SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(x) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1997
or
( ) Transaction Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
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
incorporation or organization] Identification No.]
2307 Oregon Street, P.O. Box 2566, Oshkosh, Wisconsin 54903
[Address of principal executive offices] [Zip Code]
Registrant's telephone number, including area code (920) 235-9151
None
[Former name, former address and former fiscal year, if changed since
last report]
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class A Common Stock Outstanding as of July 31, 1997: 406,878
Class B Common Stock Outstanding as of July 31, 1997: 7,895,981
<PAGE>
OSHKOSH TRUCK CORPORATION
FORM 10-Q INDEX
FOR THE QUARTER ENDED JUNE 30, 1997
Page
PART I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Statements of
Income (Loss) . . . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Balance Sheets . . . . . . . . . 4
Condensed Consolidated Statement of
Shareholders' Equity . . . . . . . . . . . . . . . . . 5
Condensed Consolidated Statements of
Cash Flows . . . . . . . . . . . . . . . . . . . . . . 6
Notes to Condensed Consolidated
Financial Statements . . . . . . . . . . . . . . . . . 7
Item 2. Management's Discussion and Analysis of
Consolidated Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . 9
PART II. Other Information . . . . . . . . . . . . . . . . . . . 14
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
<PAGE>
<TABLE>
PART I. ITEM 1. FINANCIAL INFORMATION
OSHKOSH TRUCK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 29, June 30, June 29,
1997 1996 1997 1996
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Net sales $176,596 $111,950 $497,381 $295,472
Cost of sales 154,699 104,303 433,033 264,649
-------- -------- -------- --------
Gross income 21,897 7,647 64,348 30,823
Operating expenses:
Selling, general and administrative 11,742 9,665 34,383 24,685
Engineering, research & development 2,211 1,783 5,957 4,516
Amortization of goodwill and other
intangibles 1,117 12 3,352 12
-------- ------- -------- -------
Total operating expenses 15,070 11,460 43,692 29,213
-------- ------- -------- -------
Income (loss) from continuing operations 6,827 (3,813) 20,656 1,610
Other income (expense):
Interest expense (2,848) (64) (9,571) (188)
Interest income 130 168 484 956
Miscellaneous, net (24) 24 (93) (76)
-------- ------ ------- -------
(2,742) 128 (9,180) 692
-------- ------ ------- -------
Income (loss) from continuing operations
before income taxes 4,085 (3,685) 11,476 2,302
Provision (credit) for income taxes 1,293 (1,287) 4,586 898
-------- ------ ------- -------
Net income (loss) from continuing operations 2,792 (2,398) 6,890 1,404
======== ====== ======= =======
Loss from discontinued operations, net of
income tax benefit -- (2,211) -- (2,211)
-------- ------ ------- -------
Net income (loss) $ 2,792 $ (4,609) $ 6,890 $ (807)
======== ======= ======= =======
Earnings (loss) per common share:
Income (loss) from continuing operations $ 0.33 $ (0.27) $ 0.80 $ 0.16
Discontinued operations 0.00 (0.25) 0.00 (0.25)
-------- -------- ------- -------
Net income (loss) $ 0.33 $ (0.52) $ 0.80 $ (0.09)
======== ======== ======= =======
Cash dividends per common share:
Class A $0.10875 $0.10875 $0.32625 $0.32625
Class B $0.12500 $0.12500 $0.37500 $0.37500
The accompanying notes are an integral part of these condensed consolidated financial statements.
</TABLE>
<PAGE>
OSHKOSH TRUCK CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, Sept. 30,
1997 1996
ASSETS (In thousands)
Current assets:
Cash and cash equivalents $ 1,236 $ 127
Receivables, net 66,431 76,624
Inventories 100,056 106,289
Prepaid expenses 3,137 3,619
Refundable income taxes 4,350 6,483
Deferred income taxes 7,055 7,055
-------- ----------
Total current assets 182,265 200,197
Deferred charges 1,720 2,645
Other long-term assets 7,089 7,834
Property, plant, and equipment:
Land 7,071 7,131
Buildings 42,233 40,421
Machinery and equipment 79,580 77,485
-------- ----------
128,884 125,037
Less accumulated depreciation (72,896) (67,002)
-------- ----------
Net property, plant, and equipment 55,988 58,035
Goodwill and other intangible assets, net 163,098 166,450
-------- ----------
Total assets $410,160 $435,161
======== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 42,809 $ 49,178
Customer advances 27,337 27,793
Payroll-related obligations 14,407 12,843
Accrued warranty 9,030 8,942
Other current liabilities 18,321 18,972
Current maturities of long-term debt -- 15,000
-------- ----------
Total current liabilities 111,904 132,728
Long-term debt 142,471 142,882
Postretirement benefit obligations 9,944 9,517
Other long-term liabilities 3,651 4,424
Deferred income taxes 23,475 24,008
Shareholders' equity:
Common stock:
Class A 4 4
Class B 89 89
Paid-in capital 13,573 16,059
Retained earnings 118,001 114,246
-------- ----------
131,667 130,398
Cost of Class B common stock
in treasury (12,952) (8,796)
-------- ----------
Total shareholders' equity 118,715 121,602
-------- ----------
Total liabilities and shareholders'
equity $410,160 $435,161
======== ==========
The accompanying notes are an integral part of these condensed
consolidated financial statements.
