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 January 31, 2000
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 February 29, 2000, the number of shares outstanding of the
registrant's common stock was 61,885,758.
<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 Ended January 31, 2000
and January 31, 1999............................. 3
Statement of Financial Condition
January 31, 2000, October 31, 1999
and January 31, 1999............................. 4
Statement of Cash Flow
Three Months Ended January 31, 2000
and January 31, 1999............................. 5
Notes to Financial Statements............................... 6
Supplemental Financial Information.......................... 10
Item 2. Management's Discussion and Analysis
of Results of Operations and
Financial Condition.......................... 12
Part II. Other Information:
Item 1. Legal Proceedings............................ 17
Item 6. Exhibits and Reports on Form 8-K............. 17
Signature .................................................. 18
<PAGE>
PAGE 3
PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1. Financial Statements
STATEMENT OF INCOME (Unaudited)
- ------------------------------------------------------------------------------
Millions of dollars, except per share data
- ------------------------------------------------------------------------------
Navistar International
Corporation and
Consolidated Subsidiaries
-------------------------
Three Months Ended
January 31
----------------------
2000 1999
-------- --------
Sales and revenues
Sales of manufactured products.................. $ 2,086 $ 1,837
Finance and insurance revenue................... 69 62
Other income ................................. 11 25
-------- --------
Total sales and revenues..................... 2,166 1,924
-------- --------
Costs and expenses
Cost of products and services sold.............. 1,748 1,544
Postretirement benefits......................... 48 49
Engineering and research expense................ 71 58
Sales, general and administrative expense....... 124 126
Interest expense................................ 35 32
Other expense ................................. 27 16
-------- --------
Total costs and expenses..................... 2,053 1,825
-------- --------
Income before income taxes............... 113 99
Income tax expense....................... 43 38
-------- --------
Net income ..................................... $ 70 $ 61
======== ========
Earnings per share
Basic ...................................... $ 1.12 $ .92
Diluted...................................... $ 1.10 $ .91
Average shares outstanding (millions)
Basic ...................................... 62.6 66.4
Diluted...................................... 63.7 67.1
- ----------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
PAGE 4
STATEMENT OF FINANCIAL CONDITION (Unaudited)
- -------------------------------------------------------------------------------
Millions of dollars
- -------------------------------------------------------------------------------
Navistar International Corporation
and Consolidated Subsidiaries
-----------------------------------
January 31 October 31 January 31
2000 1999 1999
----------- ---------- ----------
ASSETS
Current assets
Cash and cash equivalents......... $ 461 $ 243 $ 187
Marketable securities............. 145 138 175
Receivables, net.................. 1,358 1,550 1,343
Inventories....................... 703 625 560
Deferred tax asset, net........... 226 229 188
Other assets...................... 87 57 42
-------- --------- --------
Total current assets.................... 2,980 2,842 2,495
-------- --------- --------
Marketable securities................... 71 195 385
Finance and other receivables, net...... 777 1,268 759
Property and equipment, net............. 1,518 1,475 1,134
Investments and other assets............ 179 207 120
Prepaid and intangible pension assets... 284 274 241
Deferred tax asset, net................ 635 667 688
-------- --------- --------
Total assets............................ $ 6,444 $ 6,928 $ 5,822
======== ========= ========
LIABILITIES AND SHAREOWNERS' EQUITY
Liabilities
Current liabilities
Current maturities of
long-term debt................... $ 199 $ 192 $ 103
Accounts payable, principally trade 1,051 1,399 1,095
Other liabilities.................. 732 911 686
-------- -------- --------
Total current liabilities................ 1,982 2,502 1,884
-------- -------- --------
Debt: Manufacturing operations........... 460 445 465
Financial services operations...... 1,646 1,630 1,424
Postretirement benefits liability........ 627 634 873
Other liabilities........................ 412 426 356
-------- -------- --------
Total liabilities.................. 5,127 5,637 5,002
-------- -------- --------
Commitments and contingencies
Shareowners' equity
Series D convertible junior
preference stock...................... 4 4 4
Common stock (75.3 million shares issued) 2,139 2,139 2,139
Retained earnings (deficit).............. (234) (297) (769)
Accumulated other comprehensive loss..... (192) (197) (340)
Common stock held in treasury, at cost
(13.2 million, 12.1 million
and 9.1 million shares held)...... (400) (358) (214)
-------- -------- --------
Total shareowners' equity.......... 1,317 1,291 820
-------- -------- --------
Total liabilities and shareowners' equity $ 6,444 $ 6,928 $ 5,822
======== ======== ========
- -----------------------------------------------------------------------------
See Notes to Financial Statements.
