<PAGE 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, 1996
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 1-5236
NAVISTAR INTERNATIONAL TRANSPORTATION CORP.
-------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 36-1264810
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
455 North Cityfront Plaza Drive, Chicago, Illinois 60611
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(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 3, 1996, the number of shares outstanding of the registrant's
Common Stock was 1,000.
THE REGISTRANT IS A WHOLLY OWNED SUBSIDIARY OF NAVISTAR INTERNATIONAL
CORPORATION AND MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS
H(1) (a) AND (b) OF THE FORM 10-Q AND IS THEREFORE FILING THIS FORM
WITH THE REDUCED DISCLOSURE FORMAT.
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<PAGE 2>
NAVISTAR INTERNATIONAL TRANSPORTATION CORP.
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, 1996 and 1995. 3
Statement of Financial Condition --
April 30, 1996, October 31, 1995 and April 30, 1995 ...... 5
Statement of Cash Flow --
Six Months Ended April 30, 1996 and 1995 ................. 6
Notes to Financial Statements .............................. 7
Item 2. Management's Discussion and Analysis
of Results of Operations and Financial Condition .. 9
Part II. Other Information:
Item 1. Legal Proceedings ................................. 13
Item 6. Exhibits and Reports on Form 8-K .................. 13
Signature .................................................. 14
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<PAGE 3>
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION> ------------------------------
ITEM 1. Financial Statements
STATEMENT OF INCOME (Unaudited)
-------------------------------------------------------------------------------------------------------------------------
Millions of dollars
-------------------------------------------------------------------------------------------------------------------------
Three Months Ended April 30
----------------------------------------------------------------------------------
Navistar International
Transportation Corp. and
Consolidated Subsidiaries Manufacturing* Financial Services*
------------------------- ------------------ ------------------
1996 1995 1996 1995 1996 1995
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Sales and revenues
Sales of manufactured products ......... $1,423 $1,586 $1,423 $1,586 $ - $ -
Finance and insurance revenue .......... 46 40 - - 59 54
Other income ........................... 5 9 2 7 3 4
------ ------ ------ ------ ------ ------
Total sales and revenues ............. 1,474 1,635 1,425 1,593 62 58
------ ------ ------ ------ ------ ------
Costs and expenses
Cost of products and services sold ..... 1,231 1,366 1,229 1,364 2 2
Postretirement benefits ................ 54 55 54 55 - -
Engineering and research expense ....... 34 26 34 26 - -
Marketing and administrative expense ... 75 73 67 66 8 7
Interest expense ....................... 44 44 22 24 22 22
Financing charges on sold receivables .. 7 9 20 23 - -
Insurance claims
and underwriting expense ............. 14 14 - - 14 14
------ ------ ------ ------ ------ ------
Total costs and expenses ............. 1,459 1,587 1,426 1,558 46 45
------ ------ ------ ------ ------ ------
Income (loss) before income taxes
Manufacturing ........................ - - (1) 35 - -
Financial Services ................... - - 16 13 - -
------ ------ ------ ------ ------ ------
Income before income taxes ......... 15 48 15 48 16 13
Income tax expense ................. (17) (11) (17) (11) (6) (4)
------ ------ ------ ------ ------ ------
Net income (loss) ...................... $ (2) $ 37 $ (2) $ 37 $ 10 $ 9
====== ====== ====== ====== ====== ======
<FN>
See Notes to Financial Statements.
