Document/Exhibit Description Pages Size
1: 10-K Annual Report 43 96K
2: EX-3 Articles of Incorporation/Organization or By-Laws 1 8K
3: EX-3 Articles of Incorporation/Organization or By-Laws 37 73K
4: EX-4 Instrument Defining the Rights of Security Holders 2± 9K
5: EX-10 Material Contract 3 14K
6: EX-11 Statement re: Computation of Earnings Per Share 2± 9K
7: EX-13 Annual or Quarterly Report to Security Holders 133 293K
8: EX-22 Published Report Regarding Matters Submitted to a 1 7K
Vote of Security Holders
9: EX-27 Financial Data Schedule (Pre-XBRL) 1 8K
10: EX-28 Information from a Report Furnished to State 87 189K
Insurance Regulatory Authorities
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, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission file number 1-9618
N A V I S T A R I N T E R N A T I O N A L C O R P O R A T I O N
---------------------------------------------------------------------
(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 Stock Exchange
$6.00 cumulative convertible preferred stock,
Series G (with $1.00 par value) New York Stock Exchange
Cumulative convertible junior preference stock,
Series D (with $1.00 par value) New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months and (2) has been
subject to such filing requirements for the past 90 days: Yes X No
--- ---
As of January 20, 1995, the aggregate market value of Common Stock
(excluding Class B Common Stock) held by non-affiliates of the registrant
was $790,281,440.
As of January 20, 1995, the number of shares outstanding of the
registrant's Common Stock was 49,392,590 and the Class B Common was
25,034,861.
Documents Incorporated by Reference
-----------------------------------
1994 Annual Report to Shareowners (Parts I, II and IV)
1994 Proxy Statement (Parts I and III)
Navistar Financial Corporation 1994 Annual Report on Form 10-K (Part IV)
2
NAVISTAR INTERNATIONAL CORPORATION
FORM 10-K
Year Ended October 31, 1994
INDEX
10-K Page
---------
PART I
Item 1. Business .......................................... 3
Item 2. Properties ........................................ 12
Item 3. Legal Proceedings ................................. 12
Executive Officers of the Registrant .............. 14
Item 4. Submission of Matters to a Vote of Security Holders 15
PART II
Item 5. Market for the Registrant's Common Equity
and Related Stockholder Matters ................. 15
Item 6. Selected Financial Data ........................... 15
Item 7. Management's Discussion and Analysis
of Results of Operations and Financial Condition. 15
Item 8. Financial Statements and Supplementary Data ....... 15
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure .......... 15
PART III
Item 10. Directors and Executive Officers of the Registrant 15
Item 11. Executive Compensation ........................... 15
Item 12. Security Ownership of Certain Beneficial Owners
and Management ................................. 15
Item 13. Certain Relationships and Related Transactions ... 15
PART IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K ........................ 16
SIGNATURES
Principal Accounting Officer ............................... 18
Directors .................................................. 19
POWER OF ATTORNEY .......................................... 19
INDEPENDENT AUDITORS' REPORT ............................... 21
INDEPENDENT AUDITORS' CONSENT .............................. 21
SCHEDULES .................................................. F-1
EXHIBITS ................................................... E-1
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 and "Parent Company" refers to Navistar International
Corporation alone.
Navistar, through its wholly-owned subsidiary Transportation,
operates in one principal business segment, the manufacture and marketing
of Class 5 through 8 diesel trucks, including school bus chassis, mid-
range diesel engines and service parts in the United States and Canada and
in selected export markets. Transportation is the industry market share
leader in the combined Class 5 through 8 truck market in the United States
and Canada, offering a full line of diesel-powered products in the common
carrier, private carrier, government/service, leasing, construction,
energy/petroleum and student transportation markets. Transportation also
produces mid-range diesel engines for use in its Class 5, 6 and 7 medium
trucks and for sale to original equipment manufacturers. Transportation
markets its products through an extensive distribution network which
includes 951 dealer and distribution outlets in the United States and
Canada. Service and customer support are also supplied at these outlets.
As a further extension of its business, Transportation provides financing
and insurance for its dealers, distributors and retail customers through
its wholly-owned subsidiary, Navistar Financial Corporation, referred to
as "Navistar Financial". See "Important Supporting Operations".
THE MEDIUM AND HEAVY TRUCK INDUSTRY
The market in which Navistar competes is subject to considerable
volatility as it moves in response to cycles in the overall business
environment and is particularly sensitive to the industrial sector which
generates a significant portion of the freight tonnage hauled. Government
regulation has impacted and will continue to impact trucking operations
and efficiency and the specifications of equipment.
The following table shows retail deliveries in the combined United
States and Canadian markets for the five years ended October 31, 1994, in
thousands of units.
YEARS ENDED OCTOBER 31,
-----------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
Class 5, 6 and 7 medium trucks
and school bus chassis ..... 134.2 122.5 118.3 120.1 149.8
Class 8 heavy trucks ......... 205.4 166.4 125.2 109.0 139.0
----- ----- ----- ----- -----
Total ...................... 339.6 288.9 243.5 229.1 288.8
===== ===== ===== ===== =====
Source: Based upon monthly data by the American Automobile
Manufacturers Associations (AAMA) in the United States and Canada and
other sources.
