATION ------------------------------
ITEM 1. Financial Statements STATEMENT OF INCOME (Unaudited) ------------------------------------------------------------------ Millions of dollars, except per share data ------------------------------------------------------------------ Navistar International Corporation and Consolidated Subsidiaries ----------------------------------------------- Three Months Ended Six Months Ended April 30 April 30 ------------------- ---------------- 1997 1996 1997 1996 ------ ------ ------ ------ Sales and revenues Sales of manufactured products ....... $1,493 $1,423 $2,733 $2,785 Finance and insurance revenue ........ 43 46 88 101 Other income ..... 15 11 26 26 ------ ------ ------ ------ Total sales and revenues. 1,551 1,480 2,847 2,912 ------ ------ ------ ------ Costs and expenses Cost of products and services sold 1,292 1,230 2,368 2,429 Postretirement benefits ...... 57 54 108 111 Engineering and research expense 32 35 62 64 Marketing and administrative expense ....... 87 75 170 148 Interest expense. 20 23 37 41 Financing charges on sold receivables ... 5 7 12 16 Insurance claims and underwriting expense ....... 9 14 17 26 ------ ------ ------ ------ Total costs and expenses. 1,502 1,438 2,774 2,835 ------ ------ ------ ------ Income before income taxes 49 42 73 77 Income tax expense ... 19 16 28 29 ------ ------ ------ ------ Net income ...... 30 26 45 48 Less dividends on Series G Preferred stock 7 7 14 14 ------ ------ ------ ------ Net income applicable to common stock .. $ 23 $ 19 $ 31 $ 34 ====== ====== ====== ====== Net income per common share $ .31 $ .26 $ .41 $ .46 ====== ====== ====== ====== Average number of common and dilutive common equivalent shares outstanding (millions) .. 73.7 73.8 73.7 73.8 See Notes to Financial Statements.
STATEMENT OF FINANCIAL CONDITION (Unaudited) - ------------------------------------------------------------------- Millions of dollars - ------------------------------------------------------------------- Navistar International Corporation and Consolidated Subsidiaries --------------------------------------- April 30 October 31 April 30 1997 1996 1996 - ------------------------------------------------------------------- ASSETS - ---------------------------- Cash and cash equivalents .. $ 237 $ 487 $ 223 Marketable securities ...... 533 394 528 ------ ------ ------ 770 881 751 Receivables, net ........... 1,618 1,655 1,805 Inventories ................ 473 463 600 Property, net of accumulated depreciation and amortization of $869, $842 and $803 ................. 748 770 703 Investments and other assets 333 213 235 Intangible pension assets .. 267 314 284 Deferred tax asset, net .... 995 1,030 1,065 ------ ------ ------ Total assets ............... $5,204 $5,326 $5,443 ====== ====== ====== LIABILITIES AND SHAREOWNERS' EQUITY - ---------------------------- Liabilities Accounts payable, principally trade ........ $ 907 $ 820 $ 870 Debt: Manufacturing operations . 109 115 125 Financial services operations ............. 1,213 1,305 1,379 Postretirement benefits liability ................ 1,200 1,351 1,300 Other liabilities........... 816 819 871 ------ ------ ------ Total liabilities ...... 4,245 4,410 4,545 ------ ------ ------ Commitments and contingencies Shareowners' equity Series G convertible preferred stock (liquidation preference $240 million) ............ 240 240 240 Series D convertible junior preference stock (liquidation preference $4 million) ... 4 4 4 Common stock (51.0 million shares issued) ................. 1,642 1,642 1,641 Class B Common stock (24.3 million shares issued) ................. 491 491 491 Retained earnings (deficit)- balance accumulated after the deficit reclassification as of October 31, 1987 ... (1,388) (1,431) (1,448) Common stock held in treasury, at cost ........ (30) (30) (30) ------ ------ ------ Total shareowners' equity ............... 959 916 898 ------ ------ ------ Total liabilities and shareowners' equity .. $5,204 $5,326 $5,443 ====== ====== ====== See Notes to Financial Statements.