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PAGE 5
STATEMENT OF CASH FLOW (Unaudited)
- -------------------------------------------------------------------------------
For the Three Months Ended January 31 (Millions of dollars)
- -------------------------------------------------------------------------------
Navistar International
Corporation and
Consolidated Subsidiaries
-------------------------
2000 1999
-------- --------
Cash flow from operations
Net income........................................... $ 70 $ 61
Adjustments to reconcile net income
to cash used in operations:
Depreciation and amortization................. 49 49
Deferred income taxes......................... 28 39
Other, net.................................... (15) (14)
Change in operating assets and liabilities:
Receivables................................... 232 (116)
Inventories................................... (84) (63)
Prepaid and other current assets.............. (23) (13)
Accounts payable.............................. (156) (166)
Other liabilities............................. (189) (105)
-------- --------
Cash used in operations.......................... (88) (328)
-------- --------
Cash flow from investment programs
Purchases of retail notes and lease receivables...... (274) (316)
Collections/sales of retail notes
and lease receivables.............................. 522 518
Purchases of marketable securities................... (152) (127)
Sales or maturities of marketable securities......... 268 241
Capital expenditures................................. (68) (44)
Property and equipment leased to others.............. (14) (23)
Investment in affiliates............................. 12 (5)
Capitalized interest and other....................... 5 (9)
-------- --------
Cash provided by investment programs............. 299 235
-------- --------
Cash flow from financing activities
Issuance of debt..................................... 60 68
Principal payments on debt........................... (25) (92)
Net increase (decrease) in notes and debt
outstanding under bank revolving credit
facility and commercial paper programs ............ 15 (86)
Purchases of common stock............................ (43) -
-------- --------
Cash provided by (used in)
financing activities........................... 7 (110)
-------- --------
Cash and cash equivalents
Increase (decrease) during the period............ 218 (203)
At beginning of the year......................... 243 390
-------- --------
Cash and cash equivalents at end of the period....... $ 461 $ 187
======== ========
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
<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). Effective February 23, 2000, Transportation changed its name
to International Truck and Engine Corporation. As used hereafter, "company" or
"Navistar" refers to Navistar International Corporation and its consolidated
subsidiaries. Navistar operates in three principal industry segments: truck,
engine (collectively called "manufacturing operations"), and financial services.
The consolidated financial statements include the results of the company'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 1999 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 1999 amounts have been reclassified to conform with the
presentation used in the 2000 financial statements.
Note B. Supplemental Cash Flow Information
Consolidated interest payments during the first three months of 2000 and
1999 were $29 million and $31 million, respectively. Consolidated tax payments
made during the first three months of 2000 were $26 million, and were not
material for the same period last year.
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 United States federal
income taxes will be minimal.
<PAGE>
PAGE 7
Navistar International Corporation and Consolidated Subsidiaries
Notes to Financial Statements (Unaudited)
Note D. Inventories
Inventories are as follows:
January 31 October 31 January 31
Millions of dollars 2000 1999 1999
- -------------------------------------------------------------------------------
Finished products................... $ 372 $ 285 $ 278
Work in process..................... 55 95 85
Raw materials and supplies.......... 276 245 197
-------- --------- ---------
Total inventories................... $ 703 $ 625 $ 560
======== ========= =========
Note E. Financial Instruments
In November 1999, Navistar Financial Corporation (NFC) sold $533 million
of fixed rate retail notes, net of unearned finance income, through Navistar
Financial Retail Receivables Corporation (NFRRC), a wholly owned subsidiary of
NFC, on a variable rate basis to two multi-seller asset-backed commercial paper
conduits sponsored by a major financial institution. The gain on the sale was
not material. NFC entered into an interest rate swap agreement to hedge the
future cash flows of the amounts due from the sale of receivables. Under the
terms of the agreement, NFC will make or receive payments based on changes in
interest rates.
In January 2000, NFC sold $300 million of variable funding certificates,
through Navistar Financial Securities Corporation, a wholly owned subsidiary of
NFC, to a conduit sponsored by a major financial institution. The variable
funding certificates mature in 2001.
In March 2000, NFC sold $475 million of retail notes, net of unearned
finance income, through NFRRC to an owner trust which, in turn, sold notes to
investors. The gain on the sale was not material.
