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 March 31, 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
-------
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 April 15, 2000: 422,609
- --------------------------------------------------------------------
Common Stock Outstanding as of April 15, 2000: 16,205,798
- --------------------------------------------------------------------
OSHKOSH TRUCK CORPORATION
FORM 10-Q INDEX
FOR THE QUARTER ENDED MARCH 31, 2000
Page
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Statements of Income
- Three Months Ended March 31, 2000 and 1999;
Six Months Ended March 31, 2000 and 1999 ..............3
Condensed Consolidated Balance Sheets
- March 31, 2000 and September 30, 1999...................4
Condensed Consolidated Statement of Shareholders' Equity
- Six Months Ended March 31, 2000 ........................5
Condensed Consolidated Statements of Cash Flows
- Six Months Ended March 31, 2000 and 1999 ...............6
Notes to Condensed Consolidated Financial Statements
- March 31, 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 1. Legal Proceedings ..........................................28
Item 4. Submission of Matters to Vote of Security Holders ..........28
Item 6. Exhibits and Reports on Form 8-K ...........................28
Signatures ...................................................................29
2
PART I. ITEM 1. FINANCIAL INFORMATION
OSHKOSH TRUCK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
March 31, March 31,
2000 1999 2000 1999
---- ---- ---- ----
(In thousands, except per share amounts)
Net sales $330,524 $298,534 $574,391 $521,227
Cost of sales 280,763 254,014 484,653 444,599
-------- -------- -------- --------
Gross income 49,761 44,520 89,738 76,628
Operating expenses:
Selling, general and administrative 22,334 24,754 42,912 41,299
Amortization of goodwill and other intangibles 2,772 2,890 5,544 5,625
-------- -------- -------- --------
Total operating expenses 25,106 27,644 48,456 46,924
-------- -------- -------- --------
Operating income 24,655 16,876 41,282 29,704
Other income (expense):
Interest expense (5,412) (6,645) (11,198) (13,226)
Interest income 188 241 354 427
Miscellaneous, net 171 198 285 340
-------- -------- -------- --------
(5,053) (6,206) (10,559) (12,459)
-------- -------- -------- --------
Income from continuing operations before income
taxes, equity in earnings of unconsolidated
partnership and extraordinary item 19,602 10,670 30,723 17,245
Provision for income taxes 7,964 4,501 12,704 7,501
-------- -------- -------- --------
11,638 6,169 18,019 9,744
Equity in earnings of unconsolidated
partnership, net of income taxes 275 380 590 717
-------- -------- -------- --------
Income from continuing operations before
extraordinary item 11,913 6,549 18,609 10,461
Gain from discontinued operations, net of
income taxes of $1,235 2,015 -- 2,015 --
Extraordinary charge for early retirement of debt,
net of income tax benefit of $356 -- -- (581) --
-------- -------- -------- --------
Net income $ 13,928 $ 6,549 $ 20,043 $ 10,461
======== ======== ======== ========
Earnings per share:
Income from continuing operations before
extraordinary item $ 0.72 $ 0.51 $ 1.20 $ 0.83
Net income $ 0.84 $ 0.51 $ 1.29 $ 0.83
Earnings per share assuming dilution:
Income from continuing operations before
extraordinary item $ 0.70 $ 0.50 $ 1.18 $ 0.81
Net income $ 0.82 $ 0.50 $ 1.27 $ 0.81
Cash dividends:
Class A Common Stock $0.07500 $0.07250 $0.15000 $0.14500
Common Stock $0.08625 $0.08333 $0.17250 $0.16667
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
OSHKOSH TRUCK CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, September 30,
2000 1999
--------- -------------
(Unaudited)
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 4,659 $ 5,137
Receivables, net 105,374 93,186
Inventories 249,392 198,446
Prepaid expenses 6,182 4,963
Deferred income taxes 12,378 14,558
---------- ----------
Total current assets 377,985 316,290
Investment in unconsolidated partnership 13,885 12,335
Other long-term assets 22,441 20,853
Property, plant and equipment 166,493 154,597
Less accumulated depreciation (75,355) (70,606)
---------- ----------
Net property, plant and equipment 91,138 83,991
Goodwill and other intangible assets, net 314,277 319,821
---------- ----------
Total assets $ 819,726 $ 753,290
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 100,316 $ 84,727
Floor plan notes payable 37,861 26,616
Customer advances 66,040 68,364
Payroll-related obligations 21,987 24,734
Accrued warranty 14,492 14,623
Other current liabilities 44,869 48,462
Revolving credit facility and current
maturities of long-term debt 42,030 5,259
---------- ----------
Total current liabilities 327,595 272,785
Long-term debt 157,976 255,289
Deferred income taxes 42,053 44,265
Other long-term liabilities 18,581 18,071
Commitments and contingencies -- --
Shareholders' equity 273,521 162,880
---------- ----------
Total liabilities and shareholders' equity $ 819,726 $ 753,290
========== ==========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
OSHKOSH TRUCK CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
SIX MONTHS ENDED MARCH 31, 2000
(Unaudited)
Common Paid-in Retained Cost of Common
Stock Capital Earnings Stock in Treasury Total
