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 December 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
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Commission File Number 0-13886
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Oshkosh Truck Corporation
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[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
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[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 January 31, 2001: 419,991
- ----------------------------------------------------------------------
Common Stock Outstanding as of January 31, 2001: 16,252,166
- ----------------------------------------------------------------------
OSHKOSH TRUCK CORPORATION
FORM 10-Q INDEX
FOR THE QUARTER ENDED DECEMBER 31, 2000
Page
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Statements of Income
- Three Months Ended December 31, 2000 and 1999 ...............3
Condensed Consolidated Balance Sheets
- December 31, 2000 and September 30, 2000.....................4
Condensed Consolidated Statement of Shareholders' Equity
- Three Months Ended December 31, 2000 ........................5
Condensed Consolidated Statements of Cash Flows
- Three Months Ended December 31, 2000 and 1999 ...............6
Notes to Condensed Consolidated Financial Statements
- December 31, 2000............................................7
Item 2. Management's Discussion and Analysis of Consolidated
Financial Condition and Results of Operations ................18
Item 3. Quantitative and Qualitative Disclosure of Market Risk ..........23
Part II. Other Information
Item 1. Legal Proceedings ...............................................24
Item 6. Exhibits and Reports on Form 8-K ................................24
Signatures .................................................................25
2
PART I. ITEM 1. FINANCIAL INFORMATION
OSHKOSH TRUCK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
December 31,
2000 1999
---- ----
(In thousands, except
per share amounts)
Net sales $ 281,517 $ 243,867
Cost of sales 238,250 203,890
------------ ------------
Gross income 43,267 39,977
Operating expenses:
Selling, general and administrative 22,619 20,578
Amortization of goodwill and other
intangibles 2,864 2,772
------------ ------------
Total operating expenses 25,483 23,350
------------ ------------
Operating income 17,784 16,627
Other income (expense):
Interest expense (4,658) (5,786)
Interest income 169 166
Miscellaneous, net -- 114
------------ ------------
(4,489) (5,506)
------------ ------------
Income before items noted below 13,295 11,121
Provision for income taxes 5,375 4,740
------------ ------------
7,920 6,381
Equity in earnings of unconsolidated
partnership, net of income taxes 303 315
------------ ------------
Income from operations 8,223 6,696
Extraordinary charge for early retirement
of debt, net of income tax benefit -- (581)
------------ ------------
Net income $ 8,223 $ 6,115
============ ============
Earnings (loss) per share:
Income from operations $ 0.49 $ 0.46
Extraordinary charge -- (0.04)
------------ ------------
Net income $ 0.49 $ 0.42
============ ============
Earnings (loss) per share assuming
dilution:
Income from operations $ 0.48 $ 0.46
Extraordinary charge -- (0.04)
------------ ------------
Net income $ 0.48 $ 0.42
============ ============
Cash dividends:
Class A Common Stock $ 0.07500 $ 0.07500
Common Stock $ 0.08625 $ 0.08625
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
OSHKOSH TRUCK CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
December, 31, September 30,
2000 2000
---- ----
(Unaudited)
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 4,854 $ 13,569
Receivables, net 102,163 106,805
Inventories 236,373 201,210
Prepaid expenses 6,076 5,424
Deferred income taxes 13,608 14,708
------------- --------------
Total current assets 363,074 341,716
Investment in unconsolidated partnership 15,954 15,179
Other long-term assets 13,408 9,995
Property, plant and equipment 213,695 206,507
Less accumulated depreciation (90,231) (87,748)
-------------- --------------
Net property, plant and equipment 123,464 118,759
Goodwill and other intangible assets, net 314,102 310,731
------------- --------------
Total assets $ 830,002 $ 796,380
============= ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 63,249 $ 84,215
Floor plan notes payable 36,085 23,925
Customer advances 88,659 58,493
Payroll-related obligations 16,114 23,465
Accrued warranty 14,849 15,519
Other current liabilities 59,641 52,310
Revolving credit facility and current
maturities of long-term debt 17,606 8,544
------------- --------------
Total current liabilities 296,203 266,471
Long-term debt 151,511 154,238
Deferred income taxes 45,705 46,414
Other long-term liabilities 28,308 28,200
Commitments and contingencies
Shareholders' equity 308,275 301,057
------------- --------------
Total liabilities and shareholders' equity $ 830,002 $ 796,380
