UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
|
|||||||||||
FORM
10-Q
|
|||||||||||
(X)
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
|
||||||||||
SECURITIES
EXCHANGE ACT OF 1934
|
|||||||||||
For
the quarterly period ended July 31, 2005
|
|||||||||||
OR
|
|||||||||||
(
)
|
TRANSITION
REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
|
||||||||||
SECURITIES
EXCHANGE ACT OF 1934
|
|||||||||||
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
incorporation
or organization)
|
(I.R.S.
Employer
Identification
No.)
|
||||||||||
4201
Winfield Road, P.O. Box 1488
Warrenville,
Illinois 60555
|
|||||||||||
|
|||||||||||
(Address
of principal executive offices, Zip Code)
|
|||||||||||
Registrant's
telephone number, including area code (630) 753-5000
|
|||||||||||
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 whether the registrant is an accelerated filer (as
defined
in Rule12b-2 of the Act.) Yes X
No
__
|
|||||||||||
Indicate
by check mark whether the registrant is a shell company (as defined
in
Rule12b-2 of the Act.) Yes
No
X .
|
|||||||||||
APPLICABLE
ONLY TO ISSUERS INVOLVED
IN
BANKRUPTCY PROCEEDINGS DURING
THE
PRECEDING FIVE YEARS
|
|||||||||||
Indicate
by check mark whether the registrant has filed all documents and
reports
required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities
under a
plan confirmed by a court. Yes ___No ___
|
|||||||||||
APPLICABLE
ONLY TO CORPORATE ISSUERS:
|
|||||||||||
As
of August 31, 2005, the number of shares outstanding of the registrant's
common stock was 70,106,556.
|
NAVISTAR
INTERNATIONAL CORPORATION
|
|||||
AND
CONSOLIDATED SUBSIDIARIES
|
|||||
INDEX
|
|||||
Page
Reference
|
|||||
Part
I. Financial
Information:
|
|||||
Item
1. Condensed
Consolidated Financial Statements
|
|||||
Statement
of Income
|
|||||
Three
and Nine Months Ended July 31, 2005 and 2004 (restated)
|
|||||
Statement
of Financial Condition
|
|||||
July
31, 2005, October 31, 2004 and July 31, 2004 (restated)
|
|||||
Statement
of Cash Flow
|
|||||
Nine
Months Ended July 31, 2005 and 2004 (restated)
|
|||||
Notes
to the Financial Statements
|
|||||
Additional
Financial Information
|
|||||
Item
2. Management's
Discussion and Analysis of Financial
|
|||||
Condition
and Results of Operations
|
|||||
Item
3. Quantitative
and Qualitative Disclosures
|
|||||
About
Market Risk
|
|||||
Item
4. Controls
and Procedures
|
|||||
Part
II. Other
Information:
|
|||||
Item
1. Legal
Proceedings
|
|||||
Item
2. Unregistered
Sales of Equity Securities and Use of Proceeds
|
|||||
Item
6. Exhibits
|
|||||
Signature
|
|||||
PART
I - FINANCIAL INFORMATION
|
|||||||||||||
ITEM
1. Condensed Consolidated Financial
Statements
|
|||||||||||||
STATEMENT
OF INCOME (Unaudited)
Millions
of dollars, except per share data
|
|||||||||||||
|
|||||||||||||
Navistar
International Corporation
and
Consolidated Subsidiaries
|
|||||||||||||
|
|||||||||||||
Three
Months Ended
July
31
|
Nine
Months Ended
July
31
|
||||||||||||
|
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
|
|
|
|
||||||||||
*
As
Restated
|
*
As
Restated
|
||||||||||||
Sales
and revenues
|
|||||||||||||
Sales
of manufactured products
|
$
|
2,923
|
$
|
2,294
|
$
|
8,318
|
$
|
6,456
|
|||||
Finance
revenue
|
60
|
55
|
180
|
182
|
|||||||||
Other
income
|
11
|
-
|
24
|
9
|
|||||||||
|
|
|
|
||||||||||
Total
sales and revenues
|
2,994
|
2,349
|
8,522
|
6,647
|
|||||||||
|
|
|
|
||||||||||
Costs
and expenses
|
|||||||||||||
Cost
of products and services sold
|
2,474
|
1,953
|
7,149
|
5,582
|
|||||||||
Restructuring
and other non-recurring charges
|
-
|
(5
|
)
|
-
|
(1
|
)
|
|||||||
Postretirement
benefits expense
|
59
|
43
|
178
|
162
|
|||||||||
Engineering
and research expense
|
91
|
66
|
254
|
181
|
|||||||||
Selling,
general and administrative expense
|
210
|
174
|
584
|
473
|
|||||||||
Interest
expense
|
51
|
31
|
126
|
96
|
|||||||||
Other
expense
|
12
|
5
|
26
|
20
|
|||||||||
|
|
|
|
||||||||||
Total
costs and expenses
|
2,897
|
2,267
|
8,317
|
6,513
|
|||||||||
|
|
|
|
||||||||||
Income
before income taxes
|
97
|
82
|
205
|
134
|
|||||||||
Income
tax expense
|
33
|
32
|
70
|
46
|
|||||||||
|
|
|
|
||||||||||
Net
income
|
$
|
64
|
$
|
50
|
$
|
135
|
$
|
88
|
|||||
|
|
|
|
||||||||||
|
|||||||||||||
Earnings
per share
|
|||||||||||||
Basic
|
$
|
0.91
|
$
|
0.72
|
$
|
1.93
|
$
|
1.27
|
|||||
Diluted
|
$
|
0.83
|
$
|
0.66
|
$
|
1.78
|
$
|
1.19
|
|||||
Average
shares outstanding (millions)
|
|||||||||||||
Basic
|
70.1
|
69.9
|
70.1
|
69.6
|
|||||||||
Diluted
|
79.9
|
80.0
|
80.1
|
80.2
|
|||||||||
|
|||||||||||||
See
Notes to Financial Statements.
|
|||||||||||||
* See Note Q to the Financial Statements. |
STATEMENT
OF FINANCIAL CONDITION (Unaudited)
Millions
of dollars
|
||||||||||
|
||||||||||
Navistar
International Corporation
and
Consolidated Subsidiaries
|
||||||||||
|
||||||||||
July
31
2005
|
October
31
2004
|
July
31
2004
|
||||||||
|
|
|
||||||||
ASSETS
|
*
As
Restated
|
|||||||||
Current
assets
|
||||||||||
Cash
and cash equivalents
|
$
|
593
|
$
|
605
|
$
|
478
|
||||
Marketable
securities
|
719
|
182
|
6
|
|||||||
Receivables,
net
|
962
|
1,215
|
850
|
|||||||
Inventories
|
1,064
|
790
|
856
|
|||||||
Deferred
tax asset, net
|
169
|
207
|
152
|
|||||||
Other
assets
|
224
|
168
|
183
|
|||||||
|
|
|
||||||||
Total
current assets
|
3,731
|
3,167
|
2,525
|
|||||||
Marketable
securities
|
523
|
73
|
424
|
|||||||
Finance
and other receivables, net
|
1,108
|
1,222
|
878
|
|||||||
Property
and equipment, net
|
1,533
|
1,444
|
1,405
|
|||||||
Investments
and other assets
|
516
|
374
|
327
|
|||||||
Prepaid
and intangible pension assets
|
90
|
73
|
70
|
|||||||
Deferred
tax asset, net
|
1,266
|
1,239
|
1,290
|
|||||||
|
|
|
||||||||
Total
assets
|
$
|
8,767
|
$
|
7,592
|
$
|
6,919
|
||||
|
|
|
||||||||
LIABILITIES
AND SHAREOWNERS' EQUITY
|
||||||||||
Liabilities
|
||||||||||
Current
liabilities
|
||||||||||
Notes
payable and
current maturities of long-term debt
|
$
|
1,170
|
$
|
823
|
$
|
271
|
||||
Accounts
payable,
principally trade
|
1,383
|
1,462
|
1,161
|
|||||||
Other
liabilities
|
996
|
965
|
844
|
|||||||
|
|
|
||||||||
Total
current liabilities
|
3,549
|
3,250
|
2,276
|
|||||||
Debt:
Manufacturing
operations
|
1,359
|
1,258
|
1,268
|
|||||||
Financial services operations
|
1,361
|
787
|
1,253
|
|||||||
Postretirement
benefits liability
|
1,426
|
1,382
|
1,391
|
|||||||
Other
liabilities
|
384
|
384
|
364
|
|||||||
|
|
|
||||||||
Total
liabilities
|
8,079
|
7,061
|
6,552
|
|||||||
|
|
|
||||||||
Commitments
and contingencies
|
||||||||||
Shareowners'
equity
|
||||||||||
Series
D convertible junior preference stock
|
4
|
4
|
4
|
|||||||
Common
stock and additional paid in capital
(75.3
million shares issued)
|
2,078
|
2,096
|
2,087
|
|||||||
Retained
earnings (deficit)
|
(470
|
)
|
(604
|
)
|
(762
|
)
|
||||
Accumulated
other comprehensive loss
|
(756
|
)
|
(789
|
)
|
(782
|
)
|
||||
Common
stock held in treasury, at cost
|
||||||||||
(5.2
million, 5.3 million and 5.5 million shares held)
|
(168
|
)
|
(176
|
)
|
(180
|
)
|
||||
|
|
|
||||||||
Total
shareowners’ equity
|
688
|
531
|
367
|
|||||||
|
|
|
||||||||
Total
liabilities and shareowners’ equity
|
$
|
8,767
|
$
|
7,592
|
$
|
6,919
|
||||
|
|
|
||||||||
|
||||||||||
See
Notes to Financial Statements.
