<PAGE>
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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 March 31, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-13098
Case Corporation
(Exact name of registrant as specified in its charter)
Delaware
(State of Incorporation)
76-0433811
(I.R.S. Employer Identification No.)
700 State Street, Racine, WI 53404
(Address of principal executive offices including Zip Code)
Registrant's telephone number, including area code: (414) 636-6011
----------------
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 (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO[_]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date.
Common Stock, par value $0.01 per share: 74,339,080 shares outstanding as
of April 30, 1999.
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I--Financial Information
Case Corporation and Consolidated Subsidiaries--
Statements of Income.................................................. 3
Balance Sheets........................................................ 4
Statements of Cash Flows.............................................. 5
Statements of Changes in Stockholders' Equity......................... 6
Notes to Financial Statements......................................... 7
Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................ 11
Part II--Other Information
Item 1. Legal Proceedings............................................... 19
Item 2. Changes in Securities........................................... *
Item 3. Defaults Upon Senior Securities................................. *
Item 4. Submission of Matters to a Vote of Security Holders............. *
Item 5. Other Information............................................... *
Item 6. Exhibits and Reports on Form 8-K................................ 19
</TABLE>
- --------
* No response to this item is included herein for the reason that it is
inapplicable or the answer to such item is negative.
2
<PAGE>
PART I
FINANCIAL INFORMATION
CASE CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1999 and 1998
(in millions, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Case
Consolidated Industrial Case Capital
-------------- -------------- -------------
Three Months Three Months Three Months
Ended Ended Ended
March 31, March 31, March 31,
-------------- -------------- -------------
1999 1998 1999 1998 1999 1998
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Net sales........................ $1,084 $1,297 $1,084 $1,297 $ -- $ --
Interest income and other........ 117 84 10 8 109 76
------ ------ ------ ------ ------ ------
1,201 1,381 1,094 1,305 109 76
Costs and Expenses:
Cost of goods sold............... 932 1,019 932 1,019 -- --
Selling, general and
administrative.................. 174 146 157 137 17 9
Research, development and
engineering..................... 49 52 49 52 -- --
Interest expense................. 75 47 32 18 45 29
Other, net....................... 30 15 14 7 16 8
------ ------ ------ ------ ------ ------
Income (loss) before taxes......... (59) 102 (90) 72 31 30
Income tax provision (benefit)..... (11) 33 (22) 22 11 11
------ ------ ------ ------ ------ ------
(48) 69 (68) 50 20 19
Equity in income--Case Capital..... -- -- 20 19 -- --
------ ------ ------ ------ ------ ------
Net income (loss).................. $ (48) $ 69 $ (48) $ 69 $ 20 $ 19
====== ====== ====== ====== ====== ======
Preferred stock dividends.......... 2 2
------ ------
Net income (loss) to common........ $ (50) $ 67
====== ======
Per share data:
Basic earnings (loss) per share.. $(0.68) $ 0.91
====== ======
Diluted earnings (loss) per
share........................... $(0.68) $ 0.88
====== ======
</TABLE>
The accompanying notes to financial statements are an integral part of these
Statements of Income.
Reference is made to Note 1 for definitions of "Case Industrial" and "Case
Capital."
3
<PAGE>
CASE CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 1999, AND DECEMBER 31, 1998
(in millions, except share data)
(Unaudited)
<TABLE>
<CAPTION>
Consolidated Case Industrial Case Capital
---------------------- ---------------------- ----------------------
March 31, December 31, March 31, December 31, March 31, December 31,
ASSETS 1999 1998 1999 1998 1999 1998
------ --------- ------------ --------- ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Current Assets:
Cash and cash
equivalents........... $ 119 $ 142 $ 91 $ 107 $ 28 $ 35
Accounts and notes
receivable............ 2,786 2,476 1,745 1,594 1,045 934
Inventories............ 1,465 1,430 1,465 1,430 -- --
Deferred income
taxes................. 269 272 249 252 20 20
Prepayments and
other................. 53 49 52 47 1 2
------- ------- ------- ------- ------ ------
Total current
assets.............. 4,692 4,369 3,602 3,430 1,094 991
------- ------- ------- ------- ------ ------
Long-Term Receivables... 1,750 1,938 48 326 1,677 1,593
Other Assets:
Investments in joint
ventures.............. 96 98 81 83 15 15
Investment in Case
Capital............... -- -- 482 459 -- --
Equipment on operating
leases, net........... 495 468 -- -- 495 468
Goodwill and
intangibles........... 346 358 346 358 -- --
Other.................. 436 373 222 201 240 190
------- ------- ------- ------- ------ ------
Total other assets... 1,373 1,297 1,131 1,101 750 673
------- ------- ------- ------- ------ ------
Property, Plant and
Equipment, at cost..... 2,149 2,144 2,144 2,139 5 5
Accumulated
Depreciation........... (1,101) (1,048) (1,099) (1,046) (2) (2)
------- ------- ------- ------- ------ ------
Net property, plant
and equipment....... 1,048 1,096 1,045 1,093 3 3
------- ------- ------- ------- ------ ------
Total................ $ 8,863 $ 8,700 $ 5,826 $ 5,950 $3,524 $3,260
======= ======= ======= ======= ====== ======
<CAPTION>
LIABILITIES AND EQUITY
----------------------
<S> <C> <C> <C> <C> <C> <C>
Current Liabilities:
Current maturities of
long-term debt........ $ 9 $ 9 $ 9 $ 9 $ -- $ --
Short-term debt........ 1,112 1,310 856 766 256 550
Accounts payable....... 605 605 595 625 15 25
Restructuring
liability............. 82 99 82 99 -- --
Other accrued
liabilities........... 814 847 752 785 62 62
------- ------- ------- ------- ------ ------
Total current
liabilities......... 2,622 2,870 2,294 2,284 333 637
------- ------- ------- ------- ------ ------
Long-Term Debt.......... 3,591 3,080 981 972 2,610 2,108
Other Liabilities:
Pension benefits....... 196 205 196 205 -- --
Other postretirement
benefits.............. 168 161 168 161 -- --
Other postemployment
benefits.............. 37 37 37 37 -- --
Other.................. 183 153 86 99 97 54
------- ------- ------- ------- ------ ------
Total other
liabilities......... 584 556 487 502 97 54
------- ------- ------- ------- ------ ------
Commitments and
Contingencies (Note 7).
