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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
( X ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended October 31, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission file number 1-9618
N A V I S T A R I N T E R N A T I O N A L C O R P O R A T I O N
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(Exact name of registrant as specified in its charter)
Delaware 36-3359573
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
455 North Cityfront Plaza Drive, Chicago, Illinois 60611
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (312) 836-2000
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
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Common stock, par value $0.10 per share New York Stock Exchange
Chicago Stock Exchange
Pacific Stock Exchange
$6.00 cumulative convertible preferred stock,
Series G (with $1.00 par value) New York Stock Exchange
Cumulative convertible junior preference stock,
Series D (with $1.00 par value) New York Stock Exchange
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 and (2) has been subject to such filing
requirements for the past 90 days: Yes X No
--- ---
As of January 16, 1996, the aggregate market value of Common Stock
(excluding Class B Common Stock) held by non-affiliates of the registrant was
$548,099,758.
As of January 16, 1996, the number of shares outstanding of the
registrant's Common Stock was 50,986,024 and the Class B Common Stock was
24,292,206.
Documents Incorporated by Reference
-----------------------------------
1995 Annual Report to Shareowners (Parts I, II and IV)
1995 Proxy Statement (Parts I and III)
Navistar Financial Corporation 1995 Annual Report on Form 10-K (Part IV)
NAVISTAR INTERNATIONAL CORPORATION
FORM 10-K
Year Ended October 31, 1995
INDEX
10-K Page
---------
PART I
Item 1. Business .............................................. 3
Item 2. Properties ............................................ 11
Item 3. Legal Proceedings ..................................... 12
Executive Officers of the Registrant .................. 13
Item 4. Submission of Matters to a Vote of Security Holders ... 14
PART II
Item 5. Market for the Registrant's Common Equity
and Related Stockholder Matters ..................... 14
Item 6. Selected Financial Data ............................... 14
Item 7. Management's Discussion and Analysis
of Results of Operations and Financial Condition .... 14
Item 8. Financial Statements and Supplementary Data 14
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure .............. 14
PART III
Item 10. Directors and Executive Officers of the Registrant ... 14
Item 11. Executive Compensation ............................... 14
Item 12. Security Ownership of Certain Beneficial Owners
and Management ..................................... 14
Item 13. Certain Relationships and Related Transactions ....... 14
PART IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K ............................ 15
SIGNATURES
Principal Accounting Officer ................................... 17
Directors ...................................................... 18
POWER OF ATTORNEY ................................................ 18
INDEPENDENT AUDITORS' REPORT ..................................... 20
INDEPENDENT AUDITORS' CONSENT .................................... 20
SCHEDULES ........................................................ F-1
EXHIBITS ......................................................... E-1
PART I
ITEM 1. BUSINESS
Navistar International Corporation is a holding company and its principal
operating subsidiary is Navistar International Transportation Corp. referred
to as "Transportation". As used hereafter, "Navistar" or "Company" refers to
Navistar International Corporation and its subsidiaries, and "Parent Company"
refers to Navistar International Corporation alone.
Navistar, through its wholly-owned subsidiary Transportation, operates in
one principal business segment, the manufacture and marketing of Class 5
through 8 diesel trucks (GVW 16,001 lbs. and greater), including school buses,
mid-range diesel engines and service parts in the United States and Canada,
and in selected export markets. Transportation is the industry market share
leader in the combined Class 5 through 8 truck market in the United States and
Canada, offering a full line of diesel-powered products in the common carrier,
private carrier, government/service, leasing, construction, energy/petroleum
and student transportation markets. Transportation also produces mid-range
diesel engines for use in its Class 5, 6 and 7 medium trucks and for sale to
original equipment manufacturers. Transportation markets its products through
an extensive distribution network which includes 958 dealer and distribution
outlets in the United States and Canada. Service and customer support are also
supplied at these outlets. As a further extension of its business,
Transportation provides financing and insurance for its dealers, distributors
and retail customers through its wholly-owned subsidiary, Navistar Financial
Corporation, referred to as "Navistar Financial". See "Important Supporting
Operations".
THE MEDIUM AND HEAVY TRUCK INDUSTRY
The market in which Navistar competes is subject to considerable
volatility as it moves in response to cycles in the overall business
environment and is particularly sensitive to the industrial sector which
generates a significant portion of the freight tonnage hauled. Government
regulation has impacted and will continue to impact trucking operations and
efficiency, and the specifications of equipment.
The following table shows industry retail deliveries in the combined
United States and Canadian markets for the five years ended October 31, 1995,
in thousands of units:
YEARS ENDED OCTOBER 31,
-----------------------
1995 1994 1993 1992 1991
----- ----- ----- ----- -----
Class 5, 6 and 7 medium trucks and
school buses ...................... 151.8 134.2 122.5 118.3 120.1
Class 8 heavy trucks ................ 228.8 205.4 166.4 125.2 109.0
----- ----- ----- ----- -----
Total ............................. 380.6 339.6 288.9 243.5 229.1
===== ===== ===== ===== =====
Source: Based upon monthly data by the American Automobile Manufacturers
Associations (AAMA) in the United States and Canada, and other sources.