|
||||||||||
* See Note Q to the Financial Statements. |
STATEMENT
OF CASH FLOW (Unaudited)
Millions
of dollars
|
|||||||
|
|||||||
Navistar
International Corporation
and
Consolidated Subsidiaries
|
|||||||
|
|||||||
Nine
Months Ended
July
31
|
|||||||
|
|||||||
2005
|
2004
|
||||||
|
|
||||||
*
As
Restated
|
|||||||
Cash
flow from operating activities
|
|||||||
Net
income
|
$
|
135
|
$
|
88
|
|||
Adjustments
to reconcile net income to cash provided by (used in) operating
activities:
|
|||||||
Depreciation
and amortization
|
168
|
149
|
|||||
Deferred
income taxes
|
20
|
18
|
|||||
Postretirement
benefits funding less than (in excess of) expense
|
45
|
(173
|
)
|
||||
Gains
on sales of receivables
|
(14
|
)
|
(26
|
)
|
|||
Other,
net
|
(20
|
)
|
(89
|
)
|
|||
Change
in operating assets and liabilities, net of effect of
acquisitions:
|
|||||||
Receivables
|
79
|
(45
|
)
|
||||
Inventories
|
(246
|
)
|
(240
|
)
|
|||
Prepaid
and other current assets
|
(34
|
)
|
(30
|
)
|
|||
Accounts
payable
|
(50
|
)
|
51
|
||||
Other
liabilities
|
3
|
61
|
|||||
|
|
||||||
Cash
provided by (used in) operating activities
|
86
|
(236
|
)
|
||||
|
|
||||||
Cash
flow from investment programs
|
|||||||
Purchases
of retail notes and lease receivables
|
(1,240
|
)
|
(1,192
|
)
|
|||
Collections/sales
of retail notes and lease receivables
|
1,537
|
1,360
|
|||||
Purchases
of marketable securities
|
(1,676
|
)
|
(235
|
)
|
|||
Sales
or maturities of marketable securities
|
688
|
401
|
|||||
Capital
expenditures
|
(107
|
)
|
(103
|
)
|
|||
Property
and equipment leased to others
|
21
|
4
|
|||||
Acquisitions
and investment in affiliates
|
(229
|
)
|
(1
|
)
|
|||
Other
investment programs
|
(83
|
)
|
(16
|
)
|
|||
|
|
||||||
Cash
provided by (used in) investment programs
|
(1,089
|
)
|
218
|
||||
|
|
||||||
Cash
flow from financing activities
|
|||||||
Issuance
of debt
|
1,029
|
165
|
|||||
Principal
payments on debt
|
(111
|
)
|
(194
|
)
|
|||
Net
increase in notes and debt outstanding under bank revolving credit
facility and commercial paper programs
|
80
|
56
|
|||||
Premium
on call options, net
|
-
|
(22
|
)
|
||||
Other
financing activities
|
(7
|
)
|
24
|
||||
|
|
||||||
Cash
provided by financing activities
|
991
|
29
|
|||||
|
|
||||||
Cash
and cash equivalents
|
|||||||
Increase
(decrease) during the period
|
(12
|
)
|
11
|
||||
At
beginning of the period
|
605
|
467
|
|||||
|
|
||||||
Cash
and cash equivalents at end of the period
|
$
|
593
|
$
|
478
|
|||
|
|
||||||
Supplemental
cash flow information
|
|||||||
Interest
paid
|
$
|
122
|
$
|
113
|
|||
Income
taxes paid, net of refunds
|
$
|
18
|
$
|
16
|
|||
|
|||||||
See
Notes to Financial Statements.
|
|||||||
* See Note Q to the Financial Statements. |
Three
Months Ended
July
31
|
Nine
Months Ended
July
31
|
||||||||||||
|
|
||||||||||||
Millions
of dollars, except per share data
|
2005
|
2004
|
2005
|
2004
|
|||||||||
|
|
|
|
|
|||||||||
Net
income, as reported
|
$
|
64
|
$
|
50
|
$
|
135
|
$
|
88
|
|||||
Add:
Interest expense on 2.5% senior convertible and 4.75% subordinated
exchangeable debt for dilutive purposes (net of tax)
|
2
|
3
|
7
|
7
|
|||||||||
|
|
|
|
||||||||||
Adjusted
net income available to common shareholders plus assumed
conversions
|
66
|
53
|
142
|
95
|
|||||||||
Deduct:
Total stock-based employee compensation expense determined under
fair
value based method for all awards net of related tax
effects
|
(2
|
)
|
(3
|
)
|
(8
|
)
|
(10
|
)
|
|||||
|
|
|
|
||||||||||
Pro
forma net income
|
$
|
64
|
$
|
50
|
$
|
134
|
$
|
85
|
|||||
|
|
|
|
||||||||||
Earnings
per share:
|
|||||||||||||
Basic
- as reported
|
$
|
0.91
|
$
|
0.72
|
$
|
1.93
|
$
|
1.27
|
|||||
Basic
- pro forma
|
$
|
0.88
|
$
|
0.68
|
$
|
1.81
|
$
|
1.13
|
|||||
Diluted
- as reported
|
$
|
0.83
|
$
|
0.66
|
$
|
1.78
|
$
|
1.19
|
|||||
Diluted
- pro forma
|
$
|
0.80
|
$
|
0.62
|
$
|
1.67
|
$
|
1.06
|
Three
Months Ended
July
31
|
Nine
Months Ended
July
31
|
||||||||||||
|
|
||||||||||||
Millions
of dollars
|
2005
|
2004
|
2005
|
2004
|
|||||||||
|
|
|
|
|
|||||||||
Pension
expense
|
$
|
17
|
$
|
14
|
$
|
52
|
$
|
52
|
|||||
Other
benefits expense
|
42
|
32
|
126
|
108
|
|||||||||
Profit
sharing provision to Trust
|
-
|
(3
|
)
|
-
|
2
|
||||||||
|
|
|
|
||||||||||
Net
postretirement benefits expense
|
$
|
59
|
$
|
43
|
$
|
178
|
$
|
162
|
|||||
|
|
|
|
Pension
Expense
|
|||||||||||||
|
|||||||||||||
Three
Months Ended
July
31
|
Nine
Months Ended
July
31
|
||||||||||||
|
|
||||||||||||
Millions
of dollars
|
2005
|
2004
|
2005
|
2004
|
|||||||||
|
|
|
|
|
|||||||||
Service
costs for benefits earned during the period
|
$
|
6
|
$
|
3
|
$
|
18
|
$
|
17
|
|||||
Interest
on obligation
|
55
|
58
|
166
|
174
|
|||||||||
Amortization
of cumulative losses
|
15
|
12
|
44
|
37
|
|||||||||
Amortization
of prior service cost
|
2
|
1
|
6
|
4
|
|||||||||
Other
|
6
|
7
|
19
|
20
|
|||||||||
Less
expected return on assets
|
(67
|
)
|
(67
|
)
|
(201
|
)
|
(200
|
)
|
|||||
|
|
|
|
||||||||||
Net
pension expense
|
$
|
17
|
$
|
14
|
$
|
52
|
$
|
52
|
|||||
|
|
|
|
||||||||||
Other
Benefits Expense
|
|||||||||||||
|
|||||||||||||
Three
Months Ended
July
31
|
Nine
Months Ended
July
31
|
||||||||||||
|
|
||||||||||||
Millions
of dollars
|
2005
|
2004
|
2005
|
2004
|
|||||||||
|
|
|
|
|
|||||||||
Service
costs for benefits earned during the period
|
$
|
4
|
$
|
3
|
$
|
13
|
$
|
10
|
|||||
Interest
on obligation
|
36
|
34
|
108
|
105
|
|||||||||
Amortization
of cumulative losses
|
15
|
10
|
45
|
31
|
|||||||||
Other
|
-
|
(1
|
)
|
-
|
3
|
||||||||
Less
expected return on assets
|
(13
|
)
|
(14
|
)
|
(40
|
)
|
(41
|
)
|
|||||
|
|
|
|
||||||||||
Net
other benefits expense
|
$
|
42
|
$
|
32
|
$
|
126
|
$
|
108
|
|||||
|
|
|
|
July
31
|
October
31
|
July
31
|
||||||||
Millions
