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, 2000
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
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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 21, 2000: 422,542
-------------------------------------------------------------------
Common Stock Outstanding as of July 21, 2000: 16,218,490
-------------------------------------------------------------------
<PAGE>
OSHKOSH TRUCK CORPORATION
FORM 10-Q INDEX
FOR THE QUARTER ENDED JUNE 30, 2000
Page
----
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Statements of Income
- Three Months Ended June 30, 2000 and 1999;
Nine Months Ended June 30, 2000 and 1999................. 3
Condensed Consolidated Balance Sheets
- June 30, 2000 and September 30, 1999..................... 4
Condensed Consolidated Statement of Shareholders' Equity
- Nine Months Ended June 30, 2000.......................... 5
Condensed Consolidated Statements of Cash Flows
- Nine Months Ended June 30, 2000 and 1999................. 6
Notes to Condensed Consolidated Financial Statements
- June 30, 2000............................................ 7
Item 2. Management's Discussion and Analysis of Consolidated
Financial Condition and Results of Operations............. 20
Item 3. Quantitative and Qualitative Disclosure of Market Risk....... 27
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K............................. 28
Signatures................................................................... 29
2
<PAGE>
PART I. ITEM 1. FINANCIAL INFORMATION
OSHKOSH TRUCK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
-------- --------
2000 1999 2000 1999
---- ---- ---- ----
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Net sales $391,667 $329,821 $966,058 $851,048
Cost of sales 332,865 281,529 817,518 726,128
-------- -------- -------- --------
Gross income 58,802 48,292 148,540 124,920
Operating expenses:
Selling, general and administrative 27,213 22,023 70,125 63,322
Amortization of goodwill and
other intangibles 2,780 2,775 8,324 8,400
-------- -------- -------- --------
Total operating expenses 29,993 24,798 78,449 71,722
-------- -------- -------- --------
Operating income 28,809 23,494 70,091 53,198
Other income (expense):
Interest expense (5,116) (6,613) (16,314) (19,839)
Interest income 286 187 640 614
Miscellaneous, net 244 224 529 564
-------- -------- -------- --------
(4,586) (6,202) (15,145) (18,661)
-------- -------- -------- --------
Income from continuing operations
before income taxes, equity in
earnings of unconsolidated
partnership and extraordinary item 24,223 17,292 54,946 34,537
Provision for income taxes 9,253 7,199 21,957 14,700
-------- -------- -------- --------
14,970 10,093 32,989 19,837
Equity in earnings of unconsolidated
partnership, net of income taxes 304 452 894 1,169
-------- -------- -------- --------
Income from continuing operations
before extraordinary item 15,274 10,545 33,883 21,006
Gain from discontinued operations,
net of income taxes of $1,235 -- -- 2,015 --
Extraordinary charge for early
retirement of debt, net of income
tax benefit of $356 -- -- (581) --
-------- -------- -------- --------
Net income $ 15,274 $ 10,545 $ 35,317 $ 21,006
======== ======== ======== ========
Earnings per share:
Income from continuing operations
before extraordinary item $ 0.92 $ 0.83 $ 2.13 $ 1.65
Discontinued operations -- -- 0.13 --
Extraordinary item -- -- (0.04) --
-------- -------- -------- --------
Net income $ 0.92 $ 0.83 $ 2.22 $ 1.65
======== ======== ======== ========
Earnings per share assuming dilution:
Income from continuing operations
before extraordinary item $ 0.90 $ 0.81 $ 2.10 $ 1.62
Discontinued operations -- -- 0.12 --
Extraordinary item -- -- (0.04) --
-------- -------- -------- --------
Net income $ 0.90 $ 0.81 $ 2.18 $ 1.62
======== ======== ======== ========
Cash dividends:
Class A Common Stock $0.07500 $0.07250 $0.22500 $0.21750
Common Stock $0.08625 $0.08333 $0.25875 $0.25000
The accompanying notes are an integral part of these condensed consolidated financial
statements.
</TABLE>
3
<PAGE>
OSHKOSH TRUCK CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, September 30,
2000 1999
-------- -------------
(Unaudited)
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 4,698 $ 5,137
Receivables, net 108,712 93,186
Inventories 214,895 198,446
Prepaid expenses 5,743 4,963
Deferred income taxes 12,498 14,558
---------- ----------
Total current assets 346,546 316,290
Investment in unconsolidated partnership 16,099 12,335
Other long-term assets 24,593 20,853
Property, plant and equipment 181,641 154,597
Less accumulated depreciation (78,127) (70,606)
----------- ----------
Net property, plant and equipment 103,514 83,991
Goodwill and other intangible assets, net 313,138 319,821
---------- ----------
Total assets $ 803,890 $ 753,290
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 85,625 $ 84,727
Floor plan notes payable 25,208 26,616
Customer advances 59,913 68,364
Payroll-related obligations 25,263 24,734
Accrued warranty 15,222 14,623
Other current liabilities 55,074 48,462
Revolving credit facility and current
maturities of long-term debt 23,774 5,259
---------- ----------
Total current liabilities 290,079 272,785
Long-term debt 156,648 255,289
Deferred income taxes 39,745 44,265
Other long-term liabilities 29,815 18,071
Commitments and contingencies -- --
Shareholders' equity 287,603 162,880
---------- ----------
Total liabilities and shareholders' equity $ 803,890 $ 753,290
========== ==========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE>
OSHKOSH TRUCK CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
NINE MONTHS ENDED JUNE 30, 2000
(Unaudited)
Cost of
Common
Common Paid-in Retained Stock in
Stock Capital Earnings Treasury Total
------ ------- -------- -------- -----
(In thousands)
Balance at September 30,
1999 $ 140 $ 15,997 $157,810 $(11,067) $162,880
Net income and
comprehensive income ---- ---- 35,317 ---- 35,317
Proceeds from Common Stock
offering, net of expenses 38 93,364 ---- ---- 93,402
Cash dividends:
Class A Common Stock ---- ---- (95) ---- (95)
Common Stock ---- ---- (4,194) ---- (4,194)
Other ---- 140 ---- 153 293
----- -------- -------- -------- --------
Balance at June 30, 2000 $ 178 $109,501 $188,838 $(10,914) $287,603
===== ======== ======== ======== ========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE>
OSHKOSH TRUCK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
June 30,
2000 1999
---- ----
(In thousands)
Operating activities:
Income from continuing operations
before extraordinary item $ 33,883 $ 21,006
Non-cash adjustments 13,998 6,165
Changes in operating assets and liabilities (34,203) (26,102)
-------- --------
Net cash provided from operating activities 13,678 1,069
Investing activities:
Acquisition of businesses, net of cash acquired (7,287) --
Additions to property, plant and equipment (11,783) (6,900)
Proceeds from sale of property, plant
and equipment 46 58
Increase in other long-term assets (5,663) (4,356)
-------- --------
Net cash used for investing activities (24,687) (11,198)
Net cash provided from discontinued operations 2,015 --
Financing activities:
Net borrowings under revolving credit facility 12,800 14,300
Repayments of long-term debt (93,842) (248)
Proceeds from Common Stock offering 93,736 --
Costs of Common Stock offering (334) --
Dividends paid (3,961) (3,163)
Other 156 1,059
-------- --------
Net cash provided from financing activities 8,555 11,948
-------- --------
Increase (decrease) in cash and cash equivalents (439) 1,819
Cash and cash equivalents at beginning of period 5,137 3,622
-------- --------
Cash and cash equivalents at end of period $ 4,698 $ 5,441
======== ========
Supplementary disclosures:
Depreciation and amortization $ 17,640 $ 17,018
Cash paid for interest 14,396 16,987
Cash paid for income taxes 14,084 20,342
The accompanying notes are an integral part of these condensed consolidated
financial statements.