STATEMENT OF CASH FLOW (Unaudited) ------------------------------------------------------------------ For the Six Months Ended April 30 (Millions of dollars) ------------------------------------------------------------------ Navistar International Corporation and Consolidated Subsidiaries ------------------------- 1997 1996 ------ ------ Cash flow from operations Net income ............................ $ 45 $ 48 Adjustments to reconcile net income to cash used in operations: Depreciation and amortization ....... 60 55 Deferred income taxes ............... 26 26 Other, net .......................... (18) (4) Change in operating assets and liabilities: Receivables ....................... (63) 63 Inventories ....................... (18) (184) Prepaid and other current assets .. (4) (22) Accounts payable .................. 93 (59) Other liabilities ................. (126) (143) ------ ------ Cash used in operations ............... (5) (220) ------ ------ Cash flow from investment programs Purchase of retail notes and lease receivables ............... (445) (576) Collections/sales of retail notes and lease receivables .............. 518 561 Purchase of marketable securities ..... (332) (378) Sales or maturities of marketable securities ............... 195 399 Capital expenditures .................. (58) (55) Other investment programs, net ........ (12) (13) ------ ------ Cash used in investment programs ...... (134) (62) ------ ------ Cash flow from financing activities Issuance of debt ...................... 79 - Principal payments on debt ............ (18) (8) Net increase (decrease) in notes and debt outstanding under bank revolving credit facility and asset-backed and other commercial paper programs ...................... (158) 42 Dividends paid ........................ (14) (14) ------ ------ Cash provided by (used in) financing activities ................ (111) 20 ------ ------ Cash and cash equivalents Decrease during the period .......... (250) (262) At beginning of the year ............ 487 485 ------ ------ Cash and cash equivalents at end of the period................. $ 237 $ 223 ====== ====== See Notes to Financial Statements.
Navistar International Corporation and Consolidated Subsidiaries Notes to Financial Statements (Unaudited) Note A. Summary of Accounting Policies Navistar International Corporation is a holding company whose principal operating subsidiary is Navistar International Transportation Corp. (Transportation). As used hereafter, "company" refers to Navistar International Corporation and its consolidated subsidiaries. The consolidated financial statements include the results of Transportation's manufacturing operations and its wholly owned financial services subsidiaries. The effects of transactions between the manufacturing and financial services operations have been eliminated to arrive at the consolidated totals. The accompanying unaudited financial statements have been prepared in accordance with accounting policies described in the 1996 Annual Report on Form 10-K and should be read in conjunction with the disclosures therein. In the opinion of management, these interim financial statements reflect all adjustments, consisting of normal recurring accruals, necessary to present fairly the financial position, results of operations and cash flow for the periods presented. Interim results are not necessarily indicative of results for the full year. Certain 1996 amounts have been reclassified to conform with the presentation used in the 1997 financial statements. Note B. Supplemental Cash Flow Information Consolidated interest payments during the first six months of 1997 and 1996 were $37 million and $40 million, respectively. No consolidated tax payments were made during the first six months of 1997 and $3 million were made during the first six months of 1996. Note C. Income Taxes The benefit of Net Operating Loss (NOL) carryforwards is recognized as a deferred tax asset in the Statement of Financial Condition, while the Statement of Income includes income taxes calculated at the statutory rate. The amount reported does not represent cash payment of income taxes except for certain state income, foreign withholding and federal alternative minimum taxes which are not material. In the Statement of Financial Condition, the deferred tax asset is reduced by the amount of deferred tax expense or increased by a deferred tax benefit recorded during the year. Until the company has utilized its significant NOL carryforwards, the cash payment of federal income taxes will be minimal. Note D. Receivables On January 1, 1997, the company adopted Statement of Financial Accounting Standards No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities" for all applicable transactions. As a result, certain 1997 balance sheet items have been reclassified. Restatement of prior periods is not permitted. The new standard did not have a material effect on the company's net income or financial position. Navistar International Corporation and Consolidated Subsidiaries Notes to Financial Statements (Unaudited) Note E. Inventories Inventories are as follows: April 30 October 31 April 30 Millions of dollars 1997 1996 1996 - ------------------------------------------------------------------- Finished products ........ $ 238 $ 242 $ 295 Work in process .......... 101 97 148 Raw materials and supplies 134 124 157 ------- ------- ------- Total inventories ........ $ 473 $ 463 $ 600 ======= ======= ======= Note F. Financial Instruments The company purchases collateralized mortgage obligations (CMOs) that have predetermined fixed-principal payment patterns which are relatively certain. These instruments totaled $33 million at April 30, 1997. During March through April 1997, Navistar Financial Corporation (NFC) entered into $500 million of forward interest rate lock agreements on a U.S. Treasury security maturing in 1999 related to NFC's May 1997 sale of retail receivables. These hedge agreements were closed in conjunction with the pricing of the sale. The loss, which was not material, was deferred at April 30, 1997, and included in the gain on the sale of $500 million of retail notes in May 1997. In April 1997, NFC entered into a $100 million forward interest rate lock agreement on a U.S. Treasury security maturing in 2002 related to NFC's May 1997 subordinated debt issue. The hedge agreement was closed in conjunction with the pricing of the subordinated debt, and the loss, which was not material, will be amortized over the life of the subordinated debt. In May 1997, NFC entered into a $50 million forward starting swap agreement on a U.S. Treasury security maturing in 1999 related to NFC's anticipated November 1997 sale of retail receivables. This swap agreement starts on October 31, 1997. NFC intends to sell this position in October 1997 on the pricing date of the sale. The gain or loss which will result from the swap transaction will be included in the gain or loss recognized on the sale of receivables. During May 1997, NFC sold $100 million of Senior Subordinated Notes due 2002. NFC used the net proceeds to repurchase $6 million of its outstanding 1998 Notes and to reduce outstanding indebtedness under the Bank Revolving Credit Facility. Navistar International Corporation and Consolidated Subsidiaries Notes to Financial Statements (Unaudited) Note G. Environmental Matters In the fourth quarter of 1994, Transportation recorded a charge for potential clean-up costs related to two formerly owned businesses, Wisconsin Steel and Solar Turbines, Inc. (Solar), as disclosed in Note 4 to the company's Annual Report on Form 10-K. In March 1997, the U.S. Department of Justice and Transportation approved the final consent decree in settlement of a dispute related to the Wisconsin Steel property. In June 1997, the company paid $11 million to the Economic Development Administration in settlement of various commercial issues and past environmental costs which is consistent with the company's estimate of the anticipated clean-up costs of the Wisconsin Steel and Solar sites reported at October 31, 1996. Note H. New Pronouncements In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings Per Share." This statement specifies the computation, presentation and disclosure requirements for earnings per share and is effective for financial statements issued for periods ending after December 15, 1997, including interim periods. The standard is not expected to have a material effect on the company's net income per common share computation. Navistar International Corporation and Consolidated Subsidiaries Notes to Financial Statements (Unaudited) Note I. Supplemental Financial Information
Navistar International Corporation (with financial services operations on an equity basis) in millions of dollars: Three Months Ended Six Months Ended April 30 April 30 ------------------- ------------------ Condensed Statement of Income 1997 1996 1997 1996 - --------------- ------ ------ ------ ------ Sales of manufactured products ..... $1,493 $1,423 $2,733 $2,785 Other income ... 14 8 24 23 ------ ------ ------ ------ Total sales and revenues . 1,507 1,431 2,757 2,808 ------ ------ ------ ------ Cost of products sold 1,287 1,228 2,358 2,424 Postretirement benefits .... 57 54 108 111 Engineering and research expense 32 35 62 64 Marketing and administrative expense 78 67 154 132 Other expenses .. 20 21 41 43 ------ ------ ------ ------ Total costs and expenses .. 1,474 1,405 2,723 2,774 ------ ------ ------ ------ Income before income taxes Manufacturing operations .. 33 26 34 34 Financial services operations 16 16 39 43 ------ ------ ------ ------ Income before income taxes 49 42 73 77 Income tax expense 19 16 28 29 ------ ------ ------ ------ Net income ....... $ 30 $ 26 $ 45 $ 48 ====== ====== ====== ======