of dollars
|
2005
|
2004
|
2004
|
|||||||
|
|
|
|
|||||||
Finished
products
|
$
|
675
|
$
|
505
|
$
|
539
|
||||
Work
in process
|
57
|
47
|
69
|
|||||||
Raw
materials and supplies
|
332
|
238
|
248
|
|||||||
|
|
|
||||||||
Total
inventories
|
$
|
1,064
|
$
|
790
|
$
|
856
|
||||
|
|
|
Three
Months Ended
July
31
|
Nine
Months Ended
July
31
|
||||||||||||
|
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
|
|
|
|
||||||||||
Sales
of retail receivables
|
$
|
385
|
$
|
325
|
$
|
1,559
|
$
|
1,120
|
|||||
Gain
on sales of retail receivables
|
3
|
3
|
14
|
26
|
· |
Replacement
of steel cab trucks with a new line of High Performance Vehicles
(HPV) and
a concurrent realignment of the company’s truck manufacturing facilities
|
· |
Launch
of the next generation technology diesel engines
(NGD)
|
· |
Consolidation
of corporate operations
|
· |
Realignment
of the bus and truck dealership network and termination of various
dealerships’ contracts
|
· |
Closure
of certain facilities and operations and exit of certain activities
including the Chatham, Ontario heavy truck assembly facility, the
Springfield, Ohio body plant and a manufacturing production line
within
one of the company’s plants
|
· |
Offer
of early retirement and voluntary severance programs to certain union
represented employees
|
Millions
of dollars
|
Balance
October 31
2004
|
Amount
Incurred
|
Balance
July
31
2005
|
|||||||
|
|
|
|
|||||||
Lease
terminations
|
$
|
21
|
$
|
(4
|
)
|
$
|
17
|
|||
Dealer
terminations and other charges
|
12
|
-
|
12
|
|||||||
Other
non-recurring charges
|
64
|
(7
|
)
|
57
|
||||||
|
|
|
||||||||
Total
|
$
|
97
|
$
|
(11
|
)
|
$
|
86
|
|||
|
|
|
Inception
Date
|
Maturity
Date
|
Derivative
Type
|
Notional
Amount
|
Fair
Value
|
|||||||||
|
|
|
|
|
|||||||||
October
2003 -
April
2005
|
April
2008 -
September
2009
|
Interest
rate swaps*
|
$
|
16
|
$
|
-
|
|||||||
July
2001 -
June
2004
|
April
2006 -
June
2011
|
Interest
rate swaps
|
929
|
1
|
|||||||||
October
2000 -
September
2001
|
October
2009 -
November
2012
|
Interest
rate caps
|
2,065
|
-
|
|||||||||
Entity
|
Amount
of Guaranty
|
Outstanding
Balance
|
Maturity
dates extend to
|
|||||||
|
|
|
|
|||||||
NIC
|
$
|
393
|
(1)
|
$
|
99
|
2010
|
||||
NFC
|
145
|
127
|
2010
|
|||||||
NIC
and NFC
|
100
|
10
|
2010
|
Millions
of dollars
|
||||
|
|
|||
Balance,
beginning of period
|
$
|
286
|
||
Change
in liability for warranties issued during the period
|
171
|
|||
Change
in liability for pre-existing warranties
|
20
|
|||
Payments
made
|
(199
|
)
|
||
|
||||
Balance,
end of period
|
$
|
278
|
||
|
Millions
of dollars
|
Truck
|
Engine
|
Financial
Services
|
Total
|
|||||||||
|
|||||||||||||
For
the quarter ended July 31, 2005
|
|||||||||||||
|
|||||||||||||
External
revenues
|
$
|
2,211
|
$
|
712
|
$
|
65
|
$
|
2,988
|
|||||
Intersegment
revenues
|
-
|
181
|
16
|
197
|
|||||||||
|
|
|
|
||||||||||
Total
revenues
|
$
|
2,211
|
$
|
893
|
$
|
81
|
$
|
3,185
|
|||||
|
|
|
|
||||||||||
Segment
profit
|
$
|
113
|
$
|
13
|
$
|
26
|
$
|
152
|
|||||
|
For
the nine months ended July 31, 2005
|
||||||||||||
|
|||||||||||||
External
revenues
|
$
|
6,355
|
$
|
1,963
|
$
|
190
|
$
|
8,508
|
|||||
Intersegment
revenues
|
-
|
515
|
44
|
559
|
|||||||||
|
|
|
|
||||||||||
Total
revenues
|
$
|
6,355
|
$
|
2,478
|
$
|
234
|
$
|
9,067
|
|||||
|
|
|
|
||||||||||
Segment
profit
|
$
|
262
|
$
|
9
|
$
|
88
|
$
|
359
|
|||||
|
As
of July 31, 2005
|
||||||||||||
|
|||||||||||||
Segment
assets
|
$
|
2,173
|
$
|
1,564
|
$
|
2,827
|
$
|
6,564
|
|||||
|
For
the quarter ended July 31, 2004
|
||||||||||||
|
|||||||||||||
External
revenues
|
$
|
1,789
|
$
|
504
|
$
|
56
|
$
|
2,349
|
|||||
Intersegment
revenues
|
-
|
159
|
10
|
169
|
|||||||||
|
|
|
|
||||||||||
Total
revenues
|
$
|
1,789
|
$
|
663
|
$
|
66
|
$
|
2,518
|
|||||
|
|
|
|
||||||||||
Segment
profit
|
$
|
85
|
$
|
34
|
$
|
26
|
$
|
145
|
|||||
|
For
the nine months ended July 31, 2004
|
||||||||||||
|
|||||||||||||
External
revenues
|
$
|
4,936
|
$
|
1,521
|
$
|
185
|
$
|
6,642
|
|||||
Intersegment
revenues
|
-
|
440
|
29
|
469
|
|||||||||
|
|
|
|
||||||||||
Total
revenues
|
$
|
4,936
|
$
|
1,961
|
$
|
214
|
$
|
7,111
|
|||||
|
|
|
|
||||||||||
Segment
profit
|
$
|
164
|
$
|
71
|
$
|
86
|
$
|
321
|
|||||
|
As
of July 31, 2004
|
||||||||||||
|
|||||||||||||
Segment
assets
|
$
|
1,781
|
$
|
1,091
|
$
|
2,153
|
$
|
5,025
|
|||||
Three
Months Ended
July
31
|
Nine
Months Ended
July
31
|
||||||||||||
|
|
||||||||||||
Millions
of dollars
|
2005
|
2004
|
2005
|
2004
|
|||||||||
|
|
|
|
|
|||||||||
Segment
sales and revenues
|
$
|
3,185
|
$
|
2,518
|
$
|
9,067
|
$
|
7,111
|
|||||
Other
income
|
6
|
-
|
14
|
5
|
|||||||||
Intercompany
|
(197
|
)
|
(169
|
)
|
(559
|
)
|
(469
|
)
|
|||||
|
|
|
|
||||||||||
Consolidated
sales and revenues
|
$
|
2,994
|
$
|
2,349
|
$
|
8,522
|
$
|
6,647
|
|||||
|
|
|
|
||||||||||
Segment
profit
|
$
|
152
|
$
|
145
|
$
|
359
|
$
|
321
|
|||||
Restructuring
adjustment
|
-
|
5
|
-
|
1
|
|||||||||
Corporate
items
|
(38
|
)
|
(51
|
)
|
(109
|
)
|
(146
|
)
|
|||||
Manufacturing
net interest expense
|
(17
|
)
|
(17
|
)
|
(45
|
)
|
(42
|
)
|
|||||
|
|
|
|
||||||||||
Consolidated
pre-tax income
|
$
|
97
|
$
|
82
|
$
|
205
|
$
|
134
|
|||||
|
|
|
|
||||||||||
Segment
assets
|
$
|
6,564
|
$
|
5,025
|
|||||||||
Cash
and marketable securities
|
634
|
281
|
|||||||||||
Deferred
taxes
|
1,435
|
1,442
|
|||||||||||
Corporate
intangible pension assets
|
1
|
3
|
|||||||||||
Other
corporate and eliminations
|
133
|
168
|
|||||||||||
|
|
||||||||||||
Consolidated
assets
|
$
|
8,767
|
$
|
6,919
|
|||||||||
|
|
Three
Months Ended
July
31
|
Nine
Months Ended
July
31
|
||||||||||||
|
|
||||||||||||
Millions
of dollars
|
2005
|
2004
|
2005
|
2004
|
|||||||||
|
|
|
|
|
|||||||||
Net
income
|
$
|
64
|
$