Minority Interest....... 7 7 5 5 2 2
Preferred Stock with
Mandatory Redemption
Provisions............. 77 77 77 77 -- --
Stockholders' Equity:
Common Stock, $0.01
par value; authorized
200,000,000 shares,
issued 79,374,449,
outstanding
74,265,497............ 1 1 1 1 -- --
Paid-in capital........ 1,439 1,430 1,439 1,430 269 269
Retained earnings...... 1,063 1,116 1,063 1,116 234 214
Accumulated other
comprehensive
income................ (241) (159) (241) (159) (21) (24)
Unearned compensation
on restricted stock... (29) (31) (29) (31) -- --
Treasury stock,
5,108,952 shares, at
cost.................. (251) (247) (251) (247) -- --
------- ------- ------- ------- ------ ------
Total stockholders'
equity.............. 1,982 2,110 1,982 2,110 482 459
------- ------- ------- ------- ------ ------
Total................ $ 8,863 $ 8,700 $ 5,826 $ 5,950 $3,524 $3,260
======= ======= ======= ======= ====== ======
</TABLE>
The accompanying notes to financial statements are an integral part of these
Balance Sheets.
Reference is made to Note 1 for definitions of "Case Industrial" and "Case
Capital."
4
<PAGE>
CASE CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(in millions)
(Unaudited)
<TABLE>
<CAPTION>
Consolidated Case Industrial Case Capital
-------------- ---------------- --------------
Three Months Three Months
Ended Three Months Ended
March 31, Ended March 31, March 31,
-------------- ---------------- --------------
1999 1998 1999 1998 1999 1998
------ ------ ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Operating activities:
Net income (loss)......... $ (48) $ 69 $ (48) $ 69 $ 20 $ 19
Adjustments to reconcile
net income (loss) to net
cash provided (used) by
operating activities:
Depreciation and
amortization........... 56 43 40 34 16 9
Deferred income tax
expense................ -- 4 -- 4 -- --
Cash paid for
restructuring.......... (17) (10) (17) (10) -- --
Undistributed (earnings)
loss of unconsolidated
subsidiaries........... 3 2 (17) (18) -- --
Changes in components of
working capital:
(Increase) decrease in
receivables.......... (387) (324) (234) (326) (106) 44
(Increase) decrease in
inventories.......... (108) (195) (107) (195) (1) --
(Increase) decrease in
prepayments and other
current assets....... (3) (9) (5) (7) 2 (2)
Increase (decrease) in
payables............. 83 74 47 29 (11) 5
Increase (decrease) in
accrued liabilities.. (14) (69) (15) (19) 1 (50)
(Increase) decrease in
long-term receivables.. 208 70 283 61 (68) 12
Increase (decrease) in
long-term liabilities.. 44 15 1 15 43 --
Other, net.............. (94) (59) (51) (6) (50) (57)
------ ------ ------- ------- ------ ------
Net cash provided
(used) by operating
activities.......... (277) (389) (123) (369) (154) (20)
------ ------ ------- ------- ------ ------
Investing activities:
Proceeds from the sale of
businesses and assets.... 3 1 3 1 -- --
Expenditures for property,
plant and equipment...... (20) (24) (20) (24) -- --
Expenditures for equipment
on operating leases...... (42) (36) -- -- (42) (36)
------ ------ ------- ------- ------ ------
Net cash provided
(used) by investing
activities.......... (59) (59) (17) (23) (42) (36)
------ ------ ------- ------- ------ ------
Financing activities:
Proceeds from the issuance
of long-term debt........ 511 279 20 -- 491 279
Payment of long-term debt. (2) (2) (2) (2) -- --
Payment of short-term
debt..................... (10) -- -- -- -- --
Net increase (decrease) in
short-term revolving
credit facilities........ (173) 83 116 346 (299) (263)
Proceeds from the issuance
of common stock.......... 7 27 7 27 -- --
Repurchases of common
stock.................... -- (27) -- (27) -- --
Dividends paid (common and
preferred)............... (5) (6) (5) (6) -- --
Other, net................ (14) (6) (10) (6) (4) --
------ ------ ------- ------- ------ ------
Net cash provided
(used) by financing
activities.......... 314 348 126 332 188 16
------ ------ ------- ------- ------ ------
Effect of foreign exchange
rate changes on cash and
cash equivalents.......... (1) -- (2) -- 1 --
------ ------ ------- ------- ------ ------
Increase (decrease) in cash
and cash equivalents...... $ (23) $ (100) $ (16) $ (60) $ (7) $ (40)
Cash and cash equivalents,
beginning of period....... 142 252 107 185 35 67
------ ------ ------- ------- ------ ------
Cash and cash equivalents,
end of period............. $ 119 $ 152 $ 91 $ 125 $ 28 $ 27
====== ====== ======= ======= ====== ======
Cash paid during the period
for interest.............. $ 69 $ 65 $ 40 $ 28 $ 31 $ 37
====== ====== ======= ======= ====== ======
Cash paid during the period
for taxes................. $ 26 $ 41 $ 19 $ 27 $ 7 $ 14
====== ====== ======= ======= ====== ======
</TABLE>
The accompanying notes to financial statements are an integral part of these
Statements of Cash Flows.
Reference is made to Note 1 for definitions of "Case Industrial" and "Case
Capital."