Navistar International Corporation and Consolidated Subsidiaries Notes to Financial Statements (Unaudited) Note I. Supplemental Financial Information (continued)
Navistar International Corporation (with financial services operations on an equity basis) in millions of dollars: Condensed Statement April 30 October 31 April 30 of Financial Condition 1997 1996 1996 - ------------------------------------------------------------------- Cash, cash equivalents and marketable securities ............... $ 610 $ 707 $ 589 Receivables, net ........... 264 181 178 Inventories ................ 473 463 600 Property and equipment, net. 637 666 647 Equity in financial services subsidiaries .... 306 306 297 Other assets ............... 516 462 464 Deferred tax asset, net .... 995 1,030 1,065 ------- ------- ------- Total assets .......... $ 3,801 $ 3,815 $ 3,840 ------- ------- ------- Accounts payable, principally trade ........ $ 862 $ 771 $ 806 Debt ....................... 109 115 125 Postretirement benefits liabilities .............. 1,192 1,344 1,293 Other liabilities .......... 679 669 718 Shareowners' equity ........ 959 916 898 ------- ------- ------- Total liabilities and shareowners' equity .............. $ 3,801 $ 3,815 $ 3,840 ======= ======= =======
Navistar International Corporation and Consolidated Subsidiaries Notes to Financial Statements (Unaudited) Note I. Supplemental Financial Information (continued)
Navistar International Corporation (with financial services operations on an equity basis) in millions of dollars: Six Months Ended April 30 -------------------- Condensed Statement of Cash Flow 1997 1996 - ------------------------------------------- -------- -------- Cash flow from operations Net income ................................ $ 45 $ 48 Adjustments to reconcile net income to cash provided by (used in) operations: Depreciation and amortization ........ 49 47 Equity in earnings of nonconsolidated companies, net of dividends received 6 (17) Deferred income taxes ............... 26 26 Other, net ........................... (6) 4 Change in operating assets and liabilities. (44) (290) -------- -------- Cash provided by (used in) operations ..... 76 (182) -------- -------- Cash flow from investment programs Purchase of marketable securities ......... (280) (332) Sales or maturities of marketable securities 134 349 Capital expenditures ...................... (58) (55) Advance to Navistar Financial Corporation . (98) (29) Other investment programs, net ............ 4 6 -------- -------- Cash used in investment programs .......... (298) (61) -------- -------- Cash flow used in financing activities .... (21) (22) -------- -------- Cash and cash equivalents Decrease during the period ................ (243) (265) At beginning of the year .................. 452 461 -------- -------- Cash and cash equivalents at end of the period ................... $ 209 $ 196 ======== ========
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS Certain statements under this caption constitute "forward- looking statements" under the Reform Act, which involve risks and uncertainties. Navistar International Corporation's actual results may differ significantly from the results discussed in such forward- looking statements. Factors that might cause such a difference include, but are not limited to, those discussed under the heading "Business Environment." Second Quarter Ended April 30, 1997 ----------------------------------- The company reported net income of $30 million, or $0.31 per common share for the second quarter ended April 30, 1997, compared with net income of $26 million, or $0.26 per common share for the comparable quarter last year. The company's manufacturing operations reported income before income taxes of $33 million compared with pretax income of $26 million in the second quarter of 1996 reflecting continued strong demand for mid-range diesel engines. The financial services operations' pretax income for the second quarter of 1997 was $16 million, unchanged from the same period in 1996. Sales and Revenues. Second quarter 1997 industry retail sales of Class 5 through 8 trucks totaled 86,800 units, equal to the number of units sold during this period in 1996. Class 8 heavy truck sales of 48,500 units during the second quarter of 1997 were two percent lower than the 1996 level of 49,700 units. Industry sales of Class 5, 6 and 7 medium trucks, including school buses, increased three percent to 38,300 units. Industry sales of school buses, which accounted for 18 percent of the medium truck market, decreased four percent. Sales and revenues for the second quarter of 1997 totaled $1,551 million, five percent higher than the $1,480 million reported for the comparable quarter in 1996. Sales of trucks, mid-range diesel engines and service parts for the second quarter of 1997 totaled $1,493 million compared with $1,423 million reported for the same period in 1996. The company