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 30, 1997 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 (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 July 31, 1997: 406,878 Class B Common Stock Outstanding as of July 31, 1997: 7,895,981
OSHKOSH TRUCK CORPORATION FORM 10-Q INDEX FOR THE QUARTER ENDED JUNE 30, 1997 Page PART I. Financial Information Item 1. Financial Statements Condensed Consolidated Statements of Income (Loss) . . . . . . . . . . . . . . . . . . . . 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 Consolidated Financial Condition and Results of Operations . . . . . . . . . . . . . . . . 9 PART II. Other Information . . . . . . . . . . . . . . . . . . . 14 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
<TABLE> PART I. ITEM 1. FINANCIAL INFORMATION OSHKOSH TRUCK CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (Unaudited) <CAPTION> Three Months Ended Nine Months Ended June 30, June 29, June 30, June 29, 1997 1996 1997 1996 (In thousands, except per share amounts) <S> <C> <C> <C> <C> Net sales $176,596 $111,950 $497,381 $295,472 Cost of sales 154,699 104,303 433,033 264,649 -------- -------- -------- -------- Gross income 21,897 7,647 64,348 30,823 Operating expenses: Selling, general and administrative 11,742 9,665 34,383 24,685 Engineering, research & development 2,211 1,783 5,957 4,516 Amortization of goodwill and other intangibles 1,117 12 3,352 12 -------- ------- -------- ------- Total operating expenses 15,070 11,460 43,692 29,213 -------- ------- -------- ------- Income (loss) from continuing operations 6,827 (3,813) 20,656 1,610 Other income (expense): Interest expense (2,848) (64) (9,571) (188) Interest income 130 168 484 956 Miscellaneous, net (24) 24 (93) (76) -------- ------ ------- ------- (2,742) 128 (9,180) 692 -------- ------ ------- ------- Income (loss) from continuing operations before income taxes 4,085 (3,685) 11,476 2,302 Provision (credit) for income taxes 1,293 (1,287) 4,586 898 -------- ------ ------- ------- Net income (loss) from continuing operations 2,792 (2,398) 6,890 1,404 ======== ====== ======= ======= Loss from discontinued operations, net of income tax benefit -- (2,211) -- (2,211) -------- ------ ------- ------- Net income (loss) $ 2,792 $ (4,609) $ 6,890 $ (807) ======== ======= ======= ======= Earnings (loss) per common share: Income (loss) from continuing operations $ 0.33 $ (0.27) $ 0.80 $ 0.16 Discontinued operations 0.00 (0.25) 0.00 (0.25) -------- -------- ------- ------- Net income (loss) $ 0.33 $ (0.52) $ 0.80 $ (0.09) ======== ======== ======= ======= 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. </TABLE>
OSHKOSH TRUCK CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) June 30, Sept. 30, 1997 1996 ASSETS (In thousands) Current assets: Cash and cash equivalents $ 1,236 $ 127 Receivables, net 66,431 76,624 Inventories 100,056 106,289 Prepaid expenses 3,137 3,619 Refundable income taxes 4,350 6,483 Deferred income taxes 7,055 7,055 -------- ---------- Total current assets 182,265 200,197 Deferred charges 1,720 2,645 Other long-term assets 7,089 7,834 Property, plant, and equipment: Land 7,071 7,131 Buildings 42,233 40,421 Machinery and equipment 79,580 77,485 -------- ---------- 128,884 125,037 Less accumulated depreciation (72,896) (67,002) -------- ---------- Net property, plant, and equipment 55,988 58,035 Goodwill and other intangible assets, net 163,098 166,450 -------- ---------- Total assets $410,160 $435,161 ======== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 42,809 $ 49,178 Customer advances 27,337 27,793 Payroll-related obligations 14,407 12,843 Accrued warranty 9,030 8,942 Other current liabilities 18,321 18,972 Current maturities of long-term debt -- 15,000 -------- ---------- Total current liabilities 111,904 132,728 Long-term debt 142,471 142,882 Postretirement benefit obligations 9,944 9,517 Other long-term liabilities 3,651 4,424 Deferred income taxes 23,475 24,008 Shareholders' equity: Common stock: Class A 4 4 Class B 89 89 Paid-in capital 13,573 16,059 Retained earnings 118,001 114,246 -------- ---------- 131,667 130,398 Cost of Class B common stock in treasury (12,952) (8,796) -------- ---------- Total shareholders' equity 118,715 121,602 -------- ---------- Total liabilities and shareholders' equity $410,160 $435,161 ======== ========== 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 30, 1997 (Unaudited) <CAPTION> Common Paid-in Retained Treasury Stock Capital Earnings Stock Total (In thousands) <S> <C> <C> <C> <C> <C> Balance at September 30, 1996 $93 $16,059 $114,246 $(8,796) $121,602 Net income -- -- 6,890 -- 6,890 Cash dividends: Class A common stock -- -- (133) -- (133) Class B common stock -- -- (3,002) -- (3,002) Purchase of 350,000 shares of Class B common stock and 1,250,000 warrants for the purchase of Class B common stock -- (2,504) -- (4,246) (6,750) Exercise of stock options -- 18 -- 90 108 ----- --------- -------- --------- --------- Balance at June 30, 1997 $93 $13,573 $118,001 $(12,952) $118,715 ===== ========= ======== ========= ========= The accompanying notes are an integral part of these condensed consolidated financial statements. </TABLE>
