SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) (x) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended December 31, 2000 or ( ) Transaction Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Transition period from to --------------- ------------------- Commission File Number 0-13886 ------------- Oshkosh Truck Corporation ------------------------------------------------------ [Exact name of registrant as specified in its charter] Wisconsin 39-0520270 - ------------------------------- ------------------ [State or other jurisdiction of [I.R.S. Employer incorporation or organization] Identification No.] 2307 Oregon Street, P.O. Box 2566, Oshkosh, Wisconsin 54903 - ----------------------------------------------------- --------- [Address of principal executive offices] [Zip Code] Registrant's telephone number, including area code (920) 235-9151 -------------- None --------------------------------------------------------------- [Former name, former address and former fiscal year, if changed since last report] Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- ---- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class A Common Stock Outstanding as of January 31, 2001: 419,991 - ---------------------------------------------------------------------- Common Stock Outstanding as of January 31, 2001: 16,252,166 - ----------------------------------------------------------------------
OSHKOSH TRUCK CORPORATION FORM 10-Q INDEX FOR THE QUARTER ENDED DECEMBER 31, 2000 Page Part I. Financial Information Item 1. Financial Statements (Unaudited) Condensed Consolidated Statements of Income - Three Months Ended December 31, 2000 and 1999 ...............3 Condensed Consolidated Balance Sheets - December 31, 2000 and September 30, 2000.....................4 Condensed Consolidated Statement of Shareholders' Equity - Three Months Ended December 31, 2000 ........................5 Condensed Consolidated Statements of Cash Flows - Three Months Ended December 31, 2000 and 1999 ...............6 Notes to Condensed Consolidated Financial Statements - December 31, 2000............................................7 Item 2. Management's Discussion and Analysis of Consolidated Financial Condition and Results of Operations ................18 Item 3. Quantitative and Qualitative Disclosure of Market Risk ..........23 Part II. Other Information Item 1. Legal Proceedings ...............................................24 Item 6. Exhibits and Reports on Form 8-K ................................24 Signatures .................................................................25 2
PART I. ITEM 1. FINANCIAL INFORMATION OSHKOSH TRUCK CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three Months Ended December 31, 2000 1999 ---- ---- (In thousands, except per share amounts) Net sales $ 281,517 $ 243,867 Cost of sales 238,250 203,890 ------------ ------------ Gross income 43,267 39,977 Operating expenses: Selling, general and administrative 22,619 20,578 Amortization of goodwill and other intangibles 2,864 2,772 ------------ ------------ Total operating expenses 25,483 23,350 ------------ ------------ Operating income 17,784 16,627 Other income (expense): Interest expense (4,658) (5,786) Interest income 169 166 Miscellaneous, net -- 114 ------------ ------------ (4,489) (5,506) ------------ ------------ Income before items noted below 13,295 11,121 Provision for income taxes 5,375 4,740 ------------ ------------ 7,920 6,381 Equity in earnings of unconsolidated partnership, net of income taxes 303 315 ------------ ------------ Income from operations 8,223 6,696 Extraordinary charge for early retirement of debt, net of income tax benefit -- (581) ------------ ------------ Net income $ 8,223 $ 6,115 ============ ============ Earnings (loss) per share: Income from operations $ 0.49 $ 0.46 Extraordinary charge -- (0.04) ------------ ------------ Net income $ 0.49 $ 0.42 ============ ============ Earnings (loss) per share assuming dilution: Income from operations $ 0.48 $ 0.46 Extraordinary charge -- (0.04) ------------ ------------ Net income $ 0.48 $ 0.42 ============ ============ Cash dividends: Class A Common Stock $ 0.07500 $ 0.07500 Common Stock $ 0.08625 $ 0.08625 The accompanying notes are an integral part of these condensed consolidated financial statements. 3
OSHKOSH TRUCK CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS December, 31, September 30, 2000 2000 ---- ---- (Unaudited) (In thousands) ASSETS Current assets: Cash and cash equivalents $ 4,854 $ 13,569 Receivables, net 102,163 106,805 Inventories 236,373 201,210 Prepaid expenses 6,076 5,424 Deferred income taxes 13,608 14,708 ------------- -------------- Total current assets 363,074 341,716 Investment in unconsolidated partnership 15,954 15,179 Other long-term assets 13,408 9,995 Property, plant and equipment 213,695 206,507 Less accumulated depreciation (90,231) (87,748) -------------- -------------- Net property, plant and equipment 123,464 118,759 Goodwill and other intangible assets, net 314,102 310,731 ------------- -------------- Total assets $ 830,002 $ 796,380 ============= ============== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 63,249 $ 84,215 Floor plan notes payable 36,085 23,925 Customer advances 88,659 58,493 Payroll-related obligations 16,114 23,465 Accrued warranty 14,849 15,519 Other current liabilities 59,641 52,310 Revolving credit facility and current maturities of long-term debt 17,606 8,544 ------------- -------------- Total current liabilities 296,203 266,471 Long-term debt 151,511 154,238 Deferred income taxes 45,705 46,414 Other long-term liabilities 28,308 28,200 Commitments and contingencies Shareholders' equity 308,275 301,057 ------------- -------------- Total liabilities and shareholders' equity $ 830,002 $ 796,380 ============= ============== The accompanying notes are an integral part of these condensed consolidated financial statements. 4
