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 January 31, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 1-4146-1
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NAVISTAR FINANCIAL CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 36-2472404
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2850 West Golf Road Rolling Meadows, Illinois 60008
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code 708-734-4275
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 February 28, 1994, the number of shares outstanding of the registrant's
common stock was 1,600,000.
THE REGISTRANT IS A WHOLLY-OWNED SUBSIDIARY OF NAVISTAR INTERNATIONAL
TRANSPORTATION CORP. AND MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS
H(1)(a) AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED
DISCLOSURE FORMAT.<PAGE>
<PAGE>
Form 10-Q
NAVISTAR FINANCIAL CORPORATION
AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Statement of Consolidated Income and Retained Earnings --
Three Months Ended January 31, 1994 and 1993. . . . . . . . . . . 2
Statement of Consolidated Financial Condition --
January 31, 1994; October 31, 1993; and January 31, 1993. . . . . 3
Statement of Consolidated Cash Flow --
Three Months Ended January 31, 1994 and 1993. . . . . . . . . . . 4
Notes to Consolidated Financial Statements. . . . . . . . . . . . . 5
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition. . . . . . . . . . . . 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . 12
Signature. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
<PAGE>
<PAGE>
Form 10-Q
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
NAVISTAR FINANCIAL CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED INCOME AND RETAINED EARNINGS (Unaudited)
(Millions of dollars)
<TABLE>
Three Months Ended
January 31
1994 1993
<S> <C> <C>
Revenue
Retail notes and lease financing . . . . . . . . . . . . . . . . . . . $ 24.5 $ 28.8
Wholesale notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.1 7.1
Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.6 4.1
Insurance premiums earned. . . . . . . . . . . . . . . . . . . . . . . 13.7 15.0
Marketable securities. . . . . . . . . . . . . . . . . . . . . . . . . 2.7 3.8
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54.6 58.8
Expense
Cost of borrowing
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.7 20.8
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.4 .7
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.1 21.5
Credit, collection and administrative. . . . . . . . . . . . . . . . . 2.5 4.0
Provision for losses on receivables. . . . . . . . . . . . . . . . . . .8 .9
Insurance claims and underwriting. . . . . . . . . . . . . . . . . . . 15.6 15.5
Other expense (revenue), net . . . . . . . . . . . . . . . . . . . . . .9 1.8
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36.9 43.7
Income Before Taxes on Income and Cumulative Effect
of Changes in Accounting Policy. . . . . . . . . . . . . . . . . . . . 17.7 15.1
Taxes on Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.8 5.4
Income Before Cumulative Effect of Changes
in Accounting Policy . . . . . . . . . . . . . . . . . . . . . . . . . 10.9 9.7
Cumulative Effect of Changes in Accounting Policy (Note 1) . . . . . . . - 8.8
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.9 .9
Retained Earnings
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . 48.4 48.5
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.9 -
End of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 52.4 $ 49.4
</TABLE>
See Notes to Consolidated Financial Statements.<PAGE>
<PAGE>
Form 10-Q
NAVISTAR FINANCIAL CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED FINANCIAL CONDITION (Unaudited)
(Millions of dollars)
<TABLE>
<CAPTION>
January 31 October 31 January 31
1994 1993 1993
ASSETS
<S> <C> <C> <C>
Cash and Cash Equivalents. . . . . . . . . . . . $ 36.4 $ 33.9 $ 180.9
Marketable Securities. . . . . . . . . . . . . . 136.6 125.6 131.3
Finance Receivables
Retail notes and lease financing. . . . . . . 460.7 831.4 845.2
Wholesale notes . . . . . . . . . . . . . . . 264.5 259.0 147.4
Accounts. . . . . . . . . . . . . . . . . . . 281.7 245.1 222.6
1,006.9 1,335.5 1,215.2
Allowance for losses. . . . . . . . . . . . . (10.3) (12.0) (11.8)
Finance Receivables, Net. . . . . . . . . . 996.6 1,323.5 1,203.4
Amounts Due from Sales of Receivables
