PRESS RELEASE
Navistar Announces Q1 Fiscal Results
13 February 1997
Navistar Reports First Quarter 1997 Earnings of $15 Million; 10 Cents Per Share and Positive Trends
First Quarter Gross Margins and Order Receipts Up; Truck Production
Scheduled to Increase with 500 Employees Recalled; Engine Business Runs Strong
CHICAGO, Feb. 13 -- Navistar International Corporation
today reported net income of $15 million, or $0.10 per common
share for the first quarter ended January 31, 1997, compared to net income of
$22 million or $0.20 per common share in the year-ago period.
Consolidated sales and revenues from the company's manufacturing and
financial services operations in the quarter totaled $1.3 billion, compared to
$1.4 billion in the first quarter of 1996.
Navistar's worldwide shipments of 20,400 medium (Class 5-7 G.V.W.) and
heavy trucks (Class 8 G.V.W.) and school buses during the first quarter
were 15.9 percent lower than a year ago.
"Demand for trucks is fairly strong by historical standards. In fact, our
order receipts in the first quarter are up across the board in school buses
and medium and heavy trucks compared with 1996," said John R. Horne, chairman,
president and chief executive officer. "On the engine side, we continue to
see strong demand due to our ability to deliver efficiencies and improvements
in first-time quality."
Shipments of mid-range diesel engines to other original equipment
manufacturers during the quarter totaled 41,000 units, an 8.4 percent increase
over last year. Sales of parts were $186 million, compared to $177 million in
the same period a year ago, an increase of 5.1 percent.
"We have made significant progress in implementing our truck strategy over
the most recent quarters. Now we're also seeing encouraging signs of our
focus on improving operating performance. On a quarter-to-quarter comparison,
our gross margin is up, improving to 13.6 percent in 1997 from 12.2 percent,"
added Horne. "Our challenge for this year is to continue to aggressively
drive our strategies and operating improvements."
Recent Developments
Due to increased demand for trucks, the company plans to boost production
at its Springfield, Ohio truck assembly plant in the upcoming quarter.
Production on the plant's medium truck and school bus line will increase from
224 to 266 units per day, with heavy truck production growing from 47 to
65 trucks per day. In line with those plans, Navistar intends to call back
500 employees in February.
"As order receipts began to increase, we were able to meet with the UAW
and explain the need to increase production. Those conversations led us to an
agreement that gave us the flexibility to call back workers as we revised our
production schedules upward," Horne said.
During the first quarter, the company continued to make progress against
its five-point truck strategy: focusing truck assembly plants, simplifying
current product lines, investing in new product development, expanding its
presence internationally and achieving competitive wages, benefits and
productivity.
In line with the initiative to focus its plants, Navistar will begin
production of its Paystar(R) severe service trucks during February at SST
Truck Company, the Garland, Texas-based facility of the company's joint
venture with TIC United Corp. Paystar production is being moved out of
Navistar's Chatham, Ontario plant, and that facility will be focused on
production of conventional, heavy-duty trucks only.
Navistar also announced that it will cease production by mid-year 1997 of
its International(R) 8200 heavy trucks, which are currently produced at the
Springfield plant. This initiative is in keeping with plans to reduce
complexity at Springfield. Navistar will continue to fill customer orders
that were received by the end of January 1997 for the International
8200 models.
In new product development, the company is scheduled to begin production
next month in Chatham of the International(R) 9100 truck. The International
9100 model is a heavy-duty truck designed to meet the needs of local and
regional operators, with applications including beverage, refrigeration, less
than truck load (LTL), hub-and-spoke freight pickup and general freight
delivery.
In simplifying its product line, the company rolled out its Diamond
SPEC(TM) vehicles, which involve a simplified ordering system and
manufacturing process. Diamond SPEC enables purchasers of International(R)
9000 series premium conventional trucks to specify their vehicles using
11 categories of pre-engineered components.
"Since the roll out of the program, 75 percent of stock trucks purchased
by our dealers have been Diamond SPEC vehicles," Horne noted.