As of January 31, 2000, NFC was a party to a total of $400 million of
forward treasury locks and $75 million of forward starting swaps related to the
anticipated March 2000 sale of retail receivables. NFC closed these positions
and the resulting gain was not material.
In the second quarter of 2000, NFC entered into a total of $200 million
of forward treasury locks in anticipation of a July 2000 sale of retail
receivables. Any gain or loss will be included in the gain or loss on the sale
of receivables recognized in July 2000.
As of January 31, 2000, the company held German mark and Japanese yen
forward contracts with respective notional amounts of $49 million and $18
million related to committed capital equipment purchases. The company held
Canadian dollar forward contracts with notional amounts of $41 million and other
derivative contracts with notional amounts of $16 million. The unrealized net
loss on these contracts was not material.
<PAGE>
PAGE 8
Navistar International Corporation and Consolidated Subsidiaries
Notes to Financial Statements (Unaudited)
Note F. Earnings Per Share
Earnings per share was computed as follows:
Three Months Ended
January 31
Millions of dollars, -----------------------
except share and per share data 2000 1999
- ------------------------------------------- -------- --------
Net income................................. $ 70 $ 61
======== ========
Average shares outstanding (millions)
Basic................................... 62.6 66.4
Dilutive effect of options outstanding
and other dilutive securities......... 1.1 .7
-------- --------
Diluted................................. 63.7 67.1
======== ========
Earnings per share
Basic.................................. $ 1.12 $ .92
Diluted................................ $ 1.10 $ .91
Unexercised employee stock options to purchase .2 million and .3 million
shares of Navistar common stock during the three months ended January 31, 2000
and 1999, respectively, were excluded from the computation of diluted shares
outstanding because the exercise prices were greater than the average market
price of Navistar common stock.
Note G. Comprehensive Income
Navistar's total comprehensive income was as follows:
Three Months Ended
January 31
-----------------------
Millions of dollars 2000 1999
- -------------------------------------------- -------- --------
Net income................................... $ 70 $ 61
Other comprehensive income (loss)............ 5 (9)
-------- --------
Total comprehensive income........... $ 75 $ 52
======== ========
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PAGE 9
Navistar International Corporation and Consolidated Subsidiaries
Notes to Financial Statements (Unaudited)
Note H. Segment Data
Reportable operating segment data is as follows:
Financial
Millions of dollars Truck Engine Services Total
- ------------------------- -------- -------- -------- --------
For the quarter ended January 31, 2000
-----------------------------------------------
External revenues....... $ 1,683 $ 403 $ 72 $ 2,158
Intersegment revenues... - 169 21 190
-------- -------- -------- --------
Total revenues..... $ 1,683 $ 572 $ 93 $ 2,348
======== ======== ======== ========
Segment profit.......... $ 50 $ 58 $ 25 $ 133
For the quarter ended January 31, 1999
-----------------------------------------------
External revenues...... $ 1,477 $ 360 $ 71 $ 1,908
Intersegment revenues.. - 158 16 174
--------- --------- -------- --------
Total revenues.... $ 1,477 $ 518 $ 87 $ 2,082
========= ========= ======== ========
Segment profit......... $ 46 $ 49 $ 29 $ 124
Reconciliation to the consolidated financial statements for the quarters
ended January 31 is as follows:
Millions of dollars 2000 1999
- ---------------------------------------------- -------- --------
Segment sales and revenues.................... $ 2,348 $ 2,082
Other income.................................. 8 16
Intercompany.................................. (190) (174)
-------- --------
Consolidated sales and revenues............... $ 2,166 $ 1,924
======== ========
Segment profit................................ $ 133 $ 124
Corporate items............................... (20) (31)
Manufacturing net interest income............. - 6
-------- --------
Consolidated pretax income.................... $ 113 $ 99
======== ========
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PAGE 10
Navistar International Corporation and Consolidated Subsidiaries
Supplemental Financial Information (Unaudited)
The following supplemental financial information is provided based upon the
continuing interest of certain shareholders and creditors.