============= ==============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
OSHKOSH TRUCK CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
THREE MONTHS ENDED DECEMBER 31, 2000
(Unaudited)
Common Stock Other
Common Paid-in Retained in Treasury Comprehensive
Stock Capital Earnings at Cost Income Total
----- ------- -------- ------- -------------- -----
(In thousands, except per share amounts)
Balance at
September 30, 2000 $ 178 $ 109,740 $ 201,791 $ (10,652) $ -- $ 301,057
Comprehensive
income:
Net income -- -- 8,223 -- -- 8,223
Gain on
derivative
instruments,
net -- -- -- -- 336 336
--------- --------- --------- --------- --------- ---------
Comprehensive
income 8,559
Cash dividends:
Class A Common
Stock -- -- (32) -- -- (32)
Common Stock -- -- (1,402) -- -- (1,402)
Other -- 54 -- 39 93
--------- --------- --------- --------- --------- ---------
Balance at
December 31, 2000 $ 178 $ 109,794 $ 208,580 $ (10,613) $ 336 $ 308,275
========= ========= ========= ========= ========= =========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
OSHKOSH TRUCK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
December 31,
2000 1999
---- ----
(In thousands)
Operating activities:
Income from operations $ 8,223 $ 6,696
Non-cash adjustments 7,795 4,202
Changes in operating assets and liabilities (8,015) (5,624)
------------------ ------------------
Net cash provided from operating activities 8,003 5,274
Investing activities:
Acquisition of businesses, net of cash acquired (14,423) (5,893)
Additions to property, plant and equipment (4,244) (4,486)
Increase in other long-term assets (3,008) (1,005)
------------------ ------------------
Net cash used for investing activities (21,675) (11,384)
Financing activities:
Net borrowings under revolving credit
facility 8,600 6,000
Repayment of long-term debt (2,265) (93,709)
Proceeds from Common Stock offering -- 93,736
Costs of Common Stock offering -- (341)
Dividends paid (1,433) (1,102)
Other 55 28
----------------- -----------------
Net cash provided from financing activities 4,957 4,612
----------------- -----------------
Decrease in cash and cash equivalents (8,715) (1,498)
Cash and cash equivalents at beginning of period 13,569 5,137
----------------- -----------------
Cash and cash equivalents at end of period $ 4,854 $ 3,639
================= =================
Supplementary disclosures:
Depreciation and amortization $ 7,080 $ 5,780
Cash paid for interest 1,396 4,566
Cash paid for income taxes 2,832 361
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
General - 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 2000 annual report to shareholders.
Reclassifications - Certain reclassifications have been made to the fiscal 2000
financial statements to conform to the fiscal 2001 presentation.
Derivative Financial Instruments - On October 1, 2000, the Company adopted
Financial Accounting Standard No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("FAS 133"). This statement requires companies to record
derivatives on the balance sheet as assets or liabilities, measured at fair
value. Any changes in fair value of these instruments are recorded in the income
statement or other comprehensive income. The impact of adopting FAS 133 on
accumulated other comprehensive income resulted in a loss of $0.1 million.
During the quarter, the Company did not reclassify any derivative gains or
losses to the income statement. The cumulative effect of adopting FAS 133 on the
results of operations was immaterial.
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
December 31,
2000 1999
---------- ----------
Denominator for basic earnings
per share 16,668,914 14,398,921
Effect of dilutive options and
incentive compensation awards 401,993 310,575
-------------- --------------
Denominator for dilutive earnings
per share 17,070,907 14,709,496
============== ==============
7
3. INVENTORIES
Inventories consist of the following:
December 31, September 30,
2000 2000
---- ----
(In thousands)
Finished products $ 51,634 $ 53,068
Partially finished products 98,880 75,667
Raw materials 110,719 95,776
-------------- -------------
Inventories at FIFO cost 261,233 224,511
Less: Progress payments on U.S.
government contracts (13,531) (12,313)
Excess of FIFO cost over
LIFO cost (11,329) (10,988)
-------------- -------------
$ 236,373 $ 201,210
============== =============
Title to all inventories related to government contracts, which provide for
progress payments, vests with the government to the extent of unliquidated
progress payments.
4. ACQUISITIONS
On October 30, 2000, the Company acquired all of the issued and outstanding
capital stock of Medtec Ambulance Corporation ("Medtec") for $14.4 million in
cash, including acquisition costs and net of cash acquired. Medtec is a U.S.
manufacturer of custom ambulances and rescue vehicles. The acquisition was
financed from available cash and borrowings under the Company's revolving credit
facility ("Revolving Credit Facility").
