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PAGE 1
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, 1998
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
NAVISTAR INTERNATIONAL CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 36-3359573
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
455 North Cityfront Plaza Drive, Chicago, Illinois 60611
-------------------------------------------------- -------------------
(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
- ----------------------------------------------- -----------------------
Common stock, par value $0.10 per share New York Stock Exchange
Chicago Stock Exchange
Pacific 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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
As of December 15, 1998 the aggregate market value of Common Stock held by
non-affiliates of the registrant was $1,679,702,515.
As of December 15, 1998, the number of shares outstanding of the registrant's
Common Stock was 66,195,173.
Documents Incorporated by Reference
-----------------------------------
1998 Annual Report to Shareowners (Parts I, II and IV)
1998 Proxy Statement(Parts I and III)
Navistar Financial Corporation 1998 Annual Report on Form 10-K (Part IV)
PAGE 2
NAVISTAR INTERNATIONAL CORPORATION
FORM 10-K
Year Ended October 31, 1998
INDEX
10-K Page
---------
PART I
Item 1. Business............................................. 3
Item 2. Properties........................................... 9
Item 3. Legal Proceedings.................................... 9
Executive Officers of the Registrant................. 10
Item 4. Submission of Matters to a Vote of Security Holders.. 10
PART II
Item 5. Market for the Registrant's Common Equity
and Related Stockholder Matters.................... 11
Item 6. Selected Financial Data.............................. 11
Item 7. Management's Discussion and Analysis
of Results of Operations and Financial Condition... 11
Item 7A. Quantitative and Qualitative Disclosures
about Market Risk.................................. 11
Item 8. Financial Statements and Supplementary Data.......... 11
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure............. 12
PART III
Item 10. Directors and Executive Officers of the Registrant... 12
Item 11. Executive Compensation............................... 12
Item 12. Security Ownership of Certain
Beneficial Owners and Management................... 12
Item 13. Certain Relationships and Related Transactions....... 12
PART IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K............................ 12
SIGNATURES
Principal Accounting Officer.................................... 14
Directors ...................................................... 15
POWER OF ATTORNEY.................................................. 15
INDEPENDENT AUDITORS' REPORT....................................... 17
INDEPENDENT AUDITORS' CONSENT...................................... 17
SCHEDULE .................................................... F-1
EXHIBITS .................................................... E-1
PAGE 3
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.
Navistar operates in two principal industry segments: manufacturing and
financial services. Manufacturing operations are responsible for the manufacture
and marketing of medium and heavy trucks, including school buses, mid-range
diesel engines and service parts primarily in the United States and Canada as
well as in Mexico, Brazil and other selected export markets. Based on assets and
revenues, manufacturing operations represent the majority of the company's
business activities. The financial services operations consist of Navistar
Financial Corporation (NFC), its domestic insurance subsidiary and the company's
foreign finance and insurance subsidiaries. NFC's primary business is the retail
and wholesale financing of products sold by the manufacturing operations and its
dealers within the United States and the provision of commercial physical damage
and liability insurance to the manufacturing operations' dealers and retail
customers and to the general public through an independent insurance agency
system. Industry segment data for 1998, 1997 and 1996 is summarized in Note 13
to the Financial Statements, which is incorporated herein by reference.
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, in
thousands of units:
YEARS ENDED OCTOBER 31,
------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Class 5, 6 and 7 medium trucks and
school buses.................... 158.9 150.6 145.8 151.8 134.2
Class 8 heavy trucks.............. 232.0 196.8 195.4 228.8 205.4
----- ----- ----- ----- -----
Total.................... 390.9 347.4 341.2 380.6 339.6
===== ===== ===== ===== =====
Source: Monthly data derived from materials produced by the American
Automobile Manufacturers Associations in the United States and Canada, and other
sources.
The company's first full year of operations in Mexico was 1997. Industry
retail deliveries of Class 5, 6 and 7 medium trucks and school buses in the
Mexican market were 11,400 units and 9,600 units in 1998 and 1997, respectively.