<TABLE> OSHKOSH TRUCK CORPORATION CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY THREE MONTHS ENDED DECEMBER 31, 2000 (Unaudited) <CAPTION> Common Stock Other Common Paid-in Retained in Treasury Comprehensive Stock Capital Earnings at Cost Income Total ----- ------- -------- ------- -------------- ----- (In thousands, except per share amounts) <S> <C> <C> <C> <C> <C> <C> Balance at September 30, 2000 $ 178 $ 109,740 $ 201,791 $ (10,652) $ -- $ 301,057 Comprehensive income: Net income -- -- 8,223 -- -- 8,223 Gain on derivative instruments, net -- -- -- -- 336 336 --------- --------- --------- --------- --------- --------- Comprehensive income 8,559 Cash dividends: Class A Common Stock -- -- (32) -- -- (32) Common Stock -- -- (1,402) -- -- (1,402) Other -- 54 -- 39 93 --------- --------- --------- --------- --------- --------- Balance at December 31, 2000 $ 178 $ 109,794 $ 208,580 $ (10,613) $ 336 $ 308,275 ========= ========= ========= ========= ========= ========= </TABLE> The accompanying notes are an integral part of these condensed consolidated financial statements. 5
<TABLE> OSHKOSH TRUCK CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) <CAPTION> Three Months Ended December 31, 2000 1999 ---- ---- (In thousands) <S> <C> <C> Operating activities: Income from operations $ 8,223 $ 6,696 Non-cash adjustments 7,795 4,202 Changes in operating assets and liabilities (8,015) (5,624) ------------------ ------------------ Net cash provided from operating activities 8,003 5,274 Investing activities: Acquisition of businesses, net of cash acquired (14,423) (5,893) Additions to property, plant and equipment (4,244) (4,486) Increase in other long-term assets (3,008) (1,005) ------------------ ------------------ Net cash used for investing activities (21,675) (11,384) Financing activities: Net borrowings under revolving credit facility 8,600 6,000 Repayment of long-term debt (2,265) (93,709) Proceeds from Common Stock offering -- 93,736 Costs of Common Stock offering -- (341) Dividends paid (1,433) (1,102) Other 55 28 ----------------- ----------------- Net cash provided from financing activities 4,957 4,612 ----------------- ----------------- Decrease in cash and cash equivalents (8,715) (1,498) Cash and cash equivalents at beginning of period 13,569 5,137 ----------------- ----------------- Cash and cash equivalents at end of period $ 4,854 $ 3,639 ================= ================= Supplementary disclosures: Depreciation and amortization $ 7,080 $ 5,780 Cash paid for interest 1,396 4,566 Cash paid for income taxes 2,832 361 </TABLE> The accompanying notes are an integral part of these condensed consolidated financial statements. 6
OSHKOSH TRUCK CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. BASIS OF PRESENTATION General - The condensed consolidated financial statements included herein have been prepared by Oshkosh Truck Corporation (the "Company") without audit. However, the foregoing financial statements contain all adjustments (consisting only of normal recurring adjustments) that are, in the opinion of Company management, necessary to present fairly the condensed consolidated financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's 2000 annual report to shareholders. Reclassifications - Certain reclassifications have been made to the fiscal 2000 financial statements to conform to the fiscal 2001 presentation. Derivative Financial Instruments - On October 1, 2000, the Company adopted Financial Accounting Standard No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("FAS 133"). This statement requires companies to record derivatives on the balance sheet as assets or liabilities, measured at fair value. Any changes in fair value of these instruments are recorded in the income statement or other comprehensive income. The impact of adopting FAS 133 on accumulated other comprehensive income resulted in a loss of $0.1 million. During the quarter, the Company did not reclassify any derivative gains or losses to the income statement. The cumulative effect of adopting FAS 133 on the results of operations was immaterial. 2. EARNINGS PER SHARE The following table sets forth the computation of basic and diluted weighted average shares used in the denominator of the per share calculations: Three Months Ended December 31, 2000 1999 ---------- ---------- Denominator for basic earnings per share 16,668,914 14,398,921 Effect of dilutive options and incentive compensation awards 401,993 310,575 -------------- -------------- Denominator for dilutive earnings per share 17,070,907 14,709,496 ============== ============== 7
3. INVENTORIES Inventories consist of the following: December 31, September 30, 2000 2000 ---- ---- (In thousands) Finished products $ 51,634 $ 53,068 Partially finished products 98,880 75,667 Raw materials 110,719 95,776 -------------- ------------- Inventories at FIFO cost 261,233 224,511 Less: Progress payments on U.S. government contracts (13,531) (12,313) Excess of FIFO cost over LIFO cost (11,329) (10,988) -------------- ------------- $ 236,373 $ 201,210 ============== ============= Title to all inventories related to government contracts, which provide for progress payments, vests with the government to the extent of unliquidated progress payments. 4. ACQUISITIONS On October 30, 2000, the Company acquired all of the issued and outstanding capital stock of Medtec Ambulance Corporation ("Medtec") for $14.4 million in cash, including acquisition costs and net of cash acquired. Medtec is a U.S. manufacturer of custom ambulances and rescue vehicles. The acquisition was financed from available cash and borrowings under the Company's revolving credit facility ("Revolving Credit Facility"). The acquisition was accounted for using the purchase method of accounting and, accordingly, the operating results of Medtec are included in the Company's consolidated statements of income beginning October 30, 2000. The purchase price, including acquisition costs, exceeded the estimated fair value of the assets acquired and liabilities assumed as of the acquisition date by approximately $5.9 million, which has been recorded as goodwill and which will be amortized over a 25 year period. The purchase price allocation for Medtec is preliminary and further adjustments are likely based on final valuations and finalization of integration plans. Final adjustments are not expected to have a material impact on the Company's financial statements. Had the acquisition occurred as of October 1, 1999, there would have been no material proforma effect on net sales, income before extraordinary charge or net income. 5. LONG-TERM DEBT The Company has outstanding a senior credit facility ("Senior Credit Facility") and $100.0 million of 8.75% senior subordinated notes due March 1, 2008. The Senior Credit Facility consists of a $170.0 million Revolving Credit Facility, which had $8.6 million outstanding at December 31, 2000, and a term loan with $58.0 million outstanding at December 31, 2000. The Senior Credit Facility matures in January 2006. 8
