Navistar Reports Third Quarter 1997 Earnings Of $35 Million, 38 Cents Per Share
14 August 1997
Navistar Reports Third Quarter 1997 Earnings Of $35 Million, 38 Cents Per Share
CHICAGO, Aug. 14 -- Navistar International Corporation
today reported net income of $35 million, or $0.38 per common
share for the third quarter ended July 31, 1997. This compares to net income
of $17 million, or $0.13 per common share in the same period last year.
Consolidated sales and revenues from the company's manufacturing and
financial services operations in the third quarter totaled $1.6 billion,
compared to $1.4 billion in the third quarter of 1996.
During the third quarter, Navistar's worldwide shipments of 26,200 medium
trucks and school buses (Class 5-7 GVW) and heavy trucks (Class 8 GVW)
increased 13 percent versus last year. Shipments of mid-range diesel engines
to other original equipment manufacturers during the quarter totaled 41,900
units, a 16 percent increase over last year, while sales of service parts were
$197 million, compared to $185 million in the same period a year ago, an
increase of more than 6 percent.
Commenting on the quarter, John R. Horne, chairman, president and chief
executive officer, said, "We continue to see a strong truck and engine market,
and we plan to raise production schedules in the fourth quarter to meet
increased demand."
Through the first nine months of fiscal 1997, Navistar reported net income
of $80 million, or $0.80 per common share, versus $65 million, or $0.59 per
common share in the same period a year ago. Consolidated sales and revenues
totaled $4.4 billion for the nine months, compared with $4.3 billion a year
ago.
Manufacturing gross margin for the nine month period increased to
13.8 percent from 12.8 percent in the prior year. Commenting on the
improvement, Horne said, "Our progress toward our strategies and heightened
focus on operational excellence are delivering measurable improvement as we
fundamentally change the way we do business at Navistar."
As announced yesterday, Navistar and UAW leadership have reached tentative
agreement on a master contract extension through October 31, 2002 that would
enable the company to build its next generation truck (NGT) at Springfield,
Ohio and continue to operate its Indianapolis foundry, ensuring Navistar's
competitiveness well into the future. This agreement is subject to
ratification by the UAW membership, which is scheduled for this weekend. The
NGT program will be reviewed at the August board meeting with funding to be
approved at the October meeting.
Also announced yesterday, Ford Motor Company and Navistar reached a
tentative agreement -- subject to approval by the respective Boards -- for
Navistar to continue to supply diesel engines for Ford's F-Series pickup
trucks and Econoline vans. Under the terms of the proposed agreement,
Navistar will produce a newly designed and advanced technology engine for
Ford. The new 10-year agreement would be effective beginning with model year
2003.
Added Horne, "Customer demand for our advanced engines is at an all-time
high and, with this tentative long-term agreement with Ford, will remain
strong into the next decade." Navistar's current agreement with Ford covers
the 7.3 liter Power Stroke V-8 diesel engine through model year 2000, and it
will be extended through model year 2002. In 1997, Navistar expects to ship
178,000 engines to Ford, a 14 percent increase over 1996.
Recent Developments: Production Increases
In the fourth quarter, Navistar will increase production schedules to meet
demand. In early September, the company's Springfield, Ohio truck assembly
plant will raise production on its medium truck and school bus line to 300
from 284 units per day; heavy truck production will increase to 80 from 65.
Production will remain at 100 units per day at the Chatham, Ontario premium
conventional heavy-truck assembly plant.
Engine production at the company's Indianapolis, Indiana plant will
increase to 933 from 830 units per day by the end of August, facilitated by
ongoing improvements across the Engine & Foundry Group -- most notably
efficiencies in man hours per engine and gains in uptime and first-time yield.
To more closely align the interests of management and shareowners, on
June 16, 1997, Navistar's board of directors approved the terms of an
Executive Stock Ownership Program which requires the company's top 30
executives to make a substantial investment of personal funds in Navistar
common stock, based on a percentage of their compensation. To date, all have
met or exceeded the plan's investment requirements.
During the third quarter, Navistar made further progress toward its five-
point truck strategy: focusing assembly plants, simplifying current product
lines, investing in new product development, expanding its presence
internationally and achieving competitive wages, benefits and productivity.
Introduced in late 1996 to simplify its International(R) 9000 series and
the Eagle(R) product line, Navistar's Diamond SPEC(TM) ordering system
continued to account for almost all stock trucks ordered by dealers through
the nine months.
