UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C.
20549
___________________________________________________
FORM 11-K
___________________________________________________
(Mark
One)
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þ
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ANNUAL
REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For the
fiscal year ended December 31,
2019
OR
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o
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TRANSITION
REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For the
transition period from _____ to _____.
Commission
file number 1-9618
___________________________________________________
A. Full title of the plan and
the address of the plan, if different from that of the issuer named
below:
NAVISTAR,
INC.
RETIREMENT
ACCUMULATION PLAN
B. Name of issuer
of the securities held pursuant to the plan and the address of its
principal executive office:
NAVISTAR
INTERNATIONAL CORPORATION
2701
Navistar Drive
Lisle,
Illinois 60532
REQUIRED
INFORMATION
Navistar, Inc. is the Plan
Administrator of the Navistar, Inc. Retirement Accumulation Plan
(the “Plan”). The Plan is subject to the Employee Retirement Income
Security Act of 1974 (“ERISA”). Therefore, in lieu of the
requirements of Items 1-3 of Form 11-K, the financial statements of
the Plan as of December 31, 2019
and
2018, and for the year
ended December 31,
2019, and
the schedules as of December 31,
2019, have
been prepared in accordance with the financial reporting
requirements of ERISA.
SIGNATURE
Pursuant to the
requirements of the Securities Exchange Act of 1934, the Plan
Administrator for the Plan has duly caused this report to be signed
on its behalf by the undersigned hereunto duly
authorized.
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Navistar, Inc. Retirement
Accumulation Plan
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By:
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/s/ Samara A.
Strycker
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Name:
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Samara A.
Strycker
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Title:
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Senior Vice President and
Corporate Controller (Principal Accounting Officer)
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Dated:
June 23,
2020
FINANCIAL
STATEMENTS AND REPORT OF
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
NAVISTAR,
INC. RETIREMENT ACCUMULATION PLAN
DECEMBER 31,
2019 AND
2018
CONTENTS
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Grant
Thornton LLP
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Grant Thornton
Tower
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171 N Clark St Suite
200
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Chicago, IL
60601
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T 312.856.0200
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F 312.565.4719
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www.GrantThornton.com
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REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Plan Administrator and Plan
Participants
Navistar, Inc.
Retirement Accumulation Plan
Opinion on
the financial statements
We have audited
the accompanying statements of net assets available for benefits of
Navistar, Inc. Retirement Accumulation Plan (the “Plan”) as of
December 31, 2019 and 2018, the related statement of changes in net
assets available for benefits for the year ended December 31, 2019,
and the related notes (collectively referred to as the “financial
statements”). In our opinion, the financial statements present
fairly, in all material respects, the net assets available for
benefits of the Plan as of December 31, 2019 and 2018, and the
changes in net assets available for benefits for the year ended
December 31, 2019 in conformity with accounting principles
generally accepted in the United States of America.
Basis for
opinion
These financial
statements are the responsibility of the Plan’s management. Our
responsibility is to express an opinion on the Plan’s financial
statements based on our audits. We are a public accounting firm
registered with the Public Company Accounting Oversight Board
(United States) (“PCAOB”) and are required to be independent with
respect to the Plan in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.
We conducted our
audits in accordance with the standards of the PCAOB. Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement, whether due to error or fraud. The
Plan is not required to have, nor were we engaged to perform, an
audit of its internal control over financial reporting. As part of
our audits we are required to obtain an understanding of internal
control over financial reporting but not for the purpose of
expressing an opinion on the effectiveness of the Plan’s internal
control over financial reporting. Accordingly, we express no such
opinion.
Our audits
included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or
fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audits
also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the
overall presentation of the financial statements. We believe that
our audits provide a reasonable basis for our opinion.
Supplemental
information
The schedule of
assets (held at end of year) as of December 31, 2019 ("supplemental
information"), has been subjected to audit procedures performed in
conjunction with the audit of the Plan’s financial statements. The
supplemental information is the responsibility of the Plan’s
management. Our audit procedures included determining whether the
supplemental information reconciles to the financial statements or
the underlying accounting and other records, as applicable, and
performing procedures to test the completeness and accuracy of the
information presented in the supplemental information. In forming
our opinion on the supplemental information, we evaluated whether
the supplemental information, including its form and content, is
presented in conformity with the Department of Labor’s Rules and
Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. In our opinion, the
supplemental information is fairly stated, in all material
respects, in relation to the financial statements as a
whole.