------ ------- -------- ----------------- -----
(In thousands)
Balance at September 30, 1999 $ 140 $ 15,997 $ 157,810 $ (11,067) $ 162,880
Net income and comprehensive
income --- --- 20,043 --- 20,043
Proceeds from Common Stock
offering, net of expenses 38 93,364 --- --- 93,402
Cash dividends:
Class A Common Stock --- --- (64) --- (64)
Common Stock --- --- (2,795) --- (2,795)
Other --- 24 --- 31 55
----- --------- --------- --------- ---------
Balance at March 31, 2000 $ 178 $ 109,385 $ 174,994 $ (11,036) $ 273,521
===== ========= ========= ========= =========
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
OSHKOSH TRUCK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
March 31,
2000 1999
---- ----
(In thousands)
Operating activities:
Income from continuing operations before
extraordinary item $ 18,609 $ 10,461
Non-cash adjustments 10,500 4,252
Changes in operating assets and liabilities (45,425) (18,560)
--------- ---------
Net cash used for operating activities (16,316) (3,847)
Investing activities:
Acquisition of business (5,625) --
Additions to property, plant and equipment (8,676) (4,712)
Proceeds from sale of property, plant and
equipment 46 30
Increase in other long-term assets (2,282) (2,482)
--------- ----------
Net cash used for investing activities (16,537) (7,164)
Net cash provided from discontinued operations 2,015 --
Financing activities:
Net borrowings under revolving credit facility 33,200 13,300
Repayments of long-term debt (93,742) (241)
Proceeds from Common Stock offering 93,736 --
Costs of Common Stock offering (334) --
Dividends paid (2,531) (2,103)
Other 31 819
--------- ---------
Net cash provided from financing activities 30,360 11,775
--------- ---------
Increase (decrease) in cash and cash equivalents (478) 764
Cash and cash equivalents at beginning of period 5,137 3,622
--------- ---------
Cash and cash equivalents at end of period $ 4,659 $ 4,386
========= =========
Supplementary disclosures:
Depreciation and amortization $ 11,515 $ 11,085
Cash paid for interest 12,014 12,986
Cash paid for income taxes 9,258 14,028
The accompanying notes are an integral part of these condensed consolidated
financial statements.
6
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) which 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 Six Months Ended
March 31, March 31,
------------------ -----------------
2000 1999 2000 1999
---- ---- ---- ----
Denominator for basic
earnings per share 16,628,316 12,700,368 15,507,527 12,667,757
Effect of dilutive options
and incentive compensation
awards 314,625 304,943 312,581 289,582
---------- ---------- ---------- ----------
Denominator for dilutive
earnings per share 16,942,941 13,005,311 15,820,108 12,957,339
========== ========== ========== ==========
3. INVENTORIES
Inventories consist of the following:
March 31, September 30,
2000 1999
--------- -------------
(In thousands)
Finished products $ 74,125 $ 59,649
Partially finished products 95,415 62,047
Raw materials 100,042 89,417
--------- ---------
Inventories at FIFO cost 269,582 211,113
Less: Progress payments on U.S. government
contracts (9,191) (2,951)
Excess of FIFO cost over LIFO cost (10,999) (9,716)
--------- ---------
$ 249,392 $ 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
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.
On November 1, 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. The acquisition was financed from borrowings under the
Company's senior credit facility.
The acquisition was accounted for using the purchase method of accounting and,
accordingly, the operating results of Kewaunee are included in the Company's
consolidated statements of income beginning November 1, 1999. The purchase
price, including acquisition costs, approximated the estimated fair value of the
assets acquired and liabilities assumed as of the acquisition date.
Had the acquisition 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 March 31, 2000 on the Revolving
Credit Facility, Term Loan A, Term Loan B, and Term Loan C are $38.2 million,
$32.5 million, $13.5 million, and $13.5 million, respectively.
At March 31, 2000, outstanding borrowings of $38.2 million and $9.2 million of
outstanding letters of credit reduced available capacity under the Revolving
Credit Facility to $52.6 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 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.
8
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:
Six Months Ended
March 31,
2000 1999
---- ----
Earnings per share from continuing operations
before extraordinary item
Basic $ 1.16 $ 0.77
Assuming dilution 1.14 0.75
Weighted average shares
Basic 16,627,364 16,462,757
Assuming dilution 16,939,945 16,752,339
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.
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 March 31, 2000. Actual
liability could vary based on
9
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 March 31, 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
March 31, 2000. The Company is also contingently liable under bid, performance
and specialty bonds totaling approximately $148.6 million and open standby
letters of credit issued by the Company's bank in favor of third parties
totaling approximately $9.2 million at March 31, 2000.
