Exhibit 13
Oshkosh Truck Corporation
1995 Annual Report
["Shareholder Information" section]
Shareholder Information
Annual Meeting
The Annual Meeting of Shareholders of Oshkosh Truck Corporation will
be held on Monday, January 22, 1996, at 10:00 a.m. at the Experimental
Aircraft Association Museum, 3000 Poberezny Road, Oshkosh, Wisconsin 54901
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)
1995 1994 1993 1992 1991
Net Shipments $437,907 $582,475 $537,065 $562,361 $349,267
Income From
Continuing
Operations 11,637 13,558 1,596(1) 13,607 5,958
Per Share 1.32 1.56 .18(1) 1.57 .69
Discontinued
Operations (2,421) (504) (533) (4,836) (5,203)
Per Share (.28) (.06) (.06) (.56) (.60)
Net Income 9,216 13,054 1,063(1) 8,771 755
Per Share 1.04 1.50 .12(1) 1.01 .09
Dividends Per
Share
Class A .435 .435 .435 .435 .435
Class B .500 .500 .500 .500 .500
Total Assets 200,916 198,678 235,386 247,390 205,605
Expenditures for
Property,
Plant, and
Equipment 5,347 5,178 7,697 9,494 5,519
Depreciation 7,385 8,300 7,496 6,502 5,513
Working Capital 91,777 82,010 100,967 118,026 62,427
Long-Term Debt
(Less Current
Maturities) - 37 39,119 58,100 -
Shareholders'
Equity 133,413 121,558 112,004 116,130 111,648
Per Share 14.82 13.96 12.89 13.37 12.86
Backlog 350,000 498,000 437,000 487,000 615,000
(1) 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, 1995
Compared to Year Ended September 30, 1994
Net shipments were $437.9 million for fiscal 1995, a decrease of $144.6
million, compared to shipments of $582.5 million in fiscal 1994. Income
from continuing operations for fiscal 1995 was $11.6 million ($1.32 per
share), compared to $13.6 million ($1.56 per share) in fiscal 1994.
During the fiscal 1995 third quarter, the company sold its chassis
manufacturing business in the U.S. and its interest in a joint venture in
Mexico producing chassis for the Mexican market to Freightliner
Corporation. The results of these activities are reported as discontinued
operations and result in a charge to income in each period reported. The
gain from the sale of its U.S. business was positive; however, the net
result of discontinued operations was a loss of $2.4 million. Net income
for fiscal 1995, including discontinued operations, was $9.2 million
($1.04 per share). Net income for fiscal 1994, including a loss from
discontinued operations of $0.5 million, was $13.1 million ($1.50 per
share).
Net shipments of commercial products increased in fiscal 1995 while
defense products declined from the historically high levels which existed
in the 1992 through 1994 fiscal years. Shipments to commercial markets
increased by $20.5 million to $176.8 million during fiscal 1995. This
volume increase resulted from higher unit shipments of construction and
airport products which more than offset a decrease in trailer shipments as
the trailer industry slowed late in the fiscal year. Shipments of defense
products decreased by $165.1 million to $261.1 million in fiscal 1995.
The fiscal 1995 shipments are comprised almost exclusively of shipments
under the Palletized Load System (PLS) and the Heavy Expanded Mobility
Tactical Truck (HEMTT) contracts. Production under the PLS contract
declined due to an anticipated contractual decrease in the production rate
during fiscal 1995. These decreases were offset by a resumption of HEMTT
production which had earlier concluded midway through the 1993 fiscal
year. Most significantly, the Heavy Equipment Transporter (HET) contract
ended in fiscal 1994, accounting for nearly the entire decrease in defense
shipments. Defense export shipments were $1.6 million in fiscal 1995,
compared to $3.9 million in fiscal 1994. Commercial export shipments were
$17.5 million and $12.1 million, respectively, in fiscal 1995 and 1994.
Virtually all of the company's revenues are derived from customer orders
prior to commencing production.
Gross profits during fiscal 1995 were $58.1 million, or 13.3% of net
shipments, compared to $73.0 million, or 12.5% of net shipments for fiscal
1994. Gross profits decreased reflecting the decreased volumes. The
improved margin performance is reflective of control over material costs
and continuing improved efficiencies in the manufacturing process.
Operating expenses decreased 22.4% to $39.0 million, or 8.9% of net
shipments in fiscal 1995, compared to $50.3 million, or 8.6% of net
shipments during fiscal 1994. Fiscal 1994 includes charges of $3.1
million relating to a reduction of work force in anticipation of lower
levels of business. The remaining decrease in operating expenses relates
to strong controls over expense levels and decreased volumes in fiscal
1995 compared to fiscal 1994.
Interest income, net of interest expense, was $0.3 million during
fiscal 1995, compared to net interest expense of $0.5 million during
fiscal 1994. The improvement is due to decreased working capital
requirements during the first two quarters of fiscal 1995, cash proceeds
from the sale of the U.S. chassis business and the purchase of common
stock and warrants by Freightliner Corporation in June 1995.
