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, 1998
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 or 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, 1998: 298,823
Common Stock Outstanding as of July 31, 1998: 8,120,978
<PAGE>
OSHKOSH TRUCK CORPORATION
FORM 10-Q INDEX
FOR THE QUARTER ENDED JUNE 30, 1998
Page
PART I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Statements of Income . . . . . . 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 . . . . . . . . . . . . . . . . 22
PART II. Other Information
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . 27
Item 5. Other Information . . . . . . . . . . . . . . . . . . . 27
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . 27
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
<PAGE>
<TABLE>
PART I. ITEM 1. FINANCIAL INFORMATION
OSHKOSH TRUCK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
1998 1997 1998 1997
---- ---- ---- ----
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Net sales $ 290,104 $ 176,596 $ 659,741 $ 497,381
Cost of sales 248,033 154,699 565,435 433,033
Gross income 42,071 21,897 94,306 64,348
Operating expenses:
Selling, general and administrative 21,728 11,742 48,204 34,383
Engineering, research & development 2,313 2,211 6,656 5,957
Amortization of goodwill and other
intangibles 2,721 1,117 5,559 3,352
Total operating expenses 26,762 15,070 60,419 43,692
Income from operations 15,309 6,827 33,887 20,656
Other income (expense):
Interest expense (7,082) (2,848) (14,273) (9,571)
Interest income 10 130 544 484
Miscellaneous, net (181) (24) (344) (93)
(7,253) (2,742) (14,073) (9,180)
Income from operations before income
taxes, equity in earnings of
unconsolidated partnership and
extraordinary item 8,056 4,085 19,814 11,476
Provision for income taxes 3,639 1,293 8,378 4,586
4,417 2,792 11,436 6,890
Equity in earnings of unconsolidated
partnership, net of income taxes 583 - 760 -
-------- -------- -------- --------
Income before extraordinary item 5,000 2,792 12,196 6,890
Extraordinary charge for early
retirement of debt, net of income
tax benefit (450) - (1,185) -
-------- -------- -------- --------
Net income $ 4,550 $ 2,792 $ 11,011 $ 6,890
Earnings per share:
Before extraordinary item $ 0.59 $ 0.33 $ 1.45 $ 0.80
Extraordinary item (0.05) - (0.14) -
Net income $ 0.54 $ 0.33 $ 1.31 $ 0.80
Earnings per share assuming dilution:
Before extraordinary item $ 0.58 $ 0.33 $ 1.44 $ 0.80
Extraordinary item (0.05) - (0.14) -
Net income $ 0.53 $ 0.33 $ 1.30 $ 0.80
Cash dividends:
Class A Common Stock $ 0.10875 $ 0.10875 $ 0.32625 $ 0.32625
Common Stock $ 0.12500 $ 0.12500 $ 0.37500 $ 0.37500
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
<PAGE>
<TABLE>
OSHKOSH TRUCK CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
June 30, September 30,
1998 1997
-------- -------------
(In thousands)
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents $ 24,657 $ 23,219
Receivables, net 74,280 81,235
Inventories 135,109 76,497
Prepaid expenses and other 17,550 12,884
-------- --------
Total current assets 251,596 193,835
Other long-term assets 15,423 7,727
Investment in unconsolidated partnership 12,934 -
Property, plant and equipment 164,068 127,662
Less accumulated depreciation (78,006) (72,174)
-------- --------
Net property, plant and equipment 86,062 55,488
Goodwill and other intangible assets, net 325,626 163,344
-------- --------
Total assets $ 691,641 $ 420,394
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 61,358 $ 48,220
Floor plan notes payable 9,073 -
Customer advances 46,517 30,124
Payroll-related obligations 21,411 15,157
Other current liabilities 50,093 35,221
Current maturities of long-term debt 4,516 15,000
-------- --------
Total current liabilities 192,968 143,722
Long-term debt 294,406 120,000
Other long-term liabilities 16,818 13,320
Deferred income taxes 57,833 22,452
Shareholders' equity 129,616 120,900
-------- --------
Total liabilities and shareholders'
equity $ 691,641 $ 420,394
======== ========
</TABLE>
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, 1998
(Unaudited)
<CAPTION>
Common Paid-in Retained Treasury
Stock Capital Earnings Stock Total
------ ------- -------- ----- -----
(In thousands)
<S> <C> <C> <C> <C> <C>
Balance at September 30, 1997 $93 $13,591 $120,085 $(12,869) $120,900
Net income -- -- 11,011 -- 11,011
Cash dividends:
Class A Common Stock -- -- (121) -- (121)
Common Stock -- -- (3,025) -- (3,025)
Exercise of stock options -- 254 -- (223) 31
Issuance of stock under incentive
compensation plan -- 398 -- 422 820
--- ------ ------- -------- -------
Balance at June 30, 1998 $93 $14,243 $127,950 $ (12,670) $129,616
=== ====== ======= ======== =======
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
<TABLE>
OSHKOSH TRUCK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Nine Months Ended
June 30,
1998 1997
---- ----
(In thousands)
<S> <C> <C>
Net cash provided from operating activities $ 78,982 $ 31,813
Investing activities:
Acquisition of businesses, net of cash acquired (217,954) --
Additions to property, plant and equipment (6,270) (4,613)
Proceeds from sale of property, plant and equipment 320 333
Increase in other long-term assets (2,232) (114)
--------- --------
Net cash used for investing activities (226,136) (4,394)
Net cash used for discontinued operations (872) (1,079)
Financing activities:
Net borrowings (repayments) of long-term debt 161,069 (15,411)
Debt issuance costs (8,507) --
Purchase of Common Stock and Common Stock
warrants, and proceeds from
exercise of stock options, net 31 (6,642)
Dividends paid (3,129) (3,178)
--------- --------
Net cash provided from (used for) financing
activities 149,464 (25,231)
--------- --------
Increase in cash and cash equivalents 1,438 1,109
Cash and cash equivalents at beginning of period 23,219 127
--------- --------
Cash and cash equivalents at end of period $ 24,657 $ 1,236
========= ========
Supplementary disclosures:
Depreciation and amortization $ 12,995 $ 10,538
Cash paid for interest 7,633 9,815
Cash paid for income taxes 7,162 2,986
</TABLE>
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 AND NEW ACCOUNTING STANDARDS
------------------------------------------------------
The condensed consolidated financial statements included herein have
been prepared by Oshkosh Truck Corporation (the "Company") without
audit. However, the foregoing financial 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 reclassifica-
tions have been made to the 1997 condensed consolidated financial
statements to conform to the 1998 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. These
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the
Company's 1997 annual report to shareholders.