/s/ GRANT
THORNTON LLP
We have served as
the Plan's auditor since 2006.
Chicago,
Illinois
June 23,
2020
Navistar,
Inc. Retirement Accumulation Plan
STATEMENTS
OF NET ASSETS AVAILABLE FOR BENEFITS
December 31,
2019 and 2018
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2019
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2018
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Assets
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Plan's interest in Master
Trust, at fair value
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$
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978,833,038
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$
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795,390,476
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Other asset
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19
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—
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Receivables
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Participant
contributions
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1,742,054
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1,665,601
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Employer
contributions
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21,547,842
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27,936,978
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Notes receivable
from participants
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8,140,595
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7,971,386
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Total
receivables
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31,430,491
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37,573,965
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NET ASSETS
AVAILABLE FOR BENEFITS
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$
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1,010,263,548
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$
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832,964,441
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The accompanying
notes are an integral part of these statements.
Navistar,
Inc. Retirement Accumulation Plan
STATEMENT OF
CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
Year
ended December 31,
2019
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Change in Plan's interest in
Master Trust (note C)
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$
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184,395,493
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Interest income on notes
receivable from participants
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459,360
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Contributions
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Participant
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32,711,240
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Employer
Retirement
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20,822,262
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Employer
Matching
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8,477,835
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Rollovers from
other qualified plans
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3,674,853
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Total
contributions
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65,686,190
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Benefits paid to
participants
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(72,925,810
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)
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Administrative
expenses
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(486,008
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Increase in net assets prior
to transfers
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177,129,225
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Transfers from other
qualified plan within Master Trust, net
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169,882
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NET
INCREASE
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177,299,107
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Net assets available for
benefits
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Beginning of
year
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832,964,441
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End of year
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$
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1,010,263,548
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The accompanying
notes are an integral part of these statements.
Navistar,
Inc. Retirement Accumulation Plan
NOTES TO
FINANCIAL STATEMENTS
December 31,
2019 and 2018
NOTE A –
DESCRIPTION OF THE PLAN
The following
description of the Navistar, Inc. Retirement Accumulation Plan (the
“Plan”) is provided for general information purposes only.
Participants should refer to the Plan document for more complete
information.
General
The Plan is
sponsored by Navistar, Inc. (the “Company”), the principal
operating subsidiary of Navistar International Corporation
(“Navistar”), to provide savings and retirement benefits for
certain eligible salaried and hourly employees of the Company and
of certain affiliates participating under the Plan. The Plan was
established January 1, 1996, and has subsequently been amended to
maintain qualification under Sections 401(a), 401(k) and 501 of the
Internal Revenue Code of 1986, as amended (the “IRC”) and to modify
the provisions of the Plan. The Plan is subject to the provisions
of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”).
Eligibility
Prior to July 1,
2009, participation in the Plan was limited to those eligible
salaried employees of the Company whose initial hire date was on or
after January 1, 1996 and to eligible salaried employees of certain
affiliates. Effective July 1, 2009, participation includes those
participants whose accounts were merged into the Plan, regardless
of their initial date of hire.
Contributions and Vesting
Participant
contributions may be made to the Plan on a pretax basis, a Roth
basis, an after-tax basis, and/or any combination thereof. Those
participants who were age 50 or older during the Plan year are
permitted to contribute additional amounts on a pretax and/or Roth
basis. Participant contributions may be elected at a minimum level
of 1% of eligible compensation at any time. Total participant
contributions cannot exceed 90% of eligible compensation.
Participant contributions are limited to a prescribed IRC dollar
limit; the additional contributions by participants who were age 50
or older are limited to a separate prescribed IRC dollar limit.
Subject to Company approval, eligible employees are allowed to make
rollover contributions to the Plan, if such contributions satisfy
applicable regulations. Such employees are not required to be
participants for any purpose other than their rollover account;
however, no salary reduction contributions may be made until such
time as such employee would otherwise become eligible to and does
elect participation in the Plan. Participant salary reduction
contributions and rollover contributions are fully vested
immediately.
New employees are
automatically enrolled in the Plan at an employee pretax
contribution rate of 6% of eligible compensation. In general,
such automatic enrollment will be effective the first pay period
following the hire date, unless the employee elects to participate
earlier or elects to opt out of enrollment until a future
date.