<PAGE>
<TABLE>
OSHKOSH TRUCK CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
NINE MONTHS ENDED JUNE 30, 1997
(Unaudited)
<CAPTION>
Common Paid-in Retained Treasury
Stock Capital Earnings Stock Total
(In thousands)
<S> <C> <C> <C> <C> <C>
Balance at September 30, 1996 $93 $16,059 $114,246 $(8,796) $121,602
Net income -- -- 6,890 -- 6,890
Cash dividends:
Class A common stock -- -- (133) -- (133)
Class B common stock -- -- (3,002) -- (3,002)
Purchase of 350,000 shares of
Class B common stock and
1,250,000 warrants for the
purchase of Class B common stock -- (2,504) -- (4,246) (6,750)
Exercise of stock options -- 18 -- 90 108
----- --------- -------- --------- ---------
Balance at June 30, 1997 $93 $13,573 $118,001 $(12,952) $118,715
===== ========= ======== ========= =========
The accompanying notes are an integral part of these condensed consolidated financial statements.
</TABLE>
<PAGE>
OSHKOSH TRUCK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
June 30, June 29,
1997 1996
(In thousands)
Operating activities:
Net income from continuing operations $ 6,890 $ 1,404
Depreciation and amortization 10,538 6,146
Write-off of investments -- 3,225
Deferred income taxes (533) (493)
Loss on disposal of property,
plant, and equipment -- 74
Changes in operating assets and
liabilities 14,918 (12,627)
-------- -------
Net cash provided from (used for) operations 31,813 (2,271)
Investing activities:
Acquisitions of businesses, net of cash
acquired -- (3,912)
Additions to property, plant, and
equipment (4,613) (4,136)
Proceeds from sale of property,
plant, and equipment 333 2,079
Increase in other long-term assets (114) (1,111)
------- -------
Net cash used for investing activities (4,394) (7,080)
Net cash provided from (used for) discontinued
operations (1,079) 4,667
Financing activities:
Net repayments of long-term debt (15,411) --
Purchase of common stock and common stock warrants (6,750) --
Purchase of treasury stock and proceeds
from exercise of stock options, net 108 (3,274)
Dividends paid (3,178) (3,319)
------- -------
Net cash used for financing activities (25,231) (6,593)
------- -------
Increase (decrease) in cash and cash equivalents 1,109 (11,277)
Cash and cash equivalents at beginning of period 127 29,716
------- -------
Cash and cash equivalents at end of period $ 1,236 $18,439
======= =======
Supplementary disclosures:
Cash paid for interest $ 9,815 $ 189
Cash paid for income taxes 2,986 3,095
The accompanying notes are an integral part of these condensed
consolidated financial statements.
<PAGE>
OSHKOSH TRUCK CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The condensed consolidated financial statements included herein have been
prepared by Oshkosh Truck Corporation (the company) without audit.
However, the foregoing statements contain all adjustments (consisting only
of normal recurring adjustments) which are, in the opinion of company
management, necessary to present fairly the condensed consolidated
financial statements. Certain reclassifications have been made to the
1996 condensed consolidated financial statements to conform to the 1997
presentation.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the rules
and regulations of the Securities and Exchange Commission. It is
suggested that these consolidated financial statements be read in
conjunction with the consolidated financial statements and notes thereto
included in the company's 1996 annual report to shareholders.
2. EARNINGS (LOSS) PER COMMON SHARE
Earnings (loss) per common share is computed by dividing net income (loss)
by the weighted average number of shares outstanding. The average number
of shares outstanding was 8,415,102 and 8,839,727, respectively, for the
three month periods and 8,568,496 and 8,881,711, respectively, for the
nine month periods ended June 30, 1997 and June 29, 1996. Stock options,
warrants and stock issuable under incentive compensation awards were not
dilutive in any of the periods presented.
3. INVENTORIES
Inventories consist of the following:
June 30, Sept. 30,
1997 1996
(In thousands)
Finished products $ 10,982 $ 15,208
Partially finished products 41,412 51,533
Raw materials 56,825 47,580
---------- --------
Inventories at FIFO cost 109,219 114,321
Less:
Progress payments on U.S.
Government contracts (228) --
Excess of FIFO cost over
LIFO cost (8,935) (8,032)
---------- ---------
$100,056 $106,289
========== =========
Title to all inventories related to government contracts which provide for
progress payments vests in the government to the extent of unliquidated
progress payments.
4. LONG-TERM DEBT
At June 30, 1997, $7.5 million of borrowings and $4.5 million of letters
of credit reduced available capacity under the company's revolving credit
facility to $38.0 million.
5. STOCK BUY BACK
In July 1995, the company's board of directors authorized the repurchase
of up to 1,000,000 shares of Class B common stock. There were no stock
repurchases under this program during the nine months ended June 30, 1997.
As of June 30, 1997 and July 31, 1997, the company has repurchased 461,535
shares under this program at a total cost of $6.6 million. The repurchase
of 350,000 shares of Class B common stock from Freightliner Corporation
(Freightliner) on May 2, 1997 (see Note 7) does not impact the number of
shares available for repurchase under this program.
6. CONTINGENCIES
The company is engaged in litigation against Super Steel Products Corp.
(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 approximately
$4.5 million. 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. Both SSPC and the company have appealed the state court
judge's decision. The Wisconsin Court of Appeals has agreed to hear the
case and both the company and SSPC have filed briefs in this matter.
The company and Pierce Manufacturing Inc. (Pierce), a wholly-owned
subsidiary of the company, are contingently liable under bid and
performance bonds totaling approximately $117 million at June 30, 1997.
7. FREIGHTLINER ALLIANCE
On May 2, 1997, the company and Freightliner formally terminated the
Strategic Alliance formed on June 2, 1995. The company repurchased from
Freightliner 350,000 shares of its Class B common stock and 1,250,000
warrants for the purchase of additional shares of Class B common stock for
the total sum of $6.8 million. The company and Freightliner will continue
to supply each other with parts and components.
