EXHIBIT 13
Oshkosh Truck Corporation
1994 Anual Report
For The Year Ended September
["Shareholder Information" section]
Shareholder Information
Annual Meeting
The Annual Meeting of Shareholders of Oshkosh Truck Corporation will be
held on Monday, January 23, 1995, at 10:00 a.m. at the Oshkosh Hilton &
Convention Center, One North Main Street, Oshkosh, Wisconsin.
Stock Listing
Oshkosh Truck Corporation Class B common stock is quoted on the National
Market System of the National Association of Securities Dealers Automated
Quotations. The trading symbol is OTRKB.
Form 10-K
Copies of the company's Form 10-K as filed with the Securities and
Exchange Commission are available free of charge by written request to the
Chief Financial Officer of the company.
Transfer Agent and Registrar
Firstar Trust Company
P.O. Box 2077
Milwaukee, Wisconsin 53201
Independent Auditors
Ernst & Young, LLP
111 East Kilbourn Avenue, Suite 900
Milwaukee, Wisconsin 53202
Corporate Headquarters
2307 Oregon Street
Oshkosh, Wisconsin 54901
Mailing Address and Telephone
Oshkosh Truck Corporation
P.O. Box 2566
Oshkosh, Wisconsin 54903-2566
414-235-9151
["Financial Highlights" section]
FINANCIAL HIGHLIGHTS
Years ended September
(In thousands, except
per share amounts)
1994 1993 1992 1991 1990
Net Shipments $691,508 $635,012 $640,566 $419,616 $453,122
Net Income (Loss) 13,054 1,063<F1> 8,771 755 (2,763)
Per Share 1.50 .12<F1> 1.01 .09 (.31)
Dividends Per Share
Class A .435 .435 .435 .435 .435
Class B .500 .500 .500 .500 .500
Total Assets 216,860 253,099 260,003 219,587 178,058
Expenditures For Property,
Plant, and Equipment 5,709 8,401 10,007 6,628 8,236
Depreciation 9,132 8,588 7,794 6,939 6,071
Working Capital 82,010 100,967 118,026 62,427 86,658
Long-Term Debt
(Less Current Maturities) 8,737 47,819 66,800 8,700 8,700
Shareholders' Equity 121,558 112,004 116,130 111,648 118,002
Per Share 13.96 12.89 13.37 12.86 13.10
Backlog 512,000 459,000 505,000 639,000 349,000
<FN>
<F1> After a charge of $4,088, or $.47 per share, to reflect the cumulative effect of change in method of accounting for
postretirement benefits.
["Management's Discussion and Analysis of
Results of Operations and Financial Condition" section]
Management's Discussion and Analysis of
Results of Operations and Financial Condition
Results of Operations
Year Ended September 30, 1994
Compared to Year Ended September 25, 1993
Net shipments were $691.5 million for fiscal 1994, an increase
of $56.5 million, compared to shipments of $635.0 million in fiscal 1993.
Net income for fiscal 1994 was $13.1 million ($1.50 per share) compared to
income, before cumulative effect of accounting change for the adoption of
Statement of Financial Accounting Standards (SFAS) No. 106, Employers'
Accounting for Post Retirement Benefits Other Than Pensions, of $5.2
million ($.59 per share) for fiscal 1993. Net income for fiscal 1993,
including the non-cash SFAS No. 106 accounting change of $4.1 million, was
$1.1 million ($.12 per share).
Net shipments of both commercial and defense products increased
compared to the previous year. Shipments to commercial markets increased
by $46.3 million to $265.3 million during fiscal 1994. The volume increase
resulted from higher shipments of construction, stripped motorized
chassis, and trailers compared to the previous year. Shipments of defense
products increased by $10.2 million to $426.2 million in fiscal 1994. The
fiscal 1994 shipments are comprised almost exclusively of shipments under
the Palletized Load System (PLS) and Heavy Equipment Transporter (HET)
contracts.
Production under the PLS and HET contracts more than offset
declines due to completion of other defense contracts during fiscal 1993.
The PLS and HET programs went to full rate production during fiscal 1993
while production of the Heavy Expanded Mobility Tactical Truck (HEMTT)
ended during fiscal 1993. The company also completed a contract for U.S.
Air Force snow removal equipment during fiscal 1993.
Defense export shipments were $3.9 million in fiscal 1994,
compared to $49.3 million in fiscal 1993. Commercial export shipments were
$16.5 million and $16.6 million, respectively, in fiscal 1994 and 1993.
Virtually all of the company's revenues are derived from customer orders
prior to commencing production.
Gross profits during fiscal 1994 were $88.0 million, or 12.7% of
shipments, up from $69.6 million, or 11.0% of shipments in fiscal 1993.
The improved margin performance is attributable to increased volume and
production efficiency.
Operating expenses increased 10.4% to $63.5 million, or 9.2% of
shipments in fiscal 1994, compared to $57.5 million, or 9.1% of shipments
during fiscal 1993. Fiscal 1994 includes charges of $3.1 million relating
to a reduction of work force in anticipation of lower levels of future
business. The remaining increased operating expense is due to increased
volume in fiscal 1994 compared to a year earlier.