4
The truck market in the United States and Canada is highly
competitive. Major domestic competitors include PACCAR, Ford and General
Motors, as well as foreign-controlled manufacturers, such as Freightliner,
Mack and Volvo GM. In addition, manufacturers from Japan (Hino, Isuzu,
Nissan and Mitsubishi) are competing in the United States and Canadian
markets. The intensity of this competitiveness, which is expected to
continue, 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 and utility and a
comprehensive distribution system.
TRANSPORTATION MARKET SHARE
Transportation delivered 91,600 Class 5 through 8 trucks in the
United States and Canada in fiscal 1994, a 15% increase from the 79,800 in
1993. Navistar's combined share of the Class 5 through 8 truck market in
1994 was 27%. Transportation has been the leader in combined market share
for Class 5 through 8 trucks, including school bus chassis, in the United
States and Canada in each of its last 14 fiscal years.
PRODUCTS AND SERVICES
The following table illustrates the percentage of Transportation's
sales by class of product based on dollar amount:
YEARS ENDED OCTOBER 31,
--------------------------
PRODUCT CLASS 1994 1993 1992
------------- ---- ---- ----
Class 5, 6 and 7 medium trucks
and school bus chassis ..... 32% 31% 36%
Class 8 heavy trucks ......... 42 44 39
Service parts ................ 14 14 15
Engines ...................... 12 11 10
---- ---- ----
Total ...................... 100% 100% 100%
==== ==== ====
Transportation offers a full line of Class 5 through 8 trucks, with
the objective of serving the customer better and more effectively by
addressing requirements for increased performance and value.
Transportation has made continuing improvements in its Class 8 heavy truck
image. In 1994, new products were introduced including integrated sleeper
cabs (Pro Sleeper) in four sizes, anti-lock brakes as standard equipment
on 9000 series conventionals and cabovers, and changes in the 5000 series
of trucks (Paystar) which improve weight distribution. In addition, the
new T444E diesel engine was introduced in 1994 as the first fully
electronic mid-range diesel engine produced. This engine will further
enhance Class 5, 6 and 7 medium truck operating performance and life.
Transportation was recognized at the industry's largest trade show of
the year by winning the award for the "Most Significant Powered Vehicle"
for the 9200 Premium Conventional tractor with the all-new 51" Hi-Rise Pro
Sleeper. According to a recent survey conducted by J. D. Power and
Associates on 1994 Medium-Duty Truck Customer Satisfaction, Navistar
ranked number one in customer satisfaction in product and service for
Class 5, 6 and 7 medium conventional trucks for the second consecutive
year.
5
For over two decades, Transportation has been the leading supplier of
school bus chassis in the United States. Chassis are sold through dealers
and national account managers for delivery to the ultimate customers:
school districts and contractors. Transportation manufactures chassis for
conventional school buses, as well as chassis for use in small capacity
buses designed to meet the needs of disabled students. In addition to its
traditional chassis business, Transportation has invested in American
Transportation Corporation (AmTran), a manufacturer of school bus bodies.
Through its relationship with AmTran, Transportation participates in the
trend toward the integrated design and manufacture of school buses, which
offers the potential for improved production and marketing efficiencies
and a reduction in the school bus order cycle.
Transportation offers only diesel-powered trucks and buses because of
their improved fuel economy, ease of serviceability and greater durability
over gasoline-powered vehicles. Transportation's Class 8 heavy trucks
generally use diesel engines purchased from outside suppliers however, in
1994, it began offering the new T444E engine for use in its heavy trucks.
Class 5, 6 and 7 medium trucks are powered by diesel engines manufactured
by Transportation. In 1993, Transportation launched its all new world
class series of in-line six cylinder diesel engines for bus and Class 5
through 8 truck models. Transportation is the leading supplier of mid-
range diesel engines in the 150-300 horsepower range according to data
supplied by a private research firm, Power Systems Research of
Minneapolis, Minnesota. Based upon information published by R.L. Polk &
Company, diesel-powered Class 5, 6 and 7 medium truck shipments
represented 81% of all medium truck shipments for fiscal year 1994 in the
United States and Canada.
Transportation's truck manufacturing operations in the United States
and Canada consist principally of the assembly of components manufactured
by its suppliers, although Transportation produces its own mid-range
diesel truck engines, sheet metal components (including cabs) and
miscellaneous other parts.
The following is a summary of Transportation's truck manufacturing
capacity utilization for the five years ended October 31, 1994.
YEARS ENDED OCTOBER 31,
-----------------------
1994 1993 1992 1991 1990
------ ------ ------ ------ ------
Production units ............ 94,993 88,274 73,901 70,502 80,737
Total production capacity ... 112,966 106,032 106,088 106,762 114,402
Capacity utilization ........ 84.1% 83.3% 69.7% 66.0% 70.6%
Total production capacity varies as a result of changes in the number
of days of production during a year as well as changes in production
constraints.
