<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 1-9618
N A V I S T A R I N T E R N A T I O N A L C O R P O R A T I O N
---------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 36-3359573
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
455 North Cityfront Plaza Drive, Chicago, Illinois 60611
- -------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (312) 836-2000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED
IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of June 3, 1996, the number of shares outstanding of the registrant's
Common Stock was 50,990,985 and the Class B Common Stock was 24,292,206.
<PAGE>
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NAVISTAR INTERNATIONAL CORPORATION
AND CONSOLIDATED SUBSIDIARIES
-----------------------------
INDEX
-----
Page
Reference
---------
Part I. Financial Information:
Item 1. Financial Statements:
Statement of Income --
Three Months and
Six Months Ended April 30, 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 4. Submission of Matters to a Vote of Security Holders 13
Item 6. Exhibits and Reports on Form 8-K .................. 13
Signature .................................................. 14
Exhibit 11 ................................................... E-1
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<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1. Financial Statements
STATEMENT OF INCOME (Unaudited)
------------------------------------------------------------------------------------------------------------------------
Millions of dollars, except per share data
------------------------------------------------------------------------------------------------------------------------
Three Months Ended April 30
----------------------------------------------------------------------------------
Navistar International
Corporation 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 ........................... 11 14 8 12 3 4
------ ------ ------ ------ ------ ------
Total sales and revenues ............. 1,480 1,640 1,431 1,598 62 58
------ ------ ------ ------ ------ ------
Costs and expenses
Cost of products and services sold ..... 1,230 1,366 1,228 1,364 2 2
Postretirement benefits ................ 54 55 54 55 - -
Engineering and research expense ....... 35 26 35 26 - -
Marketing and administrative expense ... 75 73 67 66 8 7
Interest expense ....................... 23 23 1 3 22 22
Financing charges on sold receivables .. 7 9 20 23 - -
Insurance claims
and underwriting expense ............. 14 14 - - 14 14
------ ------ ------ ------ ------ ------
Total costs and expenses ............. 1,438 1,566 1,405 1,537 46 45
------ ------ ------ ------ ------ ------
Income before income taxes
Manufacturing ........................ - - 26 61 - -
Financial Services ................... - - 16 13 - -
------ ------ ------ ------ ------ ------
Income before income taxes ......... 42 74 42 74 16 13
Income tax expense ................. (16) (28) (16) (28) (6) (4)
------ ------ ------ ------ ------ ------
Net income ............................. $ 26 $ 46 $ 26 $ 46 $ 10 $ 9
====== ====== ====== ======
Less dividends on Series G
preferred stock ...................... 7 7
------ ------
Net income applicable to common stock .. $ 19 $ 39
====== ======
Net income per common share ............ $ .26 $ .52
====== ======
Average number of common and dilutive
common equivalent shares outstanding
(millions) ........................... 73.8 74.4
<FN>
See Notes to Financial Statements.
</TABLE>
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<TABLE>
<CAPTION>
Six Months Ended April 30
- ----------------------------------------------------------------------------------
Navistar International
Corporation 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
26 28 23 23 6 8
------ ------ ------ ------ ------ ------
2,912 3,056 2,808 2,976 132 110
------ ------ ------ ------ ------ ------
2,429 2,564 2,424 2,561 5 3
111 105 111 104 - 1
64 50 64 50 - -
148 142 132 128 16 14
41 43 2 5 42 41
16 15 41 42 - -
26 27 - - 26 27
------ ------ ------ ------ ------ ------
2,835 2,946 2,774 2,890 89 86
------ ------ ------ ------ ------ ------
- - 34 86 - -
- - 43 24 - -
------ ------ ------ ------ ------ ------
77 110 77 110 43 24
(29) (41) (29) (41) (16) (8)
------ ------ ------ ------ ------ ------
$ 48 $ 69 $ 48 $ 69 $ 27 $ 16
====== ====== ====== ======
14 14
------ ------
$ 34 $ 55
====== ======
$ .46 $ .74
====== ======
73.8 74.4
<FN>
* "Manufacturing" includes the consolidated
financial results of the Company's
manufacturing operations with its wholly
owned financial services subsidiaries
included under the equity method of
accounting. "Financial Services"
includes the Company'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 Corporation and
Consolidated Subsidiaries" columns.
The basis of consolidation is
described in Note A.