6
<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 financial statements contain all adjustments (consisting only of
normal recurring adjustments) that are, in the opinion of Company management,
necessary to present fairly the condensed consolidated financial statements.
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 1999 annual report to shareholders.
2. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted weighted
average shares used in the denominator of the per share calculations:
Three Months Ended Nine Months Ended
June 30, June 30,
------------------ -----------------
2000 1999 2000 1999
---- ---- ---- ----
Denominator for basic
earnings per share 16,632,665 12,763,241 15,881,205 12,699,587
Effect of dilutive options
and incentive compensation
awards 338,625 310,386 319,629 300,174
---------- ---------- ---------- ----------
Denominator for dilutive
earnings per share 16,971,290 13,073,627 16,200,834 12,999,761
========== ========== ========== ==========
3. INVENTORIES
Inventories consist of the following:
June 30, September 30,
2000 1999
-------- -------------
(In thousands)
Finished products $ 67,497 $ 59,649
Partially finished products 80,811 62,047
Raw materials 87,613 89,417
--------- ---------
Inventories at FIFO cost 235,921 211,113
Less: Progress payments on U.S. government
contracts (9,467) (2,951)
Excess of FIFO cost over LIFO cost (11,559) (9,716)
--------- ---------
$ 214,895 $ 198,446
========= =========
Title to all inventories related to government contracts, which provide for
progress payments, vests with the government to the extent of unliquidated
progress payments.
7
<PAGE>
4. ACQUISITIONS/DISPOSITIONS
In January 2000, the Company entered into a technology transfer agreement and
collected certain previously written-off receivables from a foreign affiliate,
as a part of the disposition of a business that the Company exited in 1995.
Gross proceeds of $3.2 million, less taxes of $1.2 million, or net proceeds of
$2.0 million, have been recorded as a gain from discontinued operations.
In November 1999, the Company acquired the manufacturing assets of Kewaunee
Engineering Corporation ("Kewaunee") for $5.6 million in cash plus the
assumption of certain liabilities aggregating approximately $2.2 million.
Kewaunee is a fabricator of heavy-steel components for cranes, aerial devices
and other equipment. In April 2000, the Company acquired all of the common stock
of Viking Truck & Equipment, Inc. and its affiliates (collectively "Viking") for
$2.3 million in cash, less cash acquired of $0.6 million, or $1.7 million net.
Viking is a dealer of new and used equipment primarily in the Company's
commercial products segment. The acquisitions were financed from borrowings
under the Company's senior credit facility.
The acquisitions were accounted for using the purchase method of accounting and,
accordingly, the operating results of Kewaunee and Viking were included in the
Company's consolidated statements of income since the respective dates of their
acquisitions. In each case, the fair value of the net assets acquired was based
on preliminary estimates and may be revised at a later date. For the Kewaunee
acquisition, the purchase price, including acquisition costs, approximated the
estimated fair value of the assets acquired and liabilities assumed as of the
acquisition date. For the Viking acquisition, the Company recorded $1.6 million
of cost in excess of net assets acquired.
Had the acquisitions occurred on October 1, 1999 or 1998, there would have been
no material pro forma impact on the Company's consolidated net sales, net income
or earnings per share in fiscal 2000 or 1999.
5. LONG-TERM DEBT
The Company has outstanding a senior credit facility and $100.0 million of 8.75%
senior subordinated notes due March 1, 2008. 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"). The outstanding balances as of June 30, 2000 on the Revolving
Credit Facility, Term Loan A, Term Loan B, and Term Loan C are $17.8 million,
$32.5 million, $13.5 million, and $13.5 million, respectively.
At June 30, 2000, outstanding borrowings of $17.8 million and outstanding
letters of credit of $12.5 million reduced available capacity under the
Revolving Credit Facility to $69.7 million.
Substantially all the tangible and intangible assets of the Company and its
subsidiaries (including the stock of certain subsidiaries) are pledged as
collateral under the senior credit facility. The senior credit facility includes
customary affirmative and negative covenants and requires
8
<PAGE>
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. The Subsidiary
Guarantors fully, unconditionally, jointly and severally guarantee the Company's
obligations under the senior subordinated notes.
6. COMMON STOCK OFFERING
On November 24, 1999, the Company sold 3,795,000 shares of its Common Stock at
$26.00 per share. Proceeds from the offering, net of underwriting discounts and
commissions, totaled $93.7 million with $93.5 million used to repay indebtedness
under the Company's senior credit facility.
Pro forma unaudited earnings per share of the Company, assuming that the net
proceeds to the Company from the offering were used to repay term debt as of
October 1, 1999 and 1998, are summarized below:
Nine Months Ended
June 30,
-----------------
2000 1999
---- ----
Earnings per share from continuing
operations before extraordinary item
Basic $ 2.08 $ 1.47
Assuming dilution 2.04 1.45
Weighted average shares
Basic 16,629,125 16,494,587
Assuming dilution 16,948,754 16,794,761
7. COMMITMENTS AND CONTINGENCIES
McNeilus Companies, Inc. ("McNeilus") was a defendant in litigation commenced in
1993 prior to the acquisition of McNeilus by the Company, which was brought by
The Heil Co. ("Heil"), a McNeilus competitor. This litigation sought damages and
made claims that McNeilus infringed certain aspects of one of its patents. A
settlement of the matter was reached in January 2000.