Results of Operations
Third Quarter 1997 Compared to 1996
Oshkosh Truck Corporation (the company) reported net income of $2.8
million, or $0.33 per share, on sales of $176.6 million for the third
quarter of fiscal 1997, compared to a net loss of $4.6 million, or $0.52
per share, on sales of $112.0 million for the third quarter of fiscal
1996. The fiscal 1996 results were adversely affected by after-tax
charges of $6.1 million principally related to the write-off of its then
remaining investments in Mexico and production delays associated with a
defense subcontract to Steeltech Manufacturing, Inc. (Steeltech).
Sales of both commercial and defense products increased in the third
quarter of fiscal 1997 compared to the third quarter of fiscal 1996.
Commercial sales in the third quarter of fiscal 1997 increased $51.7
million or 104.0% from the third quarter of fiscal 1996 to $101.4 million
principally due to sales of fire trucks and other fire apparatus as a
result of the acquisition of Pierce Manufacturing Inc. (Pierce) on
September 18, 1996. Sales of construction, airport rescue and fire
fighting (ARFF), snow removal and refuse vehicles and commercial van
trailers decreased slightly during the third quarter. Sales of defense
products totaled $75.2 million in the third quarter of fiscal 1997, an
increase of $12.9 million or 20.7% as compared to the third quarter of
fiscal 1996. The increase in defense sales principally resulted from the
sale of ISO-Compatible Palletized Flatracks (IPF) which are being produced
by Steeltech.
Gross income in the third quarter of fiscal 1997 totaled $21.9 million or
12.4% of sales compared to $7.6 million or 6.8% of sales in the third
quarter of fiscal 1996. The increase in gross income in the third quarter
of fiscal 1997 was principally due to increased sales volumes as a result
of the acquisition of Pierce. Also, charges of $3.1 million resulting
from production delays associated with a defense subcontract to Steeltech
reduced gross income for the third quarter of fiscal 1996.
Operating expenses totaled $15.1 million or 8.5% of sales in the third
quarter of fiscal 1997 compared to $11.5 million or 10.2% of sales in the
third quarter of fiscal 1996. The increase in operating expenses in the
third quarter of fiscal 1997 relates principally to the operating expenses
of Pierce and amortization of goodwill and other intangibles associated
with the acquisition of Pierce. Also, operating expenses for the third
quarter of fiscal 1996 include charges of $3.2 million associated with the
write-off of the company's then remaining investments in Mexico and
Steeltech.
Interest expense increased to $2.8 million in the third quarter of fiscal
1997 compared to $0.1 million in the third quarter of fiscal 1996 as a
result of the financing for the Pierce acquisition. Interest expense for
the third quarter of fiscal 1997 was also impacted by the reversal of
accrued interest related to prior years' provisions for income taxes.
The effective income tax rate for combined federal and state income taxes
for the third quarter of fiscal 1997 was 31.7% compared to 34.9% for the
third quarter of fiscal 1996. The effective income tax rate for the third
quarter of fiscal 1997 was impacted by the reversal of $0.5 million of
prior years' provision for income taxes and non-deductible goodwill of
$0.6 million.
The $2.2 million after-tax loss from discontinued operations in the third
quarter of fiscal 1996 resulted from the write-off of receivables of $2.6
million (pre-tax) related to the company's former Mexican bus chassis
business and from $1.0 million of pre-tax charges for additional warranty
and other product related liabilities with respect to the company's former
U.S. chassis business, both of which were sold in June 1995.
First Nine Months 1997 Compared to 1996
The company reported net income of $6.9 million, or $0.80 per share, on
sales of $497.4 million for the first nine months of fiscal 1997, compared
to a net loss of $0.8 million, or $0.09 per share, on sales of $295.5
million for the first nine months of fiscal 1996. The fiscal 1996 results
were adversely affected by after-tax charges of $6.1 million associated
with the company's investments in Mexican bus affiliates and a subcontract
to Steeltech.
Sales of both commercial and defense products increased in the first nine
months of fiscal 1997 compared to the first nine months of fiscal 1996.
Commercial sales in the first nine months of fiscal 1997 increased $172.3
million or 144.4% from the first nine months of fiscal 1996 to $291.6
million principally due to sales of fire trucks and other fire apparatus
as a result of the acquisition of Pierce. Sales of defense products
totaled $205.8 million in the first nine months of fiscal 1997, an
increase of $29.6 million or 16.8% as compared to the first nine months of
fiscal 1996. The increase in defense sales principally resulted from the
sale of IPFs to the U.S. Government.
Gross income in the first nine months of fiscal 1997 totaled $64.3 million
or 12.9% of sales compared to $30.8 million or 10.4% of sales in the first
nine months of fiscal 1996. The increase in gross income in the first
nine months of fiscal 1997 was principally due to increased sales volumes
as a result of the acquisition of Pierce. Charges of $3.1 million related
to a subcontract to Steeltech also adversely affected fiscal 1996 results.
Operating expenses totaled $43.7 million or 8.8% of sales in the first
nine months of fiscal 1997 compared to $29.2 million or 9.9% of sales in
the first nine months of fiscal 1996. The increase in operating expenses
in the first nine months of fiscal 1997 relates principally to the
operating expenses of Pierce and amortization of goodwill and other
intangible assets associated with the acquisition of Pierce. The 1996
operating expenses included charges of $3.2 million associated with the
company's investments in Mexican bus affiliates and Steeltech.
Interest expense increased to $9.6 million in the first nine months of
fiscal 1997 compared to $0.2 million in the first nine months of fiscal
1996 as a result of the financing for the Pierce acquisition.
The effective income tax rate for combined federal and state income taxes
for the first nine months of fiscal 1997 was 40.0% compared to 39.0% for
the first nine months of fiscal 1996. The effective income tax rate for
the first nine months of fiscal 1997 was adversely affected by non-
deductible goodwill of $1.9 million offset by a reversal of $0.5 million
of prior years' provision for income taxes.
