August 15, 2000

Navistar Reports Third Quarter Results; Says Anticipated Drop in New Truck Demand Will Result in Workforce Reductions

CHICAGO, Aug. 15 -- Navistar International Corporation (NYSE: NAV) today reported that third quarter earnings, excluding income tax related items, met analyst expectations for the 10th consecutive quarter with per share earnings up over a year ago. The company, producer of International® brand trucks, buses and engines, also announced it will eliminate approximately 1,100 salaried and contract positions in the coming weeks because of a long-anticipated sharp drop in demand for new trucks. The reduction represents approximately 15 percent of the company's white-collar workforce.

(Photo: NewsCom: http://www.newscom.com/cgi-bin/prnh/19991207/CGTU007 )

John R. Horne, chairman, president and chief executive officer of Navistar, said a strong operating performance by the company's engine subsidiary partially offset weakness in the more cyclical truck operations. He noted that the strong third quarter and nine-month results masked a continuing decline in new truck orders, indicating that the industry has reached the long anticipated downturn.

"While truck shipments have been good, our order receipts and backlog, particularly for heavy truck, are at their lowest level since 1996," Horne said. "To continue as a strong company, we must continue to deliver strong financial results regardless of market conditions. This means we will immediately defer some programs, reduce capital spending and streamline operations through improved processes and a reduction of our salaried workforce."

Excluding the benefit of a research and development tax credit, earnings for the third quarter totaled $76 million, or $1.27 per diluted share. For comparison, 1999 third quarter earnings without the benefit of the deferred tax asset adjustment were $77 million, or $1.17 per diluted common share.

Net income for the third quarter ended July 31, 2000 totaled $96 million, or $1.60 per diluted common share, compared with $255 million, or $3.86 per diluted common share in the same quarter last year. Net income in the third quarter this year benefited from a $20 million R&D tax credit, while net income in 1999 benefited from a $178 million reduction of the company's deferred tax asset valuation allowance related to increased utilization of net operating loss carryforwards and an increase in projected future earnings.

Consolidated sales and revenues from manufacturing and financial services operations for the third quarter totaled $1.9 billion, consistent with the same period in 1999. Manufacturing gross margins for the quarter totaled 17.5 percent compared with 18.3 percent a year earlier. Operating margins were adversely impacted by significantly lower pricing compared to the prior year that could only partially be offset by near-term cost improvements.

Nine-month earnings excluding the tax credit amounted to $244 million, or $3.94 per diluted common share. Nine-month earnings last year without the benefit of the deferred tax asset adjustment were $234 million, or $3.50 per diluted common share.

For the first nine months of fiscal 2000, Navistar reported net income of $264 million, or $4.26 per diluted common share, compared with $412 million, or $6.16 per diluted common share, in the first nine months of 1999. Earnings for the first nine months of 2000 and 1999 included the benefit of the previously mentioned tax related items.

Consolidated sales and revenues for the first nine months of fiscal 2000 rose to $6.5 billion from $6.1 billion in the same period in 1999. Manufacturing gross margin for the nine months was 17.4 percent compared with 17.6 percent last year.

Shipments of mid-range diesel engines to other original equipment manufacturers during the quarter totaled 72,200, a gain of 5 percent over the 68,500 units shipped in the third quarter of 1999. Worldwide shipments of International brand heavy and medium trucks and school buses during the third quarter totaled 27,600 units, compared with the 26,200 units shipped in the third quarter of 1999.

Horne said a drop in third quarter truck and bus shipments from second quarter levels and the decline in order receipts were clear indications that the industry is at the beginning of a downturn brought on by an oversupply of late model used trucks, escalating diesel fuel prices and higher interest rates.

"While we cannot control market conditions, we can control how we respond," Horne said. "The hallmark of a great company is not only how well it performs when times are good, but also whether it wins in difficult times. The steps we plan will allow us to continue to build a healthy business in the downturn and come out even stronger when the market turns up again."

The exact size and scope of the staff reductions and the anticipated charges against fourth quarter operations will be announced later this month. Charges related to the workforce reduction will be taken in the fourth quarter.