At December 31, 2000, outstanding borrowings of $8.6 million and $14.5 million of outstanding letters of credit reduced available capacity under the Revolving Credit Facility to $146.9 million. Substantially all the tangible and intangible assets of the Company and its subsidiaries (including the stock of certain subsidiaries) are pledged as collateral under the Senior Credit Facility. The Senior Credit Facility includes customary affirmative and negative covenants. The senior subordinated notes were issued pursuant to an Indenture dated February 26, 1998 (the "Indenture"), between the Company, the Subsidiary Guarantors (as defined below) and Firstar Trust Company, as trustee. The Indenture contains customary affirmative and negative covenants. The Subsidiary Guarantors fully, unconditionally, jointly and severally guarantee the Company's obligations under the senior subordinated notes. 6. COMMON STOCK OFFERING On November 24, 1999, the Company sold 3,795,000 shares of its Common Stock at $26.00 per share. Proceeds from the offering, net of underwriting discounts and commissions, totaled $93.7 million with $93.5 million used to repay indebtedness under the Company's then outstanding senior credit facility. Pro forma unaudited earnings per share of the Company, assuming that the net proceeds to the Company from the offering were used to repay term debt as of October 1, 1999, is summarized below: Three Months Ended December 31, 1999 ----------------- Earnings per share before extraordinary charge Basic $ 0.44 Assuming dilution 0.43 Weighted average shares Basic 16,626,421 Assuming dilution 16,936,996 7. COMMITMENTS AND CONTINGENCIES As part of its routine business operations, the Company disposes of and recycles or reclaims certain industrial waste materials, chemicals and solvents at third party disposal and recycling facilities, which are licensed by appropriate governmental agencies. In some instances, these facilities have been and may be designated by the United States Environmental Protection Agency ("EPA") or a state environmental agency for remediation. Under the Comprehensive Environmental Response, Compensation, and Liability Act (the "Superfund" law) and similar state laws, each potentially responsible party ("PRP") that contributed hazardous substances may be jointly and severally liable for the costs associated with cleaning up the site. Typically, PRPs negotiate a resolution with the EPA and/or the state environmental agencies. PRPs also negotiate with each other regarding allocation of the cleanup cost. As to one such Superfund site, Pierce Manufacturing Inc. ("Pierce") is one of 431 PRPs participating in the costs of addressing the site and has been 9
assigned an allocation share of approximately 0.04%. Currently, a report of the remedial investigation/ feasibility study is being completed, and as such, an estimate for the total cost of the remediation of this site has not been made to date. However, based on estimates and the assigned allocations, the Company believes its liability at the site will not be material and its share is adequately covered through reserves established by the Company at December 31, 2000. Actual liability could vary based on results of the study, the resources of other PRPs, and the Company's final share of liability. The Company is addressing a regional trichloroethylene ("TCE") groundwater plume on the south side of Oshkosh, Wisconsin. The Company believes there may be multiple sources in the area. TCE was detected at the Company's North Plant facility with testing showing the highest concentrations in a monitoring well located on the upgradient property line. Because the investigation process is still ongoing, it is not possible for the Company to estimate its long-term total liability associated with this issue at this time. Also, as part of the regional TCE groundwater investigation, the Company conducted a groundwater investigation of a former landfill located on Company property. The landfill, acquired by the Company in 1972, is approximately 2.0 acres in size and is believed to have been used for the disposal of household waste. Based on the investigation, the Company does not believe the landfill is one of the sources of the TCE contamination. Based upon current knowledge, the Company believes its liability associated with the TCE issue will not be material and that it has established adequate reserves for the matter as of December 31, 2000. However, this may change as investigations proceed by the Company, other unrelated property owners, and the government. The Company is subject to other environmental matters and legal proceedings and claims, including patent, antitrust, product liability and state dealership regulation compliance proceedings, that arise in the ordinary course of business. Although the final results of all such matters and claims cannot be predicted with certainty, management believes that the ultimate resolution of all such matters and claims, after taking into account the liabilities accrued with respect to such matters and claims, will not have a material adverse effect on the Company's financial condition or results of operations. Actual results could vary, among other things, due to the uncertainties involved in litigation. The Company has guaranteed certain customers' obligations under deferred payment contracts and lease purchase agreements totaling approximately $1 million at December 31, 2000. The Company is also contingently liable under bid, performance and specialty bonds totaling approximately $136.9 million and open standby letters of credit issued by the Company's bank in favor of third parties totaling approximately $14.6 million at December 31, 2000. 10
