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 March 31, 1998 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 May 7, 1998: 405,878 Common Stock Outstanding as of May 7, 1998: 8,012,923
OSHKOSH TRUCK CORPORATION FORM 10-Q INDEX FOR THE QUARTER ENDED MARCH 31, 1998 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 Consolidated Financial Condition and Results of Operations . . . . . . . . . . . . . . . . 22 PART II. Other Information . . . . . . . . . . . . . . . . . . . 26 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
<TABLE> PART I. ITEM 1. FINANCIAL INFORMATION OSHKOSH TRUCK CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) <CAPTION> Three Months Ended Six Months Ended March 31, March 31, 1998 1997 1998 1997 (In thousands, except per share amounts) <S> <C> <C> <C> <C> Net sales $217,836 $170,465 $369,637 $320,785 Cost of sales 187,908 147,597 317,402 278,334 -------- -------- -------- -------- Gross income 29,928 22,868 52,235 42,451 Operating expenses: Selling, general and administrative 14,800 12,616 26,476 22,641 Engineering, research & development 2,200 1,753 4,343 3,746 Amortization of goodwill and other intangibles 1,712 1,103 2,838 2,235 -------- -------- -------- -------- Total operating expenses 18,712 15,472 33,657 28,622 -------- -------- -------- -------- Income from operations 11,216 7,396 18,578 13,829 Other income (expense): Interest expense (4,687) (3,165) (7,191) (6,723) Interest income 369 148 534 354 Miscellaneous, net (235) (60) (163) (69) -------- -------- -------- -------- (4,553) (3,077) (6,820) (6,438) -------- -------- -------- -------- Income from operations before income taxes, equity in earnings of unconsolidated partnership and extraordinary item 6,663 4,319 11,758 7,391 Provision for income taxes 2,784 1,845 4,739 3,293 -------- -------- -------- -------- 3,879 2,474 7,019 4,098 Equity in earnings of unconsolidated partnership, net of income taxes of $113 177 -- 177 -- -------- -------- -------- -------- Income before extraordinary item 4,056 2,474 7,196 4,098 Extraordinary charge for early retirement of debt, net of income tax benefit of $469 (735) -- (735) -- -------- -------- -------- ------- Net income $ 3,321 $ 2,474 $ 6,461 $ 4,098 ======== ======== ======== ======= Earnings per share: Before extraordinary item $ 0.48 $ 0.28 $ 0.86 $ 0.47 Extraordinary item (0.09) -- (0.09) -- -------- ------- ------- -------- Net income $ 0.39 $ 0.28 $ 0.77 $ 0.47 ======== ======== ======= ======== Earnings per share assuming dilution: Before extraordinary item $ 0.48 $ 0.28 $ 0.85 $ 0.47 Extraordinary item (0.09) -- (0.09) -- -------- ------- -------- ------- Net income $ 0.39 $ 0.28 $ 0.76 $ 0.47 ======== ======= ======== ======= Cash dividends: Class A Common Stock $0.10875 $0.10875 $0.21750 $0.21750 Common Stock $0.12500 $0.12500 $0.25000 $0.25000 </TABLE> The accompanying notes are an integral part of these condensed consolidated financial statements.
OSHKOSH TRUCK CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) March 31, September 30, 1998 1997 ASSETS (In thousands) Current assets: Cash and cash equivalents $ 10,555 $ 23,219 Receivables, net 81,773 81,235 Inventories 166,878 76,497 Prepaid expenses 15,728 12,884 -------- -------- Total current assets 274,934 193,835 Other long-term assets 16,728 7,727 Investment in unconsolidated partnership 12,694 -- Property, plant and equipment 162,006 127,662 Less accumulated depreciation (75,700) (72,174) -------- -------- Net property, plant and equipment 86,306 55,488 Goodwill and other intangible assets, net 327,895 163,344 -------- -------- Total assets $718,557 $420,394 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 60,147 $ 48,220 Floor plan notes payable 24,960 -- Customer advances 48,847 30,124 Payroll-related obligations 20,236 15,157 Other current liabilities 42,212 35,221 Current maturities of long-term debt 11,500 15,000 -------- -------- Total current liabilities 207,902 143,722 Long-term debt 316,316 120,000 Other long-term liabilities 15,157 13,320 Deferred income taxes 53,081 22,452 Shareholders' equity 126,101 120,900 -------- -------- Total liabilities and shareholders' equity $718,557 $420,394 ======== ======== The accompanying notes are an integral part of these condensed consolidated financial statements.
