<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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) January 26, 1999
CASE CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
1-13098 76-0433811
(Commission File Number) (I.R.S. Employer Identification No.)
700 State Street, Racine, Wisconsin 53404
(Address of Principal Executive Offices) (Zip Code)
(414) 636-6011
(Registrant's Telephone Number, Including Area Code)
(Former Name or Former Address, If Changed Since Last Report)
Page 1 of 19 Pages
(Exhibit Index at Page 5)
<PAGE>
Item 5. Other Events
The press release of registrant dated January 26, 1999, filed as Exhibit 99
hereto and disclosing 1998 financial results.
2
<PAGE>
Item 7. Financial Statements and Exhibits
(c) Exhibits
Exhibit No. Exhibit
----------- -------
99 Press release of registrant dated January 26, 1999.
3
<PAGE>
SIGNATURES
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.
CASE CORPORATION
By: /s/ Kevin J. Hallagan
-----------------------------
Kevin J. Hallagan
Associate General Counsel and
Assistant Secretary
January 28, 1999
4
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page
- ----------- ----------- ----
99 Press release dated January 26, 1999 of Case Corporation. 6
5
<PAGE>
EXHIBIT 99
CASE News Release
- ----
CASE CORPORATION 700 STATE STREET RACINE, WI 53404 U.S.A.
HTTP://WWW.CASECORP.COM
For more information, contact:
William B. Masterson (414) 636-5793
CASE CORPORATION REPORTS 1998 RESULTS
. Net income, before restructuring, of $160 million (EPS $2.05) for 1998,
including a fourth quarter loss, before restructuring, of $98 million
(EPS $1.37).
. Worldwide revenues reach $6.1 billion for the year, including
$1.5 billion for the fourth quarter.
. Aggressive actions initiated by management in second half of 1998
prepare company for lower agricultural equipment demand.
Case expects lower sales and net income for 1999.
. Fourth quarter includes restructuring charge of $132 million and one-
time charges related to previously announced closure of manufacturing
plants, headcount reductions and other actions.
Racine, Wisconsin (January 26, 1999) -- Case Corporation (NYSE:CSE)
reported net income, before restructuring, of $160 million, or $2.05 per share,
in 1998, including a loss, before restructuring, of $98 million, or $1.37 per
share, in the fourth quarter. These results are consistent with the company's
expectations and reflect the impact of its previous announcements of a sharp
drop in demand for agricultural equipment, and the corresponding actions the
company has taken to lower headcount and production.
<PAGE>
In comparison, Case reported 1997 net income of $403 million, or $5.11 per
share, including net income of $123 million, or $1.56 per share, in the fourth
quarter of last year.
Case recorded revenues of $6.1 billion in 1998, including $1.5 billion for
the fourth quarter. In the prior year, the company had revenues of $6.0
billion, including $1.7 billion for the fourth quarter.
The company's fourth quarter results reflect a 14 percent drop in revenues,
driven by a 17 percent decline in wholesale sales. For the year, revenues
increased marginally on the strength of an 8 percent rise in sales of Case
construction equipment, the impact of acquisitions, and increased revenues from
Case Capital. These increases were nearly offset by a 4 percent decline in 1998
sales of agricultural equipment.
Fourth quarter results were also impacted by a restructuring charge of $132
million, $96 million after tax, related to the previously announced closure of
two manufacturing plants, as well as other actions that include a worldwide
workforce reduction of 2,600 people. The company expects to incur further
restructuring charges in 1999 in the range of $30 to $40 million for employment
reductions, including 800 people by year-end. Case's fourth quarter results
also include one-time charges covering the write-down of certain assets and
expenses directly related to the announced plant closures and other actions the
company is taking in response to the market environment. Results for the
quarter and full year also were impacted by unfavorable foreign exchange rates
in Australia and Canada, and higher product launch costs. These were partially
offset by higher pricing and ongoing cost reduction initiatives.