The effective income tax rate for combined federal and state income
taxes in fiscal 1995 was 38.5% compared to 38.7% in fiscal 1994.
Results of Operations
Year Ended September 30, 1994
Compared to Year Ended September 25, 1993
Net shipments were $582.5 million for fiscal 1994, an increase of $45.4
million, compared to shipments of $537.1 million in fiscal 1993. Income
from continuing operations for fiscal 1994 was $13.6 million ($1.56 per
share) compared to income from continuing operations of $5.7 million ($.65
per share), 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," and a loss
from discontinued operations for fiscal 1993.
Net income for fiscal 1994, including discontinued operations was $13.1
million ($1.50 per share). Net income for fiscal 1993, including the non-
cash SFAS 106 accounting change of $4.1 million ($.47 per share), and a
loss from discontinued operations of $0.5 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 $35.2 million to $156.3 million during fiscal 1994. This volume
increase resulted from higher shipments of construction vehicles and
trailers compared to the prior 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 PLS
and 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 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 $12.1 million and $13.2 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 $73.0 million or 12.5% of
shipments, up from $56.5 million or 10.5% of shipments in fiscal 1993.
The improved margin performance is attributable to increased volume and
production efficiency.
Operating expenses increased 12.4% to $50.3 million, or 8.6% of
shipments in fiscal 1994, compared to $44.7 million, or 8.3% 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 business.
The remaining increased operating expense is due to increase volume in
fiscal 1994 compared to a year earlier.
Interest expense, net of interest income, decreased to $0.5 million,
compared to $3.5 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 in fiscal 1994 was 38.7%. This compared to 33.8% in fiscal 1993.
The lower rate in fiscal 1993 is due to proportionately higher export
shipments and a lower federal statutory rate.
Liquidity and Capital Resources
Working capital was $91.8 million at year-end fiscal 1995, compared to
$82.0 million at year-end fiscal 1994. This increase is due to cash
proceeds from the sale of the company's U.S. chassis business to
Freightliner Corporation, and Freightliner's purchase of common stock and
warrants. Net current assets of discontinued operations declined $12.6
million at September 30, 1995, compared to the 1994 fiscal year-end. Cash
and cash equivalents increased to $29.7 million at September 30, 1995,
from $15.8 million at year-end fiscal 1994.
The company achieved favorable cash flow performance in fiscal 1995,
generating $10.5 million in cash, net, as a result of the discontinued
operating results, and the sale of the company's U.S. chassis business to
Freightliner Corporation, $8.6 million from the sale of common stock and
warrants to Freightliner, and $6.3 million from operations. This funded
dividend payments of $4.4 million, capital additions and investing
activities of $6.3 million, and the purchase of treasury stock of $.8
million.
During the prior year, operating activities generated $67.7 million in
cash, primarily from contraction of working capital in line with lower
business volumes. This funded dividend payments of $4.3 million,
reductions in long-term debt of $39.1 million, capital and investing
activities of $6.4 million, while discontinued operations consumed cash of
$2.9 million.
As of September 30, 1995, the company expects to ultimately realize
additional cash receipts of approximately $3.0 million when remaining
asset and liability issues related to sale of the chassis businesses are
settled.
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 of the company in the foreseeable future.
The company is dependent on its shipments of defense products to the
U.S. Government as evidenced by shipments of 60% and 73% of total
shipments during fiscal 1995 and 1994, 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 expects to maintain approximately the current level of sales to
the U.S. Government in fiscal 1996. The PLS contract will remain in
production through August 1996 at the current rate.
Additional orders could increase the current rate of production or
extend the period of production. The company remains optimistic about its
defense business prospects and its ability to sustain a reasonable level
of business into the future. The expected effect of the decline in
defense shipments on operations is that profitability could be negatively
impacted if the company does not take measures to decrease operating
expenses. The impact of a decline in defense shipments on the liquidity
of the company will be to improve liquidity due to the reduction of
working capital previously required in support of this business.
On June 2, 1995, the company entered into a far reaching strategic
alliance with Freightliner Corporation. The company is optimistic that
the alliance between Oshkosh and Freightliner, a wholly-owned subsidiary
of Daimler-Benz (NYSE-DAI), will give a further boost to the company's
commercial and defense businesses. The alliance agreement calls for
Oshkosh to market certain of its vocational products through
Freightliner's strong distribution system and for Oshkosh to build several
series of Freightliner's severe-duty trucks. As part of the agreement,
Freightliner will transfer its non-commercial military business to
Oshkosh, broadening Oshkosh's defense product line and strengthening its
worldwide presence.
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 1995 was $350 million,
compared to $498 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 $325
million of the year-end backlog with the remainder being commercial.
Environmental
The company continues to be engaged in enviromental monitoring
activities that include both investigation and remediation. The company
does not anticipate that costs relating to enviromental activities will
have a material adverse impact on the company's financial condition.
