August 12, 1999

Navistar Reports Record Third Quarter Results

CHICAGO, Aug. 12 -- Navistar International Corporation (NYSE: NAV), producer of International® brand trucks, buses and engines, today reported that even without the benefit of a deferred tax asset valuation allowance adjustment, results for the third quarter and first nine months of its fiscal year were at record levels.

The company said net income for the third quarter totaled $255 million, or $3.86 per diluted common share. Net income benefited from a $178 million reduction of the company's deferred tax asset valuation allowance relating to increased utilization of net operating loss carryforwards and an increase in projected future earnings.

Earnings without the benefit of the deferred tax asset adjustment were $77 million, or $1.17 per diluted common share, up 54 percent from the $50 million, or $0.72 per diluted common share in the third quarter of 1998. The previous record for third quarter earnings from continuing operations was $68 million, set in 1979.

John R. Horne, chairman, president and chief executive officer of Navistar, said the company continues to exceed prior year earnings while making major investments to reach its long-term goal of a 17.5 percent return on investment over the business cycle.

"The improvement in our gross margins in the third quarter clearly shows that we continue to be successful with our strategies for greater efficiency," Horne said.

Consolidated sales and revenues from manufacturing and financial services operations for the third quarter totaled $1.9 billion, consistent with the $1.9 billion reported in the third quarter of 1998. Manufacturing gross margins for the quarter increased 3.8 percentage points to 18.3 percent from the 1998 third quarter gross margin of 14.5 percent.

For the first nine months of fiscal 1999, Navistar reported record net income of $412 million, or $6.16 per diluted common share, up from $155 million or $2.02 per diluted common share in the first nine months of 1998. Earnings for the first nine months of 1999 included the benefit of the $178 million adjustment to the company's deferred tax asset valuation allowance.

Nine month earnings without the benefit of the deferred tax asset adjustment were $234 million, or $3.50 per diluted common share, up 51 percent from the $155 million, or $2.02 per diluted common share in the corresponding year-earlier period. The previous best nine-month period was 1979, when the company earned $222 million.

Consolidated sales and revenues for the first nine months rose to $6.1 billion from $5.6 billion in the same period in 1998. Manufacturing gross margin for the nine months increased 3.5 percentage points to 17.6 percent from 14.1 percent last year.

Shipments of mid-range diesel engines to other original equipment manufacturers during the quarter totaled 68,500, a gain of 44 percent over the 47,700 units shipped in the third quarter of 1998.

Truck production at the company's Springfield, Ohio assembly plant was impacted by short term disruptions associated with realigning work assignments to meet previously announced production schedule changes and process improvements. These changes resulted in the loss of some production and a backlog of trucks not ready for shipment to customers. Some of the lost production will be made up in the fourth quarter.

"The production disruptions, coupled with our overall capacity constraints resulted in a decline in truck volume," Horne said. "This is a short term situation because we are adding capacity at our plants at Escobedo, Nuevo Leon, Mexico and Garland, Texas and we are confident our market share will return to historic levels."

Worldwide shipments of International brand heavy and medium trucks and school buses during the third quarter totaled 26,200 units, compared with the 29,700 units shipped in the third quarter of 1998. Sales of service parts in the third quarter amounted to $213 million, compared with $220 million in the third quarter of 1998.

For the second time this year, Navistar has raised its projection for industry demand, forecasting that between 430,000 and 460,000 heavy and medium trucks and school buses will be sold in the United States and Canada in the fiscal year ending October 31, 1999. The new Navistar forecast breaks out as follows: heavy trucks, between 263,000 and 285,000, up from the 250,000 units previously forecast; medium trucks, between 135,000 and 142,000, up from 133,000 units; and school buses, 32,000 to 33,000, consistent with the previous estimate.

Navistar International Corporation, with world headquarters in Chicago, is a leading North American producer of heavy and medium trucks and school buses and a worldwide leader in the manufacture of mid-range diesel engines produced in a range of 160 to 300 horsepower for the International® brand. The company is also a private label designer and manufacturer of diesel engines for the full-size pickup truck and van markets. Sales and revenues in fiscal 1998 totaled $7.9 billion. Additional information can be found on the company's web site at www.navistar.com .

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
                              1999          1998         1999         1998
    Sales and Revenues
    Sales of
     manufactured
     products               $1,797        $1,804       $5,849       $5,456
    Finance and
     insurance revenue          67            57          188          149
    Other income                14            13           52           38

    Total sales
     and revenues            1,878         1,874        6,089        5,643

    Costs and expenses
    Cost of products
     and services sold       1,480         1,550        4,848        4,707
    Postretirement
     benefits                   45            40          159          128
    Engineering and
     research expense           73            43          197          124
    Marketing and
     administrative
     expense                   112            99          361          294
    Interest expense            32            31           99           77
    Other expense               11            30           47           63

    Total costs
     and expenses            1,753         1,793        5,711        5,393

       Income before
        income taxes           125            81          378          250
       Income tax
        benefit
        (expense)              130           (31)          34          (95)

    Net income                 255            50          412          155

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

    Net income applicable
     to common stock          $255           $50         $412         $144

    Earnings per share
      Basic                  $3.94          $.73        $6.27        $2.05
      Diluted                $3.86          $.72        $6.16        $2.02

    Average shares
     outstanding
     (millions)
      Basic                   64.9          68.6         65.8         69.9
      Diluted                 66.2          69.5         66.9         70.9

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
                                                   1999               1998
    Assets
    Cash and cash equivalents                      $237               $269
    Marketable securities                           389                556
                                                    626                825
    Receivables, net                              1,976              1,583
    Inventories                                     743                553
    Property and equipment, net                   1,266              1,007
    Investments and other assets                    273                193
    Prepaid and intangible pension assets           243                344
    Deferred tax asset, net                         966                842

    Total assets                                 $6,093             $5,347

    Liabilities and Shareowners' Equity
    Liabilities
    Accounts payable, principally trade            $993             $1,051
    Debt: Manufacturing operations                  473                440
          Financial services operations           1,587              1,122
    Postretirement benefits liability               980                911
    Other liabilities                             1,030              1,033
    Total liabilities                             5,063              4,557

    Commitments and contingencies

    Shareowners' equity
    Series D convertible
     junior preference stock                          4                  4
    Common stock
     (75.3 million shares issued)                 2,138              2,138
    Common stock held
     in treasury, at cost                          (340)              (184)
    Retained earnings (deficit)                    (430)              (971)
    Accumulated other comprehensive loss           (342)              (197)
    Total shareowners' equity                     1,030                790

    Total liabilities
     and shareowners' equity                     $6,093             $5,347

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


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