SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
(X) Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (Fee Required) for the fiscal year ended
September 30, 1996, or
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required) For the transition period from
to
Commission file number: 0-13886
Oshkosh Truck Corporation
(Exact name of registrant as specified in its charter)
Wisconsin 39-0520270
(State of other jurisdiction of (I.R.S. Employer Identification)
incorporation or organization)
P. O. Box 2566, Oshkosh, WI 54903-2566
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (414) 235-9151
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Class B Common Stock
(Title of Class)
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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. X
Aggregate market value of the voting stock held by non-affiliates of
the registrant as of November 15, 1996:
Class A Common Stock, $.01 par value - No Established Market Value
Class B Common Stock, $.01 par value - $87,509,997
Number of shares outstanding of each of the registrant's classes of
common stock as of November 15, 1996:
Class A Common Stock, $.01 par value - 408,958 shares
Class B Common Stock, $.01 par value - 8,236,235 shares
DOCUMENTS INCORPORATED BY REFERENCE
Parts II and IV incorporate, by reference, portions of the Annual
Report to Shareholders for the year ended September 30, 1996.
Part III incorporates, by reference, portions of the Proxy Statement
dated December 30, 1996.
<PAGE>
OSHKOSH TRUCK CORPORATION
Index to Annual Report on Form 10-K
Year ended September 30, 1996
Page
PART I.
ITEM 1. BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ITEM 2. PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . 7
ITEM 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . 8
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS . . . . . . . . . . . . . . . . . . . . . 8
EXECUTIVE OFFICERS OF THE REGISTRANT . . . . . . . . . . . . 8
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED STOCKHOLDER MATTERS . . . . . . . . . . . . . 9
ITEM 6. SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . 9
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . 9
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . . 10
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . . . . 10
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
OF THE REGISTRANT . . . . . . . . . . . . . . . . . . . . 10
ITEM 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . 10
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT . . . . . . . . . . . . . . . . . . 10
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . 10
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . 10
INDEX TO EXHIBITS . . . . . . . . . . . . . . . . . . . . . . 15
PART I
Item 1. BUSINESS
General
The company engineers, manufactures and markets a broad range of
specialized trucks and proprietary parts under the "Oshkosh" trademark,
and a broad line of specialty fire apparatus under the "Pierce" trademark.
As a specialized vehicle producer, the company holds a unique position in
the industry, having acquired the engineering, rapid product development
and lean manufacturing expertise and flexibility to profitably build
specialty vehicles in competition with companies both much larger and
smaller than itself. Mass producers design a vehicle to serve many
markets. In contrast, the company's vehicles, manufactured in low to
medium production volumes, are engineered for market niches where a
unique, innovative design will meet a purchaser's requirements for use in
specific, often adverse operating conditions. Many of the company's
products are found operating in snow, deserts and soft or rough terrain
where there is a need for high performance or high mobility. Because of
the quality of its specialized vehicles, the company believes its products
perform at lower life cycle costs than those that are mass-produced.
Markets served by the company domestically and internationally are
categorized as defense and commercial. Since 1980, specialized vehicle
sales to the defense market have significantly increased and in fiscal
1996 represented 61% of the company's sales volume, after reaching a peak
of 83% in fiscal 1987.
The company primarily depends upon components made by suppliers for
its products. The company has successfully managed its supply network,
which consists of approximately 3,500 active vendors. Through its
reliance on this supply network for the purchase of certain components,
the company is able to avoid many of the preproduction and fixed costs
associated with the manufacture of those components. While the company
purchases many of the high dollar components for assembly, such as
engines, transmissions and axles, it does have significant machining and
fabricating capability for the manufacture of certain important
proprietary components. This capability is used for the manufacture of
certain axles, transfer cases, cabs, body structures, aerial ladders, and
many smaller parts which add uniqueness and value to the company's
products. Some of these proprietary components are marketed to other
manufacturers.
Acquisitions
On September 18, 1996, the company acquired for cash all of the
issued and outstanding stock of Pierce Manufacturing Inc. (Pierce), a
leading manufacturer and marketer of fire trucks and other fire apparatus
in the U.S. The acquisition price of $156.9 million, net of cash
acquired, and including related costs was financed from borrowings under a
new credit facility. On November 9, 1995, the company through its wholly-
owned subsidiary, Summit Performance Systems, Inc. (Summit), acquired the
inventory, land, buildings, machinery and equipment, and technology of
Friesz Manufacturing Company (Friesz), a manufacturer of concrete mixer
systems and related aftermarket replacement parts, from available cash for
$3.9 million.
Products and Markets
The company currently manufactures seven different series of
commercial trucks, and eight specialty fire apparatus models, and during
fiscal 1996, had two active contracts with the U.S. Government related to
production of the Palletized Load System (PLS) and Heavy Expanded Mobility
Tactical Truck (HEMTT) vehicles. Within each series there is a varying
number of models. Models are usually distinguished by differences in
engine, transmission, axle, body configuration, pump, and ladder
combinations, among others. Vehicles produced generally range in price
from $60,000 to $1 million; in horsepower from 210 to 1,025; and in gross
vehicle weight from 33,000 to 150,000 pounds. The company has designed
vehicles to operate in the environmental extremes of arctic cold or desert
heat. Most vehicles are designed with the capability to operate in both
highway and off-road conditions. The company aggressively supports its
products with an aftermarket parts and service organization.
Defense
The company manufactures a broad range of wheeled vehicles for the
U.S. Department of Defense and export markets and is the free world's
largest producer of heavy-duty wheeled vehicles. The company has
performed major defense contracts for over 50 years, and in the year ended
September 30, 1996 had defense sales of $251.5 million or 61% of its total
sales. Contracts with the Department of Defense generally are multi-year
contracts. Each contract typically provides that the government will
purchase a base quantity of vehicles with options for additional purchases.
All obligations of the government under the contracts are subject to receipt
of government funding, and it is customary to expect purchases when
Congress has funded the purchase through annual budget appropriations and
after the government has committed the funds to the contractor.
During fiscal 1996, the company primarily produced the Palletized
Load System (PLS) and the Heavy Expanded Mobility Tactical Truck (HEMTT)
products for the U.S. Department of Defense. During 1996, the company was
awarded a contract to overhaul 274 existing HEMTT vehicles at a total
value of approximately $23.2 million, of which 119 vehicles were completed
in fiscal 1996. Each vehicle, along with major components and
subassemblies, is disassembled. Parts are thoroughly cleaned and
inspected for reuse, and for worn or damaged parts. After reassembly, the
HEMTT vehicles are covered by a new vehicle warranty. The company has
produced more than 14,400 of the eight wheel drive, ten ton capacity
HEMTTs which are considered the backbone of the U.S. Army's heavy-duty
truck fleet.
Additionally during 1996, the U.S. Government awarded the company an
innovative contract for the purchase of new HEMTTs and Logistic Vehicle
System (LVS) front modules. Under this "family" contract, the U.S.
Government plans to award sufficient sales to Oshkosh Truck to ensure a
minimum production rate of 20 trucks per month for the two truck models
through September 1999. The first purchase under this new contract is for
201 HEMTTs and 34 LVS modules valued at $47.1 million. Production at a
rate of two vehicles per day is scheduled to begin in February 1997 and
extend through August 1997. Oshkosh Truck is the first manufacturer of
heavy-duty vehicles to be awarded a family contract. This new type of
contract is called a family contract because it covers both the HEMTTs and
LVS modules -- models which are considered members of the same vehicle
family. These models are similar in design and have many common component
suppliers.
On November 21, 1996, the U.S. Army Tank Automotive and Armaments
Command awarded each of the company and one other defense contractor, $6.9
million prototype contracts for Phase I competition of the Medium Tactical
Truck Remanufacture Program (MTTR). The MTTR Program was initiated to
update and modernize the 5-Ton tactical vehicle fleet of the U.S. Marine
Corps. The goal of the program is to remanufacture the current
configuration to a more robust design capable of carrying a much greater
payload with substantially increased cross-country mobility. The current
fleet of approximately 10,000 U.S. Marine Corps trucks are up to 20 years
old. The new U.S. Marine Corps vehicle will have extraordinary
performance and mobility exceeding that of any comparable truck in the
world. The U.S. Army portion of the program is designed to increase the
useful life, and decrease operation and support costs, of a portion of the
U.S. Army's existing fleet of nearly 60,000 vehicles. It will include
inserting current technologies, making the truck capable of performing its
mission well into the next century. Phase I covers the design,
development, and production of five prototype test vehicles for the U.S.
Marine Corps. Five additional test vehicles for the U.S. Army are
available as an option under the contract. The five Marine Corps vehicles
will be ready for testing in August 1997, which will be completed in April
1998. Under Phase II of the program, up to a total of 11,500 U.S. Marine
Corps and U.S. Army units will be awarded for production at a value of
approximately $1.8 billion over several years. Competition for the Phase
II production contract will be intense between the two Phase I
contractors. Phase I testing along with the Phase II proposal will
determine the single supplier of the production contract covering both the
U.S. Marine Corps and U.S. Army vehicles.
Commercial
The company manufactures a wide variety of heavy-duty specialized
trucks for vocational, airport, and municipal markets. Products are
uniquely engineered for specific severe-duty requirements where innovative
design provides superior performance.
The fire apparatus business is conducted through the company's Pierce
subsidiary headquartered in Appleton, Wisconsin. Pierce primarily serves
municipal markets but also serves airports, universities and large
industrial companies. The Pierce product line includes pumpers, aerials
and heavy duty rescue vehicles on five different models of custom chassis
and two models of commercial chassis.
The company serves airport markets with products that include
Aircraft Rescue and Firefighting (ARFF) and snow removal vehicles. ARFF
vehicles are offered from 1000 to 3000 gallon capacities. Oshkosh also
offers the innovative Snozzle/R/, an extendable turret with an integrated
video camera and automated remote controls that can pierce into an
aircraft interior and position the agent flow precisely at the location of
the fire. Suppressant application is faster and uses up to 50% less agent
than conventional mass application techniques. The all-wheel drive
Oshkosh H-series snowblower keeps runways open by casting
4,000 tons of snow per hour. The H-series snowblower provides multi-
purpose use with an interchangeable blower, blade plows and brooms. The
all-wheel drive P-series with its heavy-duty frame has an unsurpassed
reputation for durability.
The construction business focuses on forward and rear discharge
concrete carriers. The forward placement S-series design allows the
driver to oversee faster, more accurate placement of concrete, with fewer
support personnel. This leads to greater efficiency and superior customer
service. A traditional rear discharge F-series is also offered as an
integrated package allowing for one stop service and sales. The F-series
is also sold in the utility and heavy haul transport markets. In
addition, the company produces the J-series for desert oil field and
extreme heavy hauling applications.
The refuse business consists of two low entry, dual drive models, the
NK and NL. The NL recently passed an extensive six month durability test
in one of the toughest urban environments with a 97% availability status.
The NK and NL feature eighteen inch step-in heights. Municipalities as
well as commercial contractors look to the improved visibility and safety
features a low entry low cab forward vehicle provides.
Backlog
The company's backlog at September 30, 1996 was $433 million,
compared to $350 million at September 30, 1995. The backlog at fiscal
year-end 1996 includes $272 million with respect to U.S. Government
contracts, $118 million related to Pierce, and the remainder relates to
other commercial products. All the company's backlog pertains to fiscal
1997 business except for defense backlog totaling $36 million with respect
to fiscal 1998. Virtually all the company's revenues are derived from
customer orders prior to commencing production.
Stock Buyback
In July 1995, the company's board of directors authorized the
repurchase of up to 1,000,000 shares of Class B common stock. As of
November 27, 1996, the company has repurchased 461,535 shares under this
program at a cost of $6.6 million.
Government Contracts
A significant portion of the company's sales are made to the United
States Government under long-term contracts and programs in which there
are significant risks, including the uncertainty of economic conditions
and defense policy. The company's defense business is substantially
dependent upon periodic awards of new contracts and the purchase of base
vehicle quantities and the exercise of options under existing contracts.
The company's existing contracts with the U.S. Government may be
terminated at any time for the convenience of the government. Upon such
termination, the company would be entitled to reimbursement of its
incurred costs and, in general, to payment of a reasonable profit for work
actually performed.
There can be no assurance that the U.S. Government will continue to
purchase the company's products at comparable levels. The termination of
any of the company's significant contracts, failure of the government to
purchase quantities under existing contracts or failure of the company to
receive awards of new contracts could have a material adverse effect on
the business operations of the company.
Under firm fixed-price contracts with the government, the price paid
the company is not subject to adjustment to reflect the company's actual
costs, except costs incurred as a result of contract changes ordered by
the government or for economic price adjustment clauses contained in
certain contracts. The company generally attempts to negotiate with the
government the amount of increased compensation to which the company is
entitled for government-ordered changes which result in higher costs. In
the event that the company is unable to negotiate a satisfactory agreement
to provide such increased compensation, the company may file an appeal
with the Armed Services Board of Contract Appeals or the U.S. Claims
Court. The company has no such appeals pending.
Marketing and Distribution
All domestic defense products are sold direct and the company
maintains a liaison office in Washington, D.C. The company also sells
defense products to foreign governments direct, through representatives,
or under the United States Foreign Military Sales program. The company's
commercial vehicles and aftermarket parts are sold either direct to
customers, or through dealers or distributors, depending upon geographic
area and product line. Fire apparatus products are sold almost
exclusively through a distributor network. Supplemental information
relative to export shipments is incorporated by reference to Note 11 of
the financial statements included in the company's Annual Report to
Shareholders for the fiscal year ended September 30, 1996.
Alliance
On June 2, 1995, the company entered into a strategic alliance with
Freightliner Corporation. The agreement provided for the marketing of
certain of the company's vocational products through Freightliner's
distribution system, the manufacture by the company of several series of
Freightliner's severe duty trucks and the transfer of Freightliner's non-
commercial military business to the company. Sales of the company's
vocational products through Freightliner's distribution system in fiscal
1996 were limited, and in fiscal 1997, the company will assume control of
its commercial marketing and sales. Further, Freightliner has decided not
to transfer either the manufacture of any severe duty trucks or its
noncommercial military business to the company. The company and
Freightliner will continue to supply each other specialty products and
components.