Interest expense, net of interest income, decreased to $1.3
million, compared to $4.1 million during fiscal 1993. This decrease is due
to decreased working capital requirements throughout fiscal 1994.
The effective income tax rate for combined federal and state income taxes
for fiscal 1994 was 40.5%. This compares to 35.0% in fiscal 1993. The
lower rate in fiscal 1993 is due to proportionately higher export
shipments and a lower federal statutory rate.
Results of Operations
Year Ended September 25, 1993
Compared to Year Ended September 30, 1992
Net shipments were $635.0 million for fiscal 1993, compared to
shipments of $640.6 million in fiscal 1992. Income, before cumulative
effect of accounting change for the adoption of Statement of Financial
Accounting Standards (SFAS) No. 106 "Employers' Accounting for
Postretirement Benefits Other Than Pensions," was $5.2 million ($.59 per
share). Net income for fiscal 1993 including the non-cash SFAS No. 106
accounting charge of $4.1 million, was $1.1 million ($.12 per share). This
compares to net income of $8.8 million ($1.01 per share) for fiscal 1992.
Net shipments of commercial products increased in fiscal 1993
which offset a decline in defense products. Shipments of commercial
products increased $34.1 million, totaling $219.0 million in fiscal 1993.
All commercial product lines had increased shipments during the year.
Shipments of defense products to the U.S. Government and foreign
governments decreased to $416.0 million in fiscal 1993 from $455.7 million
during fiscal 1992. The company's defense business consists of major
contracts with the U.S. Department of Defense and periodic contracts with
foreign governments. During fiscal 1993, the company had shipments to the
U.S. Department of Defense, net of Foreign Military Sales (FMS), of $366.7
million, compared to $290.1 million the previous year. Production of the
Palletized Load System (PLS) and the Heavy Equipment Transporter (HET)
more than offset declines resulting from completion of other contracts.
The PLS and HET programs went to full rate production during fiscal 1993,
while production of the Heavy Expanded Mobility Tactical Truck (HEMTT)
ended. During the year, the company also completed a contract for U.S. Air
Force snow removal equipment and a contract during fiscal 1992 for
aircraft refuelers.
Defense export shipments, including FMS, were $49.3 million in
fiscal 1993, down from $165.6 million the previous year. Fiscal 1992
shipments were substantially made up of a major export order for HET
trucks and trailers which the company began delivering late in fiscal
1991.
Virtually all of the company's revenues are derived from firm
customer orders prior to commencing production.
Gross profits increased 3.2% to $69.6 million in fiscal 1993,
inclusive of non-recurring costs of $2.9 million pertaining to settlement
with the U.S. Government of long standing cost accounting issues. This
compares to $67.5 million the previous year. As a percentage of shipments,
gross profits were 11.0% in the current year, compared to 10.5% during
fiscal 1992. This is due to the increased level of PLS and HET shipments
which had higher margins. Margin contributions of commercial products also
improved due to increased volumes and production efficiencies.
Operating expenses increased 10.5% to $57.5 million in fiscal 1993,
compared to $52.0 million the previous year, due largely to costs
associated with development of commercial markets.
Interest expense, net of interest income, increased to $4.1
million from $2.9 million the previous year. This increase is attributable
to increased working capital needs throughout much of the current year.
The effective income tax rate for combined federal and state income taxes
for fiscal 1993 was 35.0%, compared to 29.1% the previous year. The lower
rate in fiscal 1992 is attributable to tax benefits related to export
shipments.
Liquidity and Capital Resources
Working capital was $82.0 million at year-end fiscal 1994,
compared to $101.0 million for fiscal 1993. This decrease is due to
reduction in accounts receivable levels to normal levels compared to a
year earlier. Inventory levels declined $13.9 million, or 20.2% at
September 30, 1994, compared to the 1993 fiscal year. Cash and cash
equivalents increased to $15.8 million at September 30, 1994, from $0.6
million at year-end fiscal 1993.
The company achieved favorable cash flow performance in fiscal
1994, generating $64.3 million in cash provided by operations. This funded
dividend payments of $4.3 million, a reduction in long-term debt of $39.1
million to $8.7 million at September 30, 1994, and capital additions and
investing activities of $5.8 million.
During the prior year, operating activities generated $38.4
million of cash due to production efficiency and decreased working capital
needs. Payment of dividends, capital additions and investing activities
required $4.3 million and $13.8 million, respectively. Borrowings under
the long-term debt facility were reduced by $19.9 million during fiscal
1993.
The company believes its internally generated cash flow,
supplemented by progress payments when applicable, and the existing credit
facilities will be adequate to meet working capital and other operating
and capital requirements in the foreseeable future.
The company is dependent on its shipments of defense products to
the U.S. Government as evidenced by shipments of 62% and 66% of total
shipments during fiscal 1994 and 1993, respectively. Substantial decreases
in the company's level of defense business from the current level could
have an adverse effect on the company's profitability. The company is
anticipating a lower level of sales to the U.S. Government in fiscal 1995
due to the completion of the HET contract in September 1994. The PLS
contract will remain in production through August 1996. Additional orders
could increase the rate of production or extend the period of production.