5
<PAGE>
CASE CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(in millions)
(Unaudited)
<TABLE>
<CAPTION>
Accumulated
Other
Common Paid-in Unearned Retained Treasury Comprehensive Comprehensive
Stock Capital Compensation Earnings Stock Income Total Income
------ ------- ------------ -------- -------- ------------- ------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1997................... $ 1 $1,334 $(14) $1,074 $ (96) $(102) $2,197
Comprehensive income:
Net income............. -- -- -- 64 -- -- 64 $ 64
Translation
adjustment............ -- -- -- -- -- (18) (18) (18)
Pension liability
adjustment, net of
$15 tax benefit....... -- -- -- -- -- (39) (39) (39)
-----
Total................ $ 7
=====
Dividends declared...... -- -- -- (22) -- -- (22)
Capital contributions on
stock issuance......... -- 70 -- -- -- -- 70
Recognition of
compensation on
restricted stock....... -- -- 8 -- -- -- 8
Issuance of restricted
stock, net of
forfeitures............ -- 26 (25) -- (2) -- (1)
Acquisition of treasury
stock.................. -- -- -- -- (149) -- (149)
----- ------ ---- ------ ----- ----- ------
Balance, December 31,
1998................... $ 1 $1,430 $(31) $1,116 $(247) $(159) $2,110
===== ====== ==== ====== ===== ===== ======
Comprehensive income:
Net income (loss)...... -- -- -- (48) -- -- (48) $ (48)
Translation
adjustment............ -- -- -- -- -- (82) (82) (82)
-----
Total................ $(130)
=====
Dividends declared...... -- -- -- (5) -- -- (5)
Capital contributions on
stock issuance......... -- 7 -- -- -- -- 7
Recognition of
compensation on
restricted stock....... -- -- 3 -- -- -- 3
Issuance of restricted
stock, net of
forfeitures............ -- 2 (1) -- (4) -- (3)
----- ------ ---- ------ ----- ----- ------
Balance, March 31, 1999. $ 1 $1,439 $(29) $1,063 $(251) $(241) $1,982
===== ====== ==== ====== ===== ===== ======
</TABLE>
The accompanying notes to financial statements are an integral part of
these Statements of Changes in Stockholders' Equity.
6
<PAGE>
CASE CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(1) Basis of Presentation
The accompanying financial statements reflect the consolidated results of
Case Corporation and also include, on a separate and supplemental basis, the
combination of Case's industrial companies and financial services companies as
follows:
CaseIndustrial--The financial information captioned "Case Industrial"
reflects the consolidation of all majority-owned subsidiaries
except for Case Capital, the Company's wholly owned retail
credit subsidiary. Case Capital has been included using the
equity method of accounting whereby the net income and net
assets of Case Capital are reflected, respectively, in the
income statement caption, "Equity in income--Case Capital,"
and the balance sheet caption, "Investment in Case Capital."
CaseCapital--The financial information captioned "Case Capital" reflects
the consolidation of Case's retail credit subsidiaries.
All significant intercompany transactions, including activity within and
between "Case Industrial" and "Case Capital" have been eliminated.
Certain reclassifications have been made to conform the prior years'
financial statements to the 1999 presentation.
In the opinion of management, the accompanying unaudited financial
statements of Case Corporation and Consolidated Subsidiaries contain all
adjustments which are of a normal recurring nature necessary to present fairly
the financial position as of March 31, 1999, and the results of operations,
changes in stockholders' equity and cash flows for the periods indicated. It
is suggested that these interim financial statements be read in conjunction
with the financial statements and the notes thereto included in the Company's
1998 Annual Report on Form 10-K/A. Interim financial results are not
necessarily indicative of operating results for an entire year.
(2) Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. This
statement must be adopted no later than January 1, 2000, although earlier
application is permitted. The Company is currently evaluating the impact of
adopting SFAS No. 133.
Effective January 1, 1999, the Company adopted Statement of Position
("SOP") No. 98-5, "Reporting on the Costs of Start-Up Activities." The
Company's accounting for the costs of start-up activities is consistent with
the guidelines established in the SOP and, as a result, the adoption of this
statement had no effect on the Company's financial position or results of
operations.
(3) Inventories
Inventories are stated at the lower of cost or market, generally using the
first-in, first-out (FIFO) method. Inventory cost includes material, labor and
overhead.
Inventories consist of the following (in millions):
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
-------------- -----------------
<S> <C> <C>
Raw materials............................ $ 255 $ 258
Work-in-process.......................... 160 167
Finished goods........................... 1,050 1,005
------ ------
Total inventories.................... $1,465 $1,430
====== ======
</TABLE>
7
<PAGE>
CASE CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(Continued)
(4) Restructuring
During the first quarter of 1999, the Company utilized $17 million of its
restructuring reserves including $2 million related to the 1992 Restructuring
Program and $15 million related to the 1998 Restructuring Program. The $17
million reserve usage was primarily for employee termination costs and costs
related to closing, selling and downsizing existing facilities as contemplated
under the applicable restructuring program. Management believes that the
balance of its restructuring reserves are adequate to carry out all activities
as outlined under the 1992 and 1998 Restructuring Programs, and the Company
anticipates that all actions will be completed by December 31, 1999.
(5) Long-Term Debt
During the first quarter of 1999, Case Credit(R) Corporation ("Case
Credit"), the wholly owned subsidiary of Case Capital issued an aggregate of
$250 million of its medium-term notes pursuant to its $1 billion shelf
registration statement filed with the Securities and Exchange Commission in
May 1998. These fixed-rate notes have maturities that range between 2 and 3
years and bear interest between 5.85% and 6.16%. The net proceeds from these
issuances were used to fund Case Capital's growth initiatives and for other
corporate purposes, including the repayment of short-term indebtedness.
During the first quarter of 1999, Case Credit's Canadian subsidiary, Case
Credit Ltd, issued C$200 million of its medium-term notes pursuant to a short-
form prospectus and prospectus supplement filed with the Canadian Securities
Administrators in the fourth quarter of 1998. These notes mature in June 2001
and bear interest at 6.3%. The net proceeds from this issuance were used to
fund Case Capital's growth initiatives and for other corporate purposes,
including the repayment of short-term indebtedness.
During the first quarter of 1999, Case Credit Australia Pty Ltd issued
A$175 million of its medium-term notes pursuant to its medium-term note
program. These notes have maturities that range from twenty-four to thirty
months and bear interest based on BBSW for the floating rate notes, and 5.75%
for the fixed rate notes. The net proceeds from this issuance were used to
fund Case Capital's growth initiatives and for other corporate purposes,
including the repayment of short-term indebtedness.
(6) Income Taxes
On a consolidated basis, the Company's effective income tax rate of 19% for
the first quarter of 1999 was lower than the U.S. statutory rate of 35%
primarily due to losses in certain foreign jurisdictions for which no
immediate tax benefit was recognizable and foreign losses taxed at different
rates, partially offset by state tax benefits, research and development tax
credits, and the recognition of tax benefits from the Company's foreign sales
corporation. For the first quarter of 1998, the Company's consolidated
effective tax rate of 32% was lower than the U.S. statutory rate primarily due
to reductions in the tax valuation reserves in certain foreign jurisdictions,
research and development tax credits and the recognition of tax benefits from
the Company's foreign sales corporation, partially offset by state income
taxes.
