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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-Q
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
OR
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-13098
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CASE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 76-0433811
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
700 STATE STREET, RACINE, WI 53404
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES INCLUDING ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (414) 636-6011
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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 (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [_]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Common Stock, par value $0.01 per share: 74,444,695 shares outstanding as of
June 30, 1998.
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TABLE OF CONTENTS
PAGE
----
Part I--Financial Information
Case Corporation and Consolidated Subsidiaries--
Statements of Income.................................................. 3
Balance Sheets........................................................ 5
Statements of Cash Flows.............................................. 6
Statements of Changes in Stockholders' Equity......................... 7
Notes to Financial Statements......................................... 8
Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................ 12
Part II--Other Information
Item 1. Legal Proceedings............................................... 19
Item 2. Changes in Securities........................................... *
Item 3. Defaults Upon Senior Securities................................. *
Item 4. Submission of Matters to a Vote of Security Holders............. 19
Item 5. Other Information............................................... *
Item 6. Exhibits and Reports on Form 8-K................................ 19
- --------
*No response to this item is included herein for the reason that it is
inapplicable or the answer to such item is negative.
2
PART I
FINANCIAL INFORMATION
CASE CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(IN MILLIONS, EXCEPT PER SHARE DATA)
(UNAUDITED)
CONSOLIDATED
---------------------------
THREE MONTHS SIX MONTHS
ENDED JUNE ENDED JUNE
30, 30,
------------- -------------
1998 1997 1998 1997
------ ------ ------ ------
Revenues:
Net sales......................................... $1,672 $1,547 $2,984 $2,723
Interest income and other......................... 62 54 131 110
------ ------ ------ ------
1,734 1,601 3,115 2,833
Costs and Expenses:
Cost of goods sold................................ 1,274 1,153 2,293 2,063
Selling, general and administrative............... 155 143 301 277
Research, development and engineering............. 57 46 109 92
Interest expense.................................. 57 40 104 79
Other, net........................................ 9 17 24 25
------ ------ ------ ------
Income before taxes................................. 182 202 284 297
Income tax provision................................ 56 64 89 95
------ ------ ------ ------
126 138 195 202
Equity in income--Case Credit....................... -- -- -- --
------ ------ ------ ------
Net income.......................................... $ 126 $ 138 $ 195 $ 202
====== ====== ====== ======
Preferred stock dividends........................... 1 1 3 3
------ ------ ------ ------
Net income to common................................ $ 125 $ 137 $ 192 $ 199
====== ====== ====== ======
Per share data:
Basic earnings per share of common stock.......... $ 1.68 $ 1.86 $ 2.59 $ 2.70
====== ====== ====== ======
Diluted earnings per share of common stock........ $ 1.61 $ 1.75 $ 2.48 $ 2.57
====== ====== ====== ======
The accompanying notes to financial statements are an integral part of these
Statements of Income.
Reference is made to Note 1 for definitions of "Case Industrial" and "Case
Credit."
3
CASE CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(IN MILLIONS, EXCEPT PER SHARE DATA)
(UNAUDITED)
CASE INDUSTRIAL CASE CREDIT
---------------------------- -------------------------
THREE MONTHS SIX MONTHS THREE MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
-------------- ------------- ------------- -----------
1998 1997 1998 1997 1998 1997 1998 1997
------ ------ ------ ------ ------ ------ ----- -----
Revenues:
Net sales............. $1,672 $1,547 $2,984 $2,723 $ -- $ -- $ -- $ --
Interest income and
other................ 8 8 16 18 80 60 156 126
------ ------ ------ ------ ------ ------ ----- -----
1,680 1,555 3,000 2,741 80 60 156 126
Costs and Expenses:
Costs of goods sold... 1,274 1,153 2,293 2,063 -- -- -- --
Selling, general and
administrative....... 169 151 321 296 12 7 21 15
Research, development
and engineering...... 57 46 109 92 -- -- -- --
Interest expense...... 26 17 44 35 31 22 60 44
Other, net............ (1) 11 6 15 10 6 18 10
------ ------ ------ ------ ------ ------ ----- -----
Income before taxes..... 155 177 227 240 27 25 57 57
Income tax provision.... 47 56 69 77 9 8 20 18
------ ------ ------ ------ ------ ------ ----- -----
108 121 158 163 18 17 37 39
Equity in income--Case
Credit................. 18 17 37 39 -- -- -- --
------ ------ ------ ------ ------ ------ ----- -----
Net income.............. $ 126 $ 138 $ 195 $ 202 $ 18 $ 17 $ 37 $ 39
====== ====== ====== ====== ====== ====== ===== =====
The accompanying notes to financial statements are an integral part of these
Statements of Income.
Reference is made to Note 1 for definitions of "Case Industrial" and "Case
Credit."
