Navistar Reports Q2 1997 Earnings
15 May 1997
Navistar Reports Second Quarter 1997 Earnings Of $30 Million, 31 Cents Per Share
Company To Raise Production Schedules in Response to
Increased Industry Demand
CHICAGO, May 15 -- Navistar International Corporation
today reported net income of $30 million, or $0.31 per common
share for the second quarter ended April 30, 1997. This compares to net
income of $26 million or $0.26 per common share in the same period last year.
Consolidated sales and revenues from the company's manufacturing and
financial services operations in the second quarter totaled $1.6 billion,
compared to $1.5 billion in the second quarter of 1996.
Navistar's worldwide shipments of 25,600 medium (Class 5-7 G.V.W.) and
heavy trucks (Class 8 G.V.W.) and school buses during the second quarter were
approximately the same as last year. Shipments of mid-range diesel engines
to other original equipment manufacturers during the quarter totaled 48,300
units, a 19 percent increase over last year, while sales of service parts were
$203 million, compared to $195 million in the same period a year ago, an
increase of 4 percent.
"While shipments to date are consistent with last year's, we are
encouraged by indications of increased industry demand in both truck and
engine, and plan to raise production schedules to better position ourselves
for the stronger demand," said John R. Horne, chairman, president and chief
executive officer. "Our engine business, in particular, is showing real
strength due to rising customer orders."
For the first six months of 1997, Navistar reported net income of
$45 million, or $0.41 per common share, versus $48 million, or $0.46 per
common share in the same period a year ago. Consolidated sales and revenues
totaled $2.8 billion in the first six months, compared with $2.9 billion a
year ago.
"In the first six months, manufacturing gross margin improved to
13.7 percent from 13.0 percent in the prior year, which we attribute to
ongoing progress in implementing our truck strategy and improving operating
performance," added Horne. "Looking ahead, we will continue to focus on our
strategies to drive performance. With all the positive trends, it's now up to
us to deliver."
Navistar contributed an additional $109 million to its hourly and salaried
pension plans in the second quarter. This contribution is in addition to the
$105 million that the company contributed in the first quarter of 1997. These
amounts were the regularly planned contributions scheduled to be made during
fiscal years 1997 and 1998. The timing of these contributions allows for
their deduction on the company's 1996 tax return, creating a tax loss in that
year which can be carried forward 15 years. As a result, previously incurred
tax losses which expire in 1998 will most likely be utilized.
Recent Developments
In the third fiscal quarter, Navistar will increase production schedules
at its Springfield, Ohio truck assembly plant, with production of its medium
truck and school bus line increasing from 266 to 284 units per day; heavy
truck production will be held at 65 units per day. Heavy-duty truck
production was increased at the company's Chatham, Ontario truck plant from
62 to 100 units per day in late April. Engine production is also expected to
increase at the company's Indianapolis, Indiana plant as individual
bottlenecks are eliminated.
During the second quarter, Navistar also made progress against its five-
point truck strategy: focusing assembly plants, simplifying current product
lines, investing in new product development, expanding its presence in Mexico
and achieving competitive wages, benefits and productivity.
Efforts to focus assembly plants continued, as production of Navistar's
Paystar(R) severe service trucks began in February at SST Truck Company, the
Garland, Texas facility of the company's joint venture with TIC United Corp.
SST is currently ramping up production to a 1997 rate of five severe service
trucks per day. Paystar truck production was moved out of Navistar's Chatham,
Ontario plant, freeing up space in the plant to focus on the production of
conventional, heavy-duty trucks only.
Navistar introduced Diamond SPEC(TM) for its International(R) 9000 series
and Eagle(R) trucks in late 1996 to simplify its product line through a
streamlined ordering system. Demand for the company's Diamond SPEC
vehicles continued to rise in the second quarter, accounting for 43 percent of
all Class 8 premium conventional orders and almost all stock trucks ordered by
dealers in April 1997.
In new product development, Navistar began production of the
International(R) 9100 truck in March. This new heavy-duty truck model is
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. By the end of this month, more
than 200 of the 9100 models will be in customers' hands, with another 1,500 on
order.