8. BUSINESS SEGMENT INFORMATION Three Months Ended December 31, 2000 1999 ------------ ----------- (In thousands) Net sales to unaffiliated customers: Commercial $ 106,026 $ 115,394 Fire and emergency 93,746 75,577 Defense 81,745 52,896 ------------ ---------- Consolidated $ 281,517 $ 243,867 ============ ========== Operating income (loss): Commercial $ 6,172 $ 9,054 Fire and emergency 7,355 3,915 Defense 8,546 7,495 Corporate and other (4,289) (3,837) ------------ ---------- Consolidated operating income 17,784 16,627 Net interest expense (4,489) (5,620) Miscellaneous other -- 114 ------------ ---------- Income before income taxes, equity in earnings of unconsolidated partnership and extraordinary charge $ 13,295 $ 11,121 ============ ========== December 31, September 30, 2000 2000 ---- ---- (In thousands) Identifiable assets: Commercial $ 419,995 $ 385,622 Fire and emergency 305,149 288,904 Defense 99,714 108,528 Corporate and other 5,144 13,326 ------------ ------------ Consolidated $ 830,002 $ 796,380 ============ ============ 9. CONDENSED CONSOLIDATING FINANCIAL INFORMATION The following tables present condensed consolidating financial information for: (a) the Company; (b) on a combined basis, the guarantors of the senior subordinated notes, which include all wholly-owned subsidiaries of the Company ("Subsidiary Guarantors") other than McNeilus Financial Services, Inc. and Oshkosh/McNeilus Financial Services, Inc., which are the only non-guarantor subsidiaries of the Company ("Non-Guarantor Subsidiaries"), and (c) on a combined basis, the Non-Guarantor Subsidiaries. Separate financial statements of the Subsidiary Guarantors are not presented because the Subsidiary Guarantors are jointly, severally and unconditionally liable under the guarantees, and the Company believes separate financial statements and other disclosures regarding the Subsidiary Guarantors are not material to investors. The Company is comprised of Wisconsin and Florida manufacturing operations and certain corporate management, information services and finance functions. Borrowings and related interest expense under the Senior Credit Facility and the senior subordinated notes are charged to the Company. The Company has allocated a portion of this interest expense to certain Subsidiary Guarantors through formal lending arrangements. 11
<TABLE> OSHKOSH TRUCK CORPORATION Condensed Consolidating Statements of Income For the Three Months Ended December 31, 2000 (Unaudited) <CAPTION> Subsidiary Non-Guarantor Company Guarantors Subsidiaries Eliminations Consolidated ------- ---------- ------------ ------------ ------------ (In thousands) <S> <C> <C> <C> <C> <C> Net sales $ 108,039 $ 176,238 $ -- $ (2,760) $ 281,517 Cost of sales 93,212 147,950 -- (2,912) 238,250 ---------- ---------- ----------- ---------- ----------- Gross income 14,827 28,288 -- 152 43,267 Operating expenses: Selling, general and administrative 9,369 13,319 (69) -- 22,619 Amortization of goodwill and other intangibles -- 2,864 -- -- 2,864 ---------- ---------- ----------- ---------- ----------- Total operating expenses 9,369 16,183 (69) -- 25,483 ---------- ---------- ----------- ---------- ----------- Operating income 5,458 12,105 69 152 17,784 Other income (expense): Interest expense (5,511) (5,722) -- 6,575 (4,658) Interest income 5,035 1,709 -- (6,575) 169 Miscellaneous, net 2,728 (2,728) -- -- -- ---------- ---------- ----------- ---------- ----------- 2,252 (6,741) -- -- (4,489) ---------- ---------- ----------- ---------- ------------ Income before items noted below 7,710 5,364 69 152 13,295 Provision for income taxes 2,766 2,526 26 57 5,375 ---------- ---------- ----------- ---------- ----------- 4,944 2,838 43 95 7,920 Equity in earnings of subsidiaries and unconsolidated partnership, net of income taxes 3,279 -- 303 (3,279) 303 ---------- ---------- ----------- ---------- ----------- Net income $ 8,223 $ 2,838 $ 346 $ (3,184) $ 8,223 ========== ========== =========== ========== =========== </TABLE> 12
<TABLE> OSHKOSH TRUCK CORPORATION Condensed Consolidating Statements of Income For the Three Months Ended December 31, 1999 (Unaudited) <CAPTION> Subsidiary Non-Guarantor Company Guarantors Subsidiaries Eliminations Consolidated ------- ---------- ------------ ------------ ------------ (In thousands) <S> <C> <C> <C> <C> <C> Net sales $ 80,794 $ 167,714 $ -- $ (4,641) $ 243,867 Cost of sales 67,993 140,538 -- (4,641) 203,890 ---------- ---------- ----------- ----------- ----------- Gross income 12,801 27,176 -- -- 39,977 Operating expenses: Selling, general and administrative 8,398 12,096 84 -- 20,578 Amortization of goodwill and other intangibles -- 2,772 -- -- 2,772 ---------- ---------- ----------- ---------- ----------- Total operating expenses 8,398 14,868 84 -- 23,350 ---------- ---------- ----------- ---------- ----------- Operating income (loss) 4,403 12,308 (84) -- 16,627 Other income (expense): Interest expense (5,406) (1,955) -- 1,575 (5,786) Interest income 32 1,668 41 (1,575) 166 Miscellaneous, net 8 (12) 118 -- 114 ---------- ---------- ----------- ---------- ----------- (5,366) (299) 159 -- (5,506) ----------- ----------- ----------- ---------- ------------ Income (loss) before items noted below (963) 12,009 75 -- 11,121 Provision (credit) for income taxes (366) 5,078 28 -- 4,740 ----------- ---------- ----------- ---------- ----------- (597) 6,931 47 -- 6,381 Equity in earnings of subsidiaries and unconsolidated partnership, net of income taxes 7,293 -- 315 (7,293) 315 ---------- ---------- ----------- ----------- ----------- Income from operations 6,696 6,931 362 (7,293) 6,696 Extraordinary charge for early retirement of debt, net of income tax benefit (581) -- -- -- (581) ---------- ---------- ----------- ---------- ----------- Net income $ 6,115 $ 6,931 $ 362 $ (7,293) $ 6,115 ========== ========== =========== =========== =========== </TABLE> 13
<TABLE> OSHKOSH TRUCK CORPORATION Condensed Consolidating Balance Sheets December 31, 2000 (Unaudited) <CAPTION> Subsidiary Non-Guarantor Company Guarantors Subsidiaries Eliminations Consolidated ------- ---------- ------------ ------------ ------------ (In thousands) <S> <C> <C> <C> <C> <C> ASSETS Current assets: Cash and cash equivalents $ 3,532 $ 1,142 $ 180 $ -- $ 4,854 Receivables, net 52,925 50,358 181 (1,301) 102,163 Inventories 71,193 165,237 -- (57) 236,373 Prepaid expenses and other 10,898 8,643 143 -- 19,684 --------- ---------- --------- ------------ ------------ Total current assets 138,548 225,380 504 (1,358) 363,074 Investment in and advances to: Subsidiaries 394,890 5,801 -- (400,691) -- Unconsolidated partnership -- -- 15,954 -- 15,954 Other long-term assets 7,503 5,695 210 -- 13,408 Net property, plant and equipment 32,827 90,637 -- -- 123,464 Goodwill and other intangible assets, net -- 314,102 -- -- 314,102 --------- ---------- --------- ------------ ------------ Total assets $ 573,768 $ 641,615 $ 16,668 $ (402,049) $ 830,002 ========= ========== ========= ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 26,131 $ 38,414 $ 5 $ (1,301) $ 63,249 Floor plan notes payable -- 36,085 -- -- 36,085 Customer advances 7,920 80,713 26 -- 88,659 Payroll-related obligations 7,051 9,032 31 -- 16,114 Accrued warranty 7,013 7,836 -- -- 14,849 Other current liabilities 32,450 27,027 164 -- 59,641 Revolving credit facility and current maturities of long-term debt 17,100 237 269 -- 17,606 --------- ---------- --------- ------------ ------------ Total current liabilities 97,665 199,344 495 (1,301) 296,203 Long-term debt 149,500 1,843 168 -- 151,511 Deferred income taxes (794) 36,295 10,204 -- 45,705 Other long-term liabilities 19,122 9,186 -- -- 28,308 Commitments and contingencies Investments by and advances from (to) parent -- 394,947 5,801 (400,748) -- Shareholders' equity 308,275 -- -- -- 308,275 --------- ----------- --------- ------------ ------------ Total liabilities and shareholders' equity $ 573,768 $ 641,615 $ 16,668 $ (402,049) $ 830,002 ========= ========== ========= ============ ============ </TABLE> 14
<TABLE> OSHKOSH TRUCK CORPORATION Condensed Consolidating Balance Sheets September 30, 2000 (Unaudited) <CAPTION> Subsidiary Non-Guarantor Company Guarantors Subsidiaries Eliminations Consolidated ------- ---------- ------------ ------------ ------------ (In thousands) <S> <C> <C> <C> <C> <C> ASSETS Current assets: Cash and cash equivalents $ 13,034 $ 499 $ 36 $ -- $ 13,569 Receivables, net 61,156 47,473 272 (2,096) 106,805 Inventories 59,552 141,867 -- (209) 201,210 Prepaid expenses and other 12,153 7,836 143 -- 20,132 --------- --------- --------- --------- --------- Total current assets 145,895 197,675 451 (2,305) 341,716 Investment in and advances to: Subsidiaries 382,723 4,308 -- (387,031) -- Unconsolidated partnership -- -- 15,179 -- 15,179 Other long-term assets 7,731 1,980 284 -- 9,995 Net property, plant and equipment 30,196 88,563 -- -- 118,759 Goodwill and other intangible assets, net -- 310,731 -- -- 310,731 --------- --------- --------- --------- --------- Total assets $ 566,545 $ 603,257 $ 15,914 $(389,336) $ 796,380 ========= ========= ========= ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 39,602 $ 46,704 $ 5 $ (2,096) $ 84,215 Floor plan notes payable -- 23,925 -- -- 23,925 Customer advances 3,114 55,353 26 -- 58,493 Payroll-related obligations 10,642 12,792 31 -- 23,465 Accrued warranty 6,867 8,652 -- -- 15,519 Other current liabilities 27,234 24,912 164 -- 52,310 Revolving credit facility and current maturities of long-term debt 8,000 237 307 -- 8,544 --------- --------- --------- --------- --------- Total current liabilities 95,459 172,575 533 (2,096) 266,471 Long-term debt 152,000 2,052 186 -- 154,238 Deferred income taxes (905) 36,432 10,887 -- 46,414 Other long-term liabilities 18,934 9,266 -- -- 28,200 Commitments and contingencies Investments by and advances from (to) parent -- 382,932 4,308 (387,240) -- Shareholders' equity 301,057 -- -- -- 301,057 --------- --------- --------- --------- --------- Total liabilities and shareholders' equity $ 566,545 $ 603,257 $ 15,914 $(389,336) $ 796,380 ========= ========= ========= ========= ========= </TABLE> 15
<TABLE> OSHKOSH TRUCK CORPORATION Condensed Consolidating Statements of Cash Flows For the Three Months Ended December 31, 2000 (Unaudited) <CAPTION> Subsidiary Non-Guarantor Company Guarantors Subsidiaries Eliminations Consolidated ------- ---------- ------------ ------------ ------------ (In thousands) <S> <C> <C> <C> <C> <C> Operating activities: Net income $ 8,223 $ 2,838 $ 346 $ (3,184) $ 8,223 Non-cash adjustments 3,321 5,642 (1,168) -- 7,795 Changes in operating assets and liabilities (10,292) 2,314 115 (152) (8,015) --------- --------- ---------- -------- ---------- Net cash provided from (used for) operating activities 1,252 10,794 (707) (3,336) 8,003 Investing activities: Acquisition of business, net of cash acquired -- (14,423) -- -- (14,423) Investments in and advances to subsidiaries (12,167) 7,684 1,147 3,336 -- Additions to property, plant and equipment (3,790) (454) -- -- (4,244) Other (19) (2,749) (240) -- (3,008) --------- --------- ---------- -------- ---------- Net cash provided from (used for) investing activities (15,976) (9,942) 907 3,336 (21,675) Financing activities: Net borrowings under revolving credit facility 8,600 -- -- -- 8,600 Repayment of long term debt (2,000) (209) (56) -- (2,265) Dividends paid (1,433) -- -- -- (1,433) Other 55 -- -- -- 55 --------- --------- ---------- -------- ---------- Net cash provided from (used for) financing activities 5,222 (209) (56) -- 4,957 --------- --------- ---------- -------- ---------- Increase (decrease) in cash and cash equivalents (9,502) 643 144 -- (8,715) Cash and cash equivalents at beginning of period 13,034 499 36 -- 13,569 --------- --------- ---------- -------- ---------- Cash and cash equivalents at end of period $ 3,532 $ 1,142 $ 180 $ -- $ 4,854 ========= ========= ========== ======== ========== </TABLE> 16
<TABLE> OSHKOSH TRUCK CORPORATION Condensed Consolidating Statements of Cash Flows For the Three Months Ended December 31, 1999 (Unaudited) <CAPTION> Subsidiary Non-Guarantor Company Guarantors Subsidiaries Eliminations Consolidated ------- ---------- ------------ ------------ ------------ (In thousands) <S> <C> <C> <C> <C> <C> Operating activities: Income from operations $ 6,696 $ 6,931 $ 362 $ (7,293) $ 6,696 Non-cash adjustments 961 4,692 (1,451) -- 4,202 Changes in operating assets and liabilities 7,104 (11,426) (1,302) -- (5,624) --------- ---------- ----------- ---------- ----------- Net cash provided from (used for) operating activities 14,761 197 (2,391) (7,293) 5,274 Investing activities: Acquisition of business, net of cash acquired (5,893) -- -- -- (5,893) Investments in and advances to subsidiaries (13,748) 3,153 3,302 7,293 -- Additions to property, plant and equipment (1,654) (2,832) -- -- (4,486) Other 183 (296) (892) -- (1,005) --------- ---------- ----------- ---------- ----------- Net cash provided from (used for) investing activities (21,112) 25 2,410 7,293 (11,384) Financing activities: Net borrowings under revolving credit facility 6,000 -- -- -- 6,000 Repayment of long-term debt (93,500) (209) -- -- (93,709) Proceeds from Common Stock offering 93,736 -- -- -- 93,736 Costs of Common Stock offering (341) -- -- -- (341) Dividends paid (1,102) -- -- -- (1,102) Other 28 -- -- -- 28 --------- --------- ---------- ---------- ---------- Net cash provided from (used for) financing activities 4,821 (209) -- -- 4,612 --------- ---------- ---------- ---------- ---------- Increase (decrease) in cash and cash equivalents (1,530) 13 19 -- (1,498) Cash and cash equivalents at beginning of period 3,698 1,337 102 -- 5,137 --------- --------- ---------- ---------- ---------- Cash and cash equivalents at end of period $ 2,168 $ 1,350 $ 121 $ -- $ 3,639 ========= ========= ========== ========== ========== </TABLE> 17