The company remains optimistic about its defense business prospects.
Inflation
The company believes that the risks of inflation are minimized
by the nature of its businesses. All revenue derived by the company from
its contracts with the U.S. Government were received under firm
fixed-price contracts. The company prices major government programs and
contracts on a current basis that takes into account cost increases
expected to occur during performance of the contract. Generally, major
suppliers receive terms from the company similar to what the company
receives under its contracts with the U.S. Government. Commercial business
is performed on the basis of pricing specific orders. Any impact from
inflation will be minimized by the company's ability to include
inflationary cost increases in prices.
Backlog
The company's backlog at year-end fiscal 1994 was $512 million,
compared to $459 million the previous year. The change in backlog
represents delivery of products on long-term contracts net of additional
funding received. Backlog on U.S. Government contracts comprises $448
million of the year-end backlog with the remainder being commercial.
Environmental
The company continues to be engaged in environmental monitoring
activities that include both investigation and remediation. The company
does not anticipate that costs relating to environmental activities will
have a material adverse impact on the company's financial condition.
[consolidated financial statements section]
Consolidated Balance Sheet
September 30, 1994, and September 25, 1993
(In thousands, except share and per share amounts)
Assets 1994 1993
Current assets:
Cash and cash equivalents $ 15,836 $ 592
Receivables, net of allowance for
doubtful accounts of $531 and $677
at September 30, 1994 and
September 25, 1993, respectively
(Note 2) 65,926 97,429
Inventories (Note 3) 54,909 68,801
Prepaid expenses 6,334 5,672
Refundable income taxes 801 --
Deferred income taxes (Note 4) 8,156 6,166
------- -------
Total current assets 151,962 178,660
Deferred charges (Note 1) 2,884 8,128
Deferred income taxes (Note 4) 626 --
Other assets (Note 1) 10,887 11,887
Property, plant, and equipment:
Land and improvements 7,944 7,788
Buildings 34,364 33,302
Machinery and equipment 71,389 68,580
------- -------
113,697 109,670
Less accumulated depreciation 63,196 55,246
------- -------
Net property, plant,
and equipment 50,501 54,424
------- -------
Total assets $216,860 $253,099
======= =======
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 37,973 $ 52,881
Federal excise taxes 1,550 774
Payroll-related obligations 6,484 6,127
Accrued warranty 6,788 4,542
Income taxes -- 620
Other liabilities 17,157 12,749
-------- -------
Total current liabilities 69,952 77,693
Long-term debt (Note 5) 8,737 47,819
Postretirement benefit obligations (Note 7) 8,159 7,726
Other long-term liabilities (Note 1) 8,454 7,094
Deferred income taxes (Note 4) -- 763
Commitments and contingencies (Notes 1, 5
and 6)
Shareholders' equity (Notes 7 and 9):
Preferred stock, par value $.01 per share,
authorized 2,000,000 shares, none issued -- --
Common stock, par value $.01 per share:
Class A, authorized 1,000,000 shares,
issued and outstanding 449,370 shares 4 4
Class B, authorized 18,000,000 shares,
issued 8,558,795 shares 86 86
Additional paid-in capital 7,623 7,399
Retained earnings 116,890 108,158
------- -------
124,603 115,647
Less: Cost of Class B common
stock in treasury; 300,367 and
321,117 shares in 1994 and 1993,
respectively 2,591 2,767
Pension liability adjustment (Note 7) 454 876
------- -------
Total shareholders' equity 121,558 112,004
------- -------
Total liabilities and shareholders'
equity $216,860 $253,099
======== =======
See accompanying notes
Consolidated Statement of Operations and Retained Earnings
Years ended September 30, 1994, September 25, 1993, and September 30, 1992
(In thousands, except share and per share amounts)
1994 1993 1992
Net shipments (Note 8) $691,508 $635,012 $640,566
Cost of goods sold 603,537 565,410 573,094
------- ------- -------
Gross profit 87,971 69,602 67,472
Operating expenses:
Selling, general and
administrative 55,285 46,570 41,111
Engineering, research
and development 8,205 10,958 10,936
------- ------- -------
Total operating expenses 63,490 57,528 52,047
------- ------- -------
Income from operations 24,481 12,074 15,425
Other income (expense):
Interest expense (1,769) (4,232) (3,463)
Interest income 432 106 598
Miscellaneous, net (1,193) (24) (188)
-------- ------- -------
(2,530) (4,150) (3,053)
-------- ------- -------
Income before income taxes
and cumulative effect of
change in accounting principle 21,951 7,924 12,372
Provision for income taxes
(Note 4) 8,897 2,773 3,601
-------- ------- -------
Income before cumulative effect
of change in accounting
principle 13,054 5,151 8,771
Cumulative effect of change in
method of accounting for
postretirement benefits, net
of tax benefit of $2,726 -- 4,088 --
-------- ------- -------
Net income 13,054 1,063 8,771
Retained earnings at beginning
of year 108,158 111,410 106,954
Cash dividends (Note 9):
Class A common ($.435 per
share each year) (195) (196) (196)
Class B common ($.500 per
