EXHIBIT 99
CASE News Release
- ----
CASE CORPORATION 700 STATE STREET RACINE, WI 53404 U.S.A.
HTTP://WWW.CASECORP.COM
For more information, contact:
William B. Masterson (414) 636-5793
For Immediate Release
CASE CORPORATION ANNOUNCES THIRD QUARTER RESULTS
. Operating earnings of $106 million and net income of $63 million
(EPS $.82)
. Worldwide revenues up 6 percent to $1.5 billion on gains in construction
equipment, but sales decline in large agricultural equipment impacts
earnings
. Worldwide retail unit sales down 3 percent, led by 12 percent decline in
agricultural equipment
. Further production cuts and reduced spending measures announced in
response to declining agricultural equipment market and worsening global
economic outlook
Racine, Wisconsin (October 15, 1998) Consistent with expectations, Case
Corporation's (NYSE:CSE) earnings for the third quarter were lower due to
declining sales of large agricultural equipment, unfavorable exchange rates and
new product launch costs. Operating earnings for the period were $106 million,
and net income was $63 million, or $.82 per share. In the prior year period,
Case reported operating earnings of $123 million, and net income of $78 million,
or $.98 per share.
A weakening global economic picture is impacting many of the markets for
Case's products, particularly in key segments. Lower sales of large agricultural
equipment in North America and the Commonwealth of Independent States resulted
in an unfavorable sales mix, compared to the third quarter of last year.
Overall, revenues rose in the third quarter to $1.5 billion, largely due to a
continued strong North American construction equipment business, solid gains in
Latin America and acquisitions, as well as increased revenues from Case Credit.
Lower operating earnings for the third quarter reflect the sales declines
in higher-margin agricultural equipment. Unfavorable foreign exchange rates in
Australia and Canada also contributed to lower results, as did higher new
product launch costs. These were partially offset by higher pricing and ongoing
cost reduction initiatives.
For the first nine months of 1998, net income was $258 million, or
$3.30 per share, compared with $280 million, or $3.54 per share, for the same
period last year. Revenues for the first nine months of 1998 were $4.6 billion,
up from $4.3 billion in the prior year. Operating earnings were $414 million
for the first nine months of 1998, compared with $437 million last year.
Results for the first nine months were impacted by the factors detailed for the
third quarter.
"Our business conditions have changed markedly from this time last year.
Economic difficulty has spread to many major regions of the world at a time when
historically low commodity prices have caused retail sales of agricultural
equipment to decline considerably," said Jean-Pierre Rosso, Case chairman and
chief executive officer. "As expected, this impacted our results for the third
quarter, particularly in four-wheel drive tractors and combines. We believe this
will continue for the balance of 1998 and during 1999.
"Given this market outlook, and in anticipation of continued economic
deterioration, we are proactively managing our business, matching production to
retail demand. As a result, we are further decreasing production in 1998 to keep
product inventories in line with our current four-to-five months of supply. In
addition, we are accelerating cost reduction initiatives and lowering growth-
related expenditures to maximize earnings in this environment."
Management Actions
Following the company's outlook statement issued on September 9, global
economic conditions have continued to erode in many parts of the world, further
decreasing the potential for farm commodity exports from the major grain
producing regions. Case now expects the worldwide agricultural equipment market
to decline by 7 to 8 percent in 1998, compared to the previously expected 5
percent.
Consequently, Case is further reducing its production of agricultural
equipment in 1998 by 3 percent for a total reduction of 15 percent for the year.
In addition, the company will initiate further cost reductions through the
elimination of contract and temporary employees, as well as additional layoffs
at its manufacturing locations due to lower production volumes. The company
does not expect these actions to increase the previously announced, one-time
charge of $70 to $80 million that the company is taking in the fourth quarter.
Further, the company will look to lower research and development, capital
expenditures and other selected growth-related spending.
As a result of these actions, Case now expects its 1998 earnings, excluding
the one-time charge, to be approximately 40 percent below those of 1997. Based
on the current outlook, the company's 1999 results are expected to be lower than
in 1998.
2
During the quarter, Case repurchased 2.2 million shares of the company's
common stock. Case has now completed its 4 million share repurchase program,
and has begun purchases under a new 8 million share program authorized by the
company's board of directors in July.
