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, 1995
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, 1995, 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>
NAVISTAR FINANCIAL CORPORATION
AND SUBSIDIARIES
<TABLE>
<CAPTION>
INDEX
Page
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Statement of Consolidated Income and Retained Earnings --
Three Months Ended January 31, 1995 and 1994. . . . . . . . . . . 2
Statement of Consolidated Financial Condition --
January 31, 1995; October 31, 1994; and January 31, 1994. . . . . 3
Statement of Consolidated Cash Flow --
Three Months Ended January 31, 1995 and 1994. . . . . . . . . . . 4
Notes to Consolidated Financial Statements. . . . . . . . . . . . . 5
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition. . . . . . . . . . . . 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . 12
Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
<PAGE>
<PAGE>
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>
<CAPTION>
Three Months Ended
January 31
1995 1994
<S> <C> <C>
Revenue
Retail notes and lease financing . . . . . . . . . . . . . . . . . . . $ 13.7 $ 24.5
Wholesale notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.2 9.1
Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.0 4.6
Servicing fee income . . . . . . . . . . . . . . . . . . . . . . . . . 4.3 3.8
Insurance premiums earned. . . . . . . . . . . . . . . . . . . . . . . 11.3 13.7
Marketable securities. . . . . . . . . . . . . . . . . . . . . . . . . 3.4 3.1
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50.9 58.8
Expense
Cost of borrowing
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.1 15.7
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1 1.4
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19.2 17.1
Credit, collection and administrative. . . . . . . . . . . . . . . . . 6.6 6.3
Provision for losses on receivables. . . . . . . . . . . . . . . . . . .1 .8
Insurance claims and underwriting. . . . . . . . . . . . . . . . . . . 12.8 15.6
Other expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . 1.8 1.3
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40.5 41.1
Income Before Taxes on Income. . . . . . . . . . . . . . . . . . . . . . 10.4 17.7
Taxes on Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1 6.8
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.3 10.9
Retained Earnings
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . 56.8 48.4
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 6.9
End of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 63.1 $ 52.4
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<PAGE>
NAVISTAR FINANCIAL CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED FINANCIAL CONDITION (Unaudited)
(Millions of dollars)
<TABLE>
<CAPTION>
January 31 October 31 January 31
1995 1994 1994
ASSETS
<S> <C> <C> <C>
Cash and Cash Equivalents. . . . . . . . . . . . $ 3.8 $ 28.3 $ 36.4
Marketable Securities. . . . . . . . . . . . . . 128.7 130.5 136.6
Finance Receivables
Retail notes and lease financing. . . . . . . 375.1 513.9 454.1
Wholesale notes . . . . . . . . . . . . . . . 264.8 240.0 220.6
Accounts. . . . . . . . . . . . . . . . . . . 310.5 357.7 281.7
950.4 1,111.6 956.4
Allowance for losses. . . . . . . . . . . . . (6.5) (8.2) (9.2)
Finance Receivables, Net. . . . . . . . . . 943.9 1,103.4 947.2
Amounts Due from Sales of Receivables
(Note 3). . . . . . . . . . . . . . . . . . . 206.6 193.0 182.0
Equipment on Operating Leases, Net . . . . . . . 33.5 26.6 16.7
Repossessions. . . . . . . . . . . . . . . . . . 1.5 1.8 4.1
Reinsurance Receivables. . . . . . . . . . . . . 30.3 33.7 38.6
Other Assets . . . . . . . . . . . . . . . . . . 40.5 26.9 28.4
Total Assets . . . . . . . . . . . . . . . . . . $1,388.8 $1,544.2 $1,390.0
LIABILITIES AND SHAREOWNER'S EQUITY
Short-Term Borrowings. . . . . . . . . . . . . . $ 58.9 $ 419.2 $ -
Accounts Payable
Affiliated companies. . . . . . . . . . . . . 85.2 16.3 95.4
Other . . . . . . . . . . . . . . . . . . . . 56.2 56.7 72.3