4
CASE CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 1998, AND DECEMBER 31, 1997
(IN MILLIONS, EXCEPT SHARE DATA)
(UNAUDITED)
CONSOLIDATED CASE INDUSTRIAL CASE CREDIT
---------------------- ---------------------- ---------------------
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
ASSETS 1998 1997 1998 1997 1998 1997
------ -------- ------------ -------- ------------ -------- ------------
Current Assets:
Cash and cash
equivalents........... $ 115 $ 252 $ 94 $ 185 $ 21 $ 67
Accounts and notes
receivable............ 2,532 2,053 1,790 1,459 745 705
Inventories............ 1,363 1,064 1,363 1,064 -- --
Deferred income taxes.. 181 191 165 175 16 16
Prepayments and other.. 43 40 42 40 1 --
------- ------ ------- ------ ------ ------
Total current assets. 4,234 3,600 3,454 2,923 783 788
------- ------ ------- ------ ------ ------
Long-Term Receivables... 1,820 1,605 221 252 1,579 1,340
Other Assets:
Investments in joint
ventures.............. 79 82 64 66 15 16
Investment in Case
Credit................ -- -- 391 357 -- --
Goodwill and
intangibles........... 327 319 327 319 -- --
Other.................. 630 376 187 173 462 215
------- ------ ------- ------ ------ ------
Total other assets... 1,036 777 969 915 477 231
------- ------ ------- ------ ------ ------
Property, Plant and
Equipment, at cost..... 2,028 1,987 2,024 1,983 4 4
Accumulated
Depreciation........... (1,007) (988) (1,006) (987) (1) (1)
------- ------ ------- ------ ------ ------
Net property, plant
and equipment....... 1,021 999 1,018 996 3 3
------- ------ ------- ------ ------ ------
Total................ $ 8,111 $6,981 $ 5,662 $5,086 $2,842 $2,362
======= ====== ======= ====== ====== ======
LIABILITIES AND EQUITY
----------------------
Current Liabilities:
Current maturities of
long-term debt........ $ 5 $ 8 $ 5 $ 8 $ -- $ --
Short-term debt........ 2,047 1,326 690 179 1,357 1,147
Accounts payable....... 728 708 699 753 31 27
Other accrued
liabilities........... 742 828 715 799 27 67
------- ------ ------- ------ ------ ------
Total current
liabilities......... 3,522 2,870 2,109 1,739 1,415 1,241
------- ------ ------- ------ ------ ------
Long-Term Debt.......... 1,679 1,404 671 669 1,008 735
Other Liabilities:
Pension benefits....... 108 109 108 109 -- --
Other postretirement
benefits.............. 150 137 150 137 -- --
Other postemployment
benefits.............. 38 38 38 38 -- --
Other.................. 186 147 160 120 26 27
------- ------ ------- ------ ------ ------
Total other
liabilities......... 482 431 456 404 26 27
------- ------ ------- ------ ------ ------
Commitments and
Contingencies (Note 6)
Minority Interest....... 8 2 6 -- 2 2
Preferred Stock with
Mandatory Redemption
Provisions............. 77 77 77 77 -- --
Stockholders' Equity:
Common Stock, $0.01 par
value; authorized
200,000,000 shares,
issued 77,028,106,
outstanding
74,444,695............ 1 1 1 1 -- --
Paid-in capital........ 1,380 1,334 1,380 1,334 244 244
Cumulative translation
adjustment............ (114) (94) (114) (94) (19) (16)
Unearned compensation
on restricted stock... (19) (14) (19) (14) -- --
Pension liability
adjustment............ (8) (8) (8) (8) -- --
Retained earnings...... 1,258 1,074 1,258 1,074 166 129
Treasury stock,
2,583,411 shares, at
cost.................. (155) (96) (155) (96) -- --
------- ------ ------- ------ ------ ------
Total stockholders'
equity.............. 2,343 2,197 2,343 2,197 391 357
------- ------ ------- ------ ------ ------
Total................ $ 8,111 $6,981 $ 5,662 $5,086 $2,842 $2,362
======= ====== ======= ====== ====== ======
The accompanying notes to financial statements are an integral part of these
Balance Sheets.
Reference is made to Note 1 for definitions of "Case Industrial" and "Case
Credit."
5
CASE CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE MONTHS ENDED JUNE 30, 1998 AND 1997
(IN MILLIONS)
(UNAUDITED)
CONSOLIDATED CASE INDUSTRIAL CASE CREDIT
------------------ ------------------ ------------------
SIX MONTHS ENDED SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30, JUNE 30,
------------------ ------------------ ------------------
1998 1997 1998 1997 1998 1997
-------- -------- -------- -------- -------- --------
Operating activities:
Net income............ $ 195 $ 202 $ 195 $ 202 $ 37 $ 39
Adjustments to
reconcile net income
to net cash provided
(used) by operating
activities--
Depreciation and
amortization......... 88 80 71 70 17 10
Deferred income tax
expense (benefit).... 12 9 12 11 -- (2)
(Gain) loss on
disposal of fixed
assets............... 1 (1) 1 (1) -- --
Cash paid for
restructuring........ (21) (55) (21) (55) -- --
Undistributed
(earnings) loss of
unconsolidated
subsidiaries......... (5) (16) (39) (52) 1 --
Changes in components
of working capital--
(Increase) decrease in
receivables.......... (501) (326) (342) (194) (51) (125)
(Increase) decrease
in inventories...... (293) (251) (293) (251) -- --
(Increase) decrease
in prepayments and
other current
assets.............. (3) 17 (3) 17 -- --
Increase (decrease)
in payables......... 65 41 (47) 51 4 (18)
Increase (decrease)
in accrued
liabilities......... (107) 22 (68) 24 (39) (2)
(Increase) decrease in
long-term
receivables.......... (246) (16) 24 117 (263) (133)
Increase (decrease) in
other liabilities.... 54 (4) 54 (4) -- --
Other, net............ (59) 7 (18) 7 (52) 3
-------- -------- -------- -------- -------- --------
Net cash provided
(used) by operating
activities......... (820) (291) (474) (58) (346) (228)
-------- -------- -------- -------- -------- --------
Investing activities:
Proceeds from sale of
businesses and
assets............... 1 9 1 9 -- --
Expenditures for
property, plant and
equipment............ (49) (36) (49) (35) -- (1)
Expenditures for
equipment on
operating leases..... (189) (51) -- -- (189) (51)
Acquisitions and
investments.......... (40) (8) (40) (8) -- --
-------- -------- -------- -------- -------- --------
Net cash provided
(used) by investing
activities......... (277) (86) (88) (34) (189) (52)
-------- -------- -------- -------- -------- --------
Financing activities:
Proceeds from issuance
of long-term debt.... 279 -- -- -- 279 --
Payment of long-term
debt................. (8) -- (8) -- -- --
Net increase
(decrease) in short-
term debt and
revolving credit
facilities........... 718 430 508 90 210 335
Capital contributions. -- -- -- (20) -- 20
Proceeds from issuance
of common stock...... 46 22 46 22 -- --
Repurchases of common
stock................ (58) -- (58) -- -- --
Dividends paid (common
and preferred)....... (11) (10) (11) (10) -- --
Other, net............ (5) (2) (5) (2) -- --
-------- -------- -------- -------- -------- --------
Net cash provided
(used) by financing
activities......... 961 440 472 80 489 355
-------- -------- -------- -------- -------- --------
Effect of foreign
exchange rate changes
on cash and cash
equivalents........... (1) (2) (1) (2) -- --
-------- -------- -------- -------- -------- --------
Increase (decrease) in
cash and cash
equivalents........... $ (137) $ 61 $ (91) $ (14) $ (46) $ 75
Cash and cash
equivalents, beginning
of period............. 252 116 185 99 67 17
-------- -------- -------- -------- -------- --------
Cash and cash
equivalents, end of
period................ $ 115 $ 177 $ 94 $ 85 $ 21 $ 92
======== ======== ======== ======== ======== ========
Cash paid during the
period for interest... $ 96 $ 78 $ 40 $ 35 $ 56 $ 43
======== ======== ======== ======== ======== ========
Cash paid during the
period for taxes...... $ 88 $ 95 $ 62 $ 76 $ 26 $ 19
======== ======== ======== ======== ======== ========
The accompanying notes to financial statements are an integral part of these
Statements of Cash Flows.