Navistar International Corporation (with financial services operations on an
equity basis) in millions of dollars:
Three Months Ended
January 31
----------------------
Condensed Statement of Income 2000 1999
- ----------------------------------------------- -------- --------
Sales of manufactured products................. $ 2,086 $ 1,837
Other income................................... 8 19
-------- --------
Total sales and revenues................... 2,094 1,856
-------- --------
Cost of products sold.......................... 1,739 1,534
Postretirement benefits........................ 48 49
Engineering and research expense............... 71 58
Sales, general and administrative expense...... 109 115
Other expense.................................. 43 35
--------- ---------
Total costs and expenses................... 2,010 1,791
--------- ---------
Income before income taxes
Manufacturing operations................... 84 65
Financial services operations.............. 29 34
--------- --------
Income before income taxes............. 113 99
Income tax expense..................... 43 38
--------- --------
Net income..................................... $ 70 $ 61
========= ========
January 31 October 31 January 31
Condensed Statement of Financial Condition 2000 1999 1999
- ------------------------------------------ ---------- ---------- ----------
Cash, cash equivalents
and marketable securities............... $ 468 $ 386 $ 593
Inventories............................... 678 604 542
Property and equipment, net............... 1,231 1,188 897
Equity in nonconsolidated subsidiaries.... 387 377 342
Other assets.............................. 1,062 1,527 884
Deferred tax asset, net................... 861 896 876
-------- -------- --------
Total assets...................... $ 4,687 $ 4,978 $ 4,134
======== ======== ========
Accounts payable, principally trade....... $ 1,245 $ 1,386 $ 1,063
Postretirement benefits liability......... 786 776 937
Other liabilities......................... 1,339 1,525 1,314
Shareowners' equity....................... 1,317 1,291 820
-------- -------- --------
Total liabilities
and shareowners' equity......... $ 4,687 $ 4,978 $ 4,134
======== ======== ========
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PAGE 11
Navistar International Corporation and Consolidated Subsidiaries
Supplemental Financial Information (Unaudited)
Navistar International Corporation (with financial services operations on an
equity basis) in millions of dollars:
Three Months Ended
January 31
----------------------
Condensed Statement of Cash Flow 2000 1999
- ----------------------------------------------------- -------- --------
Cash flow from operations
Net income........................................... $ 70 $ 61
Adjustments to reconcile net income
to cash used in operations:
Depreciation and amortization................. 35 38
Deferred income taxes......................... 28 39
Equity in earnings of investees, net of
dividends received......................... (11) (14)
Other, net.................................... (18) (3)
Change in operating assets and liabilities........... (448) (294)
-------- --------
Cash used in operations.............................. (344) (173)
-------- --------
Cash flow from investment programs
Purchases of marketable securities................... (95) (110)
Sales or maturities of marketable securities......... 252 221
Capital expenditures................................. (68) (44)
Receivable from financial services operations........ 500 (101)
Investment in affiliates............................. 12 (5)
Capitalized interest and other....................... 5 (9)
-------- --------
Cash provided by (used in) investment programs....... 606 (48)
-------- --------
Cash (used in) provided by financing activities...... (25) 22
-------- --------
Cash and cash equivalents
Increase (decrease) during the period................ 237 (199)
At beginning of the year............................. 167 351
-------- --------
Cash and cash equivalents at end of the period....... $ 404 $ 152
======== ========
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PAGE 12
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Certain statements under this caption that are not purely historical
constitute "forward-looking statements" under the Private Securities Litigation
Reform Act of 1995 and involve risks and uncertainties. These forward-looking
statements are based on current management expectations as of the date made. The
company assumes no obligation to update any forward-looking statements. 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
caption "Business Environment."
The company reported net income of $70 million, or $1.10 per diluted
common share for the first quarter ended January 31, 2000, primarily reflecting
higher sales of manufactured products. Net income was $61 million, or $0.91 per
diluted common share, for the comparable quarter last year.
The company's manufacturing operations reported income before income
taxes of $84 million compared with pretax income of $65 million in the first
quarter of 1999. The truck segment's profit for the first quarter of 2000
increased 9% and revenue increased 14% compared to the same period last year.
The engine segment's profit increased for the first three months of 2000 by 18%
compared to a revenue increase of 10%. The truck and engine segments' profit and
revenue increases are attributable to increases in shipments of trucks and
mid-range diesel engines to other original equipment manufacturers (OEMs).
The financial services segment's profit for the first quarter of 2000
decreased $4 million from the same period last year, primarily due to a first
quarter 1999 legal settlement in favor of an insurance subsidiary of the
company. Navistar Financial Corporation's (NFC's) pretax income increased $4
million, partially offsetting the impact of this settlement.