Total. . . . . . . . . . . . . . . . . . . 141.4 73.0 167.7
Dealers' Reserves. . . . . . . . . . . . . . . . 19.1 18.8 17.2
Unpaid Insurance Claims and Unearned Premiums. . 115.6 121.7 130.3
Accrued Income Taxes . . . . . . . . . . . . . . 6.0 2.3 13.0
Accrued Interest . . . . . . . . . . . . . . . . 13.7 11.3 9.1
Senior and Subordinated Debt (Note 2). . . . . . 802.0 672.3 829.3
Shareowner's Equity
Capital stock (Par value $1.00, 1,600,000
shares issued and outstanding)
and paid-in capital. . . . . . . . . . . . 171.0 171.0 171.0
Retained earnings . . . . . . . . . . . . . . 63.1 56.8 52.4
Unrealized losses on marketable securities. . (2.0) (2.2) -
Total. . . . . . . . . . . . . . . . . . . 232.1 225.6 223.4
Total Liabilities and Shareowner's Equity. . . . $1,388.8 $1,544.2 $1,390.0
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<PAGE>
NAVISTAR FINANCIAL CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED CASH FLOW (Unaudited)
(Millions of dollars)
<TABLE>
<CAPTION>
Three Months Ended
January 31
1995 1994
<S> <C> <C>
Cash Flow From Operations
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 6.3 $ 10.9
Adjustments to reconcile net income to cash
provided from (used in) operations:
Losses (gains) on sales of receivables . . . . . . . . . . . . . . . .5 (10.3)
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . 2.5 2.0
Provision for losses on receivables. . . . . . . . . . . . . . . . . .1 .8
Decrease in unpaid insurance claims and unearned premiums,
net of reinsurance receivables . . . . . . . . . . . . . . . . . . (2.7) (2.8)
Decrease in other accounts payable
and accrued liabilities. . . . . . . . . . . . . . . . . . . . . . (9.4) -
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (.5) (.5)
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3.2) .1
Cash Flow From Investing Activities
Proceeds from sold retail notes . . . . . . . . . . . . . . . . . . . . 298.5 493.4
Purchase of retail notes and lease receivables. . . . . . . . . . . . . (215.5) (219.7)
Principal collections on retail notes and
lease receivables . . . . . . . . . . . . . . . . . . . . . . . . . . 39.4 50.3
Acquisitions under (over) cash collections of wholesale
notes and accounts receivable. . . . . . . . . . . . . . . . . . . . 22.3 (42.1)
Purchase of marketable securities . . . . . . . . . . . . . . . . . . . (11.7) (25.8)
Proceeds from sales of marketable securities. . . . . . . . . . . . . . 13.8 15.5
Decrease (increase) in property and equipment leased to others. . . . . (8.4) 7.2
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138.4 278.8
Cash Flow From Financing Activities
Net increase (decrease) in bank revolving credit facility usage . . . . 17.0 (219.0)
Net increase in asset-backed commercial paper facility usage. . . . . . 99.4 -
Net increase in commercial paper. . . . . . . . . . . . . . . . . . . . 39.8 -
Principal payments on long-term debt. . . . . . . . . . . . . . . . . . - (75.0)
Principal payments on short-term debt . . . . . . . . . . . . . . . . . (400.0) (75.0)
Net increase in advance from Transportation . . . . . . . . . . . . . . 84.1 99.5
Dividends paid to Transportation. . . . . . . . . . . . . . . . . . . . - (6.9)
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (159.7) (276.4)
Increase (Decrease) in Cash and Cash Equivalents . . . . . . . . . . . . . (24.5) 2.5
Cash and Cash Equivalents at Beginning of Period . . . . . . . . . . . . . 28.3 33.9
Cash and Cash Equivalents at End of Period . . . . . . . . . . . . . . . .$ 3.8 $ 36.4
Supplemental disclosure of cash flow information
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 14.9 $ 21.0
Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . .$ - $ .3
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<PAGE>
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 1994 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 1994
amounts have been reclassified to conform with the presentation used in
the 1995 financial statements.
