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 June 29, 1996 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 of 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 (414) 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) or 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 August 7, 1996: 409,458 Class B Common Stock Outstanding as of August 7, 1996: 8,220,070
OSHKOSH TRUCK CORPORATION FORM 10-Q INDEX FOR QUARTER ENDED JUNE 29, 1996 Page PART I. Financial Information Item 1. Financial Statements Condensed Consolidated Statements of Income 3 Condensed Consolidated Balance Sheets 4 Condensed Consolidated Statement of Shareholders' Equity 5 Condensed Consolidated Statements of Cash Flows 6 Notes to Condensed Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 10 PART II. Other Information 15 Signatures 16
PART I. FINANCIAL INFORMATION OSHKOSH TRUCK CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three Months Ended Nine Months Ended June 29, July 1, June 29, July 1, 1996 1995 1996 1995 -------- -------- -------- -------- (In thousands, except per share amounts) Net sales $112,025 $126,400 $295,697 $329,257 Cost of sales 101,294 109,455 259,678 286,097 -------- -------- -------- -------- Gross income 10,731 16,945 36,019 43,160 Operating expenses: Selling, general and administrative 12,791 8,944 29,977 24,431 Engineering, research and development 1,783 1,226 4,516 4,354 -------- -------- -------- -------- Total operating expenses 14,574 10,170 34,493 28,785 -------- -------- -------- -------- Income (loss) from continuing operations (3,843) 6,775 1,526 14,375 Other income (expense): Interest expense (34) (212) (104) (491) Interest income 168 73 956 456 Miscellaneous, net 24 28 (76) (486) -------- -------- -------- -------- 158 (111) 776 (521) -------- -------- -------- -------- Income (loss) from continuing operations before income taxes (3,685) 6,664 2,302 13,854 Provision (credit) for income taxes (1,287) 2,566 898 5,495 -------- -------- -------- -------- Net income (loss) from continuing operations (2,398) 4,098 1,404 8,359 Loss from discontinued operations, net of income tax benefit (2,211) (1,010) (2,211) (2,421) -------- -------- -------- -------- Net income (loss) $ (4,609) $ 3,088 $ (807) $ 5,938 ======== ======== ======== ======== Earnings (loss) per common share: Income (loss) from continuing operations $ (0.27) $ 0.46 $ 0.16 $ 0.96 Discontinued operations (0.25) (0.11) (0.25) (0.28) -------- -------- -------- -------- Net income (loss) $ (0.52) $ 0.35 $ (0.09) $ 0.68 ========= ========= ========= ========= Cash dividends per common share: Class A $0.10875 $0.10875 $0.32625 $0.32625 Class B $0.12500 $0.12500 $0.37500 $0.37500 The accompanying notes are an integral part of these condensed consolidated financial statements.
OSHKOSH TRUCK CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) June 29, September 30, 1996 1995 (In thousands) ASSETS Current assets: Cash and cash equivalents $ 18,439 $ 29,716 Receivables, net of allowance for doubtful accounts 52,489 58,110 Inventories 70,977 45,781 Prepaid expenses 2,859 3,627 Deferred and refundable income taxes 7,972 4,681 Net current assets of discontinued operations - 3,273 -------- -------- Total current assets 152,736 145,188 Deferred charges 2,542 2,978 Deferred income taxes 2,674 2,389 Other long-term assets 9,706 10,437 Property, plant, and equipment: Land 5,857 5,522 Buildings 30,332 30,118 Machinery and equipment 68,815 68,630 -------- -------- 105,004 104,270 Less accumulated depreciation (67,126) (64,346) -------- -------- Net property, plant, and equipment 37,878 39,924 -------- -------- Total assets $205,536 $200,916 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 37,324 $ 28,266 Payroll-related obligations 6,478 5,526 Accrued warranty 3,474 3,084 Other current liabilities 15,129 16,535 -------- -------- Total current liabilities 62,405 53,411 Postretirement benefit obligations 9,490 8,839 Other long-term liabilities 4,958 5,026 Net long-term liabilities of discontinued operations 2,803 227 Shareholders' equity: Preferred stock - - Common stock: Class A 4 4 Class B 89 89 Paid-in capital 16,396 16,533 Retained earnings 117,603 121,697 -------- -------- 134,092 138,323 Cost of Class B common stock in treasury (6,705) (3,403) Pension liability adjustment (1,507) (1,507) -------- -------- Total shareholders' equity 125,880 133,413 -------- -------- Total liabilities and shareholders' equity $205,536 $200,916 ======== ======== The accompanying notes are an integral part of these condensed consolidated financial statements