Reference is made to Note 1 of "Case Industrial" and "Case Credit."
6
CASE CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN MILLIONS)
(UNAUDITED)
CUMULATIVE PENSION
COMMON PAID-IN TRANSLATION UNEARNED LIABILITY RETAINED TREASURY
STOCK CAPITAL ADJUSTMENT COMPENSATION ADJUSTMENT EARNINGS STOCK TOTAL
------ ------- ----------- ------------ ---------- -------- -------- ------
BALANCE, DECEMBER 31,
1996................... $ 1 $1,238 $ (14) $ (9) (4) $ 693 $ (1) $1,904
Net income............. -- -- -- -- -- 403 -- 403
Dividends declared..... -- -- -- -- -- (22) -- (22)
Translation adjustment. -- -- (80) -- -- -- -- (80)
Capital contributions
on stock issuance..... -- 84 -- -- -- -- -- 84
Recognition of
compensation on
restricted stock...... -- -- -- 6 -- -- -- 6
Issuance of restricted
stock, net of
forfeitures........... -- 12 -- (11) -- -- (1) --
Pension liability
adjustment............ -- -- -- -- (4) -- -- (4)
Acquisition of treasury
stock................. -- -- -- -- -- -- (94) (94)
--- ------ ----- ---- ---- ------ ----- ------
BALANCE, DECEMBER 31,
1997................... 1 1,334 (94) (14) (8) 1,074 (96) 2,197
Net income............. -- -- -- -- -- 195 -- 195
Dividends declared..... -- -- -- -- -- (11) -- (11)
Translation adjustment. -- -- (20) -- -- -- -- (20)
Capital contributions
on stock issuance..... -- 37 -- -- -- -- -- 37
Recognition of
compensation on
restricted stock...... -- -- -- 3 -- -- -- 3
Issuance of restricted
stock, net of
forfeitures........... -- 9 -- 8 -- -- (1) --
Acquisition of treasury
stock................. -- -- -- -- -- -- (58) (58)
--- ------ ----- ---- ---- ------ ----- ------
BALANCE, JUNE 30, 1998.. $ 1 $1,380 $(114) $(19) $(8) $1,258 $(155) $2,343
=== ====== ===== ==== ==== ====== ===== ======
The accompanying notes to financial statements are an integral part of these
Statements of Changes in Stockholders' Equity.
7
CASE CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The accompanying financial statements reflect the consolidated results of
Case Corporation ("Case" or the "Company") and also include, on a separate and
supplemental basis, the combination of Case's industrial companies and credit
companies as follows:
Case Industrial--The financial information captioned "Case Industrial"
reflects the consolidation of all majority-owned subsidiaries
except for the wholly owned retail credit subsidiaries. The
credit operations are included on an equity basis.
Case Credit --The financial information captioned "Case Credit" reflects the
consolidation of Case's retail credit subsidiaries.
All significant intercompany transactions, including activity within and
between Case Industrial and Case Credit, have been eliminated.
In the opinion of management, the accompanying unaudited financial
statements of Case Corporation and Consolidated Subsidiaries contain all
adjustments which are of a normal recurring nature necessary to present fairly
the financial position as of June 30, 1998, and the results of operations,
changes in stockholders' equity and cash flows for the periods indicated. It
is suggested that these interim financial statements be read in conjunction
with the financial statements and notes thereto included in the Company's 1997
Annual Report on Form 10-K. Interim financial results are not necessarily
indicative of operating results for an entire year.
Certain reclassifications have been made to conform the prior years'
financial statements to the 1998 presentation.
(2) ACCOUNTING PRONOUNCEMENTS
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income." This
statement establishes standards for the reporting and display of comprehensive
income and its components. Components of comprehensive income include net
income and all other non-owner changes in equity. SFAS No. 130 requires that
an enterprise classify items of comprehensive income by their nature in a
financial statement for the period in which they are recognized. For interim
reporting, the Company has chosen to disclose comprehensive income in the
Notes to Financial Statements. See Note 9, "Comprehensive Income."
Effective January 1, 1998, the Company adopted SFAS No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits." This statement
standardizes the disclosure requirements for pensions and other postretirement
benefits.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This statement
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. This statement must be adopted no later than January 1,
2000, although earlier application is permitted. The Company is currently
evaluating the impact of adopting SFAS No. 133.
Effective January 1, 1998, the Company adopted Statement of Position ("SOP)"
No. 98-1, "Accounting for the Costs of Computer Software Developed or Obtained
for Internal Use." The Company's accounting for costs of computer software
developed or obtained for internal use is consistent with the guidelines
established in the SOP and, as a result, the adoption of this statement had no
effect on the Company's financial position or results of operations.
8
CASE CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Case will adopt SOP No. 98-5, "Reporting on the Costs of Start-Up
Activities," effective January 1, 1999. Adoption of this statement will have no
material effect on the Company's financial position or results of operations.
(3) INVENTORIES
Inventories are stated at the lower of cost or market, generally using the
first-in, first-out (FIFO) method. Inventory cost includes material, labor and
overhead.
Inventories consist of the following (in millions):
JUNE 30, DECEMBER 31,
1998 1997
-------- ------------
Raw materials....................................... $ 264 $ 207
Work-in-process..................................... 176 135
Finished goods...................................... 923 722
------ ------
Total inventories................................... $1,363 $1,064
====== ======
(4) ASSET-BACKED SECURITIZATIONS
During the first half of 1998, limited-purpose business trusts organized by
Case Credit issued $766 million of asset-backed securities to outside
investors, of which $50 million was issued pursuant to a private placement. As
of June 30, 1998, Case Credit has sold $753 million of U.S. and Canadian retail
notes to the trusts in connection with these issuances. Case Credit will sell
the remaining retail notes to the trusts as receivables are generated. During
the first half of 1997, limited-purpose business trusts organized by Case
Credit issued $830 million of asset-backed securities to outside investors. As
of June 30, 1997, Case Credit had sold $822 million of U.S. and Canadian retail
notes to the trusts in connection with these issuances. The proceeds from the
sale of the retail notes were used to repay outstanding debt and to finance
additional receivables.