2. Average short-term debt outstanding during the first quarter of fiscal
1995, which included commercial paper and bank borrowings, was approxi-
mately $102 million, at an average cost of 5.3%. There was no outstanding
short-term debt during the first three months of fiscal 1994. The weighted
average interest rate on all debt, including short-term debt and the effect
of discounts and related amortization, was 7.6% and 7.3% for the first
three months of fiscal 1995 and 1994, respectively.
Accounts payable due to affiliated companies at January 31, 1995 and 1994
include an intercompany advance of $84.1 million and $99.5 million,
respectively. The advance, which is payable to Transportation, accrues
interest at the Corporation's incremental short-term borrowing rate. There
was no intercompany advance outstanding at October 31, 1994.
<PAGE>
<PAGE>
NAVISTAR FINANCIAL CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
3. Finance receivable balances do not include receivables sold by the
Corporation to public and private investors with limited recourse
provisions. Uncollected sold receivables balances are as follows:
<TABLE>
<CAPTION>
January 31 October 31 January 31
1995 1994 1994
($ Millions)
<S> <C> <C> <C>
Retail notes . . . . . . . . . . . $1,222.2 $1,046.8 $ 925.3
Wholesale notes. . . . . . . . . . 300.0 300.0 300.0
Total. . . . . . . . . . . . $1,522.2 $1,346.8 $1,225.3
</TABLE>
The allowance for losses on receivables is summarized as follows:
<TABLE>
<CAPTION>
January 31 October 31 January 31
1995 1994 1994
($ Millions)
<S> <C> <C> <C>
Allowance pertaining to:
Owned notes . . . . . . . . . . $ 6.5 $ 8.2 $ 9.2
Sold notes. . . . . . . . . . . 9.9 8.0 6.1
Total. . . . . . . . . . . . $16.4 $16.2 $15.3
</TABLE>
The Corporation's retained interest in sold receivables and other related
amounts are generally restricted and subject to limited recourse provi-
sions. Holdback reserves were established pursuant to the limited recourse
provisions of the retail note sales to private investors. The securitized
sales structure requires the Corporation to maintain cash reserves with the
trusts as credit enhancement for public sales. The cash reserves are held
by the trusts and restricted for use by the securitized sales agreements.
The following is a summary of amounts included in "Amounts Due from Sales
of Receivables":
<TABLE>
<CAPTION>
January 31 October 31 January 31
1995 1994 1994
($ Millions)
<S> <C> <C> <C>
Cash held and invested by
trusts. . . . . . . . . . . . . $ 64.7 $ 51.5 $ 31.1
Subordinated retained interests
in wholesale receivables. . . . 46.5 46.5 46.5
Subordinated retained interests
in retail receivables . . . . . 13.5 14.1 11.1
Holdback reserves. . . . . . . . . 59.8 64.4 86.5
Excess servicing fee and other . . 32.0 24.5 12.9
Allowance for credit losses. . . . (9.9) (8.0) (6.1)
Total. . . . . . . . . . . . $206.6 $193.0 $182.0
</TABLE>
<PAGE>
<PAGE>
NAVISTAR FINANCIAL CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
4. Effective November 9, 1994, the Corporation amended and restated its $727
million bank revolving credit agreement, extending the maturity date to
October 31, 1998 and expanding the commitment to $900 million. In addi-
tion, the purchasers' commitments under the $600 million retail notes pur-
chase facility agreement were terminated and the Corporation established a
$300 million asset backed commercial paper ("ABCP") program supported by a
bank liquidity facility with a maturity date of October 31, 1998. Under
the terms of the ABCP program, a special purpose wholly-owned subsidiary of
NFC purchases eligible receivables from NFC. All assets of the subsidiary
are pledged to a Trust that funds the receivables with A1/P1 rated commer-
cial paper. In addition, the assets may be sold to the Trust.