</TABLE>
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<TABLE>
<CAPTION>
Six Months Ended April 30
- ----------------------------------------------------------------------------------
Navistar International
Transportation Corp. and
Consolidated Subsidiaries Manufacturing* Financial Services*
- ------------------------- ------------------ -------------------
1996 1995 1996 1995 1996 1995
------ ------ ------ ------ ------ ------
<C> <C> <C> <C> <C> <C>
$2,785 $2,953 $2,785 $2,953 $ - $ -
101 75 - - 126 102
15 20 12 15 6 8
------ ------ ------ ------ ------ ------
2,901 3,048 2,797 2,968 132 110
------ ------ ------ ------ ------ ------
2,430 2,564 2,425 2,561 5 3
111 105 111 104 - 1
63 50 63 50 - -
148 142 132 128 16 14
83 86 44 48 42 41
16 15 41 42 - -
26 27 - - 26 27
------ ------ ------ ------ ------ ------
2,877 2,989 2,816 2,933 89 86
------ ------ ------ ------ ------ ------
- - (19) 35 - -
- - 43 24 - -
------ ------ ------ ------ ------ ------
24 59 24 59 43 24
(20) (15) (20) (15) (16) (8)
------ ------ ------ ------ ------ ------
$ 4 $ 44 $ 4 $ 44 $ 27 $ 16
====== ====== ====== ====== ====== ======
<FN>
* "Manufacturing" includes the consolidated
financial results of Transportation's
manufacturing operations with its wholly
owned financial services subsidiaries included
under the equity method of accounting.
"Financial Services" includes Transportation's
wholly owned subsidiary, Navistar Financial
Corporation, and other wholly owned finance
and insurance subsidiaries. Transactions
between Manufacturing and Financial Services
have been eliminated from the "Navistar
International Transportation Corp. and
Consolidated Subsidiaries" columns.
The basis of consolidation is described
in Note A.
</TABLE>
<PAGE>
<PAGE 5>
<TABLE>
<CAPTION>
STATEMENT OF FINANCIAL CONDITION (Unaudited)
- ----------------------------------------------------------------------------------------------------------------------------------
Millions of dollars
- ----------------------------------------------------------------------------------------------------------------------------------
Navistar International
Transportation Corp. and
Consolidated Subsidiaries Manufacturing* Financial Services*
------------------------------ ------------------------------ ------------------------------
April 30 October 31 April 30 April 30 October 31 April 30 April 30 October 31 April 30
1996 1995 1995 1996 1995 1995 1996 1995 1995
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
- ----------------------------------
Cash and cash equivalents ........ $ 161 $ 442 $ 349 $ 134 $ 418 $ 269 $ 27 $ 24 $ 80
Marketable securities ............ 136 226 192 1 86 54 135 140 138
------ ------ ------ ------ ------ ------ ------ ------ ------
297 668 541 135 504 323 162 164 218
Receivables, net ................. 1,796 1,831 1,703 169 251 249 1,679 1,672 1,551
Inventories ...................... 600 416 493 600 416 493 - - -
Property, net of accumulated
depreciation and amortization
of $803, $764 and $716 ......... 703 683 592 647 642 559 56 41 33
Equity in Financial Services
subsidiaries ................... - - - 297 282 264 - - -
Investments and other assets ..... 195 163 200 141 119 151 54 44 49
Prepaid and intangible pension
assets ......................... 322 320 363 321 319 362 1 1 1
------ ------ ------ ------ ------ ------ ------ ------ ------
Total assets ..................... $3,913 $4,081 $3,892 $2,310 $2,533 $2,401 $1,952 $1,922 $1,852
====== ====== ====== ====== ====== ====== ====== ====== ======
LIABILITIES AND
SHAREOWNER'S EQUITY
- ----------------------------------
Liabilities
Accounts payable ................. $ 870 $ 933 $ 901 $ 806 $ 876 $ 846 $ 113 $ 146 $ 154
Other liabilities ................ 854 949 893 701 795 732 156 157 159
Debt due Parent Company .......... 864 923 909 864 923 909 - - -
Debt ............................. 1,544 1,457 1,430 165 127 162 1,379 1,330 1,268
Postretirement benefits
liabilities .................... 1,300 1,341 1,209 1,293 1,334 1,202 7 7 7
------ ------ ------ ------ ------ ------ ------ ------ ------
Total liabilities ............ 5,432 5,603 5,342 3,829 4,055 3,851 1,655 1,640 1,588
------ ------ ------ ------ ------ ------ ------ ------ ------
Shareowner's equity
Capital stock
(1,000 shares issued) ......... 786 786 786 786 786 786 178 178 178
Retained earnings (deficit) ...... (2,305) (2,308) (2,236) (2,305) (2,308) (2,236) 119 104 86
------ ------ ------ ------ ------ ------ ------ ------ ------
Total shareowner's equity .... (1,519) (1,522) (1,450) (1,519) (1,522) (1,450) 297 282 264
------ ------ ------ ------ ------ ------ ------ ------ ------
Total liabilities
and shareowner's equity ........ $3,913 $4,081 $3,892 $2,310 $2,533 $2,401 $1,952 $1,922 $1,852
====== ====== ====== ====== ====== ====== ====== ====== ======
<FN>
See Notes to Financial Statements. * "Manufacturing" includes the consolidated financial results of
Transportation's manufacturing operations with its wholly owned
financial services subsidiaries included under the equity method of
accounting. "Financial Services" includes Transportation's wholly
owned subsidiary, Navistar Financial Corporation, and other wholly
owned finance and insurance subsidiaries. Transactions between
Manufacturing and Financial Services have been eliminated from the
"Navistar International Transportation Corp. and Consolidated
Subsidiaries" columns. The basis of consolidation is described in
Note A.
