<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, 1997
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
NAVISTAR INTERNATIONAL CORPORATION
------------------------------------
(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 9, 1997, the number of shares outstanding of the
registrant's common stock was 49,335,410 and the Class B Common
was 23,674,846.
<PAGE>
<PAGE 2>
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, 1997 and 1996 ...................... 3
Statement of Financial Condition --
April 30, 1997, October 31, 1996 and April 30, 1996. 4
Statement of Cash Flow --
Six Months Ended April 30, 1997 and 1996 ........... 5
Notes to Financial Statements .......................... 6
Item 2. Management's Discussion and Analysis
of Results of Operations and Financial Condition 12
Part II. Other Information:
Item 1. Legal Proceedings .............................. 18
Item 6. Exhibits and Reports on Form 8-K ............... 18
Signature ............................................... 19
Exhibit 11 ................................................ E-1
<PAGE>
<PAGE 3>
PART I - FINANCIAL INFORMATION
------------------------------
<TABLE>
<CAPTION>
ITEM 1. Financial Statements
STATEMENT OF INCOME (Unaudited)
------------------------------------------------------------------
Millions of dollars, except per share data
------------------------------------------------------------------
Navistar International Corporation
and Consolidated Subsidiaries
-----------------------------------------------
Three Months Ended Six Months Ended
April 30 April 30
------------------- ----------------
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Sales and revenues
Sales of
manufactured
products ....... $1,493 $1,423 $2,733 $2,785
Finance and
insurance
revenue ........ 43 46 88 101
Other income ..... 15 11 26 26
------ ------ ------ ------
Total sales
and revenues. 1,551 1,480 2,847 2,912
------ ------ ------ ------
Costs and expenses
Cost of products
and services sold 1,292 1,230 2,368 2,429
Postretirement
benefits ...... 57 54 108 111
Engineering and
research expense 32 35 62 64
Marketing and
administrative
expense ....... 87 75 170 148
Interest expense. 20 23 37 41
Financing charges
on sold
receivables ... 5 7 12 16
Insurance claims
and underwriting
expense ....... 9 14 17 26
------ ------ ------ ------
Total costs
and expenses. 1,502 1,438 2,774 2,835
------ ------ ------ ------
Income before
income taxes 49 42 73 77
Income tax
expense ... 19 16 28 29
------ ------ ------ ------
Net income ...... 30 26 45 48
Less dividends
on Series G
Preferred stock 7 7 14 14
------ ------ ------ ------
Net income
applicable to
common stock .. $ 23 $ 19 $ 31 $ 34
====== ====== ====== ======
Net income
per common share $ .31 $ .26 $ .41 $ .46
====== ====== ====== ======
Average number
of common and
dilutive
common
equivalent
shares
outstanding
(millions) .. 73.7 73.8 73.7 73.8
<FN>
See Notes to Financial Statements.
</TABLE>
<PAGE>
<PAGE 4>
<TABLE>
<CAPTION>
STATEMENT OF FINANCIAL CONDITION (Unaudited)
- -------------------------------------------------------------------
Millions of dollars
- -------------------------------------------------------------------
Navistar International Corporation
and Consolidated Subsidiaries
---------------------------------------
April 30 October 31 April 30
1997 1996 1996
- -------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
- ----------------------------
Cash and cash equivalents .. $ 237 $ 487 $ 223
Marketable securities ...... 533 394 528
------ ------ ------
770 881 751
Receivables, net ........... 1,618 1,655 1,805
Inventories ................ 473 463 600
Property, net of accumulated
depreciation and
amortization of $869, $842
and $803 ................. 748 770 703
Investments and other assets 333 213 235
Intangible pension assets .. 267 314 284
Deferred tax asset, net .... 995 1,030 1,065
------ ------ ------
Total assets ............... $5,204 $5,326 $5,443
====== ====== ======
LIABILITIES AND
SHAREOWNERS' EQUITY
- ----------------------------
Liabilities
Accounts payable,
principally trade ........ $ 907 $ 820 $ 870
Debt:
Manufacturing operations . 109 115 125
Financial services
operations ............. 1,213 1,305 1,379
Postretirement benefits
liability ................ 1,200 1,351 1,300
Other liabilities........... 816 819 871
------ ------ ------
Total liabilities ...... 4,245 4,410 4,545
------ ------ ------
Commitments
and contingencies
Shareowners' equity
Series G convertible
preferred stock
(liquidation
preference
$240 million) ............ 240 240 240
Series D convertible junior
preference stock
(liquidation
preference $4 million) ... 4 4 4
Common stock
(51.0 million shares
issued) ................. 1,642 1,642 1,641
Class B Common stock
(24.3 million shares
issued) ................. 491 491 491
Retained earnings (deficit)-
balance accumulated after
the deficit
reclassification
as of October 31, 1987 ... (1,388) (1,431) (1,448)
Common stock held in
treasury, at cost ........ (30) (30) (30)
------ ------ ------
Total shareowners'
equity ............... 959 916 898
------ ------ ------
Total liabilities
and shareowners' equity .. $5,204 $5,326 $5,443
====== ====== ======
<FN>
See Notes to Financial Statements.