OSHKOSH TRUCK CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended June 30, June 29, 1997 1996 (In thousands) Operating activities: Net income from continuing operations $ 6,890 $ 1,404 Depreciation and amortization 10,538 6,146 Write-off of investments -- 3,225 Deferred income taxes (533) (493) Loss on disposal of property, plant, and equipment -- 74 Changes in operating assets and liabilities 14,918 (12,627) -------- ------- Net cash provided from (used for) operations 31,813 (2,271) Investing activities: Acquisitions of businesses, net of cash acquired -- (3,912) Additions to property, plant, and equipment (4,613) (4,136) Proceeds from sale of property, plant, and equipment 333 2,079 Increase in other long-term assets (114) (1,111) ------- ------- Net cash used for investing activities (4,394) (7,080) Net cash provided from (used for) discontinued operations (1,079) 4,667 Financing activities: Net repayments of long-term debt (15,411) -- Purchase of common stock and common stock warrants (6,750) -- Purchase of treasury stock and proceeds from exercise of stock options, net 108 (3,274) Dividends paid (3,178) (3,319) ------- ------- Net cash used for financing activities (25,231) (6,593) ------- ------- Increase (decrease) in cash and cash equivalents 1,109 (11,277) Cash and cash equivalents at beginning of period 127 29,716 ------- ------- Cash and cash equivalents at end of period $ 1,236 $18,439 ======= ======= Supplementary disclosures: Cash paid for interest $ 9,815 $ 189 Cash paid for income taxes 2,986 3,095 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 Oshkosh Truck Corporation (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 1996 condensed consolidated financial statements to conform to the 1997 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 consolidated financial statements and notes thereto included in the company's 1996 annual report to shareholders. 2. 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 8,415,102 and 8,839,727, respectively, for the three month periods and 8,568,496 and 8,881,711, respectively, for the nine month periods ended June 30, 1997 and June 29, 1996. Stock options, warrants and stock issuable under incentive compensation awards were not dilutive in any of the periods presented. 3. INVENTORIES Inventories consist of the following: June 30, Sept. 30, 1997 1996 (In thousands) Finished products $ 10,982 $ 15,208 Partially finished products 41,412 51,533 Raw materials 56,825 47,580 ---------- -------- Inventories at FIFO cost 109,219 114,321 Less: Progress payments on U.S. Government contracts (228) -- Excess of FIFO cost over LIFO cost (8,935) (8,032) ---------- --------- $100,056 $106,289 ========== ========= Title to all inventories related to government contracts which provide for progress payments vests in the government to the extent of unliquidated progress payments. 4. LONG-TERM DEBT At June 30, 1997, $7.5 million of borrowings and $4.5 million of letters of credit reduced available capacity under the company's revolving credit facility to $38.0 million. 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. There were no stock repurchases under this program during the nine months ended June 30, 1997. As of June 30, 1997 and July 31, 1997, the company has repurchased 461,535 shares under this program at a total cost of $6.6 million. The repurchase of 350,000 shares of Class B common stock from Freightliner Corporation (Freightliner) on May 2, 1997 (see Note 7) does not impact the number of shares available for repurchase under this program. 6. CONTINGENCIES The company is engaged in litigation against Super Steel Products Corp. (SSPC), the company's former supplier of mixer systems for front discharge concrete mixer trucks under a long-term supply contract. SSPC sued the company in state court claiming the company breached the contract. The company counterclaimed for repudiation of contract. On July 26, 1996, a jury returned a verdict for SSPC awarding damages totaling approximately $4.5 million. On October 10, 1996, the state court judge overturned the verdict against the company, granted judgment for the company on its counterclaim, and ordered a new trial for damages on the company's counterclaim. Both SSPC and the company have appealed the state court judge's decision. The Wisconsin Court of Appeals has agreed to hear the case and both the company and SSPC have filed briefs in this matter. The company and Pierce Manufacturing Inc. (Pierce), a wholly-owned subsidiary of the company, are contingently liable under bid and performance bonds totaling approximately $117 million at June 30, 1997. 7. FREIGHTLINER ALLIANCE On May 2, 1997, the company and Freightliner formally terminated the Strategic Alliance formed on June 2, 1995. The company repurchased from Freightliner 350,000 shares of its Class B common stock and 1,250,000 warrants for the purchase of additional shares of Class B common stock for the total sum of $6.8 million. The company and Freightliner will continue to supply each other with parts and components. Results of Operations Third Quarter 1997 Compared to 1996 Oshkosh Truck Corporation (the company) reported net income of $2.8 million, or $0.33 per share, on sales of $176.6 million for the third quarter of fiscal 1997, compared to a net loss of $4.6 million, or $0.52 per share, on sales of $112.0 million for the third quarter of fiscal 1996. The fiscal 1996 results were adversely affected by