Sales and Revenues. United States (U.S.) and Canadian industry retail sales of
Class 5 through 8 trucks totaled 113,300 units in the first quarter of 2000,
which is 8% higher than the 105,100 units sold during this period in 1999. Class
8 heavy truck sales of 69,300 units during the first quarter of 2000 were 12%
higher than the 1999 level of 61,900 units. Industry sales of Class 5, 6 and 7
medium trucks, including school buses, increased 2% to 44,000 units. Industry
sales of school buses, which accounted for 17% of the medium truck market,
decreased 13% to 7,500 units.
Sales and revenues for the first quarter of 2000 totaled $2,166 million,
13% higher than the $1,924 million reported for the comparable quarter in 1999.
Sales of manufactured products for the first quarter of 2000 totaled $2,086
million compared with $1,837 million reported for the same period in 1999.
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PAGE 13
Although the company's retail deliveries in the combined U.S. and
Canadian Class 5 through 8 truck market increased 4%, market share for the
first quarter of 2000 decreased to 26.3% from 27.2% for the same period last
year. (Sources: Ward's Communications and the Canadian Vehicle Manufacturers
Association.)
Shipments of mid-range diesel engines by the company to OEMs during the
first quarter of 2000 totaled 71,600 units, a 23% increase from the same period
of 1999. This increase resulted from higher shipments to Ford Motor Company to
meet consumer demand for the light trucks and vans which use this engine. The
engine segment's revenues increased at a lower rate than units shipped due to a
shift in warranty administration between Navistar and its customers.
Finance and insurance revenue of $69 million in the first quarter of 2000
increased 11% from 1999, primarily as a result of increased wholesale and lease
financing activities.
Other income for 1999 included a $10 million legal settlement in favor
of an insurance subsidiary of the company.
Costs and expenses. Manufacturing gross margin was 16.6% of sales for the first
quarter of 2000 consistent with 16.5% for the same period in 1999.
Engineering and research expense increased $13 million from the first
quarter of 1999 to $71 million due to the company's continuing investment in its
next generation vehicle (NGV) program.
Other expense includes finance charges, insurance claims and underwriting
fees, and costs associated with the company's investment in dealer operations.
Liquidity and Capital Resources
Cash flow is generated from the manufacture and sale of trucks and
mid-range diesel engines and their associated service parts as well as from
product financing and insurance coverage provided to the company's dealers and
retail customers by the financial services segment. The company's current debt
ratings have made sales of finance receivables the most economic source of
funding for NFC. Insurance operations are self-funded.
The company had working capital of $998 million at January 31, 2000,
compared to $340 million at October 31, 1999. Cash used in operations during the
first quarter of 2000 totaled $88 million primarily from a net change in
operating assets and liabilities of $220 million partially offset by net income
of $70 million, $28 million of noncash deferred taxes and $34 million of other
noncash items, principally depreciation. The net change in operating assets and
liabilities included a $189 million decrease in other liabilities primarily due
to the payment of the company's profit sharing and performance incentive awards
for fiscal 1999, a $156 million decrease in accounts payable due to the timing
of payments related to the company's next generation diesel (NGD) program and
cyclically lower production in the first quarter, and an increase in inventories
primarily due to the timing of shipments to customers and an increase in used
truck inventory. These were partially offset by a $232 million decrease in
accounts receivable, primarily due to a net decrease in wholesale note and
account balances.
<PAGE>
PAGE 14
Investment programs provided $299 million in cash primarily reflecting a
net decrease in retail notes and lease receivables of $248 million and a net
decrease in marketable securities of $116 million. These were partially offset
by a $14 million net increase in property and equipment leased to others and $68
million of capital expenditures primarily for the NGV and NGD programs.
Cash provided by financing activities resulted from a net increase of $15
million in notes and debt outstanding under the bank revolving credit facility
and other commercial paper programs. Cash was also provided by a $35 million net
increase in long-term debt which included $17 million of borrowings under the
Mexican credit facility. These were offset by purchases of $43 million of common
stock during the first quarter. Subsequent to January 31, 2000, approximately
$13 million of cash was used to purchase common stock through March 10, 2000.
NFC has traditionally obtained funds to provide financing to the
company's dealers and retail customers from sales of finance receivables,
commercial paper, short and long-term bank borrowings, medium and long-term debt
and equity capital. As of January 31, 2000, NFC's funding consisted of sold
finance receivables of $2,887 million, bank and other borrowings of $1,265
million, subordinated debt of $100 million, capital lease obligations of $341
million and equity of $289 million.