</TABLE>
<PAGE>
<PAGE 5>
<TABLE>
<CAPTION>
STATEMENT OF CASH FLOW (Unaudited)
------------------------------------------------------------------
For the Six Months Ended April 30 (Millions of dollars)
------------------------------------------------------------------
Navistar International
Corporation and
Consolidated Subsidiaries
-------------------------
1997 1996
------ ------
<S> <C> <C>
Cash flow from operations
Net income ............................ $ 45 $ 48
Adjustments to reconcile net income
to cash used in operations:
Depreciation and amortization ....... 60 55
Deferred income taxes ............... 26 26
Other, net .......................... (18) (4)
Change in operating assets
and liabilities:
Receivables ....................... (63) 63
Inventories ....................... (18) (184)
Prepaid and other current assets .. (4) (22)
Accounts payable .................. 93 (59)
Other liabilities ................. (126) (143)
------ ------
Cash used in operations ............... (5) (220)
------ ------
Cash flow from investment programs
Purchase of retail notes
and lease receivables ............... (445) (576)
Collections/sales of retail notes
and lease receivables .............. 518 561
Purchase of marketable securities ..... (332) (378)
Sales or maturities of
marketable securities ............... 195 399
Capital expenditures .................. (58) (55)
Other investment programs, net ........ (12) (13)
------ ------
Cash used in investment programs ...... (134) (62)
------ ------
Cash flow from financing activities
Issuance of debt ...................... 79 -
Principal payments on debt ............ (18) (8)
Net increase (decrease) in notes
and debt outstanding under bank
revolving credit facility and
asset-backed and other commercial
paper programs ...................... (158) 42
Dividends paid ........................ (14) (14)
------ ------
Cash provided by (used in)
financing activities ................ (111) 20
------ ------
Cash and cash equivalents
Decrease during the period .......... (250) (262)
At beginning of the year ............ 487 485
------ ------
Cash and cash equivalents
at end of the period................. $ 237 $ 223
====== ======
<FN>
See Notes to Financial Statements.
</TABLE>
<PAGE>
<PAGE 6>
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 consolidated financial statements include the
results of Transportation's manufacturing operations and its wholly
owned financial services subsidiaries. The effects of transactions
between the manufacturing and financial services operations have
been eliminated to arrive at the consolidated totals.
The accompanying unaudited financial statements have been
prepared in accordance with accounting policies described in the
1996 Annual Report on Form 10-K and should be read in conjunction
with the disclosures 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 periods presented.
Interim results are not necessarily indicative of results for the
full year. Certain 1996 amounts have been reclassified to conform
with the presentation used in the 1997 financial statements.
Note B. Supplemental Cash Flow Information
Consolidated interest payments during the first six months of
1997 and 1996 were $37 million and $40 million, respectively. No
consolidated tax payments were made during the first six months of
1997 and $3 million were made during the first six months of 1996.
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.