Available funding under the amended and restated credit facility and the
ABCP program was $712 million, of which $59 million provided funding backup
for the outstanding short-term debt at January 31, 1995. The remaining
$653 million when combined with unrestricted cash and cash equivalents made
$657 million available to fund the general business purposes of the Corpor-
ation at January 31, 1995. While the amended revolving credit facility
removes certain dividend restrictions, the Corporation is required to main-
tain tangible net worth at a minimum of $175 million and a debt to tangible
net worth ratio of no greater than 7 to 1. Consistent with the previous
revolving credit agreement, the restated agreement grants security inter-
ests in substantially all of the Corporation's assets to the Corporation's
debtholders. Compensating cash balances are not required under the
restated revolving credit facility. Facility fees are paid quarterly
regardless of usage.
As of January 31, 1995, approximately $327 million of sold notes were
outstanding under the $600 million retail notes purchase facility.
Participants of the facility will continue to own the receivables during
the run off.
There were no dividends paid to Transportation during the first three
months of 1995 compared with $6.9 million of dividends paid during the
first three months of 1994.
5. The Corporation acquires floating rate wholesale receivables and fixed rate
retail receivables and generally funds floating rate receivables with
floating rate funding and fixed rate receivables with fixed rate funding
and equity. The Corporation may use a variety of contracts to lock in
interest rates during the period in which retail receivables are being
sold. In February 1995, the Corporation entered into two short-term for-
ward interest rate lock agreements related to the future sale of retail
receivables. The Corporation, in anticipation of selling receivables at
some time prior to June 1, 1995, hedged, until that date, a total of $150
million against two Treasuries maturing in 1997.
The Corporation's wholly-owned insurance subsidiary has investments in
Collateralized Mortgage Obligations of $20.0 million and are included in
the Corporation's marketable securities at January 31, 1995.
<PAGE>
<PAGE>
NAVISTAR FINANCIAL CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
6. In December 1994, Navistar Financial Securities Corporation ("NFSC"), a
wholly-owned subsidiary of NFC, filed a shelf registration statement with
the Securities and Exchange Commission providing for the issuance of up to
$200 million of pass-through certificates backed by an undivided ownership
interest in wholesale notes. The registration statement, which was
declared effective March 1, 1995, permits NFSC to offer and sell series of
certificates backed by interests in wholesale notes. Such certificates
will be issued by a new Navistar Financial Dealer Note Trust.
<PAGE>
<PAGE>
NAVISTAR FINANCIAL CORPORATION
AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
Customer demand for Class 5 through 8 trucks remained high in 1995, as the
strength in the U. S. economy experienced during fiscal 1994 continued during
the first quarter of 1995. As a result of the strong truck industry and
economy, the financial strength and cash flows of many NFC's customers contin-
ued to improve and NFC's portfolio delinquencies and losses remained low. The
strong economy is contributing to high liquidity in the commercial financing
markets. Many financial institutions have increased their loan activity which
gives NFC's customers more financing alternatives than normal. This competi-
tion has caused NFC to increase its marketing efforts of its retail financing
products and services at reduced margins.
Financial Condition
The Corporation's serviced receivables portfolio, which includes sold
receivables, totaled $2.5 billion at January 31, 1995 compared to $2.2 billion
at January 31, 1994. The $.3 billion increase over the twelve months reflects
the continued growth in the truck industry. During the first quarter of 1995,
the Corporation supplied 92% of the wholesale financing of new trucks sold to
Transportation's dealers, the same as supplied during the first quarter of
1994. Acquisitions of wholesale notes increased $152 million to $643 million
during the first three months of fiscal 1995 as compared to the same period a
year ago. Serviced wholesale note balances were $565 at January 31, 1995 up
from $540 million and $518 million at October 31, 1994 and January 31, 1994,
respectively. Acquisitions of retail notes and leases, net of unearned fin-
ance, remained strong during the first three months of fiscal 1995 at $216
million compared to $220 million during the first three months of fiscal 1994.