</TABLE>
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<TABLE>
<CAPTION>
STATEMENT OF CASH FLOW (Unaudited)
-----------------------------------------------------------------------------------------------------------------------------
Six Months Ended April 30 (Millions of dollars)
----------------------------------------------------------------------------------------------------------------------------
Navistar International
Transportation Corp. and
Consolidated Subsidiaries Manufacturing* Financial Services*
------------------------- ------------------ ------------------
1996 1995 1996 1995 1996 1995
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Cash flow from operations
Net Income ................................. $ 4 $ 44 $ 4 $ 44 $ 27 $ 16
Adjustments to reconcile net income
to cash provided by (used in) operations:
Depreciation and amortization ............ 52 43 47 40 5 3
Equity in earnings of Financial Services,
net of dividends received .............. - - (17) (13) - -
Additional pension funding ............... - (72) - (72) - -
Change in operating assets and liabilities:
Receivables ............................ 49 (110) 106 30 - -
Inventories ............................ (184) (64) (184) (64) - -
Prepaid and other current assets ....... (23) (6) (23) (6) - -
Accounts payable ....................... (59) 56 (68) 66 (60) (24)
Other liabilities ...................... (143) 37 (136) 35 (7) 3
Other, net ............................... 3 2 8 5 (5) (3)
------ ------ ------ ------ ------ ------
Cash provided by (used in) operations ...... (301) (70) (263) 65 (40) (5)
------ ------ ------ ------ ------ ------
Cash flow from investment programs
Purchase of retail notes
and lease receivables .................... (576) (457) - - (576) (457)
Collections/sales of retail notes and lease
receivables .............................. 561 375 - - 561 375
Acquisitions in excess of cash
collections of wholesale notes and
accounts receivable ...................... - - - - 12 (127)
Purchase of marketable securities .......... (194) (92) (148) (68) (46) (24)
Sales or maturities of marketable securities 283 74 233 47 50 27
Proceeds from property
sold under sale/leaseback ................ 7 - 7 - - -
Capital expenditures ....................... (55) (50) (55) (50) - -
Advance to Navistar Financial .............. - - (29) (99) 29 99
Other investment programs, net ............. (21) 1 (2) 7 (19) (6)
------ ------ ------ ------ ------ ------
Cash provided by (used in)
investment programs ...................... 5 (149) 6 (163) 11 (113)
------ ------ ------ ------ ------ ------
Cash flow from financing activities
Principal payments on debt ................. (27) (429) (27) (29) - (400)
Net increase in notes and debt outstanding
under bank revolving credit facility and
asset-backed and other commercial paper ... 42 543 - - 42 543
Dividends paid .............................. - - - - (10) (3)
------ ------ ------ ------ ------ ------
Cash provided by (used in)
financing activities ...................... 15 114 (27) (29) 32 140
------ ------ ------ ------ ------ ------
Cash and cash equivalents
Increase (decrease) during the period ..... (281) (105) (284) (127) 3 22
At beginning of the year .................. 442 454 418 396 24 58
------ ------ ------ ------ ------ ------
Cash and cash equivalents
at end of the period ...................... $ 161 $ 349 $ 134 $ 269 $ 27 $ 80
====== ====== ====== ====== ====== ======
<FN>
See Notes to Financial Statements. * "Manufacturing" includes the consolidated
financial results of Transportation's
manufacturing operations with its wholly
owned financial services subsidiaries
included under the equity method of
accounting. "Financial Services"
includes Transportation's wholly owned
subsidiary, Navistar Financial Corporation,
and other wholly owned finance and insurance
subsidiaries. Transactions between
Manufacturing and Financial Services have
been eliminated from the "Navistar
International Transportation Corp. and
Consolidated Subsidiaries" columns.