The acquisition was accounted for using the purchase method of accounting and,
accordingly, the operating results of Medtec are included in the Company's
consolidated statements of income beginning October 30, 2000. The purchase
price, including acquisition costs, exceeded the estimated fair value of the
assets acquired and liabilities assumed as of the acquisition date by
approximately $5.9 million, which has been recorded as goodwill and which will
be amortized over a 25 year period. The purchase price allocation for Medtec is
preliminary and further adjustments are likely based on final valuations and
finalization of integration plans. Final adjustments are not expected to have a
material impact on the Company's financial statements.
Had the acquisition occurred as of October 1, 1999, there would have been no
material proforma effect on net sales, income before extraordinary charge or net
income.
5. LONG-TERM DEBT
The Company has outstanding a senior credit facility ("Senior Credit Facility")
and $100.0 million of 8.75% senior subordinated notes due March 1, 2008. The
Senior Credit Facility consists of a $170.0 million Revolving Credit Facility,
which had $8.6 million outstanding at December 31, 2000, and a term loan with
$58.0 million outstanding at December 31, 2000. The Senior Credit Facility
matures in January 2006.
8
At December 31, 2000, outstanding borrowings of $8.6 million and $14.5 million
of outstanding letters of credit reduced available capacity under the Revolving
Credit Facility to $146.9 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.
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 then outstanding 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, is summarized below:
Three Months Ended
December 31, 1999
-----------------
Earnings per share before extraordinary charge
Basic $ 0.44
Assuming dilution 0.43
Weighted average shares
Basic 16,626,421
Assuming dilution 16,936,996
7. COMMITMENTS AND CONTINGENCIES
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
9
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 December 31,
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 December 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 million at
December 31, 2000. The Company is also contingently liable under bid,
performance and specialty bonds totaling approximately $136.9 million and open
standby letters of credit issued by the Company's bank in favor of third parties
totaling approximately $14.6 million at December 31, 2000.
10
8. BUSINESS SEGMENT INFORMATION
Three Months Ended
December 31,
2000 1999
------------ -----------
(In thousands)
Net sales to unaffiliated customers:
Commercial $ 106,026 $ 115,394
Fire and emergency 93,746 75,577
Defense 81,745 52,896
------------ ----------
Consolidated $ 281,517 $ 243,867
============ ==========
Operating income (loss):
Commercial $ 6,172 $ 9,054
Fire and emergency 7,355 3,915
Defense 8,546 7,495
Corporate and other (4,289) (3,837)
------------ ----------
Consolidated operating income 17,784 16,627
Net interest expense (4,489) (5,620)
Miscellaneous other -- 114
------------ ----------
Income before income taxes, equity
in earnings of unconsolidated
partnership and extraordinary
charge $ 13,295 $ 11,121
============ ==========
December 31, September 30,
2000 2000
---- ----
(In thousands)
Identifiable assets:
Commercial $ 419,995 $ 385,622
Fire and emergency 305,149 288,904
Defense 99,714 108,528
Corporate and other 5,144 13,326
------------ ------------
Consolidated $ 830,002 $ 796,380
============ ============
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.
11
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Statements of Income
For the Three Months Ended December 31, 2000
(Unaudited)
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ ------------
(In thousands)
Net sales $ 108,039 $ 176,238 $ -- $ (2,760) $ 281,517
Cost of sales 93,212 147,950 -- (2,912) 238,250
---------- ---------- ----------- ---------- -----------
Gross income 14,827 28,288 -- 152 43,267
Operating expenses:
Selling, general and
administrative 9,369 13,319 (69) -- 22,619
Amortization of goodwill and
other intangibles -- 2,864 -- -- 2,864
---------- ---------- ----------- ---------- -----------
Total operating expenses 9,369 16,183 (69) -- 25,483
---------- ---------- ----------- ---------- -----------
Operating income 5,458 12,105 69 152 17,784
Other income (expense):
Interest expense (5,511) (5,722) -- 6,575 (4,658)
Interest income 5,035 1,709 -- (6,575) 169
Miscellaneous, net 2,728 (2,728) -- -- --
---------- ---------- ----------- ---------- -----------
2,252 (6,741) -- -- (4,489)
---------- ---------- ----------- ---------- ------------
Income before items noted below 7,710 5,364 69 152 13,295
Provision for income taxes 2,766 2,526 26 57 5,375
---------- ---------- ----------- ---------- -----------
4,944 2,838 43 95 7,920
Equity in earnings of subsidiaries
and unconsolidated partnership,
net of income taxes 3,279 -- 303 (3,279) 303
---------- ---------- ----------- ---------- -----------
Net income $ 8,223 $ 2,838 $ 346 $ (3,184) $ 8,223