(5) INCOME TAXES
On a consolidated basis, the Company's first half effective income tax rate
of 31% for 1998 and 32% for 1997 were lower than the U.S. statutory tax rate of
35%, primarily due to recognition of tax benefits associated with the Company's
foreign sales corporation, research and development tax credits and a reduction
in the tax valuation reserve in certain foreign jurisdictions, partially offset
by state income taxes and foreign income taxed at different rates.
(6) COMMITMENTS AND CONTINGENCIES
Environmental
Expenditures for ongoing compliance with environmental regulations that
relate to current operations are expensed or capitalized as appropriate.
Expenditures that relate to an existing condition caused by past operations and
which do not contribute to current or future revenue generation are expensed.
Liabilities are recorded when environmental assessments indicate that remedial
efforts are probable and the costs can be reasonably estimated. Estimates of
the liability are based upon currently available facts, existing technology and
presently enacted laws and regulations. All available evidence is considered,
including prior experience in remediation of contaminated sites, other parties'
share of liability at the waste sites and their ability to pay and data
concerning the waste sites
9
CASE CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
released by the U.S. Environmental Protection Agency or other organizations.
These liabilities are included in the accompanying Balance Sheets at their
undiscounted amounts. Recoveries are evaluated separately from the liability
and, if appropriate, are recorded separately from the associated liability in
the accompanying Balance Sheets.
Case has received and from time to time receives inquiries and/or notices of
potential liability at multiple sites that are the subject of remedial
activities under Federal or state environmental laws and Case may be required
to share in the cost of clean-up. Case is also involved in remediating a
number of other sites, including certain of its currently and formerly
operated facilities or those assumed through corporate acquisitions. Based
upon information currently available, management is of the opinion that any
such potential liability or remediation costs will not have a material adverse
effect on Case's financial position or results of operations.
Product liability
Product liability claims against Case arise from time to time in the
ordinary course of business. There is an inherent uncertainty as to the
eventual resolution of unsettled claims. However, in the opinion of
management, any losses with respect to existing claims will not have a
material adverse effect on Case's financial position or results of operations.
Other
Case is the subject of various other legal claims arising from its
operations, including product warranty, dealer disputes, workmen's
compensation and employment matters. Management is of the opinion that the
resolution of these claims, individually and in the aggregate, will not have a
material adverse effect on Case's financial position or results of operations.
(7) ACQUISITIONS
During the second quarter of 1998, the Company acquired certain assets of
the Tyler Industries division ("Tyler") of IBOCO, Inc., a privately owned
company. The acquisition of Tyler, a designer, manufacturer and distributor of
a complete line of chemical and fertilizer sprayers and applicators,
strengthens Case's equipment line for large-scale production agriculture and
provides another application for Case's Advanced Farming Systems. Tyler, with
operations in Benson, Minnesota, had sales of approximately $66 million in
1997.
(8) EARNINGS PER SHARE OF COMMON STOCK
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -----------------
1998 1997 1998 1997
--------- --------- -------- --------
Earnings per average share of common
stock (shares in millions):
Basic
Net earnings per share of common
stock................................ $ 1.68 $ 1.86 $ 2.59 $ 2.70
--------- --------- -------- --------
Weighted-average shares outstanding... 73.9 73.7 73.9 73.6
Diluted
Net earnings per share of common
stock................................ $ 1.61 $ 1.75 $ 2.48 $ 2.57
--------- --------- -------- --------
Weighted-average shares outstanding,
assuming full dilution............... 78.4 78.9 78.5 78.7
10
CASE CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(9) COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income." The components of comprehensive income for the three
and six months ended June 30, 1998 and 1997, are as follows (in millions):
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- ------------------
1998 1997 1998 1997
--------- --------- -------- --------
Net income........................... $ 126 $ 138 $ 195 $ 202
Pension liability adjustment, net of
taxes............................... -- -- -- --
Translation adjustment, net of taxes. (13) (14) (20) (48)
--------- --------- -------- --------
Comprehensive income................. $ 113 $ 124 $ 175 $ 154
========= ========= ======== ========
(10) OTHER MATTERS
The Company's contract with the United Automobile, Aerospace and
Agricultural Implement Workers of America (the "UAW") expired on March 29,
1998. During the second quarter, UAW-represented workers ratified a new 73
month labor agreement with the Company.
The UAW represents approximately 3,300 Case employees at facilities in
Burlington, Iowa; East Moline, Illinois; Burr Ridge, Illinois; Racine,
Wisconsin; and St. Paul, Minnesota.
(11) SUBSEQUENT EVENTS
During the second quarter of 1998, Case Credit Corporation increased its
$550 million medium-term note program to $1 billion pursuant to a shelf
registration statement filed with the Securities and Exchange Commission in
May 1998. During the third quarter, and as of the date of this filing, Case
Credit has issued $350 million of its fixed and floating rate medium-term
notes under this program, with maturities of two to three years and interest
rates ranging from 5.9% to 6.1%.
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
ANALYSIS OF RESULTS OF OPERATIONS
Three Months Ended June 30, 1998 vs. Three Months Ended June 30, 1997
EARNINGS
The Company recorded net income of $126 million for the second quarter of
1998, down 9% or $12 million from $138 million for the second quarter of 1997.
Diluted earnings per share for the second quarter of 1998 was $1.61 per share
as compared to $1.75 per share in the same quarter of 1997, primarily
reflecting the year-over-year decrease in net income partially offset by a
decrease in the number of common shares outstanding.
The Company's industrial operations recorded income, before equity income of
Case Credit, of $108 million in the second quarter of 1998 versus $121 million
in the comparable quarter of 1997. On a pretax basis, the Company's industrial
operations recorded earnings of $155 million in comparison to $177 million in
the same quarter of 1997. The industrial effective income tax rate decreased
from 32% in the second quarter of 1997 to 30% in the second quarter of 1998,
primarily due to tax benefits associated with the Company's foreign sales
corporation, research and development tax credits and reductions in the tax
valuation reserves in certain foreign jurisdictions, partially offset by state
income taxes and foreign income taxed at different rates.