|
50
|
$
|
135
|
$
|
88
|
|||||
Other
comprehensive income (loss)
|
13
|
(8
|
)
|
33
|
(4
|
)
|
|||||||
|
|
|
|
||||||||||
Total
comprehensive income
|
$
|
77
|
$
|
42
|
$
|
168
|
$
|
84
|
|||||
|
|
|
|
Three
Months Ended
July
31
|
Nine
Months Ended
July
31
|
||||||||||||
|
|
||||||||||||
Millions
of dollars,
except
share and per share data
|
2005
|
2004
|
2005
|
2004
|
|||||||||
|
|
|
|
|
|||||||||
Net
income
|
$
|
64
|
$
|
50
|
$
|
135
|
$
|
88
|
|||||
Add:
Interest expense on 2.5% senior convertible and 4.75% subordinated
exchangeable debt for dilutive purposes (net of tax)
|
2
|
3
|
7
|
7
|
|||||||||
|
|
|
|
||||||||||
Net
income available to common shareholders plus assumed
conversions
|
$
|
66
|
$
|
53
|
$
|
142
|
$
|
95
|
|||||
|
|
|
|
||||||||||
Average
shares outstanding (millions)
|
|||||||||||||
Basic
|
70.1
|
69.9
|
70.1
|
69.6
|
|||||||||
Convertible
debt
|
9.5
|
9.5
|
9.5
|
9.5
|
|||||||||
Stock
options
|
0.3
|
0.6
|
0.5
|
1.1
|
|||||||||
|
|
|
|
||||||||||
Diluted
|
79.9
|
80.0
|
80.1
|
80.2
|
|||||||||
Earnings
per share
|
|||||||||||||
Basic
|
$
|
0.91
|
$
|
0.72
|
$
|
1.93
|
$
|
1.27
|
|||||
Diluted
|
$
|
0.83
|
$
|
0.66
|
$
|
1.78
|
$
|
1.19
|
|||||
Millions
of dollars
|
NIC
|
International
|
Non-Guarantor
Companies and Eliminations
|
Consolidated
|
|||||||||
|
|
|
|
|
|||||||||
CONDENSED
CONSOLIDATING STATEMENT OF INCOME FOR THE NINE MONTHS ENDED JULY
31,
2005
|
|||||||||||||
Sales
and revenues
|
$
|
8
|
$
|
6,402
|
$
|
2,112
|
$
|
8,522
|
|||||
|
|
|
|
||||||||||
Cost
of products and services sold
|
5
|
5,964
|
1,180
|
7,149
|
|||||||||
All
other operating expenses
|
(25
|
)
|
842
|
351
|
1,168
|
||||||||
|
|
|
|
||||||||||
Total
costs and expenses
|
(20
|
)
|
6,806
|
1,531
|
8,317
|
||||||||
|
|
|
|
||||||||||
Equity
in income (loss) of non-consolidated subsidiaries
|
177
|
464
|
(641
|
)
|
-
|
||||||||
|
|
|
|
||||||||||
Income
(loss) before income taxes
|
205
|
60
|
(60
|
)
|
205
|
||||||||
Income
tax expense (benefit)
|
70
|
61
|
(61
|
)
|
70
|
||||||||
|
|
|
|
||||||||||
Net
income (loss)
|
$
|
135
|
$
|
(1
|
)
|
$
|
1
|
$
|
135
|
||||
|
|
|
|
||||||||||
CONDENSED
CONSOLIDATING STATEMENT OF FINANCIAL CONDITION AS OF JULY 31,
2005
|
|||||||||||||
Assets
|
|||||||||||||
Cash
and marketable securities
|
$
|
552
|
$
|
9
|
$
|
1,274
|
$
|
1,835
|
|||||
Receivables,
net
|
1
|
239
|
1,830
|
2,070
|
|||||||||
Inventories
|
-
|
486
|
578
|
1,064
|
|||||||||
Property
and equipment, net
|
-
|
719
|
814
|
1,533
|
|||||||||
Investment
in affiliates
|
(2,562
|
)
|
1,752
|
810
|
-
|
||||||||
Deferred
tax asset and other assets
|
1,391
|
238
|
636
|
2,265
|
|||||||||
|
|
|
|
||||||||||
Total
assets
|
$
|
(618
|
)
|
$
|
3,443
|
$
|
5,942
|
$
|
8,767
|
||||
|
|
|
|
||||||||||
Liabilities
and shareowners’ equity
|
|||||||||||||
Debt
|
$
|
1,459
|
$
|
13
|
$
|
2,418
|
$
|
3,890
|
|||||
Postretirement
benefits liability
|
-
|
1,369
|
238
|
1,607
|
|||||||||
Amounts
due to (from) affiliates
|
(2,866
|
)
|
3,692
|
(826
|
)
|
-
|
|||||||
Other
liabilities
|
101
|
1,453
|
1,028
|
2,582
|
|||||||||
|
|
|
|
||||||||||
Total
liabilities
|
(1,306
|
)
|
6,527
|
2,858
|
8,079
|
||||||||
|
|
|
|
||||||||||
Shareowners’
equity (deficit)
|
688
|
(3,084
|
)
|
3,084
|
688
|
||||||||
|
|
|
|
||||||||||
Total
liabilities and shareowners’ equity
|
$
|
(618
|
)
|
$
|
3,443
|
$
|
5,942
|
$
|
8,767
|
||||
|
|
|
|
||||||||||
CONDENSED
CONSOLIDATING STATEMENT OF CASH FLOW FOR THE NINE MONTHS ENDED JULY
31,
2005
|
|||||||||||||
Cash
provided by (used in) operating activities
|
$
|
(426
|
)
|
$
|
162
|
$
|
350
|
$
|
86
|
||||
|
|
|
|
||||||||||
Cash
flow from investment programs
|
|||||||||||||
Purchases,
net of collections, of finance receivables
|
-
|
-
|
297
|
297
|
|||||||||
Net
decrease in marketable securities
|
(20
|
)
|
-
|
(968
|
)
|
(988
|
)
|
||||||
Capital
expenditures
|
-
|
(41
|
)
|
(66
|
)
|
(107
|
)
|
||||||
Other
investing activities
|
(7
|
)
|
(216
|
)
|
(68
|
)
|
(291
|
)
|
|||||
|
|
|
|
||||||||||
Cash
used in investment programs
|
(27
|
)
|
(257
|
)
|
(805
|
)
|
(1,089
|
)
|
|||||
|
|
|
|
||||||||||
Cash
flow from financing activities
|
|||||||||||||
Net
borrowing (repayments) of debt
|
401
|
(2
|
)
|
599
|
998
|
||||||||
Other
financing activities
|
3
|
79
|
(89
|
)
|
(7
|
)
|
|||||||
|
|
|
|
||||||||||
Cash
provided by financing activities
|
404
|
77
|
510
|
991
|
|||||||||
|
|
|
|
||||||||||
Cash
and cash equivalents
|
|||||||||||||
Increase
(decrease) during the period
|
(49
|
)
|
(18
|
)
|
55
|
(12
|
)
|
||||||
At
beginning of the period
|
406
|
22
|
177
|
605
|
|||||||||
|
|
|
|
||||||||||
Cash
and cash equivalents at end of the period
|
$
|
357
|
$
|
4
|
$
|
232
|
$
|
593
|
|||||
|
|
|
|
Millions
of dollars
|
NIC
|
International
|
Non-Guarantor
Companies and Eliminations
|
Consolidated
|
|||||||||
|
|
|
|
|
|||||||||
CONDENSED
CONSOLIDATING STATEMENT OF INCOME FOR THE NINE MONTHS ENDED JULY
31,
2004
|
|||||||||||||
Sales
and revenues
|
$
|
1
|
$
|
5,132
|
$
|
1,514
|
$
|
6,647
|
|||||
|
|
|
|
||||||||||
Cost
of products and services sold
|
(31
|
)
|
4,709
|
904
|
5,582
|
||||||||
Restructuring
and other non-recurring charges
|
-
|
(4
|
)
|
3
|
(1
|
)
|
|||||||
All
other operating expenses
|
(12
|
)
|
701
|
243
|
932
|
||||||||
|
|
|
|
||||||||||
Total
costs and expenses
|
(43
|
)
|
5,406
|
1,150
|
6,513
|
||||||||
|
|
|
|
||||||||||
Equity
in income (loss) of non-consolidated subsidiaries
|
90
|
258
|
(348
|
)
|
-
|
||||||||
|
|
|
|
||||||||||
Income
(loss) before income taxes
|
134
|
(16
|
)
|
16
|
134
|
||||||||
Income
tax expense (benefit)
|
46
|
27
|
(27
|
)
|
46
|
||||||||
|
|
|
|
||||||||||
Net
income (loss)
|
$
|
88
|
$
|
(43
|
)
|
$
|
43
|
$
|
88
|
||||
|
|
|
|
||||||||||
CONDENSED
CONSOLIDATING STATEMENT OF FINANCIAL CONDITION AS OF JULY 31,