========== ========== =========== ========== ===========
12
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Statements of Income
For the Three Months Ended December 31, 1999
(Unaudited)
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ ------------
(In thousands)
Net sales $ 80,794 $ 167,714 $ -- $ (4,641) $ 243,867
Cost of sales 67,993 140,538 -- (4,641) 203,890
---------- ---------- ----------- ----------- -----------
Gross income 12,801 27,176 -- -- 39,977
Operating expenses:
Selling, general and
administrative 8,398 12,096 84 -- 20,578
Amortization of goodwill and
other intangibles -- 2,772 -- -- 2,772
---------- ---------- ----------- ---------- -----------
Total operating expenses 8,398 14,868 84 -- 23,350
---------- ---------- ----------- ---------- -----------
Operating income (loss) 4,403 12,308 (84) -- 16,627
Other income (expense):
Interest expense (5,406) (1,955) -- 1,575 (5,786)
Interest income 32 1,668 41 (1,575) 166
Miscellaneous, net 8 (12) 118 -- 114
---------- ---------- ----------- ---------- -----------
(5,366) (299) 159 -- (5,506)
----------- ----------- ----------- ---------- ------------
Income (loss) before items noted
below (963) 12,009 75 -- 11,121
Provision (credit) for income taxes (366) 5,078 28 -- 4,740
----------- ---------- ----------- ---------- -----------
(597) 6,931 47 -- 6,381
Equity in earnings of subsidiaries
and unconsolidated partnership,
net of income taxes 7,293 -- 315 (7,293) 315
---------- ---------- ----------- ----------- -----------
Income from operations 6,696 6,931 362 (7,293) 6,696
Extraordinary charge for early
retirement of debt, net of income
tax benefit (581) -- -- -- (581)
---------- ---------- ----------- ---------- -----------
Net income $ 6,115 $ 6,931 $ 362 $ (7,293) $ 6,115
========== ========== =========== =========== ===========
13
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Balance Sheets
December 31, 2000
(Unaudited)
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ ------------
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 3,532 $ 1,142 $ 180 $ -- $ 4,854
Receivables, net 52,925 50,358 181 (1,301) 102,163
Inventories 71,193 165,237 -- (57) 236,373
Prepaid expenses and other 10,898 8,643 143 -- 19,684
--------- ---------- --------- ------------ ------------
Total current assets 138,548 225,380 504 (1,358) 363,074
Investment in and advances to:
Subsidiaries 394,890 5,801 -- (400,691) --
Unconsolidated partnership -- -- 15,954 -- 15,954
Other long-term assets 7,503 5,695 210 -- 13,408
Net property, plant and equipment 32,827 90,637 -- -- 123,464
Goodwill and other intangible
assets, net -- 314,102 -- -- 314,102
--------- ---------- --------- ------------ ------------
Total assets $ 573,768 $ 641,615 $ 16,668 $ (402,049) $ 830,002
========= ========== ========= ============ ============
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 26,131 $ 38,414 $ 5 $ (1,301) $ 63,249
Floor plan notes payable -- 36,085 -- -- 36,085
Customer advances 7,920 80,713 26 -- 88,659
Payroll-related obligations 7,051 9,032 31 -- 16,114
Accrued warranty 7,013 7,836 -- -- 14,849
Other current liabilities 32,450 27,027 164 -- 59,641
Revolving credit facility and
current maturities of long-term
debt 17,100 237 269 -- 17,606
--------- ---------- --------- ------------ ------------
Total current liabilities 97,665 199,344 495 (1,301) 296,203
Long-term debt 149,500 1,843 168 -- 151,511
Deferred income taxes (794) 36,295 10,204 -- 45,705
Other long-term liabilities 19,122 9,186 -- -- 28,308
Commitments and contingencies
Investments by and advances from
(to) parent -- 394,947 5,801 (400,748) --
Shareholders' equity 308,275 -- -- -- 308,275
--------- ----------- --------- ------------ ------------
Total liabilities and shareholders'
equity $ 573,768 $ 641,615 $ 16,668 $ (402,049) $ 830,002
========= ========== ========= ============ ============
14
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Balance Sheets
September 30, 2000
(Unaudited)
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ ------------
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 13,034 $ 499 $ 36 $ -- $ 13,569
Receivables, net 61,156 47,473 272 (2,096) 106,805
Inventories 59,552 141,867 -- (209) 201,210
Prepaid expenses and other 12,153 7,836 143 -- 20,132
--------- --------- --------- --------- ---------
Total current assets 145,895 197,675 451 (2,305) 341,716
Investment in and advances to:
Subsidiaries 382,723 4,308 -- (387,031) --
Unconsolidated partnership -- -- 15,179 -- 15,179
Other long-term assets 7,731 1,980 284 -- 9,995
Net property, plant and equipment 30,196 88,563 -- -- 118,759
Goodwill and other intangible
assets, net -- 310,731 -- -- 310,731
--------- --------- --------- --------- ---------
Total assets $ 566,545 $ 603,257 $ 15,914 $(389,336) $ 796,380
========= ========= ========= ========= =========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 39,602 $ 46,704 $ 5 $ (2,096) $ 84,215
Floor plan notes payable -- 23,925 -- -- 23,925
Customer advances 3,114 55,353 26 -- 58,493
Payroll-related obligations 10,642 12,792 31 -- 23,465
Accrued warranty 6,867 8,652 -- -- 15,519