10
8. BUSINESS SEGMENT INFORMATION
Three Months Ended Six Months Ended
March 31, March 31,
--------- ---------
2000 1999 2000 1999
---- ---- ---- ----
(In thousands)
Net sales to unaffiliated
customers:
Commercial $181,873 $168,848 $297,267 $265,667
Fire and emergency 102,804 85,781 178,381 159,630
Defense 45,847 44,405 98,743 96,430
Corporate and other -- (500) -- (500)
-------- -------- -------- --------
Consolidated net sales $330,524 $298,534 $574,391 $521,227
======== ======== ======== ========
Operating income (loss):
Commercial $ 17,809 $ 13,624 $ 26,863 $ 18,418
Fire and emergency 9,478 6,878 13,393 11,697
Defense 2,163 4,605 9,658 10,769
Corporate and other (4,795) (8,231) (8,632) (11,180)
-------- -------- -------- --------
Consolidated operating income 24,655 16,876 41,282 29,704
Net interest expense (5,224) (6,404) (10,844) (12,799)
Miscellaneous other 171 198 285 340
-------- -------- -------- -------
Income from continuing
operations before income
taxes, equity in earnings
of unconsolidated partnership
and extraordinary item $ 19,602 $ 10,670 $ 30,723 $ 17,245
======== ======== ======== ========
March 31, September 30,
2000 1999
--------- -------------
(In thusands)
Identifiable assets:
Commercial $ 442,127 $ 381,199
Fire and emergency 295,638 276,692
Defense 76,593 85,796
Corporate and other 5,368 9,603
--------- ---------
Consolidated identifiable assets $ 819,726 $ 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
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Statements of Income
For the Three Months Ended March 31, 2000
(Unaudited)
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------- ------------ ------------
(In thousands)
Net sales $ 109,843 $ 225,691 $ -- $ (5,010) $ 330,524
Cost of sales 97,941 187,832 -- (5,010) 280,763
--------- --------- ------- ---------- ---------
Gross income 11,902 37,859 -- -- 49,761
Operating expenses:
Selling, general and
administrative 10,333 11,899 102 -- 22,334
Amortization of goodwill and
other intangibles -- 2,772 -- -- 2,772
--------- --------- ------- --------- ---------
Total operating expenses 10,333 14,671 102 -- 25,106
--------- --------- ------- --------- ---------
Operating income (loss) 1,569 23,188 (102) -- 24,655
Other income (expense):
Interest expense (4,717) (2,270) -- 1,575 (5,412)
Interest income 56 1,706 1 (1,575) 188
Miscellaneous, net (60) 100 131 -- 171
--------- --------- ------- --------- ---------
(4,721) (464) 132 -- (5,053)
---------- ---------- ------- --------- ----------
Income (loss) from continuing
operations before income taxes
and equity in earnings of
subsidiaries and unconsolidated
partnership (3,152) 22,724 30 -- 19,602
Provision (credit) for income taxes (1,198) 9,150 12 -- 7,964
---------- --------- ------- --------- ---------
(1,954) 13,574 18 -- 11,638
Equity in earnings of subsidiaries
and unconsolidated partnership,
net of income taxes 13,867 -- 275 (13,867) 275
--------- --------- ------- ---------- ---------
Income from continuing operations 11,913 13,574 293 (13,867) 11,913
Discontinued operations, net 2,015 -- -- -- 2,015
--------- --------- ------- --------- ---------
Net income $ 13,928 $ 13,574 $ 293 $ (13,867) $ 13,928
========= ========= ======= ========== =========
12
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Statements of Income
For the Three Months Ended March 31, 1999
(Unaudited)
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------- ------------ ------------
(In thousands)
Net sales $ 101,360 $ 198,635 $ -- $ (1,461) $ 298,534
Cost of sales 89,187 166,288 -- (1,461) 254,014
--------- ---------- ------- ---------- ---------
Gross income 12,173 32,347 -- -- 44,520
Operating expenses:
Selling, general and
administrative 12,458 12,196 100 -- 24,754
Amortization of goodwill and
other intangibles -- 2,890 -- -- 2,890
--------- ---------- ------- --------- ---------
Total operating expenses 12,458 15,086 100 -- 27,644
--------- ---------- ------- --------- ---------
Operating income (loss) (285) 17,261 (100) -- 16,876
Other income (expense):
Interest expense (6,158) (2,062) -- 1,575 (6,645)
Interest income 123 1,671 22 (1,575) 241
Miscellaneous, net 39 35 124 -- 198
--------- ---------- ------- --------- ---------
(5,996) (356) 146 -- (6,206)
---------- ----------- ------- --------- ----------
Income (loss) before income taxes
and equity in earnings of
subsidiaries and unconsolidated
partnership (6,281) 16,905 46 -- 10,670
Provision (credit) for income taxes (2,499) 6,982 18 -- 4,501
---------- ---------- ------- --------- ---------
(3,782) 9,923 28 -- 6,169
Equity in earnings of subsidiaries
and unconsolidated partnership,
net of income taxes 10,331 -- 380 (10,331) 380
--------- ---------- ------- ---------- ---------
Net income $ 6,549 $ 9,923 $ 408 $ (10,331) $ 6,549
========= ========== ======= ========== =========
13
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Statements of Income
For the Six Months Ended March 31, 2000
(Unaudited)
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------- ------------ ------------
(In thousands)
Net sales $ 190,637 $ 393,405 $ -- $ (9,651) $ 574,391