"During the second half of 1998, we acted swiftly in the face of a
significant drop in agricultural equipment retail demand," said Jean-Pierre
Rosso, Case chairman and chief executive officer. "We have demonstrated our
commitment to keep production in line with lower retail demand, which is the
necessary discipline to maintain consistent pricing in the marketplace. We are
entering 1999 confident that we have taken steps to maximize our performance
under current conditions, and we are in an excellent position to show rapid
improvement when the market rebounds."
-2-
<PAGE>
Management Actions
During 1998, Case took a number of actions aimed at maximizing the
company's performance in the face of an industry-wide downturn in the
agricultural equipment market. First, the company progressively lowered
production to match declining retail demand, resulting in a total reduction of
17 percent for the year. The company also is reducing its employment by another
800 people in 1999, bringing the total reduction to 3,400 by year-end. As
previously announced, these reductions will come from restructuring actions that
include the elimination of contract and temporary employees as well as an
acceleration of integration plans for several recently acquired businesses. As
part of this integration, the company is closing facilities in Hamilton,
Ontario, and Hugo, Minnesota. These actions are expected to result in annual
savings of $95 to $100 million beginning in 2000, with nearly two-thirds of
those savings to be realized in 1999.
Further, the company will lower research and development, capital
expenditures and other selected growth-related spending in 1999.
Equipment Sales
Case's worldwide retail unit sales declined by 9 percent in the fourth
quarter, driven principally by lower agricultural equipment sales, with gains
coming only in the North American construction equipment market and the Latin
American agricultural equipment business.
Construction Equipment--Led by strong double-digit increases in retail unit
sales of loader/backhoes, skid steers and crawlers, fourth quarter retail sales
of Case construction equipment rose by 12 percent in North America. In Europe,
retail unit sales of Case construction equipment were down 3 percent, as an 8
percent rise in retail sales of skid steers was offset by declines in other
equipment categories. Retail sales were down sharply in Latin America and in
Asia Pacific, reflecting the economic conditions in those regions.
Agricultural Equipment--Fourth quarter retail unit sales of Case
agricultural equipment were down 19 percent overall, reflecting continued
weakness in the global agricultural equipment market. In North America, retail
sales were lower in every product category, with the largest declines coming in
high-horsepower tractors and combines. In Europe, sales also were down in all
product lines, particularly high-horsepower tractors and combines, reflecting
the loss of business to the Commonwealth of Independent States and Eastern and
Central Europe. In Asia Pacific, sales of all tractor classes were down by
double-digits, with
-3-
<PAGE>
combine sales relatively flat. In Latin America, strong retail sales of combines
and smaller gains in high-horsepower tractors fueled an 11 percent gain for the
fourth quarter.
Market Outlook
The market outlook for Case's agricultural and construction equipment and
financial services business is decidedly mixed throughout the world.
Demand for agricultural equipment continued to drop significantly during
the fourth quarter of 1998. This decline is the result of low commodity prices,
driven principally by a third consecutive year of strong-to-record harvests in
most major grain crops. In addition, exports of farm commodities have dropped
substantially year-over-year, affecting large-scale production agriculture
farmers. In the United States, net farm income for 1998 is projected to be
lower than the previous year by approximately 5 percent, and significant
declines are also anticipated in other parts of the world. In addition,
financing for equipment purchases in emerging markets is expected to remain
extremely difficult. As a result of these factors, worldwide sales of
agricultural equipment are projected to decline by approximately 8 to 10 percent
in 1999.
The global outlook for the construction equipment market varies by region.
In North America, demand is stable due to a sustained level of housing starts
and a favorable interest rate environment. This outlook is supported by the new
U.S. highway bill that will increase infrastructure spending. In Europe, the
market is expected to decline moderately in 1999 as anticipated improvements in
Germany and France will be offset by lower sales in the United Kingdom and the
Africa/Middle East region. In Asia Pacific, any recovery in business conditions
is tied to Japan's ability to stimulate its economy and resolve its banking
crisis. Case is further affected by a weak Australian dollar, impacting the
overall economy and construction activity there. In Latin America, the outlook
has dampened considerably given Brazil's currency devaluation and the prospect
for implementation of new fiscal programs required as part of the International
Monetary Fund (IMF) assistance plan. In total, worldwide construction equipment
sales in 1999 are expected to be down 2 to 5 percent.