<TABLE> OSHKOSH TRUCK CORPORATION CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY NINE MONTHS ENDED JUNE 29, 1996 (Unaudited) <CAPTION> Pension Common Paid-in Retained Treasury Liability Stock Capital Earnings Stock Adjustment Total (In thousands) <S> <C> <C> <C> <C> <C> <C> Balance at September 30, 1995 $93 $16,533 $121,697 $(3,403) $(1,507) $133,413 Net loss - - (807) - - (807) Cash dividends: Class A common stock - - (132) - - (132) Class B common stock - - (3,155) - - (3,155) Purchase of treasury stock - - - (3,425) - (3,425) Exercise of stock options - 28 - 123 - 151 Incentive compensation awards - (165) - - - (165) ----- ------- -------- ------- ------- -------- Balance at June 29, 1996 $93 $16,396 $117,603 $(6,705) $(1,507) $125,880 ===== ======= ======== ======= ======= ======== </TABLE> The accompanying notes are an integral part of these condensed consolidated financial statements.
OSHKOSH TRUCK CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended June 29, July 1, 1996 1995 (In thousands) Cash provided from (used for) operations: Net income from continuing operations $ 1,404 $ 8,359 Depreciation and amortization 6,146 6,225 Write-off of investments 3,225 - Deferred income taxes (493) 1,329 Loss on disposal of property, plant, and equipment 74 26 Changes in operating assets and liabilities (13,039) (25,948) ------- ------- Net cash used for operations (2,683) (10,009) Cash provided from (used for) investing activities: Additions to property, plant, and equipment (5,486) (3,546) Proceeds from sale of property, plant, and equipment 2,079 - Increase in other long-term assets (3,261) (619) ------- ------- Net cash used for investing activities (6,668) (4,165) Cash provided from discontinued operations 4,667 7,407 Cash provided from (used for) financing activities: Net payments on lines of credit - (37) Sales of common stock and common stock warrants, net of issuance costs - 8,574 Purchase of treasury stock and proceeds from stock options, net (3,274) 36 Dividends paid (3,319) (3,245) ------- ------- Net cash provided from (used for) financing activities (6,593) 5,328 ------- ------- Decrease in cash and cash equivalents (11,277) (1,439) Cash and cash equivalents at beginning of period 29,716 15,836 ------- ------- Cash and cash equivalents at end of period $18,439 $14,397 ======= ======= Supplementary disclosures: Cash paid for interest: Continuing operations $ 104 $ 585 Discontinued operations - 709 Cash paid for income taxes 3,095 961 The accompanying notes are an integral part of these condensed consolidated financial statements.
OSHKOSH TRUCK CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. BASIS OF PRESENTATION The condensed consolidated financial statements included herein have been prepared by the company without audit. However, the foregoing statements contain all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of company management, necessary to present fairly the condensed consolidated financial statements. Certain reclassifications have been made to the 1995 condensed consolidated financial statements to conform to the 1996 presentation. 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. It is suggested that these consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the company's 1995 annual report to shareholders. 2. INVENTORIES Inventories consist of the following: June 29, 1996 September 30, 1995 (In thousands) Finished products $ 7,264 $ 3,368 Products in process 33,944 15,132 Raw materials 39,191 35,106 ------- ------- Inventories at FIFO cost 80,399 53,606 Less: Progress payments on U.S. Government contracts 1,909 852 Allowance for reduction to LIFO cost 7,513 6,973 ------- ------- $70,977 $45,781 ======= ======= Title to all inventories related to U.S. Government contracts which provide for progress payments vests with the government to the extent of unliquidated progress payments. 3. EARNINGS (LOSS) PER COMMON SHARE Earnings (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares outstanding. The average number of shares outstanding was 8,839,727 and 8,827,350, respectively, for the three month periods and 8,881,711 and 8,749,133, respectively, for the nine month periods ended June 29, 1996 and July 1, 1995. Stock options, warrants and stock issuable under incentive compensation awards were not dilutive in any of the periods presented. 