(7) Commitments and Contingencies
Environmental
Expenditures for ongoing compliance with environmental regulations that
relate to current operations are expensed or capitalized as appropriate.
Expenditures that relate to an existing condition caused by past operations
and which do not contribute to current or future revenue generation are
expensed. Liabilities are recorded when environmental assessments indicate
that remedial efforts are probable and the costs can be reasonably estimated.
Estimates of the liability are based upon currently available facts, existing
technology and presently enacted laws and regulations. All available evidence
is considered, including prior experience in remediation of contaminated
sites, other parties' share of liability at the waste sites and their ability
to pay and data concerning the waste sites released by the U.S. Environmental
Protection Agency or other organizations. These liabilities are included in
8
<PAGE>
CASE CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(Continued)
the accompanying Balance Sheets at their undiscounted amounts. Recoveries are
evaluated separately from the liability and, if appropriate, are recorded
separately from the associated liability in the accompanying Balance Sheets.
Case has received and from time to time receives inquiries and/or notices of
potential liability at multiple sites that are the subject of remedial
activities under Federal or state environmental laws and Case may be required
to share in the cost of clean-up. Case is also involved in remediating a number
of other sites, including certain of its currently and formerly operated
facilities or those assumed through corporate acquisitions. Based upon
information currently available, management is of the opinion that any such
potential liability or remediation costs will not have a material adverse
effect on Case's financial position or results of operations.
Product liability
Product liability claims against Case arise from time to time in the
ordinary course of business. There is an inherent uncertainty as to the
eventual resolution of unsettled claims. However, in the opinion of management,
any losses with respect to existing claims will not have a material adverse
effect on Case's financial position or results of operations.
Other
Case is the subject of various other legal claims arising from its
operations, including product warranty, dealer disputes, workmen's compensation
and employment matters. Management is of the opinion that the resolution of
these claims, individually and in the aggregate, will not have a material
adverse effect on Case's financial position or results of operations.
(8) Earnings per Share
The following reconciles the numerators and denominators of the basic and
diluted earnings per share computations for income from continuing operations
(in millions, except per share data):
<TABLE>
<CAPTION>
Three Months
Ended
March 31,
-------------
1999 1998
------ -----
<S> <C> <C>
Basic
Net income (loss)............................................. $ (48) $ 69
Less: Preferred stock dividends............................... (2) (2)
------ -----
Net income (loss) after preferred stock dividends............. $ (50) $ 67
====== =====
Weighted-average shares outstanding........................... 72.9 73.9
====== =====
Basic earnings (loss) per share............................... $(0.68) $0.91
====== =====
Diluted
Net income (loss)............................................. $ (48) $ 69
Less: Antidilutive preferred stock dividends.................. (2) N/A
------ -----
Net income (loss) after antidilutive preferred stock
dividends.................................................... $ (50) $ 69
====== =====
Weighted-average shares outstanding--Basic.................... 72.9 73.9
Effect of Dilutive Securities (when dilutive):
Convertible preferred stock................................. -- 3.5
Stock options............................................... -- 1.0
Restricted stock............................................ -- 0.1
------ -----
Weighted-average shares outstanding--Diluted.................. 72.9 78.5
====== =====
Diluted earnings (loss) per share............................. $(0.68) $0.88
====== =====
</TABLE>
9
<PAGE>
CASE CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(Continued)
(9) Accumulated Other Comprehensive Income
The components of accumulated other comprehensive income as of March 31,
1999 and December 31, 1998, are as follows (in millions):
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
--------- ------------
<S> <C> <C>
Cumulative translation adjustment.................. $(194) $(112)
Pension liability adjustment....................... (47) (47)
----- -----
Total accumulated other comprehensive income... $(241) $(159)
===== =====
</TABLE>
(10) Segment Information
Case Corporation has three reportable operating segments:
Agricultural Equipment
The agricultural equipment segment manufactures and distributes a broad line
of farm machinery and implements, including two-wheel and four-wheel drive
tractors ranging in size from 40 to 425 horsepower, combines, cotton pickers,
hay and forage equipment, planting and seeding equipment, soil preparation and
cultivation implements, sugar cane harvesters and material handling equipment.
Construction Equipment
The construction equipment segment manufactures and distributes a broad line
of construction machinery that primarily serves the light- to medium-sized
equipment market. Product lines include loader/backhoes, crawler and wheel
excavators, wheel loaders, crawler dozers, skid steers loaders, trenchers and
rough terrain forklifts.
Financial Services
The financial services segment reflects the operations of Case Capital, the
wholly owned finance subsidiary of Case. The financial services segment
provides financing for retail installment sales contracts and leases,
commercial lending within the equipment industry, multiple lines of insurance
products and offers a private-label credit card. These financing arrangements
are established in conjunction with the purchase or lease of new and used Case
farm and construction equipment and other new and used products to end-use
customers.
Case evaluates segment performance based on operating earnings. Case defines
operating earnings as the income of Case Industrial before interest, taxes,
restructuring charges and extraordinary items, including the income of Case
Capital on an equity basis. Transfers between segments are accounted for at
market value.
Case's reportable segments are strategic business units that offer different
products and services. Each segment is managed separately as they require
different technology and marketing strategies.