The consistently high levels of acquisitions reflect increased sales by
Transportation. The Corporation's share of the retail financing of new trucks
manufactured by Transportation and sold in the United States was 12% during the
first quarter of 1995 compared to 15% during the same period a year ago. The
Corporation's reduced level of retail financing support of Transportation's
sales in 1995 is a result of competition and liquidity in the commercial
financing markets.
Owned net finance receivable balances declined to $.9 billion at January 31,
1995 from $1.1 billion at October 31, 1994 and $.9 billion at January 31, 1994.
The decrease in owned receivable balances resulted from retail receivables
sales activity as sold receivables balances increased to $1.5 billion at
January 31, 1995 from $1.3 billion and $1.2 billion at October 31, 1994 and
January 31, 1994, respectively.
Results of Operations
The components of net income for the three months ended January 31 are as
follows:
<TABLE>
<CAPTION>
1995 1994
($ Millions)
<S> <C> <C>
Income before income taxes:
Finance operations. . . . . . . . . . . . . . . . . . $10.0 $17.2
Insurance operations. . . . . . . . . . . . . . . . . 0.4 0.5
Income before taxes. . . . . . . . . . . . . . . . 10.4 17.7
Taxes on income. . . . . . . . . . . . . . . . . . . . . 4.1 6.8
Net income . . . . . . . . . . . . . . . . . . . . $ 6.3 $10.9
</TABLE>
<PAGE>
<PAGE>
NAVISTAR FINANCIAL CORPORATION
AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
Results of Operations (continued)
In the first quarter of fiscal 1995, the Corporation's pretax income decreased
$7.3 million to $10.4 million compared to the same period a year ago. Pretax
income from the Corporation's finance operations decreased $7.2 million as
lower margins on retail financing resulted in losses of $.5 million on $315
million of retail receivables sold in the first quarter of 1995 compared with
$10.3 million of gains recognized on $538 million sold in 1994. Retail note
margins were lower as rising interest costs to fund retail note acquisitions
could not be offset fully by increased retail note pricing. In a rising inter-
est rate environment this margin contraction is a typical occurrence for NFC as
retail truck customers require finance rate commitments on the purchase date
for trucks to be delivered over the next 30 to 90 days. In addition, the
Corporation funds the majority of its retail notes by selling the notes in the
public or private markets and the effective interest rate for each sale is
based on a market interest rate at the time of sale which may be three to four
months after the truck delivery date. In addition, competition, coupled with
liquidity in the commercial financing markets, limited the Corporation's ability
to increase customer finance rates commensurate with the increase in funding
costs. The decline in retail financing during the first quarter of 1995 was
partially offset by an increased volume of wholesale note financing as well as
higher average account balances in support of increased demand for Transpor-
tation truck products.
Borrowing costs increased $2.1 million to $19.2 million in 1995 from $17.1
million in 1994 primarily as a result of higher debt balances to support
increased wholesale note and account balances and higher market interest rates.
These increased borrowing costs were offset by an improvement in the
Corporation's borrowing spread over market interest rates as a result of the
amended revolving debt agreement and the asset backed commercial paper ("ABCP")
program. The provision for losses decreased to $.1 million in 1995 from $.8
million in 1994 reflecting lower losses on receivables.
The $.1 million decrease in pretax income for Harco National Insurance Company,
the Corporation's wholly-owned insurance subsidiary, resulted from a reduction
in written premium volume during the first three months of 1995 as compared to
the same period a year ago. The decrease in written premiums reflects
management's underwriting actions and competition.
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 gen-
erate their funds through internal operations and have no external borrowings.