Competition
In all the company's markets, the competitors include smaller,
specialized manufacturers as well as the larger, mass producers. The
company believes that its technical strength and production capability
enable it to effectively compete with other specialized manufacturers.
The company also believes that its manufacturing flexibility, engineering,
product development and lean manufacturing expertise in the low to middle
production volumes allows it to compete effectively in its markets against
mass producers.
The company's principal competitors for U.S. Department of Defense
contracts include AM General Corporation and Stewart & Stevenson Services,
Inc. Pierce's principal fire apparatus competitors include Emergency One,
Inc. (a subsidiary of Federal Signal Corporation), FWD Corporation (a
subsidiary of Corsta Corporation), Kovatch Mobile Equipment Corp.,
American La France (a subsidiary of Freightliner Corporation), and over 75
other manufacturers. The company's principal competitors in other
commercial markets include McNeilus Truck Manufacturing, Inc., CCC
Industries Inc., Advance Mixer Inc., and Mack Trucks Inc.
The principal method of competition for the company in the defense
and municipal markets, where there is intense competition, is generally
on the basis of lowest qualified bid. In the non-governmental markets,
the company competes on the basis of price, innovation, quality and
product performance capabilities.
Engineering, Test and Development
For fiscal years 1996, 1995, and 1994 the company incurred
engineering, research and development expenditures of $6.3 million, $5.4
million, and $6.6 million, respectively, portions of which were
recoverable from customers, principally the U.S. Government. The company
does not believe that patents are a significant factor in its business
success.
Employees
As of September 30, 1996, the company had approximately 2,700
employees of which approximately 1,300 and 1,200 employees are located at
its principal facilities in Oshkosh and Appleton, Wisconsin, respectively.
Production workers totaling approximately 800 employees at the company's
principal facilities in Oshkosh, Wisconsin are represented by the United
Auto Workers union. The company's five-year contract with the United Auto
Workers extends through September 30, 2001. The company believes its
relationship with employees is satisfactory.
Item 2. PROPERTIES.
The company's principal offices and manufacturing facilities are
located in Oshkosh, Wisconsin. Space occupied encompasses 688,000 square
feet, 52,000 of which is leased and the remainder is owned. One-half of
the space owned by the company has been constructed since 1970. The
company owns approximately 50 acres of vacant land adjacent to its
existing facilities. The company's Pierce subsidiary, located in
Appleton, Wisconsin, occupies 554,000 square feet of owned office and
manufacturing space. The company additionally owns a 28,000 square foot
manufacturing facility located in Weyauwega, Wisconsin, and owns a
287,000 sq. ft. manufacturing facility located in Bradenton, Florida. In
addition, the company has a leased parts and service facility in Hartford,
CT and owns a similar facility in Oshkosh, WI.
The company's equipment and buildings are modern, well maintained and
adequate for its present and anticipated needs.
Item 3. LEGAL PROCEEDINGS.
Various actions or claims have been asserted or may be asserted in
the future by the government against the company. A potential action by
the government against the company in connection with a grand jury
investigation was commenced in 1989. In 1996, the government discontinued
this investigation without any action against the company or its
employees, although a civil investigation is possible.
The company is engaged in litigation against Super Steel Products
Corporation (SSPC), the company's former supplier of mixer systems for
front discharge concrete mixer trucks under a long-term supply contract.
SSPC sued the company in state court claiming the company breached the
contract. The company counterclaimed for repudiation of contract. On
July 26, 1996, a jury returned a verdict for SSPC awarding damages
totaling $4,485,000. On October 10, 1996, the state court judge
overturned the verdict against the company, granted judgment for the
company on its counterclaim, and ordered a new trial for damages on the
company's counterclaim. SSPC has appealed this judgment.
The company is subject to environmental matters and other legal
proceedings and claims which arise in the ordinary course of business.
Although the final results of all such matters and claims cannot be
predicted with certainty, management believes that the ultimate resolution
of all such matters and claims, after taking into account the liabilities
accrued with respect to such matters and claims, will not have a material
adverse effect on the company's financial condition or results of
operations.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year ended September 30, 1996.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the company are as follows:
Name Age* Title
R. Eugene Goodson 61 Chairman & Chief Executive Officer,
Member of Executive Committee and
Director
Robert G. Bohn 43 President & Chief Operating Officer
Timothy M. Dempsey 56 Vice President, General Counsel and
Secretary
Paul C. Hollowell 55 Executive Vice President
Charles L. Szews 40 Vice President and Chief Financial
Officer
Matthew J. Zolnowski 43 Vice President-Administration
*As of December 4, 1996
All of the company's officers serve terms of one year and until their
successors are elected and qualified.
R. EUGENE GOODSON - Mr. Goodson joined the company in 1990 in his
present position. Prior thereto, Mr. Goodson served as Group Vice
President and General Manager of the Automotive Systems Group of Johnson
Controls, Inc., a supplier of automated building controls, automotive
seating, batteries and plastic packaging, which position he held since
1985. Mr. Goodson is also a director of Donnelly Corporation.
ROBERT G. BOHN - Mr. Bohn joined the company in 1992 as Vice
President-Operations. He was appointed President and Chief Operating
Officer in 1994. Prior to joining the company Mr. Bohn was Director-
European Operations for Johnson Controls, Inc. from 1984 until 1992. He
was elected a director of the company by the Board of Directors in June
1995.
TIMOTHY M. DEMPSEY - Mr. Dempsey joined the company in October 1995
as Vice President, General Counsel and Secretary. Mr. Dempsey has been
and continues to be a partner in the law firm of Dempsey, Magnusen,
Williamson and Lampe in Oshkosh, Wisconsin.
PAUL C. HOLLOWELL - Mr. Hollowell joined the company in April 1989 as
Vice President-Defense Products and assumed his present position in
February 1994. Mr. Hollowell was previously employed by General Motors
Corporation where he served for three years as manager of their
Washington, DC office for military tactical vehicle programs. He
previously served 22 years in the U.S. Army from which he retired with the
rank of Lieutenant Colonel.
CHARLES L. SZEWS - Mr. Szews joined the company in March 1996 as Vice
President and Chief Financial Officer. Mr. Szews was previously employed
by Fort Howard Corporation from June 1988 until March 1996 in various
positions, including Vice President and Controller from September 1994
until March 1996.
MATTHEW J. ZOLNOWSKI - Mr. Zolnowski joined the company as Vice
President-Human Resources in January 1992 and assumed his present position
in February 1994. Before joining the company Mr. Zolnowski was Director,
Human Resources and Administration at Rexene Products Company from
September 1990 through January 1992 and Director, Headquarters Employee
Relations at PepsiCo, Inc. from June 1982 through August 1990.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS.
The information under the captions "Shareholder Information", Note 7
to the Consolidated Financial Statements, and "Financial Statistics"
contained in the company's Annual Report to Shareholders for the fiscal
year ended September 30, 1996, is hereby incorporated by reference in
answer to this item.
Item 6. SELECTED FINANCIAL DATA.
The information under the caption "Financial Highlights" contained in
the company's Annual Report to Shareholders for the fiscal year ended
September 30, 1996, is hereby incorporated by reference in answer to this
item.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The information under the caption "Management's Discussion and
Analysis of Consolidated Financial Condition and Results of Operations"
contained in the company's Annual Report to Shareholders for the fiscal
year ended September 30, 1996, is hereby incorporated by reference in
answer to this item.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements set forth in the company's Annual Report to
Shareholders for the fiscal year ended September 30, 1996, are hereby
incorporated by reference in answer to this item. Data regarding
quarterly results of operations included under the caption "Financial
Statistics" in the company's Annual Report to Shareholders for the fiscal
year ended September 30, 1996, is hereby incorporated by reference.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES.
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information under the captions "Election of Directors" and "Other
Matters" of the company's definitive proxy statement for the annual
meeting of shareholders on February 3, 1997, as filed with the Securities
and Exchange Commission, is hereby incorporated by reference in answer to
this Item. Reference is also made to the information under the heading
"Executive Officers of the Registrant" included under Part I of this
report.
Item 11. EXECUTIVE COMPENSATION.
The information under the captions "Executive Compensation" contained
in the company's definitive proxy statement for the annual meeting of
shareholders on February 3, 1997, as filed with the Securities and
Exchange Commission is hereby incorporated by reference in answer to this
item.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information under the caption "Shareholdings of Nominees and
Principal Shareholders" contained in the company's definitive proxy
statement for the annual meeting of shareholders on February 3, 1997, as
filed with the Securities and Exchange Commission, is hereby incorporated
by reference in answer to this item.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information contained under the captions "Election of Directors"
and "Certain Transactions" contained in the company's definitive proxy
statement for the annual meeting of shareholders on February 3, 1997, as
filed with the Securities and Exchange Commission, is hereby incorporated
by reference in answer to this item.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements: The following consolidated financial
statements of the company and the report of independent auditors included
in the Annual Report to Shareholders for the fiscal year ended September
30, 1996, are incorporated by reference in Item 8:
Consolidated Statements of Income (Loss) for the years ended
September 30, 1996, 1995, and 1994
Consolidated Balance Sheets at September 30, 1996, and 1995
Consolidated Statements of Shareholders' Equity for the years ended
September 30, 1996, 1995, and 1994.
Consolidated Statements of Cash Flows for the years ended
September 30, 1996, 1995, and 1994
Notes to Consolidated Financial Statements
Report of Ernst & Young, LLP Independent Auditors
2. Financial Statement Schedules:
Schedule II - Valuation & Qualifying Accounts
All other schedules are omitted because they are not applicable, or
the required information is shown in the consolidated financial
statements or notes thereto.
3. Exhibits:
2.1 Stock Purchase Agreement by and among Pierce
Manufacturing Inc., the shareholders of Pierce
Manufacturing Inc., and Oshkosh Truck Corporation
dated August 7, 1996 (incorporated by reference to
Exhibit 2.1 to the company's Current Report on Form
8-K dated September 18, 1996 (Commission File No. 0-
13886)).
2.2 First Amendment to Stock Purchase Agreement by and
among Pierce Manufacturing Inc., the shareholders of
Pierce Manufacturing Inc., and Oshkosh Truck
Corporation dated September 18, 1996 (incorporated
by reference to Exhibit 2.2 to the company's Current
Report on Form 8-K dated September 18, 1996
(Commission File No. 0-13886)).
3.1 Restated Articles of Incorporation *
3.2 Bylaws of the company, as amended *****
4.1 Credit Agreement dated as of September 18, 1996
among Oshkosh Truck Corporation, and certain lenders
with Firstar Bank Milwaukee, N.A., as Agent
(incorporated by reference to Exhibit 4 to the
company's Current Report on Form 8-K dated September
18, 1996 (Commission File No. 0-13886)).
4.2 Series A Warrant to purchase shares of Class B
Common Stock of Oshkosh Truck Corporation delivered
to Freightliner Corporation by Oshkosh. ######
4.3 First Amendment to Credit Agreement dated as of
November 27, 1996 among Oshkosh Truck Corporation,
and certain lenders with Firstar Bank Milwaukee,
N.A., as Agent.
10.1 Lease with Cadence Company (formerly Mosling Realty
Company) and related documents *
10.2 1990 Incentive Stock Plan for Key Employees, as
amended (through January 25, 1995) #### @
10.3 Form of Key Employee Employment and Severance
Agreement with R. E. Goodson, Chairman & CEO ** @
10.4 Employment Agreement with R. E. Goodson, Chairman &
CEO as of April 16, 1990 **** @
10.5 Restricted stock grant to R. E. Goodson, Chairman &
CEO**** @
10.6 Incentive Stock Option Agreement to R. E. Goodson,
Chairman & CEO **** @
10.7 Employment Agreement with R. E. Goodson, Chairman &
CEO as of April 16, 1992 ## @
10.8 1994 Long-Term Incentive Compensation Plan dated
March 29, 1994 #### @
10.9 Form of Key Employees Employment and Severance
Agreement with Messrs. R.G. Bohn, T.M. Dempsey, P.C.
Hollowell, C.L. Szews, and M.J. Zolnowski #### @
10.10 Employment Agreement with P.C. Hollowell, Executive
Vice President @
10.11 Form of Oshkosh Truck Corporation 1990 Incentive
Stock Plan, as amended, Nonqualified Stock Option
Agreement.##### @
10.12 Form of Oshkosh Truck Corporation 1990 Incentive
Stock Plan, as amended, Nonqualified Director Stock
Option Agreement. ##### @
10.13 Alliance Agreement, dated as of June 2, 1995,
between Freightliner and Oshkosh. ######
10.14 Letter Agreement among J. Peter Mosling, Jr.,
Stephen P. Mosling, Freightliner, Oshkosh and R.
Eugene Goodson. ######
10.15 Lease extension with Cadence Company (as referenced
under 10.1) (incorporated by reference to Exhibit
10.15 to the Company's Annual Report on Form 10-K
for the year ended September 30, 1995 (Commission
File No. 1-13886))
10.16 Form of 1994 Long-Term Incentive Compensation Plan
Award Agreement (incorporated by reference to Exhibit
10.16 to the Company's Annual Report on Form 10-K
for the year ended September 30, 1995 (Commission
File No. 1-13886))@
10.17 Stock Purchase Agreement, dated April 26, 1996,
among Oshkosh Truck Corporation, J. Peter Mosling,
Jr. and Stephen P. Mosling, and consented to by R.
Eugene Goodson.
11. Computation of per share earnings (contained in Note
1 of "Notes to Consolidated Financial Statements" of
the company's Annual Report to Shareholders for the
fiscal year ended September 30, 1996)
13. 1996 Annual Report to Shareholders, to the extent
incorporated herein by reference
23. Consent of Ernst & Young LLP
27. Financial Data Schedule
*Previously filed and incorporated by reference to the company's Form S-1
registration statement filed August 22, 1985, and amended September 27,
1985, and October 2, 1985 (Reg. No. 2-99817).
**Previously filed and incorporated by reference to the company's Form 10-
K for the year ended September 30, 1987.