In June 1998, the Financial Accounting Standards Board issued Statement
No. 133, Accounting for Derivative Instruments and Hedging Activities,
which is required to be adopted in years beginning after June 15, 1999.
Because of the Company's minimal use of derivatives, management does
not anticipate that the adoption of the new Statement will have a
significant effect on earnings or the financial position of the Company.
Given the complexity of the new standard and that the impact of adoption
hinges on market values at the date of adoption, it will be extremely
difficult to estimate the impact of adoption unless adoption is imminent.
2. EARNINGS PER SHARE
---------------------
In February 1997, the Financial Accounting Standards Board issued State-
ment of Financial Accounting Standard (SFAS) No. 128, "Earnings per
Share." SFAS No. 128 replaced the calculation of primary and fully
diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share excludes
any dilutive effects of options, warrants and convertible securities.
Earnings per share amounts for all periods have been presented, and where
appropriate, restated to conform to SFAS No. 128 requirements., and
where appropriate, restated to conform to SFAS No. 128 requirements.
The following table sets forth the computation of basic and diluted
weighted average shares used in the denominator of the per share
calculations:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Denominator for basic earnings
per share 8,419,471 8,415,102 8,391,100 8,568,496
Effect of dilutive options,
warrants and incentive
compensation awards 113,201 41,257 96,972 33,241
--------- --------- --------- ---------
Denominator for dilutive
earnings per share 8,532,672 8,456,359 8,488,072 8,601,737
========= ========= ========= =========
</TABLE>
3. INVENTORIES
--------------
Inventories consist of the following:
June 30, September 30,
1998 1997
-------- -------------
(In thousands)
Finished products $ 27,244 $ 6,430
Partially finished products 53,330 36,661
Raw materials, purchased chassis,
and parts 63,336 44,455
-------- -------
Inventories at FIFO cost 143,910 87,546
Less:
Progress payments on U.S.
Government contracts -- (2,988)
Excess of FIFO cost over
LIFO cost (8,801) (8,061)
-------- -------
$ 135,109 $ 76,497
======== =======
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. ACQUISITIONS
---------------
On February 26, 1998, the Company acquired for cash all of the issued and
outstanding capital stock of McNeilus Companies, Inc. ("McNeilus") and
entered into related non-compete and ancillary agreements for a net
acquisition price of $214.4 million, including acquisition costs and net
of cash acquired. McNeilus is a leading manufacturer and marketer of
rear-discharge concrete mixers for the construction industry and refuse
truck bodies for the waste services industry in the United States.
Concurrent with the acquisition of McNeilus, the Company entered into a
senior credit facility ("Senior Credit Facility") and consummated a $100.0
million offering of 8 3/4% Senior Subordinated Notes due March 1, 2008
("Senior Subordinated Notes"). The Senior Credit Facility is comprised of
a multi-tranche term loan facility aggregating $225.0 million and a $100.0
million revolving credit facility. Proceeds from the Senior Credit
Facility and Senior Subordinated Notes were used to repay existing bank
indebtedness of the Company and to acquire McNeilus.
Also effective February 26, 1998, a subsidiary of McNeilus entered into a
general partnership (Oshkosh/McNeilus Financial Services Partnership, "the
Partnership")created for the purpose of offering lease financing to
customers of the Company. The subsidiary of McNeilus contributed existing
lease receivables and assigned related indebtedness (on a non-recourse
basis) to the Partnership. The Company accounts for its 50% investment in
the Partnership under the equity method.
The acquisition was accounted for using the purchase method of accounting,
and accordingly, the operating results of McNeilus are included in the
Company's consolidated statements of income 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 $61.0
million of the purchase price was allocated to the distribution network
and other intangible assets, including non-competition agreements. The
excess of the purchase price over the estimated fair value of net assets
acquired amounted to approximately $104.7 million and has been accounted
for as goodwill.
Pro forma unaudited condensed consolidated operating results of the
Company, assuming McNeilus had been acquired, the lease financing
partnership and the Senior Credit Facility established, the Senior
Subordinated Notes issued and existing indebtedness repaid, all as of
October 1, 1997 and 1996, are summarized below:
Nine Months Ended
June 30,
1998 1997
---- ----
(In thousands, except per
share amounts)
Net sales $ 797,935 $ 740,296
Income before extraordinary 13,752 11,356
item
Net income 12,567 11,356
Earnings per share:
Before extraordinary item 1.64 1.33
Net income 1.50 1.33
Earnings per share assuming
dilution:
Before extraordinary item 1.62 1.32
Net income 1.48 1.32
On December 19, 1997, the Company through its wholly-owned subsidiary,
Pierce Manufacturing Inc. ("Pierce"), acquired certain inventory,
machinery and equipment, and intangible assets of Nova Quintech, a
division of Nova Bus Corporation ("Nova Quintech"), from available cash
for $3.5 million. Nova Quintech was engaged in the manufacture and sale
of aerial devices for fire trucks. Approximately $1.7 million of the
purchase price has been allocated to intangible assets, principally aerial
device designs and technology. The Nova Quintech products have been
integrated into Pierce's product line and are being manufactured at Pierce.
5. LONG-TERM DEBT
-----------------
On February 26, 1998, the Company entered into the Senior Credit Facility
and issued $100.0 million of 8 3/4% Senior Subordinated Notes due March 1,
2008 to finance the acquisition of McNeilus (see Note 4) and to refinance
a previous credit facility. The Senior Credit Facility consists of a six
year $100.0 million revolving credit facility ("Revolving Credit
Facility") and three term loan facilities ("Term Loan A", "Term Loan B",
and "Term Loan C"--collectively, the "Term Loan Facility"). Term Loan A
was for $100.0 million and matures on March 31, 2004. Term Loans B and C
each were for $62.5 million and mature on March 31, 2005 and March 31,
2006, respectively.