Equipment Sales
Case's worldwide retail unit sales were down 3 percent, as double-digit
gains in sales of construction equipment in North America and Latin America were
more than offset by lower agricultural equipment sales in each region.
Construction Equipment - Led by strong increases in retail unit sales of
loader/backhoes and skid steers, third quarter retail sales of Case construction
equipment rose by 17 percent in North America. A 14 percent increase in the
company's Latin American retail sales was fueled by a double-digit improvement
in nearly every product category, led by exceptionally strong sales in
excavators and skid steers. Sales of the Sumitomo-designed Case excavator
continue to be very strong in Latin America.
In Europe, retail unit sales of Case construction equipment were up
slightly on solid growth in sales of loader/backhoes and wheel loaders, offset
by a decline in excavators. The retail unit gains in North America, Latin
America and Europe were partially offset by a sharp decline in retail sales in
Case's Asia Pacific region.
Agricultural Equipment - Retail unit sales of Case agricultural equipment
in the third quarter were lower in all regions of the world, reflecting
significantly weaker conditions in the global agricultural equipment market. In
North America, retail sales were lower in every product category, particularly
in high-horsepower tractors. In Europe, retail sales of combines were
significantly lower, reflecting a marked decline in sales to the Commonwealth of
Independent States, and Eastern and Central Europe. Small horsepower tractors
were also lower. In Latin America, higher retail sales of combines and cotton
pickers were more than offset by lower tractor sales. And in the Asia Pacific
region, sales of combines and cotton pickers were higher, although retail sales
of row-crop tractors were significantly lower.
During the third quarter, Case launched the new MX Magnum tractor and began
shipping models in October. This tractor sets new industry standards for power
and fuel efficiency. Also, an imbedded controller-area network allows for
greater on-farm service capability and, for the first time, enables a tractor to
communicate with attached implements and automate on-the-go input changes
through a single connection. In addition to providing farmers with the
potential to lower their operating costs, the MX Magnum is also more efficient
to manufacture, containing 30 percent fewer parts than the previous model.
Also in the third quarter, Case announced that it had reached an agreement
to acquire the agricultural equipment business of DMI, Inc., the leading
producer of soil management equipment in North America. The acquisition will
broaden Case's implement business, creating a complete system of products for
3
production agriculture farmers, and add DMI's recognized knowledge in soil
management to Case's growing farm practice expertise, which includes use of
Case's AFS technology for precision farming.
Market Outlook
The market outlook for Case's agricultural and construction equipment and
financial services business is decidedly mixed throughout the world.
Demand for agricultural equipment began to drop significantly during the
third quarter of 1998. This decline is the result of low commodity prices,
driven principally by a second consecutive year of strong-to-record harvests in
most major grain crops. In addition, exports of farm commodities have dropped
substantially year-over-year, affecting large-scale production agriculture
farmers. In the United States, net farm income for 1998 is projected to be
lower than the previous year by at least 15 percent, and significant declines
are also anticipated in other parts of the world. In addition, financing for
equipment purchases in emerging markets is expected to remain extremely
difficult. As a result of these factors, sales of agricultural equipment are
projected to continue to decline in 1999 by 15 to 20 percent in North America
and by 5 to 10 percent in Europe. Worldwide, the company expects the
agricultural equipment market to be an additional 7 to 8 percent lower than in
1998.
The global outlook for the construction equipment market varies by region.
In North America, demand is stable due to a sustained level of housing starts
and a favorable interest rate environment. This outlook is supported by the new
U.S. highway bill that will increase infrastructure spending. In Europe, the
market is expected to weaken for the balance of 1998, following a strong first
half, resulting in modest year-over-year growth. In the Asia Pacific region,
any recovery is dependent upon Japan's ability to stimulate its economy and
resolve its banking crisis. Case is further affected by a weak Australian
dollar, impacting the overall economy and construction activity there. In Latin
America, the markets are expected to be down in the fourth quarter as a result
of current, high interest rates.
Case is proactively managing under these less favorable business
conditions. The company has taken steps to keep production in line with
anticipated retail demand to maintain inventories at historically low levels
relative to the business cycle. These steps are expected to lower earnings,
while also decreasing the earnings volatility traditionally experienced under
these business conditions. In addition, the company is
4
aggressively reducing costs, while continuing to execute its operating strategy
of simultaneous revenue growth and cost reduction. These measures are intended
to maximize the company's earnings and improve performance relative to past
downturns.