****Previously filed and incorporated by reference to the company's Form
10-K for the year ended September 30, 1990.
*****Previously filed and incorporated by reference to the company's Form
10-K for the year ended September 30, 1991.
## Previously filed and incorporated by reference to the company's Form
10-K for the year ended September 30, 1992.
#### Previously filed and incorporated by reference to the company's Form
10-K for the year ended September 30, 1994.
@Denotes a management contract or compensatory plan or arrangement.
##### Previously filed and incorporated by reference to the company's Form
S-8 filing dated September 22, 1995. (Reg. No. 33-62687)
###### Previously filed and incorporated by reference to the company's
Form 8-K filing dated June 2, 1995.
(b) On October 2, 1996, the company filed a Current Report on Form
8-K dated September 18, 1996 reporting the company's acquisition
of all of the issued and outstanding stock of Pierce
Manufacturing Inc.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
OSHKOSH TRUCK CORPORATION
December 27, 1996 By /s/ R. Eugene Goodson
R. Eugene Goodson
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the registrant and in the capacities on the dates indicated.
December 27, 1996 /s/ R. Eugene Goodson
R. E. Goodson
Chairman and Chief Executive Officer
(Principal Executive Officer)
December 27, 1996 /s/ R. G. Bohn
R. G. Bohn
President and Chief Operating Officer and
Director
December 27, 1996 /s/ C. L. Szews
C. L. Szews
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
December 27, 1996 /s/ J. W. Andersen
J. W. Andersen
Director
December 27, 1996 /s/ D. T. Carroll
D. T. Carroll
Director
December 27, 1996 /s/ M. W. Grebe
M. W. Grebe
Director
December 27, 1996 /s/ S. P. Mosling
S. P. Mosling
Director and Member of Executive Committee
December 27, 1996 /s/ J. P. Mosling, Jr.
J. P. Mosling, Jr.
Director and Member of Executive Committee
<PAGE>
SCHEDULE II
OSHKOSH TRUCK CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
Years Ended September 30, 1996, 1995, and 1994
(In Thousands)
Balance at Purchase Additions Balance
Beginning of Charged to at End
Classification of Year Pierce Expense Reductions* of Year
Receivables -
Allowance for
doubtful accounts:
1994 $417 --- $288 $(274) $431
==== ==== ==== ==== ====
1995 $431 --- $143 $(97) $477
==== ==== ==== ==== ====
1996 $477 $509 $182 $(102) $1,066
==== ==== ==== ==== =====
* Represents amounts written off to the reserve, net of recoveries.
<PAGE>
EXHIBIT INDEX
Exhibits
3. Exhibits:
2.1 Stock Purchase Agreement by and among Pierce
Manufacturing Inc., the shareholders of Pierce
Manufacturing Inc., and Oshkosh Truck Corporation dated
August 7, 1996 (incorporated by reference to Exhibit 2.1
to the company's Current Report on Form 8-K dated
September 18, 1996 (Commission File No. 0-13886)).
2.2 First Amendment to Stock Purchase Agreement by and among
Pierce Manufacturing Inc., the shareholders of Pierce
Manufacturing Inc., and Oshkosh Truck Corporation dated
September 18, 1996 (incorporated by reference to Exhibit
2.2 to the company's Current Report on Form 8-K dated
September 18, 1996 (Commission File No. 0-13886)).
3.1 Restated Articles of Incorporation *
3.2 Bylaws of the company, as amended *****
4.1 Credit Agreement dated as of September 18, 1996 among
Oshkosh Truck Corporation, and certain lenders with
Firstar Bank Milwaukee, N.A., as Agent (incorporated by
reference to Exhibit 4 to the company's Current Report on
Form 8-K dated September 18, 1996 (Commission File No. 0-
13886)).
4.2 Series A Warrant to purchase shares of Class B Common
Stock of Oshkosh Truck Corporation delivered to
Freightliner Corporation by Oshkosh. ######
4.3 First Amendment to Credit Agreement dated as of
November 27, 1996 among Oshkosh Truck Corporation, and
certain lenders with Firstar Bank Milwaukee, N.A., as
Agent.
10.1 Lease with Cadence Company (formerly Mosling Realty
Company) and related documents *
10.2 1990 Incentive Stock Plan for Key Employees, as amended
(through January 25, 1995) #### @
10.3 Form of Key Employee Employment and Severance Agreement
with R. E. Goodson, Chairman & CEO ** @
10.4 Employment Agreement with R. E. Goodson, Chairman & CEO
as of April 16, 1990 **** @
10.5 Restricted stock grant to R. E. Goodson, Chairman &
CEO**** @
10.6 Incentive Stock Option Agreement to R. E. Goodson,
Chairman & CEO **** @
10.7 Employment Agreement with R. E. Goodson, Chairman & CEO
as of April 16, 1992 ## @
10.8 1994 Long-Term Incentive Compensation Plan dated March
29, 1994 #### @
10.9 Form of Key Employees Employment and Severance Agreement
with Messrs. R.G. Bohn, T.M. Dempsey, P.C. Hollowell,
C.L. Szews, and M.J. Zolnowski #### @
10.10 Employment Agreement with P.C. Hollowell, Executive Vice
President @
10.11 Form of Oshkosh Truck Corporation 1990 Incentive Stock
Plan, as amended, Nonqualified Stock Option
Agreement.##### @
10.12 Form of Oshkosh Truck Corporation 1990 Incentive Stock
Plan, as amended, Nonqualified Director Stock Option
Agreement. ##### @
10.13 Alliance Agreement, dated as of June 2, 1995, between
Freightliner and Oshkosh. ######
10.14 Letter Agreement among J. Peter Mosling, Jr., Stephen P.
Mosling, Freightliner, Oshkosh and R. Eugene Goodson.
######
10.15 Lease extension with Cadence Company (as referenced under
10.1) (incorporated by reference to Exhibit 10.15 to the
Company's Annual Report on Form 10-K for the year ended
September 30, 1995 (Commission File No. 1-13886))
10.16 Form of 1994 Long-Term Incentive Compensation Plan Award
Agreement (incorporated by reference to Exhibit 10.16 to
the Company's Annual Report on Form 10-K for the year
ended September 30, 1995 (Commission File No. 1-13886))@
10.17 Stock Purchase Agreement, dated April 26, 1996, among
Oshkosh Truck Corporation, J. Peter Mosling, Jr. and
Stephen P. Mosling, and consented to by R. Eugene
Goodson.
11. Computation of per share earnings (contained in Note 1 of
"Notes to Consolidated Financial Statements" of the
company's Annual Report to Shareholders for the fiscal
year ended September 30, 1996)
13. 1996 Annual Report to Shareholders, to the extent
incorporated herein by reference
23. Consent of Ernst & Young LLP
27. Financial Data Schedule
*Previously filed and incorporated by reference to the company's Form S-1
registration statement filed August 22, 1985, and amended September 27,
1985, and October 2, 1985 (Reg. No. 2-99817).
**Previously filed and incorporated by reference to the company's Form 10-
K for the year ended September 30, 1987.
****Previously filed and incorporated by reference to the company's Form
10-K for the year ended September 30, 1990.
*****Previously filed and incorporated by reference to the company's Form
10-K for the year ended September 30, 1991.
## Previously filed and incorporated by reference to the company's Form
10-K for the year ended September 30, 1992.
#### Previously filed and incorporated by reference to the company's Form
10-K for the year ended September 30, 1994.
@Denotes a management contract or compensatory plan or arrangement.
##### Previously filed and incorporated by reference to the company's Form
S-8 filing dated September 22, 1995. (Reg. No. 33-62687)
###### Previously filed and incorporated by reference to the company's
Form 8-K filing dated June 2, 1995.
(b) On October 2, 1996, the company filed a Current Report on Form
8-K dated September 18, 1996 reporting the company's acquisition
of all of the issued and outstanding stock of Pierce
Manufacturing Inc.
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (the "First Amendment"),
dated as of November 27, 1996 but with retroactive effect to September 28,
1996, amends the Credit Agreement dated as of September 18, 1996 by and
among OSHKOSH TRUCK CORPORATION, a Wisconsin corporation (the "Borrower"),
those Subsidiaries identified as a "Guarantor" on the signature pages
hereto and such other Subsidiaries as may from time to time become a party
hereto (the "Guarantors"), the several lenders identified on the signature
pages hereto and such other lenders as may from time to time become a
party hereto (the "Lenders"), FIRSTAR BANK MILWAUKEE, N.A., as agent for
the Lenders (in such capacity, the "Agent") and BANK ONE, MILWAUKEE, NA,
NATIONSBANK, N.A. and HARRIS TRUST AND SAVINGS BANK, as co-agents (as so
amended, the "Credit Agreement").
1. Definitions. Capitalized terms not otherwise defined herein
shall have the meanings assigned to them in the Credit Agreement.
2. Amendment. The parties hereby agree to amend the Credit
Agreement as follows:
2.1 Section 7.9(a). Section 7.9(a) of the Credit Agreement is
deleted in its entirety and replaced by the following new Section 7.9(a):
(a) Consolidated Funded Debt Ratio. There shall be maintained
as of the end of each fiscal quarter to occur during the periods
shown below a Consolidated Funded Debt Ratio of not greater than:
Period
From Closing Date through
December 27, 1996 4.75:1.0
December 28, 1996 through
March 28, 1997 4.50:1.0
March 29, 1997 through
June 27, 1997 4.25:1.0
June 28, 1997 through
September 26, 1997 4.00:1.0
September 27, 1997 through
September 25, 1998 3.25:1.0
September 26, 1998 through
September 24, 1999 3.00:1.0
September 25, 1999 though
September 29, 2000 2.50:1.0
September 30, 2000 through
September 28, 2001 2.25:1.0
September 29, 2001 through
September 27, 2002 2.00:1.0
September 28, 2002 and thereafter 1.75:1.0
2.2 Section 7.9(c). Section 7.9(c) of the Credit Agreement is
deleted in its entirety and replaced by the following new Section 7.9(c):
(c) Interest Coverage Ratio. There shall be maintained as of
the end of each fiscal quarter to occur during the periods shown
below an Interest Coverage Ratio of at least:
Period
From Closing Date through
March 28, 1997 0.85:1.0
March 29, 1997 through
June 27, 1997 1.00:1.0
June 28, 1997 through
September 26, 1997 1.25:1.0
September 27, 1997 through
December 26, 1997 1.75:1.0
December 27, 1997 through
March 27, 1998 2.00:1.0
March 28, 1998 through
September 25, 1998 2.25:1.0
September 26, 1998 through
September 29, 2000 2.50:1.0
September 30, 2000 and thereafter 3.00:1.0
2.3 Schedule 2.1(d). Schedule 2.1(d) of the Credit Agreement
is deleted in its entirety and replaced by new Schedule 2.1(d) in the form
attached hereto.
3. Conditions Precedent. This First Amendment shall become
effective on the date that the Agent (for the benefit of the Lenders)
shall have received each of the following:
(a) this First Amendment, duly executed by an authorized
representative of each of the Credit Parties and the Lenders; and
(b) an amendment fee in an amount equal to one-eighth of 1% of
the Revolving Committed Amount and the Term Loan Committed Amount.
4. Representations and Warranties. To induce the Lenders to enter
into this First Amendment, each of the Credit Parties hereby represents
and warrants to the Agent and to each Lender that:
(a) the representations and warranties contained in the Credit
Agreement are true and correct as of the date of this First Amendment; and
(b) no Default or Event of Default has occurred and is
continuing as of the date of this First Amendment.
5. Full Force and Effect. Except as provided herein, all of the
terms and conditions set forth in the Credit Agreement, and all additional
documents entered into in connection with the Credit Agreement, shall
remain unchanged and shall continue in full force and effect as originally
set forth, and each of the foregoing is hereby ratified and confirmed in
all respects.
6. Binding Effect. This First Amendment shall be binding upon the
parties hereto and their respective successors and assigns.
[REMAINDER OF PAGE DELIBERATELY BLANK]
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this First Agreement to be duly executed and delivered as
of the date first above written.
BORROWER: OSHKOSH TRUCK CORPORATION,
a Wisconsin corporation
By: /s/ Charles L. Szews
Title: Vice President and Chief Financial
Officer
GUARANTORS: PIERCE MANUFACTURING INC.,
a Wisconsin corporation
By: /s/ Charles L. Szews
Title: Vice President and Chief Financial
Officer
SUMMIT PERFORMANCE SYSTEMS, INC.,
a Wisconsin corporation
By: /s/ Charles L. Szews
Title: Vice President and Chief Financial
Officer
LENDERS: FIRSTAR BANK MILWAUKEE, N.A.,
in its capacity as Agent and as a
Lender
By: /s/
Title: First Vice President
BANK ONE, MILWAUKEE, NA,
in its capacity as a Co-Agent and
as a Lender
By: /s/ A. F. Maggione
Title: Vice President
NATIONSBANK, N.A.,
in its capacity as a Co-Agent and
as a Lender
By: /s/ Wallace Harris Jr.
Title: Vice President
HARRIS TRUST AND SAVINGS BANK,
in its capacity as a Co-Agent and
as a Lender
By: /s/
Title: Vice President
BANK OF AMERICA ILLINOIS, as Lender
By: /s/
Title: Sr. Vice President
LASALLE NATIONAL BANK, as Lender
By: /s/
Title:
FIRST BANK (N.A.), as Lender
By: /s/
Title: Vice President
THE NORTHERN TRUST COMPANY, as Lender
By: /s/
Title: Vice President
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Lender
By: /s/ Michael W. Krutoch
Title: Vice President
COMERICA BANK, as Lender
By: /s/
Title: Vice President
<PAGE>
Schedule 2.1(d)
Applicable Percentage
1. If the Interest Coverage Ratio is less than 1.00:1.0, then the
Applicable Percentage shall be as specified below for Pricing Level
8.
2. If the Interest Coverage Ratio is less than 1.5:1.0 but equal to or
greater than 1.0:1.0, then the Applicable Percentage shall be as
specified below for Pricing Level 7.