Industry retail deliveries of Class 8 heavy trucks were 10,900 units and 6,000
units over the same two-year period based on monthly data provided by the
Associacion Nacional de Productores de Autobuses, Camiones y Tractocamiones.
PAGE 4
The Class 5 through 8 truck markets in the United States, Canada, Mexico
and Brazil are highly competitive. Major U.S. domestic competitors include
PACCAR, Ford and General Motors, as well as foreign-controlled domestic
manufacturers, such as Freightliner, Sterling, Mack and Volvo. 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.
TRUCK MARKET SHARE
The company delivered 112,800 Class 5 through 8 trucks, including school
buses, in the United States and Canada in fiscal 1998, a 13% increase from the
99,500 units delivered in 1997. Navistar's combined share of the Class 5 through
8 truck market was 28.9% in 1998 and 28.6% in 1997. Navistar 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 18 fiscal years based on
data obtained from the American Automobile Manufacturers Association, the
Canadian Motor Vehicle Manufacturers Association and R.L. Polk & Company.
The company delivered 4,100 Class 5 through 8 trucks, including school buses, in
Mexico in 1998, a 141% increase from the 1,700 units delivered in 1997.
Navistar's combined share of the Class 5 through 8 truck market in Mexico was
18.3% in 1998 and 10.9% in 1997.
PRODUCTS
The following table illustrates the percentage of the company's
manufacturing sales by class of product based on dollar amount:
YEARS ENDED OCTOBER 31,
------------------------------------
1998 1997 1996
---- ---- ----
PRODUCT CLASS
- -------------
Class 5, 6 and 7 medium trucks and
school buses.................... 34% 34% 35%
Class 8 heavy trucks.............. 39 37 35
Engines........................... 16 16 16
Service parts..................... 11 13 14
---- ---- ----
Total...................... 100% 100% 100%
==== ==== ====
The company manufactures a full line of products in the common carrier,
private carrier, government/service, leasing, construction, energy/petroleum and
student transportation markets. The company offers diesel-powered trucks and
school buses because of their improved fuel economy, ease of serviceability and
greater durability over gasoline-powered vehicles. Navistar'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 Navistar. Based upon information published by R.L. Polk
& Company, diesel-powered Class 5, 6 and 7 medium truck and bus shipments
represented 87.6% of all medium shipments for fiscal year 1998 in the United
States and Canada.
PAGE 5
The company's truck and bus manufacturing operations in the United States,
Canada and Mexico consist principally of the assembly of components manufactured
by its suppliers, although the company produces its own mid-range diesel truck
engines, sheet metal components (including cabs) and miscellaneous other parts.
The company currently estimates approximately $515 million in capital spending
and $330 million in development expense through 2003 for development of its next
generation vehicles.
ENGINE AND FOUNDRY
The company designs and manufactures diesel engines for use in its Class
5, 6 and 7 medium trucks and school buses and selected Class 8 heavy truck
models, and for sale to original equipment manufacturers (OEM's) in the United
States and Canada. The company also sells engines for industrial, agricultural
and marine applications. Navistar is the leading supplier of mid-range diesel
engines in the 160-300 horsepower range according to data supplied by Power
Systems Research of Minneapolis, Minnesota.
Navistar has an agreement to supply its 7.3 liter (7.3L) electronically
controlled diesel engine to Ford Motor Company (Ford) through the year 2002 for
use in all of Ford's diesel-powered light trucks and vans. Sales to Ford
currently account for approximately 88% of the company's 7.3L sales. The
company's shipments of engines to all OEM's totaled 214,000 units in 1998, an
increase of 16% from the 184,000 units shipped in 1997. During 1997, Navistar
entered into a ten-year agreement, effective with model year 2003, to supply
Ford with a successor engine to the current 7.3L product for use in its
diesel-powered super duty trucks and vans (over 8,500 lbs. GVW). In March 1998,
the company was selected by Ford to negotiate an extended agreement to supply
diesel engines to Ford for certain under 8,500 lbs. GVW light duty trucks and
sport utility vehicles, such as the Ford Expedition, F-150 and F-250 pick-ups
and Econoline 150 and 250 van models.