Case's operating earnings for the second quarter of 1998 were $199 million
versus $211 million for the same period in 1997. Case defines operating
earnings as industrial earnings before interest, taxes, changes in accounting
principles and extraordinary items, including the income of Case Credit on an
equity basis. The year-over-year decrease in operating earnings is primarily
attributable to expenses and operating inefficiencies related to the Company's
negotiations with the United Automobile, Aerospace and Agricultural Implement
Workers of America (the "UAW"), unfavorable foreign exchange rates, including
a 17% decline in the value of the Australian dollar, and substantially higher
new product launch expenses, partially offset by pricing and cost reduction
initiatives. The Company's contract with the UAW expired on March 29, 1998.
During the second quarter, UAW-represented workers ratified a new 73 month
labor agreement with the Company.
A reconciliation of the Company's industrial net income to operating
earnings is as follows (in millions):
CASE INDUSTRIAL
-------------------
THREE MONTHS ENDED
JUNE 30,
-------------------
1998 1997
--------- ---------
Net income............................................ $ 126 $ 138
Income tax provision.................................. 47 56
Interest expense...................................... 26 17
--------- ---------
Operating earnings................................ $ 199 $ 211
========= =========
REVENUES
On a consolidated basis, worldwide revenues increased $133 million or 8% in
the second quarter of 1998 to $1,734 million. Net sales of equipment and parts
increased $125 million or 8% to $1,672 million. The increase in net sales
consists primarily of an 8% volume increase and a 2% improvement in price
realization, partially offset by a 2% deterioration resulting from the impact
of foreign exchange. Net sales in the second quarter of 1998 increased in
North America and Europe, with year-over-year increases of 12% and 7%,
respectively. In addition, net sales in the Company's Latin American region
increased 35% as compared to the prior year. Net sales in the Asia Pacific
region were down 30% versus the prior year due to continued unfavorable
economic conditions in that region. Worldwide, net sales of agricultural
equipment increased 2% over the comparable period in 1997, while second
quarter net sales of construction equipment increased 22% over the same period
in 1997.
12
NET SALES
Worldwide net sales of agricultural equipment increased 2% in the second
quarter of 1998 as compared to the second quarter of 1997. The increase in
sales of agricultural equipment in North America was driven by increases in
sales of tractors, hay and forage equipment and implements, partially offset
by decreased sales of combines and cotton pickers. In Europe, the Company
experienced higher year-over-year second quarter sales of combines, cotton
pickers, hay and forage equipment and implements, partially offset by
decreased tractor sales. Year-over-year sales in the Company's Asia Pacific
region decreased, reflecting continued unfavorable economic conditions in that
region. The decrease in agricultural sales in the Asia Pacific region reflects
lower sales of sugar cane harvesters, MAGNUM(TM) and four-wheel drive tractors
and combines, partially offset by increased sales of cotton pickers. In the
Company's Latin American region, the Company experienced increases in year-
over-year sales of tractors, combines and cotton pickers, partially offset by
decreased sales of sugar cane harvesters.
Worldwide net sales of construction equipment increased 22% in the second
quarter of 1998 as compared to the second quarter of 1997. In North America,
second quarter sales of construction equipment increased in all product
categories, led by increased sales of loader/backhoes, skid steers, excavators
and wheel loaders. Net sales of construction equipment in Europe increased in
virtually all product categories, led by significant increases in sales of
excavators, loader/backhoes and skid steers. In the Company's Asia Pacific
region, sales of construction equipment were primarily impacted by lower sales
of loader/backhoes, partially offset by higher excavator and wheel loader
sales, as unfavorable economic conditions in the region continued during the
second quarter of 1998. In the Company's Latin American region, increased
sales of construction equipment reflects increased sales of loader/backhoes,
wheel loaders and excavators, partially offset by lower sales of skid steers.
COSTS AND EXPENSES
Cost of goods sold for the industrial operations increased $121 million to
$1,274 million in the second quarter of 1998 as compared to the same period in
1997, primarily due to the sales volume increase. Cost of goods sold as a
percentage of net sales increased to 76.2% in the second quarter of 1998 from
74.5% in the second quarter of 1997. This increase as a percentage of net
sales reflects changes in geographic and product line sales mix, the impact of
foreign currency exchange and operating inefficiencies associated with the
Company's negotiations with the UAW, partially offset by pricing actions and
cost improvement initiatives.
Selling, general and administrative expenses for the industrial operations
increased $18 million to $169 million in the second quarter of 1998 as
compared to $151 million in the second quarter of 1997. As a percentage of net
sales, selling, general and administrative expenses for the second quarter of
1998 was 10.1% as compared to 9.8% in the second quarter of 1997. This year-
over-year increase as a percentage of net sales reflects increases in general
and administrative expenses related to information services and one-time costs
associated with the Company's negotiations with the UAW, as well as increased
selling expenses related to low rate and other sales financing programs,
partially offset by ongoing cost reduction initiatives. Case Industrial makes
payments to Case Credit in an amount equal to the difference between the rate
actually paid by retail customers and the rate charged by Case Credit. These
payments are included in selling, general and administrative expenses of Case
Industrial and are eliminated to arrive at consolidated selling, general and
administrative expenses.
Research, development and engineering expenses increased to $57 million in
the second quarter of 1998 as compared to $46 million in the second quarter of
1997, primarily due to expenditures for new product development.
Interest expense for Case's industrial operations was $26 million for the
second quarter of 1998, $9 million higher than the same period of 1997. The
increase in interest expense was due to higher average debt levels during the
second quarter of 1998 as compared to the second quarter of 1997.
13
CREDIT OPERATIONS
Net income for the second quarter of 1998 was $18 million as compared to $17
million for the second quarter of 1997. The $1 million increase in year-over-
year net income is primarily due to higher earnings as a result of increased
levels of on-balance-sheet receivables, including higher lease income from
operating leases. These amounts were largely offset by increased interest
expense due to higher average on-book receivables, as well as increased
depreciation of equipment on operating leases.
Case Credit reported total revenues of $80 million for the second quarter of
1998 and $60 million for the second quarter of 1997. Finance income earned on
retail notes and finance leases increased to $32 million in the second quarter
of 1998 as compared to $24 million for the same period in 1997, primarily due
to increased levels of on-balance-sheet receivables. In addition, operating
lease income increased $7 million to a total of $15 million for the second
quarter of 1998, reflecting the growth in Case Credit's operating lease
portfolio.