3. If the Interest Coverage Ratio is less than 2.0:1.0 but equal to or
greater than 1.5:1.0, then the Applicable Percentage shall be as
specified below for Pricing Level 6.
2. If the Interest Coverage Ratio is 2.00:1.0 or greater, then the
Applicable Percentage shall be determined by reference to the
Consolidated Funded Debt Ratio, as specified below:
<TABLE>
<CAPTION>
Applicable
Applicable Percentage Applicable Percentage
Pricing Consolidated for Revolving Loans and Percentage for Unused
Level Funded Debt Ratio Letter of Credit Fee for Term Loan Facility Fee
<S> <C> <C> <C> <C>
8 >4.0:1.0 2.125 2.50 0.250
7 <4.0:1.0 but >3.5:1.0 1.875 2.25 0.250
6 <3.5:1.0 but >3.0:1.0 1.625 2.00 0.250
5 <3.0:1.0 but >2.5:1.0 1.375 1.75 0.175
4 <2.5:1.0 but >2.0:1.0 1.125 1.50 0.175
3 <2.0:1.0 but >1.5:1.0 0.875 1.25 0.175
2 <1.5:1.0 but >1.0:1.0 0.625 1.00 0.100
1 <1.0:1.0 0.375 0.750 0.100
</TABLE>
STOCK PURCHASE AGREEMENT
I. The Parties
The Parties to this Agreement are:
1.01 Oshkosh Truck Corporation, a Wisconsin corporation, located
at 2307 Oregon Street, Oshkosh, Wisconsin ("Oshkosh").
1.02 J. Peter Mosling, Jr., an adult resident of Pickett, Wisconsin
("Peter").
1.03 Stephen P. Mosling, an adult resident of Oshkosh, Wisconsin
("Stephen").
II. The Recitals
2.01 The Date of this Agreement is the 26th day of April, 1996.
2.02 Peter and Stephen, together, are the individual owners of a
substantial majority of the issued and outstanding shares of
Class A Common Stock of Oshkosh (such shares that Peter and
Stephen own individually are collectively referred to as
"Shares").
2.03 The Parties desire to establish the circumstances, terms and
conditions under which Oshkosh will acquire the Shares, to
impose certain limitations upon the transferability of Shares by
Peter and Stephen in the interim, and to provide ultimately for
conversion of all issued and outstanding shares of Class A
Common Stock of Oshkosh into shares of its Class B Common Stock.
2.04 The number of issued and outstanding shares of Class A Common
Stock on the Date of this Agreement are 409,503. Of these,
Peter owns individually 119,813 shares, and Stephen owns
individually 120,892 shares. Class A shares owned indirectly or
beneficially by either of them through Cadence Company, a
Wisconsin general partnership, are not intended to be subject to
this Agreement. Class A shares owned by Stephen as Trustee for
Melissa K. Mosling also are not intended to be subject to this
Agreement.
2.05 Previously, in connection with execution by Oshkosh of a
Strategic Alliance Agreement with Freightliner Corporation on
June 2, 1995, Peter and Stephen agreed to certain limitations
upon the transferability of their Shares, and it is the
intention of the Parties that this Agreement be effective
independent from the effect of that agreement.
2.06 The Class B Common Stock of Oshkosh is publicly traded on NASDAQ
and registered with the Securities and Exchange Commission. The
Class A Common Stock is not registered with the Securities and
Exchange Commission and is publicly traded only on occasion.
III. The Agreement
3.01 The Recitals. The Recitals are a part of this Agreement.
3.02 Restrictions on Sale or Transfer by Peter and Stephen. Except
as provided by this Agreement, and as limited by the agreement
dated June 2, 1995, Peter and Stephen agree that they will not
transfer, sell or otherwise dispose of any shares which either
of them now or in the future may own directly in their own
names.
3.021 A pledge of Shares shall not be considered a transfer,
sale or other disposition, but a levy upon or
foreclosure of a pledge shall be deemed to be a sale
or other disposition.
3.022 Peter and Stephen each may transfer Shares to the
other, or to trusts for the respective benefit of each
or the other, including voting trusts in which at
least one of them serves as trustee and, as such, or
as otherwise provided by the trust, shall have the
full and unrestricted authority, power and discretion
to vote such Shares on all matters as to which the
Shares may be voted.
3.023 Peter and Stephen each may transfer Shares to trusts
which are effective upon the death of the transferor,
whether testamentary or otherwise, in which at least
one of them serves as a trustee and, as such, or as
otherwise provided by the trust, shall have the full
and unrestricted authority, power and discretion to
vote such Shares on all matters as to which the Shares
may be voted.
3.024 Peter and/or Stephen each may transfer Shares to R.
Eugene Goodson pursuant to a certain letter agreement
dated June 25, 1990.
3.025 Transfers to a pledgee or Trustee, under this Section
3.02, or to Mr. Goodson shall be subject to all of the
terms and conditions of this Agreement, and any
further transfer of Shares by any such pledgee or
Trustee or by Mr. Goodson, except to a permitted
transferee under this Section shall be deemed a
prohibited transfer, sale or other disposition of the
Shares.
3.026 Peter and Stephen each may exchange Shares for shares
of Class B Common Stock of Oshkosh at any time(s) and
in any amount. To the extent that they transfer
Shares as permitted by this Section 3.02, their
transferees also may exchange Shares for shares of
Class B Common Stock. When exchanged, such shares of
Class B Common Stock shall be free from the terms and
conditions of this Agreement. Notwithstanding the
foregoing, Peter and/or Stephen and/or any such
transferee, will not exchange Shares if, following
such exchange, the remaining Shares would not
constitute a majority of the outstanding Class A
Common Stock on a fully diluted basis unless the
amendment contemplated by Section 3.03 has been
effected.
3.03 Covenant to Act to Amend the Articles of Incorporation of
Oshkosh. Peter and Stephen each agree that in the event the
Board of Directors of Oshkosh at any time proposes to its
Shareholders that the Articles of Incorporation of Oshkosh be
amended to provide a mechanism for mandatory conversion of
issued and outstanding shares of Class A Common Stock so that
Oshkosh will have only one issued and outstanding class of
common stock, with such conversion to occur upon the earliest to
occur of:
3.031 The death of the survivor of Peter and Stephen;
3.032 The legal incapacity of Peter and/or Stephen under
circumstances in which neither of them has the legal
capacity and capability to vote a majority of the
issued and outstanding shares of Class A Common Stock
of Oshkosh at that time, which incapacity thereafter
continues for a period of time which includes the date
of regularly-scheduled annual meeting of the
shareholders of Oshkosh and two hundred seventy (270)
days following such date; or
3.033 The number of issued and outstanding shares of Class A
Common Stock of Oshkosh beneficially owned by Peter
and/or Stephen falls for any reason below 150,000
shares, or such higher number as may be agreed upon by
the Parties;
they will vote their Class A Common Stock shares in favor of
such an amendment, and will cause any trustee or pledgee of
Shares to vote in favor of such an amendment.
3.04 Covenant to Act to Eliminate Class A Stock. Peter and Stephen
each agree that in the event of the death of the survivor of
them, or in the event that at an earlier time neither of them
has the legal capacity and capability to vote a majority of the
issued and outstanding shares of Class A Common Stock of
Oshkosh, then they or their legal representatives and trustees,
if any, promptly shall exert their best efforts to cause Oshkosh
to do all things necessary to effect a prompt and orderly
elimination, whether by conversion into shares of Class B Common
Stock of Oshkosh or otherwise, of all issued and outstanding
shares of Class A Common Stock of Oshkosh. They also agree that
they and their legal representatives and trustees, if any,
promptly shall take such actions, including the tender of Shares
for shares of Class B Common Stock, as may be necessary to
require the conversion of all issued and outstanding shares of
Class A Common Stock of Oshkosh so that Oshkosh will have only
one class of issued and outstanding common stock.
3.041 Notwithstanding anything to the contrary provided by
this Section or elsewhere by this Agreement, no action
shall be required of Peter, Stephen or their legal
representatives or trustees which would have the
effect of eliminating Shares other than in the context
of a simultaneous conversion of all other issued and
outstanding shares of Class A Common Stock of Oshkosh.
3.042 In the event of action by Oshkosh to amend its
Articles of Incorporation as set forth in Section
3.03, Peter and Stephen each shall give Oshkosh an
irrevocable notice of conversion of their Shares in a
form sufficient to give effect to their covenants in
this Section 3.04.
3.05 Action by Oshkosh. In the absence of prior action by Oshkosh
under Section 3.03, above, Oshkosh agrees that upon receipt of a
request by Peter and Stephen, or their legal representatives or
trustees, or in the event of the death of either of them by the
survivor of them, or his legal representatives, to undertake the
cancellation and elimination of the authorization of its shares
of Class A Common Stock, it will act promptly to call a meeting
of the necessary shareholders of Oshkosh at an appropriate time
and place for the purposes of amending the Articles of
Incorporation of Oshkosh in order to eliminate from the capital
structure of Oshkosh the authorization of Class A Common Stock,
and for such other actions as Oshkosh shall deem necessary or
appropriate in order to redeem or otherwise cancel all then
issued and outstanding shares of Class A Common Stock.
3.06 Consideration. Oshkosh has determined that if Peter and Stephen
were to cease to be owners of their Shares, and others were to
become owners of a majority of the shares of Class A Common
Stock, it would not be in the interests of the other
shareholders of Oshkosh. In consideration of the agreements of
Peter and Stephen set forth above, Oshkosh shall pay to each of
them the sum of FIFTY THOUSAND DOLLARS ($50,000.00) upon
execution of this Agreement.
3.07 Stock Certificate Legend. Upon execution of this Agreement the
certificates representing the Shares shall be surrendered to
Oshkosh by Peter and Stephen for the purpose of placing on each
such certificate a printed legend which is appropriate to
disclose the substance of the restrictions on transferability
and other covenants imposed by this Agreement on the Shares,
after which the certificates promptly shall be returned to Peter
and Stephen.
3.08 Covenant Against Transfer. While this Agreement is in force and
effect, Oshkosh shall not transfer Shares except in compliance
with the provisions of this Agreement.
3.09 Specific Enforcement. Upon the death of the survivor of Peter
and Stephen or the earlier legal incapacity of Peter and/or
Stephen under circumstances in which neither of them has the
legal capacity and capability to vote a majority of the issued
and outstanding shares of Class A Common Stock of Oshkosh, if
his legal representative, including any trustee, guardian,
conservator or holder of an appropriate durable power, shall
fail for any reason within thirty (30) days of such event to
request Oshkosh to take actions contemplated under Sections 3.03
and 3.04 of this Agreement, Oshkosh may specifically enforce
this Agreement, including the court appointment of such a legal
representative if there be none.
3.10 Schedule 13D Filing. Peter and Stephen each shall file a
Securities and Exchange Commission Schedule 13D within ten (10)
days after execution of this Agreement.
3.11 Binding Agreement. This Agreement shall bind the Parties, their
legal representatives, heirs, successors and assigns.
Executed by the Parties on the Date of this Agreement.
OSHKOSH TRUCK CORPORATION:
By: /s/ R. Eugene Goodson
Attest: /s/ Connie S. Stellmacher
/s/ J. Peter Mosling, Jr.
J. Peter Mosling, Jr.
/s/ Stephen P. Mosling
Stephen P. Mosling
R. Eugene Goodson hereby consents, to the extent necessary in
connection with the agreement dated June 25, 1990, between himself, Peter
and Stephen, to be bound by the terms and conditions of the foregoing
Agreement.
Dated: April 26, 1996.
/s/ R. Eugene Goodson
R. Eugene Goodson
Financial Highlights
Years ended September
(In thousands, except per share amounts)
1996 1995 1994 1993 1992
Net Sales $413,455 $438,557 $581,275 $537,065 $562,361
Income (Loss) From
Continuing
Operations (241) 11,637 13,558 1,596(1) 13,607
Per Share (.03) 1.32 1.56 .18(1) 1.57
Discontinued
Operations (2,859) (2,421) (504) (533) (4,836)
Per Share (.32) (.28) (.06) (.06) (.56)
Net Income (Loss) (3,100) 9,216 13,054 1,063(1) 8,771
Per Share (.35) 1.04 1.50 .12(1) 1.01
Dividends Per Share
Class A .435 .435 .435 .435 .435
Class B .500 .500 .500 .500 .500
Total Assets 435,161 200,916 198,678 235,386 247,390
Expenditures for
Property, Plant,
and Equipment 5,355 5,347 5,178 7,697 9,494
Depreciation 7,616 7,385 8,300 7,496 6,502
Net Working Capital 67,469 91,777 82,010 100,967 118,026
Long-Term Debt
(Including Current
Maturities) 157,882 - 610 40,338 58,868
Shareholders'
Equity 121,602 113,413 121,558 112,004 116,130
Per Share 14.08 14.82 13.96 12.89 13.37
Backlog 433,000(2) 350,000 498,000 437,000 487,000
(1) After a charge of $4.1 million, or $.47 per share, to reflect the
cumulative effect of change in method of accounting for
postretirement benefits.
(2) Includes $118.0 million related to Pierce.
<PAGE>
Financial Statistics
<TABLE>
Common Dividends
Quarterly (Payable February, May, August, November)
(In thousands, except per share amounts)
<CAPTION>
Fiscal 1996
Fiscal 1995
4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A Cash Dividend:
Declared $ 45 $ 45 $ 44 $ 43 $ 46 $ 47 $ 49 $ 49
Per Share .10875 .10875 .10875 .10875 .10875 .10875 .10875 .10875
Class B Cash Dividend:
Declared $1,019 $1,040 $1,054 $1,061 $1,073 $1,079 $1,033 $1,033
Per Share .125 .125 .125 .125 .125 .125 .125 .125
</TABLE>
Oshkosh Truck Corporation Class B Common Stock Price*
The company's common stock is quoted on the National Association of
Securities Dealers Automated Quotation System (NASDAQ) National Market
System. The following table sets forth prices reflecting actual sales as
reported on the NASDAQ National Market System.