Quality
The company received the International ISO 9001 quality certification
during the 1995 fiscal year. This recognition of the company's quality
and productivity improves its competitive position worldwide.
Stock Buyback
In July 1995, the company's board of directors authorized repurchase of
up to 1,000,000 shares of Class B common stock. As of December 8, 1995,
the company has repurchased 194,900 shares under this program at a cost of
$2.8 million.
[Consolidated financial statements section]
Consolidated Balance Sheets
September 30, 1995, and 1994
(In thousands, except share and per share amounts)
ASSETS 1995 1994
Current assets:
Cash and cash equivalents $ 29,716 $ 15,836
Receivables, net of allowance for
doubtful accounts of $477 in 1995
and $431 in 1994 (Note 2) 57,374 49,768
Inventories (Note 3) 45,781 45,743
Prepaid expenses 4,363 6,309
Refundable income taxes 165 801
Deferred income taxes (Note 4) 4,516 8,156
Net current assets of discontinued
operations (Note 10) 3,273 15,882
------- -------
Total current assets 145,188 142,495
Deferred charges 2,978 2,884
Deferred income taxes (Note 4) 2,389 626
Other assets 10,437 10,551
Net long-term assets of discontinued
operations (Note 10) - 67
Property, plant and equipment, at cost:
Land 5,522 5,495
Buildings 30,118 28,982
Machinery and equipment 68,630 65,312
-------- --------
104,270 99,789
Less accumulated depreciation (64,346) (57,734)
-------- --------
Net property, plant and equipment 39,924 42,055
-------- --------
Total assets $200,916 $198,678
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 28,266 $ 32,580
Payroll-related obligations 5,526 5,808
Accrued warranty 3,084 3,820
Other current liabilities 16,535 18,277
-------- --------
Total current liabilities 53,411 60,485
Postretirement benefit obligations (Note 7) 8,839 8,159
Other long-term liabilities (Note 7) 5,026 8,476
Net long-term liabilities of discontinued
operations (Note 10) 227 -
Commitments and contingencies (Notes 1 and 6)
Shareholders' equity (Notes 7 and 8):
Preferred stock, par value $.01 per
share, 2,000,000 shares authorized,
none issued - -
Common stock, par value $.01 per share:
Class A, 1,000,000 shares authorized,
427,262 and 449,370 shares issued in
1995 and 1994, respectively 4 4
Class B, 18,000,000 shares authorized,
8,930,903 and 8,558,795 shares issued
in 1995 and 1994, respectively 89 86
Paid-in capital 16,533 7,623
Retained earnings 121,697 116,890
------- -------
138,323 124,603
Cost of Class B common stock in treasury;
353,617 shares in 1995 and 300,367
shares in 1994 (3,403) (2,591)
Pension liability adjustment (Note 7) (1,507) (454)
------- -------
Total shareholders' equity 133,413 121,558
------- -------
Total liabilities and shareholders' equity $200,916 $198,678
======= =======
See accompanying notes
Consolidated Statements of Income
Years ended September 30, 1995, 1994, and September 25, 1993
(In thousands, except per share amounts)
1995 1994 1993
Continuing operations:
Net shipments (Note 9) $437,907 $582,475 $537,065
Cost of goods sold 379,799 509,458 480,556
------- ------- -------
Gross profit 58,108 73,017 56,509
Operating expenses:
Selling, general and administrative 33,540 43,660 35,752
Engineering, research and development 5,443 6,597 8,973
------- ------- -------
Total operating expenses 38,983 50,257 44,725
------- ------- -------
Income from operations 19,125 22,760 11,784
Other income (expense):
Interest expense (511) (770) (3,533)
Interest income 774 249 64
Miscellaneous, net (466) (137) 270
------- ------- -------
(203) (658) (3,199)
------- ------- -------
Income from continuing operations before
income taxes and accounting change 18,922 22,102 8,585
Provision for income taxes (Note 4) 7,285 8,544 2,901
------- ------- -------
Income from continuing operations before
accounting change 11,637 13,558 5,684
Cumulative effect of change in method of
accounting for postretirement benefits,
net of income tax benefit of $2,726
(Note 7) - - 4,088
------- ------- -------
Income from continuing operations 11,637 13,558 1,596
Discontinued operations (Note 10):
Loss from discontinued operations,
net of income tax benefit (provision)
of $1,623 in 1995, ($353) in 1994,
and $128 in 1993 (3,137) (504) (533)
Gain on disposal of operations,
including income tax benefit of $357 716 - -
-------- ------- -------
(2,421) (504) (533)
-------- -------- -------
Net income $ 9,216 $ 13,054 $ 1,063
======== ======== =======
Earnings per common share:
Income from continuing operations
before accounting change $ 1.32 $ 1.56 $ .65
Cumulative effect of accounting