The company has approved a plan for up to $600 million in capital spending
over the next five years in order to manufacture a next generation version of
diesel engines. In addition, approximately $110 million of development expense
was approved for the development of these engines.
SERVICE PARTS
In the United States and Canada, the company operates seven regional parts
distribution centers, which allow it to offer 24-hour availability and same day
shipment of the parts most frequently requested by customers. The company also
operates a parts distribution center in Mexico.
Navistar's service parts program is vital to the maintenance of the
relationship with its customers and dealers. The sale of replacement parts does
not represent a separate and distinct business of the company. The company's
truck group makes decisions about the pricing of trucks and replacement parts
based upon a variety of factors which integrally link the pricing and sale of
replacement parts with the sale of medium and heavy duty trucks, including
school buses. The acceptable price for dealers and fleet truck sales is
determined by not only looking at the market price of the individual trucks
themselves, but also by analyzing the amount of future replacement parts that
will be purchased from Navistar over the truck's life cycle and the total
expected profit contribution, including future replacement parts, expected to be
realized on each sale. Accordingly, the pricing of trucks and replacement parts
is not independently determined.
PAGE 6
MARKETING AND DISTRIBUTION
Navistar's truck products are distributed in virtually all key markets in
the United States and Canada. The company's truck distribution and service
network in these countries was composed of 945, 954 and 957 dealers and retail
outlets at October 31, 1998, 1997 and 1996, respectively. Included in these
totals were 524, 514 and 504 secondary and associate locations at October 31,
1998, 1997 and 1996, respectively. The company also has a dealer network in
Mexico composed of 44, 38 and 23 dealer locations at October 31, 1998, 1997 and
1996, respectively, and a dealer network in Brazil composed of six dealer
locations at October 31, 1998.
Retail dealer activity is supported by five regional operations in the
United States and general offices in Canada, Mexico and Brazil. The company has
a national account sales group, responsible for 94 major U.S. national account
customers. Navistar's network of 16 Used Truck Centers in the United States
provides trade-in support to the company's dealers and national accounts group,
and markets all makes and models of reconditioned used trucks to owner-operators
and fleet buyers. Trucks, components and service parts are exported for
wholesale and retail sale to more than 70 countries around the world.
FINANCIAL SERVICES
NFC is a financial services organization that provides wholesale, retail
and lease financing of new and used trucks sold by Transportation and its
dealers in the United States. NFC 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 1998 and 1997, NFC provided wholesale financing for 95% and 94%,
respectively, of the new truck units sold by Transportation to its dealers and
distributors in the United States, and retail and lease financing for 16% and
13%, respectively, of all new truck units sold or leased by Transportation to
retail customers.
NFC'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.
Navistar's wholly owned subsidiaries, Arrendadora Financiera Navistar and
Servicios Financiera Navistar, provide wholesale and lease financing to the
company's dealers and customers in Mexico.
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.
IMPORTANT SUPPORTING OPERATIONS
Navistar International Corporation Canada has an agreement with a
subsidiary of General Electric Capital Canada, Inc. to provide financing for
Canadian dealers and customers.
RESEARCH AND DEVELOPMENT
Research and development activities, which are directed toward the
introduction of new products and improvements of existing products and processes
used in their manufacture, totaled $138 million, $85 million and $90 million for
1998, 1997 and 1996, respectively.
PAGE 7
BACKLOG
The backlog of unfilled truck orders (subject to cancellation or return in
certain events) at October 31, 1998, 1997 and 1996, was $4,505 million, $2,360
million and $1,254 million, respectively.
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 company employed 17,558, 16,168 and 14,187 individuals at October 31,
1998, 1997 and 1996, respectively, worldwide.