The basis of consolidation is described
in Note A.
</TABLE>
<PAGE>
<PAGE 7>
Navistar International Transportation Corp. and Consolidated Subsidiaries
Notes to Financial Statements (Unaudited)
Note A. Summary of Accounting Policies
Navistar International Transportation Corp., hereafter referred to as
"the Company" and "Transportation" is the wholly owned subsidiary of Navistar
International Corporation, hereafter referred to as "Parent Company." See
Note 1 to the Consolidated Financial Statements in the 1995 Annual Report on
Form 10-K.
The accompanying unaudited financial statements have been prepared in
accordance with accounting policies described in the 1995 Annual Report on
Form 10-K and should be read in conjunction with the disclosures therein.
In addition to the consolidated financial statements, Transportation has
elected to provide financial information in a format that presents the
operating results, financial condition and cash flow designated as
"Manufacturing" and "Financial Services." As used herein and in the 1995
Annual Report on Form 10-K, Manufacturing includes the consolidated financial
results of Transportation's manufacturing operations with its wholly owned
financial services subsidiaries included on a one-line basis under the equity
method of accounting. Financial Services includes the consolidated financial
results of Navistar Financial Corporation (Navistar Financial), its domestic
insurance subsidiary and foreign finance and insurance companies.
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 1995 amounts have been reclassified to conform
with the presentation used in the 1996 financial statements.
Note B. Supplemental Cash Flow Information
On the Statement of Cash Flow, Acquisitions in excess of cash
collections" relating to Financial Services' wholesale notes and accounts
receivable are included on a consolidated basis as a change in operating
assets and liabilities under cash flow from operations and in Financial
Services as cash flow from investment programs.
Consolidated interest payments during the first six months of 1996 and
1995 were $82 million and $84 million, respectively. Pursuant to a Tax
Allocation Agreement, all U.S. income taxes are paid by the Parent Company to
the federal tax authorities.
Note C. Income Taxes
The Parent Company files a consolidated U.S. federal income tax return
which includes Transportation and its U.S. subsidiaries. Transportation has
a tax allocation agreement (Tax Agreement) with the Parent Company, which
requires Transportation to compute its separate federal income tax expense
based on its adjusted book income. Any resulting tax liability is paid to the
Parent Company. In addition, under the Tax Agreement, Transportation is
required to pay to the Parent Company any tax payments received from its
subsidiaries. The effect of the Tax Agreement is to allow the Parent Company
rather than Transportation to utilize U.S. operating losses and loss
carryforwards (NOLs) generated in earlier years.
<PAGE>
<PAGE 8>
Navistar International Transportation Corp. and Consolidated Subsidiaries
Notes to Financial Statements (Unaudited)
Note D. Inventories
Inventories are as follows:
April 30 October 31 April 30
Millions of dollars 1996 1995 1995
- --------------------------------------------------------------------------
Finished products ....................... $ 295 $ 167 $ 211
Work in process ......................... 148 91 126
Raw materials and supplies .............. 157 158 156
------- ------- -------
Total inventories ....................... $ 600 $ 416 $ 493
======= ======= =======
Note E. Financial Instruments
Navistar Financial enters into forward interest rate contracts to manage
its exposures to fluctuations in funding costs from the anticipated
securitization and sale of retail notes. Gains or losses incurred with the
closing of these agreements are included as a component of the gain or loss
on the sale of receivables.