change - - (.47)
Discontinued operations (.28) (.06) (.06)
------- ------- -------
Net income $ 1.04 $ 1.50 $ 0.12
======= ======= =======
See accompanying notes
Consolidated Statements of Shareholders' Equity
Years ended September 30, 1995, 1994, and September 25, 1993
(In thousands, except share and per share amounts)
Pension
Common Paid-In Retained Treasury Liability
Stock Capital Earnings Stock Adjustment Total
Balance at September 30, 1992 $90 $17,399 $111,410 $(2,769) $ - $116,130
Net income - - 1,063 - - 1,063
Cash dividends:
Class A common
($.435 per share) - - (196) - - (196)
Class B common
($.500 per share) - - (4,119) - - (4,119)
Exercise of stock options - - - 2 - 2
Pension liability adjustment
(Note 7) - - - - (876) (876)
------- ------ ------- ------- ------- -------
Balance at September 25, 1993 90 7,399 108,158 (2,767) (876) 112,004
Net income - - 13,054 - - 13,054
Cash dividends:
Class A common
($.435 per share) - - (196) - - (196)
Class B common
($.500 per share) - - (4,126) - - (4,126)
Exercise of stock options - 34 - 176 - 210
Incentive compensation awards - 190 - - - 190
Pension liability adjustment
(Note 7) - - - - 422 422
------- ------ ------- ------- ------- -------
Balance at September 30, 1994 90 7,623 116,890 (2,591) (454) 121,558
Sale of 350,000 shares of
common stock 3 5,247 - - - 5,250
Sale of 1,250,000 stock
warrants - 4,187 - - - 4,187
Common stock issuance costs
and stock restriction agreement - (863) - - - (863)
Net income - - 9,216 - - 9,216
Cash dividends:
Class A common
($.435 per share) - - (191) - - (191)
Class B common
($.500 per share) - - (4,218) - - (4,218)
Purchase of treasury stock - - - (933) - (933)
Exercise of stock options - 12 - 121 - 133
Incentive compensation awards - 327 - - - 327
Pension liability adjustment
(Note 7) - - - - (1,053) (1,053)
------- ------- ------- ------- ------- -------
Balance at September 30, 1995 $93 $16,533 $121,697 $(3,403) $(1,507) $133,413
======= ======= ======= ======= ======= ========
See accompanying notes
Consolidated Statements of Cash Flows
Years ended September 30, 1995, 1994, and September 25, 1993
(In thousands)
1995 1994 1993
Operating activities:
Net income $11,637 $13,558 $ 1,596
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 8,409 9,278 8,292
Deferred income taxes 2,577 (3,659) (7,279)
Cumulative effect of accounting
change - - 6,814
Loss on disposal of property,
plant and equipment 93 500 373
Changes in operating assets and
liabilities:
Receivables (7,606) 35,241 (18,196)
Inventories (38) 14,494 30,294
Prepaid expenses 1,946 (739) (2,881)
Deferred charges (94) 5,244 4,881
Accounts payable (4,314) (15,002) 2,002
Income taxes 636 (1,421) 3,943
Payroll-related obligations 313 587 (93)
Accrued warranty (736) 1,810 419
Other current liabilities (1,779) 5,362 1,630
Other long-term liabilities (4,764) 2,455 4,076
------- ------- -------
Total adjustments (5,357) 54,150 34,275
------- ------- -------
Net cash provided by operating
activities 6,280 67,708 35,871
------- ------- -------
Investing activities:
Additions to property, plant and
equipment (5,347) (5,178) (7,182)
Increase in other assets (937) (1,243) (4,837)
------- ------- --------
Net cash used by investing activities (6,284) (6,421) (12,019)
------- ------- --------
Net cash provided (used) by
discontinued operations 10,482 (2,851) 702
Financing activities:
Net payments on lines of credit - (39,082) (19,871)
Sale of common stock and common
stock warrants, net of issuance
costs 8,574 - -
Purchase of treasury stock and
proceeds from exercise of stock
options, net (800) 210 2
Dividends paid (4,372) (4,320) (4,314)
------- ------- -------
Net cash provided (used) by
financing activities 3,402 (43,192) (24,183)
------- ------- -------
Increase in cash and cash equivalents 13,880 15,244 371
Cash and cash equivalents at
beginning of year 15,836 592 221
------- ------- -------
Cash and cash equivalents at end
of year $29,716 $15,836 $ 592
====== ====== =======
Supplementary disclosures:
Cash paid for interest:
Continuing operations $ 605 $ 858 $ 3,524
Discontinued operations $ 709 $ 994 $ 703
Cash paid for income taxes $ 2,114 $13,972 $ 3,382
See accompanying notes.
Notes To Consolidated Financial Statetments
Years ended September 30, 1995, 1994, and September 25, 1993.
(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 its wholly owned subsidiaries (collectively referred
to as the company).
Government Contracts
The company derives a significant portion of its revenue from the U.S.
Government (see Note 9). Inherent in doing business with the U.S.