Navistar also announced that full production of its Pro Sleeper(R) Sky-
Rise(TM) began this month at its Chatham plant. Offering the tallest interior
of the Pro Sleeper family of integrated sleeper cabs, the Sky-Rise model is
available on International(R) and Eagle(R) 9200, 9300 and 9400 premium
conventional models.
Construction of the company's new truck assembly plant in Escobedo, Nuevo
Leon, Mexico, is on target with plans to begin production there in early 1998.
Current operations, including contract manufacturing and 30 dealer locations
established one year ago, have captured 9 percent of the Mexican truck market
for the first half of 1997.
Navistar continues to have discussions with the United Auto Workers and
hopes to build on the positive dialogue established with UAW representatives
during the past six months.
Outlook for 1997 Industry Demand
Navistar forecasts that industry demand for heavy trucks in the United
States and Canada will reach 180,000 units in fiscal 1997, compared with
195,400 heavy trucks sold by the industry in 1996. "However, given recent
indications of continued strength in the truck market, there may be upside
beyond our current forecast," Horne added.
The company 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 sold in 1996.
Navistar forecasts that industry demand for school buses in fiscal 1997
will fall slightly below the 32,500 buses sold in 1996.
Navistar International Corporation, with world headquarters in Chicago, is
the leading North American producer of heavy and medium trucks and school
buses. Navistar maintained its position as the sales leader in the combined
United States and Canadian retail markets for medium and heavy trucks and
school buses through the first six months, achieving a 26.8 percent share, up
from the 26.2 percent share in the year-ago period. The company also is a
worldwide leader in the manufacture of mid-range diesel engines which are
produced in a range of 160 to 300 horsepower.
NAVISTAR INTERNATIONAL CORPORATION
And Consolidated Subsidiaries
Statement of Income (Unaudited)
(Millions of dollars, except per share data)
THREE MONTHS ENDED SIX MONTHS ENDED
APRIL 30 APRIL 30
1997 1996 1997 1996
Sales and Revenues
Sales of
manufactured
products $1,493 $1,423 $2,733 $2,785
Finance and
insurance
revenue 43 46 88 101
Other income 15 11 26 26
Total sales
and revenues 1,551 1,480 2,847 2,912
Costs and expenses
Cost of
products
and services
sold 1,292 1,230 2,368 2,429
Postretirement
benefits 57 54 108 111
Engineering and
research
expense 32 35 62 64
Marketing and
administrative
expense 87 75 170 148
Interest expense 20 23 37 41
Financing charges
on sold
receivables 5 7 12 16
Insurance claims
and underwriting
expense 9 14 17 26
Total costs
and expenses 1,502 1,438 2,774 2,835
Income before
income taxes 49 42 73 77
Income tax
expense 19 16 28 29
Net income 30 26 45 48
Less dividends
on Series G
preferred
stock 7 7 14 14
Net income
applicable
to common
stock $23 $19 $31 $34
Net income
per common
share $.31 $.26 $.41 $.46
Average number
of common
and dilutive
common
equivalent
shares
outstanding
(millions) 73.7 73.8 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 APRIL 30
1997 1996
ASSETS
Cash and cash equivalents $237 $223
Marketable securities 533 528
Total 770 751
Receivables, net 1,618 1,805
Inventories 473 600
Property and equipment, net 748 703
Investments and other assets 333 235
Intangible pension assets 267 284
Deferred tax asset, net 995 1,065
Total assets $5,204 $5,443
LIABILITIES AND SHAREOWNERS' EQUITY
Liabilities
Accounts payable $907 $870
Debt:
Manufacturing operations 109 125
Financial services operations 1,213 1,379
Postretirement benefits
liabilities 1,200 1,300
Other liabilities 816 871
Total liabilities 4,245 4,545
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 (1,388) (1,448)
Common stock held
in treasury, at cost (30) (30)
Total shareowners' equity 959 898
Total liabilities
and shareowners' equity $5,204 $5,443
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