The Class 5 through 8 diesel truck market in the United States and Canada
is highly competitive. Major domestic competitors include PACCAR, Ford and
General Motors, as well as foreign-controlled manufacturers, such as
Freightliner, Mack and Volvo GM. In addition, manufacturers from Japan (Hino,
Isuzu, Nissan and Mitsubishi) are competing in the United States and Canadian
markets. The intensity of this competition results in price discounting and
margin pressures throughout the industry. In addition to the influence of
price, market position is driven by product quality, engineering, styling,
utility and distribution.
TRANSPORTATION MARKET SHARE
Transportation delivered 101,700 Class 5 through 8 trucks, including
school buses, in the United States and Canada in fiscal 1995, an 11% increase
from the 91,600 in 1994. Navistar's combined share of the Class 5 through 8
truck market in 1995 was 26.7%. Transportation has been the leader in
combined market share for Class 5 through 8 trucks, including school buses, in
the United States and Canada in each of its last 15 fiscal years.
PRODUCTS AND SERVICES
The following table illustrates the percentage of Transportation's sales
by class of product based on dollar amount:
YEARS ENDED OCTOBER 31,
-----------------------
1995 1994 1993
----- ----- -----
PRODUCT CLASS
- -------------
Class 5, 6 and 7 medium trucks and
school buses ..................... 32% 32% 31%
Class 8 heavy trucks ............... 42 42 44
Service parts ...................... 12 14 14
Engines ............................ 14 12 11
----- ----- -----
Total ........................... 100% 100% 100%
===== ===== =====
Transportation offers a full line of Class 5 through 8 trucks, with the
objective of serving the customer by addressing requirements for performance
and value. In 1995, Transportation solidified its market leadership position
in the cabover market segment with the introduction of the 9800 Pro Sleeper,
an industry first with a totally flat floor design. The T444E and DT466E
electronically controlled diesel engines, which were introduced in 1994,
enhance Class 5, 6 and 7 medium truck operating performance and life. In
addition, new interiors and a hydraulic anti-lock brake system were introduced
in 1995 in the Company's Class 5 through 7 medium trucks.
Transportation was recognized as possessing the best overall dealer
franchise organization according to the most recent American Truck Dealers
(ATD) Dealer Attitude Survey (May 1995). In 1995, Heavy Duty Trucking
magazine recognized Transportation for two products. The "9800 Pro Sleeper
with Flat Floor" and the "International HEUI Engine" were selected as two of
the most significant 50 new truck-related products of 1995. According to the
annual survey conducted by J. D. Power and Associates on 1995 Medium-Duty
Truck Customer Satisfaction, Navistar ranked number one in customer
satisfaction in product for Class 5, 6 and 7 medium conventional trucks for
the third consecutive year.
For over two decades, Transportation has been the leading supplier of
school bus chassis in the United States. Transportation manufactures chassis
for conventional school buses as well as for use in small capacity buses,
designed to meet the needs of disabled students. Chassis are sold through
dealers and national account managers for delivery to the ultimate customers:
school districts and contractors. In addition to its traditional chassis
business, Transportation's wholly-owned subsidiary, American Transportation
Corporation (AmTran), manufactures school bus bodies. In 1995, Transportation
acquired the remaining interests in AmTran. Through its relationship with
AmTran, Transportation participates in the trend toward the integrated design
and manufacture of school buses, which offers improved production and
marketing efficiencies, and a reduction in the school bus order cycle.
Transportation offers diesel-powered trucks and buses because of their
improved fuel economy, ease of serviceability and greater durability over
gasoline-powered vehicles. Transportation's Class 8 heavy trucks generally
use diesel engines purchased from outside suppliers while Class 5, 6 and 7
medium trucks are powered by a proprietary line of mid-range diesel engines
manufactured by Transportation. In 1994, Transportation launched its all new
series of V-8 and in-line six-cylinder diesel engines for bus and Class 5
through 8 truck models. In 1995, the HEUI (Hydraulically actuated,
Electronically controlled Unit Injection) fuel system extended
Transportation's leadership position as the only truck and engine manufacturer
to offer a fully electronic mid-range diesel engine line. Based upon
information published by R.L. Polk & Company, diesel-powered Class 5, 6 and 7
medium truck shipments represented 80% of all medium truck shipments for
fiscal year 1995 in the United States and Canada.
Transportation's truck and bus manufacturing operations in the United
States and Canada consist principally of the assembly of components
manufactured by its suppliers, although Transportation produces its own mid-
range diesel truck engines, sheet metal components (including cabs) and
miscellaneous other parts.
The following is a summary of Transportation's truck manufacturing
capacity utilization for the five years ended October 31, 1995:
YEARS ENDED OCTOBER 31,
-----------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
Production units ............. 110,633 94,993 88,274 73,901 70,502
Total production capacity .... 112,952 112,966 106,032 106,088 106,762
Capacity utilization ......... 97.9% 84.1% 83.3% 69.7% 66.0%
Total production capacity varies as a result of changes in the number of
days of production during a year, as well as changes in production
constraints. The capacity utilization information excludes AmTran which was
acquired during the fourth quarter of 1995.