Government are certain risks, including technological changes and changes
in levels of defense spending. Shipments and related cost of goods sold
under fixed-price contracts, which the company has with the government,
are recorded as units are accepted by the government. Amounts for
government-ordered changes are not invoiced until they are agreed upon by
the government. Recognition of profit on government-ordered changes and
certain contracts is based upon estimates which may be revised during the
term of the contract.
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 asserted or may be asserted in the
future by the government 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, $2.9 million was charged to cost of sales in 1993, with the
remainder amortized over units delivered under the PLS contract in 1994
and 1995 and to be delivered in 1996.
A potential action by the government against the company in connection
with a grand jury investigation which commenced in 1989 remains pending.
In addition, in October 1992, the company responded to a grand jury
investigation of Steeltech Manufacturing, Inc., a supplier to the company.
No charges have been filed against the company or its employees in either
action. The company and its employees are cooperating fully with both
investigations. No provisions for loss for either investigation are
included in the consolidated 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.
Cash Equivalents
Cash equivalents consist of commercial paper ($14,787 in 1995 and $10,900
in 1994), government repurchase agreements ($7,381 in 1995 and $2,400 in
1994), and Eurodollar time deposits ($7,406 in 1995 and $2,400 in 1994),
all maturing within 30 days of purchase date. Cash equivalents are stated
at cost, which approximates fair value. There are no unrealized gains or
losses at September 30, 1995 or 1994, related to these investments.
Inventories
The company values its inventories at the lower of cost, computed
principally on 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 $6,973 and $6,212 higher than reported at September 30, 1995 and
1994, respectively. Inventories do not include general and administrative
expenses related to U.S. Government contracts.
Property, Plant, and Equipment
Depreciation has been provided over the estimated useful lives of the
respective assets principally on accelerated methods.
Deferred Charges
Deferred charges include certain engineering and technical support costs
incurred in connection with multi-year government contracts. These costs
are charged to expense when the related project is billable to the
government, or are amortized to cost of goods sold as base units are
delivered under the related contracts.
Other Assets
Other assets include capitalized software and related costs which are
being amortized on a straight-line method over a five-year period, prepaid
funding of pension costs and certain investments. These investments
include $3,025 in a Mexican bus manufacturer accounted for under the cost
method. The company also has investments aggregating $1,100 in a minority-
owned supplier and a joint venture which leases equipment to the minority-
owned supplier. The company has guaranteed loans of the joint venture
totaling $1,699 at September 30, 1995 and $2,218 at September 30, 1994.
Warranty Costs
The company provides for the estimated cost of warranty work related to
specific shipments. Amounts expensed related to continuing operations in
1995, 1994 and 1993 were $4,368, $3,746 and $2,538, respectively.
Income Per Common Share
Income per common share is computed by dividing net income by the weighted
average number of shares of common stock outstanding (8,823,766, 8,699,846
and 8,686,973 in 1995, 1994 and 1993, respectively). Stock options,
warrants and stock issuable under incentive compensation awards were not
dilutive in any of the periods reported.
Reclassifications
Certain reclassifications have been made to the 1994 and 1993 consolidated
financial statements to conform to the 1995 presentation.
2. Receivables
Receivables at September 30, consist of the following:
1995 1994
U.S. Government:
Amounts billed, net $34,101 $21,338
Amounts unbilled 5,198 4,277
------ ------
39,299 25,615
Commercial customers 16,930 23,469
Other 1,145 684
------ ------
$57,374 $49,768
====== ======
The receivables from the U.S. Government result principally from multi-
year contracts. The unbilled amounts represent estimated claims for
government-ordered changes which will be invoiced upon completion of
negotiations and price adjustment provisions which will be invoiced when
they are agreed upon by the government.
3. Inventories
Inventories at September 30, consist of the following:
1995 1994
Finished products $ 3,368 $ 8,593
Products in process 15,132 9,191
Raw materials 35,106 34,171
------- -------
Inventories at FIFO cost 53,606 51,955
Less:
Progress payments on
U.S. Government contracts 852 -
Allowance for reduction
to LIFO cost 6,973 6,212
------- -------
$45,781 $45,743
======= =======
Title to all inventories related to U.S. Government contracts which
provide for progress payments vests in the government to the extent of
unliquidated progress payments.
