May 16, 2000

Navistar Reports Record Second Quarter, First Half Results; Per Share Earnings Again Exceed Analyst Estimates

CHICAGO, May 16 -- Navistar International Corporation (NYSE: NAV), producer of International® brand trucks, school buses and diesel engines, today reported record earnings for the second quarter and first six months of its fiscal year. It marked the ninth consecutive quarter that per diluted share earnings have met or exceeded the consensus estimate of financial analysts.

The company said that net income for the quarter ended April 30, 2000 rose to $98 million, or $1.58 per diluted common share, from $96 million, or $1.42 per diluted common share in the same period a year ago. Net income was up 2 percent while per diluted share earnings were up 11 percent.

Consolidated sales and revenues from manufacturing and financial services operations for the second quarter totaled $2.4 billion, up slightly from the $2.3 billion reported in the second quarter of 1999. Manufacturing gross margins for the second quarter improved to 18.0 percent from the 1999 second quarter gross margin of 17.9 percent.

For the first six months of fiscal 2000, Navistar reported net income of $168 million, or $2.68 per diluted common share, up from $157 million or $2.33 per diluted common share in the first half of 1999. Consolidated sales and revenues rose to $4.6 billion from $4.2 billion in the first six months of 1999.

John R. Horne, Navistar chairman, president and chief executive officer, said the highlight of the record second quarter performance continued to be strong OEM engine volume and ongoing productivity improvement in all areas. He noted that the modest gain in year-over-year gross margin was significant in the face of a highly competitive truck market and the company's aggressive investment in new product programs.

According to Horne, the record results were achieved despite intense truck pricing competition that is expected to continue throughout the year. Despite an industry-wide decline in incoming heavy truck orders, actual industry sales volume in the first half held up well compared to last year's record levels. However, Horne noted there was less growth in new truck pricing and a significant deterioration in used truck pricing that has negatively influenced trade-in values. Higher diesel fuel prices and higher interest rates are also affecting the sales environment, he said.

"Significantly, our record earnings and ROE performance was achieved while we continued to make major investments in truck and engine product development," Horne said. "We are confident that our engine business will set another volume record this year and we anticipate continued improvement in truck operating efficiencies."

Worldwide shipments of International brand medium and heavy trucks and school buses during the second quarter totaled 35,900 units, compared with the 36,100 units shipped in the second quarter of 1999.

Shipments of mid-range diesel engines to other original equipment manufacturers during the quarter totaled 83,200 units, up 15 percent from the 72,200 units shipped in the second quarter of 1999.

"After two consecutive record years of truck sales, we are seeing an easing of demand for heavy trucks as we had forecast last December," Horne said. "However, we are well positioned with our products and expect to improve dramatically in both truck and engine operations. Our brand is getting stronger and our productivity and cost structure continue to improve as we move relentlessly toward our goal of becoming the best truck and engine company."

Horne said that plans for producing International's next generation vehicle at its Springfield, Ohio assembly plant continue on schedule as does work on a new engine facility in Huntsville, Ala. and a new school bus facility in Tulsa, Okla. The new next generation medium truck will be available to customers next March.

Based on its current outlook, Navistar is still forecasting total truck industry volume in fiscal 2000 in the United States and Canada at 405,000 units, down from 465,500 units in fiscal 1999. Demand for heavy trucks is expected to reach 245,000 units, while demand for medium trucks is estimated at 128,000 units with school bus demand forecast at 32,000 units.

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 .

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 release.

(Millions of dollars, except per share data)

                               Three Months Ended          Six Months Ended
                                   April 30                   April 30
                              2000          1999         2000          1999

    Sales and revenues
    Sales of manufactured
      products              $2,313        $2,215       $4,399        $4,052
    Finance and insurance
      revenue                   64            59          133           121
    Other income                11            13           22            38

    Total sales
      and revenues           2,388         2,287        4,554         4,211

    Costs and expenses
    Cost of products
      and services sold      1,908         1,824        3,656         3,368
      benefits                  61            65          109           114
    Engineering and
      research expense          76            66          147           124
    Sales, general
      and administrative
       expense                 126           123          250           249
    Interest expense            33            35           68            67
    Other expense               26            20           53            36

    Total costs
      and expenses           2,230         2,133        4,283         3,958

      Income before
        income taxes           158           154          271           253
      Income tax
        expense                 60            58          103            96

    Net income                 $98           $96         $168          $157

    Earnings per share
      Basic                 $ 1.61        $ 1.44       $ 2.72        $ 2.37
      Diluted               $ 1.58        $ 1.42       $ 2.68        $ 2.33

    Average shares
      outstanding (millions)
      Basic                   61.0          66.2         61.8          66.3
      Diluted                 61.9          67.5         62.7          67.3

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

(Millions of dollars)

                                                         As of April 30
                                                        2000           1999

    Cash and cash equivalents                           $480           $181
    Marketable securities                                195            406
                                                         675            587
    Receivables, net                                   2,211          2,611
    Inventories                                          726            646
    Property and equipment, net                        1,570          1,186
    Investments and other assets                         304            294
    Prepaid and intangible pension assets                313            243
    Deferred tax asset, net                              850            834

    Total assets                                      $6,649         $6,401

    Accounts payable, principally trade                1,264         $1,307
    Debt:  Manufacturing operations                      582            477
           Financial services operations               1,640          1,702
    Postretirement benefits liability                    807            967
    Other liabilities                                  1,052          1,063
    Total liabilities                                  5,345          5,516

    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)          (236)
    Retained earnings (deficit)                         (137)          (682)
    Accumulated other comprehensive loss                (193)          (340)
    Total shareowners' equity                          1,304            885

    Total liabilities
      and shareowners' equity                         $6,649         $6,401

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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