The Plan permits,
but does not require, the Company or its affiliates to make
matching and retirement contributions. Such contributions are
subject to a vesting schedule based upon the participant’s length
of employment, and fully vest upon completion of five years of
service. For those participants who are eligible for such matching
contributions, the Company currently matches 50% of the first 6% of
eligible compensation deferred as combined pretax and/or Roth
contributions by the participant. Additional compensation deferred
by a participant who is age 50 or older is not matched by the
Company. Retirement contributions are allocated to eligible
participants and are calculated as a percentage of eligible
compensation, based on the participant’s age.
Company match
contributions must be deposited at least annually; however,
effective January 1, 2019, Company match contributions changed from
being deposited annually to being deposited monthly without regard
to whether the employee was employed by the Company as of the last
day of that month or of that Plan year. Retirement contributions
are deposited into participant accounts on an annual basis, as soon
as administratively practical after the close of the Plan year. A
participant who has terminated employment prior to the end of the
calendar year for any reason except death, involuntary termination
or “retirement” as defined under the Plan, will not receive any
Company retirement contributions for that year.
Participant and
Company contributions are subject to the combined annual addition
limitation of IRC Section 415. Such limit is monitored throughout
the Plan year.
Non-vested
Company matching and retirement contributions are forfeited when a
participant terminates service. Such forfeitures may be used to
offset future Company contributions or to pay administrative
expenses of the Plan. At December 31, 2019
and
2018, forfeited non-vested
accounts approximated $830,000 and $1,252,000, respectively. For the
employer contributions recognized for the Plan year ended
December 31,
2019,
approximately $875,000 of forfeitures were used to
offset Company contributions.
Navistar,
Inc. Retirement Accumulation Plan
NOTES TO
FINANCIAL STATEMENTS
December 31,
2019 and 2018
Investment Options
Participants
direct the investment of their account balances and future
contributions. Investment options during 2019 and 2018 consisted of funds classified
as registered investment companies, collective trusts or Navistar
common stock.
Participant Accounts
Individual
accounts are maintained for each Plan participant. Realized
gains and losses, unrealized appreciation and depreciation, and
dividends and interest are allocated to participants based on their
proportionate share of the funds. Fund managers’ fees are
charged to participants’ accounts as a reduction of the return
earned on each investment option. Also, participant
accounts are assessed a quarterly recordkeeping
fee.
Notes Receivable from Participants
Participants may
borrow from their fund accounts a minimum of $1,000 up to the
lesser of 50% of their pretax, Roth, after-tax and rollover account
balance or $50,000, with no more than two loans outstanding at a
time. Company matching and retirement contributions are not
available for loans. Loan transactions are treated as a transfer
between the applicable investment funds and the loan fund. Loan
terms range from one to five years, with the exception of loans
made for the purchase of a principal residence, which may be repaid
in installments over a period of up to ten years. The loans are
secured by the balance in the participant’s account and bear
interest at a rate equal to prime as of the date of loan
origination, plus one percentage point.
Payment of Benefits
Participants may
request either an in-service or hardship withdrawal of certain
assets in their account. Participants may only withdraw authorized
pretax and Roth salary reduction contributions after attaining age
59 ½, or on a hardship basis prior to attaining age 59 ½. Effective
January 1, 2019, participants may also withdraw earnings on
authorized pretax and Roth salary reduction contributions after
attaining age 59 ½, or on a hardship basis prior to attaining age
59 ½. Company matching and retirement contributions and investment
earnings thereon are not eligible for in-service
withdrawal.
A participant’s
vested account is distributable at the time a participant separates
from service with the Company, suffers a total and permanent
disability or dies. When the participant terminates employment
prior to reaching normal retirement age with a vested balance of
$5,000 or less, and does not elect to have the distribution paid
directly to an eligible retirement plan or receive a distribution,
then the balance will be rolled over to an individual retirement
plan designated by the Plan administrator.
If the vested
balance is more than $5,000, the participant has the option of
receiving the account upon separation or deferring commencement
until a later date. If the participant elects to receive a check
and the check remains uncashed after 120 days, the Plan
administrator will notify the participant that the check remains
uncashed. Following an administrative period, if the check remains
uncashed, the check will be void and the funds will be rolled over
to an individual retirement plan designated by the Plan
administrator. If the participant elects to defer commencement, the
deferral generally cannot go beyond April 1 of the calendar year
following the year in which the participant attains age 70 ½ or
retires, whichever is later. At that time, the participant must
begin to receive a required minimum distribution. Accounts are
distributed in a single sum prior to this date, or may be
distributed at this date as a lump sum or a required minimum
distribution. Effective on or after August 1, 2019, accounts may
also be distributed as partial lump sums for those who are not
subject to a mandatory distribution, subject to rules and limits
established by the plan administrator in its
discretion.