4. Income Taxes
The provision for income taxes consists of the following:
1995 1994 1993
Current:
Federal $5,572 $12,550 $6,417
State 873 1,889 1,036
------ ------ ------
6,445 14,439 7,453
Deferred:
Federal 763 (5,391) (4,075)
State 77 (504) (477)
------ ------ -----
840 (5,895) (4,552)
------ ------ -----
$7,285 $ 8,544 $2,901
===== ====== ======
The components of the deferred income tax assets and liabilities at
September 30, are as follows:
1995 1994
Deferred tax assets:
Postretirement benefit
obligations $ 4,380 $ 3,121
Payroll-related obligations 1,388 1,703
Accrued warranty 1,068 2,475
Other current liabilities 4,030 4,842
Revenue recognition 876 4,135
Deferred charges 902 469
Investments in affiliates 160 555
Net assets of discontinued
operations 847 -
------- -------
Total deferred tax assets 13,651 17,300
Deferred tax liabilities:
Depreciation and
amortization 5,549 6,142
Prepaid expenses 805 1,675
Inventories 392 186
------- -------
Total deferred tax liabilities 6,746 8,003
------- -------
6,905 9,297
Valuation allowance for
investment in affiliates - 515
------- -------
Net deferred income taxes $ 6,905 $ 8,782
======= =======
A reconciliation of the provision for income taxes computed at the federal
statutory income tax rate to the income tax provision is as follows:
1995 1994 1993
Provision for income
taxes at statutory rate $6,623 $7,736 $3,005
Increase (decrease)
in taxes resulting from:
State income taxes,
net of federal
tax benefit 662 727 305
Benefit from untaxed
earnings of the foreign
sales corporation (116) (80) (374)
Other, net 116 161 (35)
----- ------ ------
$7,285 $8,544 $2,901
===== ===== =====
5. Long-Term Debt
The company has an unsecured revolving credit agreement with a group of
banks permitting borrowings and letters of credit of up to $45.0 million
through February 20, 1998. The agreement allows the company to borrow at
various rates equivalent to or less than the current prime rate of Firstar
Bank. The company is required to pay a commitment fee of 1/8% on the
unused facility. The agreement requires the company to maintain certain
minimum financial ratios and restricts the payment of dividends, capital
expenditures, business acquisitions and additional indebtedness. As of
September 30, 1995, retained earnings available for the payment of
dividends totaled $3.3 million. As of September 30, 1995, the company had
no borrowings under the agreement but had letters of credit outstanding of
$2.0 million. The average borrowings for 1995 and 1994 amounted to
approximately $2.2 million and $10.5 million, respectively, at a weighted
average interest rate of 9.0% and 5.75%, respectively. The maximum amount
of borrowings at any month-end during 1995 and 1994 was $18.5 million and
$24.0 million, respectively.
At September 30, 1994, the company had outstanding $8,700 of industrial
development revenue bonds that were used to finance the construction of a
chassis manufacturing facility. The bonds were assumed by the purchaser of
the chassis businesses (see Note 10).
6. Operating Leases
Total rental expense for plant and equipment charged to continuing
operations under noncancellable operating leases was $1,004, $955 and
$1,547 in 1995, 1994 and 1993, respectively. Minimum annual rental
payments due under operating leases for subsequent fiscal years are: 1996-
$805; 1997-$603; 1998-$451; and 1999-$203.
Included in rental expense are charges of $215, $304 and $332 in 1995,
1994 and 1993, 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 date of birth. The company's policy is to fund the plans in
amounts which comply with contribution limits imposed by law.
Components of net periodic pension cost for these plans for 1995, 1994 and
1993, including discontinued operations, which is not significant in any
year presented, are as follows:
1995 1994 1993
Service cost -
benefits earned
during year $1,140 $1,227 $ 986
Interest cost on
projected benefit
obligations 1,862 1,684 1,506
Actual return on
plan assets (2,505) (296) (743)
Net amortization
and deferral 438 (1,523) (948)
------- ------- -------
Net periodic
pension cost 935 1,092 801
Curtailment loss
related to reduction
in work force - 560 -
------- ------- -------
Net periodic
pension cost $ 935 $1,652 $ 801
======= ======= ======
The following table summarizes the funded status of the pension plans and
the amounts recognized in the company's consolidated balance sheets at
September 30, 1995 and 1994.
1995 1994
Assets Assets
Exceed Accumulated Exceed Accumulated
Accumulated Benefits Accumulated Benefits
Benefits Exceed Assets Benefits Exceed Assets
Actuarial present value of benefit
obligations:
Vested $11,847 $8,288 $10,072 $6,250
Nonvested 561 458 477 345
------ ----- ------- -----
Accumulated benefit obligations 12,408 8,746 10,549 6,595
Adjustment for projected benefit
obligations 6,039 - 5,134 -
------ ------ ------ -----
Projected benefit obligations 18,447 8,746 15,683 6,595
Plan assets at fair value 16,229 7,148 14,450 5,933
------ ------ ------ -----
Projected benefit obligations in
excess of plan assets (2,218) (1,598) (1,233) (662)
Unrecognized net transition asset (237) (491) (264) (536)
Unrecognized net loss 4,155 3,002 2,793 1,295
Unrecognized prior service cost 33 340 86 366
Adjustment required to recognize
minimum liability - (2,851) - (1,125)
----- ------- ------ ------
Prepaid pension asset (liability) $ 1,733 $(1,598) $ 1,382 $ (662)
====== ====== ===== =====
Generally accepted accounting principles require the recognition of an
additional minimum liability for each defined benefit plan for which the
accumulated benefit obligation exceeds plan assets. This amount is
recorded as a long-term liability ($2,851 in 1995 and $1,125 in 1994) with
an offsetting intangible asset ($340 in 1995 and $366 in 1994) to the
extent of unrecognized prior service cost. In addition, the company
recorded a reduction of shareholders' equity of $1,507 in 1995 and $454 in
1994, net of income tax benefits of $1,004 in 1995 and $304 in 1994.