Interest expense for the second quarter of 1998 was $31 million, up $9
million from the $22 million reported for the second quarter of 1997. The
increase in interest expense resulted from higher average debt levels during
the second quarter of 1998 as compared to the second quarter of 1997,
primarily due to the growth in Case Credit's on-balance-sheet receivables and
increased equipment on operating leases.
Operating expenses increased $9 million to a total of $22 million in the
second quarter of 1998 as compared to the second quarter of 1997. This
increase primarily resulted from higher year-over-year depreciation expense
for equipment on operating leases relating to Case Credit's larger operating
lease portfolio, as well as higher operating expenses in support of Case
Credit's growth initiatives.
As of June 30, 1998, Case Credit's serviced portfolio of receivables
increased 23% over the same time last year to a record $5.8 billion. This
growth resulted from Case Credit's focus on new markets and new products,
including retail financing through Case Credit's European joint venture, Case
Credit Europe S.A.S. Gross receivables originated in the first six months of
1998 increased $557 million or 36% to $2.1 billion versus the same period in
1997. During the second quarter of 1998, Case Credit sold $264 million of U.S.
and Canadian retail notes to limited-purpose business trusts organized by Case
Credit in connection with asset-backed securitization transactions, as
compared to $320 million in the second quarter of 1997. The proceeds from the
sale of the retail notes were used to repay outstanding debt and to finance
additional receivables.
Six Months Ended June 30, 1998 vs. Six Months Ended June 30, 1997
EARNINGS
The Company recorded net income of $195 million for the first six months of
1998, down 3% or $7 million from net income of $202 million for the first six
months of 1997. Diluted earnings per share for the first six months of 1998
was $2.48 per share as compared to $2.57 per share in the same period of 1997,
primarily reflecting the year-over-year decrease in net income.
The Company's industrial operations recorded income, before equity income in
Case Credit, of $158 million in the first six months of 1998 versus $163
million in the first six months of 1997. On a pretax basis, the Company's
industrial operations recorded earnings of $227 million in comparison to $240
million in 1997, a $13 million or 5% decrease from the first six months of
1997. The industrial effective income tax rate decreased from 32% in the first
half of 1997 to 30% in the first half of 1998 primarily due to tax benefits
associated with the Company's foreign sales corporation, research and
development tax credits and a reduction in the tax valuation reserves in
certain foreign jurisdictions, partially offset by state income taxes and
foreign income taxed at different rates.
Case's operating earnings for the first six months of 1998 were $308 million
versus $314 million for the same period in 1997. Case defines operating
earnings as industrial earnings before interest, taxes, changes in
14
accounting principles and extraordinary items, including the income of Case
Credit on an equity basis. The year-over-year decrease in operating earnings
is primarily attributable to expenses and operating inefficiencies related to
the Company's negotiations with the UAW, unfavorable foreign exchange rates
and substantially higher new product launch expenses, partially offset by
pricing and cost reduction initiatives.
A reconciliation of the Company's industrial net income to operating
earnings is as follows (in millions):
CASE INDUSTRIAL
-----------------
SIX MONTHS ENDED
JUNE 30,
-----------------
1998 1997
-------- --------
Net income.............................................. $ 195 $ 202
Income tax provision.................................... 69 77
Interest expense........................................ 44 35
-------- --------
Operating earnings.................................. $ 308 $ 314
======== ========
REVENUES
On a consolidated basis, worldwide revenues increased $282 million or 10% in
the first six months of 1998 to $3,115 million. Net sales of equipment and
parts increased $261 million or 10% to $2,984 million. The increase in net
sales consists primarily of a 10% volume increase and a 2% improvement in
price realization, partially offset by a 2% deterioration resulting from the
impact of foreign exchange. Net sales in the first six months of 1998
increased in North America and Europe, with year-over-year increases of 14%
and 5%, respectively. Net sales also increased in the Company's Latin American
region, increasing 43% as compared to the prior year. Net sales in the Asia
Pacific region were down 26% versus the prior year as unfavorable economic
conditions continued in this region during the first six months of 1998.
Worldwide, net sales of agricultural equipment increased 8% over the
comparable period in 1997, while net sales of construction equipment increased
18% over prior year levels.
NET SALES
Worldwide net sales of agricultural equipment increased 8% in the first six
months of 1998 as compared to the first six months of 1997. The increase in
sales of agricultural equipment in North America was driven by increases in
sales of tractors, combines, implements and hay and forage equipment,
partially offset by decreased sales of cotton pickers. In Europe, the Company
experienced higher year-over-year first half sales of combines, cotton
pickers, implements and hay and forage equipment, partially offset by
decreased sales of tractors. In the Company's Asia Pacific region,
agricultural sales were down in all product categories, reflecting continued
unfavorable economic conditions in that region. In the Company's Latin
American region, the Company experienced increases in year-over-year sales of
tractors, combines and cotton pickers, partially offset by decreased sales of
sugar cane harvesters.
Worldwide net sales of construction equipment increased 18% in the first six
months of 1998 as compared to the first six months of 1997. In North America,
first half sales of construction equipment increased in all product
categories, driven by significant increases in sales of excavators, skid
steers and wheel loaders. The increase in net sales of construction equipment
in Europe primarily reflects increased sales of excavators, loader/backhoes,
wheel loaders and skid steers. Unfavorable economic conditions continued
during the first six months of 1998 in the Company's Asia Pacific region. As a
result, the Company experienced lower year-over-year sales of construction
equipment in most product categories, partially offset by increased sales of
excavators. In the Company's Latin American region, increased sales of
construction equipment reflects increased sales of wheel loaders and
loader/backhoes.
15
COSTS AND EXPENSES
Cost of goods sold for the industrial operations increased $230 million to
$2,293 million in the first six months of 1998 as compared to the same period
in 1997, primarily due to the sales volume increase. Cost of goods sold as a
percentage of net sales increased to 76.8% in the first six months of 1998
from 75.8% in 1997. This increase as a percentage of net sales reflects
changes in geographic and product line sales mix, the impact of foreign
currency exchange and operating inefficiencies associated with the Company's
negotiations with the UAW, partially offset by pricing actions and cost
improvement initiatives.
Selling, general and administrative expenses for the industrial operations
increased $25 million to $321 million in the first six months of 1998, as
compared to $296 million in the comparable period of 1997. This year-over-year
increase reflects increases in general and administrative expenses related to
information services and one-time costs associated with the Company's
negotiations with the UAW, as well as increased selling expenses related to
low rate and other sales financing programs, partially offset by the impact of
foreign currency and ongoing cost reduction initiatives. As a percentage of
net sales, selling, general and administrative expenses decreased slightly to
10.8% in the first six months of 1998 as compared to 10.9% in the first six
months of 1997.