Cost of sales 165,934 328,370 -- (9,651) 484,653
--------- --------- ------- ---------- ---------
Gross income 24,703 65,035 -- -- 89,738
Operating expenses:
Selling, general and
administrative 18,731 23,995 186 -- 42,912
Amortization of goodwill and
other intangibles -- 5,544 -- -- 5,544
--------- --------- ------- --------- ---------
Total operating expenses 18,731 29,539 186 -- 48,456
--------- --------- ------- --------- ---------
Operating income (loss) 5,972 35,496 (186) -- 41,282
Other income (expense):
Interest expense (10,123) (4,225) -- 3,150 (11,198)
Interest income 88 3,374 42 (3,150) 354
Miscellaneous, net (52) 88 249 -- 285
--------- --------- ------- --------- ---------
(10,087) (763) 291 -- (10,559)
---------- ---------- ------- --------- ----------
Income (loss) from continuing
operations before income taxes,
equity in earnings of
subsidiaries and unconsolidated
partnership and extraordinary
item (4,115) 34,733 105 -- 30,723
Provision (credit) for income taxes (1,564) 14,228 40 -- 12,704
---------- --------- ------- --------- ---------
(2,551) 20,505 65 -- 18,019
Equity in earnings of subsidiaries
and unconsolidated partnership,
net of income taxes 21,160 -- 590 (21,160) 590
--------- --------- ------- ---------- ---------
Income from continuing operations
before extraordinary item 18,609 20,505 655 (21,160) 18,609
Discontinued operations, net 2,015 -- -- -- 2,015
Extraordinary item, net (581) -- -- -- (581)
--------- --------- ------- --------- ----------
Net income $ 20,043 $ 20,505 $ 655 $ (21,160) $ 20,043
========= ========= ======= ========== =========
14
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Statements of Income
For the Six Months Ended March 31, 1999
(Unaudited)
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------- ------------ ------------
(In thousands)
Net sales $ 178,094 $ 345,574 $ -- $ (2,441) $ 521,227
Cost of sales 155,529 291,511 -- (2,441) 444,599
--------- --------- ------- ---------- ---------
Gross income 22,565 54,063 -- -- 76,628
Operating expenses:
Selling, general and
administrative 19,756 21,400 143 -- 41,299
Amortization of goodwill and
other intangibles -- 5,625 -- -- 5,625
--------- --------- ------- --------- ---------
Total operating expenses 19,756 27,025 143 -- 46,924
--------- --------- ------- --------- ---------
Operating income (loss) 2,809 27,038 (143) -- 29,704
Other income (expense):
Interest expense (12,342) (4,034) -- 3,150 (13,226)
Interest income 197 3,346 34 (3,150) 427
Miscellaneous, net 111 73 156 -- 340
--------- --------- ------- --------- ---------
(12,034) (615) 190 -- (12,459)
---------- ---------- ------- --------- ----------
Income (loss) before income taxes
and equity in earnings of
subsidiaries and unconsolidated
partnership (9,225) 26,423 47 -- 17,245
Provision (credit) for income taxes (3,618) 11,101 18 -- 7,501
---------- --------- ------- --------- ---------
(5,607) 15,322 29 -- 9,744
Equity in earnings of subsidiaries
and unconsolidated partnership,
net of income taxes 16,068 -- 717 (16,068) 717
--------- --------- ------- ---------- ---------
Net income $ 10,461 $ 15,322 $ 746 $ (16,068) $ 10,461
========= ========= ======= ========== =========
15
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Balance Sheets
March 31, 2000
(Unaudited)
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------- ------------ ------------
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 3,550 $ 1,099 $ 10 $ -- $ 4,659
Receivables, net 49,792 57,634 (19) (2,033) 105,374
Inventories 76,747 172,645 -- -- 249,392
Prepaid expenses 4,833 1,349 -- -- 6,182
Deferred income taxes 5,447 3,638 3,293 -- 12,378
--------- --------- -------- ---------- ---------
Total current assets 140,369 236,365 3,284 (2,033) 377,985
Investment in and advances to:
Subsidiaries 390,701 (2,705) -- (387,996) --
Unconsolidated partnership -- -- 13,885 -- 13,885
Other long-term assets 13,372 9,015 54 -- 22,441
Net property, plant and equipment 22,935 68,203 -- -- 91,138
Goodwill and other intangible
assets, net -- 314,277 -- -- 314,277
--------- --------- -------- ---------- ---------
Total assets $ 567,377 $ 625,155 $ 17,223 $ (390,029) $ 819,726
========= ========= ======== =========== =========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 42,631 $ 58,254 $ 32 $ (601) $ 100,316
Floor plan notes payable -- 39,293 -- (1,432) 37,861
Customer advances 3,101 62,939 -- -- 66,040
Payroll-related obligations 8,674 13,282 31 -- 21,987
Accrued warranty 7,237 7,255 -- -- 14,492
Other current liabilities 22,721 13,881 8,267 -- 44,869
Revolving credit facility and
current maturities of long-term
debt 41,796 234 -- -- 42,030
--------- --------- -------- ---------- ---------
Total current liabilities 126,160 195,138 8,330 (2,033) 327,595
Long-term debt 155,904 2,072 -- -- 157,976
Deferred income taxes (6,146) 36,601 11,598 -- 42,053
Other long-term liabilities 17,938 643 -- -- 18,581
Commitments and contingencies -- -- -- -- --
Investments by and advances from
(to) parent -- 390,701 (2,705) (387,996) --
Shareholders' equity 273,521 -- -- -- 273,521
--------- --------- -------- ---------- ---------