share each year) (4,127) (4,119) (4,119)
-------- -------- --------
Retained earnings at end of
year $116,890 $108,158 $ 111,410
======== ======= =======
Earnings per common share:
Before cumulative effect of
accounting change $ 1.50 $ .59 $ 1.01
Cumulative effect of change
in method of accounting
for postretirement benefits,
net of taxes -- (.47) --
--------- --------- --------
Net income $ 1.50 $ .12 $ 1.01
========= ========= ========
See accompanying notes
Consolidated Statement of Cash Flows
Years ended September 30, 1994, September 25, 1993, and September 30, 1992
(In thousands, except share and per share amounts)
1994 1993 1992
Operating activities:
Net income $ 13,054 $11,063 $28,771
Adjustments to reconcile net
income to net cash provided
(used) by operating activities:
Depreciation and amortization 10,137 9,420 8,242
Deferred income taxes (3,659) (7,279) 2,250
Cumulative effect of change
in accounting principle -- 6,814 --
Loss on disposal of property,
plant, and equipment 500 377 22
Changes in operating assets
and liabilities:
Receivables 31,503 (21,861) (8,808)
Inventories 13,892 30,834 (17,631)
Prepaid expenses (662) (2,956) 344
Deferred charges 5,244 4,881 (4,174)
Accounts payable (14,908) 5,886 (5,395)
Income taxes (1,421) 3,943 (2,681)
Federal excise taxes 776 (1,914) (3,443)
Payroll-related obligations 702 154 163
Accrued warranty 2,246 967 812
Other liabilities 4,406 3,954 1,103
Long-term liabilities 2,459 4,087 1,973
------- ------- -------
Total adjustments 51,215 37,307 (27,223)
------- ------- -------
Net cash provided (used) by
operating activities 64,269 38,370 (18,452)
------- ------- -------
Investing activities:
Additions to property, plant,
and equipment (5,709) (8,401) (10,007)
Less amount capitalized under
financing leases -- 639 1,240
------- ------- -------
Net additions to property,
plant, and equipment (5,709) (7,762) (8,767)
Increase in other assets (124) (6,054) (5,153)
------- ------- -------
Net cash used by investing
activities (5,833) (13,816) (13,920)
------- ------- -------
Financing activities:
Net borrowings (payments) on
lines of credit (39,082) (19,871) 36,554
Sale of common stock from
treasury 210 2 26
Dividends paid (4,320) (4,314) (4,314)
------- ------- ------
Net cash provided (used) by
financing activities (43,192) (24,183) 32,266
------- ------- ------
Increase (decrease) in cash and
cash equivalents 15,244 371 (106)
Cash and cash equivalents at
beginning of year 592 221 327
------- ------- -------
Cash and cash equivalents at
end of year $ 15,836 $ 592 $ 221
======= ======= =======
Supplementary disclosures:
Cash paid for interest $ 1,852 $ 4,227 $ 3,048
Cash paid for income taxes $ 13,972 $ 3,382 $ 4,032
See accompanying notes
Financial Notes
Years ended September 30, 1994, September 25, 1993, and September 30, 1992
(In thousands, except share and per share amounts)
1. Summary of Significant Accounting Policies
Consolidation and Presentation
The consolidated financial statements include the accounts of Oshkosh
Truck Corporation and a wholly owned foreign sales corporation
(collectively referred to as the company).
Government Contracts
The company derives a significant portion of its revenue from the U.S.
Government (see Note 8). Inherent in doing business with the U.S.
Government are certain risks, including technological changes and changes
in levels of defense spending. Sales and related costs under fixed-price
contracts, which the company has with the government, are recorded as
units are accepted. Amounts for government ordered changes are not
invoiced until they are agreed upon. Recognition of profit on government
ordered changes and certain contracts is based upon estimates of final
performance which may be revised as the contract progresses.
All U.S. Government contracts contain a provision that they may be
terminated at any time for the convenience of the government. In such an
event, the company is entitled to recover allowable costs plus a
reasonable profit earned to the date of termination.
Various actions or claims have been brought or asserted or may be
contemplated by government authorities against the company. During 1993,
the company entered into a $3.5 million settlement with the U.S.
Government related to alleged noncompliance with certain cost accounting
standards. Of that amount, $0.2 million and $2.9 million has been charged
to cost of sales in 1994 and 1993, respectively, with the remainder to be
amortized over remaining deliverable units under the PLS contract.
A potential action by government authorities against the company in
connection with a grand jury investigation which commenced in 1989 remains
open. In addition, in October 1992, the company responded to a grand jury
investigation related to Steeltech Manufacturing, Inc., a vendor. No
charges have been filed against the company or its employees in either
action. The company and its employees have cooperated fully with the
investigations. No provisions for loss are recorded in the financial
statements because the company cannot reasonably estimate what, if any,
costs may result from these actions. Costs incurred in responding to these
actions have been expensed as incurred.