4. SPECIAL CHARGES During the third quarter of fiscal 1996, the company recognized pre-tax charges of $9.9 million (or $6.1 million after-tax). During the quarter, the company evaluated the carrying values of its remaining investments and receivables associated with its Mexican bus affiliate. Due to prolonged weakness in the Mexican economy and continuing losses and high leverage reported by the affiliate, the company is no longer assured that it will realize its investments and receivables associated with its affiliate and wrote off such investments and receivables with a pre-tax charge totaling $5.6 million. The company's fiscal 1996 third quarter earnings also were adversely affected by pre-tax charges of approximately $3.3 million due to delays in the start-up of full scale production of an $85 million Improved Palletized Flatracks (IPF) contract for the U.S. Army. This production has been subcontracted to Steeltech Manufacturing, Inc. (Steeltech). In late July 1996, Steeltech production under the IPF contract passed first article testing. Production under the contract is expected to be completed in early 1998. Fiscal 1996 third quarter earnings were also adversely affected by pre-tax charges of $1.0 million to recognize additional warranty and other product related liabilities with respect to the company's U.S. chassis business which was sold in June 1995. 5. STOCK BUY BACK In July 1995, the company's Board of Directors authorized the repurchase of up to 1,000,000 shares of Class B common stock. As of August 7, 1996, the company has purchased 457,035 shares under this program at a total cost of $6.5 million or an average of $14.22 per share. 6. LITIGATION The company is engaged in litigation against Super Steel Products Corporation (SSPC), the company's former supplier of mixer systems for S- Series front discharge concrete mixer trucks. After incurring internal cost overruns under its long-term supply contract with the company, SSPC conditioned its continued performance under the contract upon the company accepting material price increases for such cost overruns. Following unsuccessful efforts to negotiate a resolution, SSPC sued the company in state court, claiming the company breached the contract. The company counterclaimed for repudiation of contract. The case was recently tried to a jury in Milwaukee County. On July 26, 1996, the jury returned a verdict for SSPC awarding damages totaling approximately $4.5 million. A judgment will not be entered until after post-verdict motions have been made. The company will file motions with the trial court requesting the court to overturn or substantially reduce the verdict. Based on advice of counsel, management believes such motions have substantial merit and that the trial court may grant substantial relief from the verdict. In the event of an adverse judgment against the company, management would expect to vigorously pursue an appeal. 7. ACQUISITION OF PIERCE MANUFACTURING INC. On August 7, 1996, the company entered into an agreement to acquire all the outstanding stock of Pierce Manufacturing Inc. (Pierce). Pierce is a leading manufacturer and marketer of fire fighting apparatus sold into the domestic market with sales for the year ended October 31, 1995 of approximately $180 million. The company expects to finalize the acquisition in mid-September for a total purchase price of $158 million. The company will enter into a new bank credit agreement, principally with its current bank group, to finance the acquisition. The new bank credit agreement will replace the existing credit facility and is expected to consist of a $150 million term loan and a $50 million revolving credit facility. OSHKOSH TRUCK CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS Third Quarter 1996 Compared to 1995 For the third quarter of the 1996 fiscal year, the company incurred a net loss of $4.6 million or $0.52 per share compared to net income of $3.1 million or $0.35 per share in the third quarter of the 1995 fiscal year. During the third quarter of fiscal 1996, the company recognized pre-tax charges of $9.9 million (or $6.1 million after-tax), principally related to the write-off of its remaining investments in Mexico and production delays associated with a large subcontract to Steeltech Manufacturing, Inc. (Steeltech). Net income in the third quarter of the 1995 fiscal year was reduced by an after-tax charge of $1.0 million or $0.11 per share related to discontinued operations of the company's U.S. and Mexico chassis businesses which were sold in June 1995. During the third quarter of fiscal 1996, the company evaluated the carrying values of its remaining investments and receivables associated with its Mexican bus affiliate. The company's affiliate continues to maintain a leading share in the Mexican bus market. However, due to prolonged weakness in the Mexican economy and continuing losses and high leverage reported by the Mexican affiliate, the company is no longer assured that it will realize its investments and receivables associated with its affiliate and wrote off such investments and receivables in the third quarter of fiscal 1996 with a pre-tax charge totaling $5.6 million. The company's fiscal 1996 third quarter earnings also were adversely affected by pre-tax charges of $3.3 million due to delays in the start-up of full scale production of an $85 million Improved Palletized Flatracks (IPF) contract for the U.S. Army. This production has been