Commenting on new product development, Horne added, "We are encouraged by
positive customer response to both our Pro Sleeper(R) Skyrise(TM), which
targets the long-haul customer, and the new International(R) 9100 truck, which
meets the needs of regional haulers." To date, over 3,100 of the
International 9100 trucks have been ordered. The company's total U.S. and
Canadian Class 8 market share is up to 17.8 percent for the nine months,
compared to 17.1 percent in the same period a year ago.
The company's new truck assembly plant in Escobedo, Nuevo Leon, Mexico, is
on target with construction and scheduled to begin production in early 1998.
Through the first nine months of fiscal 1997, Navistar has captured 10 percent
of the Mexican truck market, up from 5 percent in 1996.
In addition, the company recently reached a three-year agreement with
Navistars Australian licensee, International Trucks of Australia Ltd. (ITAL),
a subsidiary of IVECO. In addition to supply, license and technical
provisions, the agreement covers selected fully assembled truck models
imported from the U.S. to complement ITAL's current product offering in
Australia.
Outlook for 1997 Industry Demand
Navistar revised its forecast on industry demand for heavy trucks in the
United States and Canada to 190,000 units in fiscal 1997, compared with
195,400 heavy trucks sold by the industry in 1996. Industry demand for medium
trucks in the United States and Canada is now expected to reach 114,000 units
in 1997, a slight increase from the 113,200 trucks sold in 1996, and demand
for school buses in fiscal 1997 is expected to be 30,500 versus 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 nine months, achieving a 27.1 percent share that is
consistent with the same period 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 160 to 300 horsepower.
NAVISTAR INTERNATIONAL CORPORATION
AND CONSOLIDATED SUBSIDIARIES
STATEMENT OF INCOME (UNAUDITED)
(Millions of dollars, except per share data)
Three Months Ended Nine Months Ended
July 31 July 31
1997 1996 1997 1996
Sales and Revenues
Sales of manufactured products $1,526 $1,325 $4,259 $4,110
Finance and insurance revenue 45 53 133 154
Other income 15 13 41 39
Total sales and revenues 1,586 1,391 4,433 4,303
Costs and expenses
Cost of products and
services sold 1,320 1,159 3,688 3,588
Postretirement benefits 50 52 158 163
Engineering and research expense 28 29 90 93
Marketing and administrative expense 97 84 267 232
Interest expense 20 22 57 63
Financing charges on
sold receivables 4 5 16 21
Insurance claims and underwriting
expense 11 12 28 38
Total costs and expenses 1,530 1,363 4,304 4,198
Income before income taxes 56 28 129 105
Income tax expense (21) (11) (49) (40)
Net income 35 17 80 65
Less dividends on Series G
preferred stock 7 7 21 21
Net income applicable to
common stock $ 28 $ 10 $ 59 $ 44
Net income per common share $ .38 $ .13 $ .80 $ .59
Average number of common and
dilutive common equivalent
shares outstanding (millions) 73.6 73.8 73.6 73.8
The Statement of Income includes the consolidated financial results of the
company's manufacturing operations with its wholly owned financial services
operations.
8/14/97
NAVISTAR INTERNATIONAL CORPORATION
AND CONSOLIDATED SUBSIDIARIES
STATEMENT OF FINANCIAL CONDITION (UNAUDITED)
(Millions of dollars)
AS OF JULY 31
1997 1996
ASSETS
Cash and cash equivalents $ 212 $ 201
Marketable securities 503 386
715 587
Receivables, net 1,379 1,503
Inventories 497 549
Property and equipment, net 772 703
Investments and other assets 311 227
Intangible pension assets 267 284
Deferred tax asset, net 976 1,055
Total assets $ 4,917 $ 4,908
LIABILITIES AND SHAREOWNERS' EQUITY
Liabilities
Accounts payable, principally trade $ 864 $ 750
Debt:
Manufacturing operations 98 122
Financial services operations 957 996
Postretirement benefits liabilities 1,221 1,323
Other liabilities 814 811
Total liabilities 3,954 4,002
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
(52.2 and 51.0 million
shares issued) 1,662 1,642
Class B Common stock
(23.1 and 24.3 million
shares issued) 471 491
Retained earnings (deficit)
- balance accumulated
after the deficit
reclassification (1,364) (1,441)
Common stock held in
treasury, at cost (50) (30)
Total shareowners' equity 963 906
Total liabilities
and shareowners' equity $ 4,917 $ 4,908
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