Note D. Receivables
On January 1, 1997, the company adopted Statement of Financial
Accounting Standards No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities"
for all applicable transactions. As a result, certain 1997 balance
sheet items have been reclassified. Restatement of prior periods is
not permitted. The new standard did not have a material effect on
the company's net income or financial position.
<PAGE>
<PAGE 7>
Navistar International Corporation and Consolidated Subsidiaries
Notes to Financial Statements (Unaudited)
Note E. Inventories
Inventories are as follows:
April 30 October 31 April 30
Millions of dollars 1997 1996 1996
- -------------------------------------------------------------------
Finished products ........ $ 238 $ 242 $ 295
Work in process .......... 101 97 148
Raw materials and supplies 134 124 157
------- ------- -------
Total inventories ........ $ 473 $ 463 $ 600
======= ======= =======
Note F. Financial Instruments
The company purchases collateralized mortgage obligations
(CMOs) that have predetermined fixed-principal payment patterns
which are relatively certain. These instruments totaled $33 million
at April 30, 1997.
During March through April 1997, Navistar Financial Corporation
(NFC) entered into $500 million of forward interest rate lock
agreements on a U.S. Treasury security maturing in 1999 related to
NFC's May 1997 sale of retail receivables. These hedge agreements
were closed in conjunction with the pricing of the sale. The loss,
which was not material, was deferred at April 30, 1997, and included
in the gain on the sale of $500 million of retail notes in May 1997.
In April 1997, NFC entered into a $100 million forward interest
rate lock agreement on a U.S. Treasury security maturing in 2002
related to NFC's May 1997 subordinated debt issue. The hedge
agreement was closed in conjunction with the pricing of the
subordinated debt, and the loss, which was not material, will be
amortized over the life of the subordinated debt.
In May 1997, NFC entered into a $50 million forward starting
swap agreement on a U.S. Treasury security maturing in 1999 related
to NFC's anticipated November 1997 sale of retail receivables. This
swap agreement starts on October 31, 1997. NFC intends to sell
this position in October 1997 on the pricing date of the sale. The
gain or loss which will result from the swap transaction will be
included in the gain or loss recognized on the sale of receivables.
During May 1997, NFC sold $100 million of Senior Subordinated
Notes due 2002. NFC used the net proceeds to repurchase $6 million
of its outstanding 1998 Notes and to reduce outstanding indebtedness
under the Bank Revolving Credit Facility.
<PAGE>
<PAGE 8>
Navistar International Corporation and Consolidated Subsidiaries
Notes to Financial Statements (Unaudited)
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 4 to the company's Annual Report on Form 10-K.
In March 1997, the U.S. Department of Justice and
Transportation approved the final consent decree in settlement of a
dispute related to the Wisconsin Steel property. In June 1997, the
company paid $11 million to the Economic Development
Administration in settlement of various commercial issues and past
environmental costs which is consistent with the company's estimate
of the anticipated clean-up costs of the Wisconsin Steel and Solar
sites reported at October 31, 1996.
Note H. New Pronouncements
In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 128,
"Earnings Per Share." This statement specifies the computation,
presentation and disclosure requirements for earnings per share and
is effective for financial statements issued for periods ending
after December 15, 1997, including interim periods. The standard is
not expected to have a material effect on the company's net income
per common share computation.