10
<PAGE>
CASE CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(Concluded)
A summary of Case's reportable segment information is set forth in the
following table (in millions):
<TABLE>
<CAPTION>
Three Months
Ended March
31, Three Months Ended
-------------- -----------------------------------
June 30, September 30, December 31,
1999 1998 1998 1998 1998
------ ------ -------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Net sales
Agricultural equipment.. $ 549 $ 783 $1,016 $ 888 $ 846
Construction equipment.. 535 514 630 530 531
------ ------ ------ ------ ------
Total net sales....... 1,084 1,297 1,646 1,418 1,377
Financial services........ 109 76 80 108 113
Other revenues............ 8 8 8 8 10
------ ------ ------ ------ ------
Total................. $1,201 $1,381 $1,734 $1,534 $1,500
====== ====== ====== ====== ======
Segment profit (loss):
Agricultural equipment.... $ (99) $ 41 $ 113 $ 31 $ (150)
Construction equipment.... 41 49 68 50 9
Financial services........ 20 19 18 25 23
------ ------ ------ ------ ------
Total................. $ (38) $ 109 $ 199 $ 106 $ (118)
====== ====== ====== ====== ======
</TABLE>
11
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
First Quarter 1999 vs. First Quarter 1998
Analysis of Results of Operations
Summary of Revenues
Case Corporation ("Case" or the "Company") is a leading worldwide designer,
manufacturer, marketer and distributor of farm equipment and light- to medium-
sized construction equipment and offers a broad array of financial products and
services. As used herein, "Case Industrial" refers to the Company's
agricultural and construction equipment operations. Case's financial services
business is provided through Case Capital Corporation, including its wholly
owned subsidiary Case Credit(R) Corporation ("Case Credit") and their
subsidiaries and joint ventures (collectively, "Case Capital" or "Financial
Services"). Case Capital provides and administers financing for the retail
purchase or lease of new and used Case and other agricultural and construction
equipment and other products to end-use customers. Case's revenues for the
first quarter of 1999 and 1998 were derived from the following sources (in
millions):
<TABLE>
<CAPTION>
For the Three
Months Ended
March 31,
-------------
1999 1998
------ ------
<S> <C> <C>
Revenues:
Net sales
Agricultural equipment.................................. $ 549 $ 783
Construction equipment.................................. 535 514
------ ------
Total net sales....................................... 1,084 1,297
Financial services........................................ 109 76
Other revenues............................................ 8 8
------ ------
Total revenues........................................ $1,201 $1,381
====== ======
</TABLE>
Case's sales are derived from the manufacture and distribution of a full
line of farm equipment and light- to medium-sized construction equipment, and
are affected by worldwide agricultural production and demand, housing starts
and other construction levels, commodity prices, government subsidies, weather,
interest and exchange rates, industry capacity and equipment levels, and the
other factors set forth below under "Outlook." During the first quarter of 1999
and 1998, net sales of Case products were made into the following geographic
regions (in millions):
<TABLE>
<CAPTION>
For the Three
Months Ended
March 31,
-------------
1999 1998
------ ------
<S> <C> <C>
Net sales
North America............................................. $ 647 $ 770
Europe*................................................... 330 383
Asia Pacific.............................................. 66 68
Latin America............................................. 41 76
------ ------
Total net sales......................................... $1,084 $1,297
====== ======
</TABLE>
- --------
* Includes Africa and Middle East
Revenues
On a consolidated basis, worldwide revenues decreased $180 million or 13% in
the first quarter of 1999 to $1,201 million. Net sales of farm and construction
equipment decreased $213 million or 16% to $1,084 million.
12
<PAGE>
The decrease in net sales consists primarily of a 20% volume decrease,
partially offset by a 3% increase resulting from the impact of acquisitions and
a 1% improvement in price realization.
Sales in North America were $647 million in the first quarter of 1999 versus
$770 million for the same period in 1998. The year-over-year decrease primarily
reflects lower sales of tractors and combines, partially offset by increased
sales of Case construction equipment, including higher sales of
loader/backhoes, skid steers, wheel loaders and trenchers. In Europe, 1999
first quarter sales were $330 million, down 14% from the $383 million reported
for the same period in 1998, primarily reflecting decreased sales of combines
and loader/backhoes. In the Company's Asia Pacific region, sales were $66
million, down slightly from the $68 million reported during the first quarter
of 1998, reflecting weaker economic conditions in that region. In the Company's
Latin American region, sales of Case agricultural and construction equipment
were $41 million, down 46% from the $76 million reported during the same period
in 1998, reflecting ongoing unfavorable economic conditions in Brazil.
In the first quarter of 1999, Case Capital revenues increased 43% to $109
million, as compared with $76 million during the same period in 1998. This
increase was primarily driven by increased finance revenues earned on retail
and other notes and finance leases.
Earnings
The Company recorded a net loss of $(48) million in the first quarter of
1999, as compared to net income of $69 million in 1998. On a diluted basis, the
Company reported a per share loss of $(0.68) in the first quarter of 1999, as
compared to diluted earnings per share of $0.88 in the same quarter of 1998.
The Company's industrial operations recorded a loss, before equity income of
Case Capital, of $(68) million in the first quarter of 1999 versus income of
$50 million in the first quarter of 1998. The Company's first quarter operating
results include the impact of aggressive actions initiated by the Company in
response to the industry-wide downturn in the agricultural equipment market.
The Company has progressively lowered agricultural equipment production to
address declining retail demand and is continuing its cost reduction
initiatives. The decrease in net income primarily resulted from a 30% decrease
in agricultural equipment sales and currency depreciation in Brazil.
Case's operating loss for the first quarter of 1999 was $(38) million versus
operating earnings of $109 million for the same period in 1998. 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. Case Capital recorded net income
of $20 million in the first quarter of 1999, as compared to net income of $19
million for the same period in 1998. A reconciliation of Case Industrial's
income to operating earnings is as follows (in millions):
<TABLE>
<CAPTION>
Case
Industrial
Three
Months
Ended
March 31,
------------
1999 1998
----- -----
<S> <C> <C>
Net income (loss)........................................... $ (48) $ 69
Income tax provision (benefit).............................. (22) 22
Interest expense............................................ 32 18
----- -----
Operating earnings (loss)................................. $ (38) $ 109
===== =====
</TABLE>
Consolidated interest expense was $75 million in the first quarter of 1999
as compared to $47 million in the first quarter of 1998. The year-over-year
increase in consolidated interest expense primarily reflects higher average
debt levels for Case Capital, largely due to the growth in Case Capital's on-
balance-sheet receivables and increased equipment on operating leases. In
addition, interest expense for Case Industrial increased from $18 million in
the first quarter of 1998 to $32 million in the first quarter of 1999,
primarily due to increased
13
<PAGE>
levels of inventories and receivables as a result of acquisitions and lower
retail demand in the agricultural equipment industry.