Receivable sales were a significant source of funding in 1995 and 1994. During
the first quarter of 1995, the Corporation sold $315 million of retail notes,
net of unearned finance income, through Navistar Financial Retail Receivables
Corporation ("NFRRC"), its wholly-owned subsidiary, to an owner trust. The
owner trust, in turn, sold $304 million of notes and $11 million of certifi-
cates to investors. Net proceeds from the sale were $295 million after deduct-
ing $1 million for underwriting fees and $19 million to establish a reserve
<PAGE>
<PAGE>
NAVISTAR FINANCIAL CORPORATION
AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
Liquidity and Funds Management (continued)
account with the trust as credit enhancement for the public sale. The net pro-
ceeds were used by the Corporation for general working capital purposes.
During the same period in 1994, the Corporation sold $538 million of retail
notes receivable, $203 million through its bank receivable purchase facility
and $335 million through NFRRC and an owner trust to public investors. Net
proceeds from these sales were $491 million after the reduction of holdback
reserves and credit enhancement and were used by the Corporation for general
working capital purposes. At January 31, 1995, the remaining shelf registra-
tion available to NFRRC for issuance of asset backed securities was $1,855
million.
At January 31, 1995, available funding under the amended and restated credit
facility and the asset-backed commercial paper facility was $712 million, of
which $59 million provided funding backup for the outstanding short-term debt
at January 31, 1995. The remaining $653 million when combined with unre-
stricted cash and cash equivalents made $657 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.
There were no dividends paid to Transportation during the first quarter of 1995
compared with $6.9 million of dividends paid during the first quarter of 1994.
The Corporation's debt to equity ratio was 3.7:1 at January 31, 1995, 4.8:1 at
October 31, 1994 and 3.7:1 at January 31, 1994.
The Corporation manages sensitivity to interest rate changes by funding float-
ing rate assets with floating rate debt, primarily borrowings under the bank
revolving credit agreement and ABCP program, 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. The Corporation will occasionally enter into a forward
interest rate lock agreement prior to a retail note receivables sale to protect
against rising interest rates.
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 1995 and beyond.
<PAGE>
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
The Registrant filed the following reports on Form 8-K during the three months
ended January 31, 1995:
<TABLE>
<CAPTION>
Items
Date of Report Date Filed Reported
<S> <C> <C>
November 4, 1994 December 22, 1994 5, 7
</TABLE>
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 13, 1995 /s/P. E. Cochran
P. E. Cochran
Vice President and Controller
<PAGE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENT OF CONSOLIDATED INCOME AND RETAINED EARNINGS AND THE STATEMENT
OF CONSOLIDATED FINANCIAL CONDITION AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1995<F1>
<PERIOD-END> JAN-31-1995
<CASH> 3,800
<SECURITIES> 128,700
<RECEIVABLES> 950,400
<ALLOWANCES> (6,500)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 8,900
<DEPRECIATION> (6,500)
<TOTAL-ASSETS> 1,388,800
<CURRENT-LIABILITIES> 0
<BONDS> 802,000
<COMMON> 171,000
0
0
<OTHER-SE> 61,100
<TOTAL-LIABILITY-AND-EQUITY> 1,388,800
<SALES> 0
<TOTAL-REVENUES> 50,900
<CGS> 0
<TOTAL-COSTS> 21,500
<OTHER-EXPENSES> 1,800
<LOSS-PROVISION> 100
<INTEREST-EXPENSE> 17,100
<INCOME-PRETAX> 10,400
<INCOME-TAX> 4,100
<INCOME-CONTINUING> 6,300
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,300
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>THE CORPORATION'S STATEMENT OF FINANCIAL CONDITION IS UNCLASSIFIED,
THEREFORE, THE DISTINCTION BETWEEN CURRENT AND LONG-TERM ASSETS AND
LIABILITIES IS NOT AVAILABLE.
</FN>
</TABLE>