LABOR RELATIONS
At October 31, 1998, the United Automobile, Aerospace and Agricultural
Implement Workers of America (UAW) represented 9,017 of the company's active
employees in the United States, and the National Automobile, Aerospace, and
Agricultural Implement Workers of Canada (CAW) represented 2,339 of the
company's active employees in Canada. Other unions represented 848 of the
company's active employees in the United States and 147 of the company's active
employees in Mexico. The company entered into a collective bargaining agreement
with the UAW in 1995, which would have expired on October 1, 1998. During August
1997, the company's collective bargaining agreement with the UAW was extended
through October 1, 2002. This contract allows the company to focus its assembly
plants, simplify current product lines, invest in new product development and
achieve more competitive wage, benefit and productivity levels. In addition, the
company entered into a collective bargaining agreement with the CAW in 1996
which expires on October 24, 1999.
PATENTS AND TRADEMARKS
Navistar continuously obtains patents on its inventions and, thus, owns a
significant patent portfolio. Additionally, many of the components which the
company purchases for its products are protected by patents that are owned or
controlled by the component manufacturer. Navistar has licenses under
third-party patents relating to its products and their manufacture, and Navistar
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 the company to be essential to its business as a whole.
Like all businesses which offer well-known products or services,
Navistar'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, Navistar 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
The company purchases raw materials, parts and components from numerous
outside suppliers, but relies upon some suppliers for a substantial number of
components for its truck and engine products. A majority of the company's
requirements for raw materials and supplies is filled by single-source
suppliers.
PAGE 8
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.
While the company believes that it has adequate assurances of continued
supply, the inability of a supplier to deliver could have an adverse effect on
production at certain of the company's manufacturing locations. The company's
exposure in Mexico and Brazil to an interruption in local supply could result in
an inability to meet local content requirements.
At current demand levels, the entire truck industry is operating at or
near capacity. Accordingly, constraints have been placed on the company's
ability to meet certain customers' demands because of component parts
availability. Suppliers have initiated investments to expand capacity to support
demand growth. Although some of this additional capacity will become available
in 1999, much of the expansion will require several years. In those commodities
where domestic supply is constrained, the company is searching globally for
alternative sources.
IMPACT OF GOVERNMENT REGULATION
Truck and engine manufacturers continue to face heavy 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 research,
development and tooling costs to design its engine product lines to meet United
States Environmental Protection Agency (U.S. EPA) and California Air Resources
Board (CARB) emission standards that will come into effect after the turn of the
century. The company intends to provide engines that satisfy CARB's emission
standards effective in 2002 for engines used in vehicles from 8,501 to 14,000
pounds GVW, as well as heavy-duty engines that comply with more stringent CARB
and U.S. EPA emission standards, promulgated in 1997, for 2004 and later model
years.
In October 1998, Navistar, along with other heavy-duty diesel engine
manufacturers, entered into a Consent Decree with the U.S. EPA and a Settlement
Agreement with CARB concerning alleged emissions from heavy-duty diesel engines
which utilized strategies to improve fuel economy and may have affected nitrogen
oxide emissions. The company's settlement with the U.S. EPA and CARB requires a
payment of $3 million and changes to new engine configurations which are to be
produced after October 2002. Navistar has received unconditional EPA approval
for its 1999 model engines. Therefore, current engine configurations, which are
primarily used in the company's medium trucks and other light and medium duty
vehicles, will not be affected by this settlement. Navistar believes that
neither the settlement nor the potential changes will have a material effect on
the company's financial position or operating results.
PAGE 9
Canadian and Mexican heavy-duty engine emissions regulations essentially
mirror those of the U.S. EPA, except that compliance in Mexico is conditioned on
availability of low-sulfur diesel fuel. The company's engines comply with
Canadian and Mexican emissions regulations, as well as those of Brazil, where
the company began assembling trucks in 1998.
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 OEM's 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 the company's products have not been
material except for two sites formerly owned by the company: Wisconsin Steel in
Chicago, Illinois, and Solar Turbine in San Diego, California. In 1994, the
company recorded a $20 million after-tax charge as a loss of discontinued
operations for environmental liabilities and cleanup cost at these two sites. It
is not expected that the costs of compliance with foreseeable environmental
requirements will have a material effect on the company's financial position or
operating results.