Total liabilities and shareholders'
equity $ 567,377 $ 625,155 $ 17,223 $ (390,029) $ 819,726
========= ========= ======== =========== =========
16
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Balance Sheets
September 30, 1999
(Unaudited)
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------- ------------ ------------
(In thousands)
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
========= ========= ======== ========== ==========
17
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Statements of Cash Flows
For the Six Months Ended March 31, 2000
(Unaudited)
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------- ------------ ------------
(In thousands)
Operating activities:
Income from continuing operations
before extraordinary item $ 18,609 $ 20,505 $ 655 $ (21,160) $ 18,609
Non-cash adjustments 266 12,122 (1,888) -- 10,500
Changes in operating assets and
liabilities (15,320) (27,602) (2,503) -- (45,425)
---------- ---------- --------- --------- ----------
Net cash provided from (used
for) operating activities 3,555 5,025 (3,736) (21,160) (16,316)
Investing activities:
Acquisition of business (5,625) -- -- -- (5,625)
Investments in and advances to
subsidiaries (27,501) 2,111 4,230 21,160 --
Additions to property, plant and
equipment (2,080) (6,596) -- -- (8,676)
Other (1,114) (536) (586) -- (2,236)
---------- ---------- --------- --------- ----------
Net cash provided from (used
for) investing activities (36,320) (5,021) 3,644 21,160 (16,537)
Net cash provided from discontinued
operations 2,015 -- -- -- 2,015
Financing activities:
Net borrowings under revolving
credit facility 33,200 -- -- -- 33,200
Repayments of long-term debt (93,500) (242) -- -- (93,742)
Proceeds from Common Stock
offering 93,736 -- -- -- 93,736
Costs of Common Stock offering (334) -- -- -- (334)
Dividends paid (2,531) -- -- -- (2,531)
Other 31 -- -- -- 31
--------- --------- -------- --------- ---------
Net cash provided from (used
for) financing activities 30,602 (242) -- -- 30,360
--------- ---------- -------- --------- ---------
Decrease in cash and cash
equivalents (148) (238) (92) -- (478)
Cash and cash equivalents at
beginning of period 3,698 1,337 102 -- 5,137
--------- --------- -------- --------- ---------
Cash and cash equivalents at end of
period $ 3,550 $ 1,099 $ 10 $ -- $ 4,659
========= ========= ======== ========= =========
18
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Statements of Cash Flows
For the Six Months Ended March 31, 1999
(Unaudited)
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------- ------------ ------------
(In thousands)
Operating activities:
Net income $ 10,461 $ 15,322 $ 746 $ (16,068) $ 10,461
Non-cash adjustments (1,048) 8,816 (3,516) -- 4,252
Changes in operating assets and
liabilities (21,210) 3,624 (974) -- (18,560)
--------- --------- --------- --------- ----------
Net cash provided from (used for)
operating activities (11,797) 27,762 (3,744) (16,068) (3,847)
Investing activities:
Investments in and advances to
subsidiaries 1,868 (21,745) 3,809 16,068 --
Additions to property, plant and
equipment (1,867) (2,845) -- -- (4,712)
Other (310) (2,232) 90 -- (2,452)
--------- ---------- -------- --------- ----------
Net cash provided from (used for)
investing activities (309) (26,822) 3,899 16,068 (7,164)
Financing activities:
Net borrowings under revolving
credit facility 13,300 -- -- -- 13,300
Repayments of long term debt -- (241) -- -- (241)
Dividends paid (2,103) -- -- -- (2,103)
Other 819 -- -- -- 819
--------- --------- -------- --------- ----------
Net cash provided from (used for)
financing activities 12,016 (241) -- -- 11,775
--------- ---------- -------- --------- ----------
Increase (decrease) in cash and cash
equivalents (90) 699 155 -- 764
Cash and cash equivalents at
beginning of period 1,065 979 1,578 -- 3,622
--------- --------- -------- --------- ----------
Cash and cash equivalents at end of
period $ 975 $ 1,678 $ 1,733 $ -- $ 4,386
========= ========= ======== ========= ==========
19
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, budgets, targets,
projected costs 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 with
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 prospectus dated November 18, 1999 included in the
Company's Registration Statement on Form S-3 No. 333-87149. 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
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:
Second Quarter Fiscal First Six Months Fiscal
--------------------- -----------------------
2000 1999 2000 1999
---- ---- ---- ----
(In thousands)
Net sales to unaffiliated
customers:
Commercial $ 181,873 $ 168,848 $ 297,267 $ 265,667
Fire and emergency 102,804 85,781 178,381 159,630
Defense 45,847 44,405 98,743 96,430
Corporate and other -- (500) -- (500)
--------- --------- --------- ---------
Consolidated net
sales $ 330,524 $ 298,534 $ 574,391 $ 521,227
========= ========= ========= =========
Second Quarter Fiscal 2000 Compared to 1999
Consolidated net sales increased $32.0 million, or 10.7%, to $330.5 million for
the second quarter of fiscal 2000 compared to the second quarter of fiscal 1999.