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 (the "Superfund" law)
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.
9
<PAGE>
As to one such Superfund site, Pierce Manufacturing Inc. ("Pierce") is one of
431 PRPs participating in the costs of addressing the site and has been assigned
an allocation share of approximately 0.04%. Currently, a report of the 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, 2000. 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 at the Company's North Plant
facility with 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
investigation 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 that it has
established adequate reserves for the matter as of June 30, 2000. However, this
may change as investigations proceed by the Company, other unrelated property
owners, and the government.
The Company is subject to other environmental matters and legal proceedings and
claims, including patent, antitrust, product liability and state dealership
regulation compliance proceedings, that 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 litigation.
The Company has guaranteed certain customers' obligations under deferred payment
contracts and lease purchase agreements totaling approximately $1.0 million at
June 30, 2000. The Company is also contingently liable under bid, performance
and specialty bonds totaling approximately $113.4 million and open standby
letters of credit issued by the Company's bank in favor of third parties
totaling approximately $12.5 million at June 30, 2000.
10
<PAGE>
8. BUSINESS SEGMENT INFORMATION
Three Months Ended Nine Months Ended
June 30, June 30,
------------------ -----------------
2000 1999 2000 1999
---- ---- ---- ----
(In thousands)
Net sales to unaffiliated
customers:
Commercial $219,217 $196,294 $516,484 $461,961
Fire and emergency 103,482 83,465 281,863 243,095
Defense 69,368 50,562 168,111 146,992
Corporate and other (400) (500) (400) (1,000)
-------- -------- -------- --------
Consolidated net sales $391,667 $329,821 $966,058 $851,048
======== ======== ======== ========
Operating income (expense):
Commercial $ 18,351 $ 16,609 $ 45,214 $ 35,027
Fire and emergency 9,523 8,147 22,916 19,844
Defense 7,305 4,188 16,963 14,957
Corporate and other (6,370) (5,450) (15,002) (16,630)
-------- -------- -------- --------
Consolidated operating
income 28,809 23,494 70,091 53,198
Net interest expense (4,830) (6,426) (15,674) (19,225)
Miscellaneous other 244 224 529 564
-------- -------- -------- -------
Income from continuing
operations before income
taxes, equity in earnings
of unconsolidated partnership
and extraordinary item $ 24,223 $ 17,292 $ 54,946 $ 34,537
======== ======== ======== ========
June 30, September 30,
2000 1999
-------- -------------
(In thousands)
Identifiable assets:
Commercial $ 402,853 $ 381,199
Fire and emergency 285,483 276,692
Defense 108,021 85,796
Corporate and other 7,533 9,603
--------- ---------
Consolidated identifiable assets $ 803,890 $ 753,290
========= =========
9. 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 include all wholly-owned subsidiaries of the Company
("Subsidiary Guarantors") other than McNeilus Financial Services, Inc. and
Oshkosh/McNeilus Financial Services, Inc., which are the only non-guarantor
subsidiaries of the Company ("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 Subsidiary 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 certain Subsidiary Guarantors through
formal lending arrangements. There are no management fee arrangements between
the Company and its Non-Guarantor Subsidiaries.
11
<PAGE>
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Statements of Income
For the Three Months Ended June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------- ------------ ------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Net sales $ 148,363 $ 256,957 $ -- $ (13,653) $ 391,667
Cost of sales 128,039 218,413 -- (13,587) 332,865
--------- --------- ------- --------- ---------
Gross income 20,324 38,544 -- (66) 58,802
Operating expenses:
Selling, general and
administrative 11,463 15,658 92 -- 27,213
Amortization of goodwill
and other intangibles -- 2,780 -- -- 2,780
--------- --------- ------- --------- ---------
Total operating expenses 11,463 18,438 92 -- 29,993
--------- --------- ------- --------- ---------
Operating income (loss) 8,861 20,106 (92) (66) 28,809
Other income (expense):
Interest expense (4,654) (2,022) (15) 1,575 (5,116)
Interest income 104 1,748 9 (1,575) 286
Miscellaneous, net 6 36 202 -- 244
--------- --------- ------- --------- ---------
(4,544) (238) 196 -- (4,586)
--------- --------- ------- --------- ---------
Income (loss) before income taxes
and equity in earnings of
subsidiaries and unconsolidated
partnership 4,317 19,868 104 (66) 24,223
Provision (credit) for income taxes 1,174 8,065 39 (25) 9,253
--------- --------- ------- ---------- ---------
3,143 11,803 65 (41) 14,970
Equity in earnings of subsidiaries
and unconsolidated partnership,
net of income taxes 12,131 -- 304 (12,131) 304
--------- --------- ------- --------- ---------
Net income $ 15,274 $ 11,803 $ 369 $ (12,172) $ 15,274
========= ========= ======= ========= =========
</TABLE>
12
<PAGE>
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Statements of Income
For the Three Months Ended June 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------- ------------ ------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Net sales $ 117,247 $ 213,720 $ -- $ (1,146) $ 329,821
Cost of sales 103,831 178,844 -- (1,146) 281,529
--------- --------- ------- --------- ---------
Gross income 13,416 34,876 -- -- 48,292
Operating expenses:
Selling, general and
administrative 10,399 11,519 105 -- 22,023
Amortization of goodwill and
other intangibles -- 2,775 -- -- 2,775
--------- --------- ------- --------- ---------
Total operating expenses 10,399 14,294 105 -- 24,798
--------- --------- ------- --------- ---------
Operating income (loss) 3,017 20,582 (105) -- 23,494
Other income (expense):
Interest expense (6,151) (2,037) -- 1,575 (6,613)
Interest income 48 1,701 13 (1,575) 187
Miscellaneous, net 19 57 148 -- 224
--------- --------- ------- --------- ---------
(6,084) (279) 161 -- (6,202)
--------- --------- ------- --------- ---------
Income (loss) before income taxes
and equity in earnings of
subsidiaries and unconsolidated
partnership (3,067) 20,303 56 -- 17,292