2004
|
|||||||||||||
Assets
|
|||||||||||||
Cash
and marketable securities
|
$
|
166
|
$
|
14
|
$
|
728
|
$
|
908
|
|||||
Receivables,
net
|
1
|
138
|
1,589
|
1,728
|
|||||||||
Inventories
|
-
|
421
|
435
|
856
|
|||||||||
Property
and equipment, net
|
-
|
761
|
644
|
1,405
|
|||||||||
Investment
in affiliates
|
(2,741
|
)
|
989
|
1,752
|
-
|
||||||||
Deferred
tax asset and other assets
|
1,462
|
211
|
349
|
2,022
|
|||||||||
|
|
|
|
||||||||||
Total
assets
|
$
|
(1,112
|
)
|
$
|
2,534
|
$
|
5,497
|
$
|
6,919
|
||||
|
|
|
|
||||||||||
Liabilities
and shareowners’ equity
|
|||||||||||||
Debt
|
$
|
1,058
|
$
|
15
|
$
|
1,719
|
$
|
2,792
|
|||||
Postretirement
benefits liability
|
-
|
1,348
|
208
|
1,556
|
|||||||||
Amounts
due to (from) affiliates
|
(2,633
|
)
|
3,063
|
(430
|
)
|
-
|
|||||||
Other
liabilities
|
96
|
1,326
|
782
|
2,204
|
|||||||||
|
|
|
|
||||||||||
Total
liabilities
|
(1,479
|
)
|
5,752
|
2,279
|
6,552
|
||||||||
|
|
|
|
||||||||||
Shareowners’
equity (deficit)
|
367
|
(3,218
|
)
|
3,218
|
367
|
||||||||
|
|
|
|
||||||||||
Total
liabilities and shareowners’ equity
|
$
|
(1,112
|
)
|
$
|
2,534
|
$
|
5,497
|
$
|
6,919
|
||||
|
|
|
|
||||||||||
CONDENSED
CONSOLIDATING STATEMENT OF CASH FLOW FOR THE NINE MONTHS ENDED JULY
31,
2004
|
|||||||||||||
Cash
provided by (used in) operating activities
|
$
|
(275
|
)
|
$
|
(19
|
)
|
$
|
58
|
$
|
(236
|
)
|
||
|
|
|
|
||||||||||
Cash
flow from investment programs
|
|||||||||||||
Purchases,
net of collections, of finance receivables
|
-
|
-
|
168
|
168
|
|||||||||
Net
increase in marketable securities
|
22
|
-
|
144
|
166
|
|||||||||
Capital
expenditures
|
-
|
(72
|
)
|
(31
|
)
|
(103
|
)
|
||||||
Other
investing activities
|
-
|
55
|
(68
|
)
|
(13
|
)
|
|||||||
|
|
|
|
||||||||||
Cash
provided by (used in) investment programs
|
22
|
(17
|
)
|
213
|
218
|
||||||||
|
|
|
|
||||||||||
Cash
flow from financing activities
|
|||||||||||||
Net
borrowing (repayment) of debt
|
218
|
(2
|
)
|
(211
|
)
|
5
|
|||||||
Other
financing activities
|
(17
|
)
|
31
|
10
|
24
|
||||||||
|
|
|
|
||||||||||
Cash
provided by (used in) financing activities
|
201
|
29
|
(201
|
)
|
29
|
||||||||
|
|
|
|
||||||||||
Cash
and cash equivalents
|
|||||||||||||
Increase
(decrease) during the period
|
(52
|
)
|
(7
|
)
|
70
|
11
|
|||||||
At
beginning of the period
|
218
|
21
|
228
|
467
|
|||||||||
|
|
|
|
||||||||||
Cash
and cash equivalents at end of the period
|
$
|
166
|
$
|
14
|
$
|
298
|
$
|
478
|
|||||
|
|
|
|
Navistar
International Corporation
and
Consolidated Subsidiaries
|
|||||||||||||
|
|||||||||||||
STATEMENT
OF INCOME
|
Three
Months Ended
July
31, 2004
|
Nine
Months Ended
July
31, 2004
|
|||||||||||
|
|
||||||||||||
Millions
of dollars
|
As
Previously Reported
|
As
Restated
|
As
Previously Reported [1]
|
As
Restated
|
|||||||||
|
|
|
|
|
|||||||||
Sales
and revenues
|
|||||||||||||
Sales
of manufactured products
|
$
|
2,301
|
$
|
2,294
|
$
|
6,362
|
$
|
6,456
|
|||||
Finance
revenue
|
59
|
55
|
179
|
182
|
|||||||||
Other
income
|
-
|
-
|
9
|
9
|
|||||||||
|
|
|
|
||||||||||
Total
sales and revenues
|
2,360
|
2,349
|
6,550
|
6,647
|
|||||||||
|
|
|
|
||||||||||
Costs
and expenses
|
|||||||||||||
Cost
of products and services sold
|
1,984
|
1,953
|
5,563
|
5,582
|
|||||||||
Restructuring
and other non-recurring charges
|
(5
|
)
|
(5
|
)
|
(1
|
)
|
(1
|
)
|
|||||
Postretirement
benefits expense
|
46
|
43
|
165
|
162
|
|||||||||
Engineering
and research expense
|
66
|
66
|
181
|
181
|
|||||||||
Selling,
general and administrative expense
|
151
|
174
|
405
|
473
|
|||||||||
Interest
expense
|
29
|
31
|
90
|
96
|
|||||||||
Other
expense
|
4
|
5
|
20
|
20
|
|||||||||
|
|
|
|
||||||||||
Total
costs and expenses
|
2,275
|
2,267
|
6,423
|
6,513
|
|||||||||
|
|
|
|
||||||||||
Income
before income taxes
|
85
|
82
|
127
|
134
|
|||||||||
Income
tax expense
|
29
|
32
|
39
|
46
|
|||||||||
|
|
|
|
||||||||||
Net
income
|
$
|
56
|
$
|
50
|
$
|
88
|
$
|
88
|
|||||
|
|
|
|
||||||||||
|
|||||||||||||
Earnings
per share
|
|||||||||||||
Basic
|
$
|
0.80
|
$
|
0.72
|
$
|
1.27
|
$
|
1.27
|
|||||
Diluted
|
$
|
0.73
|
$
|
0.66
|
$
|
1.19
|
$
|
1.19
|
|||||
Average
shares outstanding (millions)
|
|||||||||||||
Basic
|
69.9
|
69.9
|
69.6
|
69.6
|
|||||||||
Diluted
|
80.0
|
80.0
|
80.2
|
80.2
|
|||||||||
|
Navistar
International Corporation
and
Consolidated Subsidiaries
|
|||||||
|
|||||||
STATEMENT
OF FINANCIAL CONDITION
|
As
of
July
31, 2004
|
||||||
|
|||||||
Millions
of dollars
|
As
Previously Reported
|
As
Restated
|
|||||
|
|
|
|||||
ASSETS
|
|||||||
Current
assets
|
|||||||
Cash
and cash equivalents
|
$
|
473
|
$
|
478
|
|||
Marketable
securities
|
6
|
6
|
|||||
Receivables,
net
|
749
|
850
|
|||||
Inventories
|
787
|
856
|
|||||
Deferred
tax asset, net
|
152
|
152
|
|||||
Other
assets
|
186
|
183
|
|||||
|
|
||||||
Total
current assets
|
2,353
|
2,525
|
|||||
Marketable
securities
|
424
|
424
|
|||||
Finance
and other receivables, net
|
878
|
878
|
|||||
Property
and equipment, net
|
1,333
|
1,405
|
|||||
Investments
and other assets
|
348
|
327
|
|||||
Prepaid
and intangible pension assets
|
70
|
70
|
|||||
Deferred
tax asset, net
|
1,466
|
1,290
|
|||||
|
|
||||||
Total
assets
|
$
|
6,872
|
$
|
6,919
|
|||
|
|
||||||
LIABILITIES
AND SHAREOWNERS' EQUITY
|
|||||||
Liabilities
|
|||||||
Current
liabilities
|
|||||||
Notes
payable and current maturities of long-term debt
|
$
|
259
|
$
|
271
|
|||
Accounts
payable, principally trade
|
1,134
|
1,161
|
|||||
Other
liabilities
|
856
|
844
|
|||||
|
|
||||||
Total
current liabilities
|
2,249
|
2,276
|
|||||
Debt: Manufacturing
operations
|
1,071
|
1,268
|
|||||
Financial
services operations
|
1,253
|
1,253
|
|||||
Postretirement
benefits liability
|
1,391
|
1,391
|
|||||
Other
liabilities