Inventories
The company values its inventories principally at the lower of cost,
determined using the last-in, first-out (LIFO) method, or market. If the
company had used the first-in, first-out (FIFO) method, inventories would
have been $6,212 and $6,506 higher than reported at September 30, 1994 and
September 25, 1993, respectively. Inventories do not include amounts of
general and administrative expenses related to U.S. Government contracts.
Property, Plant, and Equipment
Additions and improvements are capitalized at cost, whereas expenditures
for maintenance and repairs are charged to expense as incurred.
Depreciation has been provided over the estimated useful lives of the
respective assets on the following basis: machinery and equipment --
accelerated method; other assets -- principally straight-line method.
Other Assets
Other assets include capitalized software and related costs which are
being amortized over a five-year period, funding for long-term pension
costs, and certain other investments. These investments include $3,526 in
joint ventures in Mexico to manufacture vehicles for that market and
Central and South America. The company accounts for its investments in
Mexico under the equity method as it is able to exercise significant
influence over their operations. The equity from operations included in
the company's earnings in these investments was a loss of $942 in 1994,
and earnings of $9 in 1993, included in other expense. The company also
has an investment aggregating $1,100 in a minority-owned supplier and
joint venture which leases equipment to the minority-owned supplier and
has guaranteed loans of the joint venture in the amount of $2,218 at
September 30, 1994.
Deferred Charges
Deferred charges include certain engineering and technical support costs
incurred in connection with long-term contracts. These costs are charged
to expense when the related project is billable to the government, or are
amortized to expense as base units are delivered under the contract.
Long-Term Liabilities
Long-term liabilities include accumulated postretirement benefit
obligations and deferred revenue on long-term U.S. Government contracts,
which will be recognized as income in future years as base units are
delivered under the contracts.
Warranty Costs
The company provides for the estimated cost of warranty work related to
specific sales. Amounts expensed in 1994, 1993 and 1992 were $7,739,
$6,836 and $5,886, respectively.
Net Income Per Common Share
Net income per common share was computed by dividing net income by the
weighted average number of shares of common stock outstanding (8,699,846,
8,686,973 and 8,685,804 in 1994, 1993 and 1992, respectively). Stock
options were not dilutive in any of the three years.
Reclassifications
Certain reclassifications have been made to the 1993 and 1992 consolidated
financial statements to conform to the 1994 presentation.
2. Receivables
Receivables consist of the following:
1994 1993
Government:
Amounts billed, net $21,338 $55,563
Unbilled 4,277 2,080
------- ------
25,615 57,643
Commercial customers 39,599 38,845
Other 712 941
------- -------
$65,926 $97,429
====== ======
The receivables from the government result principally from long-term
contracts (see Note 1).
The unbilled amount principally represents estimated claims for government
ordered changes which are expected to be invoiced upon completion of
negotiations within two years, and price adjustment provisions which will
be invoiced within the next year. Receivables include $7,977, and $3,507
from the company's joint venture in Mexico, at September 30, 1994 and
September 25, 1993, respectively.
3. Inventories
Inventories consisted of the following:
1994 1993
Finished products $12,618 $ 8,912
Products in process 9,572 17,495
Raw material 38,931 48,900
------ ------
61,121 75,307
Less:
Allowance for reduction
to LIFO cost 6,212 6,506
------ ------
$54,909 $68,801
====== =======
Title to all inventories related to U.S. Government contracts which
provide for progress payments vests in the U.S. Government to the extent
of unliquidated progress payments.
4. Income Taxes
Effective October 1, 1992, the company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS No.
109), which requires recognition of deferred tax assets and liabilities
for the expected future tax consequences of events that have been included
in the financial statements or tax returns. This method requires all
deferred taxes to be recorded using enacted tax rates for the year in
which the differences between the financial statement and tax bases of
assets and liabilities are expected to reverse. The impact of adopting
SFAS No. 109 was not material to 1993 operations.