<TABLE> OSHKOSH TRUCK CORPORATION CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY SIX MONTHS ENDED MARCH 31, 1998 (Unaudited) <CAPTION> Common Paid-in Retained Treasury Stock Capital Earnings Stock Total (In thousands) <S> <C> <C> <C> <C> <C> Balance at September 30, 1997 $93 $13,951 $120,085 $(12,869) $120,900 Net income -- -- 6,461 -- 6,461 Cash dividends: Class A Common Stock -- -- (89) -- (89) Common Stock -- -- (2,009) -- (2,009) Purchase of Common Stock for treasury -- -- -- (1,423) (1,423) Exercise of stock options -- 249 -- 1,192 1,441 Issuance of stock under incentive compensation plan -- 398 -- 422 820 ---- ------- -------- -------- -------- Balance at March 31, 1998 $93 $14,238 $124,448 $(12,678) $126,101 ==== ======= ======== ======== ======= </TABLE> The accompanying notes are an integral part of these condensed consolidated financial statements.
OSHKOSH TRUCK CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Six Months Ended March 31, 1998 1997 (In thousands) Net cash provided from operating activities $ 29,050 $14,826 Investing activities: Acquisition of businesses, net of cash acquired (217,954) -- Additions to property, plant and equipment (4,355) (2,907) Proceeds from sale of property, plant and equipment 119 314 (Increase) decrease in other long-term assets 1,868 (135) -------- ------- Net cash used for investing activities (220,322) (2,728) Net cash used for discontinued operations (811) (695) Financing activities: Net borrowings (repayments) of long-term debt 189,963 (9,354) Debt issuance costs (8,479) -- Purchase of Common Stock and proceeds from exercise of stock options, net 18 85 Dividends paid (2,083) (2,148) -------- ------- Net cash provided from (used for) financing activities 179,419 (11,417) -------- ------- Decrease in cash and cash equivalents (12,664) (14) Cash and cash equivalents at beginning of period 23,219 127 -------- ------- Cash and cash equivalents at end of period $ 10,555 $ 113 ======== ======= Supplementary disclosures: Depreciation and amortization $ 7,398 $ 7,045 Cash paid for interest 5,171 6,059 Cash paid (received) for income taxes 6,601 (239) 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 financial 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 1997 condensed consolidated financial statements to conform to the 1998 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 1997 annual report to shareholders. 2. EARNINGS PER SHARE In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard (SFAS) No. 128, "Earnings per Share." SFAS No. 128 replaced the calculation of primary and fully diluted earnings per share with basic and diluted earnings per share. Unlike primary earnings per share, basic earnings per share excludes any dilutive effects of options, warrants and convertible securities. Earnings per share amounts for all periods have been presented, and where appropriate, restated to conform to SFAS No. 128 requirements. 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 Six Months Ended March 31, March 31, 1998 1997 1998 1997 Denominator for basic earnings per share 8,413,774 8,645,193 8,376,914 8,645,149 Effect of dilutive options, warrants and incentive compensation awards 83,051 32,015 90,705 28,952 --------- --------- --------- --------- Denominator for dilutive earnings per share 8,496,825 8,677,208 8,467,619 8,674,101 ========= ========= ========= ========= 3. INVENTORIES Inventories consist of the following: March 31, September 30, 1998 1997 (In thousands) Finished products $49,593 $ 6,430 Partially finished products 61,910 36,661 Raw materials, purchased chassis, and parts 64,316 44,455 ------- ------- Inventories at FIFO cost 175,819 87,546 Less: Progress payments on U.S. Government contracts (441) (2,988) Excess of FIFO cost over LIFO cost (8,500) (8,061) -------- ------- $166,878 $76,497 ======== ======= 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. ACQUISITIONS On February 26, 1998, the Company acquired for cash all of the issued and outstanding capital stock of McNeilus Companies, Inc. ("McNeilus") and entered into related non-compete and ancillary agreements for a net acquisition price of $214.4 million, including acquisition costs and net of cash acquired. McNeilus is a leading manufacturer and marketer of rear-discharge concrete mixers for the construction industry and refuse truck bodies for the waste services industry in the United States. Concurrent with the acquisition of McNeilus, the Company entered into a senior credit facility ("Senior Credit Facility") and consummated a $100.0 million offering of 8 3/4% Senior Subordinated Notes due March 1, 2008 ("Senior Subordinated Notes"). The Senior Credit Facility is comprised of a multi-tranche term loan facility aggregating $225.0 million and a $100.0 million revolving credit facility. Proceeds from the Senior Credit Facility and Senior Subordinated Notes were used