(Note 3). . . . . . . . . . . . . . . . . . . 98.9 75.5 60.1
Equipment on Operating Leases, Net . . . . . . . 16.7 25.1 18.4
Repossessions. . . . . . . . . . . . . . . . . . 4.1 1.8 9.9
Other Assets . . . . . . . . . . . . . . . . . . 98.1 39.8 41.0
Total Assets . . . . . . . . . . . . . . . . . . $1,387.4 $1,625.2 $1,645.0
LIABILITIES AND SHAREOWNER'S EQUITY
Short-Term Bank Borrowings . . . . . . . . . . . $ - $ 75.0 $ -
Accounts Payable
Affiliated companies. . . . . . . . . . . . . 95.4 19.5 22.2
Other . . . . . . . . . . . . . . . . . . . . 69.7 57.8 55.6
Total. . . . . . . . . . . . . . . . . . . 165.1 77.3 77.8
Dealers' Reserves. . . . . . . . . . . . . . . . 17.2 17.3 16.9
Unpaid Insurance Claims and Unearned Premiums. . 130.3 94.5 84.6
Accrued Income Taxes . . . . . . . . . . . . . . 13.0 3.1 8.5
Accrued Interest . . . . . . . . . . . . . . . . 9.1 14.4 14.3
Senior and Subordinated Debt (Note 2). . . . . . 829.3 1,124.2 1,222.5
Shareowner's Equity
Capital stock (Par value $1.00, 1,600,000
shares issued and outstanding) . . . . . . 171.0 171.0 171.0
Retained earnings . . . . . . . . . . . . . . 52.4 48.4 49.4
Total. . . . . . . . . . . . . . . . . . . 223.4 219.4 220.4
Total Liabilities and Shareowner's Equity. . . . $1,387.4 $1,625.2 $1,645.0
</TABLE>
See Notes to Consolidated Financial Statements.<PAGE>
<PAGE>
Form 10-Q
NAVISTAR FINANCIAL CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED CASH FLOW (Unaudited)
(Millions of dollars)
<TABLE>
<CAPTION>
Three Months Ended
January 31
1994 1993
<S> <C> <C>
Cash Flow From Operations
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 10.9 $ .9
Adjustments to reconcile net income to cash
provided from operations:
Cumulative effect of changes in accounting policy. . . . . . . . . . - 8.8
Gains on sales of receivables. . . . . . . . . . . . . . . . . . . . (8.9) (5.1)
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . 2.0 1.8
Provision for losses on receivables. . . . . . . . . . . . . . . . . .8 .9
Increase in accounts payable to affiliated companies . . . . . . . . 75.9 23.0
Increase (decrease) in unpaid insurance reserves . . . . . . . . . . (2.8) .8
Increase (decrease) in other accounts payable
and accrued liabilities. . . . . . . . . . . . . . . . . . . . . . 23.6 (1.4)
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1.9) (1.5)
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99.6 28.2
Cash Flow From Investing Activities
Proceeds from sold retail notes . . . . . . . . . . . . . . . . . . . . 493.4 166.9
Purchase of retail notes and lease receivables. . . . . . . . . . . . . (219.7) (142.2)
Principal collections on retail notes and
lease receivables . . . . . . . . . . . . . . . . . . . . . . . . . . 50.3 90.2
Acquisitions over cash collections of wholesale
notes and accounts receivable. . . . . . . . . . . . . . . . . . . . (42.1) (37.7)
Purchase of marketable securities . . . . . . . . . . . . . . . . . . . (25.8) (24.0)
Proceeds from sales of marketable securities. . . . . . . . . . . . . . 15.5 23.7
Decrease (increase) in property and equipment leased to others. . . . . 7.2 (3.4)
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 278.8 73.5
Cash Flow From Financing Activities
Principal payments on bank revolving credit facility. . . . . . . . . . (219.0) -
Principal payments on long-term debt. . . . . . . . . . . . . . . . . . (75.0) -
Dividends paid to Transportation. . . . . . . . . . . . . . . . . . . . (6.9) -
Principal payments on short-term debt . . . . . . . . . . . . . . . . . (75.0) -
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (375.9) -
Increase in Cash and Cash Equivalents. . . . . . . . . . . . . . . . . . . 2.5 101.7
Cash and Cash Equivalents at Beginning of Period . . . . . . . . . . . . . 33.9 79.2
Cash and Cash Equivalents at End of Period . . . . . . . . . . . . . . . .$ 36.4 $ 180.9
Supplemental disclosure of cash flow information
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 21.0 $ 26.6
Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . .$ .3 $ .1
</TABLE>
See Notes to Consolidated Financial Statements.<PAGE>
<PAGE>
Form 10-Q
NAVISTAR FINANCIAL CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The consolidated financial statements include the accounts of Navistar
Financial Corporation ("NFC") and its wholly-owned subsidiaries
("Corporation"). Navistar International Transportation Corp.