<PAGE>
<PAGE 9>
Navistar International Corporation and Consolidated Subsidiaries
Notes to Financial Statements (Unaudited)
Note I. Supplemental Financial Information
<TABLE>
<CAPTION>
Navistar International Corporation
(with financial services operations on an equity basis)
in millions of dollars:
Three Months Ended Six Months Ended
April 30 April 30
------------------- ------------------
<S> <C> <C> <C> <C>
Condensed
Statement
of Income 1997 1996 1997 1996
- --------------- ------ ------ ------ ------
Sales of
manufactured
products ..... $1,493 $1,423 $2,733 $2,785
Other income ... 14 8 24 23
------ ------ ------ ------
Total sales
and revenues . 1,507 1,431 2,757 2,808
------ ------ ------ ------
Cost of
products sold 1,287 1,228 2,358 2,424
Postretirement
benefits .... 57 54 108 111
Engineering and
research expense 32 35 62 64
Marketing and
administrative
expense 78 67 154 132
Other expenses .. 20 21 41 43
------ ------ ------ ------
Total costs
and expenses .. 1,474 1,405 2,723 2,774
------ ------ ------ ------
Income before
income taxes
Manufacturing
operations .. 33 26 34 34
Financial
services
operations 16 16 39 43
------ ------ ------ ------
Income before
income taxes 49 42 73 77
Income tax expense 19 16 28 29
------ ------ ------ ------
Net income ....... $ 30 $ 26 $ 45 $ 48
====== ====== ====== ======
</TABLE>
<PAGE>
<PAGE 10>
Navistar International Corporation and Consolidated Subsidiaries
Notes to Financial Statements (Unaudited)
Note I. Supplemental Financial Information (continued)
<TABLE>
<CAPTION>
Navistar International Corporation
(with financial services operations on an equity basis)
in millions of dollars:
Condensed Statement April 30 October 31 April 30
of Financial Condition 1997 1996 1996
- -------------------------------------------------------------------
<S> <C> <C> <C>
Cash, cash equivalents
and marketable
securities ............... $ 610 $ 707 $ 589
Receivables, net ........... 264 181 178
Inventories ................ 473 463 600
Property and equipment, net. 637 666 647
Equity in financial
services subsidiaries .... 306 306 297
Other assets ............... 516 462 464
Deferred tax asset, net .... 995 1,030 1,065
------- ------- -------
Total assets .......... $ 3,801 $ 3,815 $ 3,840
------- ------- -------
Accounts payable,
principally trade ........ $ 862 $ 771 $ 806
Debt ....................... 109 115 125
Postretirement benefits
liabilities .............. 1,192 1,344 1,293
Other liabilities .......... 679 669 718
Shareowners' equity ........ 959 916 898
------- ------- -------
Total liabilities
and shareowners'
equity .............. $ 3,801 $ 3,815 $ 3,840
======= ======= =======
</TABLE>
<PAGE>
<PAGE 11>
Navistar International Corporation and Consolidated Subsidiaries
Notes to Financial Statements (Unaudited)
Note I. Supplemental Financial Information (continued)
<TABLE>
<CAPTION>
Navistar International Corporation
(with financial services operations on an equity basis)
in millions of dollars:
Six Months Ended
April 30
--------------------
Condensed Statement of Cash Flow 1997 1996
- ------------------------------------------- -------- --------
<S> <C> <C>
Cash flow from operations
Net income ................................ $ 45 $ 48
Adjustments to reconcile net income
to cash provided by (used in) operations:
Depreciation and amortization ........ 49 47
Equity in earnings of nonconsolidated
companies, net of dividends received 6 (17)
Deferred income taxes ............... 26 26
Other, net ........................... (6) 4
Change in operating assets and liabilities. (44) (290)
-------- --------
Cash provided by (used in) operations ..... 76 (182)
-------- --------
Cash flow from investment programs
Purchase of marketable securities ......... (280) (332)
Sales or maturities of marketable securities 134 349
Capital expenditures ...................... (58) (55)
Advance to Navistar Financial Corporation . (98) (29)
Other investment programs, net ............ 4 6
-------- --------
Cash used in investment programs .......... (298) (61)
-------- --------
Cash flow used in financing activities .... (21) (22)
-------- --------
Cash and cash equivalents
Decrease during the period ................ (243) (265)
At beginning of the year .................. 452 461
-------- --------
Cash and cash equivalents
at end of the period ................... $ 209 $ 196
======== ========
</TABLE>
<PAGE>
<PAGE 12>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Certain statements under this caption constitute "forward-
looking statements" under the Reform Act, which involve risks and
uncertainties. Navistar International 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 Environment."
Second Quarter Ended April 30, 1997
-----------------------------------
The company reported net income of $30 million, or $0.31 per
common share for the second quarter ended April 30, 1997, compared
with net income of $26 million, or $0.26 per common share for the
comparable quarter last year.
