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, 1997
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 847-734-4275
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, 1997, 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>
NAVISTAR FINANCIAL CORPORATION
AND SUBSIDIARIES
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Statement of Consolidated Income and Retained Earnings --
Three Months Ended January 31, 1997 and 1996. . . . . . . . . . 2
Statement of Consolidated Financial Condition --
January 31, 1997; October 31, 1996; and January 31, 1996 . . . 3
Statement of Consolidated Cash Flow --
Three Months Ended January 31, 1997 and 1996. . . . . . . . . . 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. . . . . . . . . . . . . 13
Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
<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
1997 1996
<S> <C> <C>
Revenue
Retail notes and lease financing . . . . . . . . . . . $ 25.7 $ 27.2
Wholesale notes. . . . . . . . . . . . . . . . . . . . 9.2 16.1
Accounts . . . . . . . . . . . . . . . . . . . . . . . 7.2 6.8
Servicing fee income . . . . . . . . . . . . . . . . . 5.6 5.6
Insurance premiums earned. . . . . . . . . . . . . . . 8.4 10.4
Marketable securities. . . . . . . . . . . . . . . . . 2.0 2.6
Total. . . . . . . . . . . . . . . . . . . . . . 58.1 68.7
Expense
Cost of borrowing:
Interest expense. . . . . . . . . . . . . . . . . . 14.3 17.1
Other . . . . . . . . . . . . . . . . . . . . . . . 1.6 3.1
Total . . . . . . . . . . . . . . . . . . . . . 15.9 20.2
Credit, collection and administrative. . . . . . . . . 7.0 6.8
Provision for losses on receivables. . . . . . . . . . .7 1.1
Insurance claims and underwriting. . . . . . . . . . . 7.9 10.9
Other expense, net . . . . . . . . . . . . . . . . . . 4.7 2.8
Total . . . . . . . . . . . . . . . . . . . . . 36.2 41.8
Income Before Taxes on Income . . . . . . . . . . . . . . 21.9 26.9
Taxes on Income . . . . . . . . . . . . . . . . . . . . . 8.5 10.3
Net Income . . . . . . . . . . . . . . . . . . . . . . . 13.4 16.6
Retained Earnings
Beginning of period. . . . . . . . . . . . . . . . . . 107.4 84.0
Dividends paid . . . . . . . . . . . . . . . . . . . . - 10.0
End of period. . . . . . . . . . . . . . . . . . . . . $120.8 $ 90.6
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
NAVISTAR FINANCIAL CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED FINANCIAL CONDITION (Unaudited)
(Millions of dollars)
<TABLE>
<CAPTION>
January 31 October 31 January 31
1997 1996 1996
ASSETS
<S> <C> <C> <C>
Cash and Cash Equivalents. . . . . . . . . . . .$ 12.2 $ 6.7 $ 6.2
Marketable Securities. . . . . . . . . . . . . . 121.8 128.1 131.7
Finance Receivables
Retail notes and lease financing. . . . . . . 437.7 733.3 466.1
Wholesale notes . . . . . . . . . . . . . . . 138.4 100.5 341.6
Accounts. . . . . . . . . . . . . . . . . . . 329.5 371.4 239.2
905.6 1,205.2 1,046.9
Allowance for losses. . . . . . . . . . . . . (9.0) (11.6) (7.9)
Finance Receivables, Net. . . . . . . . . . 896.6 1,193.6 1,039.0
Amounts Due from Sales of Receivables. . . . . . 270.6 264.3 279.9
Equipment on Operating Leases, Net . . . . . . . 113.4 101.1 47.4
Repossessions. . . . . . . . . . . . . . . . . . 12.5 13.2 5.8
Reinsurance Receivables. . . . . . . . . . . . . 25.7 21.2 22.3
Other Assets . . . . . . . . . . . . . . . . . . 45.6 65.6 45.5
Total Assets . . . . . . . . . . . . . . . . . .$1,498.4 $1,793.8 $1,577.8
LIABILITIES AND SHAREOWNER'S EQUITY
Short-Term Borrowings. . . . . . . . . . . . . .$ 142.0 $ 99.4 $ 56.5
Accounts Payable
Affiliated companies . . . . . . . . . . . . . 80.6 24.5 14.2
Other . . . . . . . . . . . . . . . . . . . . 43.8 42.2 54.7
Total . . . . . . . . . . . . . . . . . . . 124.4 66.7 68.9
Dealers' Reserves. . . . . . . . . . . . . . . . 22.0 22.3 21.7
Unpaid Insurance Claims and Unearned Premiums. . 92.8 99.6 102.0
Accrued Income Taxes . . . . . . . . . . . . . . 16.3 10.8 18.8
Accrued Interest . . . . . . . . . . . . . . . . 3.8 8.9 6.0
Senior and Subordinated Debt . . . . . . . . . . 804.9 1,206.4 1,039.6