Term Loan A requires principal payments of $5.0 million in fiscal 1998,
$11.0 million in fiscal 1999, $13.5 million in fiscal 2000, $15.0 million
in fiscal 2001, $19.5 million in fiscal 2002 and $24.0 million in fiscal
2003, with the remaining outstanding principal amount of $12.0 million due
in fiscal 2004. Term Loan B and C each require principal payments of $.2
million per quarter through March 31, 2004 (for Term Loan B) and through
March 31, 2005 (for Term Loan C). Any remaining outstanding principal
balance on Term Loans B and C are due in quarterly installments through
March 31, 2005 and March 31, 2006, respectively. From February 26, 1998
through July 31, 1998, the Company has paid from available cash $53.0
million on the Term Loan Facility. All prepayments are first applied to
the next twelve months mandatory principal payments and then on a pro rata
basis to the principal payments due over the remainder of the loans. All
mandatory principal payments have been paid through June 1999. The
outstanding balances as of July 31, 1998 on Term Loan A, Term Loan B, and
Term Loan C are $87.0 million, $42.5 million, and $42.5 million,
respectively, after the prepayments.
Interest rates on borrowings under the Revolving Credit and Term Loan
Facilities are equal to the "Base Rate" (which is equal to the higher of a
bank's reference rate and the federal funds rate plus 0.5%) or the "IBOR
Rate" (which is a bank's inter-bank offered rate for U.S. dollars in off-
shore markets) plus a margin of 0.50%, 0.50%, 1.00% and 1.25% for Base
Rate loans and a margin of 1.75%, 1.75%, 2.25%, and 2.50% for IBOR Rate
loans under the Revolving Credit Facility, Term Loan A, Term Loan B, and
Term Loan C, respectively. The margins are subject to adjustment based on
whether certain financial criteria are met.
At June 30, 1998, $10.6 million of letters of credit reduced available
capacity under the Company's Revolving Credit Facility to $89.4 million.
Substantially all the tangible and intangible assets of the Company and
its subsidiaries (including stock of subsidiaries and except for certain
McNeilus subsidiaries including Nation's Casualty Insurance, Inc.,
McNeilus Financial Services, Inc. and Oshkosh/McNeilus Financial Services,
Inc.) are pledged as collateral under the Senior Credit Facility. The
Senior Credit Facility includes customary affirmative and negative
covenants and requires mandatory prepayments to the extent of "excess cash
flows" as defined in the Senior Credit Facility.
The Senior Subordinated Notes were issued pursuant to an Indenture dated
February 26, 1998 (the "Indenture"), between the Company, the Subsidiary
Guarantors (as defined below) and Firstar Trust Company, as trustee. The
Indenture contains customary affirmative and negative covenants. In
addition to the Company, certain of the Company's subsidiaries, including
Pierce Manufacturing Inc., Summit Performance Systems, Inc., McNeilus
Companies, Inc., McNeilus Truck & Manufacturing, Inc., Iowa Contract
Fabricators, Inc., McIntire Fabricators, Inc., Kensett Fabricators, Inc.
and McNeilus Financial, Inc. (collectively, the "Subsidiary Guarantors")
fully, unconditionally, jointly and severally guarantee the Company's
obligations under the Senior Subordinated Notes.
6. COMMITMENTS AND CONTINGENCIES
--------------------------------
The Company is engaged in litigation against Super Steel Products Corp.
("SSPC"), the Company's former supplier of mixer systems for forward-
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 the contract. On
July 26, 1996, a jury returned a verdict for SSPC awarding damages
totaling $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 subject to certain time and calculation
limitations. Both SSPC and the Company have appealed the state court
judge's decision as to its aspects which are adverse to them. The
Wisconsin Court of Appeals agreed to hear the case. Both parties have
filed briefs and made oral arguments. A decision is pending.
The arbitration proceeding and separate civil litigation of certain
disputes between the Oshkosh Florida Division and O.V. Containers, Inc.
("OV") has been settled. The disputes arose out of the performance of a
contract to deliver 690 skeletal container chassis and additional issues
of, among others, warranty performance and misuse and abuse of the
chassis. As part of the settlement OV has agreed to accept the chassis
"as is" and the Company has agreed to pay OV $1.1 million.
As part of its routine business operations, the Company disposes of and
recycles or reclaims certain industrial waste materials, chemicals and
solvents at third party disposal and recycling facilities which are
licensed by appropriate governmental agencies. In some instances, these
facilities have been and may be designated by the United States
Environmental Protection Agency ("EPA") or a state environmental agency
for remediation. Under the Comprehensive Environmental Response,
Compensation, and Liability Act ("CERCLA") and similar state laws, each
potentially responsible party ("PRP") that contributed hazardous
substances may be jointly and severally liable for the costs associated
with cleaning up the site. Typically, PRPs negotiate a resolution with
the EPA and/or the state environmental agencies. PRPs also negotiate with
each other regarding allocation of the cleanup cost.
At the Seaboard Chemical site located in Jamestown, North Carolina, Pierce
is one of 414 PRPs participating in the costs of addressing the site and
has been assigned an allocation share of approximately 0.04%. Currently a
remedial investigation/ feasibility study is being completed, and as such,
an estimate for the total cost of the remediation of this site has not
been made to date. However, based on estimates and the assigned
allocations, the Company believes its liability at the site will not be
material and its share is adequately covered through reserves established
by the Company at June 30, 1998. Actual liability could vary based on
results of the study, the resources of other PRPs and the Company's final
share of liability.
The Company is addressing a regional trichloroethylene ("TCE") groundwater
plume on the south side of Oshkosh, Wisconsin. The Company believes there
may be multiple sources in the area. TCE was detected in the groundwater
at the Company's North Plant facility with recent testing showing the
highest concentrations in a monitoring well located on the upgradient
property line. Because the investigation process is still ongoing, it is
not possible for the Company to estimate its long-term total liability
associated with this issue at this time. Also, as part of the regional TCE
groundwater investigation, the Company conducted a groundwater investiga-
tion of a former landfill located on Company property. The landfill,
acquired by the Company in 1972, is approximately 2.0 acres in size and is
believed to have been used for the disposal of household waste. Based on
the investigation, the Company does not believe the landfill is one of the
sources of the TCE contamination. Based upon current knowledge, the
Company believes its liability associated with the TCE issue will not be
material and believes that it is adequately covered through reserves
established by the Company at June 30, 1998. However, this may change as
investigations proceed by the Company, other unrelated property owners,
and government entities.