In November, Navistar broke ground for its $167 million truck assembly
plant in Escobedo, Mexico. Production at the new plant is slated to begin in
early 1998, with a daily production rate of 65 trucks on one shift achieved
later in the year.
Outlook for 1997 Industry Demand
Navistar forecasts that industry demand for heavy trucks in the United
States and Canada will reach 170,000 units in 1997, down 13 percent from
195,400 heavy trucks sold by the industry in 1996. "While we have not revised
our forecast, current order receipts indicate that there may be some strength
beyond this level," Horne noted.
The company also expects that industry demand for medium trucks in the
United States and Canada will reach 112,000 units in 1997, a slight decrease
from the 113,200 trucks delivered in 1996.
Navistar forecasts that industry demand for school buses in fiscal 1997
will remain relatively flat year over year with the 32,500 buses sold in 1996.
Navistar International Corporation, with headquarters in Chicago, is the
leading North American producer of heavy and medium trucks and school buses.
In the first quarter, Navistar continued as the sales leader in the combined
United States and Canadian retail markets for medium and heavy trucks and
school buses, achieving a 26.6 percent share, up from the 25.1 percent share
the company held at the same time a year ago. The company also is a worldwide
leader in the manufacture of mid-range diesel engines which are produced in a
range of 175 to 300 horsepower.
NAVISTAR INTERNATIONAL CORPORATION
AND CONSOLIDATED SUBSIDIARIES
Statement of Income (Unaudited)
(Millions of dollars, except per share data)
THREE MONTHS ENDED
JANUARY 31
1997 1996
Sales and Revenues
Sales of manufactured products $1,240 $1,362
Finance and insurance revenue 45 55
Other income 11 15
Total sales and revenues 1,296 1,432
Costs and expenses
Cost of products and services sold 1,076 1,199
Postretirement benefits 51 57
Engineering and research expense 30 29
Marketing and administrative expense 83 73
Interest expense 17 18
Financing charges on sold receivables 7 9
Insurance claims and underwriting expense 8 12
Total costs and expenses 1,272 1,397
Income before income taxes 24 35
Income tax expense 9 13
Net income 15 22
Less dividends on Series G preferred stock 7 7
Net income applicable to common stock $8 $15
Net income per common share $0.10 $0.20
Average number of common and
dilutive common equivalent
shares outstanding (millions) 73.7 73.8
The Statement of Income includes the consolidated financial results of the
company's manufacturing operations with its wholly owned financial
services operations.
NAVISTAR INTERNATIONAL CORPORATION
AND CONSOLIDATED SUBSIDIARIES
Statement of Financial Condition (Unaudited)
(Millions of dollars)
AS OF JANUARY 31
1997 1996
ASSETS
Cash and cash equivalents $197 $186
Marketable securities 448 620
645 806
Receivables, net 1,311 1,511
Inventories 452 498
Property and equipment, net 773 684
Investments and other assets 187 205
Intangible pension assets 365 283
Deferred tax asset, net 1,024 1,080
Total assets $4,757 $5,067
LIABILITIES AND SHAREOWNERS' EQUITY
Liabilities
Accounts payable $714 $822
Debt:
Manufacturing operations 113 127
Financial services operations 947 1,096
Postretirement benefits liabilities 1,278 1,272
Other liabilities 783 864
Total liabilities $3,835 $4,181
Commitments and contingencies
Shareowners' equity
Series G convertible preferred stock
(liquidation preference $240) $240 $240
Series D convertible junior preference stock
(liquidation preference $4) 4 4
Common stock (51.0 million shares issued) 1,642 1,641
Class B Common stock
(24.3 million shares issued) 491 491
Retained earnings (deficit) - balance
accumulated after the deficit reclassification (1,425) (1,460)
Common stock held in treasury, at cost (30) (30)
Total shareowners' equity 922 886
Total liabilities and shareowners' equity $4,757 $5,067
The Statement of Financial Condition includes the consolidated financial
results of the company's manufacturing operations with its wholly owned
financial services operations.
SOURCE Navistar International Corporation
CONTACT: Investors: Carmen Corbett, 312-836-2406, or Media: Andy Opila, 312-836-2901,
both of Navistar International