The provision for income taxes consists of the following:
1994 1993 1992
Current:
Federal $12,857 $6,307 $ 1,107
State 1,935 1,018 244
------ ------ ------
14,792 7,325 1,351
Deferred:
Federal (5,391) (4,075) 1,843
State (504) (477) 407
------ ------ ------
(5,895) (4,552) 2,250
------ ------ ------
$ 8,897 $2,773 $ 3,601
====== ====== ======
The components of the net deferred tax asset as of September 30, 1994 and
September 25, 1993, were as follows:
1994 1993
Deferred tax assets:
Non-pension
postretirement benefits $ 3,121 $ 2,945
Accrued compensation/benefits 1,703 1,026
Accrued expenses 4,842 1,010
Revenue recognition 4,135 6,940
Accrued warranty 2,475 1,740
Deferred charges, and other 469 82
Investments in affiliates 555 79
------ ------
Total deferred tax assets 17,300 13,822
Deferred tax liabilities:
Depreciation and amortization 6,142 5,650
Inventory 177 286
Prepaid expenses 1,675 1,241
Deferred charges, and other 9 1,242
------- -------
Total deferred tax liabilities 8,003 8,419
9,297 5,403
Valuation allowance for
investment in affiliates 515 --
------- --------
Net deferred tax assets $ 8,782 $ 5,403
The sources of significant temporary differences which gave rise to
deferred taxes in 1992, were as follows:
1992
Depreciation and amortization $ 1,331
Revenue recognition (776)
Inventory valuation 367)
Warranty (198)
Pension 357)
Deferred charges 2,890
Other, net (721)
------
$ 2,250
======
A reconciliation of the provision for federal income taxes computed at the
federal statutory rate to the income tax provision is as follows:
1994 1993 1992
Federal income tax
provision computed
at statutory rate $7,683 $2,773 $4,206
Increase (decrease)
in taxes resulting from:
Statutory rate increase from
34% to 35% effective
January 1,1993 -- (19) --
State income taxes,
net of federal tax benefit 723 310 220
Benefit from untaxed
earnings of the
company's foreign
sales corporation (80) (374) (903)
Valuation allowance 515 -- --
Other, net 56 83 78
----- ----- -----
$8,897 $2,773 $3,601
====== ====== ======
5. Long-term Debt
Long-term debt consists of the following as of September 30, 1994 and
September 25, 1993:
1994 1993
Revolving credit agreement $ -- $38,500
Industrial revenue bonds 8,700 8,700
Other 37 619
------ ------
$ 8,737 $47,819
Revolving Credit Facility -- On March 31, 1992, the company entered into
an unsecured revolving credit agreement with a group of banks. This credit
facility extends to the company an $80.0 million working capital line and
a $5.0 million letter of credit facility. The agreement was extended
during the current fiscal year and will expire on March 17, 1997. The
facility allows the company to borrow at various rates equivalent to or
less than the current prime rate of Firstar Bank. The company incurred
certain fees at closing for agent and facility fees and will also incur a
fee on the unused portion of the facility. The agreement contains various
restrictive covenants under which the company must meet certain financial
ratio tests and has some restrictions relative to the payment of
dividends, amounts of capital expenditures, acquisitions, and other
indebtedness. As of September 30, 1994, the company had no outstanding
borrowings under the revolving credit facility and had letters of credit
outstanding of $2.4 million under the letter of credit facility. The
average borrowings for 1994 and 1993 amounted to approximately $10.5
million and $61.1 million at weighted average effective interest rates of
5.75% and 5.05%, respectively. The maximum amount of borrowings at any
month-end during 1994 was $24.0 million, and $73.5 million during 1993.
Industrial Revenue Bonds -- The company has outstanding $8,700 of
industrial development revenue bonds that were used to finance the
construction of a chassis manufacturing facility. The bonds are due in a
single payment on August 1, 2019. Interest on the bonds is adjusted each
week to the lesser of 15% or the rate that would allow the bonds to be
resold at par. The average interest rate on the bonds was 2.7%, 2.6% and
3.5% during 1994, 1993 and 1992, respectively. The company has the option
to convert the variable interest rate to a fixed rate.
Through June 6, 1995, the bonds are secured by a letter of credit which is
secured by the chassis manufacturing facility.
The maturities of long-term debt are as follows: 1995-$592; 1996-$37 and
2019-$8,700.
6. Operating Leases
Total rental expense for plant and equipment charged to operations under
noncancellable operating leases was $1,940, $2,474 and $2,499 in 1994,
1993 and 1992, respectively. Minimum annual rental payments for the five
fiscal years after 1994, are: 1995-$1,254; 1996-$795; 1997-$562; 1998-$421
and 1999-$191, for an aggregate commitment of $3,223.
Included in rental expense are charges of $304, $332 and $307 in 1994,
1993 and 1992, respectively, relating to leases between the company and
certain shareholders.
7. Employee Benefit and Incentive Plans
The company has defined benefit pension plans covering substantially all
employees. The plans provide benefits based on compensation, years of
service and year of birth. The company's funding policy is to fund the
pension plans in amounts which comply with contribution limits imposed by
law.
Net periodic pension cost for these plans for 1994, 1993 and 1992 includes
the following components:
1994 1993 1992
Service cost -- benefits
earned during year $(1,227) $ 986 $ 873
Interest cost on
projected benefit
obligations 1,684 1,506 1,344
Actual return on
plan assets (296) (743) (1,607)
Net amortization
(deferral) (1,523) (948) 186)
------ ------- ------
Net periodic
pension cost 1,092 801 796
Curtailment loss related
to reduction in work force 560 -- --
------ ----- ------
Net expense $ 1,652 $ 801 $ 796
====== ===== ======
The following table summarizes the combined funded status of the pension
plans and the amounts recognized in the company's consolidated balance
sheets at September 30, 1994 and September 25, 1993.