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 . . . . . . . . . . . . . . 120.8 107.4 90.6
Unrealized gains (losses) on
marketable securities. . . . . . . . . . . . 0.4 1.3 2.7
Total. . . . . . . . . . . . . . . . . . . . 292.2 279.7 264.3
Total Liabilities and Shareowner's Equity. . . $1,498.4 $1,793.8 $1,577.8
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
NAVISTAR FINANCIAL CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED CASH FLOW (Unaudited)
(Millions of dollars)
<TABLE>
<CAPTION>
Three Months Ended
January 31
1997 1996
<S> <C> <C>
Cash Flow From Operations
Net income. . . . . . . . . . . . . . . . . . . . . . $ 13.4 $ 16.6
Adjustments to reconcile net income to cash
used in operations:
Gains on sales of receivables . . . . . . . . . . . (6.9) (12.2)
Depreciation and amortization. . . . . . . . . . . . 4.5 4.1
Provision for losses on receivables. . . . . . . . . .7 1.1
Decrease in accounts payable to affiliates . . . . . (17.4) (75.3)
Other. . . . . . . . . . . . . . . . . . . . . . . . (8.2) 6.0
Total. . . . . . . . . . . . . . . . . . . . . . . (13.9) (59.7)
Cash Flow From Investing Activities
Proceeds from sold retail notes . . . . . . . . . . . . 479.8 500.4
Purchase of retail notes and lease receivables. . . . . (207.6) (264.5)
Principal collections on retail notes and
lease receivables . . . . . . . . . . . . . . . . . . 17.1 20.6
Acquisitions under cash collections of wholesale
notes and accounts receivable. . . . . . . . . . . . 4.2 53.4
Purchase of marketable securities . . . . . . . . . . . (10.0) (19.3)
Proceeds from sales and maturities of
marketable securities . . . . . . . . . . . . . . . 18.3 21.5
Increase in property and equipment leased to others . . (16.3) (10.1)
Total. . . . . . . . . . . . . . . . . . . . . . . 285.5 302.0
Cash Flow From Financing Activities
Net increase in short term borrowings . . . . . . . . . 42.6 6.0
Net decrease in bank revolving credit facility usage . (302.0) (180.0)
Net decrease in asset-backed commercial
paper facility usage . . . . . . . . . . . . . . . . (150.0) (55.0)
Proceeds from long-term debt . . . . . . . . . . . . . 78.9 -
Principal payment of long-term debt . . . . . . . . . . (9.2) -
Net increase in advance from Transportation . . . . . . 73.6 -
Dividends paid to Transportation. . . . . . . . . . . . - (10.0)
Total. . . . . . . . . . . . . . . . . . . . . . . (266.1) (239.0)
Increase in Cash and Cash Equivalents . . . . . . . . . . 5.5 3.3
Cash and Cash Equivalents at Beginning of Period . . . . . 6.7 2.9
Cash and Cash Equivalents at End of Period . . . . . . . . $ 12.2 $6.2
Supplemental disclosure of cash flow information
Interest paid . . . . . . . . . . . . . . . . . . . . . $ 19.1 $23.2
Income taxes paid . . . . . . . . . . . . . . . . . . . $ 2.4 $ 4.1
</TABLE>
See Notes to Consolidated Financial Statements.
<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 1996 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 fairly present 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 1996 amounts have been reclassified to conform with the
presentation used in the 1997 financial statements.
2. Finance receivable balances do not include receivables sold by
the Corporation to public and private investors with limited
recourse provisions. Outstanding sold receivables balances are as
follows:
<TABLE>
<CAPTION>
January 31 October 31 January 31
1997 1996 1996
($ Millions)
<S> <C> <C> <C>
Retail notes. . . . . . . . . . . $1,636.0 $1,366.4 $1,513.4
Wholesale notes . . . . . . . . . 427.8 500.0 500.0
Total . . . . . . . . . . . $2,063.8 $1,866.4 $2,013.4
</TABLE>
In November 1996, the Corporation sold $487 million of retail
notes, net of unearned finance income, through Navistar
Financial Retail Receivables Corporation to an owner trust
which, in turn, sold $455 million of notes and $32 million of
certificates to investors. The proceeds of $474 million, net
of underwriting fees and credit enhancements were used by the
Corporation for general working capital purposes.