Commercial segment net sales increased $13.0 million, or 7.7%, to $181.9 million
for the second quarter of fiscal 2000 compared to the second quarter of fiscal
1999. Continued strong end-markets in the concrete placement industry, the
growing popularity of Oshkosh's front-discharge concrete mixer and sales,
marketing and distribution synergies created through the February 1998
acquisition of McNeilus Companies, Inc. ("McNeilus") contributed to an 11.6%
increase in concrete mixer sales for the second quarter of fiscal 2000 compared
to the second quarter of fiscal 1999. Refuse packer sales decreased 4.1% for the
second quarter of fiscal 2000 compared to the second quarter of fiscal 1999 on a
lower mix of packer body and chassis package sales. Refuse packer unit volume in
the quarter was flat as municipal sales increases offset significantly lower
packer shipments to the U.S.'s largest waste haulers.
Fire and emergency segment net sales increased $17.0 million, or 19.8%, to
$102.8 million for the second quarter of fiscal 2000 compared to the second
quarter of fiscal 1999, on a strong mix of custom pumpers and aerials. The
Company believes production inefficiencies resulting from the installation of an
enterprise-wide resource planning ("ERP") system at Pierce Manufacturing
Inc.("Pierce") have largely been resolved.
Defense segment net sales increased $1.4 million, or 3.2%, to $45.8 million for
the second quarter of fiscal 2000 compared to the second quarter of fiscal 1999.
A slight decrease in defense vehicle sales was offset by an increase in parts
sales. Vehicle sales under the Medium Tactical Vehicle Replacement ("MTVR")
contract awarded to Oshkosh in
21
December 1998 began in the second quarter of fiscal 2000. The Company expects
sales under this contract to increase throughout fiscal 2000.
First Six Months of Fiscal 2000 Compared to 1999
Consolidated net sales increased $53.2 million, or 10.2%, to $574.4 million for
the first six months of fiscal 2000 compared to the first six months of fiscal
1999.
Commercial segment net sales increased $31.6 million, or 11.9%, to $297.3
million for the first six months of fiscal 2000 compared to the first six months
of fiscal 1999. Continued strong end-markets in the concrete placement industry,
the growing popularity of Oshkosh's front-discharge concrete mixer and sales,
marketing and distribution synergies created through the February 1998
acquisition of McNeilus contributed to a 13.7% increase in concrete mixer sales
for the first six months of fiscal 2000 compared to the first six months of
fiscal 1999. Refuse packer sales increased 7.3% for the first six months of
fiscal 2000 compared to the first six months of fiscal 1999, generally as a
result of increases in sales to municipal and international customers.
Fire and emergency segment net sales increased $18.8 million, or 11.7%, to
$178.4 million for the first six months of fiscal 2000 compared to the first six
months of fiscal 1999. Pierce comprises a substantial majority of the revenue of
this segment. Pierce's sales increased 12.7% during the period, which is in line
with Pierce's long-term sales growth rate of 11% per annum since 1980. The
Company believes production inefficiencies resulting from the installation of an
ERP system at Pierce have largely been resolved.
Defense segment net sales increased $2.3 million, or 2.4%, to $98.7 million for
the first six months of fiscal 2000 compared to the first six months of fiscal
1999. Vehicle sales under the MTVR contract awarded to Oshkosh in December 1998
began in the second quarter of fiscal 2000. The Company expects defense segment
sales to increase substantially in the second half of fiscal 2000 as MTVR sales
ramp up and as Oshkosh's heavy tactical truck sales are more heavily weighted to
the second half of the year.
Analysis of Consolidated Operating Income
The following table presents operating income by business segment:
Second Quarter Fiscal First Six Months Fiscal
--------------------- -----------------------
2000 1999 2000 1999
---- ---- ---- ----
(In thousands)
Operating income (loss):
Commercial $ 17,809 $ 13,624 $ 26,863 $ 18,418
Fire and emergency 9,478 6,878 13,393 11,697
Defense 2,163 4,605 9,658 10,769
Corporate and other (4,795) (8,231) (8,632) (11,180)
-------- -------- -------- ---------
Consolidated operating
income $ 24,655 $ 16,876 $ 41,282 $ 29,704
======== ======== ======== =========
22
Second Quarter Fiscal 2000 Compared to 1999
Consolidated operating income increased $7.8 million, or 46.1%, for the second
quarter of fiscal 2000 compared to the second quarter of fiscal 1999.
Commercial segment operating income increased $4.2 million, or 30.7%, for the
second quarter of fiscal 2000 compared to the second quarter of fiscal 1999.
Operating income as a percent of segment sales ("operating income margin")
increased to 9.8% of commercial segment sales for the second quarter of fiscal
2000 compared to 8.1% of commercial segment sales for the second quarter 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 $2.6 million, or 37.8%,
for the second quarter of fiscal 2000 compared to the second quarter of fiscal
1999. The operating income margin increased from 8.0% to 9.2% during this same
time period. Increased operating income margins were primarily attributable to
increased sales volume and improved production efficiencies as operations
stabilized under Pierce's new ERP system. The Company believes that any
lingering effects from the system conversion have been substantially resolved.