ITEM 2. PROPERTIES
In North America, the company owns and operates ten manufacturing and
assembly operations, which contain approximately ten million square feet of
floor space. Six facilities manufacture and assemble trucks, two plants
manufacture diesel engines and two locations produce gray iron castings. In
addition, the company owns or leases other significant properties in the United
States and Canada, including vehicle and parts distribution centers, sales
offices, an engineering center and its headquarters in Chicago. The company's
truck assembly facility located in Escobedo, Mexico is encumbered by a lien in
favor of certain lenders of the company as collateral for a $125 million
revolving loan agreement.
Navistar's principal research and engineering facilities are located in
Fort Wayne, Indiana, and Melrose Park, Illinois. In addition, certain research
is conducted at its manufacturing plants.
All of the company's plants are being utilized and have been adequately
maintained, are in good operating condition and are suitable for its current
needs through productive utilization of the facilities. These facilities,
together with planned capital expenditures, are expected to meet the company's
manufacturing needs in the foreseeable future.
A majority of the activity of the financial services operations is
conducted from its leased headquarters in Rolling Meadows, Illinois. The
financial services operations also lease six other office locations in the
United States.
ITEM 3. LEGAL PROCEEDINGS
The company and its subsidiaries are subject to various 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.
PAGE 10
EXECUTIVE OFFICERS OF REGISTRANT
The following selected information for each of the company's current
executive officers was prepared as of December 15, 1998.
OFFICERS AND POSITIONS WITH
NAME AGE NAVISTAR AND OTHER INFORMATION
---- --- ------------------------------
John R. Horne............. 60 Chairman, President and Chief
Executive Officer since 1996
and a Director since 1990.
Mr. Horne also is Chairman,
President and Chief Executive
Officer of Transportation
since 1995 and a Director since
1987. Prior to this, Mr. Horne
served as President and Chief
Executive Officer, 1995-1996,
President and Chief Operating
Officer, 1990-1995.
Don DeFosset, Jr.......... 50 Executive Vice President and
President, Truck Group since
1996. Mr. DeFosset also is
Executive Vice President
and President, Truck Group of
Transportation since 1996.
Prior to this, Mr. DeFosset
served as President, Allied Signal
Safety Restraints Systems of
Allied Signal Inc., 1993 - 1996,
Group Executive and General
Manager, Allied Signal
Turbocharging and Truck Brake
Systems, 1992 - 1993, and Vice
President, Planning and
Business Development in 1992.
Robert C. Lannert......... 58 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.
Robert A. Boardman........ 51 Senior Vice President and General
Counsel since 1990. Mr. Boardman
also is Senior Vice President
and General Counsel of
Transportation since 1990.
Thomas M. Hough........... 53 Vice President and Treasurer
since 1992. Mr. Hough also is
Vice President and Treasurer of
Transportation since 1992.
Mark T. Schwetschenau..... 42 Vice President and Controller since
1998. Mr. Schwetschenau also is
Vice President and Controller
of Transportation since 1998.
Prior to this, Mr. Schwetschenau
served as Vice President,
Finance, Quaker Foods Division,
the Quaker Oats Company,
1995-1997, and Director, Finance,
Convenience Foods Division, the
Quaker Oats Company, 1993-1995.
Steven K. Covey........... 47 Corporate Secretary since 1990.
Mr. Covey also is Associate
General Counsel of Transportation
since 1992.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
PAGE 11
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
Navistar International Corporation Common Stock is listed on the New York
Stock Exchange, the Chicago Stock Exchange and the Pacific Exchange under the
abbreviated stock symbol "NAV." Information regarding high and low market price
per share of Common Stock for each quarter of 1998 and 1997 is incorporated by
reference from the 1998 Annual Report to Shareowners, page 46, filed as Exhibit
13 to this Form 10-K. There were approximately 55,157 owners of Common Stock at
October 31, 1998.