Research, development and engineering expenses increased to $109 million in
the first six months of 1998 as compared to $92 million in the first six
months of 1997, primarily due to expenditures for new product development.
Interest expense for Case's industrial operations was $44 million for the
first six months of 1998, $9 million higher than the same period of 1997. The
increase in interest expense was due to higher average debt levels during the
first six months of 1998 as compared to the first six months of 1997.
The consolidated effective income tax rates of 31% for the first half of
1998 and 32% for the first half of 1997 were lower than the U.S. statutory
rate of 35% primarily due to tax benefits associated with the Company's
foreign sales corporation, research and development tax credits and reductions
in the tax valuation reserves in certain foreign jurisdictions, partially
offset by state income taxes and foreign income taxed at different rates.
CREDIT OPERATIONS
Net income for the first six months of 1998 was $37 million as compared to
$39 million for the first six months of 1997. The $2 million decrease in year-
over-year net income is primarily due to increased interest expense as a
result of higher average on-book receivables, as well as increased
depreciation of equipment on operating leases. These amounts were partially
offset by higher earnings as a result of increased levels of on-balance-sheet
receivables, including higher lease income from operating leases.
Case Credit reported total revenues of $156 million for the first six months
of 1998 and $126 million for the first six months of 1997. Finance income
earned on retail notes and finance leases increased to $62 million in the
first six months of 1998 as compared to $46 million for the same period in
1997, primarily due to increased levels of on-balance-sheet receivables. In
addition, operating lease income increased $12 million to a total of $26
million for the first six months of 1998, reflecting the growth in Case
Credit's operating lease portfolio.
Interest expense for the first six months of 1998 was $60 million, up $16
million from the $44 million reported in the first six months of 1997. The
increase in interest expense resulted from higher average debt levels during
the first six months of 1998 as compared to the first six months of 1997,
primarily due to the growth in Case Credit's on-balance-sheet receivables and
increased equipment on operating leases.
Operating expenses increased $14 million to a total of $39 million in the
first six months of 1998 as compared to the first six months of 1997. This
increase primarily resulted from higher year-over-year depreciation expense
for equipment on operating leases relating to Case Credit's larger operating
lease portfolio, as well as higher operating expenses in support of Case
Credit's growth initiatives.
16
During the first six months of 1998, Case Credit's serviced portfolio of
receivables increased 23% over the same time last year to a record $5.8
billion. Growth in the first six months resulted from Case Credit's focus on
new markets and new products, including retail financing through Case Credit's
European joint venture, Case Credit Europe S.A.S. Gross receivables originated
in the first six months of 1998 increased 36% to $2.1 billion versus the same
period in 1997. During the first six months of 1998, limited-purpose business
trusts organized by Case Credit issued $766 million of asset-backed securities
to outside investors, of which $50 million was issued pursuant to a private
placement. Case Credit has sold $753 million of U.S. and Canadian retail notes
to the trusts in connection with these issuances. During the first six months
of 1997, Case Credit issued $830 million of asset-backed securities to outside
investors. Case Credit had sold $822 million of U.S. and Canadian retail notes
to the trusts in connection with these issuances. The proceeds from the sale
of the retail notes were used to repay outstanding debt and to finance
additional receivables.
LIQUIDITY AND CAPITAL RESOURCES
The discussion of liquidity and capital resources focuses on the balance
sheets and statements of cash flows. The Company's operations are capital
intensive and subject to seasonal variations in financing requirements for
dealer receivables and inventories. Whenever necessary, funds provided from
operations are supplemented from external sources.
In the first six months of 1998, cash used by operating activities was $820
million. Cash used by the industrial operations and Case Credit during the
first six months of 1998 was $474 million and $346 million, respectively. The
net cash used by operating activities primarily resulted from increased levels
of wholesale receivables and inventory, partially offset by net income and
depreciation and amortization. The increase in wholesale and retail
receivables reflects higher levels of actual sales volumes, as well as
increased levels of on-balance-sheet receivables as part of Case Credit's
growth initiatives. Inventories have increased since December 31, 1997, due to
growth in the Company's Latin American region, the impact of 1997 acquisitions
and increased inventory for impending third quarter shipments to the former
Soviet Union. Cash used by operating activities was $291 million in the first
six months of 1997. This use of cash primarily reflects increased inventories
and retail receivables, offset by net income and depreciation and
amortization.
Cash used by investing activities was $277 million in the first six months
of 1998. During the first half of 1998, the Company expended $49 million for
property, plant and equipment in comparison to $36 million in the first half
of 1997. Cash used by Case Credit was $189 million versus $52 million for the
comparable period of 1997, reflecting increased year-over-year expenditures
for equipment on operating leases due to the growth in Case Credit's operating
lease portfolio. Also during the first six months of 1998, the Company
expended approximately $40 million to acquire certain assets of the Tyler
Industries division of IBOCO, Inc., a designer, manufacturer and distributor
of a complete line of chemical and fertilizer sprayers and applicators.
Net cash provided by financing activities was $961 million for the first
half of 1998 and was primarily used to support increased levels of receivables
and inventories. During the first six months of 1998, Case Credit issued an
aggregate of $279 million of medium-term notes pursuant to a shelf
registration filed with the Securities and Exchange Commission in September of
1997. The net proceeds from the medium-term note issuances will be used to
fund Case Credit's growth initiatives and for other corporate purposes,
including the repayment of indebtedness. During the first six months of 1997,
net cash provided by financing activities was $440 million, primarily due to
increases under the Company's short-term debt and revolving credit facilities
to fund Case Credit's growing portfolio of receivables.
Total debt at June 30, 1998, was $3,731 million, $2,365 million of which
related to Case Credit. The consolidated debt to capitalization ratio, defined
as total debt divided by the sum of total debt, stockholders' equity and
preferred stock with mandatory redemption provisions, was 60.7% at June 30,
1998, and the Company's industrial debt to capitalization ratio was 36.1%. The
consolidated and industrial ratios at December 31, 1997, were 54.6% and 27.3%,
respectively.
17
FUTURE LIQUIDITY AND CAPITAL RESOURCES
The Company has various sources of future liquidity including asset-backed
securitization markets, public debt offerings and other available lines of
credit.