-4-
<PAGE>
The information included in this news release contains forward-looking
statements and involves risks and uncertainties that could cause actual results
to differ materially from those in the forward-looking statements. The
company's outlook is predominantly based on its interpretation of what it
considers key economic assumptions. Crop production and commodity prices are
strongly affected by weather and can fluctuate significantly. Housing starts
and other construction activity are sensitive to interest rates and government
spending. Some of the other significant factors for the company include general
economic and capital market conditions, the cyclical nature of its business,
foreign currency movements, the company's and its customers' access to credit,
political uncertainty and civil unrest in various areas of the world, pricing,
product initiatives and other actions taken by competitors, disruptions in
production capacity, excess inventory levels, the effect of changes in laws and
regulations (including government subsidies and international trade
regulations), changes in environmental laws, and employee and labor relations.
Further information concerning factors that could significantly impact expected
results is included in the following sections of the company's Form 10-K Annual
Report for 1997, as filed with the Securities and Exchange Commission: Business
- -- Employees, Business -- Environmental Matters, Business -- Significant
International Operations, Business -- Seasonality and Production Schedules,
Business -- Competition, Legal Proceedings, and Management's Discussion and
Analysis of Financial Condition and Results of Operations.
Case Corporation is a leading worldwide designer, manufacturer and
distributor of agricultural and construction equipment and offers a broad array
of financial products and services. Headquartered in Racine, Wisconsin, Case
had 1998 revenues of $6.1 billion and sells its products in 150 countries
through a network of approximately 4,900 independent dealers.
###
-5-
<PAGE>
The following is issued in conjunction with Case Corporation's 1998 fourth
quarter results:
For more information, contact:
Sandra J. Lasch (414) 636-6473
For Immediate Release
CASE CAPITAL CORPORATION REPORTS RECORD PORTFOLIO
AND 15 PERCENT INCOME GROWTH
. Serviced portfolio grows to a record $6.8 billion
. Net income up 15 percent for the quarter to $23 million
. Originations increase 31 percent for the year
. Diversified financing business increases significantly
Racine, Wisconsin (January 26, 1999) -- Case Capital Corporation, the
financial services arm of Case Corporation, today announced net income of $23
million for the fourth quarter, up 15 percent from $20 million in the comparable
period last year. Revenues increased 59 percent over the prior year to a record
$113 million. The improvements in net income are attributed to higher financing
income from strong growth in receivables and leases. These were partially
offset by increased selling, general and administrative expenses and additional
provisions for loan losses to support the company's growth and portfolio
diversification initiatives.
For the year, revenues increased 39 percent over the prior period to $377
million. Net income for the period was $85 million, compared to $82 million in
the prior period. The increase in net income for the year is attributable to
higher financing income associated with the growth in receivables and improved
margins resulting from the declining interest rate environment. These
improvements were partially offset by increased selling, general and
administrative expenses and loan loss reserves, as well as a higher year-over-
year tax rate.
-6-
<PAGE>
Case Capital's serviced portfolio grew to a record $6.8 billion as of
December 31, 1998, a 30 percent increase year-over-year. Financing originations
increased 14 percent in the fourth quarter and 31 percent for the year, as
compared to prior year periods. Diversified financing represented 33 percent of
total retail originations during the quarter and 29 percent for the year. These
increases reflect the success of Case Capital's strategy to grow and diversify
its business.
"This was another landmark year for our financial services business,"
stated Ted R. French, Case president, financial services, and chief financial
officer. "Our outstanding performance for both the quarter and the year once
again demonstrates the strength of our business. We are well positioned for
continued success in the financial services industry."