ENGINE & FOUNDRY
Transportation builds diesel engines for use in its Class 5, 6 and 7
medium trucks, school buses, selected Class 8 heavy truck models and for
sale to original equipment manufacturers. Production in 1994 totalled
192,400 units, an increase of 9.7% from the 175,500 units produced in
1993.
6
Transportation has completed a major capital investment in its engine
products and facilities to manufacture a new generation of mid-range
diesel engines in both the in-line six cylinder and V-8 configurations.
This new generation of engines is designed to respond to customer demands
for engines that have more power, improved fuel economy, longer life, and
meet current emission requirements through 1997. The engines are offered
in a wider horsepower range than previously offered, which will give
Transportation an opportunity to expand the number of applications for its
engines and broaden its customer base. Transportation believes that its
family of diesel engines, each designed to provide superior performance in
customer applications, offers both the lowest cost of ownership and
excellent value to its customers.
In September 1993, Transportation introduced three new in-line six
cylinder engines that replaced its long-standing DT family of engines in
International Class 5, 6 and 7 medium trucks. These new engines, the DT
466 [175-230 HP], DT 466 High Torque [195-250 HP] and the International
530 [250-300 HP] offer displacements of 466 and 530 cubic inches. These
in-line six cylinder products feature 20 percent longer life as a result
of larger main and rod bearings, stronger crankshafts, and gear driven
accessories. In 1995, full electronic control of the fuel system will be
incorporated into three new six-cylinder engine models, the DT 466E, DT
466E High Torque and International 530E. These electronically controlled
engines will offer the customer a flexible array of features such as
cruise control, self diagnostics and an engine protection system.
Transportation is the first to offer a totally electronic mid-range
diesel engine family which meets emissions standards without the use of
catalytic converters. With the introduction of the 8.7 Liter 530 and 530E
engines, Transportation offers to customers who, in the past have only
been able to purchase larger 10 Liter class engines, a lighter-weight,
more cost-effective product.
In February 1994, Transportation replaced the 7.3 Liter V-8 diesel
engine with an entirely new product. The T444E is a 444 cubic inch V-8
engine with an electronically controlled fuel injection system. This new
diesel engine offers significant customer advantages, with a 10 to 15
percent improvement in fuel economy, 30 to 40 percent enhancement in
durability, and improved power and torque when compared to
Transportation's 7.3 Liter V-8 product. The new V-8 also meets current
emissions requirements cost-effectively and includes such optional
features as electronic cruise control, electronically controlled power
take-off and diagnostic capabilities.
Based on U.S. registrations published by R.L. Polk & Company, the
T444E electronically controlled diesel engine is the leading engine of its
class. In addition to its strong contribution to the market position of
Transportation's medium trucks, a light truck version, marketed as the 7.3
Liter Direct Injection Diesel, has had significant external sales.
Transportation has entered into an agreement to supply this new V-8
product to a major automotive company through the year 2000 for use in all
of its diesel-powered light trucks and vans. Sales of this engine to the
automotive company currently accounts for approximately 88% of Navistar's
444E sales. Shipments to all original equipment manufacturers totalled a
record 130,600 units in 1994, an increase of 11% from the 118,200 units
shipped in 1993.
7
The following is a summary of Transportation's engine capacity
utilization for the five years ended October 31, 1994.
YEARS ENDED OCTOBER 31,
-----------------------
1994 1993 1992 1991 1990
------- ------- ------- ------- -------
Engine production units ..... 192,446 175,464 148,991 126,103 160,434
Total production capacity ... 188,000 166,260 166,260 166,720 166,720
Capacity utilization ........ 102.4% 105.5% 89.6% 75.6% 96.2%
Total production capacity varies as a result of changes in product
mix.
Transportation is exploring the development of alternative fuel
engines, including engines powered by compressed natural gas.
Transportation has entered into an agreement with Detroit Diesel
Corporation to develop a natural gas engine based on Transportation's new
V-8 engine and Detroit Diesel's electronic alternative fuel technology.
SERVICE PARTS
The service parts business is a significant contributor to
Transportation's sales and gross margin and to the maintenance of its
Class 5 through 8 truck and engine customer base. In the United States
and Canada, Transportation operates seven regional parts distribution
centers, which allows it to offer 24-hour availability and same day
shipment of the parts most frequently requested by customers.
Transportation is undertaking initiatives to increase parts sales outside
of the United States and Canada. As customers have explored ways to
reduce their costs and improve efficiency, Transportation and its dealers
have established programs to help them manage the parts and maintenance
aspects of their businesses more efficiently. Transportation also offers
a "Fleet Charge" program, which allows participating customers to purchase
parts on credit at all of its dealer locations at consistent and
competitive prices. In 1994, service parts sales increased as a result of
higher net selling prices, export business expansion and growth in dealer
and national accounts.
MARKETING AND DISTRIBUTION
United States and Canadian Operations. Transportation's truck
products are distributed in virtually all key markets in the United States
and Canada through the largest retail organization specializing in medium
and heavy trucks. As part of its continuing program to adapt to changing
market conditions, Transportation has been assisting dealers to expand
their operations to better serve their customer base. Transportation's
truck distribution and service network in the United States and Canada was
composed of 951, 950 and 952 dealers and retail outlets at October 31,
1994, 1993 and 1992, respectively. Included in these totals were 473, 467
and 460 secondary and associate locations at October 31, 1994, 1993 and
1992, respectively.