Holders of Common Stock are entitled to receive dividends when and as
declared by the Board of Directors out of funds legally available therefor,
provided that, so long as any shares of the company's preferred stock and
preference stock are outstanding, no dividends (other than dividends payable in
Common Stock) or other distributions (including purchases) may be made with
respect to the Common Stock unless full cumulative dividends, if any, on the
shares of preferred stock and preference stock have been paid. Under the General
Corporation Law of the State of Delaware, dividends may only be paid out of
surplus or out of net profits for the fiscal year in which the dividend is
declared or the preceding fiscal year, and no dividend may be paid on Common
Stock at any time during which the capital of outstanding preferred stock or
preference stock exceeds the net assets of the company.
The company has not paid dividends on the Common Stock since 1980. The
company does not expect to pay cash dividends on the Common Stock in the
foreseeable future, and is subject to restrictions under the indentures for the
$100 million 7% Senior Subordinated Notes and the $250 million 8% Senior
Subordinated Notes on the amount of cash dividends the company may pay and is
subject to certain debt to equity ratios under the $125 million Mexican credit
facility which may indirectly limit its ability to pay dividends.
ITEMS 6, 7, 7A AND 8
The information required by Items 6-8 is incorporated herein by reference
from the 1998 Annual Report to Shareowners, filed as Exhibit 13 to this Form
10-K as follows:
1998
Annual
Report
Page
------
ITEM 6. SELECTED FINANCIAL DATA.............................. 48
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION.............. 2
ITEM 7A. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK ..................... 7
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.......... 15
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 1998
Annual Report to Shareowners is not to be deemed filed as part of this report.
----------------------------------------------------------
PAGE 12
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 Items 10, 11, 12 and 13 of this Form is
incorporated herein by reference from Navistar's definitive Proxy Statement for
the February 23, 1999 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 1998 Annual Report
to Shareowners, filed as Exhibit 13 to this Form 10-K as follows:
1998
Annual
Report
Page
------
Financial Statements
- --------------------
Independent Auditors' Report................................. 14
Statement of Income for the years ended
October 31, 1998, 1997 and 1996............................ 15
Statement of Financial Condition
as of October 31, 1998 and 1997............................ 16
Statement of Cash Flow for the years ended
October 31, 1998, 1997 and 1996............................ 17
Notes to Financial Statements................................ 18
Form
10-K
Page
----
Schedule
- --------
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 1998 Annual Report to Shareowners.
Finance and Insurance Subsidiaries:
The financial statements of Navistar Financial Corporation for the years
ended October 31, 1998, 1997 and 1996 appearing on pages 10 through 37 in the
Annual Report on Form 10-K for Navistar Financial Corporation for the fiscal
year ended October 31, 1998, Commission File No. 1-4146-1, are incorporated
herein by reference and filed as Exhibit 28 to this Form 10-K.
PAGE 13
Form
10-K
Page
----
Exhibits, Including Those Incorporated by Reference
- ---------------------------------------------------
(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-4
(13) Navistar International Corporation
1998 Annual Report to Shareowners
(only those portions incorporated
herein by reference).............................. *
(21) Subsidiaries of the Registrant...................... E-6
(23) Independent Auditors' Consent....................... 17
(24) Power of Attorney................................... 15
(27) Financial Data Schedule............................. *
(28) Navistar Financial Corporation Annual Report
on Form 10-K for the fiscal year
ended October 31, 1998............................ *
*Filed only electronically with the Securities and Exchange Commission.
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 1998 Annual Report to Shareowners.
Exhibits, other than those incorporated by reference, have been included in
copies of this report filed with the Securities and Exchange Commission.
Shareowners of the company will be provided with copies of these exhibits upon
written request to the Corporate Secretary at the address given on the cover
page of this Form 10-K.
Reports on Form 8-K
- -------------------
No reports on Form 8-K were filed for the three months ended October 31,
1998.