Navistar International Corporation (NYSE: NAV) is the parent company of International Truck and Engine Corporation, a leading producer of medium trucks, school buses, heavy trucks, severe service vehicles, mid-range diesel engines and parts and service sold under the International? brand. The company also is a private label designer and manufacturer of diesel engines for the pickup truck, van and SUV markets. Through its finance subsidiary, the company also provides financing and liability insurance for its dealers and customers. With world headquarters in Chicago, Navistar had 1999 sales and revenues of $8.6 billion. Additional information can be found on the company's web site at www.nav-international.com .

Forward Looking Statements

Statements contained in this news release that are not purely historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding the company's expectations, hopes, beliefs and intentions on strategies regarding the future. It is important to note that the company's actual future results could differ materially from those projected in such forward-looking statements because of a number of factors, including but not limited to general economic, business and financing conditions, labor relations, governmental action, competitor pricing activity, expense volatility, and other risks detailed from time to time in Navistar's Securities and Exchange Commission filings. Navistar assumes no obligation to update the information included in this news release.

NAVISTAR INTERNATIONAL CORPORATION
AND CONSOLIDATED SUBSIDIARIES
STATEMENT OF INCOME (UNAUDITED)
(Millions of dollars, except per share data)

                                        THREE MONTHS ENDED NINE MONTHS ENDED
                                             JULY 31            JULY 31
                                        2000      1999      2000       1999

    Sales and revenues
    Sales of manufactured
      products                         $1,841    $1,797    $6,240    $5,849
    Finance and Insurance
      revenue                              72        67       205       188
    Other income                           11        10        33        48

    Total sales
      and revenues                      1,924     1,874     6,478     6,085


    Costs and expenses
    Cost of products and
      services sold                     1,528     1,480     5,184     4,848
    Postretirement
      benefits                             48        45       157       159
    Engineering and
      research expense                     66        73       213       197
    Sales, general
      and administrative
       expense                            107       112       357       361
    Interest expense                       37        32       105        99
    Other expense                          16         7        69        43

    Total costs
      and expenses                      1,802     1,749     6,085     5,707

        Income before
          income taxes                    122       125       393       378
        Income tax
         expense                          (26)      130      (129)       34

    Net income                            $96      $255      $264      $412


    Earnings per share
        Basic                          $ 1.62    $ 3.94    $ 4.32    $ 6.27
        Diluted                        $ 1.60    $ 3.86    $ 4.26    $ 6.16

    Average shares
      outstanding
       (millions)
        Basic                            59.4      64.9      61.1      65.8
        Diluted                          60.1      66.2      61.9      66.9

The Statement of Income includes the consolidated financial results of the company's manufacturing operations with its wholly owned financial services operations.

NAVISTAR INTERNATIONAL CORPORATION
AND CONSOLIDATED SUBSIDIARIES
STATEMENT OF FINANCIAL CONDITION (UNAUDITED)
(Millions of dollars)

                                                           AS OF JULY 31
                                                        2000           1999

    ASSETS
    Cash and cash equivalents                           $532           $237
    Marketable securities                                210            389
                                                         742            626
    Receivables, net                                   2,164          1,976
    Inventories                                          718            743
    Property and equipment, net                        1,609          1,266
    Investments and other assets                         340            273
    Prepaid and intangible pension assets                314            243
    Deferred tax asset, net                              813            966

    Total assets                                      $6,700         $6,093

    LIABILITIES AND SHAREOWNERS' EQUITY
    Liabilities
    Accounts payable, principally trade                 $923           $993
    Debt:   Manufacturing operations                     578            473
            Financial services operations              1,964          1,587
    Postretirement benefits liability                    814            980
    Other liabilities                                  1,022          1,030
    Total liabilities                                  5,301          5,063

    Commitments and contingencies

    Shareowners' equity
    Series D convertible junior
      preference stock                                     4              4
    Common stock
      (75.3 million shares issued)                     2,139          2,139
    Common stock held in treasury, at cost              (509)          (340)
    Retained earnings (deficit)                          (40)          (431)
    Accumulated other comprehensive loss                (195)          (342)
    Total shareowners' equity                          1,399          1,030

    Total liabilities
      and shareowners' equity                         $6,700         $6,093

The Statement of Financial Condition includes the consolidated financial results of the company's manufacturing operations with its wholly owned financial services operations. SOURCE Navistar International Corporation


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