Retail dealer activity is supported by 5 regional operations in the
United States and a general office in Canada. A national account sales
group is responsible for 155 major national account customers.
8
Transportation's 10 retail and 4 wholesale used truck centers in the
United States and Canada provide sales and trade-in benefits to its
dealers and retail customers.
International Operations. Transportation exports trucks, components
and service parts, both wholesale and retail, to more than 70 countries
around the world. In 1994, 5,100 trucks were exported while 5,300 trucks
were exported in 1993. Cumulatively, from 1986 through 1994,
Transportation was the leading North American exporter of Class 6-8
trucks, according to data provided by the AAMA.
In Mexico, Transportation has an agreement with DINA Camiones, S.A.
(DINA) to supply product technology, components and technical services for
assembly of DINA trucks and buses. In 1994, Transportation exported
almost 10,000 engines to DINA, bringing the total engines shipped to
approximately 30,000 over the past three years. Transportation also has
initiated sales of the in-line six cylinder family of mid-range diesel
engines to Perkins Group, Ltd., of Peterborough, England, for worldwide
distribution and to Detroit Diesel Corporation, the North American
distributor of Perkins.
NAVISTAR FINANCIAL CORPORATION
Navistar Financial is engaged in the wholesale, retail and to a
lesser extent lease financing of new and used trucks sold by
Transportation and its dealers in the United States. Navistar Financial
also finances wholesale accounts and selected retail accounts receivable
of Transportation. Sales of new products (including trailers) of other
manufacturers are also financed regardless of whether designed or
customarily sold for use with Transportation's truck products. During
fiscal 1994 and 1993, Navistar Financial provided wholesale financing for
93% and 90%, respectively, of the new truck units sold by Transportation
to its dealers and distributors in the United States. Navistar Financial
also provided retail financing in fiscal 1994 for approximately 15% of the
new truck units sold by Transportation and its dealers and distributors in
the United States, unchanged from fiscal 1993.
Navistar Financial's wholly-owned insurance subsidiary, Harco
National Insurance Company, provides commercial physical damage and
liability insurance coverage to Transportation's dealers and retail
customers and to the general public through an independent insurance
agency system.
IMPORTANT SUPPORTING OPERATIONS
Third Party Sales Financing Agreements. In the United States,
Transportation has an agreement with Associates Commercial Corporation
(Associates) to provide wholesale financing to certain of its truck
dealers and retail financing to their customers. During fiscal 1994 and
1993, Associates provided 7% and 10%, respectively, of the wholesale
financing utilized by Transportation's dealers and distributors.
Navistar International Corporation Canada has an agreement with a
subsidiary of General Electric Canadian Holdings Limited to provide
financing for Canadian dealers and customers.
9
Foreign Insurance Subsidiaries. Harbour Assurance Company of
Bermuda Limited offers a variety of programs to the Company, including
general liability insurance, ocean cargo coverage for shipments to and
from foreign distributors and reinsurance coverage for various
Transportation policies. The company writes minimal third party coverage
and provides a variety of insurance programs to Transportation, its
dealers, distributors and customers.
CAPITAL EXPENDITURES AND RESEARCH AND DEVELOPMENT
Transportation designs and manufactures its trucks and diesel engines
to meet or exceed specific industry requirements. New products are
introduced and improvements are made, in accordance with operating plans
and market requirements and not on a predetermined cycle.
During 1994, capital expenditures totalled $87 million. Major
program expenditures included continued investment in machinery and
equipment at the Melrose Park, Illinois and Indianapolis, Indiana engine
facilities to manufacture mid-range diesel engines used in trucks and
school bus chassis manufactured by the Company and also sold to original
equipment manufacturers. Other expenditures were made for truck product
improvements, modernization of facilities and compliance with
environmental regulations.
During 1993, capital expenditures totalled $110 million. Major
product program expenditures included investment at the Melrose Park,
Illinois and Indianapolis, Indiana engine facilities to manufacture a new
series of mid-range diesel engines for use within the Company's truck
products and for sale to original equipment manufactures. Other
expenditures were made for truck product improvements, modernization of
facilities and compliance with environmental regulations. In 1992,
capital expenditures were $55 million.
Product development is an ongoing process at Transportation.
Research and development activities are directed toward the introduction
of new products and improvements of existing products and processes used
in their manufacture. Spending for company-sponsored activities totalled
$95 million in 1994 and 1993 and $90 million in 1992.
BACKLOG
The backlog of unfilled truck orders (subject to cancellation or
return in certain events) was as follows:
AT OCTOBER 31 MILLIONS OF DOLLARS UNITS
------------- ------------------- ------
1994 ...... $ 4,197 64,841
1993 ...... $ 1,353 23,939
1992 ...... $ 1,124 20,456
Although the backlog of unfilled orders is one of many indicators of
market demand, many factors may affect point-in-time comparisons such as
changes in production rates, available capacity, new product introductions
and competitive pricing actions.