The information included in this news release contains 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 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.
Case Corporation is a leading worldwide designer, manufacturer and
distributor of agricultural and construction equipment and offers a broad array
of financial products and services. Headquartered in Racine, Wisconsin, Case
had 1997 revenues of $6 billion and sells its products in 150 countries through
a network of approximately 4,900 independent dealers.
5
The following is issued in conjunction with Case Corporation's 1998 third
quarter results:
For more information, contact:
Sandra J. Lasch
414-636-6473
For Immediate Release
CASE CAPITAL CORPORATION REPORTS RECORD PORTFOLIO
AND 9 PERCENT INCOME GROWTH FOR CASE CREDIT CORPORATION
. Serviced portfolio grows to record $6.4 billion
. Net income up 9 percent to $25 million
. Originations increase 40 percent
. Diversified financing business increases significantly
Racine, Wisconsin (October 15, 1998) -- Case Capital Corporation, the
financial services arm of Case Corporation, today announced that Case Credit
Corporation reported net income of $25 million for the third quarter of 1998, up
9 percent from $23 million in the comparable period last year. Revenues
increased 44 percent over the prior year to a record $108 million. These
improvements are attributed to higher financing income from strong growth in
receivables and leases. In addition, increases in net income were partially
offset by a higher tax rate.
For the first nine months of 1998, revenues increased 31 percent over the
prior year period to $264 million. Net income for the period was $62 million,
comparable to last year. Increases in financing income were offset by the impact
of Case Credit's asset-management strategy and a higher tax rate during the
first nine months of 1998.
Case Credit's serviced portfolio grew to a record $6.4 billion as of
September 30, 1998, a 30 percent increase year-over-year. Financing
originations increased 40 percent in the third quarter and 41 percent for the
first nine months, as compared to prior year periods. These increases reflect
the impact of Case Capital's strategy to grow and diversify Case Credit's
financial services business while continuing to serve Case dealers and customers
worldwide. Diversified financing represented 29 percent of total retail
originations during the third quarter and 25 percent for the first nine months.
Year-over-year, diversified retail originations have increased nearly 200
percent.
"Case Credit's outstanding performance once again demonstrates the strength
of our financial services business," stated Ted R. French, Case Capital chairman
and Case president, financial services, and chief financial officer. "The
continued growth in our balance sheet and net income, despite weaker retail
demand in the agricultural sector, demonstrates that we are
6
successfully executing our strategy. We are well-positioned for leadership in
the financial services industry and remain confident in our ability to make a
stable, growing contribution to Case Corporation and its shareholders."
Case Credit announced in September that it has formed a strategic marketing
alliance with GMAC Commercial Mortgage Corporation to offer agricultural real
estate financing through the Case dealer network. This strategic alliance was
formed to provide Case customers with a one-stop shopping source for their
agricultural equipment and real estate financing needs.
"We are continuing our efforts to expand the scope of our financial
services business and strengthen our non-cyclical earnings base," said French.
"The strength of our portfolio reflects our success in managing growth and
diversification. We will maintain our superior portfolio quality as we pursue
new business opportunities and enter into strategic initiatives that support
sustainable, long-term earnings growth for Case Capital."
Case Capital Corporation, recently formed by Case Corporation to provide
broad-based financial services for the global marketplace, will soon encompass
Case Credit Corporation. Established in 1957, Case Credit provides financial
services to customers purchasing, leasing and insuring equipment through
established dealer networks located primarily in North America, Australia and
Europe. Based in Racine, Wisconsin, Case Credit services a $6.4 billion
portfolio of receivables and leases.
