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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 14, 1998
NAVISTAR INTERNATIONAL CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 1-9618 36-3359573
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(State or other jurisdiction of (Commission File No.) (I.R.S. Employer
incorporation or organization) Identification No.)
455 North Cityfront Plaza Drive, Chicago, Illinois 60611
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (312) 836-2000
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ITEM 5. OTHER EVENTS
On May 14, 1998, the Registrant issued the press release which is
attached as Exhibit 99.2 to this Report and incorporated by reference
herein.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
Exhibit No. Description Page
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99.2 Press Release dated E-1
May 14, 1998
SIGNATURES
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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 hereunto duly authorized.
NAVISTAR INTERNATIONAL CORPORATION
- ----------------------------------
Registrant
Date: May 14, 1998 /s/ J. Steven Keate
-------------------
J. Steven Keate
Vice President and Controller
(Principal Accounting Officer)
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INDEX TO EXHIBITS
Exhibit No. Description Page
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99.2 Press Release dated E-1
May 14, 1998
Exhibit 99.2
Investor Contact: Carmen Corbett, 312/836-2406
Media Contact: Rebecca Hayne, 312/836-3005
NAVISTAR REPORTS SECOND QUARTER 1998 EARNINGS
OF $67 MILLION, 89 CENTS PER SHARE
Company Posts Best Second Quarter Results in 9 Years
Truck Order Demand, Engine Business Continue Strong
Ford Agreement, Mexico Plant Opening Highlight Developments
CHICAGO (May 14, 1998) -- Navistar International Corporation (NYSE: NAV) today
reported net income of $67 million, or $0.89 per common share (diluted) for the
second quarter ended April 30, 1998. This compares to net income of $30 million,
or $0.31 per common share in the same period last year.
Consolidated sales and revenue from the company's manufacturing and
financial services operations for the second quarter totaled $2.0 billion,
compared to $1.6 billion in the second quarter of 1997.
During the quarter, Navistar's worldwide shipments of 33,600 medium
trucks and school buses (class 5-7 GVW) and heavy trucks (class 8 GVW) increased
31 percent over last year's second quarter total of 25,600. Shipments of
mid-range diesel engines to other original equipment manufacturers during the
quarter totaled 56,000, a 16 percent increase over the same period last year,
while sales of service parts were $217 million, an increase of 7 percent over
the second quarter of 1997.
Commenting on the second quarter, John R. Horne, chairman, president
and chief executive officer, said, "Our second quarter performance reflects
continued solid truck and engine demand coupled with aggressive implementation
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NAVISTAR EARNINGS -- page 2
of our five-point truck strategy and our engine strategies which led to an
increase in net income and manufacturing gross margin." Gross margins increased
from 13.8 percent in the year ago period, to 14.4 percent for the second quarter
this year.
"While we are pleased with the results of our efforts for the second
quarter, we believe the results could have been better if our supply base were
able to meet the high level of demand efficiently. For our part, we face
significant challenges in the year ahead, as we continue to focus manufacturing
operations, ramp up production at our new plant in Mexico, prepare for the
introduction of the next generation vehicle program, and continue to work to
reduce our cost structure and improve margins to meet our 1998 plan," Horne
said.
For the first six months of 1998, Navistar reported net income of $105
million, or $1.30 per common share (diluted), versus $45 million, or $0.41 per
common share in the same period a year ago. Consolidated sales and revenues
totaled $3.8 billion in the first six months, compared with $2.8 billion a year
ago.
Navistar's U.S. and Canadian market share was up from the same period a
year ago. Market share for International(R) brand medium trucks increased to
39.9 percent, up more than five percentage points from last year's second
quarter share of 34.4 percent. International(R) school bus market share climbed
nearly four percentage points, up from 50.8 percent to 54.5 percent. The
company's share for heavy trucks is at 20.5 percent, up nearly two percentage
points from last year's 18.6 percent.