On a consolidated basis, the Company's effective tax rate of 19% for the
first quarter of 1999 was lower than the U.S. statutory tax rate of 35%
primarily due to losses in certain foreign jurisdictions for which no immediate
tax benefit was recognizable and foreign losses taxed at different rates,
partially offset by state tax benefits, research and development tax credits,
and the recognition of tax benefits from the Company's foreign sales
corporation. For the first quarter of 1998, the Company's consolidated
effective income tax rate of 32% was lower than the U.S. statutory rate
primarily due to reductions in the tax valuation reserves in certain foreign
jurisdictions, research and development tax credits and recognition of tax
benefits from the Company's foreign sales corporation, partially offset by
state income taxes.
Business Segment Operating Results
The following is a discussion of Case Corporation's industry segment
operating results. Case defines operating earnings as industrial earnings
before interest, taxes, changes in accounting principles, restructuring charges
and extraordinary items. Operating earnings for Case Capital are reported on a
net income basis.
Agricultural Equipment
Operating earnings for Case's worldwide agricultural equipment business
decreased from $41 million in the first quarter of 1998 to an operating loss of
$(99) million during the first quarter of 1999. The decrease in operating
earnings is primarily due to lower agricultural equipment sales in nearly all
product categories, particularly high margin, large equipment, and increased
selling, general and administrative expenses. Agricultural equipment sales
decreased $234 million or 30% in the first quarter of 1999 to $549 million,
reflecting the quarter-over-quarter global decline in the agricultural
equipment industry. Worldwide sales of high horsepower and four-wheel drive
tractors decreased 43% while worldwide sales of combines decreased 62% from the
same period last year. The lower retail demand and resulting decrease in dealer
orders were due to the continued decline in the near-term fundamentals in the
global agricultural market and the ongoing overall economic uncertainties in
several emerging markets. In addition, low commodity prices and exports of farm
commodities have dropped substantially quarter-over-quarter, affecting large-
scale production agriculture. Selling, general and administrative expenses in
the first quarter of 1999 increased over the prior year's level primarily due
to higher Year 2000 remediation costs and additional bad debt provisions
resulting from economic uncertainties in several emerging markets. These
decreases in operating earnings were partially offset by benefits from the
Company's restructuring actions and ongoing cost improvement initiatives.
Construction Equipment
Operating earnings for Case's worldwide construction equipment business
decreased from $49 million in the first quarter of 1998 to $41 million in 1999.
The decrease in operating earnings is primarily due to increased selling,
general and administrative expenses and higher research, development and
engineering expenses. Selling, general and administrative expenses increased
primarily due to higher quarter-over-quarter Year 2000 remediation and trade
show costs. Research, development and engineering expenses increased largely
due to expenditures for new product development. Construction equipment sales
increased $21 million or 4% in the first quarter of 1999 to $535 million,
driven by increases in sales of loader/backhoes, skid steers and trenchers,
partially offset by decreased sales of wheel loaders and excavators.
Financial Services
Net income for the first quarter of 1999 was $20 million as compared to $19
million for the first quarter of 1998, reflecting higher finance income earned
on retail notes and finance leases and increased operating lease income. These
increases were partially offset by an increase in the Company's credit loss
provision as a result of
14
<PAGE>
the significant growth in Case Credit's serviced portfolio. In addition, 1999
first quarter operating results reflect increased interest expense due to
higher average on-balance-sheet receivables and increased equipment on
operating leases and higher operating expenses in support of Case Capital's
growth initiatives, including increased depreciation expense for equipment on
operating leases.
Liquidity and Capital Resources
The discussion of liquidity and capital resources focuses on the balance
sheets and statements of cash flows. The Company's operations are capital
intensive and subject to seasonal variations in financing requirements for
dealer receivables and inventories. Whenever necessary, funds provided from
operations are supplemented from external sources.
In the first quarter of 1999, cash used by operating activities was $277
million. Cash used by the industrial operations and Case Capital during the
first quarter was $123 million and $154 million, respectively. The net cash
used by operating activities primarily resulted from increased levels of
wholesale receivables and inventory, largely as a result of acquisitions,
partially offset by depreciation and amortization. Cash used by Case Capital
was $154 million as compared to $20 million in 1998, reflecting the year-over-
year growth in Case Capital's on-balance-sheet portfolio. In the first quarter
of 1998, cash used by operating activities was $389 million. Cash used by the
industrial operations of $369 million in the first quarter of 1998 primarily
resulted from increased levels of wholesale receivables and inventory,
reflecting higher levels of actual and projected sales volumes, as well as the
Company's seasonal build-up of inventory for traditionally strong second
quarter shipments.
During the first quarter of 1999 and 1998, cash used by investing activities
was $59 million. Case invested $20 million and $24 million in property, plant
and equipment during the first quarter of 1999 and 1998, respectively. Cash
used by Case Capital included $42 million and $36 million for the purchase of
equipment on operating leases during the first quarter of 1999 and 1998,
respectively.
Net cash provided by financing activities was $314 million for the first
quarter of 1999, primarily due to the issuance of $491 million of medium-term
notes by Case Credit to repay outstanding debt and to fund its growing
portfolio. During the first quarter of 1998, net cash provided by financing
activities was $348 million, primarily due to the issuance of $279 million of
medium-term notes by Case Credit to fund its growing receivable portfolio, as
well as a net increase under the Company's short-term debt facilities to fund
seasonal inventory builds.
Future Liquidity and Capital Resources
The Company has various lines of credit and liquidity facilities that
include borrowings under both committed credit facilities and uncommitted lines
of credit. The Company also has the ability to issue commercial paper in the
United States, Canada and Australia. Under the terms of the Company's
commercial paper programs, the principal amount of the commercial paper
outstanding, combined with the amounts outstanding under the applicable
revolving credit facility, cannot exceed the total amount available under the
revolving credit facility.
The Company maintains sufficient committed lines of credit and liquidity
facilities to cover its expected funding needs on both a short-term and long-
term basis. The Company manages its aggregate short-term borrowings so as not
to exceed its availability under its committed lines of credit. The Company
accesses short-term debt markets, predominantly through commercial paper
issuances and uncommitted credit facilities, to fund its short-term financing
requirements and to ensure near-term liquidity. As funding needs are determined
to be of a longer-term nature, the Company accesses medium- and long-term debt
markets, as appropriate, to refinance short-term borrowings and, thus,
replenish its short-term liquidity. The Company's long-term financing strategy
is to maintain continuous access to the debt and equity capital markets to
accommodate its liquidity needs. Whenever necessary, funds provided from
operations are supplemented from external borrowing sources.