maintained its position as sales leader in the combined United States and Canadian Class 5 through 8 truck market with a 27.1 percent market share for the second quarter of 1997, a slight decrease from the market share reported in 1996. (Sources: American Automobile Manufacturer's Association, the United States Motor Vehicle Manufacturer's Association and R.L. Polk & Company.) Shipments of mid-range diesel engines by the company to other original equipment manufacturers during the second quarter of 1997 totaled 48,300 units, a 19 percent increase from the same period of 1996. Higher shipments to a domestic automotive manufacturer to meet consumer demand for the light trucks and vans which use this engine was the primary reason for the increase. Service parts sales of $203 million in the second quarter of 1997 increased four percent from the prior year's level. Finance and insurance revenue was $43 million in the second quarter of 1997 slightly lower than in 1996 primarily as a result of a decline in wholesale note revenue. Costs and expenses. Manufacturing gross margin was 13.8 percent of sales for the second quarter of 1997 compared with 13.7 percent for the same period in 1996. Consolidated marketing and administrative expense increased to $87 million in 1997 from $75 million in the second quarter of 1996 reflecting investment in the implementation of the company's strategy to reduce costs and complexity in its manufacturing processes. Six Months Ended April 30, 1997 ------------------------------- Pretax income for the first six months of 1997 was $73 million compared with $77 million reported for the same period of 1996. The company's manufacturing operations reported income before income taxes of $34 million during this period, equal to the amount reported in 1996. The financial services operations' pretax income for the first six months of 1997 was $39 million, a decline from the $43 million reported in 1996. This change is a result of lower income on sales of retail receivables and a lower volume of wholesale financing. Manufacturing operations' sales and revenues during this period totaled $2,757 million, slightly lower than in 1996. During the first six months of 1997, sales of trucks declined six percent while sales of diesel engines to original equipment manufacturers increased ten percent. Service parts sales were five percent higher than in the same period of 1996. Finance and insurance revenue was $88 million during the first two quarters of 1997 compared with $101 million in 1996. Industry retail sales of Class 5 through 8 trucks during the first six months of 1997 totaled 159,000 units, a decrease from the 167,600 units sold during this period in 1996. The company remained the sales leader in the combined United States and Canadian Class 5 through 8 truck market for the first two quarters of the year with a 26.8 percent market share, an increase over the 26.2 percent market share reported for the same period last year. Manufacturing gross margin for the first six months of 1997 was 13.7 percent compared with 13.0 percent in 1996. The increase in gross margin reflects improved operating performance and pricing. Consolidated marketing and administrative expense was $170 million during this period compared with $148 million during the first two quarters of 1996. The factors which influenced this expense during the second quarter of 1997 were also responsible for the change during the first half of the year. Liquidity and Capital Resources Cash flow is generated from the manufacture and sale of trucks, mid-range diesel engines and service parts as well as product financing and insurance coverage provided to the company's dealers and retail customers by the financial services operations. Historically, funds to finance the company's products are obtained from a combination of commercial paper, short- and long- term bank borrowings, medium- and long-term debt issues, sales of finance receivables and equity capital. NFC's current debt ratings have made bank borrowings and sales of finance receivables the most economic sources of cash. Insurance operations are funded through internal operations. Total cash, cash equivalents and marketable securities of the company amounted to $770 million at April 30, 1997, $881 million at October 31, 1996 and $751 million at April 30, 1996. Cash used in operations during the first six months of 1997 totaled $5 million primarily from a net change in operating assets and liabilities of $118 million offset by net income of $45 million and $68 million of other noncash items, principally depreciation. The net change in operating assets and liabilities includes a $93 million increase in payables offset by a slight increase in inventory, a $63 million increase in receivables and a $126 million decline in other liabilities. The change in other liabilities includes the company's contribution of $109 million to its