10
EMPLOYEES
The following table summarizes employment levels as of the end of
fiscal years 1992 through 1994:
TOTAL
AT OCTOBER 31 EMPLOYMENT
------------- ----------
1994 ....................... 14,910
1993 ....................... 13,612
1992 ....................... 13,945
To meet the increased customer demand, additional production workers
were employed at the Chatham, Ontario and Springfield, Ohio Truck
Facilities and at the Melrose Park, Illinois and Indianapolis, Indiana
Engine Facilities.
LABOR RELATIONS
At October 31, 1994, the United Automobile, Aerospace and
Agricultural Implement Workers of America (UAW) represented 8,278 of the
Company's active employees in the United States, and the Canadian Auto
Workers (CAW) represented 1,873 of the Company's active employees in
Canada. Other unions represented 1,015 of the Company's active employees
in the United States and Canada. The Company entered into collective
bargaining agreements with the UAW and CAW in 1993 which expire on October
1, 1995 and October 24, 1996, respectively.
PATENTS AND TRADEMARKS
Transportation continuously obtains patents on its inventions and
thus owns a significant patent portfolio. Additionally, many of the
components which Transportation purchases for its products are protected
by patents that are owned or controlled by the component manufacturer.
Transportation has licenses under third party patents relating to its
products and their manufacture, and Transportation grants licenses under
its patents. The royalties paid or received under these licenses are not
significant. No particular patent or group of patents is considered by
Transportation to be essential to its business as a whole.
Like all businesses which offer well-known products or services,
Transportation's primary trademarks symbolize the Company's goodwill and
provide instant identification of its products and services in the
marketplace and thus, are an important part of its worldwide sales and
marketing efforts. To support these efforts, Transportation maintains, or
has pending, registrations of its primary trademarks in those countries in
which it does business or expects to do business.
11
RAW MATERIALS AND ENERGY SUPPLIES
Transportation purchases raw materials, parts and components from
numerous outside suppliers but relies upon some suppliers for a
substantial number of components for its truck products. Transportation's
purchasing strategies have been designed to improve access to the lowest
cost, highest quality sources of raw materials, parts and components, and
to reduce inventory carrying requirements. A portion of Transportation's
requirements for raw materials and supplies is filled by single source
suppliers.
The impact of an interruption in supply will vary by commodity. Some
parts are generic to the industry while others are of a proprietary design
requiring unique tooling which would require time to recreate. However,
the Company's exposure to a disruption in production as a result of an
interruption of raw materials and supplies is no greater than the industry
as a whole. In order to remedy any losses resulting from an interruption
in supply, the Company maintains contingent business interruption
insurance for storms, fire and water damage. In 1994, as a result of
industry-wide growth and demand, several suppliers experienced capacity
constraints which created interruptions in the flow of supplies to the
Company.
IMPACT OF GOVERNMENT REGULATION
Truck and engine manufacturers continue to face increasing
governmental regulation of their products, especially in the areas of
environment and safety. The Company believes its products comply with all
applicable environmental and safety regulations.
As a diesel engine manufacturer, the Company has incurred significant
research and tooling costs to totally redesign its engine product lines to
meet United States Environmental Protection Agency (U.S. EPA) and
California Air Resources Board (CARB) emission standards effective in the
1994 model year. The Company faces significant additional outlays through
1998 to meet further tightening of these standards. The Company expects
that its diesel engines will be able to meet all of these standards in the
required time-frame. However, compliance with California's 1998 Ultra-
Low-Emission Vehicle (ULEV) standards for medium-size vehicles (which
includes vehicles up to 14,000 lbs. Gross Vehicle Weight Rating - GVWR)
will require the use of alternative fuels. The Company expects to have
products available to meet these standards prior to 1998.
Emissions regulations in Canada and Mexico are similar, but not
identical, to the U.S. federal regulations. Although Canada's regulations
impose standards equivalent only to the U.S. standards for the 1990 model
year, diesel engine manufacturers, including the Company, have voluntarily
signed several memorandums of understanding with the Canadian federal
government, agreeing to sell only engines meeting the 1994 U.S. emission
standards in model years 1995 to 1997. Mexico has adopted the U.S. heavy
diesel engine emission standards as of the 1994 model year but has
conditioned compliance on the availability of low-sulfur diesel fuel. The
Mexican government is expected to complete the conversion of diesel fuel
supplies nationwide to low-sulfur fuel in mid-1995.
12
Truck manufacturers are also subject to various noise standards
imposed by federal, state and local regulations. The engine is one of a
truck's primary noise sources, and the Company therefore works closely
with original equipment manufacturers to develop strategies to reduce
engine noise. The Company is also subject to the National Traffic and
Motor Vehicle Safety Act (Safety Act) and Federal Motor Vehicle Safety
Standards (Safety Standards) promulgated by the National Highway Traffic
Safety Administration. The Company believes it is in compliance with the
Safety Act and the Safety Standards.