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NAVISTAR EARNINGS -- page 3
Recent Developments
During the quarter, Navistar announced it had been selected to
negotiate an extended term agreement to supply diesel engines for select Ford
Motor Company under 8,500 lb. GVW light-duty trucks and sport utility vehicles,
such as the Ford Expedition, Lincoln Navigator, F-150 and F-250 pickups and
Econoline 150 and 250 van models. Navistar currently supplies 7.3 liter V8
diesel engines for Ford's over-8,500 lb. GVW F- Series trucks and Econoline
vans. Last year the companies agreed to extend that relationship, which began in
1981, with a new, 10-year contract beginning with model year 2003.
"Our engine business continues to experience exceptional growth, fueled
by product leadership and innovation," said Dan Ustian, group vice president and
general manager, engine and foundry division. "Bringing innovation to market is
key to the results we are enjoying. We're really in the business of providing
solutions to our customers' needs, and our technology is what's putting us ahead
of the competition."
Also during the quarter, Navistar increased production from 933 to
1,002 engines per day at its Indianapolis Engine Plant in order to meet growing
demand from Ford Motor Company for V8 engines used in Ford's F-250 and 350
super-duty pickups and Econoline vans. Production is scheduled to be increased
in August to 1,127 engines per day.
In addition, Navistar continued to drive its five-point truck strategy:
focusing its truck assembly plants, simplifying current product lines, investing
in new product development, expanding internationally and achieving competitive
wages, benefits and productivity.
In April, Navistar announced the opening of its new $167 million truck
assembly facility in Escobedo, Nuevo Leon, Mexico. The 700,000 square-foot
plant, the company's first plant in 20 years, is designed to meet Mexican and
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NAVISTAR EARNINGS -- page 4
Latin American truck and urban bus demand. It has the capacity to produce 65
International brand medium and heavy trucks and buses per shift. The plant is
expected to be fully operational by fall 1998. Navistar's share in Mexico has
grown January through March 1998 to 19.1 percent or 969 units, up from 12.2
percent in 1997. The company currently serves customers in Mexico through a
42-location dealer network and a parts distribution center near Mexico City.
Said Don DeFosset, executive vice president and president of the truck
group, "We have made significant progress on a number of other fronts during the
quarter as we continue to implement our truck strategies and make measurable
improvements in quality, productivity and processes. This is an exciting time
for the truck industry since demand is at nearly an all-time high."
In March, Navistar introduced the International Eagle 9900 class 8
premium conventional truck at the Mid-America show in Louisville. Focused on
driver satisfaction and retention and developed with the input of
owner-operators and drivers in the U.S. and Canada, the truck features the use
of a common chassis which reduces product complexity to enhance product quality
and aftermarket support. The introduction continues the company's efforts to
focus assembly facilities. All premium conventional models in the International
9000 series are currently assembled at the company's focused facility in
Chatham, Ont. "Focused facilities and reduced manufacturing complexity
contribute to improved quality and speedier delivery," said DeFosset.
Navistar continued rollout of its popular Diamond SPEC(TM) program for
its medium-duty trucks. Diamond SPEC is a faster, simplified truck ordering
process that packages individual components into pre-engineered modules. It
reduces manufacturing complexity and guarantees customers improved quality and
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NAVISTAR EARNINGS -- page 5
enhanced overall vehicle performance. Through the second quarter, Diamond SPEC
for medium truck accounted for 60 percent of the company's medium stock trucks
ordered by dealers. Last year, Diamond SPEC for the heavy truck business met
with significant success, accounting for 80 percent of the company's premium
conventional class 8 stock trucks ordered by dealers.
Outlook for 1998 Demand
Navistar forecasts industry demand for heavy trucks in the United
States and Canada at 230,000 in fiscal 1998, compared with 196,800 heavy trucks
sold by the industry in 1997. Industry demand for medium trucks in the United
States and Canada is expected to reach 127,000 units in 1998, compared with the
117,400 trucks sold in 1997, and demand for school buses in fiscal 1998 is
expected to be 32,000, compared with last year's total of 33,200.