Other current liabilities 27,234 24,912 164 -- 52,310
Revolving credit facility and
current maturities of long-term
debt 8,000 237 307 -- 8,544
--------- --------- --------- --------- ---------
Total current liabilities 95,459 172,575 533 (2,096) 266,471
Long-term debt 152,000 2,052 186 -- 154,238
Deferred income taxes (905) 36,432 10,887 -- 46,414
Other long-term liabilities 18,934 9,266 -- -- 28,200
Commitments and contingencies
Investments by and advances from
(to) parent -- 382,932 4,308 (387,240) --
Shareholders' equity 301,057 -- -- -- 301,057
--------- --------- --------- --------- ---------
Total liabilities and shareholders'
equity $ 566,545 $ 603,257 $ 15,914 $(389,336) $ 796,380
========= ========= ========= ========= =========
15
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Statements of Cash Flows
For the Three Months Ended December 31, 2000
(Unaudited)
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ ------------
(In thousands)
Operating activities:
Net income $ 8,223 $ 2,838 $ 346 $ (3,184) $ 8,223
Non-cash adjustments 3,321 5,642 (1,168) -- 7,795
Changes in operating assets and
liabilities (10,292) 2,314 115 (152) (8,015)
--------- --------- ---------- -------- ----------
Net cash provided from (used for)
operating activities 1,252 10,794 (707) (3,336) 8,003
Investing activities:
Acquisition of business, net of
cash acquired -- (14,423) -- -- (14,423)
Investments in and advances to
subsidiaries (12,167) 7,684 1,147 3,336 --
Additions to property, plant and
equipment (3,790) (454) -- -- (4,244)
Other (19) (2,749) (240) -- (3,008)
--------- --------- ---------- -------- ----------
Net cash provided from (used for)
investing activities (15,976) (9,942) 907 3,336 (21,675)
Financing activities:
Net borrowings under revolving
credit facility 8,600 -- -- -- 8,600
Repayment of long term debt (2,000) (209) (56) -- (2,265)
Dividends paid (1,433) -- -- -- (1,433)
Other 55 -- -- -- 55
--------- --------- ---------- -------- ----------
Net cash provided from (used for)
financing activities 5,222 (209) (56) -- 4,957
--------- --------- ---------- -------- ----------
Increase (decrease) in cash and cash
equivalents (9,502) 643 144 -- (8,715)
Cash and cash equivalents at
beginning of period 13,034 499 36 -- 13,569
--------- --------- ---------- -------- ----------
Cash and cash equivalents at end of
period $ 3,532 $ 1,142 $ 180 $ -- $ 4,854
========= ========= ========== ======== ==========
16
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Statements of Cash Flows
For the Three Months Ended December 31, 1999
(Unaudited)
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ ------------
(In thousands)
Operating activities:
Income from operations $ 6,696 $ 6,931 $ 362 $ (7,293) $ 6,696
Non-cash adjustments 961 4,692 (1,451) -- 4,202
Changes in operating assets and
liabilities 7,104 (11,426) (1,302) -- (5,624)
--------- ---------- ----------- ---------- -----------
Net cash provided from (used
for) operating activities 14,761 197 (2,391) (7,293) 5,274
Investing activities:
Acquisition of business, net of
cash acquired (5,893) -- -- -- (5,893)
Investments in and advances to
subsidiaries (13,748) 3,153 3,302 7,293 --
Additions to property, plant and
equipment (1,654) (2,832) -- -- (4,486)
Other 183 (296) (892) -- (1,005)
--------- ---------- ----------- ---------- -----------
Net cash provided from (used
for) investing activities (21,112) 25 2,410 7,293 (11,384)
Financing activities:
Net borrowings under revolving
credit facility 6,000 -- -- -- 6,000
Repayment of long-term debt (93,500) (209) -- -- (93,709)
Proceeds from Common Stock
offering 93,736 -- -- -- 93,736
Costs of Common Stock offering (341) -- -- -- (341)
Dividends paid (1,102) -- -- -- (1,102)
Other 28 -- -- -- 28
--------- --------- ---------- ---------- ----------
Net cash provided from (used
for) financing activities 4,821 (209) -- -- 4,612
--------- ---------- ---------- ---------- ----------
Increase (decrease) in cash and cash
equivalents (1,530) 13 19 -- (1,498)
Cash and cash equivalents at
beginning of period 3,698 1,337 102 -- 5,137
--------- --------- ---------- ---------- ----------
Cash and cash equivalents at end of
period $ 2,168 $ 1,350 $ 121 $ -- $ 3,639
========= ========= ========== ========== ==========
17
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
statements that the Company believes are "forward-looking statements" 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 similar
terminology. The Company 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 U.S. government expenditures; (3)
the potential for actual costs to exceed projected costs under long-term,
fixed-price government contracts; (4) the risks related to suspension,
termination or audit of U.S. government contracts, including for failure to meet
performance thresholds; (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
January 25, 2001. 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, ambulances and other emergency
vehicles primarily sold to fire departments, airports and other governmental
units in the U. S. and abroad.