|
517
|
364
|
|||||
|
|
||||||
Total
liabilities
|
6,481
|
6,552
|
|||||
|
|
||||||
Commitments
and contingencies
|
|||||||
Shareowners'
equity
|
|||||||
Series
D convertible junior preference stock
|
4
|
4
|
|||||
Common
stock and additional paid in capital (75.3 million shares
issued)
|
2,087
|
2,087
|
|||||
Retained
earnings (deficit)
|
(770
|
)
|
(762
|
)
|
|||
Accumulated
other comprehensive loss
|
(784
|
)
|
(782
|
)
|
|||
Common
stock held in treasury, at cost (5.5 million shares held)
|
(146
|
)
|
(180
|
)
|
|||
|
|
||||||
Total
shareowners' equity
|
391
|
367
|
|||||
|
|
||||||
Total
liabilities and shareowners' equity
|
$
|
6,872
|
$
|
6,919
|
|||
|
|
||||||
Condensed
Statement of Income
|
Three
Months Ended
July
31
|
Nine
Months Ended
July
31
|
|||||||||||
|
|
||||||||||||
Millions
of dollars
|
2005
|
2004
|
2005
|
2004
|
|||||||||
|
|
|
|
|
|||||||||
As
Restated
|
As
Restated
|
||||||||||||
Sales
of manufactured products
|
$
|
2,923
|
$
|
2,292
|
$
|
8,318
|
$
|
6,456
|
|||||
Other
income
|
6
|
-
|
14
|
5
|
|||||||||
|
|
|
|
||||||||||
Total
sales and revenues
|
2,929
|
2,292
|
8,332
|
6,461
|
|||||||||
|
|
|
|
||||||||||
Cost
of products sold
|
2,465
|
1,942
|
7,120
|
5,545
|
|||||||||
Restructuring
and other non-recurring charges
|
-
|
(5
|
)
|
-
|
(1
|
)
|
|||||||
Postretirement
benefits expense
|
58
|
42
|
175
|
160
|
|||||||||
Engineering
and research expense
|
91
|
66
|
254
|
181
|
|||||||||
Selling,
general and administrative expense
|
191
|
161
|
532
|
432
|
|||||||||
Other
expense
|
54
|
31
|
135
|
99
|
|||||||||
|
|
|
|
||||||||||
Total
costs and expenses
|
2,859
|
2,237
|
8,216
|
6,416
|
|||||||||
|
|
|
|
||||||||||
Income
before income taxes:
|
|||||||||||||
Manufacturing
operations
|
70
|
55
|
116
|
45
|
|||||||||
Financial
services operations
|
27
|
27
|
89
|
89
|
|||||||||
|
|
|
|
||||||||||
Income
before income taxes
|
97
|
82
|
205
|
134
|
|||||||||
Income
tax expense
|
33
|
32
|
70
|
46
|
|||||||||
|
|
|
|
||||||||||
Net
income
|
$
|
64
|
$
|
50
|
$
|
135
|
$
|
88
|
|||||
|
|
|
|
Condensed
Statement of Financial Condition
|
July
31
|
October
31
|
July
31
|
|||||||
Millions
of dollars
|
2005
|
2004
|
2004
|
|||||||
|
|
|
|
|||||||
As
Restated
|
||||||||||
Cash,
cash equivalents and marketable securities
|
$
|
731
|
$
|
737
|
$
|
371
|
||||
Inventories
|
1,053
|
779
|
824
|
|||||||
Property
and equipment, net
|
1,414
|
1,283
|
1,233
|
|||||||
Equity
in non-consolidated subsidiaries
|
604
|
549
|
512
|
|||||||
Other
assets
|
1,346
|
1,129
|
926
|
|||||||
Deferred
tax asset, net
|
1,433
|
1,445
|
1,442
|
|||||||
|
|
|
||||||||
Total
assets
|
$
|
6,581
|
$
|
5,922
|
$
|
5,308
|
||||
|
|
|
||||||||
Accounts
payable, principally trade
|
$
|
1,411
|
$
|
1,436
|
$
|
1,175
|
||||
Postretirement
benefits liability
|
1,584
|
1,544
|
1,534
|
|||||||
Debt
|
1,803
|
1,329
|
1,299
|
|||||||
Other
liabilities
|
1,095
|
1,082
|
933
|
|||||||
Shareowners’
equity
|
688
|
531
|
367
|
|||||||
|
|
|
||||||||
Total
liabilities and shareowners’ equity
|
$
|
6,581
|
$
|
5,922
|
$
|
5,308
|
||||
|
|
|
Condensed
Statement of Cash Flow
|
Nine
Months Ended
July
31
|
||||||
|
|||||||
Millions
of dollars
|
2005
|
2004
|
|||||
|
|
|
|||||
As
Restated
|
|||||||
Cash
flow from operating activities
|
|||||||
Net
income
|
$
|
135
|
$
|
88
|
|||
Adjustments
to reconcile net income to cash provided by (used in) operating
activities:
|
|||||||
Depreciation
and amortization
|
163
|
136
|
|||||
Deferred
income taxes
|
9
|
22
|
|||||
Postretirement
benefits funding less than (in excess of) expense
|
45
|
(173
|
)
|
||||
Equity
in earnings of investees, net of dividends received
|
(54
|
)
|
(56
|
)
|
|||
Other,
net
|
(36
|
)
|
(95
|
)
|
|||
Change
in operating assets and liabilities, net of effect of
acquisitions
|
(353
|
)
|
(137
|
)
|
|||
|
|
||||||
Cash
used in operating activities
|
(91
|
)
|
(215
|
)
|
|||
|
|
||||||
Cash
flow from investment programs
|
|||||||
Purchases
of marketable securities
|
(712
|
)
|
(225
|
)
|
|||
Sales
or maturities of marketable securities
|
685
|
302
|
|||||
Capital
expenditures
|
(105
|
)
|
(102
|
)
|
|||
Receivable
from financial services operations
|
65
|
(13
|
)
|
||||
Investment
in affiliates
|
(228
|
)
|
(1
|
)
|
|||
Other
investment programs
|
(84
|
)
|
(14
|
)
|
|||
|
|
||||||
Cash
used in investment programs
|
(379
|
)
|
(53
|
)
|
|||
|
|
||||||
Cash
provided by financing activities
|
436
|
195
|
|||||
|
|
||||||
Cash
and cash equivalents
|
|||||||
Decrease
during the period
|
(34
|
)
|
(73
|
)
|
|||
At
beginning of the period
|
556
|
444
|
|||||
|
|
||||||
Cash
and cash equivalents at end of the period
|
$
|
522
|
$
|
371
|
|||
|
|
Key
Financial Indicators:
|
Three
Months Ended
July
31
|
Nine
Months Ended
July
31
|
|||||||||||
|
|
||||||||||||
(Millions
of dollars, except per share data and margin)
|
2005
|
2004
|
2005
|
2004
|
|||||||||
|
|
|
|
|
|||||||||
Sales
and revenues
|
$
|
2,994
|
$
|
2,349
|
$
|
8,522
|
$
|
6,647
|
|||||
Cost
of products and services sold
|
2,474
|
1,953
|
7,149
|
5,582
|
|||||||||
Total
expenses
|
423
|
314
|
1,168
|
931
|
|||||||||
|
|
|
|
||||||||||
Total
costs and expenses
|
2,897
|
2,267
|
8,317
|
6,513
|
|||||||||
Net
income
|
$
|
64
|
$
|
50
|
$
|
135
|
$
|
88
|
|||||
|
|
|
|
||||||||||
Diluted
earnings per share
|
$
|
0.83
|
$
|
0.66
|
$
|
1.78
|
$
|
1.19
|
|||||
Manufacturing
gross margin
|
15.7
|
%
|
15.3
|
%
|
14.4
|
%
|
14.1
|
%
|
|||||
Three
Months Ended
July
31
|
Nine
Months Ended
July
31
|
||||||||||||
|
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
|
|
|
|
||||||||||
Results
(Millions of dollars):
|
|||||||||||||
Sales
|
$
|
2,211
|
$
|
1,789
|
$
|
6,355
|
$
|
4,936
|
|||||
Segment
profit
|
113
|
85
|
262
|
164
|
|||||||||
Industry
data (in units) [1]:
|
|||||||||||||
U.S.