Expenditures to comply with various environmental regulations
relating to the control of air, water and land pollution at production
facilities and to control noise levels and emissions from Transportation's
products have not been material except for the Wisconsin Steel and Solar
Turbine sites.
ITEM 2. PROPERTIES
Transportation has 7 manufacturing and assembly plants in the United
States and 1 in Canada. All plants are owned by Transportation. The
aggregate floor space of these 8 plants is approximately 8 million square
feet.
Transportation also owns or leases other significant properties in
the United States and Canada, including a paint facility, a small
component fabrication plant, vehicle and parts distribution centers, sales
offices, engineering centers and its headquarters in Chicago.
ITEM 3. LEGAL PROCEEDINGS
ENVIRONMENTAL MATTERS
---------------------
Beginning in March 1984, Transportation received several enforcement
notices from the U.S. EPA, all of which relate to Transportation's
painting activities at its Springfield, Ohio assembly and body plants.
The notices alleged that these painting activities violated the Federal
Clean Air Act because the paint contained volatile organic compounds (VOC)
in greater quantities than permitted under applicable Ohio regulations
(the VOC Regulations). In an administrative action instituted under
Section 120 of the Clean Air Act, begun in September 1984, U.S. EPA sought
to recover a noncompliance penalty, measured as the costs allegedly saved
by Transportation by not complying with the VOC Regulations at the
assembly plant.
In a court action instituted under Section 113(b) of the Clean Air
Act, the United States filed civil complaints pertaining to the assembly
plant (filed on April 30, 1985) and the body plant (filed on November 3,
1986) in the U.S. District Court in the Southern District of Ohio. These
complaints asked the judge to impose fines of up to $25,000 per violation
of the VOC Regulations per day since December 31, 1982. In November 1994,
Transportation and U.S. EPA concluded a settlement of both the
administrative action and the court action. The settlement included a
payment of $2.7 million by Transportation.
13
OTHER MATTERS
-------------
In May 1993, a jury issued a verdict in favor of Vernon Klein Truck &
Equipment, Inc. and against Transportation in the amount of $10.8 million
in compensatory damages and $15 million in punitive damages. The Company
appealed the verdict and in order to do so was required to post a bond
collateralized with $30 million in cash. In November 1994, the Court of
Appeals of the State of Oklahoma reversed the verdict and entered
judgement in favor of Transportation on virtually all aspects of the case.
The bond and related collateral will be released when the order of the
Court of Appeals is filed.
Transportation and the Economic Development Administration (EDA), a
division of the U.S. Department of Commerce reached an agreement in the
fourth quarter of 1994 in settlement of commercial and environmental
disputes related to the Wisconsin Steel property. EDA and Transportation
became 90% and 10% beneficiaries, respectively, of a trust which was
created after the party that purchased Wisconsin Steel filed for
bankruptcy. At the time of bankruptcy, EDA had guaranteed repayment of
90% and Transportation of 10% of loans made to Wisconsin Steel. The
settlement provides that EDA transfer its interest in the trust to
Transportation, which in turn will assume responsibility for completing
the investigation of the environmental condition at the site and for any
cleanup work that may be necessary. Transportation has agreed to pay EDA
$11 million to settle various commercial issues as well as reimburse them
for a portion of environmental response costs spent by EDA. The
Department of Justice must approve the final settlement before the
interest in the trust, or the property, is transferred to Transportation.
The Company and its subsidiaries are subject to various other claims
arising in the ordinary course of business, and are parties to various
legal proceedings which constitute ordinary routine litigation incidental
to the business of the Company and its subsidiaries. In the opinion of
the Company's management, none of these proceedings or claims are material
to the business or the financial condition of the Company.
14
EXECUTIVE OFFICERS
The following selected information for each of the Company's current
executive officers was prepared as of November 4, 1994.
OFFICERS AND POSITIONS WITH
NAME AGE NAVISTAR AND OTHER INFORMATION
---- --- ----------------------------------
James C. Cotting ....... 61 Chairman and Chief Executive
Officer since 1987 and a Director
since 1983. Mr. Cotting also is
Chairman and Chief Executive
Officer of Transportation since
1990 and a Director since 1987.
Prior to this, Mr. Cotting served
as Vice Chairman and Chief
Financial Officer, 1983-1987.
John R. Horne .......... 56 President and Chief Operating
Officer and a Director since
1990. Mr. Horne also is
President and Chief Operating
Officer of Transportation since
1990 and a Director since 1987.
Prior to this, Mr. Horne served
as Group Vice President and
General Manager, Engine and
Foundry, 1990 and Vice President
and General Manager, Engine and
Foundry, 1983-1990.
Robert C. Lannert ...... 54 Executive Vice President and Chief
Financial Officer and a Director
since 1990. Mr. Lannert also is
Executive Vice President and
Chief Financial Officer of
Transportation since 1990 and a
Director since 1987. Prior to
this, Mr. Lannert served as
Vice President and Treasurer,
1987-1990 and Vice President and
Treasurer of Transportation,
1979-1990.
Robert A. Boardman ...... 47 Senior Vice President and General
Counsel since 1990. Mr. Boardman
also is Senior Vice President and
General Counsel of Transportation
since 1990. Prior to this, Mr.