The plans' assets are comprised of investments in commingled equity and
fixed income funds and individually managed equity portfolios.
Actuarial assumptions are as follows:
1995 1994 1993
Discount rate 7.50% 8.25% 7.50%
Rate of increase
in compensation 4.50% 4.50% 4.50%
Expected long-term
rate of return on
plan 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 become
eligible for these benefits if they reach normal retirement age while
working for the company.
Effective October 1, 1992, the company adopted Statement of Financial
Accounting Standards (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
the company's prior practice. The cumulative effect of adopting SFAS No.
106 on the immediate recognition basis as of October 1, 1992, was a charge
to operations of $4,088, net of income tax benefits of $2,726.
The following table summarizes the status of the plan and the amounts
recognized in the company's consolidated balance sheets at September 30,
1995 and 1994:
1995 1994
Accumulated postretirement
benefit obligations:
Retirees $2,859 $2,988
Fully eligible active
participants 387 497
Other active participants 4,749 4,396
------- -------
7,995 7,881
Unrecognized net gain 844 278
------- -------
Postretirement benefit
obligations $8,839 $8,159
====== ======
Net periodic postretirement benefit cost for continuing operations for
1995, 1994 and 1993, including discontinued operations, which is not
significant in any year reported, includes the following components:
1995 1994 1993
Service cost,
benefits attributed
for service of active
employees for the period $372 $ 472 $ 439
Interest cost on the
accumulated
postretirement
benefit obligation 610 658 579
Amortization of
unrecognized loss - 26 -
------ ----- -----
Net periodic
postretirement
benefit cost $982 $1,156 $1,018
====== ===== =====
Net change in postretirement benefit obligations includes the following:
1995 1994
Balance at beginning of year $8,159 $7,726
Benefits paid (207) (347)
Net periodic postretirement
benefit cost 982 1,156
Curtailment gain related to
reduction in work force (95) (376)
----- -----
Balance at end of year $8,839 $8,159
===== =====
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation was 12.0% in 1995, declining to 6.5% in
2007. The weighted average discount rate used in determining the
postretirement benefit obligation was 7.5%. If the health care cost trend
rate was increased by 1%, the postretirement benefit obligation at
September 30, 1995, would increase by $707 and net periodic postretirement
benefit cost would increase by $109.
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 company 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 for continuing operations were $407, $435 and $439 in 1995,
1994 and 1993, respectively.
Under the 1990 Incentive Stock Plan for Key Employees (the Plan),
officers, other key employees and directors may be granted options to
purchase up to an aggregate of 825,000 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. Options become
exercisable ratably on the first, second and third anniversary of the date
of grant. Options to purchase shares expire 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:
Shares Price Range
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 400,649 $7.88 - $15.25
Options granted 100,500 $11.25 - $14.00
Options exercised (14,250) $7.88 - $9.75
Options cancelled (9,831) $9.38 - $15.25
-------
Outstanding at
September 30, 1995 477,068 $7.88 - $15.25
=======
At September 30, 1995, 224,297 options are exercisable and 283,849 options
are available for grant under the Plan.
Under the 1994 Long-Term Incentive Compensation Plan, executive officers
may be granted incentive compensation awards of up to an aggregate of
540,000 performance units. Payouts under such awards are at the discretion
of the Compensation Committee of the Board of Directors, and will be in
the form of cash, Class B common stock or a combination thereof. The
payouts are based on the company's average return on shareholders' equity
over a defined performance period. The plan allows for awards to be
granted through December 31, 1999.
8. Shareholders' Equity
On June 2, 1995, the company entered into a strategic alliance agreement
with Freightliner Corporation. The alliance agreement calls for a
partnering of the company and Freightliner in manufacturing and marketing
commercial and military trucks. As part of the agreement, Freightliner
purchased 350,000 shares of the company's Class B common stock for $15.00
per share and warrants for the purchase of 1,250,000 additional shares of
Class B common stock exercisable at $16.50 per share through June 2, 2003.
During 1995, the company entered into a stock restriction agreement with
two shareholders owning the majority of the company's Class A common
stock. The agreement is intended to allow for an orderly transition of
Class A common stock into Class B common stock. The agreement provides
that at the time of death or incapacity of the latest to survive, the two
shareholders will exchange all of their Class A common stock for Class B
common stock, and at that time, if not earlier, will support an amendment
to the Articles of Incorporation which will provide for a mandatory
conversion of all Class A common stock into Class B common stock.
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. Each share of Class B
common stock is entitled to receive 115% of any 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.
During 1995, the company announced an offer to the holders of the
company's Class A common stock to convert any or all Class A common stock
to Class B common stock on a one-for-one basis. In addition, the company
has authorized the buyback of up to one million shares of the company's
Class B common stock. The company has reserved 2,550,917 shares of Class B
common stock at September 30, 1995, to provide for the exercise of
outstanding stock options and warrants, the granting of stock options, and
the issuance of common stock under incentive compensation awards.