Through the asset-backed markets, NFC has been able to fund fixed rate
retail note receivables at rates offered to companies with investment grade
ratings. During the first quarter of 2000, NFC sold $533 million of retail notes
through Navistar Financial Retail Receivables Corporation (NFRRC), a wholly
owned subsidiary of NFC, on a variable rate basis to two multi-seller asset-
backed commercial paper conduits sponsored by a major financial institution. NFC
entered into an interest rate swap agreement to hedge the future cash flows of
the amounts due from the sale of receivables. Under the terms of the agreement,
NFC will make or receive payments based on changes in interest rates. As of
January 31, 2000, the remaining shelf registration available to NFRRC for the
public issuance of asset-backed securities was $2,257 million.
In January 2000, NFC sold $300 million of variable funding certificates,
through Navistar Financial Securities Corporation (NFSC), a wholly owned
subsidiary of NFC, to a conduit sponsored by a major financial institution. The
variable funding certificates mature in 2001.
In March 2000, NFC sold $475 million of retail notes, net of unearned
finance income, through NFRRC to an owner trust which, in turn, sold notes to
investors. The gain on the sale was not material.
As of January 31, 2000, NFC was a party to a total of $400 million of
forward treasury locks and $75 million of forward starting swaps related to the
anticipated March 2000 sale of retail receivables. NFC closed these positions
and the resulting gain was not material.
In the second quarter of 2000, NFC entered into a total of $200 million
of forward treasury locks in anticipation of a July 2000 sale of retail
receivables. Any gain or loss will be included in the gain or loss on the sale
of receivables recognized in July 2000.
<PAGE>
PAGE 15
At January 31, 2000, available funding under NFC's bank revolving credit
facility and the asset-backed commercial paper facility was $100 million, of
which $25 million was used to back short-term debt. The remaining $75 million,
when combined with unrestricted cash and cash equivalents, made $136 million
available to fund the general business purposes of NFC. Also, as of January 31,
2000, NFSC had a revolving wholesale note trust that provides for the funding of
$900 million of eligible wholesale notes.
As of January 31, 2000, the company held German mark and Japanese yen
forward contracts with respective notional amounts of $49 million and $18
million related to committed capital equipment purchases. The company held
Canadian dollar forward contracts with notional amounts of $41 million and other
derivative contracts with notional amounts of $16 million. The unrealized net
loss on these contracts was not material.
Cash flow from the company's manufacturing operations, financial services
operations and financing capacity is sufficient to cover planned investment in
the business. The company had outstanding capital commitments of $463 million at
January 31, 2000, primarily for the NGV and NGD programs.
In February 2000, Standard and Poor's raised the company's and NFC's
senior debt ratings from BB+ to BBB-, and raised the company's and NFC's
subordinated debt ratings from BB- to BB+.
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 and capital expenditures. Management
believes that collections on the outstanding receivables portfolios as well as
funds available from various sources will permit the financial services
operations to meet the financing requirements of the company's dealers and
customers.
Year 2000
As described in the 1999 Annual Report on Form 10-K, the company had
instituted a corporate-wide Year 2000 readiness project to identify all systems
which would require modification or replacement, and to establish appropriate
remediation and contingency plans to avoid an impact on the company's ability to
continue to provide its products and services. Through the date of this report,
the company has not experienced any significant Year 2000 problems but will
continue to monitor its critical systems over the next several months. In the
event that significant issues arise, the company's contingency plans remain in
place.
The company's total cost of the Year 2000 project, which is funded through
operating cash flows, is estimated to be $32 million including $26 million of
estimated expense and $6 million of capital expenditures. Approximately $25
million has been expensed and approximately $6 million has been capitalized
through January 31, 2000. The remaining costs are estimated to be incurred
through the remainder of fiscal year 2000.
<PAGE>
PAGE 16
Business Environment
Sales of Class 5 through 8 trucks have historically been 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. The decrease in the number of new truck orders is in
line with the company's expectations and has decreased the company's order
backlog to a more normal level of 44,000 units at January 31, 2000 from 65,600
units at January 31, 1999. The company continually evaluates order receipts and
backlog throughout the year and balances production with demand as appropriate.
An industry-wide slowdown in orders for heavy trucks has resulted in a schedule
change at the company's Chatham Assembly Plant that will result in the layoff of
approximately 400 employees. This is expected to be fully implemented in March
2000 and is not expected to have a material impact on the company's financial
statements.