Administrative Fees
Certain Plan
administrative expenses are paid by the Company and are not
reflected in the Plan’s financial statements. All other
administrative expenses of the Plan are paid by the Plan and
charged to the participants’ accounts.
NOTE B -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial
statements of the Plan are presented on the accrual basis of
accounting.
Use of Estimates
The preparation
of financial statements in conformity with accounting principles
generally accepted in the United States of America requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, and changes therein,
and disclosure of contingent assets and liabilities. Actual results
could differ from those estimates.
Navistar,
Inc. Retirement Accumulation Plan
NOTES TO
FINANCIAL STATEMENTS
December 31,
2019 and 2018
New Accounting Guidance
In February 2017
the Financial Accounting Standards Board ("FASB") issued Accounting
Standards Update ("ASU") 2017-06, Employee
Benefit Plan Master Trust Reporting - a consensus of the FASB
Emerging Issues Task Force, which provides updated
guidance for improving employee benefit plan master trust
reporting. The guidance clarifies that for each master trust in
which a plan holds an interest that the plan reports its interest
in each master trust and the change in value in each master trust
interest on separate line items on the statement of net assets
available for benefits and statement of changes in net assets
available for benefits. The guidance continues to require
disclosure of a master trust’s investments by general type but now
additionally requires disclosing the individual plan’s dollar
amount of its interest in the master trust’s investments by general
type. The update also clarifies that the master trust’s other
assets and liabilities and the individual plan’s interest in each
of those balances should be disclosed. For a plan with a divided
interest in the individual investments of a master trust the
guidance eliminates the disclosure of its percentage interest in
the master trust.
The guidance is
effective for fiscal years beginning after December 15, 2018 with
early adoption permitted. Entities are required to adopt the
guidance retrospectively for all periods presented. The Plan
retrospectively adopted the guidance for the Plan year ending
December 31, 2019. The adoption of the guidance did not have a
material impact on the financial statements and it expanded the
disclosures in Note C - Interest in Master Trust.
In August 2018,
the FASB issued ASU 2018-13, Fair Value
Measurement (Topic 820) - Disclosure Framework - Changes to the
Disclosure Requirements for Fair Value
Measurement. The ASU modifies the
disclosure requirements for the fair value measurements in Topic
820, including the elimination, modification to, and addition of
certain disclosures. The ASU is effective for fiscal years
beginning after December 15, 2019. The provisions of the ASU are
not expected to have a material impact on the Plan’s financial
statement disclosures.
Risks and Uncertainties
Investment
securities, in general, are exposed to various risks, such as
interest rate, credit and overall market volatility. Due to the
level of risk associated with certain investment securities, it is
reasonably possible that changes in the values of investment
securities will occur in the near term, and that such changes could
materially affect the amounts reported in the financial
statements.
Investment Valuation
The Plan follows
guidance on accounting for fair value measurements which defines
fair value as the price that would be received to sell an asset or
paid to transfer a liability (an exit price) in an orderly
transaction between market participants at the measurement date,
and establishes a framework for measuring fair value. The Plan uses
a three-level hierarchy of measurements based upon the reliability
of observable and unobservable inputs used to arrive at fair value.
Observable inputs are independent market data, while unobservable
inputs reflect the Plan management’s assumptions about valuation.
Depending on the inputs, the Plan classifies each fair value
measurement as follows:
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•
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Level 1 - based
upon quoted prices for identical
instruments in
active markets
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•
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Level 2 - based
upon quoted prices for similar
instruments,
prices for identical or similar instruments in markets that are not
active, or model-derived valuations all of whose significant inputs
are observable, and
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•
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Level 3 - based
upon one or more significant unobservable inputs.
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The following
describes the methods and significant assumptions used to estimate
fair value of the Plan’s investments:
The Plan’s
interest in the Navistar, Inc. Defined Contribution Plans Master
Trust (“Master Trust”) is presented at fair value, which has been
determined based on the fair value of the underlying investments of
the Master Trust.