The Company is subject to other environmental matters and 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. Actual results could vary, among other things, due to the
uncertainties involved in environmental investigation and remediation and
litigation.
The Company is contingently liable under bid, performance and specialty
bonds totaling $86 million and open standby letters of credit issued by
the Company's bank in favor of third parties totaling $10.6 million at
June 30, 1998.
7. CONDENSED CONSOLIDATING FINANCIAL INFORMATION
------------------------------------------------
The following tables present condensed consolidating financial information
for: (a) the Company; (b) on a combined basis, the guarantors of the
Senior Subordinated Notes (which are all of the wholly-owned subsidiaries
of the Company and which are referred to as the "Subsidiary Guarantors";
however, the Subsidiary Guarantors do not include McNeilus Financial
Services, Inc., Oshkosh/McNeilus Financial Services, Inc., and Nation's
Casualty Insurance, Inc., which are the only non-guarantor subsidiaries of
the Company and which are collectively referred to as the "Non-Guarantor
Subsidiaries"); and (c) on a combined basis, the Non-Guarantor
Subsidiaries. Separate financial statements of the Subsidiary Guarantors
are not presented because the guarantors are jointly, severally, and
unconditionally liable under the guarantees, and the Company believes
separate financial statements and other disclosures regarding the
Subsidiary Guarantors are not material to investors.
The Company is comprised of Wisconsin and Florida manufacturing operations
and certain corporate management, information services
and finance functions. Borrowings and related interest expense under the
Senior Credit Facility and the Senior Subordinated Notes are charged to
the Company. The Company has allocated a portion of this interest expense
to Pierce Manufacturing, Inc. through a formal lending arrangement. There
are presently no management fee arrangements between the Company and its
subsidiaries.
<PAGE>
<TABLE>
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Balance Sheets
June 30, 1998
(Unaudited)
<CAPTION>
Non-
Subsidiary Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash $ 16,610 $ 853 $ 7,194 $ -- $ 24,657
equivalents
Receivables, net 49,451 24,717 112 -- 74,280
Inventories 44,433 90,676 -- -- 135,109
Prepaid expenses and
other 8,286 7,416 1,848 -- 17,550
-------- --------- --------- -------- ----------
Total current assets 118,780 123,662 9,154 -- 251,596
Other long-term assets 11,807 3,074 542 -- 15,423
Investment in and
advances to:
Subsidiaries 333,650 10,158 -- (343,808) --
Unconsolidated
partnership -- -- 12,934 -- 12,934
Property, plant and
equipment 100,368 63,700 -- -- 164,068
Less accumulated
depreciation (72,564) (5,442) -- -- (78,006)
-------- --------- --------- -------- ----------
Net property, plant and
equipment 27,804 58,258 -- -- 86,062
Goodwill and other
intangible assets, net -- 325,626 -- -- 325,626
-------- --------- --------- -------- ----------
Total assets $ 492,041 $ 520,778 $ 22,630 $(343,808) $ 691,641
======== ========= ========= ======== ========
Current liabilities:
Accounts payable $ 31,052 $ 29,696 $ 610 $ -- $ 61,358
Floor plan notes -- 9,073 -- -- 9,073
payable
Customer advances 1,541 44,955 21 -- 46,517
Payroll-related 9,764 11,612 35 -- 21,411
obligations
Other current 10,760 33,904 5,429 -- 50,093
liabilities
Current maturities
of long-term debt 4,266 250 -- -- 4,516
-------- --------- --------- -------- ----------
Total current liabilities 57,383 129,490 6,095 -- 192,968
Long-term debt 291,734 2,672 -- -- 294,406
Other long-term 15,632 1,186 -- -- 16,818
liabilities
Deferred income taxes (2,324) 40,623 19,534 -- 57,833
Investment by and -- 346,807 (2,999) (343,808) --
advances from (to)
Parent
Shareholders' equity 129,616 -- -- -- 129,616
-------- --------- --------- -------- ----------
Total liabilities $ 492,041 $ 520,778 $ 22,630 $ (343,808) $ 691,641
and shareholders' ======== ======== ========= ========== ==========
equity
</TABLE>
<PAGE>
<TABLE>
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Balance Sheets
September 30, 1997
(Unaudited)
<CAPTION>
Non-
Subsidiary Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash $ 23,210 $ 9 $ -- $ -- $ 23,219
equivalents
Receivables, net 68,059 13,176 -- -- 81,235
Inventories 44,605 31,892 -- -- 76,497
Prepaid expenses and
other 10,051 2,833 -- -- 12,884
-------- --------- --------- -------- ----------
Total current assets 145,925 47,910 -- -- 193,835
Other long-term assets 6,882 845 -- -- 7,727
Investment in and
advances to:
Subsidiaries 138,645 -- -- (138,645) --
Unconsolidated -- -- -- -- --
partnership
Property, plant and
equipment 99,685 27,977 -- -- 127,662
Less accumulated
depreciation (69,415) (2,759) -- -- (72,174)
-------- --------- --------- -------- ----------
Net property, plant and
equipment 30,270 25,218 -- -- 55,488
Goodwill and other
intangible assets, net -- 163,344 -- -- 163,344
-------- --------- --------- -------- ----------
Total assets $ 321,722 $ 237,317 $ -- $(138,645) $ 420,394
======== ========= ========= ======== ========
Current liabilities:
Accounts payable $ 28,358 $ 19,862 $ -- $ -- $ 48,220
Floor plan notes -- -- -- -- --
payable
Customer advances 353 29,771 -- -- 30,124
Payroll-related 7,745 7,412 -- -- 15,157
obligations
Other current 19,227 15,994 -- -- 35,221
liabilities
Current maturities
of long-term debt 15,000 -- -- -- 15,000
-------- --------- --------- -------- ----------
Total current liabilities 70,683 73,039 -- -- 143,722
Long-term debt 120,000 -- -- -- 120,000
Other long-term 13,266 54 -- -- 13,320
liabilities
Deferred income taxes (3,127) 25,579 -- -- 22,452
Investment by and -- 138,645 -- (138,645) --
advances from (to)
Parent
Shareholders' equity 120,900 -- -- -- 120,900
-------- --------- --------- -------- ----------