Defense segment operating income decreased $2.4 million, or 53.0%, for the
second quarter of fiscal 2000 compared to the second quarter of fiscal 1999. The
defense operating income margin decreased to 4.7% of defense segment sales for
the second quarter of fiscal 2000 compared to 10.4% of defense segment sales for
the second quarter of fiscal 1999. Second quarter 2000 operating income was
adversely impacted by an unfavorable truck sales mix and higher bid and proposal
spending compared to the second quarter of fiscal 1999.
Corporate and other expenses decreased $3.4 million to $4.8 million, or 1.5% of
consolidated net sales, for the second quarter of fiscal 2000 from $8.2 million,
or 2.8% of consolidated net sales, for the second quarter of fiscal 1999.
Results for the second quarter of fiscal 1999 included a $3.8 million charge for
litigation. Excluding that charge, corporate expenses increased $0.4 million
generally due to increased staffing to support the Company's higher level of
sales.
First Six Months of Fiscal 2000 Compared to 1999
Consolidated operating income increased $11.6 million, or 39.0%, for the first
six months of fiscal 2000 compared to the first six months of fiscal 1999.
Commercial segment operating income increased $8.4 million, or 45.9%, for the
first six months of fiscal 2000 compared to the first six months of fiscal 1999.
The commercial operating income margin increased to 9.0% of commercial segment
sales for the first six months of fiscal 2000 compared to 6.9% of commercial
segment sales for the first six months of fiscal 1999. Increased concrete mixer
unit volume and continued cost reduction activities contributed to the
improvement in the operating income margin.
23
Fire and emergency segment operating income increased $1.7 million, or 14.5%,
for the first six months of fiscal 2000 compared to the first six months of
fiscal 1999. The operating income margin increased from 7.3% to 7.5% during this
same time period. Increased operating income margins were attributable to the
resolution of the first quarter production inefficiencies following the
installation at Pierce of the final modules of a new ERP system.
Defense segment operating income decreased $1.1 million, or 10.3%, for the first
six months of fiscal 2000 compared to the first six months of fiscal 1999. The
defense operating income margin decreased to 9.8% of defense segment sales for
the first six months of fiscal 2000 compared to 11.2% of defense segment sales
for the first six months of fiscal 1999. Increases in parts and MTVR sales with
lower margins and higher bid and proposal spending contributed to the decreased
operating income margins for the first six months of fiscal 2000 compared to the
first six months of fiscal 1999.
Corporate and other expenses decreased $2.5 million to $8.6 million, or 1.5% of
consolidated net sales, for the first six months of fiscal 2000 from $11.2
million, or 2.1% of consolidated net sales, for the first six months of fiscal
1999. Results for the first six months of fiscal 1999 included a $3.8 million
pre-tax charge for litigation. Excluding that charge, corporate expenses
increased $1.3 million generally due to increased staffing to support the higher
level of sales.
Analysis of Non-Operating Income Statement Items
Second Quarter of Fiscal 2000 Compared to 1999
Net interest expense decreased $1.2 million, or 18.4%, in the second quarter of
fiscal 2000 compared to the second 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 $1.9 million reduction in interest
expense for the quarter. Increased borrowings to fund the acquisition of
Kewaunee Engineering Corporation ("Kewaunee") 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
second quarter of fiscal 2000 was 40.6% compared to 42.2% in the second quarter
of fiscal 1999. Excluding the impact of $1.4 million of nondeductible goodwill
in the second quarter of fiscal 2000 and $1.5 million in the second quarter of
fiscal 1999, the Company's effective income tax rate was 38% in both periods.
Equity in earnings of an unconsolidated partnership of $0.3 million in the
second quarter of fiscal 2000 and $0.4 million in the second quarter of fiscal
1999 represents the Company's equity interest in 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.
24
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 the
second quarter of fiscal 2000
First Six Months of Fiscal 2000 Compared to 1999
Net interest expense decreased $2.0 million, or 15.3%, in the first six months
of fiscal 2000 compared to the first six 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 $2.9 million reduction in interest
expense for the period. Increased working capital borrowings to fund the
Kewaunee acquisition and to support overall sales growth contributed to the
increase in net interest expense after consideration of the debt prepayment.
The effective tax rate for combined federal and state income taxes for the first
six months of fiscal 2000 was 41.4% compared to 43.5% for the first six months
of fiscal 1999. Excluding the impact of $2.7 million of nondeductible goodwill
in the first six months of fiscal 2000 and $2.8 million in the first six months
of fiscal 1999, the Company's effective income tax rate was 38% for both
periods.
Equity in earnings of an unconsolidated partnership of $0.6 million in the first
six months of fiscal 2000 and $0.7 million in the first six months of fiscal
1999 represents the Company's equity in earnings of its lease financing
partnership.