subcontracted to Steeltech. In late July 1996, Steeltech production under the IPF contract passed first article testing (final testing under the contract). Production under the contract is expected to be completed in early 1998. Fiscal 1996 third quarter earnings also were affected by pre-tax charges of $1.0 million to recognize additional warranty and other product related liabilities with respect to the company's former U.S. chassis business which was sold in June 1995. Net sales for the third quarter of the 1996 fiscal year were $112.0 million compared to $126.4 million for the third quarter of the 1995 fiscal year. Defense sales decreased to $62.3 million in the third quarter of the 1996 fiscal year from $71.7 million in the third quarter of the 1995 fiscal year principally due to delays in the start-up of full scale production under the IPF contract. Commercial sales decreased to $49.7 million in the third quarter of the 1996 fiscal year from $54.7 million in the third quarter of the 1995 fiscal year due to a decline in trailer sales of $10.0 million which was partially offset by increases in concrete mixer, snow truck and parts sales. Gross income was $10.7 million or 9.6% of sales in the third quarter of the 1996 fiscal year compared to $16.9 million or 13.4% of sales in the third quarter of the 1995 fiscal year. Charges of $3.1 million and overall lower defense sales, each resulting from the production delays under the IPF subcontract to Steeltech, reduced gross income for the third quarter of fiscal 1996. Operating expenses totaled $14.6 million in the third quarter of the 1996 fiscal year compared to $10.2 million in the third quarter of the 1995 fiscal year. Operating expenses for the third quarter of the 1996 fiscal year include charges of $3.2 million associated with the write-off of investments in the company's Mexican bus affiliate and Steeltech and a $1.7 million increase in warranty expenses. The $2.2 million after-tax loss from discontinued operations ($3.6 million pre-tax) in the third quarter of fiscal 1996 results from the write-off of receivables of $2.6 million (pre-tax) related to the company's former Mexican bus chassis business which was sold in June 1995 and from the $1.0 million pre-tax charge for additional warranty and other product related liabilities with respect to the company's former U.S. chassis business which also was sold in June 1995. First Nine Months 1996 Compared to 1995 For the first nine months of the 1996 fiscal year, the company incurred a net loss of $0.8 million or $0.09 per share compared to net income of $5.9 million or $0.68 per share for the first nine months of the 1995 fiscal year. The 1996 period includes after-tax charges of $6.1 million principally related to the write-off of its remaining investments in Mexico and production delays associated with a large subcontract to Steeltech. Net income in the first nine months of the 1995 fiscal year was reduced by a charge of $2.4 million or $0.28 per share related to discontinued operations of the company's former U.S. and Mexico chassis businesses which were sold in June 1995. Net sales for the nine months ended June 1996 were $295.7 million compared to $329.3 million for the nine months ended June 1995. Defense sales declined to $176.4 million in the nine months ended June 1996 from $187.2 million in the nine months ended June 1995 principally due to delays in the start-up of full scale production under the IPF subcontract to Steeltech. Commercial sales decreased to $119.3 million in the nine months ended June 1996 from $142.1 million in the nine months ended June 1995 due to a decline in trailer sales of $29.3 million which was partially offset by an increase in concrete mixer and parts sales. Gross income was $36.0 million or 12.2% of sales for the first nine months of fiscal 1996 compared to $43.2 million or 13.1% of sales in the same period of 1995. Gross income declined during the first nine months of fiscal 1996 due to charges of $3.1 million and overall lower defense sales, each resulting from the production delays under the IPF subcontract to Steeltech. Operating expenses totaled $34.5 million in the nine months ended June 1996, an increase of $5.7 million compared to the $28.8 million for the nine months ended June 1995. The nine month period ended June 1996 includes charges of $3.2 million for the write-off of investments in the company's Mexican bus affiliate and Steeltech and a $1.9 million increase in warranty expense. LIQUIDITY AND CAPITAL RESOURCES During the first nine months of fiscal 1996, cash and cash equivalents decreased by $11.3 million. Cash of $2.7 million was used in operations principally due to increased net working capital requirements related to an increase in customer orders scheduled to ship in the fourth quarter