Provision (credit) for income taxes (1,053) 8,231 21 -- 7,199
--------- --------- ------- --------- ---------
(2,014) 12,072 35 -- 10,093
Equity in earnings of subsidiaries
and unconsolidated partnership,
net of income taxes 12,559 -- 452 (12,559) 452
--------- --------- ------- --------- ---------
Net income $ 10,545 $ 12,072 $ 487 $ (12,559) $ 10,545
========= ========= ======= ========= =========
</TABLE>
13
<PAGE>
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Statements of Income
For the Nine Months Ended June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------- ------------ ------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Net sales $ 339,000 $ 650,362 $ -- $ (23,304) $ 966,058
Cost of sales 293,973 546,783 -- (23,238) 817,518
--------- --------- ------- --------- ---------
Gross income 45,027 103,579 -- (66) 148,540
Operating expenses:
Selling, general and
administrative 30,194 39,653 278 -- 70,125
Amortization of goodwill and
other intangibles -- 8,324 -- -- 8,324
--------- --------- ------- --------- ---------
Total operating expenses 30,194 47,977 278 -- 78,449
--------- --------- ------- --------- ---------
Operating income (loss) 14,833 55,602 (278) (66) 70,091
Other income (expense):
Interest expense (14,777) (6,247) (15) 4,725 (16,314)
Interest income 192 5,122 51 (4,725) 640
Miscellaneous, net (46) 124 451 -- 529
--------- --------- ------- --------- ---------
(14,631) (1,001) 487 -- (15,145)
--------- --------- ------- --------- ---------
Income (loss) from continuing
operations before income taxes,
equity in earnings of subsidiaries
and unconsolidated partnership
and extraordinary item 202 54,601 209 (66) 54,946
Provision (credit) for income taxes (390) 22,293 79 (25) 21,957
--------- --------- ------- --------- ---------
592 32,308 130 (41) 32,989
Equity in earnings of subsidiaries
and unconsolidated partnership,
net of income taxes 33,291 -- 894 (33,291) 894
--------- --------- ------- --------- ---------
Income from continuing operations
before extraordinary item 33,883 32,308 1,024 (33,332) 33,883
Discontinued operations, net 2,015 -- -- -- 2,015
Extraordinary item, net (581) -- -- -- (581)
--------- --------- ------- --------- ---------
Net income $ 35,317 $ 32,308 $ 1,024 $ (33,332) $ 35,317
========= ========= ======= ========= =========
</TABLE>
14
<PAGE>
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Statements of Income
For the Nine Months Ended June 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------- ------------ ------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Net sales $ 295,341 $ 559,294 $ -- $ (3,587) $ 851,048
Cost of sales 259,360 470,355 -- (3,587) 726,128
--------- --------- ------- ---------- ---------
Gross income 35,981 88,939 -- -- 124,920
Operating expenses:
Selling, general and
administrative 30,155 32,919 248 -- 63,322
Amortization of goodwill and
other intangibles -- 8,400 -- -- 8,400
--------- --------- ------- --------- ---------
Total operating expenses 30,155 41,319 248 -- 71,722
--------- --------- ------- --------- ---------
Operating income (loss) 5,826 47,620 (248) -- 53,198
Other income (expense):
Interest expense (18,493) (6,071) -- 4,725 (19,839)
Interest income 245 5,047 47 (4,725) 614
Miscellaneous, net 130 130 304 -- 564
--------- --------- ------- --------- ---------
(18,118) (894) 351 -- (18,661)
--------- --------- ------- --------- ---------
Income (loss) before income taxes
and equity in earnings of
subsidiaries and unconsolidated
partnership (12,292) 46,726 103 -- 34,537
Provision (credit) for income taxes (4,671) 19,332 39 -- 14,700
--------- --------- ------- --------- ---------
(7,621) 27,394 64 -- 19,837
Equity in earnings of subsidiaries
and unconsolidated partnership,
net of income taxes 28,627 -- 1,169 (28,627) 1,169
--------- --------- ------- --------- ---------
Net income $ 21,006 $ 27,394 $ 1,233 $ (28,627) $ 21,006
========= ========= ======= ========= =========
</TABLE>
15
<PAGE>
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Balance Sheets
June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------- ------------ ------------
(In thousands)
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,336 $ 1,231 $ 131 $ -- $ 4,698
Receivables, net 69,993 44,698 443 (6,422) 108,712
Inventories 59,464 155,497 -- (66) 214,895
Prepaid expenses 4,470 1,273 -- -- 5,743
Deferred income taxes 5,844 3,919 2,735 -- 12,498
--------- --------- ------- --------- ---------
Total current assets 143,107 206,618 3,309 (6,488) 346,546
Investment in and advances to:
Subsidiaries 390,902 1,245 -- (392,147) --
Unconsolidated partnership -- -- 16,099 -- 16,099
Other long-term assets 14,522 9,548 523 -- 24,593
Net property, plant and equipment 23,285 80,229 -- -- 103,514
Goodwill and other intangible
assets, net -- 313,138 -- -- 313,138
--------- --------- ------- --------- ---------
Total assets $ 571,816 $ 610,778 $19,931 $(398,635) $ 803,890
========= ========= ======= =========- =========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 39,821 $ 45,767 $ 37 $ -- $ 85,625
Floor plan notes payable -- 31,630 -- (6,422) 25,208
Customer advances 3,316 56,503 94 -- 59,913
Payroll-related obligations 10,001 15,231 31 -- 25,263
Accrued warranty 8,046 7,176 -- -- 15,222
Other current liabilities 34,585 13,651 6,838 -- 55,074
Revolving credit facility and
current maturities of long-term
debt 23,194 235 345 -- 23,774
--------- --------- ------- --------- ---------
Total current liabilities 118,963 170,193 7,345 (6,422) 290,079
Long-term debt 154,106 2,063 479 -- 156,648
Deferred income taxes (7,520) 36,403 10,862 -- 39,745
Other long-term liabilities 18,664 11,151 -- -- 29,815
Commitments and contingencies -- -- -- -- --
Investments by and advances from
(to) parent -- 390,968 1,245 (392,213) --
Shareholders' equity 287,603 -- -- -- 287,603
--------- --------- ------- --------- ---------
Total liabilities and shareholders'
equity $ 571,816 $ 610,778 $19,931 $(398,635) $ 803,890
========= ========= ======= ========= =========
</TABLE>
16
<PAGE>
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Balance Sheets
September 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------- ------------ ------------
(In thousands)
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,698 $ 1,337 $ 102 $ ---- $ 5,137
Receivables, net 49,311 43,837 38 ---- 93,186