The investments
held by the Master Trust are valued as follows:
Collective
trusts: Valued at the net asset value (“NAV”) as provided by the
administrator of the fund. The NAV is generally based on the fair
value of the underlying assets owned by the trust, minus its
liabilities, divided by the number of shares outstanding.
Collective trusts that invest in assets with observable inputs that
reflect quoted prices in an active market are classified as Level 1
and all other collective trusts are classified as Level
2.
Registered
investment companies (mutual funds): Valued at the NAV of shares
held by the plan at year end, which is obtained from an active
market.
Common stock:
Valued at the closing price reported on the active market on which
the security is traded.
See Note C -
Master Trust for the Master Trust’s investments by level within the
fair value hierarchy as of December 31, 2019
and
2018.
Navistar,
Inc. Retirement Accumulation Plan
NOTES TO
FINANCIAL STATEMENTS
December 31,
2019 and 2018
Notes Receivable from Participants
Notes receivable
from participants are measured at their unpaid principal balance
plus any accrued but unpaid interest. Interest income is recorded
on the accrual basis. Related fees are recorded as administrative
expenses and are expensed when they are incurred. No allowance for
credit losses has been recorded as of December 31, 2019
or
2018. If a participant ceases to
make loan repayments and the Plan administrator deems the
participant loan to be in default, the participant loan balance is
reduced and a benefit payment is recorded.
Income Recognition
Security
transactions are accounted for on the trade-date basis. Dividend
income is accrued on the ex-dividend date. Interest income is
recorded on the accrual basis. Net realized and unrealized
appreciation (depreciation), along with dividend income and
interest income (excluding notes receivables from participants) are
recorded in the accompanying statement of changes in net assets
available for benefits as change in Plan's interest in Master
Trust.
Participant Withdrawals
As of
December 31,
2019 and 2018, there were no benefits
which were due to former participants who have withdrawn from
participation in the Plan. Benefits are recorded when
paid.
Transfers
Transfers between
the Plan and the Navistar, Inc. 401(k) Plan for Represented
Employees (“Represented Plan”) which participates in the Master
Trust occur when a participant incurs a change in job status or a
job transfer to another affiliate that makes the participant
ineligible to participate in their current plan and requires the
transfer of their account balance to another plan within the Master
Trust for which they are eligible. Net transfers to the Plan
for 2019 are $169,882.
NOTE C -
MASTER TRUST
Great West Trust
Company, LLC (the “Trustee”) is the trustee for the Plan. All of
the Plan’s investment assets are held in a trust account at the
Trustee and consist of a divided interest in an investment account
of the Master Trust, a master trust established by the Company and
administered by the Trustee. Use of the Master Trust permits the
commingling of Plan assets with the assets of another defined
contribution plan sponsored by the Company and its affiliated
companies for investment and administrative purposes. Although
assets of the plans are commingled in the Master Trust, the Trustee
maintains supporting records for the purpose of allocating the net
gain or loss of the investment account to the participating plans.
The net investment income or loss of the investment assets is
allocated by the Trustee to each participating plan based on the
relationship of the interest of each plan to the total of the
interests of the participating plans.
The following
table presents the Master Trust's net assets and the Plan's
interest in the Master Trust's net assets as of December
31:
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2019
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2018
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Master Trust
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Plan's Interest
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Master Trust
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Plan's Interest
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Collective
trusts
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$
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334,255,673
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$
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280,956,266
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$
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530,089,831
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$
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434,317,172
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Registered investment
companies
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796,145,453
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671,231,293
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386,607,808
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|
335,351,181
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|
|
Navistar common
stock
|
34,006,264
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|
26,645,479
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33,319,137
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|
25,680,729
|
|
|
Interest bearing
cash
|
—
|
|
|
—
|
|
|
54,713
|
|
|
41,394
|
|
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Total investments, at fair
value
|
$
|
1,164,407,390
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|
|
$
|
978,833,038
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$
|
950,071,489
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$
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795,390,476