Total liabilities $ 321,722 $ 237,317 $ -- $ (138,645) $ 420,394
and shareholders' ======== ======== ========= ========== ==========
equity
</TABLE>
<PAGE>
<TABLE>
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Statements of Income
For the Three Months Ended June 30, 1998
(Unaudited)
<CAPTION>
Non-
Subsidiary Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ 100,311 $ 189,793 $ -- $ -- $ 290,104
Cost of sales 90,380 157,653 -- -- 248,033
-------- -------- --------- -------- -----------
Gross income 9,931 32,140 -- -- 42,071
Operating expenses:
Selling, general and
administrative 10,131 11,442 155 -- 21,728
Engineering, research &
development 1,635 678 -- -- 2,313
Amortization of goodwill
and other intangibles -- 2,721 -- -- 2,721
-------- -------- --------- -------- -----------
Total operating expenses 11,766 14,841 155 -- 26,762
-------- -------- --------- -------- -----------
Income from operations (1,835) 17,299 (155) -- 15,309
Other income (expense):
Interest expense (5,394) (1,868) 180 -- (7,082)
Interest income 120 110 (220) -- 10
Miscellaneous, net (159) (242) 220 -- (181)
-------- -------- --------- -------- -----------
(5,433) (2,000) (180) -- (7,253)
Income from operations
before income taxes,
equity in earnings of (7,268) 15,299 25 -- 8,056
subsidiaries and
unconsolidated partner-
ship and extraordinary
item
Provision for income taxes (2,826) 6,462 3 -- 3,639
-------- -------- --------- -------- -----------
(4,442) 8,837 22 -- 4,417
Equity in earnings of
subsidiaries and
unconsolidated 9,442 -- 583 (9,442) 583
partnership, net of -------- -------- --------- -------- ----------
income taxes
Income before
extraordinary item 5,000 8,837 605 (9,442) 5,000
Extraordinary charge for
early retirement of (450) -- -- -- (450)
debt, net of income -------- -------- --------- -------- -----------
tax benefit
Net income $ 4,550 $ 8,837 $ 605 $ (9,442) $ 4,550
======== ======== ========= ======== ===========
</TABLE>
<PAGE>
<TABLE>
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Statements of Income
For the Nine Months Ended June 30, 1998
(Unaudited)
<CAPTION>
Non-
Subsidiary Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ 305,537 $ 354,204 $ -- $ -- $ 659,741
Cost of sales 269,553 295,882 -- -- 565,435
-------- -------- --------- -------- -----------
Gross income 35,984 58,322 -- -- 94,306
Operating expenses:
Selling, general and
administrative 27,266 20,686 252 -- 48,204
Engineering, research &
development 4,971 1,685 -- -- 6,656
Amortization of goodwill
and other intangibles -- 5,559 -- -- 5,559
-------- -------- --------- -------- -----------
Total operating expenses 32,237 27,930 252 -- 60,419
-------- -------- --------- -------- -----------
Income from operations 3,747 30,392 (252) -- 33,887
Other income (expense):
Interest expense (9,117) (5,156) -- -- (14,273)
Interest income 274 270 -- -- 544
Miscellaneous, net (292) (416) 364 -- (344)
-------- -------- --------- -------- -----------
(9,135) (5,302) (364) -- (14,073)
-------- -------- --------- -------- -----------
Income from operations
before income taxes,
equity in earnings of (5,388) 25,090 112 -- 19,814
subsidiaries and
unconsolidated partner-
ship and extraordinary
item
Provision for income taxes (2,243) 10,584 37 -- 8,378
-------- -------- --------- -------- -----------
(3,145) 14,506 75 -- 11,436
Equity in earnings of
subsidiaries and
unconsolidated 15,341 -- 760 (15,341) 760
partnership, net of -------- -------- --------- -------- -----------
income taxes
Income before
extraordinary item 12,196 14,506 835 (15,341) 12,196
Extraordinary charge for
early retirement of (1,185) -- -- -- (1,185)
debt, net of income -------- -------- --------- -------- -----------
tax benefit
Net income $ 11,011 $ 14,506 $ 835 $ (15,341) $ 11,011
======== ======== ========= ======== ===========
</TABLE>
<PAGE>
<TABLE>
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Statements of Income
For the Three Months Ended June 30, 1997
(Unaudited)
<CAPTION>
Non-
Subsidiary Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ 113,631 $ 62,965 $ -- $ -- $ 176,596
Cost of sales 102,534 52,165 -- -- 154,699
-------- -------- --------- -------- -----------
Gross income 11,097 10,800 -- -- 21,897
Operating expenses:
Selling, general and
administrative 8,624 3,118 -- -- 11,742
Engineering, research &
development 1,954 257 -- -- 2,211
Amortization of goodwill
and other intangibles -- 1,117 -- -- 1,117
-------- -------- --------- -------- -----------
Total operating expenses 10,578 4,492 -- -- 15,070
-------- -------- --------- -------- -----------
Income from operations 519 6,308 -- -- 6,827
Other income (expense):
Interest expense (1,300) (1,548) -- -- (2,848)
Interest income 74 56 -- -- 130
Miscellaneous, net (24) -- -- -- (24)
-------- -------- --------- -------- -----------
(1,250) (1,492) -- -- (2,742)
Income from operations
before income taxes,
equity in earnings of (731) 4,816 -- -- 4,085
subsidiaries and
unconsolidated partner-
ship and extraordinary
item
Provision for income taxes (834) 2,127 -- -- 1,293
-------- -------- --------- -------- ----------
103 2,689 -- -- 2,792
Equity in earnings of
subsidiaries and
unconsolidated 2,689 -- -- (2,689) --
partnership, net of -------- -------- --------- -------- ----------
income taxes
Income before
extraordinary item 2,792 2,689 -- (2,689) 2,792
Extraordinary charge for
early retirement of -- -- -- -- --
debt, net of income -------- -------- --------- -------- -----------
tax benefit
Net income $ 2,792 $ 2,689 $ -- $ (2,689) $ 2,792
======== ======== ========= ======== ===========
</TABLE>
<PAGE>
<TABLE>
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Statements of Income
For the Nine Months Ended June 30, 1997
(Unaudited)
<CAPTION>
Non-
Subsidiary Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ 322,137 $ 175,244 $ -- $ -- $ 497,381
Cost of sales 286,693 146,340 -- -- 433,033
-------- -------- --------- -------- -----------