The Company recently announced that it would accelerate its four million
share repurchase program, authorized by the Company's Board of Directors in
May 1997, and substantially complete the buy back in the third quarter of
1998. On July 10, 1998, the Company's Board of Directors authorized a second
program for the purchase from time to time of up to eight million shares of
the Company's Common Stock. The purchase of Case Common Stock under these
programs is at the Company's discretion, subject to prevailing financial and
market conditions.
OUTLOOK
The market conditions for Case's agricultural and construction equipment and
financial services businesses vary by regions of the world.
Sales of agricultural equipment have been strong in North America and Latin
America, although weakness continues in the Asia Pacific region and parts of
Europe. Commodity prices, which are comparably lower, have been affected by
expectations of a strong harvest and could possibly impact net farm income.
However, farmers' balance sheets are in good condition in North America. In
other regions of the world, additional factors such as the need for self-
sufficiency or adoption of advanced equipment and farming practices support
continued demand.
The worldwide construction equipment market is led by excellent demand in
North America as a result of continued strong housing starts and a favorable
interest rate environment. This outlook is strengthened by increased spending
as a result of the new U.S. highway bill. In Europe, economic conditions
continue to show signs of improvement, and the construction sectors are
beginning to reflect that improvement. In the Asia Pacific region, overall
economic conditions have resulted in a weaker Australian dollar, which has
impacted the overall economy and construction activity there. In Latin
America, economic conditions in Brazil and Mexico are greatly improved and
retail sales of construction equipment are expected to continue to show
strength year-over-year.
The information included in the "Outlook" section represents forward-looking
statements and involves risks and uncertainties that could cause actual
results to differ materially from those in the forward-looking statements. The
Company's outlook is predominantly based on its interpretation of what it
considers key economic assumptions. Crop production and commodity prices are
strongly affected by weather and can fluctuate significantly. Housing starts
and other construction activity are sensitive to interest rates and government
spending. Some of the other significant factors for the Company and its
customers include general economic and capital market conditions, the cyclical
nature of its business, foreign currency movements, the Company's and its
customers' access to credit, political uncertainty and civil unrest in various
areas of the world, pricing, product initiatives and other actions taken by
competitors, disruptions in production capacity, excess inventory levels, the
effect of changes in laws and regulations (including government subsidies and
international trade regulations), changes in environmental laws, and employee
and labor relations. Further information concerning factors that could
significantly impact expected results is included in the following sections of
the Company's Form 10-K Annual Report for 1997, as filed with the Securities
and Exchange Commission: Business--Employees, Business--Environmental Matters,
Business--Significant International Operations, Business--Seasonality and
Production Schedules, Business--Competition, Legal Proceedings, and
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
DERIVATIVES
The Company uses derivative financial instruments to manage its foreign
currency and interest rate exposures. Case does not hold or issue financial
instruments for trading purposes. For information regarding Case's foreign
currency and interest rate risk management, reference is made to Item 7 and
Note 11 to the Case Financial Statements in the Company's 1997 Annual Report
on Form 10-K. There has been no material change in the Company's market risk
exposures that affect the quantitative and qualitative disclosures as
presented as of December 31, 1997.
18
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
For a description of legal proceedings to which the Company is party, see
footnote 6 to the Case financial statements included in this Form 10-Q.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of the Company was held on May 13, 1998.
At the meeting, stockholders voted upon (i) the election of a Board of
Directors to serve until the 1999 Annual Meeting of Stockholders and until
their successors are elected and have qualified, and (ii) the appointment of
Arthur Andersen LLP as independent public accountants for the year 1998.
Proxies for the meeting were solicited pursuant to Regulation 14 under the
Securities Exchange Act of 1934. There were 66,736,535 shares of common stock
present at the meeting in person or by proxy, each such share being entitled
to one vote on each matter being voted upon.
There was no solicitation in opposition to management's nominees for
director as listed in the proxy statement for the meeting and all such
nominees were elected by the following vote:
VOTES
NOMINEE VOTES FOR WITHHELD
------- ---------- --------
Pei-yuan Chia......................................... 66,519,382 217,153
Ronald E. Goldsberry.................................. 66,512,268 224,267
Jeffery T. Grade...................................... 66,515,104 221,431
Thomas R. Hodgson..................................... 66,516,742 219,793
Katherine M. Hudson................................... 66,517,691 218,844
Gerald Rosenfeld...................................... 66,515,253 221,282
Jean-Pierre Rosso..................................... 66,509,194 227,341
Theodore R. Tetzlaff.................................. 66,512,993 223,542
Thomas N. Urban....................................... 66,519,589 216,946
The appointment of Arthur Andersen LLP as independent public accountants was
approved by the following vote:
VOTES
VOTES FOR AGAINST ABSTENTIONS
---------- ------- -----------
66,614,368 54,664 67,503
There were no broker non-votes on either of the aforementioned matters at
the meeting.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
A list of the exhibits included as part of this Form 10-Q is set forth in
the Index to Exhibits that immediately precedes such exhibits, which is
incorporated herein by reference.
(b) Reports on Form 8-K.
The Company did not file any Current Reports on Form 8-K during the quarter
ended June 30, 1998.
19
SIGNATURE
PURSUANT TO THE REQUIREMENTS 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.
CASE CORPORATION
/s/ Theodore R. French
By __________________________________
Theodore R. French
President, Financial Services, and
Chief Financial Officer
(Principal Financial Officer and
authorized signatory for Case
Corporation)
Date: August 13, 1998
20
EXHIBIT INDEX
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION OF EXHIBITS NUMBER
------- ----------------------- ----------
4 The Company hereby agrees to furnish to the Securities
and Exchange Commission, upon its request, the instru-
ments with respect to its guaranty of certain indebted-
ness issued by its subsidiaries, which indebtedness
does not exceed 10% of the Company's total consolidated
assets.
*10 Amended and Restated Sponsors' Agreement, dated as of
April 21, 1998, between the Company, Cummins Engine
Company, Inc., Cummins Engine Holding Company, Inc. and
Case CDC Holdings, Inc.
11 Computation of Earnings Per Share of Common Stock.
12 Computation of Ratio of Earnings to Fixed Charges and
Preferred Dividends.
27 Financial Data Schedule
- --------
*Confidential information contained in this agreement has been omitted from
this filing and has been filed separately with the Securities and Exchange
Commission.