Financial Condition
First Six Months of Fiscal 2000
During the first six months of fiscal 2000, cash decreased by $0.5 million to
$4.7 million at March 31, 2000. Cash used in operating activities of $16.3
million, capital expenditures of $8.7 million, an increase in long-term assets
of $2.3 million, dividend payments of $2.5 million and the acquisition of
Kewaunee for $5.6 million were funded by net borrowings of $33.2 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. During
the period, inventory increased $50.9 million, including $36.6 million in the
commercial segment as a result of seasonal build requirements. Fire and
emergency inventories increased $17.1 million during the period, generally as a
result of earlier commercial chassis and systems-related production
inefficiencies at Pierce. Defense segment inventories were down slightly due to
timing of inventory purchases. Increases in inventory were partially offset by
increased trade payables of $15.6 million and a $11.2 million increase in floor
plan notes payable related to commercial segment chassis purchases.
First Six Months of Fiscal 1999
During the first six months of fiscal 1999, cash increased by $0.8 million. Cash
used in operations during the period of $3.8 million, equipment and
25
software purchases of $7.2 million and dividend and scheduled debt payments of
$2.1 million and $0.2 million, respectively, were funded by a $13.3 million
increase in borrowings under the Company's revolving credit facility and $0.8
million of proceeds from exercise of Common Stock options under the Company's
Incentive Stock Plan.
Liquidity and Capital Resources
The Company had $52.6 million of unused availability under the terms of its
revolving credit facility as of March 31, 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 of term
indebtedness under the Company's senior credit facility. In addition, the
Company purchased the manufacturing assets of Kewaunee. The Kewaunee acquisition
was 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, including the working capital
requirements associated with the start-up of production under the MTVR contract
and the acquisition of Kewaunee.
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
$15 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.
26
Customers and Backlog
Sales to the U. S. Department of Defense comprised approximately 17% of the
Company's net sales in the first six 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 March 31, 2000 increased 29.3% to $739.9 million
compared to $572.2 million at March 31, 1999. The commercial segment backlog
decreased by $19.4 million, or 10.3%, to $168.3 million at March 31, 2000
compared to March 31, 1999. The fire and emergency segment backlog increased
$29.7 million, or 14.9%, to $228.8 million at March 31, 2000 compared to March
31, 1999. The defense segment backlog increased by $157.4 million, or 84.9%, to
$342.8 million at March 31, 2000 compared to March 31, 1999, reflecting the
funding of the second year of the MTVR contract. Approximately 30% of the
aggregate March 31, 2000 backlog is not expected to be filled in fiscal 2000.
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
OSHKOSH TRUCK CORPORATION
PART II. OTHER INFORMATION
FORM 10-Q
MARCH 31, 2000
ITEM 1 LEGAL PROCEEDINGS
McNeilus was a defendant in litigation, which was commenced in 1998 prior to the
acquisition of McNeilus by the Company, in the U.S. District court for the
Northern District of Alabama. The litigation, which was brought by The Heil Co.
("Heil"), a McNeilus competitor, sought damages and claims that McNeilus
infringed certain aspects of one of its patents. A settlement of the matter was
reached on January 12, 2000. The settlement included a payment to Heil, the
amount of which was fully reserved for at December 31, 1999.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
At the annual meeting of shareholders held on January 31, 2000, all of the
persons nominated as directors were elected. The following table sets forth
certain information with respect to such election.
Shares
Shares Withholding Other Shares
Name of Nominee Voted For Authority Not Voted
--------------- --------- ----------- ------------
Class A Common Stock Nominees
- -----------------------------
J.W. Andersen 228,138 0 197,844
R.G. Bohn 228,138 0 197,844
F.M. Franks 228,138 0 197,844
M.W. Grebe 228,138 0 197,844
K.J. Hempel 228,138 0 197,844
S.P. Mosling 228,134 4 197,844
J.P. Mosling, Jr. 228,134 4 197,844
Common Stock Nominees
- -----------------------------
D.T. Carroll 12,914,263 50,024 3,236,886
R.G. Sim 12,912,660 51,627 3,236,886
Also at the annual meeting, shareholders approved a proposal to amend the
Company's Restated Articles of Incorporation to increase the number of shares of
Common Stock that the Company is authorized to issue from 18,000,000 to
60,000,000. The following table sets forth certain information with respect to
such vote.
Shares Abstentions
Shares Voted and Broker
Voted For Against Non-Votes
--------- ------- -----------
Class A Common Stock 225,844 0 200,138
Common Stock 8,865,413 4,055,126 3,280,634
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibits are filed herewith:
3.1 Form of Amendment to Restated Articles of Incorporation
of Oshkosh Truck Corporation.
3.2 Restated Articles of Incorporation of Oshkosh Truck
Corporation, as amended.
10.1 Oshkosh Truck Corporation Executive Retirement Plan
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
28
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
April 26, 2000 /S/ R. G. Bohn
--------------------------------------------
R. G. Bohn
Chairman, President and
Chief Executive Officer
(Principal Executive Officer)
April 26, 2000 /S/ C. L. Szews
--------------------------------------------
C. L. Szews
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
April 26, 2000 /S/ T. J. Polnaszek
--------------------------------------------
T. J. Polnaszek
Vice President and Controller
(Principal Accounting Officer)
29
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
3.1 Form of Amendment to Restated Articles of Incorporation of
Oshkosh Truck Corporation.
3.2 Restated Articles of Incorporation of Oshkosh Truck Corporation,
as amended.
10.1 Oshkosh Truck Corporation Executive Retirement Plan
27 Financial Data Schedule
30