Gross income 35,444 28,904 -- -- 64,348
Operating expenses:
Selling, general and
administrative 25,491 8,892 -- -- 34,383
Engineering, research &
development 5,228 729 -- -- 5,957
Amortization of goodwill
and other intangibles -- 3,352 -- -- 3,352
-------- -------- --------- -------- -----------
Total operating expenses 30,719 12,973 -- -- 43,692
-------- -------- --------- -------- -----------
Income from operations 4,725 15,931 -- -- 20,656
Other income (expense):
Interest expense (4,975) (4,596) -- -- (9,571)
Interest income 235 249 -- -- 484
Miscellaneous, net (101) 8 -- -- (93)
-------- -------- --------- -------- -----------
(4,841) (4,339) -- -- (9,180)
-------- -------- --------- -------- -----------
Income from operations
before income taxes,
equity in earnings of (116) 11,592 -- -- 11,476
subsidiaries and
unconsolidated partner-
ship and extraordinary
item
Provision for income taxes (683) 5,269 -- -- 4,586
-------- -------- --------- -------- ----------
567 6,323 -- -- 6,890
Equity in earnings of
subsidiaries and
unconsolidated 6,323 -- -- (6,323) --
partnership, net of -------- -------- --------- -------- -----------
income taxes
Income before
extraordinary item 6,890 6,323 -- (6,323) 6,890
Extraordinary charge for
early retirement of -- -- -- -- --
debt, net of income -------- -------- --------- -------- -----------
tax benefit
Net income $ 6,890 $ 6,323 $ 0 $ (6,323) $ 6,890
======== ======== ========= ======== ===========
</TABLE>
<PAGE>
<TABLE>
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Statements of Cash Flows
For the Nine Months Ended June 30, 1998
(Unaudited)
<CAPTION>
Non-
Subsidiary Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net cash provided from
(used for) operating $ 22,466 $ 59,764 $ (3,248) $ -- $ 78,982
activities
Investing activities:
Acquisition of
business, net of (225,524) (3,535) 11,105 -- (217,954)
cash acquired
Investments in and
advances to 48,966 (48,846) (120) -- --
subsidiaries
Additions to property,
plant and equipment (1,406) (4,864) -- -- (6,270)
Proceeds from sale of
property, plant and
equipment 297 23 -- -- 320
(Increase) decrease in
other long-term
assets 110 (1,799) (543) -- (2,232)
--------- --------- -------- ------- ---------
Net cash provided from
(used for) investing
activities (177,557) (59,021) 10,442 -- (226,136)
Net cash used for
discontinued operations (872) -- -- -- (872)
Financing activities:
Net borrowings of
long-term debt 160,968 101 -- -- 161,069
Debt issuance costs (8,507) -- -- -- (8,507)
Purchase of Common
Stock and Common
Stock warrants, and 31 -- -- -- 31
proceeds from
exercise of stock
options, net
Dividends paid (3,129) -- -- -- (3,129)
--------- --------- -------- ------- ---------
Net cash provided from
financing activities 149,363 101 -- -- 149,464
--------- --------- -------- ------- ---------
Increase (decrease) in
cash and cash
equivalents (6,600) 844 7,194 -- 1,438
Cash and cash equivalents
at beginning of period 23,210 9 -- -- 23,219
--------- --------- -------- ------- ---------
Cash and cash equivalents
at end of period $ 16,610 $ 853 $ 7,194 $ -- $ 24,657
========= ========= ======== ======= =========
</TABLE>
<PAGE>
<TABLE>
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Statements of Cash Flows
For the Nine Months Ended June 30, 1997
(Unaudited)
<CAPTION>
Non-
Subsidiary Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net cash provided from
operating activities $ 12,318 $ 19,495 $ -- $ -- $ 31,813
Investing activities:
Investments in and
advances to 16,864 (16,864) -- -- --
subsidiaries
Additions to property,
plant and equipment (1,885) (2,728) -- -- (4,613)
Proceeds from sale of
property, plant and
equipment 333 -- -- -- 333
(Increase) decrease in
other long-term
assets (201) 87 -- -- (114)
--------- --------- -------- ------- ---------
Net cash provided from
(used for) investing
activities 15,111 (19,505) -- -- (4,394)
Net cash used for
discontinued operations (1,079) -- -- -- (1,079)
Financing activities:
Net repayments of
long-term debt (15,411) -- -- -- (15,411)
Purchase of Common
Stock and Common
Stock warrants, and (6,642) -- -- -- (6,642)
proceeds from
exercise of stock
options, net
Dividends paid (3,178) -- -- -- (3,178)
--------- --------- -------- ------- ---------
Net cash used for
financing activities (25,231) -- -- -- (25,231)
--------- --------- -------- ------- ---------
Increase (decrease) in
cash and cash
equivalents 1,119 (10) -- -- 1,109
Cash and cash equivalents
at beginning of period 108 19 -- -- 127
--------- --------- -------- ------- ---------
Cash and cash equivalents
at end of period $ 1,227 $ 9 $ -- $ -- $ 1,236
========= ========= ======== ======= =========
</TABLE>
<PAGE>
All statements other than statements of historical fact included in this
Form 10-Q are forward-looking statements intended to qualify for the safe
harbors from liability established by the Private Securities Litigation
Reform Act of 1995. Forward-looking statements generally can be identified
by the use of forward-looking terminology such as "may," will," "expect,"
"intend," "estimates," "anticipate," "believe," "should," "plans" or
"continue" or the negative thereof or variations thereon or similar
terminology. Although the Company believes that the expectations reflected
in such forward-looking statements are reasonable, it can give no
assurance that such expectations will prove to have been correct.
Important factors that could cause actual results to differ materially
from the Company's expectations include, without limitation, the
consequences of financial leverage, the cyclical nature of the construction
industry, the risks related to reductions or changes in government
expenditures, the uncertainty inherent in governmental contracts, the
challenges of integration of parts or components from sole source
suppliers and subcontractors, product liability and warranty claims and
labor relations and market conditions.