of fiscal 1996. Working capital requirements are anticipated to remain at high levels through the remainder of the 1996 fiscal year. Capital additions and increases in other assets totaling $8.7 million during the first nine months of fiscal 1996 principally related to investments to enter the rear discharge concrete mixer business. Dividends and stock repurchases totaled $6.6 million in the first nine months of fiscal 1996. Partially offsetting these requirements were cash proceeds of $4.7 million of current assets of discontinued operations which were realized in fiscal 1996 and $2.1 million of cash proceeds from the sale of property, plant, and equipment, principally related to the sale of the company's airplane. The company is engaged in litigation against Super Steel Products Corporation (SSPC), the company's former supplier of mixer systems for S- Series front discharge concrete mixer trucks. After incurring internal cost overruns under its long-term supply contract with the company, SSPC conditioned its continued performance under the contract upon the company accepting material price increases for such cost overruns. Following unsuccessful efforts to negotiate a resolution, SSPC sued the company in state court, claiming the company breached the contract. The company counterclaimed for repudiation of contract. The case was recently tried to a jury in Milwaukee County. On July 26, 1996, the jury returned a verdict for SSPC awarding damages totaling approximately $4.5 million. A judgment will not be entered until after post-verdict motions have been made. The company will file motions with the trial court requesting the court to overturn or substantially reduce the verdict. Based on advice of counsel, management believes such motions have substantial merit and that the trial court may grant substantial relief from the verdict. In the event of an adverse judgment against the company, management would expect to vigorously pursue an appeal. On August 7, 1996, the company entered into an agreement to acquire all the outstanding stock of Pierce Manufacturing Inc. (Pierce). Pierce is a leading manufacturer and marketer of fire fighting apparatus sold into the domestic market with sales for the year ended October 31, 1995 of approximately $180 million. The company expects to finalize the acquisition in mid-September for a total purchase price of $158 million. The company will enter into a new bank credit agreement, principally with its current bank group, to finance the acquisition. The new bank credit agreement will replace the existing credit facility and is expected to consist of a $150 million term loan and a $50 million revolving credit facility. The company believes its internally generated cash flow, supplemented by progress payments when available, the existing credit facility and the term loan and revolving credit facility under the new bank credit agreement will be adequate to finance the acquisition of Pierce and meet working capital and other operating and capital requirements of the company in the foreseeable future. BACKLOG The backlog as of June 29, 1996, was $301 million compared to $350 million at September 30, 1995. Major United States Department of Defense trucks backlog consists of Palletized Load System (PLS) vehicles, Heavy Expanded Mobility Tactical Trucks (HEMTT), including the start of a HEMTT rebuild program, Improved Palletized Flatracks (IPF), and Logistics Vehicle System (LVS) trucks. STOCK BUY BACK In July 1995, the company's Board of Directors authorized the repurchase of up to 1,000,000 shares of Class B common stock. As of August 7, 1996, the company has purchased 457,035 shares under this program at a total cost of $6.5 million or an average of $14.22 per share. ALLIANCE Implementation of the Strategic Alliance with Freightliner Corporation continued during the third quarter of fiscal 1996. However, incremental sales attributable to the Strategic Alliance have fallen short of expectations, and the U.S. Army M916 and M917 contract has not yet been novated to the company from Freightliner. OSHKOSH TRUCK CORPORATION PART II. OTHER INFORMATION FORM 10-Q JUNE 29, 1996 ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit 27 - Financial Data Schedule (b) Reports on Form 8-K The company was not required to file a report on Form 8-K during the quarter ended June 29, 1996.
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 DATE: /s/ R. Eugene Goodson R. Eugene Goodson Chairman and Chief Executive Officer (Principal Executive Officer) DATE: /s/ Charles L. Szews Charles L. Szews Vice President and Chief Financial Officer (Principal Financial Officer) DATE: /s/ Peter F. Mueller Peter F. Mueller Corporate Controller (Principal Accounting Officer)
EXHIBIT INDEX Exhibit No. Description 27 Financial Data Schedule