Boardman served as Vice President
of Manville Corporation,
1988-1990 and Corporate
Secretary, 1983-1990.
Thomas M. Hough ......... 49 Vice President and Treasurer since
1992. Mr. Hough also is
Vice President and Treasurer of
Transportation since 1992.
Prior to this, Mr. Hough served
as Assistant Treasurer 1987-1992,
and Assistant Treasurer of
Transportation, 1987-1992. Mr.
Hough also served as Assistant
Controller, Accounting and
Financial Systems, 1987 and
Controller of Navistar Financial
Corporation, 1982-1987.
Robert I. Morrison ...... 56 Vice President and Controller
since 1987. Mr. Morrison also is
a Vice President and Controller
of Transportation since 1985.
Prior to this, Mr. Morrison
served as Assistant Treasurer and
Vice President, Finance and
Planning, International Group,
1983-1985.
Steven K. Covey ......... 43 Corporate Secretary since 1990.
Mr. Covey is Associate General
Counsel of Transportation since
November 1992. Prior to this,
Mr. Covey served as General
Attorney, Finance and Securities
of Transportation, 1989-1992,
Senior Counsel, Finance and
Securities, 1986-1989 and Senior
Attorney, Corporate Operations
1984-1986.
15
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
PART II
The information required by Items 5-8 is incorporated herein by
reference from the 1994 Annual Report to Shareowners, filed as Exhibit 13
to this Form 10-K as follows:
1994
Annual
Report
Page
------
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS ......... 65
ITEM 6. SELECTED FINANCIAL DATA ................. 63
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION ................. 4
ITEM 8. FINANCIAL STATEMENTS
AND SUPPLEMENTARY DATA .................. 19
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 1994 Annual Report to Shareowners is not to be deemed filed as part of
this report.
---------------------------------------
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None
PART III
ITEMS 10, 11, 12 AND 13
Information required by Part III (Items 10, 11, 12 and 13) of this
Form is incorporated herein by reference from Navistar's definitive Proxy
Statement for the March 15, 1995 Annual Meeting of Shareowners.
16
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 1994 Annual Report to Shareowners, filed as Exhibit 13
to this Form 10-K as follows:
1994
Annual
Report
Page
------
Financial Statements
--------------------
Statement of Income (Loss) for the years ended
October 31, 1994, 1993 and 1992 ................ 19
Statement of Financial Condition as of
October 31, 1994 and 1993 ...................... 21
Statement of Cash Flow for the years ended
October 31, 1994, 1993 and 1992 ................ 23
Statement of Non-Redeemable Preferred, Preference
and Common Shareowners' Equity for the years
ended October 31, 1994, 1993 and 1992 .......... 25
Notes to Financial Statements .................... 27
Form
10-K
Schedules Page
--------- ----
VIII - 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 1994 Annual
Report to Shareowners.
Finance and Insurance Subsidiaries:
The financial statements of Navistar Financial Corporation for the
years ended October 31, 1994, 1993 and 1992 appearing on pages 9 through
11 in Annual Report on Form 10-K for Navistar Financial Corporation for
the fiscal year ended October 31, 1994, Commission No. 1-4146-1, are
incorporated herein by reference and filed as Exhibit 28 to this
Form 10-K.
Financial information regarding all Navistar subsidiaries engaged in
finance and insurance operations, including Navistar Financial
Corporation, appears as supplemental information to the Financial
Statements in the Navistar 1994 Annual Report to Shareowners and is
incorporated herein by reference.
17
Exhibits, Including those Incorporated by Reference Form 10-K Page
--------------------------------------------------- --------------
(3) Articles of Incorporation and By-Laws ..... E-1
(4) Instruments Defining the Rights of
Security Holders, including Indentures E-2
(10) Material Contracts ....................... E-3
(11) Computation of Net Income (Loss)
Per Common Share ....................... E-5
(13) Navistar International Corporation
1994 Annual Report to Shareowners ...... N/A
(22) Subsidiaries of the Registrant ........... E-6
(23) Independent Auditors' Consent ............ 21
(24) Power of Attorney ........................ 19
(28) Navistar Financial Corporation Annual
Report on Form 10-K for the fiscal
year ended October 31, 1994 ............ N/A
All exhibits other than those indicated above are omitted because of
the absence of the conditions under which they are required or because the
information called for is shown in the financial statements and notes
thereto in the 1994 Annual Report to Shareowners.
Reports on Form 8-K
-------------------
No reports on Form 8-K were filed for the three months ended
October 31, 1994.