18
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:
First Quarter Fiscal
2001 2000
------------ -------------
(In thousands)
Net sales to unaffiliated customers:
Commercial $ 106,026 $ 115,394
Fire and emergency 93,746 75,577
Defense 81,745 52,896
------------- -------------
Consolidated $ 281,517 $ 243,867
============= =============
First Quarter 2001 Compared to 2000
Consolidated net sales increased 15.4% to $281.5 million for the first quarter
of fiscal 2001, compared to the first quarter of fiscal 2000. The November 1999
acquisition of Kewaunee Engineering Corporation ("Kewaunee") and the October
2000 acquisition of Medtec Ambulance Corporation ("Medtec") contributed 1.8% of
the increase in net sales.
Commercial segment net sales decreased 8.1% to $106.0 million for the first
quarter of fiscal 2001 compared to the first quarter of fiscal 2000. Concrete
placement sales were down 9.3% in 2001 compared to 2000. Fiscal 2000 results
were characterized by unusually strong end-markets and all-time historical sales
levels. First quarter declines in concrete placement sales were more than
anticipated and believed to be caused by an uncertain economic environment.
Refuse truck body sales decreased 6.0% and were impacted by a slow-down in large
commercial waste-hauler purchases.
Fire and emergency segment net sales increased 24.0% to $93.7 million for the
first quarter of fiscal 2001 compared to the first quarter of fiscal 2000.
Excluding the acquisitions of Kewaunee and Medtec, sales increased 18.8% for the
quarter. Pierce Manufacturing Inc. ("Pierce") comprises a substantial majority
of the revenue of this segment. Pierce's sales increased 13.2% in the first
quarter of fiscal 2001 compared to the first quarter of fiscal 2000. Pierce's
sales were limited in the first quarter of fiscal 2000 by the late receipt of
commercial chassis from truck suppliers and by production inefficiencies
resulting from the installation of an enterprise-wide resource planning ("ERP")
system at Pierce. First quarter of fiscal 2001 results also include increased
shipments of aircraft rescue and fire fighting vehicles internationally compared
to results for the first quarter of fiscal 2000.
Defense segment net sales increased 54.5% to $81.7 million for the first quarter
of fiscal 2001 compared to the first quarter of fiscal 2000. Increased Medium
Tactical Vehicle Replacement ("MTVR") sales resulting from the planned ramp-up
to full rate production scheduled for later this year, increased parts sales and
increased international sales accounted for the
19
increase during the quarter. The Company began to produce MTVR vehicles during
the second quarter of fiscal 2000.
Analysis of Consolidated Operating Income
The following table presents operating income by business segment:
First Quarter Fiscal
2001 2000
---- ----
(In thousands)
Operating income (loss):
Commercial $ 6,172 $ 9,054
Fire and emergency 7,355 3,915
Defense 8,546 7,495
Corporate and other (4,289) (3,837)
------------ ------------
Consolidated operating
income $ 17,784 $ 16,627
============ ============
First Quarter 2001 Compared to 2000
Consolidated operating income increased 7.0% to $17.8 million for the first
quarter of fiscal 2001 compared to the first quarter of fiscal 2000. Excluding
the impact of the November 1999 acquisition of Kewaunee and the October 2000
acquisition of Medtec, consolidated operating income increased 3.6% compared to
consolidated operating income for the first quarter of fiscal 2000.