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|
The net
investment earnings of the Master Trust for the year ended
December 31,
2019 are
summarized below:
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Net appreciation in fair
value of investments
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$
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175,533,825
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Dividend and interest
income
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42,022,169
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Other income
|
42,171
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$
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217,598,165
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Navistar,
Inc. Retirement Accumulation Plan
NOTES TO
FINANCIAL STATEMENTS
December 31,
2019 and 2018
The following
tables present the Master Trust's investments by level within the
fair value hierarchy as of December 31, 2019
and
2018:
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2019
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Level 1
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Level 2
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Level 3
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Total
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Collective
trusts
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$
|
131,077,488
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|
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$
|
203,178,185
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|
|
$
|
—
|
|
|
$
|
334,255,673
|
|
|
Registered investment
companies
|
|
796,145,453
|
|
|
—
|
|
|
—
|
|
|
796,145,453
|
|
|
Navistar common
stock
|
|
34,006,264
|
|
|
—
|
|
|
—
|
|
|
34,006,264
|
|
|
Total assets, at
fair value
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|
$
|
961,229,205
|
|
|
$
|
203,178,185
|
|
|
$
|
—
|
|
|
$
|
1,164,407,390
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Collective
trusts
|
|
$
|
98,689,746
|
|
|
$
|
431,400,085
|
|
|
$
|
—
|
|
|
$
|
530,089,831
|
|
|
Registered investment
companies
|
|
386,607,808
|
|
|
—
|
|
|
—
|
|
|
386,607,808
|
|
|
Navistar common
stock
|
|
33,319,137
|
|
|
—
|
|
|
—
|
|
|
33,319,137
|
|
|
Interest bearing
cash
|
|
54,713
|
|
|
—
|
|
|
—
|
|
|
54,713
|
|
|
Total assets, at
fair value
|
|
$
|
518,671,404
|
|
|
$
|
431,400,085
|
|
|
$
|
—
|
|
|
$
|
950,071,489
|
|
The collective
trusts generally provide daily redemption with written notice with
the exception of the JPMCB Stable Asset Income Fund (the "JPMCB
Fund") valued at $129,163,221 and $122,561,049 at December 31, 2019
and 2018, respectively, and the target date funds valued at
$253,225,794 at December 31, 2018 (the target date funds are mutual
funds as of December 31, 2019).
Participants can
ordinarily direct the withdrawal or transfer of all or a portion of
their investment in the JPMCB Fund at contract value. Certain
events may limit the JPMCB Fund's ability to transact at contract
value. Such events may include plan termination, bankruptcy and
other events outside the normal operation of the JPMCB Fund that
may cause a withdrawal which results in a negative market value
adjustment. The Plan may terminate its interest in the JPMCB Fund
at any time. However, requests received for complete or partial
withdrawals must be given in writing not less than 30 days prior to
the valuation date, upon which the withdrawal is to be effected,
and such withdrawals shall be paid at the lesser of book or market
value, as determined by the JPMCB Fund.
Participants are
permitted to purchase or redeem investments in the target date
funds on a daily basis. During 2018, when the target funds were
collective trusts, redemption from the target date funds, on a Plan
level, was permitted at the end of each month with 30 days written
notice. Such advance notice may have been waived if mutually agreed
by both Navistar, Inc. and the fund manager.
NOTE D - TAX
STATUS OF THE PLAN
The Plan obtained
a determination letter dated September 16,
2016, in
which the Internal Revenue Service ("IRS") stated that the Plan, as
then designed, was in compliance with the applicable requirements
of the IRC. The Plan has been amended since receiving the
determination letter. However, the Plan administrator believes that
the Plan is currently designed and being operated, in all material
respects, in compliance with the applicable requirements of the
IRC. Therefore, no provision for income taxes is included in the
Plan’s financial statements.
The Master Trust
obtained a determination letter dated May 30,
2014, in
which the IRS stated that the Trust, as then designed, was in
compliance with the applicable requirements of the IRC. The
Master Trust has been amended since receiving the determination
letter. However, the Plan administrator believes that the
Master Trust is currently designed and being operated, in all
material respects, in compliance with the applicable requirements
of the IRC. Therefore, no provision for income taxes related
to the Master Trust is included in the Plan’s financial
statements.
Accounting
principles generally accepted in the United States of America
require Plan management to evaluate tax positions taken by the Plan
and recognize a tax liability (or asset) if the Plan has taken an
uncertain position that more likely than not would not be sustained
upon examination by the IRS. The Plan administrator has analyzed
the tax positions taken by the Plan, and has concluded that as
of December 31, 2019
and
2018, there are no uncertain
positions taken or expected to be taken that would require
recognition of a liability (or asset) or disclosure in the
financial statements. The Plan is subject to routine audits by the
IRS; however, there are currently no audits for any tax periods in
progress.