after-tax charges of $6.1 million principally related to the write-off of its then remaining investments in Mexico and production delays associated with a defense subcontract to Steeltech Manufacturing, Inc. (Steeltech). Sales of both commercial and defense products increased in the third quarter of fiscal 1997 compared to the third quarter of fiscal 1996. Commercial sales in the third quarter of fiscal 1997 increased $51.7 million or 104.0% from the third quarter of fiscal 1996 to $101.4 million principally due to sales of fire trucks and other fire apparatus as a result of the acquisition of Pierce Manufacturing Inc. (Pierce) on September 18, 1996. Sales of construction, airport rescue and fire fighting (ARFF), snow removal and refuse vehicles and commercial van trailers decreased slightly during the third quarter. Sales of defense products totaled $75.2 million in the third quarter of fiscal 1997, an increase of $12.9 million or 20.7% as compared to the third quarter of fiscal 1996. The increase in defense sales principally resulted from the sale of ISO-Compatible Palletized Flatracks (IPF) which are being produced by Steeltech. Gross income in the third quarter of fiscal 1997 totaled $21.9 million or 12.4% of sales compared to $7.6 million or 6.8% of sales in the third quarter of fiscal 1996. The increase in gross income in the third quarter of fiscal 1997 was principally due to increased sales volumes as a result of the acquisition of Pierce. Also, charges of $3.1 million resulting from production delays associated with a defense subcontract to Steeltech reduced gross income for the third quarter of fiscal 1996. Operating expenses totaled $15.1 million or 8.5% of sales in the third quarter of fiscal 1997 compared to $11.5 million or 10.2% of sales in the third quarter of fiscal 1996. The increase in operating expenses in the third quarter of fiscal 1997 relates principally to the operating expenses of Pierce and amortization of goodwill and other intangibles associated with the acquisition of Pierce. Also, operating expenses for the third quarter of fiscal 1996 include charges of $3.2 million associated with the write-off of the company's then remaining investments in Mexico and Steeltech. Interest expense increased to $2.8 million in the third quarter of fiscal 1997 compared to $0.1 million in the third quarter of fiscal 1996 as a result of the financing for the Pierce acquisition. Interest expense for the third quarter of fiscal 1997 was also impacted by the reversal of accrued interest related to prior years' provisions for income taxes. The effective income tax rate for combined federal and state income taxes for the third quarter of fiscal 1997 was 31.7% compared to 34.9% for the third quarter of fiscal 1996. The effective income tax rate for the third quarter of fiscal 1997 was impacted by the reversal of $0.5 million of prior years' provision for income taxes and non-deductible goodwill of $0.6 million. The $2.2 million after-tax loss from discontinued operations in the third quarter of fiscal 1996 resulted from the write-off of receivables of $2.6 million (pre-tax) related to the company's former Mexican bus chassis business and from $1.0 million of pre-tax charges for additional warranty and other product related liabilities with respect to the company's former U.S. chassis business, both of which were sold in June 1995. First Nine Months 1997 Compared to 1996 The company reported net income of $6.9 million, or $0.80 per share, on sales of $497.4 million for the first nine months of fiscal 1997, compared to a net loss of $0.8 million, or $0.09 per share, on sales of $295.5 million for the first nine months of fiscal 1996. The fiscal 1996 results were adversely affected by after-tax charges of $6.1 million associated with the company's investments in Mexican bus affiliates and a subcontract to Steeltech. Sales of both commercial and defense products increased in the first nine months of fiscal 1997 compared to the first nine months of fiscal 1996. Commercial sales in the first nine months of fiscal 1997 increased $172.3 million or 144.4% from the first nine months of fiscal 1996 to $291.6 million principally due to sales of fire trucks and other fire apparatus as a result of the acquisition of Pierce. Sales of defense products totaled $205.8 million in the first nine months of fiscal 1997, an increase of $29.6 million or 16.8% as compared to the first nine months of fiscal 1996. The increase in defense sales principally resulted from the sale of IPFs to the U.S. Government. Gross income in the first nine months of fiscal 1997 totaled $64.3 million or 12.9% of sales compared to $30.8 million or 10.4% of sales in the first nine months of fiscal 1996. The increase in gross income in the first nine months of fiscal 1997 was principally due to increased sales volumes as a result of the acquisition of Pierce. Charges of $3.1 million related to a subcontract to Steeltech also adversely affected fiscal 1996 results. Operating expenses totaled $43.7 million or 8.8% of sales in the first nine months of fiscal 1997 compared to $29.2 million or 9.9% of sales in the first nine months of fiscal 1996. The increase in operating expenses in the first nine months of fiscal 1997 relates principally to the operating expenses of Pierce and amortization of