During the year, the company completed a series of strategic moves designed
to further grow and diversify its financial services business. Case Capital,
formed in June, serves as a broad-based financial services company for the
global marketplace. It encompasses Case Credit, which has been providing
financial services through the Case dealer network since 1957, and Soris
Financial, launched in late 1998 to serve Case Capital's diversified client base
in the agricultural, construction and other related industries.
The company also formed an insurance company to serve as a platform for
expanding its insurance business, and announced that it is offering business
insurance for U.S. equipment dealers through an alliance with Universal
Underwriters Group, a subsidiary of Zurich Insurance Company. In addition, Case
Credit Corporation established a strategic marketing alliance with GMAC
Commercial Mortgage Corporation that offers agricultural real estate financing
through the Case dealer network.
"We are experiencing success in every sector of our business, and are
confident that we have the people, programs and processes in place to ensure a
steady, growing contribution to Case Corporation and its shareholders. The
continued growth in our balance sheet and net income, despite weaker retail
demand in the agricultural equipment sector, demonstrates that we are
successfully executing our strategy," said Andrew E. Graves, president, Case
Capital.
-7-
<PAGE>
"We continue to take steps, including increasing our on-balance-sheet
assets by nearly $1 billion and aggressively investing in support services, to
maintain our superior portfolio quality as we pursue new business opportunities
and support sustainable, long-term earnings growth for Case Capital," Graves
stated. Case Capital Corporation, a wholly owned subsidiary of Case Corporation,
provides broad-based financial services for the global marketplace. Case Capital
serves customers purchasing, leasing and insuring products through Case Credit
Corporation and Soris Financial. Established in 1957, Case Credit markets its
products through Case Corporation's established dealer networks in North
America, Australia and Europe. Soris, introduced in 1998, offers products
through diverse dealer networks located in North America. Based in Racine,
Wisconsin, Case Capital services a $6.8 billion portfolio of receivables and
leases.
###
-8-
<PAGE>
CASE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Millions, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
CONSOLIDATED CASE INDUSTRIAL FINANCIAL SERVICES
Three Months Ended Three Months Ended Three Months Ended
December 31, December 31, December 31,
------------------------ ---------------------- ----------------------
1998 1997 1998 1997 1998 1997
-------- --------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues
Net sales $ 1,377 $ 1,667 $ 1,377 (a) $ 1,667 (a) $ - $ -
Interest income and other 123 80 14 10 113 71
-------- --------- -------- -------- --------- --------
Total 1,500 1,747 1,391 1,677 113 71
- -----------------------------------------------------------------------------------------------------------------------------------
Costs and Expenses
Cost of goods sold 1,258 1,309 1,258 1,309
Selling, general and administrative 208 149 185(a) 142(a) 23 7
Research, development and engineering 57 55 57 55
Restructuring charge 132 132
Interest expense 70 44 34 19 40 26
Other, net 47 8 32 1 15 7
-------- --------- -------- -------- --------- --------
Total 1,772 1,565 1,698 1,526 78 40
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) before taxes (272) 182 (307) 151 35 31
Income tax provision (benefit) (78) 59 (90) 48 12 11
- -----------------------------------------------------------------------------------------------------------------------------------
(194) 123 (217) 103 23 20
Equity in income - Case Capital 23 20
- -----------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ (194) $ 123 $ (194) $ 123 $ 23 $ 20
======== ========= ======== ======== ========= ========
Preferred stock dividends 2 2
-------- ---------
Net income (loss) to common $ (196) $ 121
======== =========
- -----------------------------------------------------------------------------------------------------------------------------------
Earnings (loss) per Common Share (EPS): (a) Case Industrial's Net sales and Selling,
Basic EPS before Restructuring $ (1.37) $ 1.64 general and administrative expenses have been
Basic EPS (2.70) 1.64 reduced by $27 and $26 in 1998 and 1997,
respectively, to reclassify financing subsidies,
Diluted EPS before Restructuring $ (1.37) $ 1.56 previously included in Selling, general and
Diluted EPS (2.70) 1.56 administrative expenses, to Net sales.