18
SIGNATURE
NAVISTAR INTERNATIONAL CORPORATION
AND SUBSIDIARIES
----------------------------------
SIGNATURE
Pursuant to the requirements of Section 13 and 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
NAVISTAR INTERNATIONAL CORPORATION
----------------------------------
(Registrant)
/s/ Robert I. Morrison
----------------------------------
Robert I. Morrison January 27, 1995
Vice President and Controller
(Principal Accounting Officer)
19SIGNATURE EXHIBIT 24
NAVISTAR INTERNATIONAL CORPORATION
AND SUBSIDIARIES
----------------------------------
POWER OF ATTORNEY
Each person whose signature appears below does hereby make,
constitute and appoint James C. Cotting and Robert I. Morrison and each of
them acting individually, true and lawful attorneys-in-fact and agents
with power to act without the other and with full power of substitution,
to execute, deliver and file, for and on such person's behalf, and in such
person's name and capacity or capacities as stated below, any amendment,
exhibit or supplement to the Form 10-K Report making such changes in the
report as such attorney-in-fact deems appropriate.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated:
Signature Title Date
----------------------- ----------------------------- ----------------
/s/ James C. Cotting
-----------------------
James C. Cotting Chairman of the Board, January 27, 1995
and Chief Executive Officer
and Director
(Principal Executive Officer)
/s/ Robert I. Morrison
-----------------------
Robert I. Morrison Vice President and Controller January 27, 1995
(Principal Accounting Officer)
/s/ Jack R. Anderson
-----------------------
Jack R. Anderson Director January 27, 1995
/s/ William F. Andrews
------------------------
William F. Andrews Director January 27, 1995
/s/ Wallace W. Booth
------------------------
Wallace W. Booth Director January 27, 1995
/s/ Andrew F. Brimmer
------------------------
Andrew F. Brimmer Director January 27, 1995
/s/ Bill Casstevens
------------------------
Bill Casstevens Director January 27, 1995
20SIGNATURE EXHIBIT 24 (CONTINUED)
NAVISTAR INTERNATIONAL CORPORATION
AND SUBSIDIARIES
----------------------------------
SIGNATURES (Continued)
/s/Richard F. Celeste
------------------------
Richard F. Celeste Director January 27, 1995
/s/John D. Correnti
------------------------
John D. Correnti Director January 27, 1995
/s/William Craig
------------------------
William Craig Director January 27, 1995
/s/Jerry E. Dempsey
------------------------
Jerry E. Dempsey Director January 27, 1995
/s/Mary Garst
------------------------
Mary Garst Director January 27, 1995
/s/ Arthur G. Hansen
------------------------
Arthur G. Hansen Director January 27, 1995
/s/ John R. Horne
------------------------
John R. Horne Director January 27, 1995
/s/Robert C. Lannert
------------------------
Robert C. Lannert Director January 27, 1995
/s/ Donald D. Lennox
------------------------
Donald D. Lennox Director January 27, 1995
/s/ Elmo R. Zumwalt, Jr.
------------------------
Elmo R. Zumwalt, Jr. Director January 27, 1995
21SIGNATURE
NAVISTAR INTERNATIONAL CORPORATION
AND SUBSIDIARIES
----------------------------------
INDEPENDENT AUDITORS' REPORT
Navistar International Corporation:
We have audited the Statement of Financial Condition of Navistar
International Corporation and Consolidated Subsidiaries as of October 31,
1994 and 1993, and the related Statement of Income (Loss), of Cash Flow,
and of Non-Redeemable Preferred, Preference and Common Shareowners' Equity
for each of the three years in the period ended October 31, 1994, and have
issued our report thereon dated December 12, 1994 (which includes an
explanatory paragraph relating to the change in methods of accounting for
postretirement benefits other than pensions and for income taxes as
required by Statements of Financial Accounting Standards No. 106 and No.
109); such consolidated financial statements and report are included in
your 1994 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 12, 1994
Chicago, Illinois
----------------------------------
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
Navistar International Corporation:
We consent to the incorporation by reference in Post-Effective
Amendment No. 1 to Registration No. 2-70979 on Form S-8 and in Post-
Effective Amendment No. 6 to Registration No. 2-55544 on Form S-8 and in
Post-Effective Amendment No. 1 to Registration No. 2-9604 on Form S-8 of
our reports dated December 12, 1994, appearing and incorporated by
reference in this Annual Report on Form 10-K of Navistar International
Corporation for the year ended October 31, 1994.
Deloitte & Touche LLP
January 27, 1995
Chicago, Illinois
22 [Enlarge/Download Table]
SCHEDULE VIII
NAVISTAR INTERNATIONAL CORPORATION
AND SUBSIDIARIES
============
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEARS ENDED OCTOBER 31, 1994, 1993 AND 1992
(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:
1994
----
Uncollectible notes
and accounts
Allowance for written off and
losses on Notes and accounts reserve adjustment,
receivables .... receivable .... $ 36 $ 2 less recoveries ... $ 13 $ 25
===== ===== ===== =====
1993
----
Uncollectible notes
and accounts
Allowance for written off and
losses on Notes and accounts reserve adjustment,
receivables .... receivable .... $ 34 $ 6 less recoveries ... $ 4 $ 36
===== ===== ===== =====
1992
----
Uncollectible notes
and accounts
Allowance for written off and
losses on Notes and accounts reserve adjustment,
receivables .... receivable .... $ 27 $ 21 less recoveries ... $ 14 $ 34
===== ===== ===== =====
F-1
Dates Referenced Herein and Documents Incorporated by Reference
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