The $2.2 million after-tax loss from discontinued operations in the first
nine months of fiscal 1996 resulted from the additional charges related to
the company's former U.S. and Mexican chassis businesses which were sold
in June 1995.
Financial Condition
First Nine Months 1997
During the first nine months of fiscal 1997, cash increased $1.1 million.
Cash provided from operations of $31.8 million was used to fund the
repayment of long-term debt of $15.4 million, the repurchase of common
stock and warrants from Freightliner Corporation (Freightliner) of $6.8
million (see below), capital additions of $4.6 million, and dividends of
$3.2 million.
First Nine Months 1996
During the first nine months of fiscal 1996, cash decreased $11.3 million.
Cash was required for operations of $2.3 million, for the acquisition of
Friesz Manufacturing Company of $3.9 million, for capital additions of
$4.1 million, for stock repurchases of $3.3 million and for dividends of
$3.3 million. Discontinued operations and proceeds from the sale of
property, plant and equipment provided cash of $4.7 million and $2.1
million, respectively, for the first nine months of fiscal 1996.
Liquidity and Capital Resources
The company's principal uses of cash for the next several years will be
interest and principal payments on long-term debt, capital expenditures
and potential acquisitions.
At June 30, 1997, $7.5 million of borrowings and $4.5 million of letters
of credit reduced available capacity under the company's revolving credit
facility to $38.0 million.
The company believes its internally generated cash flow, supplemented by
progress payments when applicable, and borrowings available under the
existing bank credit agreement will be adequate to meet working capital
and other operating and capital requirements of the company in the
foreseeable future.
Backlog
The company's backlog as of June 30, 1997 was $401 million, compared to
$301 million at June 29, 1996. The backlog at June 30, 1997 includes $228
million with respect to U.S. Government contracts, $133 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 Buy Back
In July 1995, the company's board of directors authorized the repurchase
of up to 1,000,000 shares of Class B common stock. There were no stock
repurchases under this program in the first nine months of fiscal 1997.
As of June 30, 1997 and July 31, 1997, the company has repurchased 461,535
shares under this program at a total cost of $6.6 million. The repurchase
of 350,000 shares of Class B common stock from Freightliner on May 2, 1997
(see below) does not impact the number of shares available for repurchase
under this program.
Freightliner Alliance
On May 2, 1997, the company and Freightliner formally terminated the
Strategic Alliance formed on June 2, 1995. The company repurchased from
Freightliner 350,000 shares of Class B common stock and 1,250,000 warrants
for the purchase of additional shares of Class B common stock for the
total sum of $6.8 million. The company and Freightliner will continue to
supply each other with parts and components.
New Accounting Standard
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings Per Share, which is required to be adopted
effective for both interim and annual financial statements for periods
ending after December 15, 1997. Among other provisions, the dilutive
effect of stock options must be excluded under the new requirements for
calculating basic earnings per share, which will replace primary earnings
per share. This change is not expected to materially impact the company's
fully diluted earnings per share calculations.
<PAGE>
OSHKOSH TRUCK CORPORATION
PART II. OTHER INFORMATION
FORM 10-Q
June 30, 1997
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 10 - Agreement to Terminate Strategic Alliance between
Oshkosh Truck Corporation and Freightliner Corporation
Dated May 2, 1997.
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
The company was not required to file a report on Form 8-K during the
quarter ended June 30, 1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and 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
DATE: August 12, 1997 /s/ R. Eugene Goodson
R. Eugene Goodson
Chairman and Chief
Executive Officer
(Principal Executive Officer)
DATE: August 12, 1997 /s/ Charles L. Szews
Charles L. Szews
Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
10 Agreement to Terminate Strategic Alliance Between Oshkosh
Truck Corporation and Freightliner Corporation Dated May 2,
1997.
27 Financial Data Schedule
AGREEMENT TO TERMINATE STRATEGIC ALLIANCE
I. The Parties
The Parties to this Agreement are:
1.01 Freightliner Corporation, a Delaware corporation located at Portland,
Oregon ("Freightliner").
1.02 Oshkosh Truck Corporation, a Wisconsin corporation located at
Oshkosh, Wisconsin ("Oshkosh").
II. The Recitals
2.01 The Date of this Agreement is April 10, 1997.
2.02 The Parties entered into a Strategic Alliance Agreement on June 5,
1995, pursuant to the terms of which Freightliner purchased 350,000
shares of unregistered Class B Common Stock of Oshkosh and 1,250,000
Warrants for the purchase of that number of unregistered Class B
Common Shares of Oshkosh, and each Party entered into certain
performance covenants.
2.03 Pursuant to the Strategic Alliance Agreement the Parties also entered
into a Distribution Agreement on December 13, 1995, pursuant to the
terms of which each Party entered into certain performance
covenants.
2.04 The Parties now wish to terminate the Strategic Alliance Agreement
and the Distribution Agreement, and release each other from their
respective performance covenants under those Agreements and other
liabilities with respect thereto, as set forth below.
III. The Agreement
Therefore, the Parties agree as follows:
3.01 The Recitals. The Recitals are a part of this Agreement.
3.02 Termination of Alliance. Effective upon completion of the payments
and deliveries described below, the Strategic Alliance Agreement
dated June 5, 1995, shall be terminated in all respects.
3.03 Purchase and Sale of Shares and Warrants. On June 9, 1997, or such
earlier date as Oshkosh may designate in writing, Oshkosh shall
purchase, and Freightliner shall sell all of its 350,000 shares of
Class B Common Stock and its 1,250,000 Warrants for the purchase of
that number of Class B Common Stock of Oshkosh, for the aggregate sum
of $6,750,000.00.