7
Case Corporation
Net Sales
September 30, 1998
(Millions)
Three Months Ended Nine Months Ended
------------------------------- --------------------------------
% %
1998 1997 Change 1998 1997 Change
------ ------ ------ ------ ------ ------
Net sales:
Agricultural equipment $ 719 $ 728 -1% $2,205 $2,110 5%
Construction equipment 458 380 21% 1,473 1,241 19%
Parts 272 272 - 755 752 -
------ ------ ------ ------
Total net sales $1,449 $1,380 5% $4,433 $4,103 8%
====== ====== ====== ======
Net sales:
North America $ 799 $ 736 9% $2,534 $2,254 12%
Europe* 472 456 4% 1,412 1,350 5%
Asia Pacific 78 108 -28% 223 304 -27%
Latin America 100 80 25% 264 195 35%
------ ------ ------ ------
Total net sales $1,449 $1,380 5% $4,433 $4,103 8%
====== ====== ====== ======
* Includes Africa and Middle East
8
CASE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Millions, except per share data)
(Unaudited)
CONSOLIDATED CASE INDUSTRIAL CASE CREDIT
Three Months Ended Three Months Ended Three Months Ended
September 30, September 30, September 30,
------------------ ------------------ ------------------
1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ----
Revenues
Net sales $1,449 $1,380 $1,449 $1,380 $ - $ -
Interest income and other 85 64 11 7 108 75
------ ------ ------ ------ ---- ----
Total 1,534 1,444 1,460 1,387 108 75
- ---------------------------------------------------------------------------------------------------------
Costs and Expenses
Cost of goods sold 1,149 1,075 1,149 1,075 - -
Selling, general and administrative 146 144 165 155 12 7
Research, development and engineering 58 49 58 49 - -
Interest expense 66 47 26 19 43 28
Other, net 21 14 7 8 14 6
------ ------ ------ ------ ---- ----
Total 1,440 1,329 1,405 1,306 69 41
- ---------------------------------------------------------------------------------------------------------
Income before taxes 94 115 55 81 39 34
Income tax provision 31 37 17 26 14 11
- ---------------------------------------------------------------------------------------------------------
63 78 38 55 25 23
Equity in income - Case Credit 25 23
- ---------------------------------------------------------------------------------------------------------
Net income $ 63 $ 78 $ 63 $ 78 $ 25 $ 23
====== ====== ====== ====== ==== ====
Preferred stock dividends 2 2
------ ------
Net income to common $ 61 $ 76
====== ======
- ---------------------------------------------------------------------------------------------------------
Earnings per Common Share:
Basic earnings per common share $ 0.84 $ 1.03
Diluted earnings per common share $ 0.82 $ 0.98
See Notes to Interim Financial Statements.
9
CASE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Millions, except per share data)
(Unaudited)
CONSOLIDATED CASE INDUSTRIAL CASE CREDIT
Nine Months Ended Nine Months Ended Nine Months Ended
September 30, September 30, September 30,
----------------- ----------------- -----------------
1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ----
Revenues
Net sales $4,433 $4,103 $4,433 $4,103 $ - $ -
Interest income and other 216 174 27 25 264 201
------ ------ ------ ------ ---- ----
Total 4,649 4,277 4,460 4,128 264 201
- ----------------------------------------------------------------------------------------------------------
Costs and Expenses
Cost of goods sold 3,442 3,138 3,442 3,138 - -
Selling, general and administrative 447 421 486 451 33 22
Research, development and engineering 167 141 167 141 - -
Interest expense 170 126 70 54 103 72
Other, net 45 39 13 23 32 16
------ ------ ------ ------ ---- ----
Total 4,271 3,865 4,178 3,807 168 110
- ----------------------------------------------------------------------------------------------------------
Income before taxes 378 412 282 321 96 91
Income tax provision 120 132 86 103 34 29
- ----------------------------------------------------------------------------------------------------------
258 280 196 218 62 62
Equity in income - Case Credit 62 62
- ----------------------------------------------------------------------------------------------------------
Net income $ 258 $ 280 $ 258 $ 280 $ 62 $ 62
====== ====== ====== ====== ==== ====
Preferred stock dividends 5 5
------ ------
Net income to common $ 253 $ 275
====== ======
- ----------------------------------------------------------------------------------------------------------
Earnings per Common Share:
Basic earnings per common share $ 3.44 $ 3.72
Diluted earnings per common share $ 3.30 $ 3.54
See Notes to Interim Financial Statements.