to repay existing bank indebtedness of the Company and to acquire McNeilus. Also effective February 26, 1998, a subsidiary of McNeilus entered into a general partnership created for the purpose of offering lease financing to customers of the Company. The subsidiary of McNeilus contributed existing lease receivables and assigned related indebtedness (on a non-recourse basis) to the partnership. The acquisition was accounted for using the purchase method of accounting and, accordingly, the operating results of McNeilus are included in the Company's consolidated statements of income since the date of acquisition. The purchase price, including acquisition costs, was allocated based on the estimated fair values of the assets acquired and liabilities assumed at the date of the acquisition. Approximately $61.0 million of the purchase price was allocated to the distribution network and other intangible assets, including non-competition agreements. The excess of the purchase price over the estimated fair value of net assets acquired amounted to approximately $104.7 million and has been accounted for as goodwill. Pro forma unaudited consolidated operating results of the Company, assuming McNeilus had been acquired, the lease financing partnership and the Senior Credit Facility established, the Senior Subordinated Notes issued and existing indebtedness repaid, all as of October 1, 1997 and 1996, are summarized below: Six Months Ended March 31, 1998 1997 (In thousands, except per share amounts) Net sales $507,831 $454,225 Income before extraordinary item $8,636 4,140 Net income 7,901 4,140 Earnings per share: Before extraordinary item $1.03 $0.48 Net income 0.94 0.48 Earnings per share assuming dilution: Before extraordinary item 1.02 0.48 Net income 0.93 0.48 On December 19, 1997, the Company through its wholly-owned subsidiary, Pierce Manufacturing Inc. ("Pierce"), acquired certain inventory, machinery and equipment, and intangible assets of Nova Quintech, a division of Nova Bus Corporation ("Nova Quintech") from available cash for $3.5 million. Nova Quintech was engaged in the manufacture and sale of aerial devices for fire trucks. Approximately $1.7 million of the purchase price has been allocated to intangible assets, principally aerial device designs and technology. The Nova Quintech products have been integrated into Pierce's product line and are being manufactured at Pierce. 5. LONG-TERM DEBT On February 26, 1998, the Company entered into the Senior Credit Facility and issued $100.0 million of 8 3/4% Senior Subordinated Notes due March 1, 2008 to finance the acquisition of McNeilus (see Note 4) and to refinance a previous credit facility. The Senior Credit Facility consists of a six year $100.0 million revolving credit facility ("Revolving Credit Facility") and three term loan facilities ("Term Loan A", "Term Loan B", and "Term Loan C"--collectively, the "Term Loan Facility"). Term Loan A is for $100.0 million and matures on March 31, 2004. Term Loans B and C each are for $62.5 million and mature on March 31, 2005 and March 31, 2006, respectively. Term Loan A requires principal payments of $5.0 million in fiscal 1998, $11.0 million in fiscal 1999, $13.5 million in fiscal 2000, $15.0 million in fiscal 2001, $19.5 million in fiscal 2002 and $24.0 million in fiscal 2003, with the remaining outstanding principal amount of $12.0 million due in fiscal 2004. Term Loan B and C each require principal payments of $.2 million per quarter through March 31, 2004 (for Term Loan B) and through March 31, 2005 (for Term Loan C). Any remaining outstanding principal balance on Term Loans B and C are due in quarterly installments through March 31, 2005 and March 31, 2006, respectively. Interest rates on borrowings under the Revolving Credit and Term Loan Facilities are equal to the "Base Rate" (which is equal to the higher of a bank's reference rate and the federal funds rate plus 0.5%) or the "IBOR Rate" (which is a bank's inter-bank offered rate for U.S. dollars in off- shore markets) plus a margin of 0.75%, 0.75%, 1.00% and 1.25% for Base Rate loans and a margin of 2.00%, 2.00%, 2.25%, and 2.50% for IBOR Rate loans under the Revolving Credit Facility, Term Loan A, Term Loan B, and Term Loan C, respectively. The margins are subject to adjustment based on whether certain financial criteria are met. At March 31, 1998, $7.9 million of letters of credit reduced available capacity under the Company's Revolving Credit Facility to $92.1 million. Substantially all the tangible and intangible assets and stock of the Company and its subsidiaries (except for certain McNeilus subsidiaries including Nation's Casualty Insurance, Inc., McNeilus Financial Services, Inc. and Oshkosh/McNeilus Financial Services, Inc.) are pledged as collateral under the Senior Credit Facility. The Senior Credit Facility includes customary affirmative and negative covenants and requires mandatory prepayments to the extent of "excess cash flows" a defined in the Senior Credit Facility. 