</TABLE>
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<TABLE>
<CAPTION>
STATEMENT OF FINANCIAL CONDITION (Unaudited)
- ----------------------------------------------------------------------------------------------------------------------------------
Millions of dollars
- ----------------------------------------------------------------------------------------------------------------------------------
Navistar International
Corporation 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 ........ $ 223 $ 485 $ 413 $ 196 $ 461 $ 333 $ 27 $ 24 $ 80
Marketable securities ............ 528 555 423 393 415 285 135 140 138
------ ------ ------ ------ ------ ------ ------ ------ ------
751 1,040 836 589 876 618 162 164 218
Receivables, net ................. 1,805 1,854 1,708 178 274 254 1,679 1,672 1,551
Inventories ...................... 600 416 493 600 416 493 - - -
Property, net of accumulated
depreciation and amortization
of $803, $764 and $724 ......... 703 683 593 647 642 560 56 41 33
Equity in Financial Services
subsidiaries ................... - - - 297 282 264 - - -
Investments and other assets ..... 197 166 201 143 122 152 54 44 49
Prepaid and intangible pension
assets ........................ 322 320 363 321 319 362 1 1 1
Deferred tax asset ............... 1,065 1,087 1,097 1,065 1,087 1,097 - - -
------ ------ ------ ------ ------ ------ ------ ------ ------
Total assets ..................... $5,443 $5,566 $5,291 $3,840 $4,018 $3,800 $1,952 $1,922 $1,852
====== ====== ====== ====== ====== ====== ====== ====== ======
LIABILITIES AND
SHAREOWNERS' EQUITY
- ----------------------------------
Liabilities
Accounts payable ................. $ 870 $ 933 $ 902 $ 806 $ 876 $ 847 $ 113 $ 146 $ 154
Debt ............................. 1,504 1,457 1,393 125 127 125 1,379 1,330 1,268
Postretirement benefits liability. 1,300 1,341 1,209 1,293 1,334 1,202 7 7 7
Other liabilities ................ 871 965 909 718 811 748 156 157 159
------ ------ ------ ------ ------ ------ ------ ------ ------
Total liabilities ............ 4,545 4,696 4,413 2,942 3,148 2,922 1,655 1,640 1,588
------ ------ ------ ------ ------ ------ ------ ------ ------
Shareowners' equity
Series G convertible preferred
stock (liquidation preference
$240 million) .................. 240 240 240 240 240 240 - - -
Series D convertible junior
preference stock (liquidation
preference $4 million) ......... 4 4 4 4 4 4 - - -
Common stock (51.0, 50.9 and
50.5 million shares issued) .... 1,641 1,641 1,634 1,641 1,641 1,634 178 178 178
Class B Common stock (24.3, 24.3
and 24.7 million shares issued) 491 491 496 491 491 496 - - -
Retained earnings (deficit) -
balance accumulated after the
deficit reclassification ....... (1,448) (1,478) (1,473) (1,448) (1,478) (1,473) 119 104 86
Common stock held in treasury,
at cost ........................ (30) (28) (23) (30) (28) (23) - - -
------ ------ ------ ------ ------ ------ ------ ------ ------
Total shareowners' equity .... 898 870 878 898 870 878 297 282 264
------ ------ ------ ------ ------ ------ ------ ------ ------
Total liabilities
and shareowners' equity ........ $5,443 $5,566 $5,291 $3,840 $4,018 $3,800 $1,952 $1,922 $1,852
====== ====== ====== ====== ====== ====== ====== ====== ======
<FN>
See Notes to Financial Statements. * "Manufacturing" includes the consolidated financial results of the
Company's manufacturing operations with its wholly owned financial
services subsidiaries included under the equity method of accounting.
"Financial Services" includes the Company'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 Corporation and Consolidated Subsidiaries" columns.
The basis of consolidation is described in Note A.