</TABLE>
See Notes to Financial Statements.
<PAGE>
CASE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Millions, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
CONSOLIDATED CASE INDUSTRIAL FINANCIAL SERVICES
For the Year Ended For the Year Ended For the Year Ended
December 31, December 31, December 31,
------------------------ ---------------------- ----------------------
1998 1997 1998 1997 1998 1997
-------- --------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues
Net sales $ 5,738 $ 5,718 $ 5,738 (a) $ 5,718 (a) $ - $ -
Interest income and other 411 306 41 35 377 272
-------- --------- -------- -------- --------- --------
Total 6,149 6,024 5,779 5,753 377 272
- -----------------------------------------------------------------------------------------------------------------------------------
Costs and Expenses
Cost of goods sold 4,700 4,447 4,700 4,447
Selling, general and administrative 655 570 599(a) 541(a) 56 29
Research, development and engineering 224 196 224 196
Restructuring charge 132 132
Interest expense 240 170 104 73 143 98
Other, net 92 47 45 24 47 23
-------- --------- -------- -------- --------- --------
Total 6,043 5,430 5,804 5,281 246 150
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) before taxes 106 594 (25) 472 131 122
Income tax provision (benefit) 42 191 (4) 151 46 40
- -----------------------------------------------------------------------------------------------------------------------------------
64 403 (21) 321 85 82
Equity in income - Case Capital 85 82
- -----------------------------------------------------------------------------------------------------------------------------------
Net income $ 64 $ 403 $ 64 $ 403 $ 85 $ 82
======== ========= ======== ======== ========= ========
Preferred stock dividends 7 7
-------- ---------
Net income to common $ 57 $ 396
======== =========
- -----------------------------------------------------------------------------------------------------------------------------------
Earnings per Common Share (EPS): (a) Case Industrial's Net sales and Selling,
Basic EPS before Restructuring $ 2.09 $ 5.36 general and administrative expenses have been
Basic EPS 0.78 5.36 reduced by $99 and $78 in 1998 and 1997,
respectively, to reclassify financing subsidies,
Diluted EPS before Restructuring $ 2.05 $ 5.11 previously included in Selling, general and
Diluted EPS 0.76 5.11 administrative expenses, to Net sales.
</TABLE>
See Notes to Financial Statements.
<PAGE>
Case Corporation
Revenues and Net Sales
December 31, 1998
(Millions)
<TABLE>
<CAPTION>
Three Months Ended Year Ended
-------------------------------- ----------------------------------
% %
1998 1997 Change 1998 1997 Change
--------- ------- ---------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Net sales
Agricultural equipment $ 846 $ 1,083 -22% $ 3,533 $ 3,685 -4%
Construction equipment 531 584 -9% 2,205 2,033 8%
--------- ------- ------- -------
Total net sales 1,377 1,667 -17% 5,738 5,718 -
Financial services 113 71 59% 377 272 39%
Other revenues 10 9 11% 34 34 -
--------- ------- ------- -------
Total revenues $ 1,500 $ 1,747 -14% $ 6,149 $ 6,024 2%
========= ======= ======= =======
Net sales:
North America $ 724 $ 938 -23% $ 3,187 $ 3,140 1%
Europe* 473 541 -13% 1,885 1,891 -
Asia Pacific 68 89 -24% 290 393 -26%
Latin America 112 99 13% 376 294 28%
--------- ------- ------- -------
Total net sales $ 1,377 $ 1,667 -17% $ 5,738 $ 5,718 -
========= ======= ======= =======
</TABLE>
* Includes Africa and Middle East
<PAGE>
CASE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Millions)
(Unaudited)
<TABLE>
<CAPTION>
CONSOLIDATED CASE INDUSTRIAL FINANCIAL SERVICES
December 31, December 31, December 31,
----------------- ----------------- ------------------
1998 1997 1998 1997 1998 1997
------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Assets
Cash and cash equivalents $ 142 $ 252 $ 107 $ 185 $ 35 $ 67
Accounts, notes receivable and other - net 4,414 3,658 1,920 1,711 2,527 2,045
Inventories 1,430 1,064 1,430 1,064