<PAGE>
PAGE 17
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 December 22, 1999,
Commission File No. 1-9618.
Item 6. Exhibits and reports on Form 8-K
10-Q Page
---------
(a) Exhibits:
3. Articles of Incorporation and By-Laws E-1
4. Instruments Defining The Rights E-2
of Security Holders, Including
Indentures
10. Material Contracts E-4
(b) Reports on Form 8-K:
No reports on Form 8-K were
filed for the three months
ended January 31, 2000.
<PAGE>
PAGE 18
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/ Mark T. Schwetschenau
- -----------------------------------
Mark T. Schwetschenau
Vice President and Controller
(Principal Accounting Officer)
March 15, 2000
PAGE 1
EXHIBIT 3
NAVISTAR INTERNATIONAL CORPORATION
AND CONSOLIDATED SUBSIDIARIES
----------------------------------
ARTICLES OF INCORPORATION AND BY-LAWS
The following documents of Navistar International Corporation are
incorporated herein by reference:
3.1 Restated Certificate of Incorporation of Navistar International
Corporation effective July 1, 1993, filed as Exhibit 3.2 to Annual
Report on Form 10-K dated October 31, 1993, which was filed on January
27, 1994, Commission File No. 1-9618, and amended as of May 4, 1998.
3.2 The By-Laws of Navistar International Corporation effective April 14,
1995, filed as Exhibit 3.2 on Annual Report on Form 10-K dated October
31, 1995, which was filed on January 26, 1996, on Commission File No.
1-9618.
3.3 Certificate of Designation, Preferences and Rights of Junior
Participating Preferred Stock, Series A of Navistar International
Corporation. Filed as Exhibit 3.3 to Form 10-Q dated June 11, 1999.
Commission File No. 1-9618.
E-1
PAGE 1
EXHIBIT 4
NAVISTAR INTERNATIONAL CORPORATION
AND CONSOLIDATED SUBSIDIARIES
----------------------------------
INSTRUMENTS DEFINING RIGHTS OF SECURITY HOLDERS,
INCLUDING INDENTURES
The following instruments of Navistar International Corporation and its
principal subsidiary Navistar International Transportation Corp. and its
principal subsidiary Navistar Financial Corporation defining the rights of
security holders are incorporated herein by reference.
4.1 Indenture, dated as of May 30, 1997, by and between Navistar Financial
Corporation and The Fuji Bank and Trust Company, as Trustee, for 9%
Senior Subordinated Notes due 2002 for $100,000,000. Filed on
Registration No. 333-30167.
4.2 $125,000,000 Credit Agreement dated as of November 26, 1997, as
amended by Amendment No. 1 dated as of February 4, 1998, and as
amended by Amendment No. 2 dated as of July 10, 1998, among Navistar
International Corporation Mexico, S.A. de C.V., Navistar International
Corporation, certain banks, certain Co-Arranger banks, Bank of
Montreal, as Paying Agent, and Bancomer, S.A., Institucion de Banca
Multiple, Grupo Financiero, as Peso Agent and Collateral Agent. The
Registrant agrees to furnish to the Commission upon request a copy of
such agreement which it has elected not to file under the provisions
of Regulation 601(b)(4)(iii).
4.3 Indenture, dated as of February 4, 1998, by and between Navistar
International Corporation and Harris Trust and Savings Bank, as
Trustee, for 7% Senior Notes due 2003 for $100,000,000. Filed on
Registration No. 333-47063.
4.4 Indenture, dated as of February 4, 1998, by and between Navistar
International Corporation and Harris Trust and Savings Bank, as
Trustee, for 8% Senior Subordinated Notes due 2008 for $250,000,000.
Filed on Registration No. 333-47063.
4.5 $45,000,000 Revolving Credit Agreement dated as of June 5, 1998 as
amended by Amendment No. 1 dated as of January 1, 1999, and as amended
by Amendment No. 2 dated as of April 9, 1999, as amended by Amendment
No. 3 dated as of July 1999, among Arrendadora Financiera Navistar
S.A. de C.V., Servicios Financieros Navistar S.A. de C.V. and Navistar
Comercial S.A. de C.V. and The First National Bank of Chicago. The
Registrant agrees to furnish to the Commission upon request a copy of
such agreement which it has elected not to file under the provisions
of Regulation 601(b)(4)(iii).