The company's manufacturing operations reported income before
income taxes of $33 million compared with pretax income of $26
million in the second quarter of 1996 reflecting continued strong
demand for mid-range diesel engines. The financial services
operations' pretax income for the second quarter of 1997 was $16
million, unchanged from the same period in 1996.
Sales and Revenues. Second quarter 1997 industry retail sales of
Class 5 through 8 trucks totaled 86,800 units, equal to the number
of units sold during this period in 1996. Class 8 heavy truck sales
of 48,500 units during the second quarter of 1997 were two percent
lower than the 1996 level of 49,700 units. Industry sales of Class
5, 6 and 7 medium trucks, including school buses, increased three
percent to 38,300 units. Industry sales of school buses, which
accounted for 18 percent of the medium truck market, decreased four
percent.
Sales and revenues for the second quarter of 1997 totaled
$1,551 million, five percent higher than the $1,480 million reported
for the comparable quarter in 1996. Sales of trucks, mid-range
diesel engines and service parts for the second quarter of 1997
totaled $1,493 million compared with $1,423 million reported for the
same period in 1996.
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 percent market share for the second quarter of 1997, a
slight decrease from the market share reported in 1996. (Sources:
American Automobile Manufacturer's Association, the United States
Motor Vehicle Manufacturer's Association and R.L. Polk & Company.)
<PAGE>
<PAGE 13>
Shipments of mid-range diesel engines by the company to other
original equipment manufacturers during the second quarter of 1997
totaled 48,300 units, a 19 percent increase from the same period of
1996. Higher shipments to a domestic 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 $203 million in the second quarter of
1997 increased four percent from the prior year's level.
Finance and insurance revenue was $43 million in the second
quarter of 1997 slightly lower than in 1996 primarily as a result of
a decline in wholesale note revenue.
Costs and expenses. Manufacturing gross margin was 13.8 percent of
sales for the second quarter of 1997 compared with 13.7 percent for
the same period in 1996. Consolidated marketing and administrative
expense increased to $87 million in 1997 from $75 million in the
second quarter of 1996 reflecting investment in the implementation
of the company's strategy to reduce costs and complexity in its
manufacturing processes.
Six Months Ended April 30, 1997
-------------------------------
Pretax income for the first six months of 1997 was $73 million
compared with $77 million reported for the same period of 1996. The
company's manufacturing operations reported income before income
taxes of $34 million during this period, equal to the amount
reported in 1996. The financial services operations' pretax income
for the first six months of 1997 was $39 million, a decline from the
$43 million reported in 1996. This change is a result of lower
income on sales of retail receivables and a lower volume of
wholesale financing.
Manufacturing operations' sales and revenues during this period
totaled $2,757 million, slightly lower than in 1996. During the
first six months of 1997, sales of trucks declined six percent while
sales of diesel engines to original equipment manufacturers
increased ten percent. Service parts sales were five percent higher
than in the same period of 1996. Finance and insurance revenue was
$88 million during the first two quarters of 1997 compared with $101
million in 1996.
Industry retail sales of Class 5 through 8 trucks during the
first six months of 1997 totaled 159,000 units, a decrease from the
167,600 units sold during this period in 1996. 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 year with a
26.8 percent market share, an increase over the 26.2 percent market
share reported for the same period last year.
<PAGE>
<PAGE 14>
Manufacturing gross margin for the first six months of 1997 was
13.7 percent compared with 13.0 percent in 1996. The increase in
gross margin reflects improved operating performance and pricing.
Consolidated marketing and administrative expense was $170 million
during this period compared with $148 million during the first two
quarters of 1996. The factors which influenced this expense during
the second quarter of 1997 were also responsible for the change
during the first half of the year.
Liquidity and Capital Resources
Cash flow is generated from the manufacture and sale of trucks,
mid-range diesel engines and service parts as well as product
financing and insurance coverage provided to the company's dealers
and retail customers by the financial services operations.
Historically, funds to finance the company's products are
obtained from a combination of commercial paper, short- and long-
term bank borrowings, medium- and long-term debt issues, sales of
finance receivables and equity capital. NFC's current debt ratings
have made bank borrowings and sales of finance receivables the most
economic sources of cash. Insurance operations are funded through
internal operations.