Quarter
Ended Fiscal 1996 Fiscal 1995
High Low High Low
September $14-1/2 $11-1/4 $15-3/4 $12-1/4
June 15-3/8 13-7/8 13-1/2 12-1/4
March 15-3/4 13-3/8 14 10-3/4
December 15-3/4 14-1/4 11-7/8 10-5/8
*There is no established public trading market for Class A common stock.
<TABLE>
Quarterly Financial Data (Unaudited)
(In thousands, except per share amounts)
<CAPTION>
Fiscal 1996
Fiscal 1995
4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales $117,983 $111,950 $103,139 $80,383 $109,300 $126,400 $107,440 $95,417
Gross Income 4,559 7,768 12,780 10,604 14,004 15,795 12,645 11,946
Income (Loss) From
Continuing Operations (1,645) (2,398) 2,230 1,572 3,278 4,098 1,762 2,499
Per Share (.19) (.27) .25 .18 .36 .46 .21 .29
Discontinued
Operations (648) (2,211) - - - (1,010) (423) (988)
Per Share (.07) (.25) - - - (.11) (.05) (.12)
Net Income (Loss) (2,293) (4,609) 2,230 1,572 3,278 3,088 1,339 1,511
Per Share (.26) (.52) .25 .18 .36 .35 .16 .17
</TABLE>
For the fourth quarter of 1996, continuing operations includes, on an
after-tax basis, approximately $2.4 million related to the IPF subcontract
and additional warranty provisions partially offset by reversal of $2.0
million of income tax provisions and related accrued interest.
Discontinued operations for the fourth quarter of 1996 includes $0.6
million of after-tax charges related to adjustments of estimated warranty
expenses.
The fourth quarter of 1995 includes, on an after-tax basis, approximately
$1.5 million of charges for inventory adjustments and additions to accrued
warranty partially offset by certain adjustments to other liabilities.
Quarterly results for 1995 and for the first three quarters of 1996 have
been restated from amounts previously reported to conform with the
presentation of certain items in the fourth quarter of 1996.
<PAGE>
Shareholder Information
Annual Meeting
The Annual Meeting of Shareholders of
Oshkosh Truck Corporation will be held on
Monday, February 3, 1997, at 10:00 a.m.
at the Experimental Aircraft Museum,
3000 Poberezny Road, Oshkosh, Wisconsin 54901
Stock Listing
Oshkosh Truck Corporation Class B common stock
is quoted on the National Market System
of the National Association of Securities
Dealers Automated Quotations (NASDAQ).
The trading symbol is OTRKB.
Form 10-K
Copies of the company's Form 10-K as filed
with the Securities and Exchange Commission are
available free of charge by written request to
the Chief Financial Officer of the company.
Transfer Agent and Registrar
Firstar Trust Company
P.O. Box 2077
Milwaukee, Wisconsin 53201
Independent Auditors
Ernst & Young LLP
111 East Kilbourn Avenue, Suite 900
Milwaukee, Wisconsin 53202
Corporate Headquarters
2307 Oregon Street
Oshkosh, Wisconsin 54901
Mailing Address and Telephone
Oshkosh Truck Corporation
P.O. Box 2566
Oshkosh, Wisconsin 54903-2566
414-235-9150
<PAGE>
Oshkosh Truck Corporation
Management's Discussion and Analysis of Consolidated Financial
Condition and Results of Operations
Results of Operations
Fiscal Year 1996 Compared to Fiscal Year 1995
Oshkosh Truck Corporation (the company) reported a net loss of $3.1
million, or $0.35 per share, on sales of $413.5 million for the year ended
September 30, 1996, compared to net income of $9.2 million, or $1.04 per
share, on sales of $438.6 million for the year ended September 30, 1995.
The fiscal year 1996 results were adversely affected by after-tax charges
of $11.3 million, including $3.2 million related to a defense subcontract
to Steeltech Manufacturing, Inc. (Steeltech), $3.4 million associated with
the company's Mexican bus affiliates, and warranty and other related costs
of $4.7 million. The company also recognized after-tax benefits of $2.0
million on the reversal of income tax provisions and related accrued
interest. During the third quarter of fiscal 1995, the company sold its
chassis manufacturing business in the U.S. and its interest in a joint
venture in Mexico producing chassis for the Mexican market to Freightliner
Corporation (Freightliner). The activities of these businesses are
reported as discontinued operations and resulted in a charge to income in
fiscal 1995. In fiscal 1996, further after-tax charges of $1.2 million
were reported with respect to warranty and other related costs of the
discontinued operations. On September 18, 1996, the company acquired
Pierce Manufacturing Inc. (Pierce), a leading U.S. fire truck
manufacturer, with historical annualized sales of approximately $200
million. The results of Pierce from the date of acquisition to September
30, 1996, which are not material, have been included in the consolidated
results of the company.
Sales of both commercial and defense products declined in fiscal 1996
compared to fiscal 1995. Commercial sales in fiscal 1996 decreased $14.8
million or 8.4% from fiscal 1995 to $162.0 million principally due to a
decline in sales of commercial van trailers of $31.7 million. Sales of all
other commercial product lines increased in fiscal 1996 and Pierce
contributed $6.0 million of sales in fiscal 1996. Sales of defense
products totaled $251.5 million in fiscal 1996, a decrease of $10.2
million or 3.9% as compared to fiscal 1995. The decrease in defense sales
is a result of delays in production of ISO-Compatible Palletized Flatracks
(IPF) which are being produced by Steeltech under a subcontract from the
company. Defense export sales were $60.9 million in fiscal 1996 compared
to $1.6 million in fiscal 1995. Commercial export sales totaled $20.4
million and $17.5 million, respectively, in fiscal 1996 and fiscal 1995.
Gross income in fiscal 1996 totaled $35.7 million or 8.6% of sales
compared to $54.4 million or 12.4% of sales in fiscal 1995. Fiscal 1996
margins were reduced by pre-tax charges of $5.1 million related to
production delays and cost overruns associated with the IPF subcontract to
Steeltech, increased warranty and other related costs of $5.5 million
(pre-tax), and lower volumes.
Operating expenses totaled $39.3 million or 9.5% of sales in fiscal 1996
compared to $35.1 million or 8.0% of sales in fiscal 1995. The company
recognized pre-tax charges of $3.2 million in fiscal 1996 to write-off its
investment in Steeltech and to write-off its remaining investments and
advances associated with its Mexican bus affiliates due to prolonged
weakness in the Mexican economy and continuing high losses and high
leverage reported by the Mexican affiliates.
Miscellaneous income increased to $1.5 million in fiscal 1996 compared to
miscellaneous expense of $0.5 million in fiscal 1995 as a result of the
reversal of accrued interest related to income taxes.
The credit for income taxes totaled $1.7 million in fiscal 1996 benefiting
from the reversal of $1.0 million in income tax provisions recognized in
earlier periods, compared to a provision for income taxes of $7.3 million
in fiscal 1995.
The $2.9 million after-tax loss from discontinued operations ($4.7 million
pre-tax) in fiscal 1996 results from the write-off of receivables of $2.6
million (pre-tax) related to the company's Mexican bus affiliates and from
a $2.1 million pre-tax charge for additional warranty and other related
costs with respect to the company's former U.S. chassis business which was
sold in June 1995. The $2.4 million after-tax loss from discontinued
operations in fiscal 1995 reflects losses on the sale of the company's
former U.S. chassis business and from the sale of an interest in a former
Mexican bus affiliate.
Fiscal Year 1995 Compared to Fiscal Year 1994
Oshkosh Truck Corporation reported net income of $9.2 million, or $1.04
per share, on sales of $438.6 million for the year ended September 30,
1995, compared to net income of $13.1 million, or $1.50 per share, on
sales of $581.3 million for the year ended September 30, 1994. The decline
in earnings in the 1995 fiscal year as compared to the 1994 fiscal year
was primarily related to lower defense sales. During the third quarter of
fiscal 1995, the company sold its chassis manufacturing business in the
U.S. and its interest in a joint venture in Mexico producing chassis for
the Mexican market to Freightliner. The gain from the sale of the U.S.
business was positive; however, the net result of discontinued operations
was a loss of $2.4 million.
Sales of commercial products increased in fiscal 1995 while sales of
defense products declined from the historically high levels which existed
in the 1992 through 1994 fiscal years. Sales to commercial markets
increased by $20.6 million to $176.8 million during fiscal 1995 resulting
from higher sales of construction and airport products which more than
offset a decrease in sales of commercial van trailers as the trailer
industry slowed late in the fiscal year. Sales of defense products
decreased by $163.3 million to $261.7 million in fiscal 1995. Fiscal 1995
sales related, almost exclusively, to the Palletized Load System (PLS) and
the Heavy Expanded Mobility Tactical Truck (HEMTT) contracts. Production
under the PLS contract declined due to an anticipated contractual decrease
in the production rate during fiscal 1995. Additionally, the Heavy
Equipment Transporter (HET) contract ended in fiscal 1994. These decreases
were partially offset by a resumption of HEMTT production which had
earlier concluded midway through the 1993 fiscal year. Defense export
sales were $1.6 million in fiscal 1995, compared to $3.9 million in fiscal
1994. Commercial export sales were $17.5 million and $12.1 million,
respectively, in fiscal 1995 and fiscal 1994.
Gross income during fiscal 1995 was $54.4 million or 12.4% of sales
compared to $68.1 million or 11.7% of sales for fiscal 1994. Gross income
decreased reflecting the lower sales volumes. The improved margin
performance reflects improved control over material costs and
manufacturing efficiencies.
Operating expenses decreased 22.0% to $35.1 million or 8.0% of sales in
fiscal 1995, compared to $45.0 million or 7.7% of sales during fiscal
1994. Fiscal 1994 includes pre-tax charges of $3.1 million relating to a
reduction of work force in anticipation of lower levels of future
business. The remaining decrease in operating expenses relates to strong
controls over expense levels and decreased volumes in fiscal 1995 compared
to fiscal 1994.
Interest income increased from $0.3 million in fiscal 1994 to $0.8 million
in fiscal 1995 due to higher average investment balances.
The effective income tax rate for combined federal and state income taxes
for fiscal 1995 was 38.5% compared to 38.7% in fiscal 1994.
Acquisitions
On September 18, 1996, the company acquired for cash all of the issued and
outstanding stock of Pierce, a leading manufacturer and marketer of fire
trucks and other fire apparatus in the U.S. The acquisition price of
$156.9 million, net of cash acquired, and including related costs was
financed from borrowings under a new bank credit facility. On November 9,
1995, the company through its wholly-owned subsidiary, Summit Performance
Systems, Inc. (Summit), acquired the inventory, land, buildings, machinery
and equipment, and technology of Friesz Manufacturing Company (Friesz), a
manufacturer of concrete mixer systems and related aftermarket replacement
parts, from available cash for $3.9 million.
Financial Condition
Year Ended September 30, 1996
During fiscal 1996, cash decreased $29.6 million. The acquisitions of
Pierce and Friesz for $160.8 million, cash used for operating activities
of $16.2 million, capital additions of $5.4 million, stock repurchases of
$5.4 million and dividends of $4.4 million, were funded principally from
long-term borrowings of $157.9 million and from available cash. Cash was
used for operating activities in fiscal 1996 due to higher working capital
requirements associated with sales in the fourth quarter of fiscal 1996
and first quarter of fiscal 1997.
Year Ended September 30, 1995
During fiscal 1995, cash increased $13.9 million. Cash provided from
operations of $6.2 million and net proceeds from sales of common stock and
common stock warrants of $8.6 million exceeded cash requirements for
capital additions of $5.3 million, dividends of $4.4 million and other
uses.
Liquidity and Capital Resources
Following the acquisitions of Pierce and Friesz, the company's principal
uses of cash for the next several years will be interest and principal
payments on acquisition indebtedness, capital expenditures and potentially
further acquisitions.
On September 18, 1996, the company entered into a bank credit agreement
(the Bank Credit Agreement) to finance the acquisition of Pierce and to
refinance a previous revolving credit facility. The Bank Credit Agreement,
as amended on November 27, 1996, consists of a $150 million term loan
which requires annual principal payments of $15 million and a final
payment of $60 million on September 25, 2003, and a $50 million revolving
credit facility for working capital purposes which expires on September
25, 1999. As of September 30, 1996, $150 million of the term loan and $7.9
million of the revolving credit facility were outstanding. The borrowings
under the revolving credit facility and outstanding letters of credit of
$4.6 million reduced available capacity under the revolving credit
facility to $37.5 million at September 30, 1996. The total of all term
loan and revolving credit facility borrowings, excluding letters of
credit, must be reduced to or below $160 million, $145 million, and $130
million for 60 consecutive days in fiscal 1997, 1998, and 1999,
respectively.
The Bank Credit Agreement limits capital expenditures to $15 million
annually. Capital expenditures are projected to approximate $7 to $10
million annually for the next several years. The Bank Credit Agreement
also restricts other corporate activities as described in Note 4 to the
audited consolidated financial statements. The company believes that such
limitations should not impair its future operating activities.
The company believes its internally generated cash flow, supplemented by
progress payments when applicable, and borrowings available under the Bank
Credit Agreement will be adequate to meet working capital and other
operating and capital requirements of the company in the foreseeable
future.
The company is dependent on its sales of defense products to the U.S.
Government which represented $251.5 million and $261.7 million of total
sales during fiscal 1996 and fiscal 1995, respectively. Substantial
decreases in the company's level of defense business from the current
level could have an adverse effect on the company's profitability. The
company expects to maintain approximately the current level of sales to
the U.S. Government in fiscal 1997.
On June 2, 1995, the company entered into a strategic alliance with
Freightliner. The alliance agreement called for Oshkosh to market certain
of its commercial products through Freightliner's distribution system and
for Oshkosh to build several series of Freightliner's specialty trucks. As
part of the agreement, Freightliner had agreed to transfer its military
heavy truck business to Oshkosh. This would have broadened Oshkosh's
military product line and strengthened its worldwide presence. Commercial
sales through the Freightliner distribution system have fallen short of
expectations. The company will be controlling its own commercial marketing
and sales activities in fiscal 1997. Further, Freightliner has determined
that it will not be transferring its military heavy truck business to
Oshkosh.