<PAGE>
NAVISTAR FINANCIAL CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
On January 1, 1997, the Corporation adopted Statement of
Financial Accounting Standards No. 125 ("SFAS No. 125"),
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities", for all applicable
transactions. SFAS No. 125 requires amounts previously
classified as excess servicing to be reclassified as interest
only receivables and to record such amounts at estimated fair
value. Restatement of prior periods is not permitted. The new
standard did not have a material effect on the Corporation's
net income or financial condition.
The Corporation's subordinated retained interests in sold
receivables are generally restricted and subject to limited
recourse provisions. The terms of retail receivable sales
require the Corporation to maintain cash reserves with the
trusts as credit enhancement for public sales. The cash
reserves held by the trusts are restricted for use by the
securitized sales agreements. The following is a summary of
amounts included in "Amounts Due from Sales of Receivables":
<TABLE>
<CAPTION>
January 31 October 31 January 31
1997 1996 1996
($ Millions)
<S> <C> <C> <C>
Cash held and invested by
trusts. . . . . . . . . . . . . $ 89.3 $ 85.2 $ 88.4
Subordinated retained interests
in wholesale receivables. . . . 85.1 85.4 86.0
Subordinated retained interests
in retail receivables . . . . . 98.8 96.0 101.1
Interest only receivables. . . . . 12.9 - -
Excess servicing fee . . - 10.1 17.2
Allowance for credit losses. . . . (15.5) (12.4) (12.8)
Total. . . . . . . . . . . . $270.6 $264.3 $279.9
</TABLE>
The allowance for losses on receivables is summarized as
follows:
<TABLE>
<CAPTION>
January 31 October 31 January 31
1997 1996 1997
($ Millions)
<S> <C> <C> <C>
Allowance pertaining to:
Owned notes . . . . . . . . . . $ 9.0 $11.6 $ 7.9
Sold notes. . . . . . . . . . . 15.5 12.4 12.8
Total . . . . . . . . . . . $24.5 $24.0 $20.7
</TABLE>
<PAGE>
NAVISTAR FINANCIAL CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
3. Average short-term debt outstanding during the first quarter of
fiscal 1997 and 1996, which included commercial paper and bank
borrowings, was approximately $114 million and $61 million,
respectively, at an average cost of 6.0% and 6.3%,
respectively. The weighted average interest rate on all debt,
including short-term debt and the effect of discounts and
related amortization, was 6.3% and 7.0% for the first three
months of fiscal 1997 and 1996, respectively.
Accounts payable due to affiliated companies at January 31,
1997 included an inter-company advance of $73.6 million. The
advance, which was payable to Transportation, accrued interest
at the Corporation's incremental short-term borrowing rate.
There was no inter-company advance outstanding at January 31,
1996 or October 31, 1996.
4. The Corporation has $1,325 million of contractually committed
support facilities, consisting of a $925 million bank revolving
credit facility and a $400 million asset-backed commercial
paper ("ABCP") program supported by a bank liquidity facility.
Each of these facilities has a maturity date of March 31, 2001.
At January 31, 1997, unused commitments under these facilities
were $704 million, of which $142 million provided funding
backup for the outstanding short-term debt. The remaining $562
million, when combined with unrestricted cash and cash
equivalents, made $574 million available to fund the general
business purposes of the Corporation at January 31, 1997.
5. The Corporation manages its exposure to fluctuations in
interest rate changes and limits the amount of fixed rate
assets funded with variable rate debt by selling fixed rate
retail receivables on a fixed rate basis and, to a lesser
extent, by utilizing derivative financial instruments. These
derivative financial instruments may include interest rate
swaps, interest rate caps and forward interest rate contracts.
The Corporation manages exposure to counter-party credit risk
by entering into derivative financial instruments with major
financial institutions that can be expected to fully perform
under the terms of such agreements.
<PAGE>
NAVISTAR FINANCIAL CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
During the first quarter of fiscal 1997, the Corporation did
not enter into any derivative contracts, nor were there any
derivative instruments outstanding at January 31, 1997.
The Corporation's wholly-owned insurance subsidiary has
investments in Collateralized Mortgage Obligations of $41
million which are included in the Corporation's marketable
securities at January 31, 1997.
6. During 1992, auditors of the Illinois Department of Revenue
("Department") began an income tax audit of NFC for the fiscal
years ended October 31, 1989, 1990 and 1991. On February 1, 1994,
the Department issued a Notice of Deficiency to NFC for
approximately $12 million. The Department has taken the position
that nearly 100% of NFC's income during these years should be
attributed to and taxed by Illinois. On February 14, 1997, a state
law was enacted which will negate the Department's position and
will relieve NFC of the aforementioned Notice of Deficiency.