Item 2. Oshkosh Truck Corporation Management's Discussion and Analysis of Consolidated Financial Condition and Results of Operations FORWARD-LOOKING STATEMENTS This Management's Discussion and Analysis of Consolidated Financial Condition and Results of Operations and other sections of this Form 10-Q contain statements that the Company believes are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this report, including, without limitation, statements regarding Oshkosh Truck Corporation's (the "Company" or "Oshkosh") future financial position, business strategy, budgets, targets, projected costs and plans and objectives of management for future operations, are forward-looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "will," "expect," "intend," "estimates," "anticipate," "believe," "should," "plans," or "continue," or the negative thereof or similar terminology. The Company can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from the Company's expectations include, without limitation, the following: (1) the cyclical nature of the concrete placement industry; (2) the risks related to reductions or changes in U.S. government expenditures; (3) the potential for actual costs to exceed projected costs under long-term, fixed-price government contracts; (4) the risks related to suspension, termination or audit of U.S. government contracts, including for failure to meet performance thresholds; (5) the challenges of identifying, completing and integrating future acquisitions; (6) competition; (7) disruptions in the supply of parts or components from sole source suppliers and subcontractors; (8) product liability and warranty claims; and (9) labor relations and market conditions. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained from time to time in the Company's SEC filings, including, but not limited to the Company's Current Report on Form 8-K filed with the SEC on January 25, 2001. All subsequent written and oral forward-looking statements attributable to the Company, or persons acting on its behalf, are expressly qualified in their entirety by these cautionary statements. General The major products manufactured and marketed by each of the Company's business segments are as follows: Commercial-- concrete mixer systems, refuse truck bodies, portable concrete batch plants and truck components sold to commercial ready-mix companies and commercial and municipal waste haulers in the U. S. and abroad. Fire and emergency -- commercial and custom fire trucks, aircraft rescue and firefighting trucks, snow removal trucks, ambulances and other emergency vehicles primarily sold to fire departments, airports and other governmental units in the U. S. and abroad. 18
Defense-- heavy- and medium-payload tactical trucks and supply parts sold to the U. S. military and to other militaries around the world. Results of Operations Analysis of Consolidated Net Sales The following table presents net sales by business segment: First Quarter Fiscal 2001 2000 ------------ ------------- (In thousands) Net sales to unaffiliated customers: Commercial $ 106,026 $ 115,394 Fire and emergency 93,746 75,577 Defense 81,745 52,896 ------------- ------------- Consolidated $ 281,517 $ 243,867 ============= ============= First Quarter 2001 Compared to 2000 Consolidated net sales increased 15.4% to $281.5 million for the first quarter of fiscal 2001, compared to the first quarter of fiscal 2000. The November 1999 acquisition of Kewaunee Engineering Corporation ("Kewaunee") and the October 2000 acquisition of Medtec Ambulance Corporation ("Medtec") contributed 1.8% of the increase in net sales. Commercial segment net sales decreased 8.1% to $106.0 million for the first quarter of fiscal 2001 compared to the first quarter of fiscal 2000. Concrete placement sales were down 9.3% in 2001 compared to 2000. Fiscal 2000 results were characterized by unusually strong end-markets and all-time historical sales levels. First quarter declines in concrete placement sales were more than anticipated and believed to be caused by an uncertain economic environment. Refuse truck body sales decreased 6.0% and were impacted by a slow-down in large commercial waste-hauler purchases. Fire and emergency segment net sales increased 24.0% to $93.7 million for the first quarter of fiscal 2001 compared to the first quarter of fiscal 2000. Excluding the acquisitions of Kewaunee and Medtec, sales increased 18.8% for the quarter. Pierce Manufacturing Inc. ("Pierce") comprises a substantial majority of the revenue of this segment. Pierce's sales increased 13.2% in the first quarter of fiscal 2001 compared to the first quarter of fiscal 2000. Pierce's sales were limited in the first quarter of fiscal 2000 by the late receipt of commercial chassis from truck suppliers and by production inefficiencies resulting from the installation of an enterprise-wide resource planning ("ERP") system at Pierce. First quarter of fiscal 2001 results also include increased shipments of aircraft rescue and fire fighting vehicles internationally compared to results for the first quarter of fiscal 2000. Defense segment net sales increased 54.5% to $81.7 million for the first quarter of fiscal 2001 compared to the first quarter of fiscal 2000. Increased Medium Tactical Vehicle Replacement ("MTVR") sales resulting from the planned ramp-up to full rate production scheduled for later this year, increased parts sales and increased international sales accounted for the 19