Inventories 49,988 148,458 ---- ---- 198,446
Prepaid expenses 3,791 1,172 ---- ---- 4,963
Deferred income taxes 3,818 6,523 4,217 ---- 14,558
--------- --------- ------- --------- ---------
Total current assets 110,606 201,327 4,357 ---- 316,290
Investment in and advances to:
Subsidiaries 357,575 (7,590) ---- (349,985) ----
Unconsolidated partnership ---- ---- 12,335 ---- 12,335
Other long-term assets 11,902 8,899 52 ---- 20,853
Net property, plant and equipment 22,803 61,188 ---- ---- 83,991
Goodwill and other intangible
assets, net ---- 319,821 ---- ---- 319,821
--------- --------- ------- --------- ---------
Total assets $ 502,886 $ 583,645 $16,744 $(349,985) $ 753,290
========= ========= ======= ========= =========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 34,261 $ 50,234 $ 232 $ ---- $ 84,727
Floor plan notes payable ---- 26,616 ---- ---- 26,616
Customer advances 1,669 66,695 ---- ---- 68,364
Payroll-related obligations 9,172 15,532 30 ---- 24,734
Accrued warranty 6,785 7,838 ---- ---- 14,623
Other current liabilities 17,940 19,894 10,628 ---- 48,462
Revolving credit facility and
current maturities of long-term
debt 5,000 259 ---- ---- 5,259
--------- --------- ------- --------- ---------
Total current liabilities 74,827 187,068 10,890 ---- 272,785
Long-term debt 253,000 2,289 ---- ---- 255,289
Deferred income taxes (5,407) 36,228 13,444 ---- 44,265
Other long-term liabilities 17,586 485 ---- ---- 18,071
Commitments and contingencies ---- ---- ---- ---- ----
Investments by and advances from
(to) parent ---- 357,575 (7,590) (349,985) ----
Shareholders' equity 162,880 ---- ---- ---- 162,880
--------- --------- ------- --------- ---------
Total liabilities and shareholders'
equity $ 502,886 $ 583,645 $16,744 $(349,985) $ 753,290
========= ========= ======= ========= =========
</TABLE>
17
<PAGE>
<TABLE>
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Statements of Cash Flows
For the Nine Months Ended June 30, 2000
(Unaudited)
<CAPTION>
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------- ------------ ------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Operating activities:
Income from continuing operations
before extraordinary item $ 33,883 $ 32,308 $ 1,024 $ (33,332) $ 33,883
Non-cash adjustments (96) 16,637 (2,543) -- 13,998
Changes in operating assets and
liabilities (6,253) (24,106) (3,910) 66 (34,203)
--------- --------- ------- --------- ---------
Net cash provided from (used
for) operating activities 27,534 24,839 (5,429) (33,266) 13,678
Investing activities:
Acquisition of businesses, net of
cash acquired (5,625) (1,662) -- -- (7,287)
Investments in and advances to
subsidiaries (27,702) (13,447) 7,883 33,266 --
Additions to property, plant and
equipment (3,522) (8,261) -- -- (11,783)
Other (1,959) (1,325) (2,333) -- (5,617)
--------- --------- ------- --------- ---------
Net cash provided from (used
for) investing activities (38,808) (24,695) 5,550 33,266 (24,687)
Net cash provided from discontinued
operations 2,015 -- -- -- 2,015
Financing activities:
Net borrowings under revolving
credit facility 12,800 -- -- -- 12,800
Repayments of long-term debt (93,500) (250) (92) -- (93,842)
Proceeds from Common Stock
offering 93,736 -- -- -- 93,736
Costs of Common Stock offering (334) -- -- -- (334)
Dividends paid (3,961) -- -- -- (3,961)
Other 156 -- -- -- 156
--------- --------- ------- --------- ---------
Net cash provided from (used
for) financing activities 8,897 (250) (92) -- 8,555
--------- --------- ------- --------- ---------
Increase (decrease) in cash and cash
equivalents (362) (106) 29 (439)
Cash and cash equivalents at
beginning of period 3,698 1,337 102 -- 5,137
--------- --------- ------- --------- ---------
Cash and cash equivalents at end of
period $ 3,336 $ 1,231 $ 131 $ -- $ 4,698
========= ========= ======= ========= =========
</TABLE>
18
<PAGE>
<TABLE>
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Statements of Cash Flows
For the Nine Months Ended June 30, 1999
(Unaudited)
<CAPTION>
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------- ------------ ------------
(In thousands)
<S> <C> <C> <C> <C> <C>
perating activities:
Net income $ 21,006 $ 27,394 $ 1,233 $ (28,627) $ 21,006
Non-cash adjustments (806) 11,614 (4,643) -- 6,165
Changes in operating assets and
liabilities (7,508) (17,003) (1,591) -- (26,102)
--------- --------- -------- --------- ---------
Net cash provided from (used for)
operating activities 12,692 22,005 (5,001) (28,627) 1,069
Investing activities:
Investments in and advances to
subsidiaries (18,952) (14,842) 5,167 28,627 --
Additions to property, plant and
equipment (2,589) (4,311) -- -- (6,900)
Other (302) (2,679) (1,317) -- (4,298)
--------- --------- -------- --------- ---------
Net cash provided from (used for)
investing activities (21,843) (21,832) 3,850 28,627 (11,198)
Financing activities:
Net borrowings under revolving
credit facility 14,300 -- -- -- 14,300
Repayments of long term debt -- (248) -- -- (248)
Dividends paid (3,163) -- -- -- (3,163)
Other 1,059 -- -- -- 1,059
--------- --------- ------- --------- ---------
Net cash provided from (used for)
financing activities 12,196 (248) -- -- 11,948
--------- --------- ------- --------- ---------
Increase (decrease) in cash and cash
equivalents 3,045 (75) (1,151) -- 1,819
Cash and cash equivalents at
beginning of period 1,065 979 1,578 -- 3,622
--------- --------- ------- --------- ---------
Cash and cash equivalents at end of
period $ 4,110 $ 904 $ 427 $ -- $ 5,441
========= ========= ======= ========= =========
</TABLE>
19
<PAGE>
Item 2. Oshkosh Truck Corporation
Management's Discussion and Analysis of
Consolidated Financial Condition and Results of Operations
FORWARD-LOOKING STATEMENTS
This Management's Discussion and Analysis of Consolidated Financial Condition
and Results of Operations and other sections of this Form 10-Q contain
"forward-looking statements" that are believed to be within the meaning of the
Private Securities Litigation Reform Act of 1995. All statements other than
statements of historical fact included in this report, including, without
limitation, statements regarding Oshkosh Truck Corporation's (the "Company" or
"Oshkosh") future financial position, business strategy, targets, projected
sales, costs, earnings, capital spending and debt levels, and plans and
objectives of management for future operations are forward-looking statements.