Total cash, cash equivalents and marketable securities of the
company amounted to $770 million at April 30, 1997, $881 million at
October 31, 1996 and $751 million at April 30, 1996.
Cash used in operations during the first six months of 1997
totaled $5 million primarily from a net change in operating assets
and liabilities of $118 million offset by net income of $45 million
and $68 million of other noncash items, principally depreciation.
The net change in operating assets and liabilities includes a $93
million increase in payables offset by a slight increase in
inventory, a $63 million increase in receivables and a $126 million
decline in other liabilities. The change in other liabilities
includes the company's contribution of $109 million to its hourly
and salaried pension plans in the second quarter. This contribution
is in addition to the $105 million that the company contributed in
the first quarter of 1997.
Investment programs used $134 million in cash reflecting a net
increase in marketable securities of $137 million and a net decrease
in retail notes and lease receivables of $73 million. In addition,
$58 million was used to fund capital expenditures for construction
of a truck assembly facility in Mexico, to increase mid-range diesel
engine capacity, and for truck product improvements.
Financing activities used cash to reduce notes and debt
outstanding under the bank revolving credit facility and asset-
backed and other commercial paper program by $158 million offset by
a $79 million increase in debt and to pay $14 million in dividends
on the Series G Preferred shares.
<PAGE>
<PAGE 15>
Receivable sales were a significant source of funding in 1997
and 1996. During the first six months of 1997 and of 1996, NFC sold
$487 million and $525 million, respectively, of retail notes through
Navistar Financial Retail Receivables Corporation (NFRRC). NFRRC
has filed registration statements with the Securities and Exchange
Commission which provide for the issuance of up to $5,000 million of
asset-backed securities. At April 30, 1997, the remaining shelf
registration available to NFRRC was $1,973 million.
During March through April 1997, NFC entered into $500 million
of forward interest rate lock agreements on a U.S. Treasury security
maturing in 1999 related to the May 1997 sale of retail receivables.
These hedge agreements were closed in conjunction with the pricing
of the sale.
During May 1997, NFC sold $500 million of retail notes,
realizing net proceeds of $499 million which were used for general
working capital purposes. A gain of approximately $6 million was
recognized on the sale.
In May 1997, NFC entered into a $50 million forward starting
swap agreement on a U.S. Treasury security maturing in 1999 related
to the anticipated November 1997 sale of retail receivables. This
swap agreement starts on October 31, 1997 and NFC intends to sell
this position in October 1997 on the pricing date of the sale.
NFC also utilizes a $400 million revolving wholesale note trust
that provides for the continuous sale of eligible wholesale notes on
a daily basis. The trust is comprised of two $100 million tranches
of investor certificates maturing serially from 1997 to 1999 and a
$200 million tranche maturing in 2004.
At April 30, 1997, available funding under NFC's amended and
restated credit facility and the asset-backed commercial paper
facility was $440 million, of which $145 million was used to back
short-term debt at April 30, 1997. The remaining $295 million, when
combined with unrestricted cash and cash equivalents made $298
million available to fund the general business purposes of NFC at
April 30, 1997.
In April 1997, NFC entered into a $100 million forward interest
rate lock agreement on a U.S. Treasury security maturing in 2002
related to the May 1997 subordinated debt issue. The hedge
agreement was closed in conjunction with the pricing of the
subordinated debt.
During May 1997, the NFC sold $100 million of Senior
Subordinated Notes due 2002. NFC used the net proceeds to repurchase
$6 million of its outstanding 1998 Notes and to reduce outstanding
indebtedness under the Bank Revolving Credit Facility.
<PAGE>
<PAGE 16>
The company had outstanding capital commitments of $128 million
at April 30, 1997, which consist of truck and engine development,
ongoing facility maintenance programs and construction of a plant in
Mexico. In November 1996, the company announced plans to spend $167
million, over the next two years, to construct this new truck
assembly facility in Mexico.
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. Management also believes that collections on the
outstanding receivables portfolios as well as funds available from
various funding sources will permit the financial services
operations to meet the financing requirements of the company's
dealers and customers.