In 1995, Transportation reached an agreement with Spartan Motors to
jointly develop, market and manufacture diesel-powered rear-engine
recreational vehicle chassis. Spartan Motors is the world's largest engineer
and manufacturer of custom chassis for recreational vehicles, fire trucks,
airport tankers and other specialty vehicles.
ENGINE AND FOUNDRY
Transportation builds diesel engines for use in its Class 5, 6 and 7
medium trucks, school buses, selected Class 8 heavy truck models and for sale
to original equipment manufacturers in the United States and Canada.
Transportation also sells engines for industrial, agricultural and marine
applications. Transportation is the leading supplier of mid-range diesel
engines in the 160-300 horsepower range according to data supplied by a
private research firm, Power Systems Research of Minneapolis, Minnesota.
Production in 1995 totalled 228,600 units, an increase of 19% from the
192,400 units produced in 1994.
Transportation has completed an engine program which began with a major
capital investment in its engine products and facilities to manufacture a new
generation of V-8 and in-line six cylinder diesel engines. The implementation
of this program began in 1993 with the introduction of a new in-line six-
cylinder diesel engine family, equipped with a special mechanical fuel
injection system, that replaced the long-standing DT family of engines.
In February 1994, Transportation introduced the V-8 T444E, the industry's
first full-featured electronic diesel engine designed specifically for the
medium truck market. This engine offers a 10 to 15 percent improvement in
fuel economy, 30 to 40 percent enhancement in durability, and improved power
and torque when compared to the former 7.3 Liter V-8 product. In addition,
this engine meets current emissions requirements and includes such optional
features as electronic cruise control, electronically controlled power-take-
off and diagnostic capabilities.
In 1995, Transportation became the first North American truck
manufacturer to offer a complete line of fully electronic diesel engines. All
of Transportation's electronic diesel engines are equipped with HEUI, the new
fuel injection technology first introduced in 1994. All International brand
diesel truck engines are able to meet emission standards without the use of a
catalytic converter or exhaust after treatment device, unlike Transportation's
competitors. This new generation of engines is designed to respond to
customer demands for engines that have more power, improved fuel economy, long
life, and meet current emission requirements through 1997. The engines are
offered in a wider horsepower range than previously offered, which will give
Transportation an opportunity to expand the number of applications for its
engines and broaden its customer base.
Based on U.S. registrations published by R.L. Polk & Company, the T444E
electronically controlled diesel engine is the leading engine of its class.
In addition to its strong contribution to the market position of
Transportation's medium trucks, the light truck version, marketed as the 7.3
Liter Direct Injection Diesel, has realized significant external sales.
Transportation has an agreement to supply this V-8 product to a domestic
automotive company through the year 2000 for use in all of its diesel-powered
light trucks and vans. Sales of this engine to the automotive company
currently account for approximately 87% of Transportation's T444E sales.
Shipments to all original equipment manufacturers totalled a record 156,100
units in 1995, an increase of 20% from the 130,600 units shipped in 1994.
The International 530/530E offers high horsepower and torque, as well as
a lower initial price, considerable weight savings and reduced operating
costs. The International 530 is well-suited for customers using their trucks
in "hub and spoke" freight hauling applications, such as beverage or
refrigerated delivery, and construction applications, such as material
hauling, redi-mix and roll off refuse.
The following is a summary of Transportation's engine capacity
utilization for the five years ended October 31, 1995.
YEARS ENDED OCTOBER 31,
-----------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
Engine production units ..... 228,638 192,446 175,464 148,991 126,103
Total production capacity ... 198,000 188,000 166,260 166,260 166,720
Capacity utilization ........ 115.5% 102.4% 105.5% 89.6% 75.6%
Total production capacity varies as a result of changes in product mix.
Transportation is exploring the development of alternative fuel engines,
including engines powered by compressed natural gas, and has an agreement with
Detroit Diesel Corporation to develop a natural gas engine based on
Transportation's new V-8 engine and Detroit Diesel's electronic alternative
fuel technology.
SERVICE PARTS
The service parts business is a significant contributor to
Transportation's sales and gross margin, and to the maintenance of its Class 5
through 8 truck and engine customer base. In the United States and Canada,
Transportation operates 7 regional parts distribution centers, which allows it
to offer 24-hour availability and same day shipment of the parts most
frequently requested by customers. Transportation is undertaking initiatives
to increase parts sales outside of the United States and Canada. As customers
have explored ways to reduce their costs and improve efficiency,
Transportation and its dealers have established programs to help them manage
the parts and maintenance aspects of their businesses more efficiently.
Transportation also offers a "Fleet Charge" program, which allows
participating customers to purchase parts on credit at all of its dealer
locations at consistent and competitive prices. In 1995, service parts sales
increased as a result of growth in dealer and national accounts, as well as in
its export business.
MARKETING AND DISTRIBUTION
UNITED STATES AND CANADIAN OPERATIONS. Transportation's truck products
are distributed in virtually all key markets in the United States and Canada
through the largest retail organization specializing in medium and heavy
trucks. As part of its continuing program to adapt to changing market
conditions, Transportation has been assisting dealers to expand their
operations to better serve their customer base. Transportation's truck
distribution and service network in the United States and Canada was composed
of 958, 949 and 950 dealers and retail outlets at October 31, 1995, 1994 and
1993, respectively. Included in these totals were 490, 473 and 467 secondary
and associate locations at October 31, 1995, 1994 and 1993, respectively.