Property, plant and equipment - net 1,121 999 1,118 996 3 3
Equipment on operating leases - net 468 179 468 179
Investment in Case Capital 459 357
Goodwill and intangibles 358 319 358 319
Other assets 793 510 584 454 227 68
------- ------- ------- ------- ------- -------
Total $ 8,726 $ 6,981 $ 5,976 $ 5,086 $ 3,260 $ 2,362
======= ======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------------
Liabilities and Equity
Current maturities of long-term debt $ 9 $ 8 $ 9 $ 8 $ - $ -
Short-term debt 1,310 1,326 766 179 550 1,147
Accounts payable and other accrued liabilities 1,577 1,536 1,535 1,552 87 94
Long-term debt 3,080 1,404 972 669 2,108 735
Other liabilities 563 433 507 404 56 29
------- ------- ------- ------- ------- -------
Total Liabilities 6,539 4,707 3,789 2,812 2,801 2,005
Equity 2,187 2,274 2,187 2,274 459 357
------- ------- ------- ------- ------- -------
Total $ 8,726 $ 6,981 $ 5,976 $ 5,086 $ 3,260 $ 2,362
======= ======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
<PAGE>
CASE CORPORATION
Notes to Financial Statements
-----------------------------
(1) The accompanying financial statements reflect the consolidated results of
Case Corporation and consolidated subsidiaries ("Case" or "the Company").
The supplemental "Case Industrial" consolidating data in each of the
financial statements includes Case's agricultural and construction
equipment operations, with the Company's wholly owned financial services
business reflected on the equity basis. The supplemental "Financial
Services" consolidating data includes the operating results of Case Capital
Corporation ("Case Capital"). Case Capital provides financing for retail
installment sales contracts and leases, commercial lending within the
equipment industry, multiple lines of insurance products and private-label
credit cards.
(2) Case Industrial provides financing subsidies to Case Capital in an amount
equal to the difference between the rate actually paid by retail customers
and the rate charged by Case Capital. These financing subsidies are
accounted for as a deduction in arriving at net sales by Case Industrial.
Previously, these payments were included in selling, general and
administrative expenses of Case Industrial. All necessary
reclassifications have been made to adjust the prior year financial
statements to the 1998 presentation.
A reconciliation of Case Industrial's restated net sales and selling,
general and administrative expenses is as follows (in millions):
<TABLE>
<CAPTION>
Three Year
Months Ended Ended
Case Industrial December 31, December 31,
------------------------ ------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales
Before restatement $1,404 $1,693 $5,837 $5,796
Financing subsidies (27) (26) (99) (78)
------ ------ ------ ------
As restated $1,377 $1,667 $5,738 $5,718
====== ====== ====== ======
Selling, general and administrative
Before restatement $ 212 $ 168 $ 698 $ 619
Financing subsidies (27) (26) (99) (78)
------ ------ ------ ------
As restated $ 185 $ 142 $ 599 $ 541
====== ====== ====== ======
</TABLE>
All other transactions between "Case Industrial" and "Financial Services"
have been eliminated to arrive at the "Consolidated" data.
(3) During the fourth quarter of 1998, the Company recorded a restructuring
charge of $132 million, $96 million after tax, related to the 1999 closure
of its Hamilton, Ontario, and Hugo, Minnesota, manufacturing facilities, as
well as other actions that include a worldwide workforce reduction of 2,600
people.
(4) During the fourth quarter of 1998, the Company acquired certain assets of
DMI, Inc. ("DMI"). The acquisition of DMI, the leading producer of soil
management equipment in North America, broadens Case's implement business
to include an innovative line of tillage and fertilizer applicator products
and adds DMI's recognized knowledge in soil management to Case's growing
farm practice expertise. DMI, with operations in Goodfield, Illinois, had
sales of approximately $77 million in 1997.