</TABLE>
<PAGE>
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<TABLE>
<CAPTION>
STATEMENT OF CASH FLOW (Unaudited)
----------------------------------------------------------------------------------------------------------------------------
For the Six Months Ended April 30 (Millions of dollars)
----------------------------------------------------------------------------------------------------------------------------
Navistar International
Corporation 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 ............................... $ 48 $ 69 $ 48 $ 69 $ 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) - -
Deferred income taxes .................. 26 37 26 37 - -
Additional pension funding .............. - (72) - (72) - -
Change in operating assets and liabilities:
Receivables .......................... 63 (119) 120 21 - -
Inventories .......................... (184) (64) (184) (64) - -
Prepaid and other current assets ..... (22) (5) (22) (5) - -
Accounts payable ..................... (59) 56 (68) 66 (60) (24)
Other liabilities .................... (143) 37 (136) 35 (7) 3
Other, net ............................. (1) 2 4 5 (5) (3)
------ ------ ------ ------ ------ ------
Cash provided by (used in) operations ... (220) (16) (182) 119 (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 ........ (378) (228) (332) (204) (46) (24)
Sales or maturities of marketable
securities ............................. 399 113 349 86 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 ........... (20) 2 (1) 8 (19) (6)
------ ------ ------ ------ ------ ------
Cash provided by (used in) investment
programs ............................... (62) (245) (61) (259) 11 (113)
------ ------ ------ ------ ------ ------
Cash flow from financing activities
Principal payments on debt ............... (8) (407) (8) (7) - (400)
Net increase in notes and debt outstanding
under bank revolving credit facility
and asset-backed and other commercial
paper programs ......................... 42 543 - - 42 543
Dividends paid ......................... (14) (14) (14) (14) (10) (3)
Repurchase of Class B Common Stock ....... - (5) - (5) - -
------ ------ ------ ------ ------ ------
Cash provided by (used in)
financing activities ................... 20 117 (22) (26) 32 140
------ ------ ------ ------ ------ ------
Cash and cash equivalents
Increase (decrease) during the period .. (262) (144) (265) (166) 3 22
At beginning of the year ............... 485 557 461 499 24 58
------ ------ ------ ------ ------ ------
Cash and cash equivalents
at end of the period ................... $ 223 $ 413 $ 196 $ 333 $ 27 $ 80
====== ====== ====== ====== ====== ======
<FN>
See Notes to Financial Statements. * "Manufacturing" includes the consolidated
financial results of the Company's
manufacturing operations with its wholly
owned financial services subsidiaries
included under the equity method of
accounting. "Financial Services" includes
the Company'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 Corporation and Consolidated
Subsidiaries" columns. The basis of
consolidation is described in Note A.
</TABLE>
<PAGE>
<PAGE 7>
Navistar International Corporation and Consolidated Subsidiaries
Notes to Financial Statements (Unaudited)
Note A. Summary of Accounting Policies
Navistar International Corporation is a holding company whose principal
operating subsidiary is Navistar International Transportation Corp.
(Transportation). As used hereafter, "Company" refers to Navistar
International Corporation and its consolidated subsidiaries.
The 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, the Company 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 the Company'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 subsidiaries.
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
collection" 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 $40 million and $40 million, respectively. Consolidated tax
payments made during the first six months of 1996 and 1995, were $3 million
and $3 million, respectively.
Note C. Income Taxes
The benefit of Net Operating Loss (NOL) carryforwards is recognized as
a deferred tax asset in the Statement of Financial Condition, while the
Statement of Income includes income taxes calculated at the statutory rate.
The amount reported does not represent cash payment of income taxes except for
certain state income, foreign withholding and federal alternative minimum
taxes which are not material. In the Statement of Financial Condition, the
deferred tax asset is reduced by the amount of deferred tax expense or
increased by a deferred tax benefit recorded during the year. Until the
Company has utilized its significant NOL carryforwards, the cash payment of
federal income taxes will be minimal.
<PAGE>
<PAGE 8>
Navistar International Corporation 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. The
Company 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 the Company'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
The company reported net income of $26 million, or $0.26 per common share
for the second quarter ended April 30, 1996, compared with net income of $46
million, or $0.52 per common share for the comparable quarter last year. For
the first six months of 1996, the company reported net income of $48 million,
a decrease from the $69 million reported for the same period in 1995.
Consolidated sales and revenues for the second quarter of 1996 totalled
$1,480 million compared with $1,640 million reported in 1995. During the
first six months of 1996, consolidated sales and revenues declined 5% to
$2,912 million from $3,056 million.
Manufacturing
Second Quarter Ended April 30, 1996
-----------------------------------
Manufacturing, excluding Financial Services, reported income before
income taxes of $26 million compared with pretax income of $61 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. The company maintained its position as
sales leader in the combined United States and Canadian Class 5 through 8
truck market with a 27.1% 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 the company 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.
<PAGE>
<PAGE 10>
Engineering and research expense increased to $35 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.
Six Months Ended April 30, 1996
-------------------------------
Pretax income, excluding Financial Services, for the first six months of
1996 was $34 million compared with $86 million reported for the same period
of 1995.
Manufacturing's sales and revenues during this period totalled $2,808
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. The company remained the sales leader
in the combined United States and Canadian Class 5 through 8 truck market for
the first two quarters of the 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 the company amounted to $751 million
at April 30, 1996, $1,040 million at October 31, 1995 and $836 million at
April 30, 1995.
<PAGE>
<PAGE 11>
Manufacturing
Cash used in operations during the first six months of 1996 totalled $182
million, primarily from a net change in operating assets and liabilities of
$290 million. The net change in operating assets and liabilities includes a
$120 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 used $55 million in cash to fund capital expenditures
for truck product improvement, increase diesel engine capacity and improve
cost performance. Financing programs used cash to pay $14 million in
dividends on the Series G Preferred Stock and to reduce debt by $8 million.