Backlog
The company's backlog at fiscal year-end 1996 was $433 million, compared
to $350 million in the previous year. The backlog at fiscal year-end 1996
includes $272 million with respect to U.S. Government contracts, $118
million related to Pierce, and the remainder relates to other commercial
products. Virtually all the company's revenues are derived from customer
orders prior to commencing production.
Stock Buyback
In July 1995, the company's board of directors authorized the repurchase
of up to 1,000,000 shares of Class B common stock. As of November 27,
1996, the company has repurchased 461,535 shares under this program at a
cost of $6.6 million.
<PAGE>
Oshkosh Truck Corporation
Consolidated Statements of Income (Loss)
Years ended September 30,
(In thousands, except per
share amounts) 1996 1995 1994
Continuing operations:
Net sales $413,455 $438,557 $581,275
Cost of sales 377,744 384,167 513,204
------- ------- -------
Gross income 35,711 54,390 68,071
Operating expenses:
Selling, general and
administrative 33,008 29,654 38,404
Engineering, research
and development 6,304 5,443 6,597
------- ------- -------
Total operating expenses 39,312 35,097 45,001
------- ------- -------
Income (loss) from operations (3,601) 19,293 23,070
Other income (expense):
Interest expense (929) (679) (1,080)
Interest income 1,040 774 249
Miscellaneous, net 1,508 (466) (137)
------- ------- -------
1,619 (371) (968)
------- ------- -------
Income (loss) from continuing
operations before income taxes (1,982) 18,922 22,102
Provision (credit) for income
taxes (1,741) 7,285 8,544
------- ------- -------
Income (loss) from continuing
operations (241) 11,637 13,558
Discontinued operations:
Loss from discontinued
operations, net of income
tax benefit (provision) of
$1,623 in 1995 and ($353)
in 1994 - (3,137) (504)
Gain (loss) on disposal of
operations, net of income
tax benefit of $1,827 in
1996 and $357 in 1995 (2,859) 716 -
------ ------- ------
(2,859) (2,421) (504)
------ ------- ------
Net income (loss) $ (3,100) $ 9,216 $ 13,054
====== ======= ======
Earnings (loss) per common
share:
Continuing operations $ (.03) $ 1.32 $ 1.56
Discontinued operations (.32) (.28) (.06)
------ ------- ------
Net income (loss) $ (.35) $ 1.04 $ 1.50
====== ======= ======
See accompanying notes.
<PAGE>
Oshkosh Truck Corporation
Consolidated Balance Sheets
September 30,
(In thousands)
1996 1995
Assets
Current assets:
Cash and cash equivalents $ 127 $ 29,716
Receivables, net 76,624 57,339
Inventories 106,289 46,552
Prepaid expenses 3,619 3,627
Refundable income taxes 6,483 165
Deferred income taxes 7,055 4,516
Net current assets of
discontinued operations - 3,273
------- -------
Total current assets 200,197 145,188
Deferred charges 2,645 2,978
Deferred income taxes - 2,389
Other long-term assets 7,834 10,437
Property, plant and equipment:
Land 7,131 5,522
Buildings 40,421 30,118
Machinery and equipment 77,485 68,630
------- -------
125,037 104,270
Less accumulated
depreciation (67,002) (64,346)
------- -------
Net property, plant and
equipment 58,035 39,924
Goodwill and other intangible
assets, net 166,450 -
------- -------
Total assets $435,161 $200,916
======= =======
Liabilities and Shareholders'
Equity
Current liabilities:
Accounts payable $ 49,178 $ 28,266
Customer advances 27,793 672
Payroll-related obligations 12,843 5,526
Accrued warranty 8,942 3,521
Other current liabilities 16,997 15,426
Net current liabilities of
discontinued operations 1,975 -
Current maturities of
long-term debt 15,000 -
------- -------
Total current liabilities 132,728 53,411
Long-term debt 142,882 -
Postretirement benefit
obligations 9,517 8,839
Other long-term liabilities 1,843 5,026
Net long-term liabilities of
discontinued operations 2,581 227
Deferred income taxes 24,008 -
Shareholders' equity:
Common stock:
Class A 4 4
Class B 89 89
Paid-in capital 16,059 16,533
Retained earnings 114,246 121,697
------- -------
130,398 138,323
Cost of Class B common
stock in treasury (8,796) (3,403)
Pension liability
adjustment - (1,507)
------- -------
Total shareholders'
equity 121,602 133,413
------- -------
Total liabilities and
shareholders' equity $435,161 $200,916
======= =======
See accompanying notes.
<PAGE>
<TABLE>
Oshkosh Truck Corporation
Consolidated Statements of Shareholders' Equity
<CAPTION>
Years ended September 30,
(In thousands, except share and per share amounts)
Pension
Common Paid-in Retained Treasury Liability
Stock Capital Earnings Stock Adjustment Total
<S> <C> <C> <C> <C> <C> <C>
Balance at September 25, 1993 $90 $ 7,399 $108,158 $(2,767) $ (876) $112,004
Net income - - 13,054 - - 13,054
Cash dividends:
Class A common
($.435 per share) - - (196) - - (196)
Class B common
($.500 per share) - - (4,126) - - (4,126)
Exercise of stock options - 34 - 176 - 210
Incentive compensation
awards - 190 - - - 190
Pension liability adjustment - - - - 422 422
----- ------ ------- ------- ------- -------
Balance at September 30, 1994 90 7,623 116,890 (2,591) (454) 121,558
Net income - - 9,216 - - 9,216
Cash dividends:
Class A common
($.435 per share) - - (191) - - (191)
Class B common
($.500 per share) - - (4,218) - - (4,218)
Sale of 350,000 shares of
common stock 3 5,247 - - - 5,250
Sale of 1,250,000 stock
warrants - 4,187 - - - 4,187
Common stock issuance costs
and cost of stock restriction
agreement - (863) - - - (863)
Purchase of common stock for
treasury - - - (933) - (933)
Exercise of stock options - 12 - 121 - 133
Incentive compensation awards - 327 - - - 327
Pension liability adjustment - - - - (1,053) (1,053)
----- ------ ------- ------- ------- -------
Balance at September 30, 1995 93 16,533 121,697 (3,403) (1,507) 133,413
Net loss - - (3,100) - - (3,100)
Cash dividends:
Class A common
($.435 per share) - - (177) - - (177)
Class B common
($.500 per share) - - (4,174) - - (4,174)
Purchase of common stock
for treasury - - - (5,618) - (5,618)
Exercise of stock options - 43 - 225 - 268
Termination of incentive
compensation awards - (517) - - - (517)
Pension liability adjustment - - - - 1,507 1,507
------ ------- ------- ------- ------- -------
Balance at September 30, 1996 $93 $16,059 $114,246 $(8,796) $ - $121,602
====== ======= ======= ======= ======= =======
</TABLE>
See accompanying notes.
<PAGE>
Oshkosh Truck Corporation
Consolidated Statements Of Cash Flows
Years ended September 30,
(In thousands)
1996 1995 1994
Operating activities:
Net income (loss) from
continuing operations $ (241) $11,637 $13,558
Depreciation and amortization 8,798 8,409 9,278
Write-off of investments 4,125 - -
Deferred income taxes (1,381) 2,577 (3,659)
(Gain) loss on disposal of
property, plant and equipment 77 (21) 215
Changes in operating assets
and liabilities:
Receivables (10,648) (4,349) 32,560
Inventories (25,071) (809) 14,494
Prepaid expenses 469 (540) 1,942
Deferred charges 333 (94) 5,244
Accounts payable 13,314 (4,314) (15,002)
Customer advances 930 (1,887) 2,136
Income taxes (5,268) 636 (1,421)
Payroll-related obligations 213 313 587
Accrued warranty 2,094 (639) 2,150
Other current liabilities (4,646) 11 2,886
Other long-term liabilities 665 (4,764) 2,455
------- ------- -------
Net cash provided from
(used for) operating
activities (16,237) 6,166 67,423
Investing activities:
Acquisitions of businesses,
net of cash acquired (160,838) - -
Additions to property, plant
and equipment (5,355) (5,347) (5,178)
Proceeds from sale of
property, plant and equipment 2,086 114 285
Increase in other assets (2,124) (937) (1,243)
------- ------- -------
Net cash used for investing
activities (166,231) (6,170) (6,136)
Net cash provided from (used
for) discontinued operations 4,743 10,482 (2,851)
Financing activities:
Net borrowings (repayments) of
long-term debt 157,882 - (39,082)
Sale of common stock and
common stock warrants, net of
issuance costs - 8,574 -
Purchase of treasury stock and
proceeds from exercise of stock
options, net (5,350) (800) 210
Dividends paid (4,396) (4,372) (4,320)
------- ------- -------
Net cash provided from (used
for) financing activities 148,136 3,402 (43,192)
------- ------- -------
Increase (decrease) in cash and
cash equivalents (29,589) 13,880 15,244
Cash and cash equivalents at
beginning of year 29,716 15,836 592
------- ------- -------
Cash and cash equivalents at
end of year $ 127 $29,716 $15,836
======= ======= =======
Supplemental disclosures:
Cash paid for interest:
Continuing operations $ 538 $ 759 $ 1,168
Discontinued operations - 709 994
Cash paid for income taxes 3,116 2,114 13,972
See accompanying notes.
<PAGE>
Oshkosh Truck Corporation
Notes to Consolidated Financial Statements
September 30, 1996
(In thousands, except share and per share amounts)
1. Summary of Significant Accounting Policies
Operations - Oshkosh Truck Corporation (the company) is a leading
manufacturer of a wide variety of heavy duty specialized trucks. The
company sells its products into three principal markets - fire and
emergency support, defense, and other commercial truck markets. The
company's fire and emergency support business is principally conducted
through its wholly-owned subsidiary, Pierce Manufacturing Inc. (Pierce).
Principles of Consolidation and Presentation - The consolidated financial
statements include the accounts of Oshkosh Truck Corporation and all its
wholly-owned subsidiaries and are prepared in conformity with U.S.
generally accepted accounting principles. The preparation of financial
statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. All significant
intercompany accounts and transactions have been eliminated. Certain
reclassifications have been made to conform prior years' data to the
current format.
Cash and Cash Equivalents - The company considers all highly liquid
investments with a maturity of three months or less when purchased to be
cash equivalents. The carrying amount of cash equivalents approximates
fair value due to the short maturity of the investments.
Inventories - The company values its inventories at the lower of cost,
computed principally on the last-in, first-out (LIFO) method, or market.
Property, Plant and Equipment - Property, plant and equipment are recorded
at cost. Depreciation is provided over the estimated useful lives of the
respective assets principally on accelerated methods. In 1995, the
Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of" (SFAS No. 121). The
company's adoption of SFAS No. 121, effective October 1, 1995, had no
effect on the fiscal 1996 consolidated financial statements.
Deferred Charges - Deferred charges include certain engineering and
technical support costs incurred in connection with multi-year government
contracts. These costs are charged to cost of sales when the related
project is billable to the government, or are amortized to cost of sales
as base units are delivered under the related contracts.
Other Long-Term Assets - Other long-term assets include capitalized
software and related costs which are amortized on a straight-line method
over a three to five-year period, prepaid funding of pension costs and
certain investments. During fiscal 1996, the company wrote off its $3,025
investment in a Mexican bus manufacturer, a $200 investment in Steeltech
Manufacturing, Inc. (Steeltech) and a $900 investment in a joint venture
which leases equipment to Steeltech (see Note 11). Also in fiscal 1996,
the company incurred deferred financing costs totaling $1,286 in
connection with the financing for the acquisition of Pierce which are
amortized to interest expense over the terms of the debt.
Goodwill and Other Intangible Assets - The cost of goodwill and other
intangible assets is amortized on a straight-line basis over the estimated
periods benefited ranging from 13 to 40 years. The realizability of
goodwill and other intangibles is evaluated periodically as events or
circumstances indicate a possible impairment. Such evaluations are based
on various analyses, including cash flow and profitability projections, to
determine the ability to recover their carrying amounts. The analyses
necessarily involve significant judgment to evaluate the capacity of
acquired businesses to perform within projections.
Customer Advances - Customer advances principally represent amounts
received in advance of the completion of a fire apparatus vehicle. Certain
of these advances bear interest at variable rates approximating the prime
rate.
Revenue Recognition - Sales under fixed-price defense contracts are
recorded as units are accepted by the government. Change orders are not
invoiced until agreed upon by the government. Recognition of profit on
change orders and on contracts which do not involve fixed prices is based
upon estimates which may be revised during the terms of the contracts.
Sales to commercial customers are recorded when the goods or services are
billable at time of shipment or delivery of the trucks.
Research and Development - Research and development costs are charged to
expense as incurred and amounted to approximately $6,304, $5,443, and
$6,597 for continuing operations during fiscal 1996, 1995, and 1994,
respectively.
Warranty Costs - Provisions for estimated warranty and other related costs
are recorded at the time of sale and are periodically adjusted to reflect
actual experience. Amounts expensed with respect to continuing operations
in fiscal 1996, 1995, and 1994 were $7,741, $4,518, and $4,541,
respectively.
Income Taxes - Deferred income taxes are provided to recognize temporary
differences between the financial reporting basis and the income tax basis
of the company's assets and liabilities using enacted tax rates in effect
in the years in which the differences are expected to reverse.
Earnings (Loss) Per Share - Earnings (loss) per share is computed on the
basis of the weighted average number of shares of common stock outstanding
(8,828,224; 8,823,766; and 8,699,846 in fiscal 1996, 1995, and 1994,
respectively). Stock options, warrants and stock issuable under incentive
compensation awards were not dilutive in any of the years presented.
2. Balance Sheet Information
Receivables 1996 1995
U.S. Government:
Amounts billed, net $27,353 $33,330
Amounts unbilled 4,918 5,198
------ ------
32,271 38,528
Commercial customers 41,510 17,407
Other 3,909 1,881
------ ------
77,690 57,816
Less allowance for
doubtful accounts (1,066) (477)
------ ------
$76,624 $57,339
====== ======
The unbilled amounts represent estimated claims for government-ordered
changes which will be invoiced upon completion of negotiations and price
adjustment provisions which will be invoiced when they are agreed upon by
the government.