Retail dealer activity is supported by 5 regional operations in the
United States and a general office in Canada. Transportation has a national
account sales group responsible for its 130 major national account customers.
Transportation's 8 retail and 3 wholesale used truck centers in the
United States and Canada provide sales and trade-in benefits to its dealers
and retail customers.
INTERNATIONAL OPERATIONS. Transportation exports trucks, components and
service parts, both wholesale and retail, to more than 70 countries around the
world. In 1995, 5,000 trucks were exported while 5,100 trucks were exported
in 1994. Cumulatively, from 1986 through 1995, Transportation was the leading
North American exporter of Class 6 through 8 trucks according to data provided
by the AAMA.
In 1995, the Company established new regional sales offices in
Johannesburg, South Africa, and in Dubai, United Arab Emirates, to oversee the
distribution of Class 5 through 8 diesel trucks and service parts. In Mexico,
Transportation has an agreement with DINA Camiones, S.A. (DINA) to supply
product technology, components and technical services for assembly of DINA
trucks and buses. Transportation also sells its in-line six-cylinder family
of mid-range diesel engines to Perkins Group, Ltd. (Perkins) of Peterborough,
England, for worldwide distribution and to Detroit Diesel Corporation, the
North American distributor of Perkins.
NAVISTAR FINANCIAL CORPORATION
Navistar Financial is engaged in the wholesale, retail and lease
financing of new and used trucks sold by Transportation and its dealers in the
United States. Navistar Financial also finances wholesale accounts and
selected retail accounts receivable of Transportation. Sales of new products
(including trailers) of other manufacturers are also financed regardless of
whether designed or customarily sold for use with Transportation's truck
products. During 1994 and 1995, Navistar Financial provided wholesale
financing for 93% of the new truck units sold by Transportation to its dealers
and distributors in the United States. Navistar Financial also provided retail
financing in 1995 and 1994 for approximately 14% and 15%, respectively, of the
new truck units sold by Transportation and its dealers and distributors in the
United States.
Navistar Financial's wholly-owned domestic insurance subsidiary, Harco
National Insurance Company, provides commercial physical damage and liability
insurance coverage to Transportation's dealers and retail customers, and to
the general public through an independent insurance agency system.
IMPORTANT SUPPORTING OPERATIONS
THIRD PARTY SALES FINANCING AGREEMENTS. In the United States,
Transportation has an agreement with Associates Commercial Corporation
(Associates) to provide wholesale financing to certain of its truck dealers
and retail financing to their customers. During 1995, Associates provided 7%
of the wholesale financing utilized by Transportation's dealers and
distributors, unchanged from fiscal 1994.
Navistar International Corporation Canada has an agreement with a
subsidiary of General Electric Canadian Holdings Limited to provide financing
for Canadian dealers and customers.
FOREIGN INSURANCE SUBSIDIARIES. Harbour Assurance Company of Bermuda
Limited offers a variety of programs to the Company, including general
liability insurance, ocean cargo coverage for shipments to and from foreign
distributors, and reinsurance coverage for various Transportation policies.
The company writes minimal third-party coverage and provides a variety of
insurance programs to Transportation, its dealers, distributors and customers.
CAPITAL EXPENDITURES AND RESEARCH AND DEVELOPMENT
Transportation designs and manufactures its trucks and diesel engines to
meet or exceed specific industry requirements. New products are introduced
and improvements are made in accordance with operating plans and market
requirements. Research and development activities are directed toward the
introduction of new products and improvements of existing products and
processes used in their manufacture, and spending for these activities
totalled $91 million, $88 million, and $86 million for 1995, 1994 and 1993,
respectively.
During 1995, 1994 and 1993, capital expenditures totalled $139 million,
$87 million and $110 million, respectively. Major program expenditures in
1995 and 1994 included continued investment in machinery and equipment at the
Melrose Park, Illinois and Indianapolis, Indiana engine facilities to
manufacture mid-range diesel engines used in trucks and school bus chassis
produced by the Company and also sold to original equipment manufacturers.
Other expenditures were made for truck product improvements, modernization of
facilities and compliance with environmental regulations.
BACKLOG
The backlog of unfilled truck orders (subject to cancellation or return
in certain events) was as follows:
AT OCTOBER 31 MILLIONS OF DOLLARS UNITS
----------------- ------------------- -----
1995 .......... $ 3,226 47,119
1994 .......... $ 4,197 64,841
1993 .......... $ 1,353 23,939
Although the backlog of unfilled orders is one of many indicators of
market demand, other factors such as changes in production rates, available
capacity, new product introductions and competitive pricing actions may affect
point-in-time comparisons.