In February 1996, Navistar Financial entered into $200 million of short-
term forward interest rate lock agreements on a Treasury security maturing in
1998 related to the sale of retail receivables in May 1996. At April 30,
1996, the deferred unrealized gain from hedging the anticipated , but not yet
committed, sales transactions was $4 million.
In May 1996, Navistar Financial entered into an additional $250 million
of forward interest rate lock agreements on Treasury securities maturing in
1998 related to the May 1996 sale of retail receivables. These hedge
agreements, totalling $450 million, were closed on May 22, 1996, in
conjunction with the pricing of the May sale.
Note F. Legal Proceedings
In May 1993, a jury issued a verdict in favor of Vernon Klein Truck &
Equipment, Inc. (Klein Truck) and against Transportation in the amount of $11
million in compensatory damages and $15 million in punitive damages.
Transportation appealed the verdict and in order to do so was required to post
a bond collateralized with $30 million in cash. In November 1994, the Court
of Appeals of the State of Oklahoma reversed the verdict and entered judgment
in favor of Transportation on virtually all aspects of the case. Klein Truck
appealed to the Oklahoma Supreme Court where the case is now pending. The
bond and the related collateral will be released when the order of the
Oklahoma Supreme Court is filed.
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 5 to the
Company's Annual Report on Form 10-K. During the third quarter of 1995,
Transportation and Solar entered into an agreement providing for the joint
funding of future site studies and necessary corrective action at the
facility. The agreement also provides for arbitration to resolve a dispute
over past remediation costs incurred by Solar.
There has been no change in Transportation's estimate of the anticipated
clean-up costs of the Wisconsin Steel and Solar sites reported at October 31,
1995.
<PAGE>
<PAGE 9>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Consolidated
Transportation reported a net loss of $2 million for the second quarter
ended April 30, 1996, compared with net income of $37 million for the
comparable quarter last year. For the first six months of 1996,
Transportation reported net income of $4 million, a decrease from the $44
million reported for the same period in 1995.
Consolidated sales and revenues for the second quarter of 1996 totalled
$1,474 million compared with $1,635 million reported in 1995. During the
first six months of 1996, consolidated sales and revenues declined 5% to
$2,901 million from $3,048 million.
Manufacturing
Second Quarter Ended April 30, 1996
-----------------------------------
Manufacturing, excluding Financial Services, reported a loss before
income taxes of $1 million compared with pretax income of $35 million in the
second quarter of 1995. The change reflects a decline in demand for trucks
partially offset by the effect of ongoing cost improvement initiatives and
continued strong demand for mid-range diesel engines and higher parts sales.
Second quarter 1996 industry retail sales of Class 5 through 8 trucks
totalled 87,100 units, a decrease of 11% over 1995. Class 8 heavy truck sales
of 49,700 units during the second quarter of 1996 were 15% lower than the 1995
level of 58,300 units. Industry sales of Class 5, 6 and 7 medium trucks,
including school buses, declined 5% to 37,400 units. Industry sales of school
buses, which accounted for 19% of the medium truck market increased 22%.
Manufacturing's sales of trucks, diesel engines and service parts for the
second quarter of 1996 totalled $1,423 million compared with $1,586 million
reported for the same period in 1995. Transportation maintained its position
as sales leader in the combined United States and Canadian Class 5 through 8
truck market with a 27.1% market share for the second quarter of 1996, an
improvement from the 25.2% market share reported in 1995.
Shipments of mid-range diesel engines by Transportation to other original
equipment manufacturers during the second quarter of 1996 totalled 40,600
units, a 3% increase from the same period of 1995. Higher shipments to a
major 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 $195 million in the second quarter of 1996 were
10% higher than the $177 million reported in 1995.
Operating Costs and Expenses. Manufacturing gross margin was 13.7% of sales
for the first quarter of 1996 compared with 14.0% for the same period in 1995.