increase during the quarter. The Company began to produce MTVR vehicles during the second quarter of fiscal 2000. Analysis of Consolidated Operating Income The following table presents operating income by business segment: First Quarter Fiscal 2001 2000 ---- ---- (In thousands) Operating income (loss): Commercial $ 6,172 $ 9,054 Fire and emergency 7,355 3,915 Defense 8,546 7,495 Corporate and other (4,289) (3,837) ------------ ------------ Consolidated operating income $ 17,784 $ 16,627 ============ ============ First Quarter 2001 Compared to 2000 Consolidated operating income increased 7.0% to $17.8 million for the first quarter of fiscal 2001 compared to the first quarter of fiscal 2000. Excluding the impact of the November 1999 acquisition of Kewaunee and the October 2000 acquisition of Medtec, consolidated operating income increased 3.6% compared to consolidated operating income for the first quarter of fiscal 2000. Commercial segment operating income decreased 31.8% for the first quarter of fiscal 2001 compared to 2000. Operating income as a percent of segment sales ("operating income margin") decreased to 5.8% of commercial segment sales for the first quarter of fiscal 2001 compared to 7.8% of commercial segment sales for the first quarter of fiscal 2000. First quarter 2001 operating income margins returned to levels experienced prior to last year (5.0% in the first quarter of fiscal 1999) due to lower sales and decreased absorption of fixed overhead costs in this seasonally slower quarter. Lower absorption of overhead was partially offset by productivity improvements associated with the refuse body plant expansion project completed in the fourth quarter of fiscal 2000. Fire and emergency segment operating income increased 87.9% to $7.4 million for the first quarter of fiscal 2001 compared to the first quarter of fiscal 2000. The operating income margin increased from 5.2% to 7.8% during this same period. Excluding the impacts of the Kewaunee and Medtec acquisitions, operating income margins increased from 5.1% in the first quarter of fiscal 2000 to 7.5% for the first quarter of fiscal 2001. Operating income margins in the first quarter of fiscal 2000 were lower than historic levels attributable to commercial chassis shortages from suppliers and short-term production inefficiencies following the installation at Pierce of the final modules of a new ERP system during the third quarter of fiscal 1999. Increased international sales volume of the Company's aircraft rescue and fire fighting business also contributed to increased segment operating income and operating income margins during the quarter. 20
Defense segment operating income increased 14.0% to $8.5 million for the first quarter of fiscal 2001 compared to the first quarter of fiscal 2000. Operating income margins decreased to 10.5% of defense segment sales for the first quarter of fiscal 2001 compared to 14.2% of defense segment sales for the first quarter of fiscal 2000. Lower margin MTVR sales, increased bid and proposal costs related to the Family of Medium Tactical Vehicle ("FMTV") program and the impacts of production inefficiencies incurred during the 100,000 square foot building expansion at the Oshkosh manufacturing facilities contributed to the reductions in operating income margins. Corporate and other expenses increased $0.5 million to $4.3 million, or 1.5% of consolidated net sales, for the first quarter of fiscal 2001, from $3.8 million, or 1.6% of consolidated net sales, for the first quarter of fiscal 2000. Increases in corporate expenses generally relate to increased staffing and personnel costs. Analysis of Non-Operating Income Statement Items First Quarter of Fiscal 2001 Compared to 2000 Interest expense decreased 19.5% in the first quarter of fiscal 2001, compared to the first quarter of fiscal 2000. Lower interest expense resulted from the prepayment of $93.5 million of term debt from proceeds of the Company's November 24, 1999 public offering of Common Stock. This was partially offset by interest expense on borrowings to fund the acquisitions of Kewaunee, Viking Truck and Equipment Inc. (April 2000) and Medtec. The effective tax rate for combined federal and state income taxes for the first quarter of fiscal 2001 was 40.4% compared to 42.6% in the first quarter of fiscal 2000. The Company's effective income tax rate excluding the impact of nondeductible goodwill was 36.6% in the first quarter of fiscal 2001 compared to 37.9% in the first quarter of fiscal 2000 as the Company benefited from a more efficient state income tax structure and tax benefits related to foreign sales. Equity in earnings of an unconsolidated partnership of $0.3 million in the first quarter of fiscal 2001 and fiscal 2000 represents the equity in earnings of the Company's interest in its lease financing partnership. The $0.6 million extraordinary charge in the first quarter of fiscal 2000 represents the write-off of deferred financing costs for that portion of debt prepaid in November 1999 following the equity offering. Financial Condition First Quarter of Fiscal 2001 During the quarter, cash decreased by $8.7 million to $4.9 million at December 31, 2000. Cash provided from operating activities of $8.0 million, borrowings of $8.6 million and $8.7 million in available cash was used to fund the $14.4 million acquisition of Medtec, capital expenditures of $4.2 million, scheduled term debt reductions of $2.3 million, a $3.0 million increase in other assets and $1.4 million of dividend payments. The Company's debt-to-total capital ratio at December 31, 2000 was 35.4% compared to 35.1% at September 30, 2000. 21
First Quarter of Fiscal 2000 During the quarter, cash decreased by $1.5 million to $3.6 million at December 31, 1999. Cash provided from operating activities of $5.3 million was used to fund capital expenditures of $4.5 million, increase long-term assets by $1.0 million and pay dividends of $1.1 million. Net borrowings of $6.0 million during the quarter were used to fund the acquisition of Kewaunee for $5.9 million. In November 1999, the Company completed a public offering of 3,795,000 shares of Common Stock at $26.00 per share, before commissions and expenses. Proceeds to the Company, net of underwriting discounts and commissions, were used to prepay $93.5 million of term debt under the Company's Senior Credit Facility. The Company's debt-to-total capital ratio at December 31, 1999 was 39.8%. During the quarter, inventory increased $33.5 million, including $27.0 million in the commercial segment as a result of seasonal build requirements. Fire and emergency inventories increased $9.9 million during the quarter, generally as a result of commercial chassis and systems-related production inefficiencies at Pierce. Defense segment inventories were down