9. Net Shipments
Net shipments consist of sales to the following markets:
1995 1994 1993
Domestic:
U.S. Government $259,462 $424,995 $372,574
Commercial 159,326 144,133 107,941
Export 19,119 13,347 56,550
-------- -------- --------
$437,907 $582,475 $537,065
======== ======== ========
U.S. Government sales include $2,619 and $5,915 in 1994 and 1993,
respectively, for products sold internationally under the Foreign Military
Sales Program. There were no such sales in 1995.
10. Discontinued Operations
On June 2, 1995, Freightliner Corporation acquired certain assets of the
company's motor home, bus and van chassis business. The consideration
included cash of $23,815 and the assumption by Freightliner of certain
liabilities. The assets sold to Freightliner consisted of inventories,
property, plant and equipment and the company's ownership interest in a
Mexican chassis manufacturer. The liabilities assumed by Freightliner
included warranty obligations related to previously produced chassis and
the industrial revenue bonds that were secured by the underlying real
estate.
The disposition of the chassis business has been accounted for as a
discontinued operation and, accordingly, prior years' financial statements
have been restated to reflect the chassis business as a discontinued
operation for all years presented. Revenues of the chassis business for
1995 (through the date of sale), 1994 and 1993 were $55,804, $109,032 and
$97,947, respectively.
Net assets or liabilities of the discontinued operation have been
segregated in the consolidated balance sheets. Details of such amounts at
September 30, were as follows:
1995 1994
Receivables $ 3,871 $ 8,181
Receivable from joint
venture in Mexico - 7,977
Inventories 1,421 9,166
Accounts payable and
payroll-related obligations (326) (5,393)
Accrued liabilities (1,100) (3,644)
Other, net (593) (405)
------ ------
Net current assets of
discontinued operations $ 3,273 $15,882
====== ======
Property, plant and
equipment, net $ - $ 8,446
Receivable from joint
venture in Mexico 3,165 -
Long-term debt - (8,700)
Accrued warranty (2,694) -
Other, net (698) 321
------ -------
Net long-term assets
(liabilities) of discontinued
operations $ (227) $ 67
====== ======
The company has allocated interest on the debt which was assumed by
Freightliner to discontinued operations. Interest expense included in
discontinued operations totaled $685, $1,000 and $699 in 1995, 1994 and
1993, respectively.
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, 1995 and 1994, and the
related consolidated statements of income, shareholders' equity and cash
flows for each of the three years in the period ended September 30, 1995.
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, 1995 and 1994, and the consolidated results of
its operations and its cash flows for each of the three years in the
period ended September 30, 1995, in conformity with generally accepted
accounting principles.
As discussed in Note 7 to the financial statements, the company changed
its method of accounting for postretirement benefits other than pensions
effective October 1, 1992.
ERNST & YOUNG LLP
November 7, 1995
Milwaukee, Wisconsin
["Financial Statistics" section]
Financial Statistics
Common Dividends
Quarterly (Payable February, May, August, November)
(In thousands, except per share amounts)
Fiscal 1995 Fiscal 1994
4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
Class A Cash
Dividend:
Declared $46 $47 $49 $49 $49 $49 $49 $49
Per Share .10875 .10875 .10875 .10875 .10875 .10875 .10875 .10875
Class B Cash
Dividend:
Declared $1,073 $1,079 $1,033 $1,033 $1,032 $1,032 $1,032 $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 Shareholders' Equity (see page 11).
Oshkosh Truck Corporation Class B Common Stock Price*
The company'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 1995 Fiscal 1994
High Low High Low
September $15 3/4 $12 1/4 $11 1/4 $10
June 13 1/2 12 1/4 11 1/2 8 3/4
March 14 10 3/4 11 3/4 8 3/4
December 11 7/8 10 5/8 9 3/8 8 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 1995 Fiscal 1994
4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
Net Shipments $108,650 $126,400 $107,440 $95,417 $131,328 $155,938 $153,827 $141,382
Gross Profit 14,948 16,945 13,876 12,339 20,450 18,666 17,079 16,822
Income From
Continuing
Operations 3,278 4,098 1,762 2,499 3,504 4,275 1,923 3,856
Per Share .36 .46 .21 .29 .40 .49 .22 .45
Discontinued
Operations - (1,010) (423) (988) (346) (601) 836 (393)
Per Share - (.11) (.05) (.12) (.04) (.07) .10 (.05)
Net Income 3,278 3,088 1,339 1,511 3,158 3,674 2,759 3,463
Per Share .36 .35 .16 .17 .36 .42 .32 .40
The fourth quarter of 1995 includes, on an after-tax basis, approximately
$1.5 million charges for inventory adjustments and additions to accrued
warranty partially offset by certain adjustments to other liabilities.