In addition, 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 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
following: (1) the cyclical nature of the concrete placement industry; (2) the
risks related to reductions or changes in government expenditures; (3) the
potential for actual costs to exceed projected costs under long-term,
fixed-price government contracts; (4) the uncertainty inherent in government
contracts; (5) the challenges of identifying, completing and integrating future
acquisitions; (6) competition; (7) disruptions in the supply of parts or
components from sole source suppliers and subcontractors; (8) product liability
and warranty claims; and (9) labor relations and market conditions. Additional
information concerning factors that could cause actual results to differ
materially from those in the forward-looking statements is contained from time
to time in the Company's SEC filings, including, but not limited to, the
Company's Current Report on Form 8-K filed with the SEC on July 25, 2000. All
subsequent written and oral forward-looking statements attributable to the
Company, or persons acting on its behalf, are expressly qualified in their
entirety by these cautionary statements.
General
The major products manufactured and marketed by each of the Company's business
segments are as follows:
Commercial-- concrete mixer systems, refuse truck bodies, portable concrete
batch plants and truck components sold to commercial ready-mix companies and
commercial and municipal waste haulers in the U. S. and abroad.
Fire and emergency -- commercial and custom fire trucks, aircraft rescue and
firefighting trucks, snow removal trucks and other emergency vehicles primarily
sold to fire departments, airports and other governmental units in the U. S. and
abroad.
20
<PAGE>
Defense-- heavy-and medium-payload tactical trucks and supply parts sold to the
U. S. military and to other militaries around the world.
Results of Operations
Analysis of Consolidated Net Sales
The following table presents net sales by business segment:
Third Quarter Fiscal First Nine Months Fiscal
-------------------- ------------------------
2000 1999 2000 1999
---- ---- ---- ----
(In thousands)
Net sales to unaffiliated
customers:
Commercial $219,217 $196,294 $516,484 $461,961
Fire and emergency 103,482 83,465 281,863 243,095
Defense 69,368 50,562 168,111 146,992
Corporate and other (400) (500) (400) (1,000)
-------- -------- -------- --------
Consolidated net
sales $391,667 $329,821 $966,058 $851,048
======== ======== ======== ========
Third Quarter Fiscal 2000 Compared to 1999
Consolidated net sales increased $61.8 million, or 18.8%, to $391.7 million for
the third quarter of fiscal 2000 compared to the third quarter of fiscal 1999.
Commercial segment net sales increased $22.9 million, or 11.7%, to $219.2
million for the third quarter of fiscal 2000 compared to the third quarter of
fiscal 1999. The Company believes that continued strong end-markets in the
concrete placement industry, and some early buying relative to the prior year as
customers sought to avoid chassis and mixer shortages during the peak of the
concrete placement season, contributed to a 12.9% increase in concrete mixer
unit volume in the quarter. Refuse packer unit sales grew 5.7% in the third
quarter as growing municipal sales offset softness in shipments to the U.S.'s
largest waste haulers.
Fire and emergency segment net sales increased $20.0 million, or 24.0%, to
$103.5 million for the third quarter of fiscal 2000 compared to the third
quarter of fiscal 1999, due to a 14.9% increase in sales at Pierce Manufacturing
Inc. ("Pierce"), the Company's fire apparatus manufacturer, and a $6.1 million
increase in sales of aircraft rescue and firefighting vehicles due primarily to
a large international sale.
Defense segment net sales increased $18.8 million, or 37.2%, to $69.4 million
for the third quarter of fiscal 2000 compared to the third quarter of fiscal
1999. This increase was the result of vehicle sales under the Medium Tactical
Vehicle Replacement ("MTVR") contract awarded to Oshkosh in December 1998, which
began in the second quarter of fiscal 2000. The Company expects sales under this
contract to increase throughout fiscal 2000.
21
<PAGE>
First Nine Months of Fiscal 2000 Compared to 1999
Consolidated net sales increased $115.0 million, or 13.5%, to $966.1 million for
the first nine months of fiscal 2000 compared to the first nine months of fiscal
1999.
Commercial segment net sales increased $54.5 million, or 11.8%, to $516.5
million for the first nine months of fiscal 2000 compared to the first nine
months of fiscal 1999. The Company believes that continued strong end-markets in
the concrete placement industry, and some early buying relative to the prior
year as customers sought to avoid chassis and mixer shortages during the peak of
the concrete placement season, contributed to a 14.4% increase in concrete mixer
unit volume in the first nine months. Refuse packer unit sales increased 11.3%
for the first nine months of fiscal 2000 compared to the first nine months of
fiscal 1999, generally as a result of increases in sales to municipal and
international customers.
Fire and emergency segment net sales increased $38.8 million, or 15.9%, to
$281.9 million for the first nine months of fiscal 2000 compared to the first
nine months of fiscal 1999 due to increased unit shipments at Pierce and
increased aircraft rescue and firefighting international sales. Pierce comprises
a substantial majority of the revenue of this segment. Pierce's sales increased
13.5% during the period, which is in line with Pierce's long-term sales growth
rate of 11% per annum since 1980.
Defense segment net sales increased $21.1 million, or 14.4%, to $168.1 million
for the first nine months of fiscal 2000 compared to the first nine months of
fiscal 1999. This increase was primarily the result of vehicle sales under the
MTVR contract, which began in the second quarter of fiscal 2000.
Analysis of Consolidated Operating Income
The following table presents operating income by business segment:
Third Quarter Fiscal First Nine Months Fiscal
-------------------- ------------------------
2000 1999 2000 1999
---- ---- ---- ----
(In thousands)
Operating income (expense):
Commercial $18,351 $16,609 $ 45,214 $ 35,027
Fire and emergency 9,523 8,147 22,916 19,844
Defense 7,305 4,188 16,963 14,957
Corporate and other (6,370) (5,450) (15,002) (16,630)
------- ------- -------- --------
Consolidated operating
income $28,809 $23,494 $ 70,091 $ 53,198
======= ======= ======== ========
Third Quarter Fiscal 2000 Compared to 1999
Consolidated operating income increased $5.3 million, or 22.6%, for the third
quarter of fiscal 2000 compared to the third quarter of fiscal 1999.