Item 2. Oshkosh Truck Corporation
Management's Discussion and Analysis of
Consolidated Financial Condition and Results of Operations
------------------------------------------------------------------
Results of Operations
Third Quarter 1998 Compared to 1997
Oshkosh Truck Corporation (the "Company" or "Oshkosh") reported net income
of $4.6 million, or $0.54 per share, on sales of $290.1 million for the
third quarter of fiscal 1998, compared to net income of $2.8 million, or
$0.33 per share, on sales of $176.6 million for the third quarter of
fiscal 1997. Excluding an extraordinary charge associated with the
early repayment of debt incurred in connection with the acquisition of
McNeilus Companies, Inc. ("McNeilus") on February 26, 1998, net income for
the third quarter of fiscal 1998 would have been $5.0 million, or $0.59
per share.
Sales of commercial products increased in the third quarter of fiscal 1998
compared to the third quarter of fiscal 1997 while sales of defense
products decreased. Commercial sales in the third quarter of fiscal 1998
increased $132.9 million, or 131.1%, from the third quarter of fiscal 1997
to $234.3 million. An increase of $119.7 million in sales of construction
and refuse vehicles and an $8.5 million increase in sales of fire apparatus
accounted for substantially all of the increase. Sales by McNeilus
accounted for all the increase in sales of construction and refuse
vehicles. Sales of defense products totaled $55.8 million in the third
quarter of fiscal 1998, a decrease of $19.4 million, or 25.8%, compared to
the third quarter of fiscal 1997. Defense sales declined due to the trend
in lower heavy military truck spending in the federal budget.
Gross income in the third quarter of fiscal 1998 totaled $42.1 million, or
14.5% of sales, compared to $21.9 million, or 12.4% of sales, in the third
quarter of fiscal 1997. McNeilus contributed $20.8 million of the
increase in gross income in the third quarter of fiscal 1998 compared to
fiscal 1997. During the third quarter of fiscal 1998, the Company settled
litigation with O.V. Containers, Inc. ("OV") incurring a $1.1 million
charge.
Operating expenses totaled $26.8 million, or 9.2% of sales, in the third
quarter of fiscal 1998 compared to $15.1 million, or 8.5% of sales, in the
third quarter of fiscal 1997. Substantially all the increase in
operating expenses in the third quarter of fiscal 1998 related to the
operations of McNeilus.
Interest expense increased to $7.1 million in the third quarter of fiscal
1998 compared to $2.8 million in the third quarter of fiscal 1997. The
increase in interest expense is primarily due to additional borrowings to
finance the acquisition of McNeilus, net of debt repayment.
The effective income tax rate for combined federal and state income taxes
for the third quarter of fiscal 1998 was 45.2% compared to 31.7% for the
third quarter of fiscal 1997. The effective income tax rate for the third
quarter of fiscal 1998 was impacted by non-deductible goodwill of $1.3
million. The effective income tax rate for the third quarter of fiscal
1997 was impacted by non-deductible goodwill of $0.6 million and the
reversal of $0.5 million of prior years' provisions for income taxes.
First Nine Months 1998 Compared to 1997
The Company reported net income of $11.0 million, or $1.31 per share, on
sales of $659.7 million for the first nine months of fiscal 1998, compared
to 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. Excluding an extra-
ordinary charge associated with the refinancing and early repayment
of debt to acquire McNeilus, net income for the first nine months of fiscal
1998 would have been $12.2 million, or $1.45 per share.
Sales of commercial products increased in the first nine months of fiscal
1998 compared to the first nine months of fiscal 1997 while sales of
defense products decreased. Commercial sales in the first nine months of
fiscal 1998 increased $179.3 million, or 61.5%, from the first nine months
of fiscal 1997 to $470.9 million. Increases of $158.8 million in sales
of construction and refuse vehicles and $22.3 million in sales
of fire apparatus were partially offset by the elimination of $2.7 million
of sales of commercial van trailers as the Company exited this line of
business. Sales by McNeilus accounted for all the increase in sales of
construction and refuse vehicles. Sales of defense products totaled $188.8
million in the first nine months of fiscal 1998, a decrease of $17.0
million, or 8.3%, as compared to the first nine months of fiscal 1997.
Defense sales declined due to the trend in lower heavy military truck
spending in the federal budget.
Gross income in the first nine months of fiscal 1998 totaled $94.3 million,
or 14.3% of sales, compared to $64.3 million, or 12.9% of sales, in the
first nine months of fiscal 1997. McNeilus contributed $26.8 million of
the increase in gross income for the first nine months of fiscal 1998
compared to the comparable period in fiscal 1997.
Operating expenses totaled $60.4 million, or 9.2% of sales, in the first
nine months of fiscal 1998 compared to $43.7 million, or 8.8% of sales, in
the first nine months of fiscal 1997. Operating expenses increased $12.0
million due to the inclusion of McNeilus since the date of acquisition.
Interest expense increased to $14.3 million in the first nine months of
fiscal 1998 compared to $9.6 million in the first nine months of fiscal
1997. The increase in interest expense reflects additional borrowings
to finance the acquisition of McNeilus.
The effective income tax rate for combined federal and state income taxes
for the first nine months of fiscal 1998 was 42.3% compared to 40.0% for
the first nine months of fiscal 1997. The effective income tax rate was
impacted by the reversal of $0.5 million of prior years' provisions for
income taxes in each of the nine months ended June 30, 1998 and 1997. In
addition, the effective income tax rate was adversely affected by non-
deductible goodwill of $2.8 million and $1.9 million, respectively.
Financial Condition
First Nine Months of 1998
During the first nine months of fiscal 1998, cash increased by $1.4
million. Cash available at the beginning of the period of $23.2 million
and cash provided from operations during the period of $79.0 million, or a
total of $102.2 million, was used primarily to fund $61.5 million of debt
repayments (including $25.0 million prior to the acquisition of McNeilus),
the acquisition of Nova Quintech for $3.5 million, capital additions of
$6.3 million and to pay dividends of $3.1 million. The Company borrowed
approximately $342.5 million in February 1998 ($225.0 million under a
multi-tranche senior term loan facility, $100.0 million of senior
subordinated notes and $17.5 million under a new $100.0 million revolving
credit facility). Borrowings of $224.0 million were utilized to close the
McNeilus acquisition ($249.5 million purchase price less cash acquired of
$35.1 million, or $214.4 million, plus restricted cash of $9.6 million),
to refinance $110.0 million of outstanding indebtedness under the Company's
previous credit facility and to pay $8.5 million in debt issuance costs.