The Corporation and its subsidiaries are subject to various
other claims arising in the ordinary course of business, and
are parties to various legal proceedings which constitute
ordinary routine litigation incidental to the business of the
Corporation and its subsidiaries. In the opinion of the
Corporation's management, none of these proceedings or claims
are material to the business or the financial condition of the
Corporation.
<PAGE>
NAVISTAR FINANCIAL CORPORATION
AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
Certain statements under this caption constitute "forward-looking
statements" under the Securities Reform Act, which involve risks
and uncertainties. Navistar Financial 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 Outlook."
Financing Volume
In the first quarter of fiscal 1997 customer demand for class 5
through 8 trucks declined approximately 11% compared with the same
period of 1996. As a result of the lower customer demand and the
continued highly competitive commercial financing market,
acquisitions of retail notes and leases in the first quarter of
fiscal 1997 of $224 million were 18% lower than 1996. The
Corporation's share of the retail financing of new trucks
manufactured by Transportation and sold in the United States was
15.8% during the first quarter of 1997 compared to 18.6% in the
same period of 1996. Serviced retail notes and lease financing
balances were $2.2 billion at January 31, 1997 and October 31, 1996
compared with $2.0 billion at January 31, 1996.
During the first quarter of fiscal 1997 and 1996 the Corporation
supplied 94% of the wholesale financing of new trucks sold to
Transportation's dealers. During the last quarter of fiscal 1996
and the first quarter of fiscal 1997, Transportation's dealers have
reduced inventory levels in response to lower customer demand.
Serviced wholesale note balances were $651 million at January 31,
1997 compared with $686 at October 31, 1996 and $928 million at
January 31, 1996.
Owned finance receivable and lease balances, including retained
interest in sold retail and wholesale receivables, were $1.2
billion at January 31, 1997 and 1996 and $1.4 billion at October
31, 1996. The decrease in owned receivable balances from year-end
resulted from retail sales activity as sold retail receivables
balances increased to $1.6 billion at January 31, 1997 from $1.4
billion at October 31, 1996 and $1.5 billion at January 31, 1996.
Sold wholesale note balances were $428 million at January 31, 1997
and $500 million at October 31, 1996 and January 31, 1996.
<PAGE>
NAVISTAR FINANCIAL CORPORATION
AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION (continued)
Results of Operations
The components of net income for the three months ended January 31
are as follows:
<TABLE>
<CAPTION>
1997 1996
($Millions)
<S> <C> <C>
Income before income taxes:
Finance operations. . . . . . . . . . . . . . . . . . . $19.5 $25.0
Insurance operations. . . . . . . . . . . . . . . . . . 2.4 1.9
Income before taxes. . . . . . . . . . . . . . . . . 21.9 26.9
Taxes on income . . . . . . . . . . . . . . . . . . . . 8.5 10.3
Net income . . . . . . . . . . . . . . . . . . . . . $13.4 $16.6
</TABLE>
Pretax income of $21.9 million was $5.0 million lower than 1996
primarily as a result of lower gains on sales of retail receivables
and reduced levels of wholesale financing activities in response to
lower customer demand. These factors were offset in part by lower
borrowing costs due to the maturity in the third quarter of fiscal
1996 of high fixed-rate public debt.
Gains on sales of retail notes receivable during the first quarter
of 1997 were $6.9 million on $487 million sold compared with gains
of $12.2 million on $525 million sold in the first quarter of
1996. The higher gains in fiscal 1996 resulted from higher margins
on retail notes due to declining market interest rates prior to the
sale in November 1995. During a declining interest rate
environment, the Corporation's acquisition spreads improve as NFC's
cost of borrowing differs from the time when interest rates are
quoted to borrowers and the time when notes are acquired. In
addition, the effective interest rate for each sale is based on
market interest rates at the time of the sale, which may be up to
six months after the Corporation acquired the retail notes. During
fiscal 1997 market interest rates were also declining in the period
prior to the sale in November 1996, but not to the extent
experienced in fiscal 1996 which caused the margins to be lower
year over year.
Wholesale note revenue decreased 43% in 1997 to $9.2 million as a
result of lower wholesale average outstanding note balances and
lower average yields relating to a lower prime interest rate.
Borrowing costs declined $4.3 million to $15.9 million during the
first quarter of 1997 due to lower wholesale funding requirements
and lower borrowing rates. During 1997, the Corporation's weighted
average interest rate on all debt declined to 6.3% from 7.0% in the
first quarter of 1996 primarily due to the maturity of high fixed
rate public debt in June 1996 and lower market interest rates.