Inventories 1996 1995
Finished products $ 15,208 $ 3,368
Partially finished products 51,533 15,132
Raw materials 47,580 35,106
------- ------
Inventories at FIFO cost 114,321 53,606
Less: Progress payments on
U.S. Government
contracts - (81)
Excess of FIFO cost
over LIFO cost (8,032) (6,973)
------- ------
$106,289 $46,552
======= ======
Title to all inventories related to government contracts which provide for
progress payments vests in the government to the extent of unliquidated
progress payments.
Goodwill and Other
Intangible Assets 1996 1995
Useful Lives
Goodwill 40 Years $102,523 $ -
Distribution network 40 Years 53,000 -
Other 13-40 Years 11,098 -
------- -----
166,621 -
Less accumulated
amortization (171) -
------- -----
$166,450 $ -
======= =====
3. Acquisitions
On September 18, 1996, the company acquired for cash all of the issued and
outstanding stock of Pierce, a leading manufacturer and marketer of fire
trucks and other fire apparatus in the U.S. The acquisition price of
$156,926, including acquisition costs and net of cash acquired, was
financed from borrowings under a new bank credit facility (see Note 4).
The acquisition has been accounted for using the purchase method of
accounting and, accordingly, the operating results of Pierce are included
in the company's consolidated statement of income (loss) since the date of
acquisition. The purchase price including acquisition costs was allocated
based on the estimated fair values of the assets acquired and liabilities
assumed at the date of the acquisition. Approximately $62,000 of the
purchase price has been allocated to the distribution network and other
intangible assets. The excess of the purchase price over the estimated
fair value of net assets acquired amounted to $102,523 which has been
accounted for as goodwill. This allocation was based on preliminary
estimates and may be revised at a later date.
Pro forma unaudited consolidated operating results of the company,
assuming Pierce had been acquired as of October 1, 1995 and 1994, are
summarized below:
1996 1995
Net sales $605,439 $618,555
Income (loss) from continuing
operations (1,262) 7,699
Net income (loss) (4,121) 4,901
Earnings (loss) per share:
Continuing operations $ (.14) $ .87
Net income (loss) (.47) .56
These pro forma results have been prepared for informational purposes only
and include certain adjustments to depreciation expense related to
acquired plant and equipment, amortization expense arising from goodwill
and other intangible assets, interest expense on acquisition debt,
elimination of certain non-recurring expenses incurred by Pierce prior to
the acquisition, and the estimated related income tax effects of all such
adjustments. Anticipated efficiencies from the consolidation of Pierce's
manufacturing facilities and from the synergies related to the
consolidation of certain purchasing functions among Pierce and the company
are not fully determinable and therefore have been excluded from the
amounts included in the pro forma operating results. These pro forma
results do not purport to be indicative of the results of operations which
would have resulted had the combination been in effect as of October 1,
1995 and 1994 or of the future results of operations of the consolidated
entities.
On November 9, 1995, the company through its wholly-owned subsidiary,
Summit Performance Systems, Inc. (Summit), acquired the inventory, land,
buildings, machinery and equipment, and technology of Friesz Manufacturing
Company (Friesz) from available cash for $3,912. Friesz is engaged in the
manufacture and sale of concrete mixer systems and related aftermarket
replacement parts. Approximately $2,150 of the purchase price has been
allocated to intangible assets, principally designs and related
technology. The acquisition was accounted for using the purchase method of
accounting and, accordingly, the operating results of Friesz are included
in the company's consolidated statement of income (loss) since the date of
acquisition. Had the acquisition occurred as of October 1, 1995 or 1994,
there would have been no material pro forma effects on the net sales, net
income (loss) or earnings (loss) per share of the company in fiscal 1996
or 1995.
4. Long-Term Debt
On September 18, 1996, the company entered into a bank credit agreement
(the Bank Credit Agreement) to finance the acquisition of Pierce (see Note
3) and to refinance a previous revolving credit facility. The Bank Credit
Agreement, as amended on November 27, 1996, consists of a $150,000 term
loan which requires annual principal payments of $15,000 and a final
payment of $60,000 on September 25, 2003, and a $50,000 revolving credit
facility for working capital purposes which expires on September 25, 1999.
As of September 30, 1996, $150,000 of the term loan and $7,882 of the
revolving credit facility were outstanding. The total of all term loan and
revolving credit facility borrowings, excluding letters of credit, must be
reduced to or below $160,000, $145,000, and $130,000 for 60 consecutive
days in fiscal 1997, 1998, and 1999, respectively.
Interest on the term loan and the revolving credit facility is payable at
prime or at the applicable Eurodollar rate plus 2.5% and 2.125%,
respectively, subject to downward adjustment if certain financial criteria
are met (at a weighted average rate of 8.25% and 8.25%, respectively, at
September 30, 1996).
The company is charged a 0.25% fee with respect to any unused balance
under its revolving credit facility, and a 1.625% fee with respect to any
letters of credit issued under the revolving credit facility. These fees
are subject to downward adjustment if certain financial criteria are met.
At September 30, 1996, $7,882 of borrowings and $4,570 of letters of
credit reduced available capacity under the revolving credit facility to
$37,548.
At September 30, 1996, substantially all the tangible and intangible
assets of the company and its subsidiaries are pledged as collateral under
the terms of the Bank Credit Agreement. Among other restrictions, the Bank
Credit Agreement: (1) limits payments of dividends, purchases of the
company's stock, and capital expenditures; (2) requires that certain
financial ratios be maintained at prescribed levels; (3) restricts the
ability of the company to make additional borrowings, or to consolidate,
merge or otherwise fundamentally change the ownership of the company; and
(4) limits investments, dispositions of assets and guarantees of
indebtedness. The company believes that such limitations should not impair
its future operating activities.
The aggregate annual maturities of long-term debt for the five years
succeeding September 30, 1996, are as follows: 1997 - $15,000; 1998 -
$15,000; 1999 - $22,882; 2000 - $15,000; and 2001 - $15,000.
Fair Market Value Disclosures
Due to the proximity of the date of issuance of the company's long-term
debt on September 18, 1996 to the company's fiscal year end, the aggregate
fair value of the long-term debt approximates its carrying value of
$157,882 at September 30, 1996.
5. Income Taxes
Income Tax Provision 1996 1995 1994
Current:
Federal $ 2,988 $5,572 $12,550
State 368 873 1,889
------ ----- ------
Total current 3,356 6,445 14,439
Deferred:
Federal (4,630) 763 (5,391)
State (467) 77 (504)
------ ----- ------
Total deferred (5,097) 840 (5,895)
------ ----- ------
$(1,741) $7,285 $ 8,544
====== ===== ======
Effective Rate
Reconciliation
1996 1995 1994
U.S. federal tax rate (34.0)% 35.0% 35.0%
State income taxes, net (5.0) 3.5 3.3
Reduction of prior
years' excess tax
provisions (50.5) - -
Foreign sales
corporation (5.2) (0.6) (0.4)
Other, net 6.9 0.6 0.7
---- ----- ----
(87.8)% 38.5% 38.6%
==== ===== =====
Deferred Tax Assets and Liabilities 1996 1995
Deferred tax assets:
Other current liabilities $ 6,625 $ 4,030
Postretirement benefit obligations 3,674 4,380
Accrued warranty 3,194 1,068
Investments 1,801 160
Payroll-related obligations 818 1,388
Other 419 1,723
------ ------
Total deferred tax assets 16,531 12,749
Deferred tax liabilities:
Intangible assets 24,150 -
Property, plant and equipment 5,972 5,549
Inventories 1,922 392
Deferred charges 1,091 (902)
Other 349 805
------ ------
Total deferred tax liabilities 33,484 5,844
------ ------
Net deferred tax asset (liability) $(16,953) $ 6,905
======= ======
The company has not recorded a valuation allowance with respect to any
deferred tax assets.
6. Employee Benefit Plans
The company has defined benefit pension plans covering substantially all
employees. The plans provide benefits based on compensation, years of
service and date of birth. The company's policy is to fund the plans in
amounts which comply with contribution limits imposed by law.
Components of net periodic pension cost for these plans for fiscal 1996,
1995, and 1994, including costs of discontinued operations which are not
significant in any year presented but excluding Pierce pension costs due
to the proximity of its acquisition to the company's fiscal year- end, are
as follows:
1996 1995 1994
Service cost benefits
earned during year $1,149 $1,140 $1,227
Interest cost on projected
benefit obligations 1,979 1,862 1,684
Actual return on plan
assets (3,347) (2,505) (296)
Net amortization and
deferral 1,232 438 (1,523)
----- ----- -----
1,013 935 1,092
Curtailment charge related
to reduction in work
force - - 560
----- ----- -----
Net periodic pension cost $1,013 $ 935 $1,652
===== ===== =====
The following table summarizes the funded status of the pension plans and
the amounts recognized in the company's consolidated balance sheets at
September 30, 1996 and 1995:
1996 1995 1995
Assets Exceed Assets Exceed Accumulated
Accumulated Accumulated Benefits
Benefits Benefits Exceed Assets
Actuarial present value of
benefit obligations:
Vested $26,009 $11,847 $ 8,288
Nonvested 602 561 458
------ ------ ------
Accumulated benefit obligations 26,611 12,408 8,746
Adjustment for projected
benefit obligations 4,731 6,039 -
------ ------ ------
Projected benefit obligations 31,342 18,447 8,746
Plan assets at fair value 31,089 16,229 7,148
------ ------ ------
Projected benefit obligations
in excess of plan assets (253) (2,218) (1,598)
Unrecognized net transition
asset (661) (237) (491)
Unrecognized net loss 4,811 4,155 3,002
Unrecognized prior service cost 345 33 340
Adjustment required to recognize
minimum liability - - (2,851)
------ ------ ------
Prepaid pension asset
(liability) $ 4,242 $ 1,733 $(1,598)
====== ====== ======
The increase in projected benefit obligations and plan assets from
September 30, 1995 to September 30, 1996 principally results from the
inclusion of the Pierce pension plan in the reported amounts.
Generally accepted accounting principles require the recognition of an
additional minimum liability for each defined benefit plan for which the
accumulated benefit obligation exceeds plan assets. This amount is
recorded as a long-term liability of $2,851 in 1995 with an offsetting
intangible asset of $340 to the extent of unrecognized prior service cost.
In addition, the company has recorded a reduction of shareholders' equity
of $1,507 in 1995, net of income tax benefits of $1,004.
The plans' assets are comprised of investments in commingled equity and
fixed income funds and individually managed equity portfolios.
Actuarial assumptions are as follows:
1996 1995 1994
Discount rate 7.75% 7.50% 8.25%
Rate of increase in compensation 4.50 4.50 4.50
Expected long-term rate of
return on plan assets 9.25 9.25 9.25
In addition to providing pension benefits for the majority of its
employees, the company provides health benefits to certain of its retirees
and their eligible spouses. Approximately 50% of the company's employees
become eligible for these benefits if they reach normal retirement age
while working for the company.
The following table summarizes the status of the postretirement benefit
plan and the amounts recognized in the company's consolidated balance
sheets at September 30, 1996 and 1995:
1996 1995
Postretirement benefit obligations:
Retirees $2,929 $2,859
Fully eligible active
participants 397 387
Other active participants 4,865 4,749
------ ------
8,191 7,995
Unrecognized net gain 1,326 844
------ ------
Postretirement benefit
obligations $9,517 $8,839
====== ======
Net periodic postretirement benefit cost for fiscal 1996, 1995, and 1994,
including discontinued operations which is not significant in any year
presented, includes the following components:
1996 1995 1994
Service cost $353 $372 $ 472
Interest cost on the
accumulated postretirement
benefit obligation 580 610 658
Amortization of unrecognized loss - - 26
---- ---- ------
Net periodic postretirement
benefit cost $933 $982 $1,156
==== ==== ======
Net change in postretirement benefit obligations includes the following:
1996 1995
Balance at beginning of year $8,839 $8,159
Benefits paid (255) (207)
Net periodic postretirement
benefit cost 933 982
Curtailment gain related to
reduction in workforce - (95)
----- -----
Balance at end of year $9,517 $8,839
===== =====
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation was 11.5% in fiscal 1996, declining to
6.5% in fiscal 2007. The weighted average discount rate used in
determining the postretirement benefit obligation was 7.75% in fiscal 1996
and 7.50% in fiscal 1995. If the health care cost trend rate was increased
by 1%, the postretirement benefit obligation at September 30, 1996 would
increase by $724 and net periodic postretirement benefit cost for fiscal
1996 would increase by $114.
The company has defined contribution 401(k) plans covering substantially
all employees. The plans allow employees to defer 2% to 19% of their
income on a pre-tax basis. Each employee who elects to participate is
eligible to receive company matching contributions. Amounts expensed for
company matching contributions for continuing operations were $401, $407,
and $435 in fiscal 1996, 1995, and 1994, respectively.
7. Shareholders' Equity
The company is authorized to issue 1,000,000 shares of $.01 par value
Class A common stock of which 409,258 shares and 427,262 shares were
issued and outstanding at September 30, 1996 and 1995, respectively. The
company is authorized to issue 18,000,000 shares of $.01 par value Class B
common stock. At September 30, 1996, 8,948,907 and 8,227,770 Class B
shares were issued and outstanding, respectively. At September 30, 1995,
8,930,903 and 8,577,286 Class B shares were issued and outstanding,
respectively. The company is also authorized to issue up to 2,000,000
shares of $.01 par value preferred stock, none of which were issued or
outstanding at September 30, 1996 or 1995.
On June 2, 1995, Freightliner Corporation (Freightliner) purchased 350,000
shares of the company's Class B common stock for $15.00 per share and
warrants for the purchase of 1,250,000 additional shares of Class B common
stock exercisable at $16.50 per share through June 2, 2003.
During 1995, the company entered into a stock restriction agreement with
two shareholders owning the majority of the company's Class A common
stock. The agreement is intended to allow for an orderly transition of
Class A common stock into Class B common stock.