EMPLOYEES
The following table summarizes employment levels as of the end of fiscal
years 1993 through 1995:
TOTAL
AT OCTOBER 31 EMPLOYMENT
----------------- ----------
1995 ............................... 16,079
1994 ............................... 14,910
1993 ............................... 13,612
LABOR RELATIONS
At October 31, 1995, the United Automobile, Aerospace and Agricultural
Implement Workers of America (UAW) represented 8,199 of the Company's active
employees in the United States, and the Canadian Auto Workers (CAW)
represented 1,968 of the Company's active employees in Canada. Other unions
represented 1,246 of the Company's active employees in the United States, and
Canada. The Company entered into a collective bargaining agreement with the
UAW in 1995 which expires on October 1, 1998. The 1993 collective bargaining
agreement with the CAW expires on October 24, 1996. The new UAW contract
increases the Company's pension costs but provides greater operating
flexibility.
PATENTS AND TRADEMARKS
Transportation continuously obtains patents on its inventions and, thus,
owns a significant patent portfolio. Additionally, many of the components
which Transportation purchases for its products are protected by patents that
are owned or controlled by the component manufacturer. Transportation has
licenses under third-party patents relating to its products and their
manufacture, and Transportation grants licenses under its patents. The
royalties paid or received under these licenses are not significant. No
particular patent or group of patents is considered by Transportation to be
essential to its business as a whole.
Like all businesses which offer well-known products or services,
Transportation's primary trademarks are an important part of its worldwide
sales and marketing efforts, and provide instant identification of its
products and services in the marketplace. To support these efforts,
Transportation maintains, or has pending, registrations of its primary
trademarks in those countries in which it does business or expects to do
business.
RAW MATERIALS AND ENERGY SUPPLIES
Transportation purchases raw materials, parts and components from
numerous outside suppliers but relies upon some suppliers for a substantial
number of components for its truck products. Transportation's purchasing
strategies have been designed to improve access to the lowest cost, highest
quality sources of raw materials, parts and components, and to reduce
inventory carrying requirements. A portion of Transportation's requirements
for raw materials and supplies is filled by single-source suppliers.
The impact of an interruption in supply will vary by commodity. Some
parts are generic to the industry while others are of a proprietary design
requiring unique tooling which would require time to recreate. However, the
Company's exposure to a disruption in production as a result of an
interruption of raw materials and supplies is no greater than the industry as
a whole. In order to remedy any losses resulting from an interruption in
supply, the Company maintains contingent business interruption insurance for
storms, fire and water damage. In 1995, several suppliers experienced labor
problems or capacity constraints, as a result of industry wide-growth and
demand, which created interruptions in the flow of supplies to the Company.
As the truck and automotive market demand decreases, the strain on suppliers'
production capacity will be reduced.
IMPACT OF GOVERNMENT REGULATION
Truck and engine manufacturers continue to face increasing governmental
regulation of their products, especially in the areas of environment and
safety. The Company believes its products comply with all applicable
environmental and safety regulations.
As a diesel engine manufacturer, the Company has incurred significant
research and tooling costs to totally redesign its engine product lines to
meet United States Environmental Protection Agency (U.S. EPA) and California
Air Resources Board (CARB) emission standards effective in the 1994 model
year. The Company faces significant additional outlays through 1998 to meet
further tightening of these standards. In addition to the 1998 standard, the
Company, along with other engine manufacturers, has signed an unprecedented
voluntary agreement (Statement of Principles) with U.S. EPA and CARB to
achieve dramatic new reductions in ozone-causing exhaust emissions by 2004.
Complying with the resulting new emission standards represent a significant
engineering challenge that will require a major outlay of resources. The
Company faces further challenges in satisfying California's emission standards
in 1996 and 2002 for engines used in medium-size vehicles (which includes
vehicles up to 14,000 lbs. Gross Vehicle Weight Rating. The Company expects
that its diesel engines will be able to meet all of these standards in the
required timeframe.
Emissions regulations in Canada and Mexico are similar, but not
identical, to the U.S. federal regulations. Although Canada's regulations
impose standards equivalent only to the U.S. standards for the 1990 model
year, diesel engine manufacturers, including the Company, have voluntarily
signed several memorandums of understanding with the Canadian federal
government, agreeing to sell only engines meeting the 1994 U.S. emission
standards in model years 1995 to 1997. Canada has announced its intention to
conform its heavy-duty engine emission standards to the U.S. EPA standards in
1998 and to require low-sulfur diesel fuel, as in the U.S., beginning October
1, 1997. Mexico has adopted the U.S. heavy diesel engine emission standards
as of the 1994 model year but has conditioned compliance on the availability
of low-sulfur diesel fuel. The Mexican government is expected to complete the
conversion of diesel fuel supplies nationwide to low-sulfur fuel no later than
early 1996.
Truck manufacturers are also subject to various noise standards imposed
by federal, state and local regulations. The engine is one of a truck's
primary noise sources, and the Company, therefore, works closely with original
equipment manufacturers to develop strategies to reduce engine noise. The
Company is also subject to the National Traffic and Motor Vehicle Safety Act
(Safety Act) and Federal Motor Vehicle Safety Standards (Safety Standards)
promulgated by the National Highway Traffic Safety Administration. The
Company believes it is in compliance with the Safety Act and the Safety
Standards.