("Transportation"), which is wholly-owned by Navistar International
Corporation ("Navistar"), is the parent Company of NFC.
The accompanying unaudited financial statements and notes have been prepared
in accordance with the accounting policies set forth in the Corporation's
1993 Annual Report on Form 10-K and should be read in conjunction with the
Notes to the Consolidated Financial Statements 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
interim periods presented. Interim results are not necessarily indicative
of results to be expected for the full year. Certain 1993 amounts have been
reclassified to conform with the presentation used in the 1994 financial
statements.
In the third quarter of fiscal 1993, the Corporation adopted Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" and Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" retroactive to
November 1, 1992. The cumulative effect of adopting these changes in
accounting policy retroactive to November 1, 1992 resulted in an after tax
charge to income of $8.8 million in the first quarter of fiscal 1993.
2. There was no outstanding short-term debt during the first three months of
fiscal 1994 and 1993. The weighted average interest rate on all debt,
including the effect of discounts and related amortization, was 7.3% and
6.8% for the first three months of fiscal 1994 and 1993, respectively.
Accounts payable due to affiliated companies at January 31, 1994 include an
intercompany advance of $99.5 million. The advance, which is payable to
Transportation, accrues interest at the Corporation's incremental borrowing
rate.<PAGE>
<PAGE>
Form 10-Q
NAVISTAR FINANCIAL CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
3. Finance receivable balances do not include receivables sold by the
Corporation to public and private investors with limited recourse
provisions. Uncollected sold receivables balances are as follows:
<TABLE>
<CAPTION>
January 31 October 31 January 31
1994 1993 1993
($ Millions)
<S> <C> <C> <C>
Retail notes . . . . . . . . . . . $ 925.3 $539.4 $374.0
Wholesale notes. . . . . . . . . . 300.0 300.0 300.0
Total. . . . . . . . . . . . $1,225.3 $839.4 $674.0
</TABLE>
The allowance for losses on receivables is summarized as follows:
<TABLE>
<CAPTION>
January 31 October 31 January 31
1994 1993 1993
($ Millions)
<S> <C> <C> <C>
Allowance pertaining to:
Owned notes . . . . . . . . . . $10.3 $12.0 $11.8
Sold notes. . . . . . . . . . . 5.0 2.8 2.2
Total. . . . . . . . . . . . $15.3 $14.8 $14.0
</TABLE>
The "Amounts Due From Sales of Receivables" primarily represents holdback
reserves established pursuant to the limited recourse provisions of certain
retail note sales. The Corporation's maximum exposure under all receivable
sale recourse provisions at January 31, 1994 is $164.8 million which
includes holdback reserves of $84.3 million, subordinated retained interests
in securitized receivable sales of $53.1 million and certain cash deposits
established pursuant to securitized receivables recourse provisions of $27.4
million. The allowance for estimated losses on sold notes which is
determined on a basis consistent with owned receivables is included in
"Amounts Due From Sales of Receivables" in the Statement of Consolidated
Financial Condition.