slightly due to timing of inventory purchases. Increases in inventory were offset by reductions in defense receivables ($19.5 million reduction) related to one-time accelerated payments by the U.S. government to minimize Year 2000 concerns and a $11.7 million increase in floor plan notes payable related to commercial segment chassis purchases. Liquidity and Capital Resources The Company had $146.9 million of unused availability under the terms of its Revolving Credit Facility as of December 31, 2000. The Company's primary cash requirements include working capital, interest and principal payments on indebtedness, capital expenditures, dividends and, potentially, future acquisitions. The primary sources of cash are expected to be cash flow from operations and borrowings under the Company's Senior Credit Facility. The Senior Credit Facility requires quarterly principal payments. Based upon current and anticipated future operations, management believes that capital resources will be adequate to meet future working capital, debt service and other capital requirements for fiscal 2001, including the working capital requirements associated with the ramp-up to full rate of production under the MTVR contract and the acquisition of Medtec. The Company's cash flow from operations has fluctuated, and will likely continue to fluctuate, significantly from quarter to quarter due to changes in working capital arising principally from seasonal fluctuations in sales. Capital expenditures are expected to approximate $17 million in fiscal 2001 and $20 million in fiscal 2002. Fiscal 2001 capital expenditures include approximately $4 million of an $8 million expansion of the Company's production facilities in Oshkosh. New Accounting Standards In December 1999, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin ("SAB") No. 101, which deals with revenue 22
recognition issues. SAB No. 101 (as modified by SAB No. 101 A and B) is required to be adopted by the Company no later than the fourth quarter of fiscal 2001. Management does not anticipate that the adoption of SAB No. 101, 101A or 101B will have a significant effect on the results of operations or on the financial position of the Company. In September 2000, the Emerging Issues Task Force ("EITF"), a subcommittee of the Financial Accounting Standards Board, issued EITF Issue No. 00-10 "Accounting for Shipping and Handling Fees and Cost." EITF No. 00-10 prescribes guidance regarding the income statement classification of costs incurred for shipping and handling fees and costs. This guidance requires shipping fees to be recognized in revenue and shipping costs to be recognized as cost of sales. This statement is to be effective during the fourth quarter of fiscal 2001, concurrent with the adoption of SAB 101. The Company will reclassify shipping fee revenue out of cost of sales, where it currently is classified as a reduction of shipping costs, and into revenue. The Company does not believe that the adoption of EITF No. 00-10 will have a material effect on the results of operations of the Company. Customers and Backlog Sales to the U. S. Department of Defense comprised approximately 29% of the Company's net sales in the first quarter of fiscal 2001. No other single customer accounted for more than 10% of the Company's net sales for this period. A substantial majority of the Company's net sales are derived from customer orders prior to commencing production. The Company's backlog at December 31, 2000 increased 14.4% to $639.1 million compared to $558.7 million at December 31, 1999. Commercial segment backlog decreased 29.7% to $132.8 million at December 31, 2000 compared to December 31, 1999. Fire and emergency segment backlog increased 19.8% to $264.9 million at December 31, 2000 compared to December 31, 1999. The defense segment backlog increased 60.9% to $241.4 million at December 31, 2000 compared to December 31, 1999. The Company expects that only 4% of the December 31, 2000 backlog will not be filled in fiscal 2001. Reported backlog excludes purchase options and announced orders for which definitive contracts have not been executed. Additionally, backlog excludes unfunded portions of the U. S. Department of Defense long-term family and MTVR contracts. Backlog information and comparisons thereof as of different dates may not be accurate indicators of future sales or the ratio of the Company's future sales to the U. S. Department of Defense versus its sales to other customers. Item 3. Quantitative and Qualitative Disclosure of Market Risk The Company's quantitative and qualitative disclosures about market risk for changes in interest rates and foreign exchange risk are incorporated by reference in Item 7A of the Company's Annual Report on Form 10-K for the year ended September 30, 2000 and have not materially changed since that report was filed. 23
OSHKOSH TRUCK CORPORATION PART II. OTHER INFORMATION FORM 10-Q DECEMBER 31, 2000 ITEM 1 LEGAL PROCEEDINGS None. ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 10 Second Amendment effective December 31, 2000 to Employment Agreement, dated as of October 15, 1998, between Oshkosh Truck Corporation and Robert G. Bohn.* (b) Reports on Form 8-K Current Report on Form 8-K dated October 26, 2000, reporting the announcement of the Company's earnings for the fourth quarter and the fiscal year ended September 30, 2000. Current Report on Form 8-K dated October 30, 2000, reporting the announcement of the Company's acquisition of Medtec. *Denotes a management contract or compensatory plan or arrangement. 24
SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. OSHKOSH TRUCK CORPORATION February 13, 2001 /S/ R. G. Bohn -------------------------------------------- R. G. Bohn Chairman, President and Chief Executive Officer (Principal Executive Officer) February 13, 2001 /S/ C. L. Szews -------------------------------------------- C. L. Szews Executive Vice President and Chief Financial Officer (Principal Financial Officer) February 13, 2001 /S/ T. J. Polnaszek -------------------------------------------- T. J. Polnaszek Vice President and Controller (Principal Accounting Officer) 25
EXHIBIT INDEX Exhibit No. Description 10 Second Amendment effective December 31, 2000 to Employment Agreement, dated as of October 15, 1998, between Oshkosh Truck Corporation and Robert G. Bohn.* *Denotes a management contract or compensatory plan or arrangement. 26