PAGE 14
SIGNATURE
NAVISTAR INTERNATIONAL CORPORATION
AND CONSOLIDATED 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/ Mark T. Schwetschenau
- -----------------------------------
Mark T. Schwetschenau December 22, 1998
Vice President and Controller
(Principal Accounting Officer)
PAGE 15
EXHIBIT 24
SIGNATURE
NAVISTAR INTERNATIONAL CORPORATION
AND CONSOLIDATED SUBSIDIARIES
----------------
POWER OF ATTORNEY
Each person whose signature appears below does hereby make, constitute and
appoint John R. Horne, Robert C. Lannert and Mark T. Schwetschenau 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/ John R. Horne
- --------------------------
John R. Horne Chairman of the Board, December 22, 1998
President and
Chief Executive Officer,
and Director
(Principal Executive Officer)
/s/ Robert C. Lannert
- --------------------------
Robert C. Lannert Executive Vice President December 22, 1998
and Chief Financial Officer
and Director
(Principal Financial Officer)
/s/ Mark T. Schwetschenau
- ---------------------------
Mark T. Schwetschenau Vice President and Controller December 22, 1998
(Principal Accounting Officer)
/s/ William F. Andrews
- ---------------------------
William F. Andrews Director December 22, 1998
PAGE 16
EXHIBIT 24 (CONTINUED)
SIGNATURE
NAVISTAR INTERNATIONAL CORPORATION
AND CONSOLIDATED SUBSIDIARIES
---------------
SIGNATURES (Continued)
/s/ John D. Correnti
- ---------------------------
John D. Correnti Director December 22, 1998
/s/ Jerry E. Dempsey
- ---------------------------
Jerry E. Dempsey Director December 22, 1998
/s/ John F. Fiedler
- ---------------------------
John F. Fiedler Director December 22, 1998
/s/ Dr. Abbie J. Griffin
- ---------------------------
Dr. Abbie J. Griffin Director December 22, 1998
/s/ Michael N. Hammes
- ---------------------------
Michael N. Hammes Director December 22, 1998
/s/ Allen J. Krowe
- ---------------------------
Allen J. Krowe Director December 22, 1998
/s/ Walter J. Laskowski
- ---------------------------
Walter J. Laskowski Director December 22, 1998
/s/ William F. Patient
- ---------------------------
William F. Patient Director December 22, 1998
PAGE 17
SIGNATURE
NAVISTAR INTERNATIONAL CORPORATION
AND CONSOLIDATED 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, 1998
and 1997, and the related Statements of Income and of Cash Flow for each of the
three years in the period ended October 31, 1998, and have issued our report
thereon dated December 14, 1998; such consolidated financial statements and
report are included in your 1998 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 14, 1998
Chicago, Illinois
---------------
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
Navistar International Corporation:
We consent to the incorporation by reference in the Registration
Statements, including post-effective amendments, No. 2-70979, No. 33-26847, No.
333-25783, No. 333-29735, No. 333-29739 and No. 333-29301 of Navistar
International Corporation, all on Form S-8, of our reports dated December 14,
1998, relating to the financial statements of Navistar International Corporation
and Navistar Financial Corporation, appearing and incorporated by reference in
this Annual Report on Form 10-K of Navistar International Corporation for the
year ended October 31, 1998.
Deloitte & Touche LLP
December 22, 1998
Chicago, Illinois
PAGE 1
SCHEDULE II
NAVISTAR INTERNATIONAL CORPORATION
AND CONSOLIDATED SUBSIDIARIES
============
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEARS ENDED OCTOBER 31, 1998, 1997 AND 1996
(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:
1998
----
Uncollectible notes
and accounts
Allowance for written off and
losses on Notes and accounts reserve adjustment,
receivables .... receivable .... $ 31 $ 3 less recoveries ... $ 1 $ 33
===== ===== ===== =====
1997
----
Uncollectible notes
and accounts
Allowance for written off and
losses on Notes and accounts reserve adjustment,
receivables .... receivable .... $ 31 $ 14 less recoveries ... $ 14 $ 31
===== ===== ===== =====
1996
----
Uncollectible notes
and accounts
Allowance for written off and
losses on Notes and accounts reserve adjustment,
receivables .... receivable .... $ 28 $ 21 less recoveries ... $ 18 $ 31
===== ===== ===== =====
F-1