15
<PAGE>
Restructuring
During the first quarter of 1999, the Company utilized $17 million of its
restructuring reserves including $2 million related to the 1992 Restructuring
Program and $15 million related to the 1998 Restructuring Program. The $17
million reserve usage was primarily for employee termination costs and costs
related to closing, selling and downsizing existing facilities as contemplated
under the applicable restructuring program. Management believes that the
balance of its restructuring reserves are adequate to carry out all activities
as outlined under the 1992 and 1998 Restructuring Programs, and the Company
anticipates that all actions will be completed by December 31, 1999.
Year 2000
Case Corporation understands that it is important to our customers and
stakeholders that Case's products, services and internal systems are not
adversely affected by the Year 2000. Case has implemented procedures that it
deems necessary to safeguard the Company from computer-related issues
associated with adverse effects as a result of improperly recognizing the
millennial date change. These procedures include, where necessary, the
inventorying/assessing, planning, constructing/testing, and
implementing/certifying of critical internal-use hardware and software systems,
as well as other embedded systems in the Company's manufacturing plants, other
buildings, equipment and other infrastructure. The Company believes that these
procedures will adequately address both the information technology and non-
information technology aspects of our business. Based upon its review and
efforts to date, the Company believes that future external and internal costs
to be incurred for the modification of internal-use software to address Year
2000 issues will not have a material adverse effect on Case's financial
position, cash flows or results of operations.
The Company believes, based upon its review and efforts to date, that
external and internal remediation costs to be incurred for the modification of
internal-use software to address Year 2000 issues will, in the aggregate,
approximate $45 million to $50 million. As of March 31, 1999, the Company has
incurred approximately $27 million of costs for Year 2000 remediation, and the
Company currently anticipates that remaining Year 2000 remediation costs will
approximate $17 million for the balance of 1999 and $3 million in 2000. These
cost estimates include the costs of external contractors, non-capitalizable
purchases of software and hardware, and the direct cost of internal employees
working on Year 2000 projects. Case maintains a process that tracks the cost
and time of external contractors, however, the Company does not separately
track its own internal costs incurred for the Year 2000 project. Internal costs
are compiled principally from the related payroll records for those personnel
directly working on the Year 2000 effort. The Company's cost estimate does not
include the cost of implementing contingency plans, which are in the process of
being developed, and also does not include any potential litigation or warranty
costs related to Year 2000 issues if the Company's remediation efforts are not
successful.
Case has also undertaken a program to alert its suppliers and dealers of
Year 2000 issues. Based on its contacts with suppliers and dealers, the Company
believes that a majority of our most important suppliers are Year 2000
compliant, and the Company anticipates that most of its dealers will be Year
2000 compliant by mid-1999. Case will continue to work with its remaining
suppliers and its dealers throughout 1999 to secure Year 2000 compliance by
December 31, 1999. Based on third-party representations and internal testing,
and subject to the Company's ongoing compliance efforts, the costs and
uncertainties relating to timely resolution of Year 2000 issues applicable to
the Company's business and operations are not reasonably expected by the
Company to have a material adverse effect on Case's financial position, cash
flows or results of operations. For those suppliers and dealers that have not
adequately responded to our Year 2000 concerns, we are following-up to
ultimately achieve an acceptable level of compliance within our supply chain.
As there can be no assurance that an acceptable level of Year 2000 compliance
will be achieved, Case is in the process of developing contingency plans to
address potential issues.
Case has completed all steps with regards to Year 2000 compliance that it
considers necessary regarding its agricultural and construction equipment and,
as a result, the Company has no information to suggest that its agricultural
and construction equipment is not Year 2000 compliant. The Company believes,
based on its review and testing, that products purchased from Case will
accurately determine chronological dates and accurately perform all
calculations and data manipulations based upon such dates.
16
<PAGE>
Based upon Case's review and efforts to date, the Company currently
anticipates completion of critical Year 2000 compliance issues by mid-1999, and
the Company plans to continue integration testing throughout the balance of
1999. If Case's Year 2000 compliance efforts, as well as the efforts of the
Company's suppliers and dealers, individually and in the aggregate, are not
successful, it could have a material adverse effect on the Company's financial
position, cash flows and results of operations. Factors that could cause actual
results to differ include unanticipated supplier or dealer failures, disruption
of utilities, transportation or telecommunications breakdowns, foreign or
domestic governmental failures, as well as unanticipated failures on our part
to address Year 2000 related issues. The Company's most reasonably likely worst
case scenario in light of these risks would involve a potential loss in sales
resulting from order, production and shipping delays throughout the Company's
supply chain caused by Year 2000 related disruptions. The degree of sales loss
impact would depend on the severity of the disruption, the time required to
correct it, whether the sales loss was temporary or permanent, and the degree
to which our primary competitors were also impacted by the disruption. The
Company is in the process of developing Year 2000 contingency plans that will
be designed to mitigate the impact on the Company if its Year 2000 compliance
efforts are not successful. The targeted completion date for the Company's
contingency planning is mid-1999. Case's contingency plans may include the use
of alternative systems and non-computerized approaches to our business
including manual procedures for machine operation, collecting and reporting of
its business information, as well as alternative sources of supply. At this
time, the Company has not determined whether it will be necessary to stockpile
inventory or supplies as part of its contingency planning.
The information included in this "Year 2000" section represents forward-
looking statements and involves risks and uncertainties that could cause actual
results to differ materially from those in the forward-looking statements.
Outlook
The market outlook for Case's agricultural and construction equipment and
financial services businesses is substantially unchanged from the Company's
outlook at the beginning of the year.
As expected, demand for agricultural equipment continued to decline during
the first quarter of 1999. This decrease is the result of low commodity prices,
driven principally by three consecutive years of strong-to-record harvests in
most major grain crops. Exports of farm commodities dropped substantially last
year, adversely affecting large-scale production agriculture farmers. Due to
unfavorable economic conditions in Brazil, the agricultural equipment market in
Latin America, primarily small tractors, is now projected to be down 10 to 15
percent in 1999. In addition, financing for equipment purchases in emerging
markets is expected to remain extremely difficult. As a result of these
factors, the Company continues to expect that the worldwide sales of
agricultural equipment will be down approximately 8 to 10 percent in 1999.
The global outlook for the construction equipment market varies by region.