Business Environment
Sales of Class 5 through 8 trucks are cyclical, with demand
affected by such economic factors as industrial production,
construction, demand for consumer durable goods, interest rates and
the earnings and cash flow of dealers and customers. Although the
general economy remains stable, demand for new trucks in 1997 is
anticipated to be lower than in 1996. An improvement in the number
of new orders has increased the company's order backlog to 34,900
units at April 30, 1997 from 26,700 units at April 30, 1996. Retail
deliveries during the remainder of 1997 continue to be highly
dependent on the rate at which new truck orders are received. The
company will evaluate order receipts and backlog throughout the year
and will balance production with demand as appropriate.
<PAGE>
<PAGE 17>
The company currently projects 1997 United States and Canadian
Class 8 heavy truck demand to be 180,000 units, an eight percent
decrease from 1996. Class 5, 6 and 7 medium truck demand, excluding
school buses, is forecast at 112,000 units, a slight decrease from
1996. Demand for school buses is expected to decline slightly in
1997 to 31,500 units. Mid-range diesel engine shipments by the
company to original equipment manufacturers in 1997 are expected to
be 178,100 units, nine percent higher than in 1996. The company's
service parts sales are projected to grow eight percent to $817
million.
New Pronouncements
In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 128,
"Earnings Per Share." This statement specifies the computation,
presentation and disclosure requirements for earnings per share and
is effective for financial statements issued for periods ending
after December 15, 1997, including interim periods. The standard is
not expected to have a material effect on the company's net income
per common share computation.
<PAGE>
<PAGE 18>
Navistar International Corporation and Consolidated Subsidiaries
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 22, 1997, 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 19, 1997. The following three nominees were elected
to the Board of Directors for three year terms until the
2000 Annual Meeting of Shareowners.
Shares Voted Shares
Nominees "FOR" "WITHHELD"
-------- ------------ ----------
Jerry E. Dempsey 42,157,412 1,472,941
Robert C. Lannert 42,169,966 1,460,387
John F. Fiedler 42,164,786 1,465,567
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" 43,207,901
Shares Voted "AGAINST" 283,211
Shares "ABSTAINING" 139,141
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, 1997.
<PAGE>
<PAGE 19>
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
(Principal Accounting Officer)
June 13, 1997
<PAGE 1>
E-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 1997 1996 1997 1996
- ---------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income ....... $ 30 $ 26 $ 45 $ 48
======== ======== ======== ========
Average Common
and common
equivalent
shares
(millions):
Average common
shares
outstanding
as adjusted
per primary
calculations
(millions) ..... 73.7 73.8 73.7 73.8
Assuming conversion
of Series G
Preferred Stock. .6 .6 .6 .6
-------- -------- -------- --------
Average common
and dilutive
common
equivalent
shares as
adjusted ...... 74.3 74.4 74.3 74.4
======== ======== ======== ========
Income per common
share assuming
full dilution
(dollars):
Net income ...... $ .40 # $ .36 # $ .60 # $ .65 #
======== ======== ======== ========
- ---------------
<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> 1000000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> APR-30-1997
<CASH> 237
<SECURITIES> 533
<RECEIVABLES> 1649
<ALLOWANCES> (31)
<INVENTORY> 473
<CURRENT-ASSETS> 0<F1>
<PP&E> 1617
<DEPRECIATION> (869)
<TOTAL-ASSETS> 5204
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 1322
0
244
<COMMON> 2133
<OTHER-SE> (1418)
<TOTAL-LIABILITY-AND-EQUITY> 5204
<SALES> 1493
<TOTAL-REVENUES> 1551
<CGS> 1292
<TOTAL-COSTS> 1502
<OTHER-EXPENSES> 57
<LOSS-PROVISION> 4
<INTEREST-EXPENSE> 20
<INCOME-PRETAX> 49
<INCOME-TAX> (19)
<INCOME-CONTINUING> 30
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 30
<EPS-PRIMARY> 0.31
<EPS-DILUTED> 0.31
<FN>
<F1>The company has adopted an unclassified presentation in the Statement of
Financial Condition.
</FN>
</TABLE>