Navistar,
Inc. Retirement Accumulation Plan
NOTES TO
FINANCIAL STATEMENTS
December 31,
2019 and 2018
NOTE E -
PLAN TERMINATION
Although the
Company expects to continue the Plan indefinitely, the Company, at
its discretion, reserves the right to amend, modify, suspend or
terminate the Plan, provided that no such action shall deprive any
person of any rights to contributions made under the Plan. If the
Plan is terminated or contributions thereto have been completely
discontinued, the rights of all participants to the amounts
credited to their accounts shall be non-forfeitable and the
interest of each participant in the funds will be distributed to
such participant or his or her beneficiary in accordance with the
Plan terms and ERISA. If the Plan is terminated, Plan participants
will become fully vested in any funds allocated to
them.
NOTE F -
RELATED-PARTY TRANSACTIONS
Empower
Retirement, an affiliate of the Trustee, is the record keeper as
defined by the Master Trust and, therefore, transactions with
Empower Retirement qualify as party-in-interest transactions. Also
qualifying as party-in-interest transactions are transactions
relating to notes receivable from participants and Navistar common
stock. As of December 31, 2019
and
2018, respectively, the Master
Trust held 1,175,061 and 1,283,974 shares of Navistar common
stock, respectively valued at $34,006,264
and
$33,319,137.
Fees paid by the Plan for the investment management services are
computed as a basis point reduction of the return earned on each
investment option, and are included in the net losses of the Master
Trust.
NOTE G –
SUBSEQUENT EVENTS
Management of the
Plan has evaluated subsequent events from December 31, 2019
through the date
these financial statements were issued. Other than disclosed below,
there were no subsequent events that require recognition or
additional disclosure in these financial statements.
The SECURE Act,
which was signed into law on December 20, 2019, changed the
required minimum distribution age from 70 ½ to 72 for participants
who turn age 70 ½ on or after January 1, 2020.
In response to
the pandemic outbreak of a novel coronavirus (COVID-19), the United
States Congress passed the Coronavirus Aid, Relief and Economic
Security Act (CARES Act) to provide expanded access to retirement
plan accounts. Effective April 23, 2020, the Plan adopted
provisions under the CARES Act related to distributions, loans and
deferred loan repayments for those participants who qualify under
the CARES Act.
Related to the
COVID-19 pandemic, the Company match contributions will be delayed
until 2021, effective March 1, 2020.
As disclosed in
its Form 8-K filed on January 31, 2020, on January 30, 2020
Navistar received an unsolicited proposal from TRATON SE, which is
approximately 90% owned by Volkswagen AG, regarding a potential
transaction to acquire all the outstanding shares of Navistar that
it does not already own for $35.00 per share in cash. Consistent
with its fiduciary duties, the Navistar Board of Directors, in
consultation with its financial and legal advisors, is carefully
reviewing and evaluating the proposal in the context of its
strategic plan for Navistar in order to determine the course of
action that Navistar believes is in the best interest of Navistar
and its stakeholders.
On March 23,
2020, the TRATON Group issued a press release in conjunction with
the release of its Annual Report indicating that the COVID-19
pandemic prevents it from providing any reliable guidance regarding
business performance in 2020. As of the date hereof, the TRATON
Group’s proposal has not been withdrawn. Developments arising since
the date the TRATON Group’s proposal was made may impact the
likelihood and terms of any transaction, including, without
limitation, developments relating to the COVID-19 pandemic. There
can be no assurance that any definitive, binding proposal will be
made, that any agreement will be executed or that the transaction
contemplated by the proposal or any other transaction will be
approved or consummated. Until Navistar enters into, or declares
that it will not enter into, a definitive agreement with respect to
the transaction contemplated by the TRATON Group’s offer or any
alternative transaction, the value of the Plan’s interest in
Navistar common stock in the Master Trust may change to reflect
market assumptions as to whether any transaction is likely to
occur.
SUPPLEMENTAL
SCHEDULE
Navistar,
Inc. Retirement Accumulation Plan
SCHEDULE H,
LINE 4i - SCHEDULE OF ASSETS (HELD AT END OF YEAR)
December 31,
2019
|
|
|
|
|
|
|
|
|
|
|
Identity of
issue
|
|
Description of
investment
|
|
Cost**
|
|
Current value
|
|
*Various
participants
|
|
Participant loans at interest
rates of 4.25% to 9.25%
|
|
|
|
$
|
8,140,595
|
|
*
Party-in-interest
**
Cost information is not required for
participant-directed investments and, therefore, is not
included.