3.031 Freightliner shall deliver to Oshkosh its stock certificate
evidencing the 350,000 shares of Class B Common Stock of
Oshkosh which were purchased from Oshkosh on June 5, 1995,
duly endorsed to the order of Oshkosh, together with its
Warrant certificate evidencing the Warrants to purchase
1,250,000 Warrant Shares of Class B Common Stock of Oshkosh
which were purchased from Oshkosh on June 5, 1995, duly
endorsed to the order of Oshkosh.
3.032 Oshkosh shall deliver to Freightliner a wire transfer of
immediately available funds in the amount of $6,750,000.00
to any Bank in the United States designated in writing by
Freightliner with accompanying wiring instructions at least
two business days prior to the scheduled closing date.
3.033 The Parties each shall deliver such other agreements and
payments as are described below in this Agreement.
3.04 Settlement of Accounts. Except as set forth in this Section 3.04,
accounts relating to, or arising out of the normal course of business
between the Parties shall be settled in the normal course of
business. Amounts which either Party has claimed, or could have
claimed from the other arising out of disagreements about
contribution sharing or costs reimbursements under the Distribution
Agreement, or arising out of the transfer to Oshkosh and subsequent
return to Freightliner of the manufacture and assembly of the M-915
family of vehicles, shall be settled in full by the payment of the
sum of $180,000.00 by Freightliner to Oshkosh. This sum shall be
offset against the sum payable to Freightliner by Oshkosh under Sec.
3.03, above.
3.05 Sales of FLD Cabs. Freightliner will sell to Oshkosh its FLD cab
requirements in accordance with the Cab Purchase Agreement attached
as Exhibit "B" and incorporated here by reference. Customers of
Oshkosh who purchase trucks incorporating FLD cabs shall obtain
aftermarket service and support for such cabs through authorized
Freightliner dealers.
3.06 Sales of Front Drive Axles and Transfer Cases. Oshkosh will sell to
Freightliner front drive axles and transfer cases for the
Freightliner M-915 family of vehicles in volumes, and upon prices and
other terms and conditions that the Parties may agree upon from time
to time.
3.07 Termination of Distribution Agreement. The Distribution Agreement
between the Parties, dated December 13, 1995, is rescinded as of the
Date of this Agreement, except that the obligations of
confidentiality, indemnity, warranty, and for continuing support of
Oshkosh products sold under that Agreement shall survive, including
the termination of this Agreement.
3.08 Mutual Release. Each Party, for itself, its successors and assigns,
hereby releases the other Party and any other person, firm or
corporation charged with responsibility or liability, their
successors, assigns, heirs and legal representatives, from any and
all claims, demands, damages, costs, expenses, loss of services or
profits, actions and causes of action arising out of the Strategic
Alliance Agreement, the Distribution Agreement, and activities of
each Party under the said Agreements, except as provided above in
this Agreement.
Executed by the Parties on the Date of this Agreement.
OSHKOSH TRUCK CORPORATION FREIGHTLINER CORPORATION
By: /s/ R. Eugene Goodson By: /s/ James L. Hebe
R. Eugene Goodson James L. Hebe
Its: Chairman and Chief Executive Its: President and Chief
Officer Executive Officer
<PAGE>
EXHIBIT A
INTEROFFICE CORRESPONDENCE
TO: Tim Dempsey 4/23/97
FROM: Bruce Herrmann
SUBJECT: Freightliner Parts
Following is a revision of the 9/17/96 letter showing Oshkosh part
numbers, descriptions and prices.
Freightliner Parts:
Cabs:
2218460 - Cab
2230530 & 2282130 & 2286800 - Cab spec, L10
2281850 - Cab
15-14555 010 Plate, cab mount - 2218580 - 1.36
A16-13606-000 - Valve cab leveling - 2218610 - 38.68
17-10425-002 - Pivot, hood hinge - 2218740 - 3.16
22-29646-003 - Bracket, mirror brace - 2231990 - 1.12
07-10367-000 - Retainer, shift lever boot - 2232010 - 2.35
03-21750-000 - Plate, air cleaner mounting - 2233120 - 21.37
*Supplier Parts - Freightliner Tooling:
STNOZX0615 - Behr
HUN68d885 - Buckhorn - Shift lever boot - 2232000 - 6.42
DNPVH001906 - Donaldson - Pre-cleaner - 2233090 - 155.06
EBA-11-2080 - Donaldson - Air cleaner - 2233070 - 124.80
GYRIS5-040 - Goodyear - Air bag for cab mount - 2218600 - 10.50
GYR566209131 - Goodyear - Air bag for cab mount - 2232220
17-12178-000 - Specialty Stamping - Classic hood bezel - 2270630 -
121.92
22-23512-000 - Griffith Rubber
A06-23321-000 - Delphi Packard - Engine harness
681-890-00-01 - Clevite - Cab mounting isolator - 2218570 - 3.89
18-29846-000 - Arvin - Cab mount shock absorber - 9.81
A15-13788-000 - Clevite - Cab mount tie rod - 2218660 - 13.27
681-810-0106 - Grote - Mirror head - 2219560 - 7.39
18-10960-020 - Con met - Grab handle brkt - 2219860 - 2.53
LOR/J17700-5 - Lord - Hood support - 2229360 - 2.01
22-21853-001 - Grote - Mirror - 2231970 - 2.50
22-21853-002 - Grote - Mirror - 2231980 - 4.79
681-891-00-01 - Clevite - Cab Mount - 2232200 - 1.76
A03-21474 - Custom Aluminum - Air intake duct - 2233100 - 55.60
22-38052-000 - Custom Aluminum/Elixir - Intake duct - 2233110 - 16.79
18-10960-021 - Con Met - Grab handle brkt - 2233350 - 2.53
18-28171-537 - Anodizing - Grab handle
18-15887-000 - Boyd Rubber - Grab handle gasket - 2233370 - .04
680-501-08-01 - Garrett/Allied - Charge air cooler - 2259200 - 351.00
05-16397-001 - Behr - Radiator - 2259210 - 399.19
2270390 - Betts - Spring, torsion - 3.09
2270400 - Betts - Spring, torsion - 2.75
* Vendor prices shown are current prices. Oshkosh will negotiate
future prices directly with vendors.