and Canadian sales (Class 6 through 8)
|
107,200
|
90,300
|
308,300
|
248,100
|
|||||||||
Class
8 heavy truck
|
75,200
|
58,700
|
206,800
|
154,400
|
|||||||||
Class
6 and 7 medium truck [2]
|
25,300
|
25,100
|
82,000
|
73,700
|
|||||||||
School
buses
|
6,700
|
6,500
|
19,500
|
20,000
|
|||||||||
Company
data (in units):
|
|||||||||||||
U.S.
and Canadian sales (Class 6 through 8)
|
28,100
|
24,900
|
84,300
|
69,200
|
|||||||||
Class
8 heavy truck
|
14,400
|
11,600
|
39,800
|
28,100
|
|||||||||
Class
6 and 7 medium truck [2]
|
9,500
|
9,400
|
32,300
|
29,300
|
|||||||||
School
buses
|
4,200
|
3,900
|
12,200
|
11,800
|
|||||||||
Order
backlog (in units)
|
26,100
|
27,600
|
|||||||||||
Overall
U.S. and Canada market share
(Class
6 through 8 and school buses)
|
26.2
|
%
|
27.6
|
%
|
27.3
|
%
|
27.9
|
%
|
|||||
Three
Months Ended
July
31
|
Nine
Months Ended
July
31
|
||||||||||||
|
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
|
|
|
|
||||||||||
Results
(Millions of dollars):
|
|||||||||||||
Sales
|
$
|
893
|
$
|
663
|
$
|
2,478
|
$
|
1,961
|
|||||
Segment
profit
|
13
|
34
|
9
|
71
|
|||||||||
Sales
data (in units):
|
|||||||||||||
Total
engine sales
|
133,400
|
101,700
|
366,900
|
302,300
|
|||||||||
OEM
sales
|
111,800
|
83,000
|
306,100
|
248,600
|
|||||||||
Three
Months Ended
July
31
|
Nine
Months Ended
July
31
|
||||||||||||
|
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
|
|
|
|
||||||||||
Results
(Millions of dollars):
|
|||||||||||||
Revenue
|
$
|
81
|
$
|
66
|
$
|
234
|
$
|
214
|
|||||
Segment
profit
|
26
|
26
|
88
|
86
|
|||||||||
Sales
of retail receivables
|
$
|
385
|
$
|
325
|
$
|
1,559
|
$
|
1,120
|
|||||
Gain
on sales of retail receivables
|
3
|
3
|
14
|
26
|
|||||||||
Millions
of dollars
|
Balance
October 31
2004
|
Amount
Incurred
|
Balance
July
31
2005
|
|||||||
|
|
|
|
|||||||
Lease
terminations
|
$
|
21
|
$
|
(4
|
)
|
$
|
17
|
|||
Dealer
terminations and other charges
|
12
|
-
|
12
|
|||||||
Other
non-recurring charges
|
64
|
(7
|
)
|
57
|
||||||
|
|
|
||||||||
Total
|
$
|
97
|
$
|
(11
|
)
|
$
|
86
|
|||
|
|
|
Nine
Months Ended
|
||||
Millions
of dollars
|
July
31, 2005
|
|||
|
|
|||
Cash
flow from operating activities
|
$
|
86
|
||
Cash
flow from investment programs
|
(1,089
|
)
|
||
Cash
flow from financing activities
|
991
|
|||
|
||||
Total
cash flow
|
$
|
(12
|
)
|
|
|
||||
Cash
and cash equivalents, beginning balance
|
$
|
605
|
||
Cash
and cash equivalents, ending balance
|
$
|
593
|
||
Outstanding
capital commitments
|
$
|
154
|
Company
|
Instrument
type
|
Total
Amount
|
Purpose
of funding
|
Amount
utilized
|
Matures
or expires
|
|||||||||||
|
|
|
|
|
|
|||||||||||
TERFCO
|
Trust
|
$
|
100
|
Unsecured
Ford trade receivables
|
$
|
50
|
2005
|
|||||||||
NFSC
|
Revolving
wholesale note trust
|
$
|
1,479
|
Eligible
wholesale notes
|
$
|
1,191
|
2005
through
2010
|
|||||||||
TRAC
|
Revolving
retail account conduit
|
$
|
100
|
Eligible
retail accounts
|
$
|
95
|
2005
|
|||||||||
TRIP
|
Revolving
retail facility
|
$
|
500
|
Retail
notes and leases
|
$
|
-
|
2005
|
|||||||||
|
||||||||||||||||
TRIP
|
Revolving
retail facility
|
$
|
500
|
Retail
notes and leases
|
$
|
500
|
2010
|
|||||||||
NFC
|
|
Revolving
credit facilities
|
$
|
1,200
|
Retail
notes and leases
|
$
|
708
|
(1)
|
2010
|
|||||||
|
||||||||||||||||
(1) $10 million of this amount is utilized by NIC’s Mexican finance subsidiaries. |
Navistar
International Corporation and Consolidated Subsidiaries
|
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
The
company’s primary market risks include fluctuations in interest rates and
currency exchange rates as further described in Item 7A of the 2004
Annual
Report on Form 10-K.
Interest
rate risk is the risk that the company will incur economic losses
due to
adverse changes in interest rates. The company measures its interest
rate
risk by estimating the net amount by which the fair value of all
of its
interest rate sensitive assets and liabilities would be impacted
by
selected hypothetical changes in market interest rates. Fair value
is
estimated using a discounted cash flow analysis. Assuming a hypothetical
instantaneous 10% adverse change in interest rates as of July 31,
2005,
the net fair value of these instruments would decrease by approximately
$34 million. The company’s interest rate sensitivity analysis assumes a
parallel shift in interest rate yield curves. The model, therefore,
does
not reflect the potential impact of changes in the relationship between
short-term and long-term interest rates.
The
company is exposed to changes in the price of commodities used in
its
manufacturing operations. Due to the amount of steel used in its
production of truck cabs, buses and engines, the company is exposed
to
steel price fluctuations. During the first three quarters of fiscal
2005,
steel prices were higher than fiscal 2004, but steel prices have
recently
leveled off. The year-to-date impacet of steel price increases, net
of
recovery through pricing, has been approximately $85 million. The
company
expects the full year impact from steel to be at least $100
million.
Foreign
currency risk is the risk that the company will incur economic losses
due
to adverse changes in foreign currency exchange rates. The company’s
primary exposures to foreign currency exchange fluctuations are the
Canadian dollar/U.S. dollar, Mexican peso/U.S. dollar and Brazilian
real/U.S. dollar. The potential reduction in future earnings from
a
hypothetical instantaneous 10% adverse change in quoted foreign currency
spot rates applied to foreign currency sensitive instruments would
be
approximately $7 million at July 31, 2005.
|
|
Item
4.
|
Controls
and Procedures
|
Evaluation
of disclosure controls and procedures
The
company’s principal executive officer and principal financial officer,
along with other management of the company, evaluated the effectiveness
of
the company’s disclosure controls and procedures (as defined in rule
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934,
as
amended (the Exchange Act)) as of July 31, 2005. Based on that evaluation,
the principal executive officer and principal financial officer of
the
company concluded that, as of July 31, 2005, there were weaknesses
in the
disclosure controls and procedures within the company’s finance
subsidiary, NFC, related to the lack of a sufficient quantity of
specialized accounting personnel. Because of the weakness noted within
the
finance subsidiary, the principal executive officer and principal
financial officer of the company concluded that the disclosure controls
and procedures in place at the company were not effective. Management
of
the company’s finance subsidiary is in the process of adding additional
specialized accounting personnel.