At April 30, 1996, the company had outstanding capital commitments of $29
million. The commitments include truck and engine product development and
ongoing facility maintenance programs. The company 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, capital expenditures and
anticipated payments of preferred dividends.
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.
<PAGE>
<PAGE 12>
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.
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
the company'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, the company 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 the company to original equipment
manufacturers in 1996 are expected to be approximately 157,000 units,
unchanged from 1995. The company'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. 1-9618.
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Shareowners was held on March 20,
1996. The following three nominees were elected to the Board of
Directors for three year terms until the 1999 Annual Meeting of
Shareowners.
Shares Voted Shares
Nominees "FOR" "WITHHELD"
--------------------- ------------ ----------
William F. Andrews 42,354,456 917,266
Dr. Andrew F. Brimmer 42,346,527 925,195
John D. Correnti 42,311,364 960,358
The results of the voting on the following additional items were as
follows:
- Ratification of the appointment of Deloitte & Touche LLP as
independent auditors for the current fiscal year -
Shares Voted "FOR" 42,981,406
Shares Voted "AGAINST" 168,005
Shares "ABSTAINING" 122,311
- Amend the Navistar 1988 Non-Employee Director Stock Option
Plan and increase the percentage of non-employee directors'
fees payable in restricted shares of Common Stock -
Shares Voted "FOR" 38,730,239
Shares Voted "AGAINST" 4,100,851
Shares "ABSTAINING" 201,390
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: 10-Q Page
---------
11. Computation of Net Income Per Share E-1
(b) Reports on Form 8-K:
No reports on Form 8-K were filed for the six months ended
April 30, 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 CORPORATION
- ----------------------------------
(Registrant)
/s/ J. Steven Keate
- ----------------------------------
J. Steven Keate
Vice President and Controller
June 7, 1996
<PAGE 1>
EXHIBIT 11
NAVISTAR INTERNATIONAL CORPORATION
AND SUBSIDIARIES
----------------------------------
COMPUTATION OF NET INCOME PER COMMON SHARE
A. Primary: See the Statement of Income of this Form 10-Q.
B. Full Dilution: Net income per common share assuming full dilution is
computed by assuming that all options and warrants which are exercisable
below market prices are exercised and the proceeds applied to reduce
common stock outstanding. The computations assume that convertible
preferred and preference stock are converted to common stock. Income is
divided by the average number of common shares outstanding and
unconditionally issuable at the end of each month during the period,
adjusted for the net effects of the exercise of options and warrants and
the conversion of convertible preferred and preference stocks.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
APRIL 30 APRIL 30
------------------ -------------------
Millions of Dollars 1996 1995 1996 1995
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income .................. $ 26 $ 46 $ 48 $ 69
======== ======== ======== ========
Average Common
and common equivalent
shares (millions):
Average common shares
outstanding as adjusted
per primary calculations ... 73.8 74.4 73.8 74.4
Assuming conversion
of Series G
Preferred Stock ............ .6 .6 .6 .6
-------- -------- -------- --------
Average common
and dilutive common
equivalent shares
as adjusted ................ 74.4 75.0 74.4 75.0
======== ======== ======== ========
Income per common share
assuming full dilution
(dollars):
Net income ................... $ .36 # $ .62 # $ .65 # $ .92 #
======== ======== ======== ========
- ---------------
<FN>
# This calculation is submitted in accordance with Regulation S-K item
601(b)(11) of the Securities Exchange Act although it is contrary to
paragraph 40 of APB Opinion No. 15 because it produces an anti-dilutive
result.
</TABLE>
E-1
<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> 223
<SECURITIES> 528
<RECEIVABLES> 1833
<ALLOWANCES> (28)
<INVENTORY> 600
<CURRENT-ASSETS> 0<F1>
<PP&E> 1506
<DEPRECIATION> (803)
<TOTAL-ASSETS> 5443
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 1504
0
244
<COMMON> 2132
<OTHER-SE> (1478)
<TOTAL-LIABILITY-AND-EQUITY> 5443
<SALES> 1423
<TOTAL-REVENUES> 1480
<CGS> 1230
<TOTAL-COSTS> 1438
<OTHER-EXPENSES> 54
<LOSS-PROVISION> 6
<INTEREST-EXPENSE> 23
<INCOME-PRETAX> 42
<INCOME-TAX> (16)
<INCOME-CONTINUING> 26
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26
<EPS-PRIMARY> .26
<EPS-DILUTED> .26
<FN>
<F1>The company has adopted an unclassified presentation in the Statement of
Financial Condition.
</FN>
</TABLE>