1994 1993
Actuarial present value of
benefit obligations:
Vested benefits $16,322 $17,189
Nonvested benefits 822 862
Total accumulated benefit
obligations 17,144 18,051
Adjustment for projected
benefit obligations 5,134 4,808
Projected benefit obligations 22,278 22,859
Plan assets at fair value 20,383 19,643
Projected benefit obligations in
excess of plan assets (1,895) (3,216)
Unrecognized net loss 4,088 5,521
Unrecognized prior service cost 452 591
Unrecognized net transition asset (800) (928)
Adjustment required to recognize
minimum liability (1,125) (1,946)
------ ------
Prepaid expense recognized in
the consolidated balance sheet $ 720 $ 22
====== ======
Generally accepted accounting principles require the recognition of an
additional minimum liability (recorded as a long-term liability) for each
defined benefit plan for which the accumulated benefit obligation exceeds
plan assets. The company is permitted to record an offsetting intangible
asset ($367 in 1994 and $486 in 1993) to the extent of unrecognized prior
service cost. To the extent the minimum liability exceeds the amount of
unrecognized prior service cost, the company records a reduction of
shareholders' equity ($454 in 1994 and $876 in 1993, net of tax benefits
of $304 and $584, respectively).
The assets in the pension plans are comprised of investments in commingled
equity and fixed income funds, and individually managed equity portfolios.
Actuarial assumptions are as follows:
1994 1993 1992)
Discount rate 8.25% 7.50% 9.00%
Rate of increase in
compensation 4.50% 4.50% 5.75%
Expected long-term rate
of return on assets 9.25% 9.25% 9.25%
In addition to providing pension benefits for the majority of its
employees, the company provides health benefits to retirees and their
eligible spouses. Substantially all of the company's employees may become
eligible for these benefits if they reach normal retirement age while
working for the company.
Effective October 1, 1992, the company adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other than Pensions." SFAS No. 106
requires that the cost of these benefits be recognized during the
employee's active working career rather than accounting for them on a cash
basis as had been prior practice.
The cumulative effect of adopting SFAS No. 106 on the immediate
recognition basis as of October 1, 1992, was a charge to earnings of
$4,088, net of $2,726 income tax effect.
The following tables provide information on the Plan status as of
September 30, 1994 and September 25, 1993:
1994 1993
Accumulated postretirement
benefit obligation:
Retirees $2,988 $ 2,447
Fully eligible active plan
participants 497 1,152
Other active participants 4,396 5,179
----- -----
Total 7,881 8,778
Unrecognized net gain (loss) 278 (1,052)
----- -----
Accrued postretirement
benefit cost $8,159 $ 7,726
===== ======
Net periodic postretirement benefit cost includes the following:
1994 1993
Service cost, benefits attributed
for service of active employees
for the period $ 472 $ 439
Interest cost on the accumulated
postretirement benefit obligation 658 579
Amortization of unrecognized loss 26 --
----- -----
Net periodic postretirement
benefit cost $1,156 $1,018
===== =====
Net change in accrued postretirement benefit cost includes the following:
1994 1993
Balance at beginning of year $7,726 $6,814
Benefits paid (347) (106)
Net periodic postretirement
benefit cost 1,156) 1,018)
Curtailment gain related
to reduction in work force (376) --
----- ------
Balance at end of year $8,159) $7,726)
===== =====
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation (APBO) was 14.0% in 1994, declining to
7.0% in 2006. The weighted average discount rate used in determining the
APBO was 8.25%. If the health care cost trend rate was increased by 1%,
the APBO at September 30, 1994, would increase by $808 and net periodic
postretirement benefit cost for 1994 would increase by $168. The amount
paid for retiree health benefits prior to the adoption of SFAS No. 106 was
$237 in 1992.
The company has defined contribution 401(k) plans covering substantially
all employees. The plans allow employees to defer 2% to 19% of their
income on a pre-tax basis. Each employee who elects to participate is
eligible to receive employer matching contributions. For every dollar an
employee contributes (up to 4% of one's income on a pre-tax basis), the
company will contribute $.25. Amounts expensed for company matching
contributions were $464, $467 and $410 in 1994, 1993 and 1992,
respectively.
Under the 1990 Incentive Stock Plan for Key Employees (the Plan), officers
and other key employees may be granted options to purchase up to an
aggregate of 400,000 shares of the company's Class B common stock at not
less than the fair market value of such shares on the date of grant.
Participants may also be awarded grants of restricted stock under the
Plan. The Plan expires on April 9, 2000. The option to purchase shares
expires not later than ten years and one month after the grant of the
option.
The following table sets forth information with respect to the Plan:
Option
Shares Price Range
Outstanding at
September 30, 1991 140,084 $7.88 - $15.25
Options granted 3,750) $13.00 - $14.25
Options exercised (3,750) $7.88
Options cancelled (8,000) $7.88 - $15.25
------
Outstanding at
September 30, 1992 132,084 $7.88 - $15.25
Options granted 48,500 $9.75
Options exercised (167) $7.88
Options cancelled (2,000) $15.25
------
Outstanding at
September 25, 1993 178,417 $7.88 - $15.25
Options granted 242,400 $9.13 - $10.50
Options exercised (5,750) $7.88
Options cancelled (14,418) $7.88 - $15.25
-------
Outstanding at
September 30, 1994
(120,194 exercisable) 400,649 $7.88 - $15.25
=======
In addition, in 1990 the company's chief executive officer was granted
25,000 shares of restricted Class B common stock, and during 1994, 15,000
shares of Class B common stock were granted to company officers. Options
as to 50,482 shares granted in 1994 are subject to approval by
shareholders.