In March 1998, the Company realized approximately $5.5 million from the
disposition of certain McNeilus assets.
First Nine Months of 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 repay-
ment of long-term debt of $15.4 million, the repurchase of common stock
and warrants from Freightliner Corporation ("Freightliner") of $6.8
million in connection with the termination of the Strategic Alliance
formed with Freightliner on June 2, 1995, capital additions of $4.6 million
and dividends of $3.2 million.
Liquidity and Capital Resources
The Company's primary cash requirements are expected to include working
capital, interest and principal payments on indebtedness, capital
expenditures, dividends and potentially, future acquisitions. The primary
sources of cash are expected to be cash flow from operations and borrowings
under the Company's Senior Credit Facility. Based upon current and
anticipated future operations, the Company believes that capital resources
will be adequate to meet future working capital, debt service and other
capital requirements for the foreseeable future.
Backlog
The Company's backlog as of June 30, 1998 was $421 million, compared to
$401 million at June 30, 1997. The backlog at June 30, 1998 includes $161
million with respect to U.S. Government contracts, $165 million related to
Pierce Manufacturing Inc. ("Pierce"), $56 million with respect to McNeilus
and the remainder relates to other commercial products. Approximately 95%
of the Company's backlog will be consumed in the next 12 months. Most of
the Company's revenues are derived from customer orders prior to
commencing production.
Year 2000
Certain of the Company's older computer programs were written using two
digits rather than four to define the applicable year. As a result, those
computer programs may misinterpret a date using "00" as the year 1900
rather than the year 2000. This could cause a system failure, miscalcula-
tions or other disruptions in the business.
The Company maintains two computer systems at its Oshkosh
operations and one at its Pierce operations. The Company installed an
upgrade to its primary computer system at Oshkosh in July 1998. The
secondary computer system is expected to be updated by December 31, 1998.
At Pierce, the Company has commenced a project, with outside consultants,
to install new hardware and software by February 1, 1999 to replace an
obsolete hardware and software system. The total cost of these projects
during fiscal 1998 and 1999 is estimated at approximately $6.6 million,
which includes $6.3 million for the purchase of new hardware and software
that will be capitalized and $.3 million that will be expensed as incurred.
The Company believes that following the conclusions of these projects, the
year 2000 issue will not pose significant disruptions to its business at
Oshkosh or Pierce; however, if such projects are not completed on a timely
basis, the year 2000 could have a material impact on the operations of the
Company.
McNeilus has entered into an agreement with an outside consultant to
upgrade its present computer systems by August 31, 1998. The total cost
of this upgrade, which is intended to, among other things, prevent any
disruptions related to year 2000 issues, is estimated at approximately
$400,000 and is being expensed as incurred. The Company believes that
following the conclusion of this upgrade, the year 2000 issue will not
pose significant disruptions to McNeilus' business; however, if such
upgrades are not completed on a timely basis, the year 2000 could have a
material impact on the operations of McNeilus.
Stock Buy Back
In July 1995, the Company's board of directors authorized the repurchase
of up to 1,000,000 shares of Common Stock. There were no stock repurchases
under this program in the first nine months of fiscal 1998. As of June 30,
1998 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 Common
Stock from Freightliner on May 2, 1997 did not impact the number of shares
available for repurchase under this program.
<PAGE>
OSHKOSH TRUCK CORPORATION
PART II. OTHER INFORMATION
FORM 10-Q
June 30, 1998
ITEM 1 LEGAL PROCEEDINGS
------------------------
The arbitration proceeding and separate civil litigation of certain
disputes between the Oshkosh Florida Division and O.V. Containers, Inc.
("OV") has been settled. The disputes arose out of the performance of a
contract to deliver 690 skeletal container chassis and additional issues
of, among others, warranty performance and misuse and abuse of the
chassis. As part of the settlement OV has agreed to accept the chassis
"as is" and the Company has agreed to pay OV $1.1 million.
ITEM 5 OTHER INFORMATION
------------------------
All shareholder proposals for presentation at the 1999 Annual Meeting
pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as
amended ("Rule 14a-8"), must be received at the offices of the Company,
P.O. Box 2566, Oshkosh, Wisconsin 54903, by August 18, 1998, for inclusion
in the 1999 proxy statement. After November 14, 1998, notice to the
Company of a shareholder proposal submitted otherwise than pursuant to
Rule 14a-8 will be considered untimely, and the persons named in proxies
solicited by the Board of Directors of the Company for the 1999 Annual
Meeting may exercise discretionary voting power with respect to such
proposal.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
----------------------------------------
(a) Exhibits
-------------
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
------------------------
(i) On May 7, 1998 the Company filed a current report on Form 8-K
dated May 6, 1998 announcing the Company's second quarter
earnings.
<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
August 14, 1998 /s/ R. G. Bohn
R. G. Bohn
President and Chief Executive Officer
(Principal Executive Officer)
August 14, 1998 /s/ C. L. Szews
C. L. Szews
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
August 14, 1998 /s/ T. J. Polnaszek
T. J. Polnaszek
Corporate Controller
(Principal Accounting Officer)
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS OF OSHKOSH TRUCK CORPORATION AS OF AND FOR THE
NINE MONTHS ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 24,657
<SECURITIES> 0
<RECEIVABLES> 76,773
<ALLOWANCES> 2,493
<INVENTORY> 135,109
<CURRENT-ASSETS> 251,596
<PP&E> 164,068
<DEPRECIATION> 78,006
<TOTAL-ASSETS> 691,641
<CURRENT-LIABILITIES> 192,968
<BONDS> 294,406
93
0
<COMMON> 0
<OTHER-SE> 129,523
<TOTAL-LIABILITY-AND-EQUITY> 691,641
<SALES> 659,741
<TOTAL-REVENUES> 659,741
<CGS> 565,435
<TOTAL-COSTS> 565,435
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 362
<INTEREST-EXPENSE> 14,273
<INCOME-PRETAX> 19,814
<INCOME-TAX> 8,378
<INCOME-CONTINUING> 12,196
<DISCONTINUED> 0
<EXTRAORDINARY> (1,185)
<CHANGES> 0
<NET-INCOME> 11,011
<EPS-PRIMARY> 1.31
<EPS-DILUTED> 1.30
</TABLE>