Commercial segment operating income increased $1.7 million, or 10.5%, for the
third quarter of fiscal 2000 compared to the third quarter of fiscal 1999.
Operating income as a percent of segment sales ("operating income
22
<PAGE>
margin") decreased slightly to 8.4% of commercial segment sales for the third
quarter of fiscal 2000 compared to 8.5% of commercial segment sales for the
third quarter of fiscal 1999.
Fire and emergency segment operating income increased $1.4 million, or 16.9%,
for the third quarter of fiscal 2000 compared to the third quarter of fiscal
1999. The operating income margin decreased from 9.8% to 9.2% during this same
time period. Decreased operating income margins were primarily attributable to
the sales mix at Pierce and the increased sales volume of the lower-margin
aircraft rescue and firefighting vehicles.
Defense segment operating income increased $3.1 million, or 74.4%, for the third
quarter of fiscal 2000 compared to the third quarter of fiscal 1999. The defense
operating income margin increased to 10.5% of defense segment sales for the
third quarter of fiscal 2000 compared to 8.3% of defense segment sales for the
third quarter of fiscal 1999. Third quarter 2000 operating income was positively
impacted by a favorable truck sales mix and lower bid and proposal spending
compared to the third quarter of fiscal 1999.
Corporate and other expenses increased $0.9 million to $6.4 million, or 1.6% of
consolidated net sales, for the third quarter of fiscal 2000 from $5.5 million,
or 1.7% of consolidated net sales, for the third quarter of fiscal 1999,
generally as a result of a provision for certain large health-related claims
arising in the quarter and the provision of certain management incentives.
First Nine Months of Fiscal 2000 Compared to 1999
Consolidated operating income increased $16.9 million, or 31.8%, for the first
nine months of fiscal 2000 compared to the first nine months of fiscal 1999.
Commercial segment operating income increased $10.2 million, or 29.1%, for the
first nine months of fiscal 2000 compared to the first nine months of fiscal
1999. The commercial operating income margin increased to 8.8% of commercial
segment sales for the first nine months of fiscal 2000 compared to 7.6% of
commercial segment sales for the first nine months of fiscal 1999. Increased
concrete mixer unit volume and continued cost reduction activities contributed
to the improvement in the operating income margin.
Fire and emergency segment operating income increased $3.1 million, or 15.5%,
for the first nine months of fiscal 2000 compared to the first nine months of
fiscal 1999. The fire and emergency operating income margin decreased from 8.2%
to 8.1% during this same time period. Decreased operating income margins were
attributable to faster revenue growth of the Company's aircraft rescue and
firefighting products which carry significantly lower margins.
Defense segment operating income increased $2.0 million, or 13.4%, for the first
nine months of fiscal 2000 compared to the first nine months of fiscal 1999. The
defense operating income margin decreased to 10.1% of defense segment sales for
the first nine months of fiscal 2000 compared to 10.2% of defense segment sales
for the first nine months of fiscal 1999. Increases in MTVR sales with lower
margins contributed to the decreased
23
<PAGE>
operating income margins for the first nine months of fiscal 2000 compared to
the first nine months of fiscal 1999.
Corporate and other expenses decreased $1.6 million to $15.0 million, or 1.6% of
consolidated net sales, for the first nine months of fiscal 2000 from $16.6
million, or 2.0% of consolidated net sales, for the first nine months of fiscal
1999. Results for the first nine months of fiscal 1999 included a $3.8 million
pre-tax charge for litigation. Excluding that charge, corporate expenses
increased $2.2 million generally due to previously-mentioned health claims and
increased staffing to support the higher level of sales.
Analysis of Non-Operating Income Statement Items
Third Quarter of Fiscal 2000 Compared to 1999
Net interest expense decreased $1.6 million, or 24.8%, in the third quarter of
fiscal 2000 compared to the third quarter of fiscal 1999. Prepayment of $93.5
million of term debt from proceeds of the Company's November 24, 1999 public
offering of Common Stock resulted in a $2.0 million reduction in interest
expense for the quarter. Increased borrowings to fund the acquisitions of
Kewaunee Engineering Corporation ("Kewaunee") and Viking Truck & Equipment, Inc.
and its affiliates ("Viking")and to support the seasonal working capital
requirements of the commercial segment contributed to the increase in interest
expense after consideration of the debt prepayment.
The effective tax rate for combined federal and state income taxes for the third
quarter of fiscal 2000 was 38.2% compared to 41.6% in the third quarter of
fiscal 1999. Excluding the impact of $1.4 million of nondeductible goodwill in
the third quarter of fiscal 2000 and fiscal 1999, the Company's effective income
tax rate was 36.2% in the third quarter of fiscal 2000 compared to 38.6% in the
prior year. The lower rate in fiscal 2000 relates to favorable state tax audit
refunds.
Equity in earnings of an unconsolidated partnership of $0.3 million in the third
quarter of fiscal 2000 and $0.5 million in the third quarter of fiscal 1999
represents the Company's equity interest in its lease financing partnership.
First Nine Months of Fiscal 2000 Compared to 1999
Net interest expense decreased $3.6 million, or 18.5%, in the first nine months
of fiscal 2000 compared to the first nine months of fiscal 1999. Prepayment of
$93.5 million of term debt from proceeds of the Company's November 24, 1999
public offering of Common Stock resulted in a $4.8 million reduction in interest
expense for the period. Increased working capital borrowings to fund the
Kewaunee and Viking acquisitions and to support overall sales growth partially
offset reduced interest expense resulting from debt prepayment.
The effective tax rate for combined federal and state income taxes for the first
nine months of fiscal 2000 was 40.0% compared to 42.6% for the first nine months
of fiscal 1999. Excluding the impact of $4.1 million of
24
<PAGE>
nondeductible goodwill in both the first nine months of fiscal 2000 and fiscal
1999, the Company's effective income tax rate was 37.2% in fiscal 2000 compared
to 38.0% in fiscal 1999. The lower fiscal 2000 rates are due to previously
mentioned state tax audit refunds.
Equity in earnings of an unconsolidated partnership of $0.9 million in the first
nine months of fiscal 2000 and $1.2 million in the first nine months of fiscal
1999 represents the Company's equity in earnings of its lease financing
partnership.