In North America, demand should be stable due to a sustained level of housing
starts and a continued favorable interest rate environment. The U.S. Highway
Bill that will increase infrastructure spending supports this outlook. In
Europe, the market is expected to decline moderately in 1999 as anticipated
improvements in France and Spain will be offset by lower sales in the United
Kingdom, Africa and the Middle East. In Asia Pacific, economic conditions
remain weak, but there are indications that markets are stabilizing. Case is
further affected by a still weakened Australian dollar, impacting the overall
economy and construction activity there. In Latin America, the outlook has
dampened considerably given Brazil's currency devaluation. In total, worldwide
construction equipment sales in 1999 are expected to be flat to down slightly
when compared to the prior year.
The information included in the "Outlook" section represents 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
17
<PAGE>
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), the effect of conversion to the Euro,
technological difficulties (including Year 2000), 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/A Annual Report for 1998, 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.
Derivatives
The Company uses derivative financial instruments to manage its foreign
currency and interest rate exposures. Case does not hold or issue financial
instruments for trading purposes. For information regarding Case's foreign
currency and interest rate risk management, reference is made to Item 7 and
Note 12 to the Case Financial Statements in the Company's 1998 Annual Report on
Form 10-K/A. There has been no material change in market risk exposures that
affect the quantitative and qualitative disclosures presented as of December
31, 1998.
18
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
For a description of legal proceedings to which the Company is party, see
footnote 7 to the Case financial statements included in this Form 10-Q.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
A list of the exhibits included as part of this Form 10-Q is set forth in
the Index to Exhibits that immediately precedes such exhibits, which is
incorporated herein by reference.
(b) Reports on Form 8-K.
In a Current Report filed on Form 8-K dated January 26, 1999, the Company
reported the issuance of a press release disclosing, among other things, 1998
financial results.
19
<PAGE>
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.
Case Corporation
/s/ Theodore R. French
By __________________________________
Theodore R. French
President, Financial Services, and
Chief Financial Officer
(Principal Financial Officer and
authorized signatory for Case
Corporation)
Date: May 12, 1999
20
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequential
Exhibit Page
Number Description of Exhibits Number
------- ----------------------- ----------
<C> <S> <C>
4 The Company hereby agrees to furnish to the Securities
and Exchange Commission, upon its request, the
instruments with respect to its guaranty of certain
indebtedness issued by its subsidiaries, which
indebtedness does not exceed 10% of the Company's total
consolidated assets.
11 Computation of Earnings Per Share of Common Stock
12 Computation of Ratio of Earnings to Fixed Charges and
Preferred Dividends
27 Financial Data Schedule
</TABLE>
21
<PAGE>
EXHIBIT 11
CASE CORPORATION AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK
(in millions, except share amounts)
<TABLE>
<CAPTION>
Three Months
Ended
March 31,
-------------
1999 1998
------ -----
<S> <C> <C>
Computations for Statements of Income
Basic
Net income (loss)............................................. $ (48) $ 69
Less: Preferred stock dividends............................... (2) (2)
------ -----
Net income (loss) after preferred stock dividends............. $ (50) $ 67
====== =====
Weighted-average shares outstanding........................... 72.9 73.9
====== =====
Basic earnings (loss) per share............................... $(0.68) $0.91
====== =====
Diluted
Net income (loss)............................................. $ (48) $ 69
Less: Antidilutive preferred stock dividends.................. (2) N/A
------ -----
Net income (loss) after antidilutive preferred stock
dividends.................................................... $ (50) $ 69
====== =====
Weighted-average shares outstanding--Basic.................... 72.9 73.9
Effect of Dilutive Securities (when dilutive):
Convertible preferred stock................................. -- 3.5
Stock options............................................... -- 1.0
Restricted stock............................................ -- 0.1
------ -----
Weighted-average shares outstanding--Diluted.................. 72.9 78.5
====== =====
Diluted earnings (loss) per share............................. $(0.68) $0.88
====== =====
</TABLE>
22
<PAGE>
EXHIBIT 12
CASE CORPORATION AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND PREFERRED DIVIDENDS
(dollars in millions)
<TABLE>
<CAPTION>
Three
Months
Ended
March 31,
-----------
1999 1998
---- -----
<S> <C> <C>
Net income (loss)................................................. $(48) $ 69
Add:
Interest........................................................ 75 47
Interest capitalized............................................ 1 --
Portion of rentals representative of interest factor............ 3 3
Income tax expense (benefit) and other taxes on income.......... (11) 33
Fixed charges of unconsolidated subsidiaries.................... 1 1
---- -----
Earnings as defined........................................... $ 21 $ 153
==== =====
Interest.......................................................... $ 75 $ 47
Interest capitalized.............................................. 1 --
Amortization of capitalized debt expense.......................... 1 --
Portion of rentals representative of interest factor.............. 3 3
Fixed charges of unconsolidated subsidiaries...................... 1 1
---- -----
Fixed charges as defined...................................... $ 81 $ 51
==== =====
Preferred dividends:
Amount declared................................................. $ 2 $ 2
Gross-up to pre-tax based effective rates of 19% and 32%,
respectively................................................... $ 2 $ 3
Ratio of earnings to fixed charges and preferred dividends........ -- 2.83x
==== =====
Deficiency of earnings to fixed charges........................... $(60) --
==== =====
</TABLE>
23
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from the
Company's 10-Q and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 119
<SECURITIES> 0
<RECEIVABLES> 2,786
<ALLOWANCES> 0
<INVENTORY> 1,465
<CURRENT-ASSETS> 4,692
<PP&E> 2,149
<DEPRECIATION> 1,101
<TOTAL-ASSETS> 8,863
<CURRENT-LIABILITIES> 2,622
<BONDS> 3,591
77
0
<COMMON> 1
<OTHER-SE> 1,981
<TOTAL-LIABILITY-AND-EQUITY> 8,863
<SALES> 1,084
<TOTAL-REVENUES> 1,201
<CGS> 932
<TOTAL-COSTS> 1,155
<OTHER-EXPENSES> 30
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 75
<INCOME-PRETAX> (59)
<INCOME-TAX> 0
<INCOME-CONTINUING> (48)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (48)
<EPS-PRIMARY> (0.68)
<EPS-DILUTED> (0.68)
</TABLE>