Commercial segment operating income decreased 31.8% for the first quarter of
fiscal 2001 compared to 2000. Operating income as a percent of segment sales
("operating income margin") decreased to 5.8% of commercial segment sales for
the first quarter of fiscal 2001 compared to 7.8% of commercial segment sales
for the first quarter of fiscal 2000. First quarter 2001 operating income
margins returned to levels experienced prior to last year (5.0% in the first
quarter of fiscal 1999) due to lower sales and decreased absorption of fixed
overhead costs in this seasonally slower quarter. Lower absorption of overhead
was partially offset by productivity improvements associated with the refuse
body plant expansion project completed in the fourth quarter of fiscal 2000.
Fire and emergency segment operating income increased 87.9% to $7.4 million for
the first quarter of fiscal 2001 compared to the first quarter of fiscal 2000.
The operating income margin increased from 5.2% to 7.8% during this same period.
Excluding the impacts of the Kewaunee and Medtec acquisitions, operating income
margins increased from 5.1% in the first quarter of fiscal 2000 to 7.5% for the
first quarter of fiscal 2001. Operating income margins in the first quarter of
fiscal 2000 were lower than historic levels attributable to commercial chassis
shortages from suppliers and short-term production inefficiencies following the
installation at Pierce of the final modules of a new ERP system during the third
quarter of fiscal 1999. Increased international sales volume of the Company's
aircraft rescue and fire fighting business also contributed to increased segment
operating income and operating income margins during the quarter.
20
Defense segment operating income increased 14.0% to $8.5 million for the first
quarter of fiscal 2001 compared to the first quarter of fiscal 2000. Operating
income margins decreased to 10.5% of defense segment sales for the first quarter
of fiscal 2001 compared to 14.2% of defense segment sales for the first quarter
of fiscal 2000. Lower margin MTVR sales, increased bid and proposal costs
related to the Family of Medium Tactical Vehicle ("FMTV") program and the
impacts of production inefficiencies incurred during the 100,000 square foot
building expansion at the Oshkosh manufacturing facilities contributed to the
reductions in operating income margins.
Corporate and other expenses increased $0.5 million to $4.3 million, or 1.5% of
consolidated net sales, for the first quarter of fiscal 2001, from $3.8 million,
or 1.6% of consolidated net sales, for the first quarter of fiscal 2000.
Increases in corporate expenses generally relate to increased staffing and
personnel costs.
Analysis of Non-Operating Income Statement Items
First Quarter of Fiscal 2001 Compared to 2000
Interest expense decreased 19.5% in the first quarter of fiscal 2001, compared
to the first quarter of fiscal 2000. Lower interest expense resulted from the
prepayment of $93.5 million of term debt from proceeds of the Company's November
24, 1999 public offering of Common Stock. This was partially offset by interest
expense on borrowings to fund the acquisitions of Kewaunee, Viking Truck and
Equipment Inc. (April 2000) and Medtec.
The effective tax rate for combined federal and state income taxes for the first
quarter of fiscal 2001 was 40.4% compared to 42.6% in the first quarter of
fiscal 2000. The Company's effective income tax rate excluding the impact of
nondeductible goodwill was 36.6% in the first quarter of fiscal 2001 compared to
37.9% in the first quarter of fiscal 2000 as the Company benefited from a more
efficient state income tax structure and tax benefits related to foreign sales.
Equity in earnings of an unconsolidated partnership of $0.3 million in the first
quarter of fiscal 2001 and fiscal 2000 represents the equity in earnings of the
Company's interest in its lease financing partnership.
The $0.6 million extraordinary charge in the first quarter of fiscal 2000
represents the write-off of deferred financing costs for that portion of debt
prepaid in November 1999 following the equity offering.
Financial Condition
First Quarter of Fiscal 2001
During the quarter, cash decreased by $8.7 million to $4.9 million at December
31, 2000. Cash provided from operating activities of $8.0 million, borrowings of
$8.6 million and $8.7 million in available cash was used to fund the $14.4
million acquisition of Medtec, capital expenditures of $4.2 million, scheduled
term debt reductions of $2.3 million, a $3.0 million increase in other assets
and $1.4 million of dividend payments. The Company's debt-to-total capital ratio
at December 31, 2000 was 35.4% compared to 35.1% at September 30, 2000.