hourly and salaried pension plans in the second quarter. This contribution is in addition to the $105 million that the company contributed in the first quarter of 1997. Investment programs used $134 million in cash reflecting a net increase in marketable securities of $137 million and a net decrease in retail notes and lease receivables of $73 million. In addition, $58 million was used to fund capital expenditures for construction of a truck assembly facility in Mexico, to increase mid-range diesel engine capacity, and for truck product improvements. Financing activities used cash to reduce notes and debt outstanding under the bank revolving credit facility and asset- backed and other commercial paper program by $158 million offset by a $79 million increase in debt and to pay $14 million in dividends on the Series G Preferred shares. Receivable sales were a significant source of funding in 1997 and 1996. During the first six months of 1997 and of 1996, NFC sold $487 million and $525 million, respectively, of retail notes through Navistar Financial Retail Receivables Corporation (NFRRC). NFRRC has filed registration statements with the Securities and Exchange Commission which provide for the issuance of up to $5,000 million of asset-backed securities. At April 30, 1997, the remaining shelf registration available to NFRRC was $1,973 million. During March through April 1997, NFC entered into $500 million of forward interest rate lock agreements on a U.S. Treasury security maturing in 1999 related to the May 1997 sale of retail receivables. These hedge agreements were closed in conjunction with the pricing of the sale. During May 1997, NFC sold $500 million of retail notes, realizing net proceeds of $499 million which were used for general working capital purposes. A gain of approximately $6 million was recognized on the sale. In May 1997, NFC entered into a $50 million forward starting swap agreement on a U.S. Treasury security maturing in 1999 related to the anticipated November 1997 sale of retail receivables. This swap agreement starts on October 31, 1997 and NFC intends to sell this position in October 1997 on the pricing date of the sale. NFC also utilizes a $400 million revolving wholesale note trust that provides for the continuous sale of eligible wholesale notes on a daily basis. The trust is comprised of two $100 million tranches of investor certificates maturing serially from 1997 to 1999 and a $200 million tranche maturing in 2004. At April 30, 1997, available funding under NFC's amended and restated credit facility and the asset-backed commercial paper facility was $440 million, of which $145 million was used to back short-term debt at April 30, 1997. The remaining $295 million, when combined with unrestricted cash and cash equivalents made $298 million available to fund the general business purposes of NFC at April 30, 1997. In April 1997, NFC entered into a $100 million forward interest rate lock agreement on a U.S. Treasury security maturing in 2002 related to the May 1997 subordinated debt issue. The hedge agreement was closed in conjunction with the pricing of the subordinated debt. During May 1997, the NFC sold $100 million of Senior Subordinated Notes due 2002. NFC used the net proceeds to repurchase $6 million of its outstanding 1998 Notes and to reduce outstanding indebtedness under the Bank Revolving Credit Facility. The company had outstanding capital commitments of $128 million at April 30, 1997, which consist of truck and engine development, ongoing facility maintenance programs and construction of a plant in Mexico. In November 1996, the company announced plans to spend $167 million, over the next two years, to construct this new truck assembly facility in Mexico. It is the opinion of management that, in the absence of significant unanticipated cash demands, current and forecasted cash flow will provide a basis for financing operating requirements, capital expenditures and anticipated payments of preferred dividends. Management also believes that collections on the outstanding receivables portfolios as well as funds available from various funding sources will permit the financial services operations to meet the financing requirements of the company's dealers and customers. Business Environment Sales of Class 5 through 8 trucks are cyclical, with demand affected by such economic factors as industrial production, construction, demand for consumer durable goods, interest rates and the earnings and cash flow of dealers and customers. Although the general economy remains stable, demand for new trucks in 1997 is anticipated to be lower than in 1996. An improvement in the number of new orders has increased the company's order backlog to 34,900 units at April 30, 1997 from 26,700 units at April 30, 1996. Retail deliveries during the remainder of 1997 continue to be highly dependent on the rate at which new truck orders are