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. In addition to the Company, certain of the Company's subsidiaries, including Pierce Manufacturing Inc., Summit Performance Systems, Inc., McNeilus Companies, Inc., McNeilus Truck & Manufacturing, Inc., Iowa Contract Fabricators, Inc., McIntire Fabricators, Inc., Kensett Fabricators, Inc. and McNeilus Financial, Inc. (collectively, the "Subsidiary Guarantors") fully, unconditionally, jointly and severally guarantee the Company's obligations under the Senior Subordinated Notes. 6. COMMITMENTS AND CONTINGENCIES The Company is engaged in litigation against Super Steel Products Corp. ("SSPC"), the Company's former supplier of mixer systems for forward- 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 the contract. On July 26, 1996, a jury returned a verdict for SSPC awarding damages totaling $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 subject to certain time and calculation limitations. Both SSPC and the Company have appealed the state court judge's decision as to its aspects which are adverse to them. The Wisconsin Court of Appeals agreed to hear the case. Both parties have filed briefs and made oral arguments. A decision is pending. The Company currently is engaged in the arbitration of certain disputes between the Oshkosh Florida Division and O.V. Containers, Inc. ("OV"), which arose out of the performance of a contract to deliver 690 skeletal container chassis. The dispute involves a warranty claim originally filed in an arbitration forum by OV against the Company in 1992. The Company settled the arbitration, but subsequently obtained information that the failed chassis at the heart of the dispute were subject to misuse and abuse and that certain information requested at the time of the arbitration was improperly withheld. The Company filed a lawsuit in the U.S. District Court for the Middle District of Florida seeking damages of approximately $1.6 million. OV filed a demand for arbitration of the matters underlying the Company's lawsuit, and successfully stayed the Company's lawsuit pending the arbitration. OV asserted a claim in the arbitration for alleged breach of warranty and is seeking damages of as much as $12.0 million. The arbitration is being conducted before a three- member panel under the commercial dispute rules of the American Arbitration Association, and is not expected to conclude before September 1998. The Company is vigorously contesting warranty and other claims made against it, and has asserted counterclaims against OV in excess of $2.0 million. The outcome of these matters cannot be predicted at the present time. 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 ("CERCLA") 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. At the Seaboard Chemical site located in Jamestown, North Carolina, Pierce is one of 414 PRPs participating in the costs of addressing the site and has been assigned an allocation share of approximately 0.04%. Currently a 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 March 31, 1998. 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 in the groundwater at the Company's North Plant facility with recent 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 is adequately covered through reserves established by the Company at March 31, 1998. However, this may change as investigations proceed by the Company, other unrelated property owners, and government entities. The Company is subject to other environmental matters and legal proceedings and claims which 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 environmental investigation and remediation and litigation. The Company has guaranteed certain customers' obligations under deferred payment contracts and lease purchase agreements totaling approximately $3 million at March 31, 1998. The Company is also contingently liable under bid, performance and specialty bonds totaling $93 million and open standby letters of credit issued by the Company's bank in favor of third parties totaling $7.9 million at March 31, 1998. 7. 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 are all of the wholly-owned subsidiaries of the Company and which are referred to as the "Subsidiary Guarantors"; provided however, the Subsidiary Guarantors does not include McNeilus Financial Services, Inc., Oshkosh/McNeilus Financial Services, Inc., and Nation's Casualty Insurance, Inc., which are the only non-guarantor subsidiaries of the Company and which are collectively referred to as the "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 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 Pierce Manufacturing, Inc. through a formal lending arrangement. There are presently no management fee arrangements between the Company and its subsidiaries.