Changes
in internal controls over financial reporting
The
company has not made any significant changes to its internal control
over
financial reporting (as defined in rule 13a-15(f) and 15d-15(f) under
the
Exchange Act) during the fiscal quarter ended July 31, 2005 that
have
materially affected, or are reasonably likely to materially affect,
the
company’s internal control over financial reporting except for the changes
in controls at one of the company’s foundry operations at which control
issues were identified and corrected during the third quarter. Based
on a
thorough review of the accounting records at this facility that was
completed during the third quarter, the company determined that improved
controls were needed in the areas of inventory accounting and account
reconciliation and review. Improvements in controls were made by
replacing
certain personnel, aligning the location’s accounting practices with
corporate policies and GAAP and increasing the level of analysis
and
review over the location’s financial statements.
|
Navistar
International Corporation and Consolidated Subsidiaries
|
|
PART
II - OTHER INFORMATION
|
|
Item
1.
|
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
that constitute ordinary routine litigation incidental to the business
of
the company and its subsidiaries. The majority of these claims and
proceedings relate to commercial, product liability and warranty
matters.
In the opinion of the company’s management, the disposition of these
proceedings and claims, including those discussed below, after taking
into
account established reserves and the availability and limits of the
company’s insurance coverage, will not have a material adverse affect on
the business or the financial condition of the company.
In
December 2003, the United States Environmental Protection
Agency (US EPA) issued a Notice of Violation to the company in conjunction
with the operation of its engine casting facility in Indianapolis,
Indiana. Specifically, the US EPA alleged that the company violated
applicable environmental regulations
by failing to obtain the necessary permit in connection with the
construction of certain equipment and complying with the best available
control technology for emissions from such equipment. The company
is
currently in discussions with the US EPA and believes that its discussions
will result in capital improvements together with monetary sanctions
which
will not be material.
Various
claims and controversies have arisen between the company and its
former
fuel system supplier, Caterpillar Inc. (Caterpillar), regarding the
ownership and validity of certain patents covering fuel system technology
used in the company's new version of diesel engines that were introduced
in February 2002. In June 1999, in Federal Court in Peoria, Illinois,
Caterpillar sued Sturman Industries, Inc. (Sturman), the company’s joint
venture partner in developing fuel system technology, alleging that
technology invented and patented by Sturman and licensed to the company,
belongs to Caterpillar. After a trial, on July 18, 2002, the jury
returned
a verdict in favor of Caterpillar finding that this technology belongs
to
Caterpillar under a prior contract between Caterpillar and Sturman.
Sturman appealed the adverse judgment, and the jury’s verdict was reversed
by the appellate court on October 28, 2004 and remanded to the district
court for retrial. The company is cooperating with Sturman in this
effort.
In May 2003, in Federal Court in Columbia, South Carolina, Caterpillar
sued the company, its supplier of fuel injectors and joint venture,
Siemens Diesel Systems Technology, L.L.C., and Sturman for patent
infringement alleging that the Sturman fuel system technology patents
and
certain Caterpillar patents are infringed in the company’s new engines.
The company believes that it has meritorious defenses to the claims
of
infringement of the Sturman patents as well as the Caterpillar patents
and
will vigorously defend such claims. In January 2002, Caterpillar
sued the
company in the Circuit Court in Peoria County, Illinois, alleging
the
company breached the purchase agreement pursuant to which Caterpillar
supplied fuel systems for the company’s prior version of diesel engines.
Caterpillar’s claims involve a 1990 agreement to reimburse Caterpillar for
costs associated with the delayed launch of the company’s V-8 diesel
engine program. Reimbursement of the delay costs was made by a surcharge
of $8.08 on each injector purchased and the purchase of certain minimum
quantities of spare parts. In 1999, the company concluded that, in
accordance with the 1990 agreement, it had fully reimbursed Caterpillar
for its delay costs and stopped paying the surcharge and purchasing
the
minimum quantities of spare parts. Caterpillar is asserting that
the
surcharge and the spare parts purchase requirements continue throughout
the life of the contract and has sued the company to recover these
amounts, plus interest. Caterpillar also asserts that the company
failed
to purchase all of its fuel injector requirements under the contract
and,
in collusion with Sturman, failed to pursue a future fuel systems
supply
relationship with Caterpillar. The company believes that it has
meritorious defenses to Caterpillar’s claims.
Along
with other vehicle manufacturers, the company and certain of its
subsidiaries have been subject to an increase in the number of
asbestos-related claims in recent years. Management believes that
such
claims will not have a material adverse affect on the company’s financial
condition or results of operations. In general these claims relate
to
illnesses alleged to have resulted from asbestos exposure from component
parts found in older vehicles, although some cases relate to the
presence
of asbestos in company facilities. In these claims the company is
not the
sole defendant, and the claims name as defendants numerous manufacturers
and suppliers of a wide variety of products allegedly containing
asbestos.
Management has strongly disputed these claims, and it has been the
company’s policy to defend against them vigorously. Historically, the
actual damages paid out to claimants have not been material to the
company’s results of operations and financial condition. However,
management believes
|
|
Navistar
International Corporation and Consolidated Subsidiaries
|
|
PART
II - OTHER INFORMATION
|
|
Item
1.
|
Legal
Proceedings (continued)
|
the
company and other vehicle manufacturers are being more aggressively
targeted, largely as a result of bankruptcies of manufacturers of
asbestos
and products containing asbestos. It is possible that the number
of these
claims will continue to grow, and that the costs for resolving asbestos
related claims could become significant in the future.
On
October 13, 2004, the company received a request from the staff of
the SEC
to voluntarily produce certain documents and information related
to the
company’s accounting practices with respect to defined benefit pension
plans and other postretirement benefits. The company is fully cooperating
with this request. Based on the status of the inquiry, the company
is not
able to predict the final outcome.
On
January 31, 2005, the company announced that it would restate its
financial results for fiscal years 2002 and 2003 and the first three
quarters of fiscal 2004. The SEC notified the company on February
9, 2005,
that it was conducting an informal inquiry into the company’s restatement.
On March 17, 2005, the company was advised by the SEC that the status
of
the inquiry had been changed to a formal investigation. The company
is
fully cooperating with the SEC on this investigation. Based on the
status
of the investigation, the company is not able to predict the final
outcome.
|
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
Directors
of the company who are not employees receive an annual retainer and
meeting fees payable at their election in shares of common stock
of the
company or in cash. Currently the board of directors mandates that
at
least one-fourth of the annual retainer be paid in the form of common
stock of the company. For the period covered by this report, receipt
of
approximately 1,272 shares were deferred as payment for the fiscal
year
2005 annual retainer and meeting fees. In each case, the shares were
acquired at prices ranging from $30.195 to $34.03 per share, which
represented the fair market value of such shares on the date of
acquisition. Exemption from registration of the shares is claimed
by the
company under Section 4(2) of the Securities Act of 1933, as
amended.
Payments
of cash dividends and the repurchase of common stock are currently
limited
due to restrictions contained in the company’s $400 million Senior Notes
due 2006, $250 million Senior Notes due 2011, $400 million Senior
Notes
due 2012 and $19 million Senior Notes. The company has not paid dividends
on the common stock since 1980 and does not expect to pay cash dividends
on the common stock in the foreseeable future.
|
Navistar
International Corporation and Consolidated Subsidiaries
|
||
PART
II - OTHER INFORMATION
|
||
Item
6.
|
Exhibits
|
Page
|
(a) Exhibits:
|
||
3. Articles
of Incorporation and By-Laws
|
||
4. Instruments
Defining the Rights of Security Holders, Including
Indentures
|
|
|
10. Material
Contracts
|
||
11. Computation
of Earnings per Share (incorporated by reference from Note O to the
Financial Statements)
|
||
31.1 CEO
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
|
31.2
CFO Certification pursuant to Section 302 of the Sarbanes-Oxley Act
of
2002.
|
|
|
32.1 CEO
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
|
|
32.2 CFO
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
|
Date:
September 9, 2005
|
|
/s/
Mark T. Schwetschenau
|
|
|
|
Mark
T. Schwetschenau
|
|
Senior
Vice President and Controller
|
|
(Principal
Accounting Officer)
|