received. The company will evaluate order receipts and backlog throughout the year and will balance production with demand as appropriate. The company currently projects 1997 United States and Canadian Class 8 heavy truck demand to be 180,000 units, an eight percent decrease from 1996. Class 5, 6 and 7 medium truck demand, excluding school buses, is forecast at 112,000 units, a slight decrease from 1996. Demand for school buses is expected to decline slightly in 1997 to 31,500 units. Mid-range diesel engine shipments by the company to original equipment manufacturers in 1997 are expected to be 178,100 units, nine percent higher than in 1996. The company's service parts sales are projected to grow eight percent to $817 million. New Pronouncements In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings Per Share." This statement specifies the computation, presentation and disclosure requirements for earnings per share and is effective for financial statements issued for periods ending after December 15, 1997, including interim periods. The standard is not expected to have a material effect on the company's net income per common share computation. Navistar International Corporation and Consolidated Subsidiaries PART II - OTHER INFORMATION --------------------------- Item 1. Legal Proceedings Incorporated herein by reference from Item 3 - "Legal Proceedings" in the company's definitive Form 10-K dated January 22, 1997, Commission File No. 1-9618. Item 4. Submission of Matters to a Vote of Security Holders The company's Annual Meeting of Shareowners was held on March 19, 1997. The following three nominees were elected to the Board of Directors for three year terms until the 2000 Annual Meeting of Shareowners. Shares Voted Shares Nominees "FOR" "WITHHELD" -------- ------------ ---------- Jerry E. Dempsey 42,157,412 1,472,941 Robert C. Lannert 42,169,966 1,460,387 John F. Fiedler 42,164,786 1,465,567 The results of the voting on the following additional items were as follows: - Ratification of the appointment of Deloitte & Touche LLP as independent auditors for the current fiscal year - Shares Voted "FOR" 43,207,901 Shares Voted "AGAINST" 283,211 Shares "ABSTAINING" 139,141 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 10-Q Page --------- 11. Computation of Net Income Per Share E-1 (b) Reports on Form 8-K: No reports on Form 8-K were filed for the six months ended April 30, 1997. SIGNATURE --------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. NAVISTAR INTERNATIONAL CORPORATION - ---------------------------------- (Registrant) /s/ J. Steven Keate - ----------------------------------- J. Steven Keate Vice President and Controller (Principal Accounting Officer) June 13, 1997 EX-11 2 E-1 EXHIBIT 11 NAVISTAR INTERNATIONAL CORPORATION AND SUBSIDIARIES ---------------------------------- COMPUTATION OF NET INCOME PER COMMON SHARE A. Primary: See the Statement of Income of this Form 10-Q. B. Full Dilution: Net income per common share assuming full dilution is computed by assuming that all options and warrants which are exercisable below market prices are exercised and the proceeds applied to reduce common stock outstanding. The computations assume that convertible preferred and preference stock are converted to common stock. Income is divided by the average number of common shares outstanding and unconditionally issuable at the end of each month during the period, adjusted for the net effects of the exercise of options and warrants and the conversion of convertible preferred and preference stocks.
THREE MONTHS ENDED SIX MONTHS ENDED APRIL 30 APRIL 30 ------------------ ----------------- Millions of Dollars 1997 1996 1997 1996 - --------------------------------------------------------------- Net income ....... $ 30 $ 26 $ 45 $ 48 ======== ======== ======== ======== Average Common and common equivalent shares (millions): Average common shares outstanding as adjusted per primary calculations (millions) ..... 73.7 73.8 73.7 73.8 Assuming conversion of Series G Preferred Stock. .6 .6 .6 .6 -------- -------- -------- -------- Average common and dilutive common equivalent shares as adjusted ...... 74.3 74.4 74.3 74.4 ======== ======== ======== ======== Income per common share assuming full dilution (dollars): Net income ...... $ .40 # $ .36 # $ .60 # $ .65 # ======== ======== ======== ======== - --------------- # This calculation is submitted in accordance with Regulation S-K item 601(b)(11) of the Securities Exchange Act although it is contrary to paragraph 40 of APB Opinion No. 15 because it produces an anti-dilutive result.
E-1 EX-27 3
5 1000000 3-MOS OCT-31-1997 APR-30-1997 237 533 1649 (31) 473 0 1617 (869) 5204 0 1322 0 244 2133 (1418) 5204 1493 1551 1292 1502 57 4 20 49 (19) 30 0 0 0 30 0.31 0.31 The company has adopted an unclassified presentation in the Statement of Financial Condition.
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