Expenditures to comply with various environmental regulations relating to
the control of air, water and land pollution at production facilities and to
control noise levels and emissions from Transportation's products have not
been material except for two sites formerly owned by the Company, Wisconsin
Steel and Solar Turbine. In 1994, Transportation recorded a $20 million
after-tax charge as a loss of discontinued operations for environmental
liabilities and cleanup cost.
ITEM 2. PROPERTIES
Transportation has 8 manufacturing and assembly plants in the United
States and 1 in Canada which are owned by Transportation. The aggregate floor
space of these 9 plants is approximately 9 million square feet.
Transportation also owns or leases other significant properties in the
United States and Canada, including a paint facility, a small component
fabrication plant, vehicle and parts distribution centers, sales offices,
engineering centers and its headquarters in Chicago.
ITEM 3. LEGAL PROCEEDINGS
In May 1993, a jury issued a verdict in favor of Vernon Klein Truck &
Equipment, Inc. (Klein Truck) and against Transportation in the amount of
$10.8 million in compensatory damages and $15 million in punitive damages.
The Company appealed the verdict and, in order to do so, was required to post
a bond collateralized with $30 million in cash. In November 1994, the Court
of Appeals of the State of Oklahoma reversed the verdict and entered judgment
in favor of Transportation on virtually all aspects of the case. Klein Truck
appealed to the Oklahoma Supreme Court, where the case is now pending. The
bond and related collateral will be released when the order of the Oklahoma
Supreme Court is filed.
Transportation and the Economic Development Administration (EDA), a
division of the U.S. Department of Commerce, reached an agreement in the
fourth quarter of 1994 in settlement of commercial and environmental disputes
related to the Wisconsin Steel property. EDA and Transportation became 90%
and 10% beneficiaries, respectively, of a trust which was created after the
party that purchased Wisconsin Steel filed for bankruptcy. At the time of
bankruptcy, EDA had guaranteed repayment of 90% and Transportation of 10% of
loans made to Wisconsin Steel. The settlement provides that EDA transfer its
interest in the trust to Transportation which, in turn, will assume
responsibility for completing the investigation of the environmental
condition at the site and for any cleanup work that may be necessary.
Transportation has agreed to pay EDA $11 million to settle various commercial
issues, as well as reimburse them for a portion of environmental response
costs spent by EDA. The Department of Justice must approve the final
settlement before the interest in the trust or the property is transferred to
Transportation.
Transportation and Solar Turbines Incorporated (Solar), a wholly-owned
subsidiary of Caterpillar, Inc., executed an agreement in June 1995, wherein
Transportation agreed to pay for 65% of future costs associated with
environmental cleanup at Solar's facility in San Diego, California. In
addition, Transportation agreed to pay for a yet undetermined portion of past
environmental costs. Transportation owned and operated this facility from
1961 to 1981 and sold it to Caterpillar Inc. in 1981. As part of the
agreement, Transportation will control the site investigation and any cleanup
work that may be necessary.
The Company and its subsidiaries are subject to various other claims
arising in the ordinary course of business, and are parties to various legal
proceedings which constitute ordinary routine litigation incidental to the
business of the Company and its subsidiaries. In the opinion of the
Company's management, none of these proceedings or claims are material to the
business or the financial condition of the Company.
EXECUTIVE OFFICERS
The following selected information for each of the Company's current
executive officers was prepared as of January 16, 1995.
OFFICERS AND POSITIONS WITH
NAME AGE NAVISTAR AND OTHER INFORMATION
- ------------------ --- -------------------------------------------------
John R. Horne .... 57 President and Chief Executive Officer in 1995 and
a Director since 1990. Mr. Horne also
is Chairman, President and Chief Executive
Officer of Transportation in 1995 and a Director
since 1987. Prior to this, Mr. Horne served as
President and Chief Operating Officer, 1990-1995,
Group Vice President and General Manager, Engine
and Foundry, 1990, and Vice President and General
Manager, Engine and Foundry, 1983-1990.
Robert C. Lannert. 55 Executive Vice President and Chief Financial
Officer and a Director since 1990. Mr. Lannert
also is Executive Vice President and Chief
Financial Officer of Transportation since 1990
and a Director since 1987. Prior to this,
Mr. Lannert served as Vice President and
Treasurer, 1987-1990, and Vice President and
Treasurer of Transportation, 1979-1990.
Robert A. Boardman 48 Senior Vice President and General Counsel since
1990. Mr. Boardman also is Senior Vice President
and General Counsel of Transportation since
1990. Prior to this, Mr. Boardman served as
Vice President of Manville Corporation,
1988-1990, and Corporate Secretary, 1983-1990.
Thomas M. Hough .. 50 Vice President and Treasurer since 1992. Mr. Hough
also is Vice President and Treasurer of
Transportation since 1992. Prior to this,
Mr. Hough served as Assistant Treasurer
1987-1992, and Assistant Treasurer of
Transportation, 1987-1992. Mr. Hough also
served as Assistant Controller, Accounting and
Financial Systems, 1987, and Controller of
Navistar Financial Corporation, 1982-1987.
J. Steven Keate .. 39 Vice President and Controller since December 1995.
Mr. Keate is also Vice President and Controller
of Transportation since March 1995. Prior to
this, Mr. Keate served as Vice President and
Controller of General Dynamics Corporation,
1991-1995, and Corporate Manager, Financial
Planning and Analysis, 1989-1991.