goodwill and other intangible assets associated with the acquisition of Pierce. The 1996 operating expenses included charges of $3.2 million associated with the company's investments in Mexican bus affiliates and Steeltech. Interest expense increased to $9.6 million in the first nine months of fiscal 1997 compared to $0.2 million in the first nine months of fiscal 1996 as a result of the financing for the Pierce acquisition. The effective income tax rate for combined federal and state income taxes for the first nine months of fiscal 1997 was 40.0% compared to 39.0% for the first nine months of fiscal 1996. The effective income tax rate for the first nine months of fiscal 1997 was adversely affected by non- deductible goodwill of $1.9 million offset by a reversal of $0.5 million of prior years' provision for income taxes. The $2.2 million after-tax loss from discontinued operations in the first nine months of fiscal 1996 resulted from the additional charges related to the company's former U.S. and Mexican chassis businesses which were sold in June 1995. Financial Condition First Nine Months 1997 During the first nine months of fiscal 1997, cash increased $1.1 million. Cash provided from operations of $31.8 million was used to fund the repayment of long-term debt of $15.4 million, the repurchase of common stock and warrants from Freightliner Corporation (Freightliner) of $6.8 million (see below), capital additions of $4.6 million, and dividends of $3.2 million. First Nine Months 1996 During the first nine months of fiscal 1996, cash decreased $11.3 million. Cash was required for operations of $2.3 million, for the acquisition of Friesz Manufacturing Company of $3.9 million, for capital additions of $4.1 million, for stock repurchases of $3.3 million and for dividends of $3.3 million. Discontinued operations and proceeds from the sale of property, plant and equipment provided cash of $4.7 million and $2.1 million, respectively, for the first nine months of fiscal 1996. Liquidity and Capital Resources The company's principal uses of cash for the next several years will be interest and principal payments on long-term debt, capital expenditures and potential acquisitions. At June 30, 1997, $7.5 million of borrowings and $4.5 million of letters of credit reduced available capacity under the company's revolving credit facility to $38.0 million. The company believes its internally generated cash flow, supplemented by progress payments when applicable, and borrowings available under the existing bank credit agreement will be adequate to meet working capital and other operating and capital requirements of the company in the foreseeable future. Backlog The company's backlog as of June 30, 1997 was $401 million, compared to $301 million at June 29, 1996. The backlog at June 30, 1997 includes $228 million with respect to U.S. Government contracts, $133 million related to Pierce, and the remainder relates to other commercial products. Virtually all the company's revenues are derived from customer orders prior to commencing production. 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. There were no stock repurchases under this program in the first nine months of fiscal 1997. As of June 30, 1997 and July 31, 1997, the company has repurchased 461,535 shares under this program at a total cost of $6.6 million. The repurchase of 350,000 shares of Class B common stock from Freightliner on May 2, 1997 (see below) does not impact the number of shares available for repurchase under this program. Freightliner Alliance On May 2, 1997, the company and Freightliner formally terminated the Strategic Alliance formed on June 2, 1995. The company repurchased from Freightliner 350,000 shares of Class B common stock and 1,250,000 warrants for the purchase of additional shares of Class B common stock for the total sum of $6.8 million. The company and Freightliner will continue to supply each other with parts and components. New Accounting Standard In February 1997, the Financial Accounting Standards Board issued Statement No. 128, Earnings Per Share, which is required to be adopted effective for both interim and annual financial statements for periods ending after December 15, 1997. Among other provisions, the dilutive effect of stock options must be excluded under the new requirements for calculating basic earnings per share, which will replace primary earnings per share. This change is not expected to materially impact the company's fully diluted earnings per share calculations.
OSHKOSH TRUCK CORPORATION PART II. OTHER INFORMATION FORM 10-Q June 30, 1997 ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit 10 - Agreement to Terminate Strategic Alliance between Oshkosh Truck Corporation and Freightliner Corporation Dated May 2, 1997. 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 30, 1997.
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: August 12, 1997 /s/ R. Eugene Goodson R. Eugene Goodson Chairman and Chief Executive Officer (Principal Executive Officer) DATE: August 12, 1997 /s/ Charles L. Szews Charles L. Szews Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)
EXHIBIT INDEX Exhibit No. Description 10 Agreement to Terminate Strategic Alliance Between Oshkosh Truck Corporation and Freightliner Corporation Dated May 2, 1997. 27 Financial Data Schedule