The decrease in gross margin is primarily the result of lower sales volumes
and more competitive pricing partially offset by improved operating
efficiency.
Engineering and research expense increased to $34 million in the first
quarter of 1996 from $26 million in 1995 reflecting investment in the next
generation of trucks and diesel engines as well as improvements to existing
products.
<PAGE>
<PAGE 10>
Six Months Ended April 30, 1996
-------------------------------
The pretax loss, excluding Financial Services, for the first six months
of 1996 was $19 million compared with net income of $35 million reported for
the same period of 1995.
Manufacturing's sales and revenues during this period totalled $2,797
million, 6% lower than the first two quarters of 1995. During the first six
months of 1996, sales of trucks declined 10% while sales of diesel engines to
original equipment manufacturers increased 9%. Parts sales were 10% higher
than in the same period of 1995.
Industry retail sales of Class 5 through 8 trucks during the first six
months of fiscal 1996 totalled 167,900 units, a decrease from the 186,900
units sold during this period in 1995. Transportation remained the sales
leader in the combined United States and Canadian Class 5 through 8 truck
market for the first two quarters of the fiscal year with a 26.1% market
share, a slight increase over the 25.8% market share reported for the same
period last year.
Manufacturing gross margin for the first six months of 1996 was 13.0%
compared with 13.3% in 1995. The factors which influenced gross margin during
the second quarter of 1996 were also responsible for the change during the
first half of the year.
Financial Services
Financial Services' pretax income for the second quarter of 1996 was $16
million, an improvement from the $13 million reported in 1995. Navistar
Financial was responsible for the change which reflects increased revenues
from higher retail and wholesale note balances.
The increase in pretax income from $24 million for the first six months
of 1995 to $43 million in 1996 reflects higher income on sales of retail
notes and an increased volume of wholesale financing. During the first two
quarters of 1996, sales of receivables totalled $525 million with a gain of
$12 million compared with $315 million sold a year ago with a small loss. The
improved gains on sales resulted from higher margins on retail notes
reflecting declining market interest rates prior to the date of sale.
LIQUIDITY AND CAPITAL RESOURCES
Consolidated
Consolidated cash flow is generated from the manufacture, sale and
financing of trucks, diesel engines and service parts. Total cash, cash
equivalents and marketable securities of Transportation amounted to $297
million at April 30, 1996, $668 million at October 31, 1995 and $541 million
at April 30, 1995.
Manufacturing
Cash used in operations during the first six months of 1996 totalled $263
million, primarily from a net change in operating assets and liabilities of
$305 million. The net change in operating assets and liabilities includes a
$106 million decrease in receivables, a $184 million increase in inventories
reflecting the decline in demand for trucks, an increase in accounts payable
and a $136 million decrease in other liabilities. The decline in other
liabilities is the result of the payment to employees as required by the
Company's profit sharing agreements as well as the timing of planned pension
funding.
Investment programs provided $6 million in cash reflecting a net decrease
of $85 million in marketable securities offset by $55 million used to fund
capital expenditures for truck product improvement, increase diesel engine
capacity and improve cost performance. Financing programs used cash to
reduce debt by $27 million.
<PAGE>
<PAGE 11>
At April 30, 1996, Transportation had outstanding capital commitments of
$29 million. The commitments include truck and engine product development and
ongoing facility maintenance programs. Transportation finances capital
expenditures principally through internally generated cash. Capital leasing
is used to fund selected projects based on economic and operating factors.
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 and capital expenditures.
Financial Services
Operations used $40 million in cash in the first quarter of 1996
primarily reflecting a payment to Manufacturing. Cash from investment
programs and financing activities funded Financial Services' operations.
Investment programs provided $11 million during this period principally as a
result of $29 million in funds advanced to Navistar Financial by
Transportation while financing activities provided $32 million as a result of
an increase in debt.
Receivable sales were a significant source of funding in 1996 and 1995.