8. Net Shipments
Net shipments consist of sales to the following markets:
1994 1993 1992
Domestic:
U.S. Government $424,995 $372,574 $450,901
Commercial 248,743 202,425 167,735
Export 17,770 60,013 21,930
------- ------- -------
$691,508 $635,012 $640,566
======= ======= =======
U.S. Government sales include $2,619, $5,915 and $160,818 in 1994, 1993
and 1992, respectively, for products sold internationally under the
Foreign Military Sales Program.
9. Shareholders' Equity
Dividends are required to be paid on both the Class A and Class B common
stock at any time that dividends are paid on either. Whenever cash
dividends are paid on the common stock, each share of Class B common stock
is entitled to receive 115% of the dividend paid on each share of Class A
common stock, rounded up or down to the nearest $0.0025 per share.
The Class B common stock shareholders are entitled to receive a
liquidation preference of $7.50 per share before any payment or
distribution to holders of the Class A common stock. Thereafter, holders
of the Class A common stock are entitled to receive $7.50 per share before
any further payment or distribution to holders of the Class B common
stock. Thereafter, holders of the Class A common stock and Class B common
stock share on a pro rata basis in all payments or distributions upon
liquidation, dissolution or winding up of the company.
Report of Ernst & Young, LLP, Independent Auditors
Board of Directors, Oshkosh Truck Corporation
We have audited the accompanying consolidated balance sheets of Oshkosh
Truck Corporation (the company) as of September 30, 1994 and September 25,
1993, and the related consolidated statements of operations and retained
earnings and cash flows for each of the three years in the period ended
September 30, 1994. These financial statements are the responsibility of
the company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of the
company at September 30, 1994 and September 25, 1993, and the consolidated
results of its operations and its cash flows for each of the three years
in the period ended September 30, 1994, in conformity with generally
accepted accounting principles.
As discussed in Notes 4 and 7 to the financial statements, the company
changed its methods of accounting for income taxes and postretirement
benefits other than pensions effective October 1, 1992.
ERNST & YOUNG LLP
November 14, 1994
Milwaukee, WI
[financial statistics section]
Financial Statistics
Common Dividends
Quarterly (Payable February, May, August, November)
(In thousands, except per share amounts)
Fiscal 1994 Fiscal 1993
4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
Class A Cash Dividend:
Declared $ 49 $ 49 $ 49 $ 49 $ 49 $ 49 $ 49 $ 49
Per Share .10875 .10875 .10875 .10875 .10875 .10875 .10875 .10875
Class B Cash Dividend:
Declared $ 1,032 $ 1,032 $ 1,032 $ 1,030 $ 1,030 $ 1,030 $ 1,030 $ 1,030
Per Share .125 .125 .125 .125 .125 .125 .125 .125
The information included in this exhibit reflects dividends as set forth
in the Consolidated Statements of Operations and Retained Earnings (see
page 9).
Oshkosh Truck Corporation Class B Common Stock Price*
The Corporation's common stock is quoted on the National Association of
Securities Dealers Automated Quotation System (NASDAQ) National Market
System. The following table sets forth prices reflecting actual sales as
reported on the NASDAQ National Market System.
Quarter Ended Fiscal 1994 Fiscal 1993
High Low High Low
September $11-1/4 $10 $9-1/8 $8-7/8
June 11-1/2 8-3/4 9 8-1/2
March 11-3/4 8-3/4 9 8-1/2
December 9-3/8 8-5/8 11 10-5/8
*There is no established public trading market for Class A common stock.
Quarterly Financial Data (Unaudited)
(In thousands, except per share amounts)
Fiscal 1994 Fiscal 1993<F1><F2>
4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
Net Shipments $149,281 $187,011 $192,891 $162,325 $183,142 $153,226 $154,345 $144,299
Gross Profit 23,777 22,966 22,018 19,210 16,887 17,911 19,475 15,329
Income Before
Cumulative Effect
of Accounting
Change 3,158 3,674 2,759 3,463 1,806 703 1,974 668
Per Share .36 .42 .32 .40 .21 .08 .23 .07
Net Income (Loss) 3,158 3,674 2,759 3,463 1,806 703 1,974 (3,420)
Per Share .36 .42 .32 .40 .21 .08 .23 (.40)
<FN>
<F1> Quarterly results have been restated for the adoption of SFAS No. 106 which the company adopted effective October 1,
1992.
<F2> Quarterly results have been restated to include as cost of goods sold, cost associated with settlement of long standing
cost accounting issues with the U.S. Government which had been reported as selling, general and administrative expense.
Shareholders of Record
As of December 7, 1994, there were 1,280 and 199 record holders of Class B
and Class A common stock, respectively.