Steven K. Covey .. 44 Corporate Secretary since 1990. Mr. Covey also
is Associate General Counsel of Transportation
since November 1992. Prior to this, Mr. Covey
served as General Attorney, Finance and
Securities of Transportation, 1989-1992,
Senior Counsel, Finance and Securities,
1986-1989, and Senior Attorney, Corporate
Operations 1984-1986.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
PART II
The information required by Items 5-8 is incorporated herein by reference
from the 1995 Annual Report to Shareowners, filed as Exhibit 13 to this Form
10-K as follows:
1995
Annual
Report
Page
------
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS ......................... 50
ITEM 6. SELECTED FINANCIAL DATA ................................. 48
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION ................... 4
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ............. 13
With the exception of the aforementioned information (Part II; Items 5-8)
and the information specified under Items 1 and 14 of this report, the 1995
Annual Report to Shareowners is not to be deemed filed as part of this report.
----------------------------------------------------------
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEMS 10, 11, 12 AND 13
Information required by Part III (Items 10, 11, 12 and 13) of this Form
is incorporated herein by reference from Navistar's definitive Proxy Statement
for the March 20, 1996 Annual Meeting of Shareowners.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Information required by Part IV (Item 14) of this form is incorporated
herein by reference from Navistar International Corporation's 1995 Annual
Report to Shareowners, filed as Exhibit 13 to this Form 10-K as follows:
1995
Annual
Report
Page
-------
Financial Statements
- --------------------
Independent Auditors' Report .................................... 12
Statement of Income
for the years ended October 31, 1995, 1994 and 1993 ........... 13
Statement of Financial Condition as of October 31, 1995 and 1994. 15
Statement of Cash Flow
for the years ended October 31, 1995, 1994 and 1993 ........... 17
Statement of Non-Redeemable Preferred, Preference
and Common Shareowners' Equity
for the years ended October 31, 1995, 1994 and 1993 ........... 19
Notes to Financial Statements ................................... 20
Form
10-K
Schedule Page
- -------- ----
II - Valuation and Qualifying Accounts and Reserves ........... F-1
All other schedules are omitted because of the absence of the conditions
under which they are required or because information called for is shown in
the financial statements and notes thereto in the 1995 Annual Report to
Shareowners.
Finance and Insurance Subsidiaries:
The financial statements of Navistar Financial Corporation for the years
ended October 31, 1995, 1994 and 1993 appearing on pages 10 through 39 in
Annual Report on Form 10-K for Navistar Financial Corporation for the fiscal
year ended October 31, 1995, Commission File No. 1-4146-1, are incorporated
herein by reference and filed as Exhibit 28 to this Form 10-K.
Financial information regarding all Navistar subsidiaries engaged in
finance and insurance operations, including Navistar Financial Corporation,
appears as supplemental information to the Financial Statements in the
Navistar 1995 Annual Report to Shareowners and is incorporated herein by
reference.
Form
10-K
Exhibits, Including Those Incorporated by Reference Page
- --------------------------------------------------- ----
(3) Articles of Incorporation and By-Laws .................... E-1
(4) Instruments Defining the Rights of Security Holders,
Including Indentures ................................... E-2
(10) Material Contracts E-3
(11) Computation of Net Income (Loss) Per Common Share ........ E-5
(13) Navistar International Corporation 1995 Annual Report
to Shareowners ......................................... N/A
(21) Subsidiaries of the Registrant .......................... E-6
(23) Independent Auditors' Consent ........................... 20
(24) Power of Attorney ....................................... 18
(27) Financial Data Schedule ................................. N/A
(28) Navistar Financial Corporation Annual Report
on Form 10-K for the fiscal year ended October 31, 1995 N/A
All exhibits other than those indicated above are omitted because of the
absence of the conditions under which they are required or because the
information called for is shown in the financial statements and notes thereto
in the 1995 Annual Report to Shareowners.
Reports on Form 8-K
- -------------------
No reports on Form 8-K were filed for the three months ended October 31,
1995.
SIGNATURE
NAVISTAR INTERNATIONAL CORPORATION
AND SUBSIDIARIES
----------------------------------
SIGNATURE
Pursuant to the requirements of Section 13 and 15(d) 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.