During the first six months of 1996, Navistar Financial sold $525 million of
retail notes, net of unearned finance income, through Navistar Financial
Retail Receivables Corporation (NFRRC), realizing net proceeds from the sale
of $495 million. During the same period in 1995, Navistar Financial sold $315
million of retail notes receivable with net proceeds of $295 million. In both
years, the net proceeds were used for general working capital purposes.
On May 30, 1996, Navistar Financial sold $460 million of retail notes,
net of unearned finance income, realizing net proceeds of $459 million which
were used for general working capital purposes.
On November 14, 1995, NFRRC filed an additional registration statement
with the Securities and Exchange Commission providing for the issuance of an
additional $2,000 million of asset-backed securities. This registration
statement, along with two previously filed registrations statements, allows
NFRRC to issue up to $5,000 million of asset-backed securities. At April 30,
1996, the remaining shelf registration available to NFRRC was $2,905 million.
Effective March 29, 1996, Navistar Financial amended and restated its
$900 million bank revolving credit facility and its $300 million asset-backed
commercial paper (ABCP) program, extending the maturity date of each facility
to March 2001. In addition, the commitment of the bank revolving credit
facility was expanded to $925 million, the ABCP facility was increased to $400
million and a new pricing and fee schedule was established.
At April 30, 1996, available funding under the amended and restated
credit facility and the asset-backed commercial paper facility was $227
million, of which $49 million was used to back short-term debt at April 30,
1996. The remaining $178 million when combined with unrestricted cash and
cash equivalents made $185 million available to fund the general business
purposes of Navistar Financial at April 30, 1996.
Management believes that collections on the outstanding receivables
portfolio as well as funds available from various funding sources will permit
the Financial Services subsidiaries to meet the financing requirements of the
company's dealers and customers.
<PAGE>
<PAGE 12>
Business Outlook
During the first two quarters of 1996, the Class 5 through 8 truck market
experienced a significant decline in the rate of new truck orders and an
increase in the cancellation of some existing orders. Accordingly, retail
deliveries in 1996 will be highly dependent on the rate at which new truck
orders are received. Anticipating lower year-over-year truck demand levels,
management will balance production with demand as appropriate to assure that
Transportation's operating and financial objectives for the year are met.
As a result of a decline in truck orders which reflect a softening of
certain key economic indicators in the truck industry, Transportation
currently projects 1996 United States and Canadian Class 8 heavy truck demand
to be 173,000 units, a 24% decrease from 1995. Class 5, 6 and 7 medium truck
demand, including school buses, is forecast at 144,500 units, a 5% decrease
from 1995. Diesel engine shipments by Transportation to other original
equipment manufacturers in 1996 are expected to be approximately 157,000
units, unchanged from 1995. Transportation's parts sales are expected to grow
5% to $768 million.
<PAGE>
<PAGE 13>
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 26, 1996, Commission
File No. 1-5236.
Item 6. Exhibits and Reports on Form 8-K
No reports on Form 8-K were filed for the three months ended
April 30, 1996.
<PAGE>
<PAGE 14>
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 TRANSPORTATION CORP.
- -------------------------------------------
(Registrant)
/s/ J. Steven Keate
- -------------------------------------------
J. Steven Keate
Vice President and Controller
June 7, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> APR-30-1996
<CASH> 161
<SECURITIES> 136
<RECEIVABLES> 1824
<ALLOWANCES> (28)
<INVENTORY> 600
<CURRENT-ASSETS> 0<F1>
<PP&E> 1506
<DEPRECIATION> (803)
<TOTAL-ASSETS> 3913
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 2408
0
0
<COMMON> 786
<OTHER-SE> (2305)
<TOTAL-LIABILITY-AND-EQUITY> 3913
<SALES> 1423
<TOTAL-REVENUES> 1474
<CGS> 1231
<TOTAL-COSTS> 1459
<OTHER-EXPENSES> 54
<LOSS-PROVISION> 6
<INTEREST-EXPENSE> 44
<INCOME-PRETAX> 15
<INCOME-TAX> (17)
<INCOME-CONTINUING> (2)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>The company has adopted an unclassified presentation in the Statement of
Financial Condition.
</FN>
</TABLE>