The agreement provides that at the time of death or incapacity of the
survivor of them, the two shareholders will exchange all of their Class A
common stock for Class B common stock, and at that time, if not earlier,
will support an amendment to the Articles of Incorporation which will
provide for a mandatory conversion of all Class A common stock into Class
B common stock.
Dividends are required to be paid on both the Class A and Class B common
stock at any time that dividends are paid on either. Each share of Class B
common stock is entitled to receive 115% of any dividend paid on each
share of Class A common stock, rounded up or down to the nearest $0.0025
per share.
The Class B common stock shareholders are entitled to receive a
liquidation preference of $7.50 per share before any payment or
distribution to holders of the Class A common stock. Thereafter, holders
of the Class A common stock are entitled to receive $7.50 per share before
any further payment or distribution to holders of the Class B common
stock. Thereafter, holders of the Class A common stock and Class B common
stock share on a pro rata basis in all payments or distributions upon
liquidation, dissolution or winding up of the company.
During 1995, the company announced an offer to the holders of the
company's Class A common stock to convert any or all Class A common stock
to Class B common stock on a one-for-one basis. As of September 30, 1996,
40,112 Class A common shares have been converted to Class B. In addition,
in July 1995, the company authorized the buy back of up to one million
shares of the company's Class B common stock. As of September 30, 1996,
the company had purchased 461,535 shares of its Class B common stock at a
total price of $6,551.
8. Stock Option and Performance Share Award Plans
The company has reserved 2,026,402 shares of Class B common stock at
September 30, 1996 to provide for the exercise of outstanding stock
options and warrants, and the issuance of common stock under incentive
compensation awards. Under the 1990 Incentive Stock Plan for Key Employees
(the Plan), officers, other key employees and directors may be granted
options to purchase up to an aggregate of 825,000 shares of the company's
Class B common stock at not less than the fair market value of such shares
on the date of grant. Participants may also be awarded grants of
restricted stock under the Plan. The Plan expires on April 9, 2000.
Options become exercisable ratably on the first, second and third
anniversary of the date of grant. Options to purchase shares expire not
later than ten years and one month after the grant of the option.
The following table sets forth information with respect to the Plan:
Number of Exercise Price
Options Per Option
Outstanding at September 25, 1993 178,417 $ 7.88 - 15.25
Options granted 242,400 9.13 - 10.50
Options exercised (5,750) 7.88
Options canceled (14,418) 7.88 - 15.25
-------
Outstanding at September 30, 1994 400,649 7.88 - 15.25
Options granted 100,500 11.25 - 14.00
Options exercised (14,250) 7.88 - 9.75
Options canceled (9,831) 9.38 - 15.25
-------
Outstanding at September 30, 1995 477,068 7.88 - 15.25
Options granted 14,500 13.88 - 15.25
Options exercised (24,515) 7.88 - 10.50
Options canceled (6,251) 9.38 - 15.25
-------
Outstanding at September 30, 1996 460,802 $ 7.88 - 15.25
=======
Exercisable at September 30, 1996 310,062 $ 7.88 - 15.25
=======
Shares available for grant at
September 30, 1996 315,600
=======
In October 1995, SFAS No. 123, "Accounting for Stock-Based Compensation"
was issued. Beginning in fiscal 1997, the company will make pro forma
disclosures of stock-based compensation cost utilizing the fair value
based method of accounting pursuant to SFAS No. 123, but currently intends
to continue to report stock-based compensation expense in its consolidated
financial statements for subsequent years under the intrinsic value based
method under Accounting Principles Board Opinion No. 25.
In fiscal 1996, the company terminated the 1994 Long-Term Incentive
Compensation Plan. There were no payouts under this plan in fiscal 1996,
1995, or 1994.
9. Operating Leases
Total rental expense for plant and equipment charged to continuing
operations under noncancellable operating leases was $797, $1,004, and
$955 in fiscal 1996, 1995, and 1994, respectively. Minimum rental payments
due under operating leases for subsequent fiscal years are: 1997-$660;
1998-$445; 1999-$218; 2000-$10; and 2001-$9.
Included in rental expense are charges of $128, $215, and $304 in fiscal
1996, 1995, and 1994, respectively, relating to leases between the company
and certain shareholders.
10. Discontinued Operations
On June 2, 1995, Freightliner acquired certain assets of the company's
motor home, bus and van chassis business. The consideration included cash
of $23,815 and the assumption by Freightliner of certain liabilities. The
assets sold to Freightliner consisted of inventories, property, plant and
equipment and the company's ownership interest in a Mexican chassis
manufacturer. The liabilities assumed by Freightliner included warranty
obligations related to previously produced chassis and industrial revenue
bonds that were secured by the underlying real estate. The disposition of
the chassis business has been accounted for as a discontinued operation.
Revenues of the chassis business for fiscal 1995 (through the date of
sale) and fiscal 1994 were $55,804 and $109,032, respectively.
The net assets or liabilities of the discontinued operations have been
segregated in the consolidated balance sheets. Details of such amounts at
September 30, 1996 and 1995, are as follows:
1996 1995
Receivables $ 66 $ 3,871
Inventories 92 1,421
Accounts payable - (326)
Accrued warranty (1,862) (1,450)
Other, net (271) (243)
------ ------
Net current assets (liabilities)
of discontinued operations $ (1,975) $ 3,273
====== ======
Receivable from joint venture in
Mexico $ - $ 3,165
Accrued warranty (2,181) (2,694)
Other, net (400) (698)
------ ------
Net long-term liabilities of
discontinued operations $ (2,581) $ (227)
======= ======
In fiscal 1996, the company incurred charges totaling approximately $2,623
arising from the write-off of receivables and other obligations related to
the company's former joint venture in Mexico. In addition, in fiscal 1996,
the company recognized additional warranty and other related costs
totaling $2,063 with respect to the company's former U.S. chassis
business.
The company has allocated interest on the debt which was assumed by
Freightliner to discontinued operations. Interest expense included in
discontinued operations totaled $685 and $1,000 in fiscal 1995 and 1994,
respectively.
11. Contingencies, Significant Estimates and Concentrations
The company is engaged in litigation against Super Steel Products
Corporation (SSPC), the company's former supplier of mixer systems for
front discharge concrete mixer trucks under a long-term supply contract.
SSPC sued the company in state court claiming the company breached the
contract. The company counterclaimed for repudiation of contract. On July
26, 1996, a jury returned a verdict for SSPC awarding damages totaling
$4,485. On October 10, 1996, the state court judge overturned the verdict
against the company, granted judgment for the company on its counterclaim,
and ordered a new trial for damages on the company's counterclaim. The
company expects SSPC to appeal this judgment.
The company is subject to environmental matters and other legal
proceedings and claims which arise in the ordinary course of business.
Although the final results of all such matters and claims cannot be
predicted with certainty, management believes that the ultimate resolution
of all such matters and claims, after taking into account the liabilities
accrued with respect to such matters and claims, will not have a material
adverse effect on the company's financial condition or results of
operations.
Pierce has guaranteed certain customers' obligations under deferred
payment contracts and lease purchase agreements totaling $5,504 at
September 30, 1996. Pierce and the company also are contingently liable
under bid and performance bonds totaling approximately $81,000 at
September 30, 1996.
Provisions for estimated warranty and other related costs are recorded at
the time of sale and are periodically adjusted to reflect actual
experience. As of September 30, 1996, the company has accrued $8,942 for
warranty and other related claims. Certain warranty and other related
claims involve matters of dispute that ultimately are resolved by
negotiation, arbitration or litigation. Infrequently, a material warranty
issue can arise which is beyond the scope of the company's historical
experience. During fiscal 1996, the company recorded warranty and other
related costs for matters beyond the company's historical experience
totaling $5,502 with respect to continuing operations and $2,063 with
respect to discontinued operations (see Note 10). It is reasonably
possible that additional warranty and other related claims could arise
from disputes or other matters beyond the scope of the company's
historical experience.
The company subcontracted production under an $85,000 ISO-Compatible
Palletized Flatracks (IPF) contract for the U.S. Army to Steeltech, a
minority-owned firm, pursuant to Department of Defense regulations under
the IPF contract. Due to financial difficulties encountered by Steeltech,
the company advanced working capital requirements to Steeltech in fiscal
1995 and fiscal 1996. As a result of delays in the start-up of full scale
production under the IPF contract, the company wrote-off certain of its
advances and an investment in Steeltech totaling $3,300 in fiscal 1996.
Steeltech's IPF production passed first article testing in July 1996 and
production is expected to be completed in 1998. As of September 30, 1996
and 1995, the company had outstanding advances due from Steeltech of
$2,855 and $736, respectively. In fiscal 1996, the company also wrote-off
an investment of $900 in a joint venture which leases equipment to
Steeltech and accrued $1,084 for the potential satisfaction of a guarantee
of 50% of the outstanding indebtedness of the joint venture. The company
is further contingently liable for Department of Defense progress payments
that have been advanced to Steeltech totaling $5,380 at September 30, 1996
in the event of incomplete performance under the IPF contract. While
management currently expects the company to realize its remaining advances
to Steeltech at September 30, 1996, it is reasonably possible that a
portion of the advances will not be realized.
The company derives a significant portion of its revenue from the U.S.
Department of Defense, as follows:
1996 1995 1994
Defense:
U.S. Department of Defense $249,413 $260,112 $423,795
Export 2,059 1,623 1,236
------- ------- -------
251,472 261,735 425,031
Commercial:
Domestic 141,540 159,326 144,133
Export 20,443 17,496 12,111
------- ------- -------
161,983 176,822 156,244
------- ------- -------
Net sales $413,455 $438,557 $581,275
U.S. Department of Defense sales include $58,855 and $2,619 in fiscal 1996
and 1994, respectively, for products sold internationally under the
Foreign Military Sales Program.
Inherent in doing business with the U.S. Department of Defense are certain
risks, including technological changes and changes in levels of defense
spending. All U.S. Department of Defense contracts contain a provision
that they may be terminated at any time at the convenience of the
government. In such an event, the company is entitled to recover allowable
costs plus a reasonable profit earned to the date of termination.
Various actions or claims have been asserted or may be asserted in the
future by the government against the company. A potential action by the
government against the company in connection with a grand jury
investigation was commenced in 1989. In 1996, the government discontinued
this investigation without any action against the company or its
employees, although a civil investigation is possible.
On June 2, 1995, the company entered into a strategic alliance with
Freightliner. The agreement provided for the marketing of certain of the
company's vocational products through Freightliner's distribution system,
the manufacture by the company of several series of Freightliner's severe
duty trucks and the transfer of Freightliner's non-commercial military
business to the company. Sales of the company's vocational products
through Freightliner's distribution system in fiscal 1996 were limited and
in fiscal 1997, the company will assume control of its commercial
marketing and sales. Further, Freightliner has decided not to transfer
either the manufacture of any severe duty trucks or its non-commercial
military business to the company. The company and Freightliner will
continue to supply each other specialty products and components. As of
September 30, 1996, the company has receivables totaling $5,274 due from
Freightliner, principally related to the sales of refuse and concrete
mixer trucks.
<PAGE>
Report of Ernst & Young LLP,
Independent Auditors
Board of Directors
Oshkosh Truck Corporation
We have audited the accompanying consolidated balance sheets of Oshkosh
Truck Corporation (the company) as of September 30, 1996 and 1995, and the
related consolidated statements of income (loss), shareholders' equity and
cash flows for each of the three years in the period ended September 30,
1996. These financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of the
company at September 30, 1996 and 1995, and the consolidated results of
its operations and its cash flows for each of the three years in the
period ended September 30, 1996, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
November 8, 1996, except for Note 4, as to which the date is November 27,
1996
Milwaukee, Wisconsin
<PAGE>
Oshkosh Truck Corporation
P.O. Box 2566 - Oshkosh, Wisconsin 54903-2566
414-235-9150
/R/Oshkosh and the Oshkosh logo are registered trademarks, and
/TM/phoenix is a trademark of Oshkosh Truck Corporation.
/R/Pierce, Quantum and Lance are registered trademarks
of Pierce Manufacturing Inc.
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report on Form
10-K of Oshkosh Truck Corporation of our report dated November 8, 1996,
except for Note 4, as to which the date is November 27, 1996, included in
the 1996 Annual Report to Shareholders of Oshkosh Truck Corporation.
Our audits also included the financial statement schedule of Oshkosh Truck
Corporation listed in Item 14(a). This schedule is the responsibility of
the company's management. Our responsibility is to express an opinion
based on our audits. In our opinion, the financial statement schedule
referred to above, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects,
the information set forth therein.
We also consent to the incorporation by reference in the Registration
Statements (Form S-8 No. 33-38822 and No. 33-62687) pertaining to the
Oshkosh Truck Corporation 1990 Incentive Stock Plan of our report dated
November 8, 1996, except for Note 4, as to which the date is November 27,
1996, with respect to the consolidated financial statements and schedule
of Oshkosh Truck Corporation included or incorporated by reference in the
Annual Report (Form 10-K) for the year ended September 30, 1996.
Ernst & Young LLP
Milwaukee, Wisconsin
December 27, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF OSHKOSH TRUCK CORPORATION AS OF AND
FOR THE YEAR ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> JUN-30-1996
<PERIOD-END> SEP-30-1996
<CASH> 127
<SECURITIES> 0
<RECEIVABLES> 77,690
<ALLOWANCES> 1,066
<INVENTORY> 106,289
<CURRENT-ASSETS> 200,197
<PP&E> 125,037
<DEPRECIATION> 67,002
<TOTAL-ASSETS> 435,161
<CURRENT-LIABILITIES> 132,728
<BONDS> 142,882
93
0
<COMMON> 0
<OTHER-SE> 121,509
<TOTAL-LIABILITY-AND-EQUITY> 435,161
<SALES> 413,455
<TOTAL-REVENUES> 413,455
<CGS> 377,744
<TOTAL-COSTS> 377,744
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 186
<INTEREST-EXPENSE> 929
<INCOME-PRETAX> (1,982)
<INCOME-TAX> (1,741)
<INCOME-CONTINUING> (241)
<DISCONTINUED> (2,859)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,859)
<EPS-PRIMARY> (.35)
<EPS-DILUTED> (.35)
</TABLE>