NAVISTAR INTERNATIONAL CORPORATION
- ----------------------------------
(Registrant)
/s/ J. Steven Keate
- -----------------------------------
J. Steven Keate January 26, 1996
Vice President and Controller
(Principal Accounting Officer)
EXHIBIT 24
SIGNATURE
NAVISTAR INTERNATIONAL CORPORATION
AND SUBSIDIARIES
----------------------------------
POWER OF ATTORNEY
Each person whose signature appears below does hereby make, constitute
and appoint John R. Horne and Robert I. Morrison and each of them acting
individually, true and lawful attorneys-in-fact and agents with power to act
without the other and with full power of substitution, to execute, deliver and
file, for and on such person's behalf, and in such person's name and capacity
or capacities as stated below, any amendment, exhibit or supplement to the
Form 10-K Report making such changes in the report as such attorney-in-fact
deems appropriate.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
Signature Title Date
- --------------------------- ----------------------------- ----------------
/s/ James C. Cotting
- ---------------------------
James C. Cotting Chairman of the Board, January 26, 1996
and Director
/s/ John R. Horne
- ---------------------------
John R. Horne President and January 26, 1996
Chief Executive Officer,
and Director
(Principal Executive Officer)
/s/ J. Steven Keate
- ---------------------------
J. Steven Keate Vice President and Controller January 26, 1996
(Principal Accounting Officer)
/s/ William F. Andrews
- ---------------------------
William F. Andrews Director January 26, 1996
/s/ Wallace W. Booth
- ---------------------------
Wallace W. Booth Director January 26, 1996
/s/ Andrew F. Brimmer
- ---------------------------
Andrew F. Brimmer Director January 26, 1996
EXHIBIT 24 (CONTINUED)
SIGNATURE
NAVISTAR INTERNATIONAL CORPORATION
AND SUBSIDIARIES
----------------------------------
SIGNATURES (Continued)
/s/ Richard F. Celeste
- ---------------------------
Richard F. Celeste Director January 26, 1996
/s/ John D. Correnti
- ---------------------------
John D. Correnti Director January 26, 1996
/s/ William C. Craig
- ---------------------------
William C. Craig Director January 26, 1996
/s/ Jerry E. Dempsey
- ---------------------------
Jerry E. Dempsey Director January 26, 1996
/s/ Mary Garst
- ---------------------------
Mary Garst Director January 26, 1996
/s/ Charles A. Haggerty
- ---------------------------
Charles A. Haggerty Director January 26, 1996
/s/ Arthur G. Hansen
- ---------------------------
Arthur G. Hansen Director January 26, 1996
/s/ Robert C. Lannert
- ---------------------------
Robert C. Lannert Director January 26, 1996
/s/ Walter J. Laskowski
- ---------------------------
Walter J. Laskowski Director January 26, 1996
SIGNATURE
NAVISTAR INTERNATIONAL CORPORATION
AND SUBSIDIARIES
----------------------------------
INDEPENDENT AUDITORS' REPORT
Navistar International Corporation:
We have audited the Statement of Financial Condition of Navistar
International Corporation and Consolidated Subsidiaries as of October 31, 1995
and 1994, and the related Statement of Income, of Cash Flow, and of Non-
Redeemable Preferred, Preference and Common Shareowners' Equity for each of
the three years in the period ended October 31, 1995, and have issued our
report thereon, dated December 18, 1995 (which includes an explanatory
paragraph relating to the change in methods of accounting for postretirement
benefits other than pensions and for income taxes as required by Statements of
Financial Accounting Standards No. 106 and No. 109); such consolidated
financial statements and report are included in your 1995 Annual Report to
Shareowners and are incorporated herein by reference. Our audits also
included the financial statement schedule of Navistar International
Corporation and Consolidated Subsidiaries, listed in Item 14. This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. In our opinion,
such financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
Deloitte & Touche LLP
December 18, 1995
Chicago, Illinois
----------------------------------------------------------
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
Navistar International Corporation:
We consent to the incorporation by reference in Post-Effective Amendment
No. 1 to Registration No. 2-70979 on Form S-8 and in Post-Effective Amendment
No. 6 to Registration No. 2-55544 on Form S-8 and in Post-Effective Amendment
No. 1 to Registration No. 2-9604 on Form S-8 of our reports on Navistar
International Corporation and Navistar Financial Corporation, dated
December 18, 1995, appearing and incorporated by reference in this Annual
Report on Form 10-K of Navistar International Corporation for the year ended
October 31, 1995.
Deloitte & Touche LLP
January 26, 1996
Chicago, Illinois
SCHEDULE II
NAVISTAR INTERNATIONAL CORPORATION
AND CONSOLIDATED SUBSIDIARIES
============
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEARS ENDED OCTOBER 31, 1995, 1994 AND 1993
(MILLIONS OF DOLLARS)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- -------- -------- -------- --------
BALANCE DEDUCTIONS FROM
DESCRIPTION AT RESERVES BALANCE
DESCRIPTION BEGINNING ADDITIONS CHARGED AT END
OF RESERVES DEDUCTED FROM OF YEAR TO INCOME DESCRIPTION AMOUNT OF YEAR
----------- ------------- --------- ----------------- ----------- ------ -------
Reserves deducted from
assets to which they
apply:
1995
----
Uncollectible notes
and accounts
Allowance for written off and
losses on Notes and accounts reserve adjustments,
receivables .... receivable .... $ 25 $ 4 less recoveries ... $ 1 $ 28
===== ===== ===== =====
1994
----
Uncollectible notes
and accounts
Allowance for written off and
losses on Notes and accounts reserve adjustments,
receivables .... receivable .... $ 36 $ 2 less recoveries ... $ 13 $ 25
===== ===== ===== =====
1993
----
Uncollectible notes
and accounts
Allowance for written off and
losses on Notes and accounts reserve adjustments,
receivables .... receivable .... $ 34 $ 6 less recoveries ... $ 4 $ 36
===== ===== ===== =====
F-1