10
CASE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Millions)
(Unaudited)
CONSOLIDATED CASE INDUSTRIAL CASE CREDIT
September 30, September 30, September 30,
------------------- ----------------- ------------------
1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ----
Assets
Cash and cash equivalents $ 108 $ 167 $ 85 $ 122 $ 23 $ 45
Accounts, notes receivable and other - net 4,464 3,390 2,044 1,674 2,411 1,723
Inventories 1,445 1,155 1,445 1,155 - -
Property, plant and equipment - net 1,041 905 1,039 902 2 3
Investment in Case Credit - - 411 318 - -
Goodwill and intangibles 325 304 325 304 - -
Other assets 1,078 652 496 447 598 219
------ ------ ------ ------ ------ ------
Total $8,461 $6,573 $5,845 $4,922 $3,034 $1,990
====== ====== ====== ====== ====== ======
- ---------------------------------------------------------------------------------------------------------------------
Liabilities and Equity
Current maturities of long-term debt $ 5 $ 8 $ 5 $ 8 $ - $ -
Short-term debt 2,115 1,439 920 240 1,195 1,199
Accounts payable and other accrued liabilities 1,415 1,385 1,373 1,346 49 60
Long-term debt 2,020 1,100 669 690 1,351 410
Other liabilities 490 439 462 436 28 3
------ ------ ------ ------ ------ ------
Total Liabilities 6,045 4,371 3,429 2,720 2,623 1,672
Equity 2,416 2,202 2,416 2,202 411 318
------ ------ ------ ------ ------ ------
Total $8,461 $6,573 $5,845 $4,922 $3,034 $1,990
====== ====== ====== ====== ====== ======
- ---------------------------------------------------------------------------------------------------------------------
See Notes to Interim Financial Statements.
11
CASE CORPORATION
Notes to Interim Financial Statements
-------------------------------------
(1) The accompanying financial statements reflect the consolidated results of
Case Corporation and consolidated subsidiaries. The supplemental "Case
Industrial" consolidating data in each of the financial statements includes
Case Corporation's agricultural equipment, construction equipment, parts
and wholesale (dealer) financing operations, with Case Credit reflected on
the equity basis. The supplemental "Case Credit" consolidating data
includes Case Corporation's retail credit operations. Transactions between
"Case Industrial" and "Case Credit" have been eliminated to arrive at the
"Consolidated" data.
(2) During the first nine months of 1998, limited-purpose business trusts
organized by Case Credit issued $1,379 million of asset-backed securities
to outside investors. Case Credit has sold $1,403 million of U.S. and
Canadian retail notes to the trusts in connection with these issuances.
During the first nine months of 1997, limited-purpose business trusts
organized by Case Credit issued $1,706 million of asset-backed securities
to outside investors. Case Credit had sold $1,301 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.
(3) During the third quarter of 1998, the Company announced an agreement to
acquire certain assets of DMI, Inc. ("DMI"). The acquisition of DMI, the
leading producer of soil management equipment in North America, broadens
Case's implement business to include an innovative line of tillage and
fertilizer applicator products and adds DMI's recognized knowledge in soil
management to Case's growing farm practice expertise. DMI, with operations
in Goodfield, Illinois, had sales of approximately $77 million in 1997.
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.
(4) On a consolidated basis, the Company's effective income tax rate of 32% for
the first nine months of 1998 and 1997 was 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.
12
CASE CORPORATION
Notes to Interim Financial Statements
-------------------------------------
(5) 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. A reconciliation of the
Company's industrial net income to operating earnings is as follows (in
millions):
Three Nine
Months Ended Months Ended
Case Industrial September 30, September 30,
--------------- ------------- -------------
1998 1997 1998 1997
---- ---- ---- -----
Net income $ 63 $ 78 $ 258 $ 280
Income tax provision 17 26 86 103
Interest expense 26 19 70 54
----- ----- ----- -----
Operating earnings $ 106 $ 123 $ 414 $ 437
===== ===== ===== =====
(6) Earnings Per Common Share:
Three Nine
Months Ended Months Ended
September 30, September 30,
------------- -------------
1998 1997 1998 1997
---- ---- ---- ----
Basic
-----
Net earnings available to common (millions) $ 61 $ 76 $ 253 $ 275
Average common shares outstanding (millions) 72.6 74.3 73.4 73.8
Basic earnings per common share $ .84 $1.03 $3.44 $3.72
Diluted
-------
Net earnings available to common (millions) $ 63 $ 78 $ 258 $ 280
Average common shares outstanding (millions) 76.7 79.3 78.0 78.9
Diluted earnings per common share $ .82 $ .98 $3.30 $3.54
13