<PAGE>
EXHIBIT B
CAB REQUIREMENTS AGREEMENT
BETWEEN FREIGHTLINER CORPORATION
AND
OSHKOSH TRUCK CORPORATION
I. The Parties
The Parties to this Agreement are:
1.01 Freightliner Corporation, a Delaware corporation having its principal
place of business at 4747 North Channel Avenue, Portland, Oregon
97208 ("Freightliner").
1.02 Oshkosh Truck Corporation, a Wisconsin corporation located at 2307
Oregon Street, Oshkosh, WI 54901 ("Oshkosh").
II. The Recitals
2.01 The Date of this Agreement is April 10, 1997.
2.02 Freightliner manufactures and sells vocational and other vehicles and
components and parts under the trade name of Freightliner, and
2.03 Oshkosh manufactures and sells heavy duty on/off highway trucks and
rear discharge concrete mixer systems for a wide variety of
applications under the trade name of Oshkosh.
2.04 Freightliner and Oshkosh entered into a Strategic Alliance Agreement
on June 5, 1995.
2.05 On the same Date of this Agreement the parties also entered into an
Agreement to Terminate Strategic Alliance.
III. The Agreement
3.01 The Recitals are a part of this Agreement.
3.02 Freightliner shall manufacture and sell to Oshkosh, and Oshkosh shall
purchase from Freightliner up to one hundred fifty (150) Freightliner
FLD truck cabs ("Cabs") per year during the term of this Agreement,
for installation on Oshkosh "FF" vehicles only. None of the Cabs may
be installed on or used with any Pierce products or models or re-sold
to any third party. Aftermarket parts for such Cabs shall be
available from and purchased through Freightliner dealers.
3.03 The prices of "FF" cab componentry which are presently available are
set forth on Attachment "A," attached to this Agreement and
incorporated herein by reference. These prices shall apply with
respect to any and all standard configuration products ordered by
Oshkosh from Freightliner for delivery through the end of the 1997
model year. Thereafter, such prices may be adjusted reasonably from
time to time by Freightliner subject, however, to the following:
3.031. A price shall not be increased except upon at least ninety
(90) days' prior written notice from Freightliner to
Oshkosh of the increase, including the anticipated amount
thereof;
3.032. A price increase shall not be retroactive in effect, and
under no circumstances shall any price increase be allowed
with respect to any accepted order; and
3.033. A price shall be adjusted only one (1) time per calendar
year, beginning with the 1998 model year.
3.04 Freightliner shall give purchase orders of Oshkosh under Sections
3.02, above, the highest priority for completion of manufacture and
delivery. Freightliner promptly shall notify Oshkosh at any time
that it determines that it is reasonably probable that an Oshkosh
delivery date cannot be met. Such notice also shall indicate the
date(s) on which such delivery(s) will be met, so that Oshkosh can
determine whether such delay is acceptable.
3.05 Periodically, Oshkosh may issue a blanket purchase order for FF cab
componentry required by Oshkosh for the period designated in such
order. All such blanket purchase orders shall be subject to the
terms and conditions of this Agreement and, unless the Parties
otherwise agree in writing, to the standard terms and conditions of
sale used generally from time to time by Freightliner for sale to
third parties, but in the event of any conflict between (A) the terms
and conditions of this Agreement (or other terms agreed upon in
writing by the Parties) and (B) said standard terms and conditions,
the terms and conditions referred to in this Agreement shall control.
Freightliner shall receive and process each blanket purchase order in
a timely manner and shall notify Oshkosh promptly of its order
acceptance(s).
3.06 Pursuant to blanket purchase orders issued by Oshkosh under Paragraph
3.08, Oshkosh shall issue individual releases against such orders for
shipments of Freightliner products as specified in each release.
Freightliner shall make timely shipments under all individual
releases.
3.07 Payment terms shall be net thirty (30) days after delivery. Delivery
shall be F.O.B. Portland.
3.08 Warranty
3.081. Freightliner warrants to Oshkosh that each Cab component
supplied under this Agreement (i) shall be new; (ii) shall
meet Freightliner's specifications, drawings and/or other
descriptive materials pertaining to it; (iii) shall conform
to applicable federal, state and/or local statutes, laws,
rules, regulations, codes and ordinances; (iv) shall be
free from liens and encumbrances; and (v) shall not
infringe any patent, trade secret or other proprietary
right of any third party.
3.082. In addition to the warranties set forth in Subparagraph
3.111, each Freightliner cab component supplied under this
Agreement shall be warranted by Freightliner as more
particularly set forth on Attachment "B" attached hereto
and incorporated herein (the "Freightliner Limited
Warranty"). Freightliner may at any time or from time to
time amend the Freightliner Limited Warranty, but no such
amendment shall be effective except upon ninety (90) days'
prior written notice from Freightliner to Oshkosh of such
amendment and of Freightliner's intention to make the same,
and no such amendment shall be retroactive in effect or,
under any circumstances, applicable to any accepted offer.
A claim for breach of the Freightliner Limited Warranty
shall be handled in accordance with the Freightliner
Limited Warranty.