4.6 $200,000,000 Mexican Peso Revolving Credit Agreement dated as of
October 20, 1998 as amended by Amendment No. 1 dated as of November
12, 1999, among Arrendadora Financiera Navistar S.A. de C.V.,
Servicios Financieros Navistar S.A. de C.V. and Navistar Comercial
S.A. de C.V. and Comerica Bank. The Registrant agrees to furnish to
the Commission upon request a copy of such agreement which it has
elected not to file under the provisions of Regulation 601(b)(4)(iii).
E-2
<PAGE>
PAGE 2
EXHIBIT 4 (CONTINUED)
NAVISTAR INTERNATIONAL CORPORATION
AND CONSOLIDATED SUBSIDIARIES
----------------------------------
INSTRUMENTS DEFINING RIGHTS OF SECURITY HOLDERS,
INCLUDING INDENTURES
4.7 $8,000,000 Mexican Peso Revolving Credit Agreement dated as of October
9, 1998 by and between Arrendadora Financiera Navistar S.A. de C.V.
and Banco Bilbao Vizcaya. The Registrant agrees to furnish to the
Commission upon request a copy of such agreement which it has elected
not to file under the provisions of Regulation 601(b)(4)(iii).
4.8 $27,000,000 Mexican Peso Revolving Credit Agreement dated as of
October 9, 1998 by and between Servicios Financieros Navistar S.A. de
C.V. and Banco Bilbao Vizcaya. The Registrant agrees to furnish to the
Commission upon request a copy of such agreement which it has elected
not to file under the provisions of Regulation 601(b)(4)(iii).
4.9 Rights Agreement dated as of April 20, 1999 between Navistar
International Corporation and Harris Trust and Savings Bank, as Rights
Agent, including the form of Certificate of Designation, Preferences
and Rights of Junior Participating Preferred Stock, Series A attached
thereto as Exhibit A, and the form of Rights Certificate attached
thereto as Exhibit B. Filed as Exhibit 1.1 to the company's
Registration Statement on Form 8-A, dated April 20, 1999. Commission
File No. 1-9618.
4.10 $53,000,000, Revolving Credit Agreement dated as of July 9, 1999 as
amended by Amendment No. 1 dated as of September 15, 1999, among
Arrendadora Financiera Navistar S.A. de C.V., Servicios Financieros
Navistar S.A. de C.V. and Navistar Comercial S.A. de C.V. and Banco
Nacional de Mexico, S.A. de C.V. The Registrant agrees to furnish to
the Commission upon request a copy of such agreement which it has
elected not to file under the provisions of Regulation 601(b)(4)(iii).
4.11 $20,000,000 Credit Agreement dated as of August 10, 1999 by and
between Arrendadora Financiera Navistar S.A. de C.V. and Bancomer. The
Registrant agrees to furnish to the Commission upon request a copy of
such agreement which it has elected not to file under the provisions
of Regulation 601(b)(4)(iii).
4.12 $200,000,000 Mexican Peso Revolving Credit Agreement dated as of
August 10, 1999 by and between Servicios Financieros Navistar S.A. de
C.V. and Bancomer. The Registrant agrees to furnish to the Commission
upon request a copy of such agreement which it has elected not to file
under the provisions of Regulation 601(b)(4)(iii).
=====
Instruments defining the rights of holders of other unregistered
long-term debt of Navistar and its subsidiaries have been omitted from this
exhibit index because the amount of debt authorized under any such instrument
does not exceed 10% of the total assets of the Registrant and its consolidated
subsidiaries. The Registrant agrees to furnish a copy of any such instrument to
the Commission upon request.
E-3
PAGE 1
EXHIBIT 10
NAVISTAR INTERNATIONAL CORPORATION
AND CONSOLIDATED SUBSIDIARIES
---------------------------------
MATERIAL CONTRACTS
The following documents of Navistar International Corporation and its
affiliate Navistar Financial Corporation are incorporated herein by reference.
10.22 Trust Agreement dated as of March 9, 2000, between Navistar Financial
Retail Receivables Corporation, as Seller, and Chase Manhattan Bank
Delaware, as Owner Trustee, with respect to Navistar Financial 2000-A
Owner Trust. Filed on Registration No. 333-62445.
10.23 Indenture dated as of March 9, 2000, between Navistar Financial
1999-A Owner Trust and The Bank of New York, as Indenture Trustee,
with respect to Navistar Financial 2000-A Owner Trust. Filed on
Registration No. 333-62445.
E-4
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