The securitized sales structures also require the Corporation to maintain
funds for payment of principal and/or interest to the investors in the event
that collections on the securitized notes are less than required. The
Corporation's other assets include deposits of $31.1 million at January 31,
1994 and $9.6 million at October 31, 1993 and January 31, 1993 which are
held by the sales trusts and restricted for use by the securitized sales
agreements.<PAGE>
<PAGE>
Form 10-Q
NAVISTAR FINANCIAL CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
4. The Corporation has $1,327 million of contractually committed support
facilities, consisting of a $727 million bank revolving credit facility and
a $600 million retail notes receivable purchase facility. At January 31,
1994, unused commitments under these facilities were $273 million, which
when combined with unrestricted cash and cash equivalents made $309 million
available to fund the general business purposes of the Corporation.
The Corporation paid regular dividends of $1.9 million and a special
dividend of $5.0 million to Transportation during the first three months of
1994. No dividends were paid during the first three months of 1993.
Effective with the decline in the Corporation's debt ratings in 1992, the
Corporation's bank revolving credit facility limits regular dividends to
Transportation to 50% of cumulative net income, measured quarterly beginning
February 1, 1992. Under this provision at January 31, 1994, $5.5 million
was available for regular dividends to Transportation. The restated bank
revolving credit facility also permits a special dividend to Transportation
in an aggregate amount not to exceed $20 million, payable after July 1,
1993. At January 31, 1994, $5 million was available for a special dividend
to Transportation in the second quarter of fiscal 1994 or thereafter.
5. During the first quarter of fiscal 1994, the Corporation adopted Statement
of Financial Accounting Standards No. 113, "Accounting and Reporting for
Reinsurance of Short-Duration and Long-Duration Contracts" ("SFAS 113").
This statement, which is applicable to the Corporation's wholly-owned
insurance subsidiary, Harco National Insurance Company, eliminates the
practice of reporting liabilities relating to reinsured contracts net of the
effects of reinsurance. It requires reinsurance receivables including
amounts related to unpaid insurance claims, and prepaid reinsurance premiums
to be reported as assets. The adoption of SFAS 113 resulted in the
reclassification of $38.6 million of reinsurance receivables from unpaid
insurance claims and unearned premiums to other assets at January 31, 1994.
The adoption of SFAS 113 did not have a material effect on the Corporation's
financial results.<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
Results of Operations - First Three Months of Fiscal 1994 Compared with First
Three Months of Fiscal 1993
Consolidated
In the first quarter of fiscal 1994, the Corporation earned pretax income of
$17.7 million compared to $15.1 million, excluding one-time charges, for the
same period a year ago. Pretax income from the Corporation's finance operations
increased $3.7 million with a $366 million increase in sales of retail notes
receivable. Higher loss experience in the Corporation's liability insurance
product lines reduced first quarter pretax earnings from insurance operations
by $1.1 million.
The Corporation's consolidated net income was higher by $10 million for the
first quarter of 1994 compared to the first quarter of 1993 related to the above
operational changes and a one-time $8.8 million net of tax charge in 1993 for
the cumulative effect of adopting new accounting standards for income taxes and
post-retirement benefits.
Finance Operations
First quarter revenue from finance operations decreased $2.6 million to $38.8
million in 1994 as increased volumes of retail note sales caused the average
balance of owned retail notes to decrease significantly compared to the first
quarter of 1993. A slight drop in the owned retail portfolio yield also
contributed as the portfolio yield continued to adjust to current market rates.
The effects of these factors on revenue were offset, in part, by an increase in
average wholesale note balances in support of higher demand for Transportation
truck products. Retail receivable balances of $538 were sold during the first
quarter of 1994 compared to $172 million in 1993 increasing the gain component
of retail revenue to $10.3 million from $5.1 million.