<PAGE>
NAVISTAR FINANCIAL CORPORATION
AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION (continued)
Results of Operations (continued)
The $.5 million increase in pretax income for Harco National
Insurance Company ("Harco"), the Corporation's wholly-owned
insurance subsidiary, resulted from improved loss experience in
Harco's liability insurance lines during the first quarter of 1996
compared to 1995.
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 has traditionally obtained the
funds to provide financing to Transportation's dealers and retail
customers from sales of receivables, commercial paper, short- and
long-term bank borrowings, medium- and long-term debt issues and
equity capital. The current debt ratings of the Corporation have
made bank borrowings and sales of finance receivables the most
economical sources of cash. The Corporation's insurance operation
generates its funds through internal operations and has no external
borrowings.
Operations used $13.9 million in cash in the first quarter of 1997
as the cash provided from net income was offset by a decrease in
accounts payable reflecting the timing of payments to
Transportation. Investment activities provided $285.5 million in
cash during this period principally as a result of the sales of
retail notes offset in part by the purchase of retail notes and
leases. The cash generated from investment activities was used to
reduce financing activities by $266.1 million.
Receivable sales were a significant source of funding in 1997 and
1996. Through the asset-backed public market, the Corporation has
been able to fund fixed rate retail note receivables at rates
offered to companies with investment grade ratings. During the
first quarter of fiscal 1997 and 1996 the Corporation sold $486 and
$525 million, respectively, of retail notes, through Navistar
Financial Retail Receivables Corporation ("NFRRC"), a wholly-owned
subsidiary, to owner trusts which in turn sold notes and
certificates to investors. At January 31, 1997, the remaining
shelf registration available to NFRRC for issuance of asset-backed
securities was $1,973 million. The Corporation has a revolving
wholesale note trust that provides for the continuous sale of
eligible wholesale notes on a daily basis. The trust is funded by
securities sold to the public comprised of three $100 million
tranches of investor certificates maturing serially from 1997 to
1999 and a $200 million tranche maturing in 2004. As of January
31, 1997, $72 million of the tranche maturing in 1997 has been paid
and the remaining $28 million will amortize over the next few
months. The ongoing commitment will be $400 million.
<PAGE>
NAVISTAR FINANCIAL CORPORATION
AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION (continued)
Liquidity and Funds Management (continued)
At January 31, 1997, available funding under the amended and
restated credit facility and the asset-backed commercial paper
facility was $704 million, of which $142 million provided funding
backup for the outstanding short-term debt. The remaining $562,
when combined with unrestricted cash and cash equivalents, made
$574 million available to fund the general business purposes of the
Corporation.
The Corporation manages sensitivity to interest rate changes 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, to a lesser extent, by utilizing derivative financial
instruments. See notes to the Consolidated Financial Statements.
Corporate policy prohibits the use of derivatives for speculative
purposes.
On February 1, 1994, the Illinois Department of Revenue
("Department") issued a Notice of Deficiency to the Corporation for
approximately $12 million for the fiscal years 1989 through 1991.
On February 14, 1997, a state law was enacted which will negate the
Department's position and will relieve NFC of the liability Notice
of Deficiency.
Business Outlook
The demand for heavy trucks is forecast to continue to soften
during fiscal 1997 and correspondingly NFC's profitability and
wholesale and retail financing activity are anticipated to be
lower. Competition will continue to put pressure on the
Corporation's retail note acquisition activity and retail note
margins.
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 1997 and beyond.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended
January 31, 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 Financial Corporation
(Registrant)
Date March 14, 1997 /s/ P. E. Cochran
P. E. Cochran
Vice President and Controller
(Principal Accounting Officer)
<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> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1997<F1>
<PERIOD-END> JAN-31-1997
<CASH> 12,200
<SECURITIES> 121,800
<RECEIVABLES> 905,600
<ALLOWANCES> (9,000)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 10,600
<DEPRECIATION> (7,000)
<TOTAL-ASSETS> 1,498,400
<CURRENT-LIABILITIES> 0
<BONDS> 804,900
0
0
<COMMON> 171,000
<OTHER-SE> 121,200
<TOTAL-LIABILITY-AND-EQUITY> 1,498,400
<SALES> 0
<TOTAL-REVENUES> 58,100
<CGS> 0
<TOTAL-COSTS> 16,500
<OTHER-EXPENSES> 4,700
<LOSS-PROVISION> 700
<INTEREST-EXPENSE> 14,300
<INCOME-PRETAX> 21,900
<INCOME-TAX> 8,500
<INCOME-CONTINUING> 13,400
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,400
<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>