During the second quarter of 1998, the Company acquired certain assets of
the Tyler Industries division ("Tyler") of IBOCO, Inc., a privately owned
company. The acquisition of Tyler, a designer, manufacturer and
distributor of a complete line of chemical and fertilizer sprayers and
applicators, strengthens Case's equipment line for large-scale production
agriculture and provides another application for Case's Advanced Farming
Systems. Tyler, with operations in Benson, Minnesota, had sales of
approximately $66 million in 1997.
<PAGE>
CASE CORPORATION
Notes to Financial Statements
-----------------------------
(5) The Company's 1998 consolidated effective income tax rate of 40% was higher
than the U.S. statutory tax rate of 35% as the Company adopted
restructuring plans in certain foreign jurisdictions for which no immediate
tax benefit was recognizable. Excluding restructuring, the Company's
consolidated effective income tax rates of 33% in 1998 and 32% in 1997 were
lower than the U.S. statutory tax rate primarily due to the recognition of
tax benefits associated with the Company's foreign sales corporation,
research and development tax credits, foreign losses taxed at different
rates and reductions in the tax valuation reserves in certain foreign
jurisdictions, partially offset by state income taxes and foreign income
taxed at different rates.
(6) Case defines operating earnings as industrial earnings before interest,
taxes, changes in accounting principles, restructuring charges and
extraordinary items, including the income of Case Capital on an equity
basis. A reconciliation of Case Industrial's net income to operating
earnings is as follows (in millions):
<TABLE>
<CAPTION>
Three Year
Months Ended Ended
Case Industrial December 31, December 31,
---------------------- ---------------------
1998 1997 1998 1997
----------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Net income (loss) $(194) $ 123 $ 64 $ 403
Income tax provision (benefit) (90) 48 (4) 151
Interest expense 34 19 104 73
Restructuring charge 132 - 132 -
----- ----- ----- -----
Operating earnings $(118) $ 190 $ 296 $ 627
===== ===== ===== =====
(7) Earnings (loss) per common share ("EPS")
(in millions, except per share data) Three Year
Months Ended Ended
December 31, December 31,
----------------------- ---------------------
1998 1997 1998 1997
------------ --------- ----------- --------
<S> <C> <C> <C> <C>
Basic EPS
Net income (loss) to common $ (196) $ 121 $ 57 $ 396
Restructuring charge, net of tax 96 - 96 -
------ ----- ----- -----
Net income (loss) before restructuring charge $ (100) $ 121 $ 153 $ 396
====== ===== ===== =====
Weighted-average shares outstanding - Basic 72.4 74.0 73.2 73.9
====== ===== ===== =====
Basic EPS before restructuring charge $(1.37) $1.64 $2.09 $5.36
Basic EPS $(2.70) $1.64 $ .78 $5.36
Diluted EPS
Net income (loss) $ (194) $ 123 $ 64 $ 403
Less: Antidilutive preferred stock dividends (2) - (7) -
------ ----- ----- -----
Net income (loss) after preferred stock dividends $ (196) $ 123 $ 57 $ 403
Restructuring charge, net of tax 96 - 96 -
------ ----- ----- -----
Net income (loss) after preferred stock dividends and
before restructuring charge $ (100) $ 123 $ 153 $ 403
====== ===== ===== =====
Weighted-average shares outstanding - Basic 72.4 74.0 73.2 73.9
Effect of dilutive securities:
Convertible preferred stock - 3.5 - 3.5
Stock options - 1.3 1.0 1.3
Restricted stock - 0.2 0.2 0.2
------ ----- ----- -----
Weighted-average shares outstanding - Diluted 72.4 79.0 74.4 78.9
====== ===== ===== =====
Diluted EPS before restructuring charge $(1.37) $1.56 $2.05 $5.11
Diluted EPS $(2.70) $1.56 $ .76 $5.11
</TABLE>