Navistar International Corporation, with world headquarters in Chicago
and 1997 annual sales of $6.4 billion, is the leading North American producer of
heavy and medium trucks and school buses. Navistar maintained its position as
the leader in the combined U.S. and Canadian retail markets for medium and heavy
trucks and school buses in the second quarter, achieving a 29.6 percent market
share, which is 2.7 percentage points higher than a year ago. The company is
also a worldwide leader in the manufacture of mid-range diesel engines which are
produced in a range of 160 to 300 horsepower.
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NAVISTAR INTERNATIONAL CORPORATION
AND CONSOLIDATED SUBSIDIARIES
STATEMENT OF INCOME (UNAUDITED)
(Millions of dollars, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
APRIL 30 APRIL 30
------------------------ ----------------------
1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Sales and Revenues
Sales of manufactured products $1,981 $1,493 $3,653 $2,733
Finance and insurance revenue 47 43 92 88
Other income 14 15 24 26
------ ------ ------ ------
Total sales and revenues 2,042 1,551 3,769 2,847
------ ------ ------ ------
Costs and expenses
Cost of products and services sold 1,703 1,292 3,157 2,368
Postretirement benefits 43 57 88 108
Engineering and research expense 46 32 81 62
Marketing and administrative expense 97 87 195 170
Interest expense 29 20 46 37
Financing charges on sold receivables 7 5 15 12
Insurance claims
and underwriting expense 9 9 18 17
------ ------ ------ ------
Total costs and expenses 1,934 1,502 3,600 2,774
------ ------ ------ ------
Income before income taxes 108 49 169 73
Income tax expense 41 19 64 28
------ ------ ------ ------
Net income 67 30 105 45
Less dividends on Series G
preferred stock 4 7 11 14
------ ------ ------ ------
Net income applicable to common stock $ 63 $ 23 $ 94 $ 31
====== ====== ====== ======
Earnings per share
Basic $ .90 $ .31 $ 1.32 $ .41
Diluted $ .89 $ .31 $ 1.30 $ .41
Average shares outstanding (millions)
Basic 69.2 73.6 70.6 73.6
Diluted 70.5 73.7 71.7 73.7
<FN>
The Statement of Income includes the consolidated financial results of the
company's manufacturing operations with its wholly owned financial services
operations.
</FN>
</TABLE>
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NAVISTAR INTERNATIONAL CORPORATION
AND CONSOLIDATED SUBSIDIARIES
STATEMENT OF FINANCIAL CONDITION (UNAUDITED)
(Millions of dollars)
AS OF APRIL 30
----------------------
1998 1997
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ASSETS
Cash and cash equivalents $ 453 $ 237
Marketable securities 491 533
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944 770
Receivables, net 2,044 1,618
Inventories 576 503
Property and equipment, net 968 748
Investments and other assets 334 303
Intangible pension assets 212 267
Deferred tax asset, net 871 995
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Total assets $5,949 $5,204
====== ======
LIABILITIES AND SHAREOWNERS' EQUITY
Liabilities
Accounts payable, principally trade $1,214 $ 907
Debt:
Manufacturing operations 464 109
Financial services operations 1,592 1,213
Postretirement benefits liability 910 1,200
Other liabilities 977 816
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Total liabilities 5,157 4,245
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Commitments and contingencies
Shareowners' equity
Series G convertible preferred stock
(liquidation preference $240) - 240
Series D convertible junior preference stock
(liquidation preference $4) 4 4
Common stock
(55.4 and 51.0 million shares issued) 1,750 1,642
Class B Common stock
(19.9 and 24.3 million shares issued) 388 491
Retained earnings (deficit) (1,212) (1,388)
Common stock held in treasury, at cost (138) (30)
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Total shareowners' equity 792 959
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Total liabilities and shareowners' equity $5,949 $5,204
====== ======
The Statement of Financial Condition includes the consolidated financial results
of the company's manufacturing operations with its wholly owned financial
services operations.
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