December 2, 1999

Navistar Reports Near-Record Results for Fiscal 1999; Sees Continued Strong Performance in 2000

Operating Income Best in History; Gross Margins at 18% With 42% ROE; Excluding the Change in Tax Valuation Allowance EPS Was $5.52 Vs. $3.47 in 1998

CHICAGO, Dec. 2 -- Navistar International Corporation (NYSE: NAV) today reported that net income for the fourth quarter and full fiscal year, excluding tax valuation allowance adjustments, were the second highest in history. Operating income for the year set a new record.

Net income in both 1999 and 1998 benefited from reductions to the company's deferred tax asset valuation allowance of $178 million and $45 million, respectively, which related to increased utilization of net operating loss carryforwards. The valuation allowance reductions were recorded in the third quarter of 1999 and in the fourth quarter of 1998. Excluding these benefits, net income for the three months ended October 31, 1999, totaled $132 million, or $2.04 per diluted common share, compared with $99 million, or $1.47 per diluted share in the fourth quarter of 1998; and net income for the year totaled $366 million, equal to $5.52 per diluted common share, compared with $254 million, or $3.47 per diluted common share a year earlier.

Excluding the tax valuation adjustments, net income for the full year and the fourth quarter were second only to the records set in 1979 when the company, then called International Harvester, earned $370 million for the full year and $148 million in the fourth quarter. Sales and revenues in 1979 totaled $8.4 billion.

Including the effects of the tax valuation allowance reductions, net income for the year ended October 31, 1999, totaled $544 million, or $8.20 per diluted common share, compared with $299 million, or $4.11 per diluted common share reported a year earlier.

John R. Horne, Navistar chairman, president and chief executive officer, noted that 1999 operating income totaled a record $837 million, up from $634 million in 1998 and better than the previous record of $827 million achieved in 1979.

Horne also noted that record earnings performance was achieved on modest gains in sales and revenues as manufacturing gross margin for the year increased to 18.0 percent from 15.3 percent in 1998. Fourth quarter margins rose to 19.1 percent from 18.2 percent in the fourth quarter of 1998. Return on shareowners' equity for 1999 amounted to 42.2 percent, compared with 38.9 percent in 1998.

Consolidated sales and revenues for the year totaled $8.6 billion, up from $7.9 billion a year earlier. Fourth quarter consolidated sales and revenues rose 14 percent to $2.6 billion from $2.2 billion in the fourth quarter of 1998.

Horne said that as expected, capacity constraints and a realignment of production schedules impacted revenue growth in the fourth quarter. A strong performance by the company's engine group made a substantial contribution to the overall results.

"Our margins improved primarily from increased productivity in our truck and engine groups and we anticipate this will continue," Horne said. "We believe we have rebuilt a company that is committed to and capable of achieving our ROE goals in all phases of the cycle -- not just at the peak."

Navistar's worldwide shipments in 1999 totaled 55,300 medium trucks, 21,700 school buses (Class 5-7 GVW) and 52,000 heavy trucks (Class 8 GVW), compared with 1998 shipments of 55,700 medium trucks, 21,800 school buses and 50,100 heavy trucks. Shipments of mid-range diesel engines to other original equipment manufacturers during the year totaled 286,500, a gain of 34 percent over the 213,700 units shipped in 1998. Total worldwide engine shipments rose to 374,200 units from 300,500 in 1998.

As previously announced, Navistar is 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.

"While we are forecasting lower industry volume for 1999, it is important to note that there has been a sea change in the truck industry and even at the forecasted level for 2000, demand will remain above the traditional levels of only a few years ago," Horne said.

Diesel Developments

In another area, Horne said the company made significant progress during the year with its Green Diesel Technology(SM) system, which was highlighted in a school bus demonstration before the U. S. Environmental Protection Agency. The demonstration showed that a school bus with Green Diesel Technology using low sulfur fuel achieved a reduction in nitrogen oxides emissions with 90 percent lower particulate emission than is found in a typical school bus powered by compressed natural gas. The company is also participating in a year-long demonstration in California to test the air-quality performance of the company's diesel engines using low sulfur fuel.

"We continue our commitment to be the leader in achieving clean-air goals through the development and use of innovative, proven diesel engine technology," Horne said. "Low sulfur diesel fuel is the enabler of the technology, and the California demonstration will help validate the clean-air value of diesel technology."

Navistar International Corporation, headquartered in Chicago, is a leading producer of heavy and medium trucks, school buses and mid-range diesel engines sold under the International® brand. The company is also a private label designer and manufacturer of diesel engines for the truck and van markets. Additional information can be found on the company's web site at

(Millions of dollars)

                                              AS OF OCTOBER 31
                                              1999        1998

    Cash and cash equivalents                  $243        $390
    Marketable securities                       333         674
                                                576       1,064
    Receivables, net                          2,818       2,196
    Inventories                                 625         507
    Property and equipment, net               1,475       1,106
    Investments and other assets                264         167
    Prepaid and intangible pension assets       274         237
    Deferred tax asset, net                     896         912

    Total assets                             $6,928      $6,189

    Accounts payable, principally trade      $1,399      $1,265
    Debt: Manufacturing operations              476         450
          Financial services operations       1,791       1,672
    Postretirement benefits liability           787         934
    Other liabilities                         1,184       1,099
    Total liabilities                         5,637       5,420

    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                     (358)       (214)
    Retained earnings (deficit)                (297)       (829)
    Accumulated other comprehensive loss       (197)       (331)
    Total shareowners' equity                 1,291         769

    Total liabilities
      and shareowners' equity                $6,928      $6,189

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

(Millions of dollars, except per share data)

                          THREE MONTHS ENDED    TWELVE MONTHS ENDED
                              OCTOBER 31             OCTOBER 31
                            1999      1998        1999      1998

    Sales and Revenues
    Sales of
      products             $2,477    $2,173      $8,326    $7,629
    Finance and
      insurance revenue        68        52         256       201
    Other income               13        17          65        55

    Total sales
      and revenues          2,558     2,242       8,647     7,885

    Costs and expenses
    Cost of products
      and services sold     2,014     1,791       6,862     6,498
      benefits                 57        46         216       174
    Engineering and
      research expense         84        68         281       192
    Marketing and
      expense                 125       133         486       427
    Interest expense           36        28         135       105
    Other expense              29        16          76        79

    Total costs
      and expenses          2,345     2,082       8,056     7,475

        Income before
          income taxes        213       160         591       410
        Income tax
          expense              81        16          47       111

    Net income                132       144         544       299

    Less dividends on
      Series G Preferred
      stock                     --        --          --        11

    Net income applicable
      to common stock         $132      $144        $544       $288

    Earnings per share
         Basic               $2.08      $2.16      $8.34      $4.16
         Diluted             $2.04      $2.14      $8.20      $4.11

    Average shares
         Basic                63.6     66.9        65.2      69.1
         Diluted              64.9     67.4        66.4      70.0

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

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