21
First Quarter of Fiscal 2000
During the quarter, cash decreased by $1.5 million to $3.6 million at December
31, 1999. Cash provided from operating activities of $5.3 million was used to
fund capital expenditures of $4.5 million, increase long-term assets by $1.0
million and pay dividends of $1.1 million. Net borrowings of $6.0 million during
the quarter were used to fund the acquisition of Kewaunee for $5.9 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. The
Company's debt-to-total capital ratio at December 31, 1999 was 39.8%. During the
quarter, inventory increased $33.5 million, including $27.0 million in the
commercial segment as a result of seasonal build requirements. Fire and
emergency inventories increased $9.9 million during the quarter, generally as a
result of 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 offset by reductions in defense
receivables ($19.5 million reduction) related to one-time accelerated payments
by the U.S. government to minimize Year 2000 concerns and a $11.7 million
increase in floor plan notes payable related to commercial segment chassis
purchases.
Liquidity and Capital Resources
The Company had $146.9 million of unused availability under the terms of its
Revolving Credit Facility as of December 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.
The Senior Credit Facility requires quarterly principal payments. 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 2001, including the working capital
requirements associated with the ramp-up to full rate of production under the
MTVR contract and the acquisition of Medtec.
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 $17 million in fiscal 2001 and
$20 million in fiscal 2002. Fiscal 2001 capital expenditures include
approximately $4 million of an $8 million expansion of the Company's production
facilities in Oshkosh.
New Accounting Standards
In December 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin ("SAB") No. 101, which deals with revenue
22
recognition issues. SAB No. 101 (as modified by SAB No. 101 A and B) is required
to be adopted by the Company no later than the fourth quarter of fiscal 2001.
Management does not anticipate that the adoption of SAB No. 101, 101A or 101B
will have a significant effect on the results of operations or on the financial
position of the Company.
In September 2000, the Emerging Issues Task Force ("EITF"), a subcommittee of
the Financial Accounting Standards Board, issued EITF Issue No. 00-10
"Accounting for Shipping and Handling Fees and Cost." EITF No. 00-10 prescribes
guidance regarding the income statement classification of costs incurred for
shipping and handling fees and costs. This guidance requires shipping fees to be
recognized in revenue and shipping costs to be recognized as cost of sales. This
statement is to be effective during the fourth quarter of fiscal 2001,
concurrent with the adoption of SAB 101. The Company will reclassify shipping
fee revenue out of cost of sales, where it currently is classified as a
reduction of shipping costs, and into revenue. The Company does not believe that
the adoption of EITF No. 00-10 will have a material effect on the results of
operations of the Company.
Customers and Backlog
Sales to the U. S. Department of Defense comprised approximately 29% of the
Company's net sales in the first quarter of fiscal 2001. 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 December 31, 2000 increased 14.4% to $639.1 million
compared to $558.7 million at December 31, 1999. Commercial segment backlog
decreased 29.7% to $132.8 million at December 31, 2000 compared to December 31,
1999. Fire and emergency segment backlog increased 19.8% to $264.9 million at
December 31, 2000 compared to December 31, 1999. The defense segment backlog
increased 60.9% to $241.4 million at December 31, 2000 compared to December 31,
1999. The Company expects that only 4% of the December 31, 2000 backlog will not
be filled in fiscal 2001.
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, 2000 and have not materially changed since that report was
filed.
23
OSHKOSH TRUCK CORPORATION
PART II. OTHER INFORMATION
FORM 10-Q
DECEMBER 31, 2000
ITEM 1 LEGAL PROCEEDINGS
None.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10 Second Amendment effective December 31, 2000 to Employment
Agreement, dated as of October 15, 1998, between Oshkosh Truck
Corporation and Robert G. Bohn.*
(b) Reports on Form 8-K
Current Report on Form 8-K dated October 26, 2000, reporting the
announcement of the Company's earnings for the fourth quarter and the
fiscal year ended September 30, 2000.
Current Report on Form 8-K dated October 30, 2000, reporting the
announcement of the Company's acquisition of Medtec.
*Denotes a management contract or compensatory plan or arrangement.
24
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
February 13, 2001 /S/ R. G. Bohn
--------------------------------------------
R. G. Bohn
Chairman, President and
Chief Executive Officer
(Principal Executive Officer)
February 13, 2001 /S/ C. L. Szews
--------------------------------------------
C. L. Szews
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
February 13, 2001 /S/ T. J. Polnaszek
--------------------------------------------
T. J. Polnaszek
Vice President and Controller
(Principal Accounting Officer)
25
EXHIBIT INDEX
Exhibit No. Description
10 Second Amendment effective December 31, 2000 to Employment
Agreement, dated as of October 15, 1998, between Oshkosh Truck
Corporation and Robert G. Bohn.*
*Denotes a management contract or compensatory plan or arrangement.
26