Interest expense declined $5.1 million in 1994 compared to 1993 with the
decrease in average owned finance receivable balances which required less debt
to support. Credit, collection and administration expenses also dropped as the
owned percentage of serviced retail receivables decreased.
Insurance Operations
The decrease in pretax income for Harco National Insurance Company ("Harco"),
NFC's wholly owned insurance subsidiary, resulted from higher loss experience in
Harco's liability insurance lines. Harco's losses on all product lines as a
percentage of earned premiums increased 8 points over the first quarter of 1993.
Lower earnings from Harco's investment portfolio also contributed to the decline
in insurance earnings for the first quarter of fiscal 1994.<PAGE>
<PAGE>
Form 10-Q
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
Liquidity and Funds Management
The Corporation's operations are substantially dependent upon the production and
sale of Transportation's truck products in the United States. Navistar
Financial's traditional sources of funding for its receivables include com-
mercial paper, short- and long-term bank borrowings, medium- and long-term debt
issues, sales of receivables and equity capital. The insurance operations
generate their funds through internal operations and have no external
borrowings.
During the first three months of fiscal 1994, the Corporation supplied 92% of
the wholesale financing of new trucks to Transportation's dealers and 15% of the
retail financing of new International trucks sold in the United States. These
market shares are up from 88% for wholesale financing and 14.3% for retail
financing in the first fiscal quarter of 1993. Increased industry demand for
Transportation truck products and, to a much lesser extent, these higher market
shares caused serviced truck receivables and leases to grow to $2.4 billion
at January 31, 1994, from $2.3 billion at October 31, 1993 and $2.1 billion at
January 31, 1993. Gross acquisitions of retail notes and leases for the first
fiscal quarter increased to $241 million in 1994 from $165 million in 1993.
Serviced wholesale note balances were $565 at January 31, 1994 compared to $559
million at October 31, 1993 and $447 million at January 31, 1993.
Owned net finance receivable balances declined to $997 million at January 31,
1994 from $1,324 million at October 31, 1993 and $1,203 million at January 31,
1993. During the first fiscal quarter, the Corporation sold $538 million of
retail notes receivable, $203 million through its bank receivable purchase
facility and $335 million through its special purpose subsidiary, Navistar
Financial Retail Receivables Corporation, and an owner trust to public
investors. The public sale was part of a $1 billion registration of asset
backed securities filed by Navistar Financial Retail Receivables Corporation in
September 1993. Except for a $25 million cash reserve account established as
credit enhancement for the public sale, all the cash proceeds from these
receivable sales were used to reduce borrowings under the Corporation's
revolving bank credit facility.
During 1992, ratings on the Corporation's debt were lowered by Moody's Investors
Service, Inc. ("Moody's"), Standard and Poor's Corporation ("Standard and
Poor's") and Duff & Phelps. After the reduction in credit ratings, the
Corporation's commercial paper and uncommitted bank borrowings were refinanced
at maturity with borrowings from the Corporation's revolving bank line of
credit. There were no outstanding commercial paper or short-term bank
borrowings at January 31, 1994 and 1993, compared with total short-term debt of
$75 million at October 31, 1993. The reduced credit ratings have not impacted
the Corporation's ability to sell retail notes through its receivable purchase
facility or to securitize its receivables in the public and private markets.<PAGE>
<PAGE>
Form 10-Q
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
Liquidity and Funds Management (continued)
In October 1993, ratings on the Corporation's debt were reviewed by Standard and
Poor's and Moody's. Standard and Poor's raised its ratings for the Corpora-
tion's debt from B- to BB for senior debt and from CCC to B+ for subordinated
debt. Moody's confirmed their previous ratings of Ba3 for senior debt and B2
for subordinated debt. In November 1993, Duff & Phelps confirmed their debt
ratings of BB+ for senior debt and BB for subordinated debt. The Corporation's
commercial paper is rated "not prime" by Moody's.