3.083. Freightliner shall not be liable for incidental or
consequential damages, including lost profits or production
downtime, incurred by Oshkosh as a result of a breach of
the warranties set forth in this Paragraph 3.11. Said
warranties shall be the sole and exclusive warranties and
are in lieu of all other warranties, express or implied,
and exclude the warranties of merchantability and fitness
for a particular purpose.
3.09 Oshkosh shall provide all engineering, including application
engineering, necessary for the proper and safe installation of the
Cab components and parts in its vocational trucks. Freightliner
shall provide all necessary product labeling with each Cab together
with Operator, Service, and Parts Manuals ("Operator Materials") for
each installation. Freightliner's recommended product labeling shall
include but not be limited to, warning labels to be affixed to the
vehicle and system in accordance with Freightliner's customary
procedures.
3.10 Except as provided below, this Agreement shall have an initial term
which begins on the date of this Agreement and ends on December 31,
2000.
3.101. Freightliner may terminate this Agreement upon one hundred
eighty (180) days' prior written notice to Oshkosh, in the
event that Freightliner substantially replaces and
discontinues production of its FLD cabs. Oshkosh may
terminate this Agreement upon ninety (90) days' prior
written notice of Freightliner.
3.102. A Party may terminate this Agreement immediately upon
written notice to the other Party if said other Party
ceases to do business or is declared by a court having
jurisdiction to be insolvent or bankrupt, or makes an
assignment or other arrangement for the benefit of
creditors, or sells, assigns or transfers all or
substantially all of its assets to another party outside of
the ordinary course of business.
3.103. Notwithstanding any provision of this Agreement to the
contrary, neither the expiration of the term nor the
termination or non-renewal of this Agreement shall affect
any of a Party's rights or obligations arising under this
Agreement prior to the effective date of the expiration of
the term or the termination or non-renewal of this
Agreement with respect to products sold and delivered at or
prior to the time of such expiration of the term or the
termination or non-renewal of this Agreement. This
Agreement shall continue to apply with respect to any
purchase order submitted by Oshkosh to Freightliner under
this Agreement prior to the effective date of the
expiration of the term or the termination or non-renewal of
this Agreement.
3.104. Neither Party shall be liable to the other by reason of
termination, non-renewal or breach of this Agreement for
compensation, reimbursement or damages for: (i) loss of
present or prospective profits on sales or anticipated
sales; (ii) consequential, special, or incidental damages
or production downtime; (iii) goodwill or loss thereof; or
(iv) expenditures, investment or any other type of
commitment, financial or otherwise, made in connection with
the business of such Party or in reliance upon the
existence of this Agreement.
3.11 Oshkosh may not use or advertise the name "Freightliner/TM/," in
connection with its marketing and sale of its "FF" vehicles
incorporating Freightliner products. Oshkosh shall not publicly use
or advertise the Freightliner/TM/ trademark without the prior written
approval of Freightliner.
3.12 General Provisions
3.121. Freightliner shall, at Freightliner's expense, furnish
Oshkosh with all information necessary to enable Oshkosh
to support aftermarket service of installed Freightliner
cab components and parts.
3.122. All notices under this Agreement shall be in writing and
shall be delivered personally or sent by certified mail,
return receipt requested, postage prepaid, by telex
(acknowledged by answer back), or by telecopy of telefax
(confirmed by certified mail, return receipt requested,
postage prepaid) addressed to the Parties at the addresses
immediately below, or to such other address of which either
Party may advise the other by notice under this
Subparagraph 3.132. Notices will be deemed given when
personally delivered or sent as specified above.
Freightliner Corporation Oshkosh Truck Corporation
4747 North Channel Avenue 2307 Oregon Street
P.O. Box 3849 P.O. Box 2566
Portland, OR 97208-3849 Oshkosh, WI 54903-2566
Fax No. Fax No. 414-233-9669
Atten: Atten: Vice President & General
Counsel
3.123. Any claim or dispute arising under or out of this Agreement
shall first be presented to the other Party in a concise
written statement of the claim or dispute, accompanied by
supporting facts or data and by a designation of a
reasonable time period [but not more than thirty (30) days]
for resolution. If the matter has not been resolved within
the designated time period, the matter shall be referred to
the CEO of each of the Parties for resolution. If the CEOs
are unable to agree upon a resolution within fourteen (14)
days after the matter is referred to them, then this issue
is at impasse and either party may pursue any remedy
legally available to them. Neither Party shall initiate
arbitration proceedings or litigation without first (i)
following the procedure described above and (ii) giving the
other Party at least ten (10) days' prior written notice of
its intention to do so.
3.124. Any headings used herein are for convenience and reference
only and are not part of this Agreement, nor shall they in
any way affect the interpretation hereof.
3.125. Any action or the breach of this Agreement, except for
actions for any breach of warranty, shall be brought within
three (3) years from the date of the accrual of the cause
of action. The construction and interpretation of this
Agreement shall be governed by the laws of the State of
Oregon.
3.126. Each Party shall use its best efforts and act in good faith
in carrying out this Agreement.
3.127. This Agreement shall be amended only in writing signed by
the Parties to this Agreement.
3.128. Neither Party shall, voluntarily or involuntarily, by
operation of law or otherwise, assign or otherwise transfer
this Agreement, in whole or in part, without the prior,
express written consent of the other Party, which consent
shall not be unreasonably withheld.
3.129. This Agreement contains the entire understanding and
agreement of the Parties with respect to the subject matter
of this Agreement, and this Agreement shall supersede all
prior communications, representations, understandings,
promises or agreements between the Parties, whether verbal
or written, with respect to the subject matter of this
Agreement.