In January 2000, the Company entered into a technology transfer agreement and
collected certain previously written-off receivables from a foreign affiliate,
which was part of a business that the Company exited in 1995. Gross proceeds of
$3.2 million, less taxes of $1.2 million, or net proceeds of $2.0 million, have
been recorded as a gain from discontinued operations in fiscal 2000.
Financial Condition
First Nine Months of Fiscal 2000
During the first nine months of fiscal 2000, cash decreased by $0.4 million to
$4.7 million at June 30, 2000. Capital expenditures of $11.8 million, an
increase in long-term assets of $5.7 million, dividend payments of $4.0 million
and the acquisitions of Kewaunee for $5.6 million and Viking for $1.7 million
were funded by net borrowings of $12.8 million and cash provided from operations
of $13.7 million. In November 1999, the Company completed a public offering of
3,795,000 shares of Common Stock at $26.00 per share, before commissions and
expenses. Proceeds to the Company, net of underwriting discounts and
commissions, were used to prepay $93.5 million of term debt under the Company's
senior credit facility.
First Nine Months of Fiscal 1999
During the first nine months of fiscal 1999, cash increased by $1.8 million.
Equipment and software purchases of $6.9 million and dividend and scheduled debt
payments of $3.2 million and $0.2 million, respectively, were funded by a $14.3
million increase in borrowings under the Company's revolving credit facility,
$1.1 million of cash provided from operations and $1.1 million of proceeds from
the exercise of Common Stock options under the Company's Incentive Stock Plan.
Liquidity and Capital Resources
The Company had $69.7 million of unused availability under the terms of its
revolving credit facility as of June 30, 2000. The Company's primary cash
requirements 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.
As indicated above, in November 1999, the Company completed the sale of
3,795,000 shares of Common Stock. Proceeds to the Company, net of underwriting
discounts and commissions, were used to prepay $93.5 million
25
<PAGE>
of term indebtedness under the Company's senior credit facility. In addition,
the Company purchased the manufacturing assets of Kewaunee and common stock of
Viking. The Kewaunee and Viking acquisitions were financed through borrowings
under the Company's revolving credit facility.
The senior credit facility requires prepayment of indebtedness to the extent of
"excess cash flows" as defined in the senior credit agreement. Based upon
current and anticipated future operations, management believes that capital
resources will be adequate to meet future working capital, debt service and
other capital requirements for fiscal 2000.
The Company's cash flow from operations has fluctuated, and will likely continue
to fluctuate, significantly from quarter to quarter due to changes in working
capital arising principally from seasonal fluctuations in sales.
Capital expenditures are expected to approximate $20 million in fiscal 2000 and
$20 million in fiscal 2001. Fiscal 2000 capital expenditures include
approximately $4 million of an $8 million expansion of the Company's production
facilities in Oshkosh. The remaining $4 million of the expansion will occur
early in fiscal 2001.
New Accounting Standards
The Financial Accounting Standards Board ("FASB") issued Statement of Financial
Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments
and Hedging Activities," which was amended by SFAS No. 137. Provisions of these
standards are required to be adopted in years beginning after June 15, 2000.
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 the Company's financial condition, profitability or cash flows.
Customers and Backlog
Sales to the U. S. Department of Defense comprised approximately 17% of the
Company's net sales in the first nine months of fiscal 2000. No other single
customer accounted for more than 10% of the Company's net sales for this period.
A substantial majority of the Company's net sales are derived from customer
orders prior to commencing production.
The Company's backlog at June 30, 2000 increased 27.8% to $644.9 million
compared to $504.6 million at June 30, 1999. The commercial segment backlog
decreased by $42.9 million, or 34.3%, to $82.4 million at June 30, 2000 compared
to June 30, 1999. Lower commercial backlogs are believed to be due in part to
early season customer buying relative to the prior year due to customer concerns
about mixer and chassis shortages that existed in the prior year. The fire and
emergency segment backlog increased $9.3 million, or 4.6%, to $209.6 million at
June 30, 2000 compared to June 30, 1999. The defense segment backlog increased
by $174.0 million, or 97.2%, to $352.9 million at June 30, 2000 compared to June
30, 1999, reflecting the funding of the third year of the MTVR contract.
Approximately 57% of the aggregate June 30, 2000 backlog is not expected to be
filled in fiscal 2000.
26
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Reported backlog excludes purchase options and announced orders for which
definitive contracts have not been executed. Additionally, backlog excludes
unfunded portions of the U. S. Department of Defense long-term family and MTVR
contracts. Backlog information and comparisons thereof as of different dates may
not be accurate indicators of future sales or the ratio of the Company's future
sales to the U. S. Department of Defense versus its sales to other customers.
Item 3. Quantitative and Qualitative Disclosure of Market Risk
The Company's quantitative and qualitative disclosures about market risk for
changes in interest rates and foreign exchange risk are incorporated by
reference in Item 7A of the Company's Annual Report on Form 10-K for the year
ended September 30, 1999 and have not materially changed since that report was
filed.
27
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OSHKOSH TRUCK CORPORATION
PART II. OTHER INFORMATION
FORM 10-Q
JUNE 30, 2000
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibits are filed herewith:
10.1 Form of Key Executive Employment and Severance Agreement between
Oshkosh Truck Corporation and each of Timothy M. Dempsey, Paul C.
Hollowell, Daniel J. Lanzdorf, John W. Randjelovic, Charles L. Szews
and Matthew J. Zolnowski.
27 Financial Data Schedule
(b) Reports on Form 8-K
On May 12, 2000, the Company filed a Current Report on Form 8-K, dated May
9, 2000, reporting a change in the Company's certifying accountant.
28
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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
July 27, 2000 /S/ R. G. Bohn
--------------------------------------
R. G. Bohn
Chairman, President and
Chief Executive Officer
(Principal Executive Officer)
July 27, 2000 /S/ C. L. Szews
--------------------------------------
C. L. Szews
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
July 27, 2000 /S/ T. J. Polnaszek
--------------------------------------
T. J. Polnaszek
Vice President and Controller
(Principal Accounting Officer)
29
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<PAGE>
EXHIBIT INDEX
Exhibit No. Description
10.1 Form of Key Executive Employment and Severance Agreement between
Oshkosh Truck Corporation and each of Timothy M. Dempsey, Paul C.
Hollowell, Daniel J. Lanzdorf, John W. Randjelovic, Charles L.
Szews and Matthew J. Zolnowski.
27 Financial Data Schedule
30