In November 1993, the Corporation sold $100 million of 8 7/8% Senior
Subordinated Notes due 1998 to the public. In December 1993, the net proceeds
from the 8 7/8% subordinated issue were used to redeem the Corporation's 11.95%
Subordinated Debentures due December 1995. Additionally, in December 1993, the
Corporation redeemed its 7 1/2% Senior Debentures due January 1994.
At January 31, 1994, the Corporation's committed credit and receivable purchase
facilities were $1,327 million. These facilities consisted of a contractually
committed bank revolving credit facility of $727 million and a contractually
committed retail notes receivable purchase facility of $600 million. The
maturity date of both facilities is November 15, 1995. At January 31, 1994,
unused commitments under these facilities were $273 million, which when combined
with unrestricted cash and cash equivalents made $309 million available to fund
the general business purposes of the Corporation. In addition to the committed
credit facilities, the Corporation also utilizes a $300 million revolving
wholesale note sales trust providing for the continuous sale of eligible
wholesale notes on a daily basis. The sales trust is composed of three $100
million pools of notes maturing serially from 1997 to 1999.
The Corporation paid regular dividends of $1.9 million and a special dividend of
$5.0 million to Transportation during the first quarter of 1994. No dividends
were paid during the first quarter of 1993. Effective with the decline in the
Corporation's debt ratings in 1992, dividends to Transportation are limited by
the bank revolving credit agreement to 50% of cumulative net income measured
quarterly beginning February 1, 1992. Under this provision at January 31, 1994,
$5.5 million was available for dividend to Transportation in the second quarter
of fiscal 1994 or thereafter. The restated bank revolving credit facility also
permits a special dividend to Transportation in an aggregate amount not to
exceed $20 million, payable after July 1, 1993. At January 31, 1994, $5 million
was available for a special dividend to Transportation in the second quarter of
fiscal 1994 or thereafter. The Corporation's debt to equity ratio was 3.7:1 at
January 31, 1994 and 5.5:1 at October 31, 1993 and January 31, 1993.
Interest rate sensitivity is managed by funding floating rate assets with
floating rate debt, primarily borrowings under the bank revolving credit
agreement, and fixed rate assets with fixed rate debt, equity and floating rate
debt. Management has limited the amount of fixed rate assets funded with
floating rate debt by selling retail receivables on a fixed rate basis and by
using interest rate swaps and caps.<PAGE>
<PAGE>
Form 10-Q
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
Liquidity and Funds Management (continued)
Management believes that collections on the outstanding receivables portfolio
plus funds available from the Corporation's various funding sources will permit
Navistar Financial to meet the financing requirements of Transportation's
dealers and retail customers through 1994 and beyond.
Accounting Standards
As disclosed in the Corporation's annual report on Form 10-K for the fiscal year
ended October 31, 1993, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" ("SFAS 115") in May 1993. This
statement establishes financial accounting and reporting standards for invest-
ments in equity securities that have readily determinable fair values and for
all investments in debt securities. Upon adoption of SFAS 115, the Corpora-
tion's Statement of Financial Condition classification of cash equivalents and
marketable securities will not change and the requirements of SFAS 115 will be
met through revised footnote disclosure. The effective date for this new
standard is for fiscal years beginning after December 15, 1993, or fiscal 1995
for the Corporation. The Corporation has not yet determined the impact on the
financial statements nor when it will adopt SFAS 115.<PAGE>
<PAGE>
Form 10-Q
NAVISTAR FINANCIAL CORPORATION
AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
No reports on Form 8-K were filed for the three months ended January
31, 1994.
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 Financial Corporation
(Registrant)
Date March 14, 1994 /s/A. C. Hill
A. C. Hill
Vice President and Controller<PAGE>
<PAGE>