3.1210. This Agreement shall bind and benefit the Parties and their
respective legal representatives, successors and permitted
assigns.
3.1211. The warranties and representations made by a Party in this
Agreement shall survive the execution and delivery of this
Agreement.
3.13 Indemnification
3.131 Freightliner shall, upon Oshkosh's written request, defend,
indemnify, and hold Oshkosh harmless of and from any claim,
demand, suit, damage, liability, cost or expense, including
attorney fees and expenses, final judgments and
settlements, that may be asserted, commenced or arise
against Oshkosh by reason of alleged breach of warranty,
defects in material, design (except Oshkosh designs and
parts), assembly, or manufacture of Products sold by
Freightliner to Oshkosh under this Agreement. Freightliner
shall not be required to indemnify Oshkosh if the basis of
the liability asserted would have been precluded by the
inclusion of the Freightliner warranty in the contract with
the end user, in the event Oshkosh has any liability for
incidental or consequential damages arising out of the sale
of Products in the event Oshkosh has assumed liability
independent of the Freightliner warranty.
3.132. Oshkosh shall indemnify, defend and hold Freightliner
harmless from and against any and all claims or actions by
third parties, damages, losses, costs and expenses
(including, without limitation, reasonable attorneys' fees
and other legal costs and expenses) for injury to or death
of any person or persons or damage to or destruction of any
property to the extent that such personal injury, death or
property damage is caused by (i) any negligent act or
omission of Oshkosh or Oshkosh's employees or agents, (ii)
any alteration made by Oshkosh or Oshkosh employees or
agents to Operator Materials, or to Freightliner's
recommended product labeling, without Freightliner's prior
consent or concurrence, or (iii) any allegations relating
to Oshkosh designs.
Freightliner shall promptly notify Oshkosh of any claim or
action for which indemnification will be sought by Freightliner
under this Subparagraph 3.162, and Oshkosh shall have the right,
at its expense, to assume the defense or the settlement thereof
using counsel reasonably acceptable to Freightliner , provided,
however, that Freightliner shall have the right to participate,
at its own expense, with respect to any such claim, action or
proceeding, and no such claim, action or proceeding shall be
settled without the prior written consent of Freightliner, which
consent shall not be unreasonably withhold, and in connection
with any such claim, action or proceeding, the Parties shall
cooperate with each other and provide each other with access to
relevant books and records in each Party's possession or
control.
3.14 Proprietary and Confidential Information
3.141 Proprietary Information. Oshkosh and Freightliner will use
their best efforts to keep confidential any proprietary or
secret information developed by the other party. This
obligation shall not apply to information received by
either party which : (a) is or becomes publicly known
through no fault of the recipient party; (b) is already
known to the best efforts to keep confidential any
proprietary or secret information recipient party at the
time of disclosure; (c) has been rightfully received by the
recipient party from a third party; (d) is independently
developed by the recipient party; (e) is disclosed to a
court or government agency pursuant to a subpoena or
administrative order; or (f) is expressly released in
writing by the other party.
3.142 Confidential and Third Parties. The parties' obligations
under this Paragraph 7 are not violated by dealings with
consultant, suppliers, or authorized dealers. However, in
such dealings each party will undertake to maintain the
proprietary nature of proprietary or secret information via
confidential agreements or other appropriate measures.
3.173. The covenants set forth in this Paragraph 3.14 shall
survive termination or expiration of this Agreement for any
reason, for a period of five (5) years, and shall bind the
parties, their successors and assigns.
3.15 Oshkosh agrees further that it shall not disassemble, decompile or
otherwise reverse engineer, directly or indirectly, any or all of the
proprietary parts or of Freightliner, except that Oshkosh may, with
prior authorization from Freightliner (which authorization shall not
be unreasonably withheld), disassemble any proprietary part of
Freightliner incident to the manufacture of any Oshkosh FF truck
incorporating a Freightliner cab components or parts under this
Agreement.
3.16 Force Majeure
3.161 Neither Party shall be liable to the other for any delay in
or impairment of performance under this Agreement which
results in whole or in part from: fire, floods or other
catastrophes; strikes, lockouts or labor disruption; acts
of God; wars, riots or embargo delays; government
allocations or priorities; shortages of transportation,
fuel, labor or materials; inability to procure supplies or
raw materials; severe weather conditions; or any other
circumstances or cause beyond the control of such Party in
the reasonable conduct of its business.
Executed by the Parties on the Date of this Agreement.
FREIGHTLINER CORPORATION OSHKOSH TRUCK CORPORATION
By /s/ James L. Hebe By /s/ R. Eugene Goodson
James L. Hebe R. Eugene Goodson
Name/Title: President and Chief Name/Title: Chairman and Chief
Executive Officer Executive Officer
Date: May 2, 1997 Date: April 24, 1997
<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 NINE MONTHS ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMETNS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,236
<SECURITIES> 0
<RECEIVABLES> 67,667
<ALLOWANCES> 1,236
<INVENTORY> 100,056
<CURRENT-ASSETS> 182,265
<PP&E> 128,884
<DEPRECIATION> 72,896
<TOTAL-ASSETS> 410,160
<CURRENT-LIABILITIES> 111,904
<BONDS> 142,471
93
0
<COMMON> 0
<OTHER-SE> 118,622
<TOTAL-LIABILITY-AND-EQUITY> 410,160
<SALES> 497,381
<TOTAL-REVENUES> 497,381
<CGS> 433,033
<TOTAL-COSTS> 433,033
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 220
<INTEREST-EXPENSE> 9,571
<INCOME-PRETAX> 11,476
<INCOME-TAX> 4,586
<INCOME-CONTINUING> 6,890
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,890
<EPS-PRIMARY> .80
<EPS-DILUTED> .80
</TABLE>