<TABLE> OSHKOSH TRUCK CORPORATION Condensed Consolidating Balance Sheets (Unaudited) March 31, 1998 <CAPTION> Subsidiary Non-Guarantor Company Guarantors Subsidiaries Eliminations Consolidated <S> <C> <C> <C> <C> <C> Cash and cash equivalents $ 569 $ 232 $ 9,754 $ -- $ 10,555 Receivables 51,908 30,071 (206) -- 81,773 Inventory 51,270 115,608 -- -- 166,878 Prepaid expenses and other current assets 20,845 (7,295) 2,178 -- 15,728 -------- -------- -------- -------- ------- Total current assets 124,592 138,616 11,726 -- 274,934 Other non-current 14,110 2,618 -- -- 16,728 Property, plant and equipment 100,441 61,565 -- -- 162,006 Less accumulated depreciation (71,529) (4,171) -- -- (75,700) -------- -------- -------- --------- -------- 28,912 57,394 -- -- 86,306 Investment in and advances to: Subsidiaries 356,523 3,169 -- (359,692) -- Partnership -- -- 12,694 -- 12,694 Intangibles -- 327,895 -- -- 327,895 -------- -------- ------- --------- -------- Total assets $524,137 $529,692 $24,420 $(359,692) $718,557 ======== ======== ======= ========= ======== Accounts payable $ 31,587 $ 28,545 $ 15 $ -- $ 60,147 Floor plan notes payable -- 24,960 -- -- 24,960 Customer advances 984 47,862 1 -- 48,847 Payroll-related obligations 7,964 12,240 32 -- 20,236 Other current liabilities 20,272 16,263 5,677 -- 42,212 Current maturities of long-term debt 11,250 250 -- -- 11,500 -------- -------- -------- -------- -------- Total current liabilities 72,057 130,120 5,725 -- 207,902 Other liabilities 15,128 29 -- -- 15,157 Long-term debt 313,750 2,566 -- -- 316,316 Deferred income taxes (2,899) 36,446 19,534 -- 53,081 Investment by, and advances from Parent -- 360,531 (839) (359,692) -- Shareholders' equity 126,101 -- -- -- 126,101 -------- -------- -------- --------- -------- Total liabilities and shareholders' equity $524,137 $529,692 $24,420 $(359,692) $718,557 ======== ======== ======== ========= ======== </TABLE>
<TABLE> OSHKOSH TRUCK CORPORATION Condensed Consolidating Balance Sheets (Unaudited) September 30, 1997 <CAPTION> Subsidiary Non-Guarantor Company Guarantors Subsidiaries Eliminations Consolidated <S> <C> <C> <C> <C> <C> Cash and cash equivalents $ 23,210 $ 9 $ -- $ -- $ 23,219 Receivables 68,059 13,176 -- -- 81,235 Inventory 44,605 31,892 -- -- 76,497 Prepaid expenses and other current assets 10,051 2,833 -- -- 12,884 -------- -------- -------- -------- -------- Total current assets 145,925 47,910 -- -- 193,835 Other non-current 6,882 845 -- -- 7,727 Property, plant and equipment 99,685 27,977 -- -- 127,662 Less accumulated depreciation (69,415) (2,759) -- -- (72,174) -------- -------- -------- --------- -------- 30,270 25,218 -- -- 55,488 Investment in and advances to: Subsidiaries 138,645 -- -- (138,645) -- Partnership -- -- -- -- -- Intangibles -- 163,344 -- -- 163,344 --------- -------- -------- --------- -------- Total assets $321,722 $237,317 $ -- $(138,645) $420,394 ======== ======== ======== ========= ======== Accounts payable $ 28,358 $ 19,862 $ -- $ -- $ 48,220 Floor plan notes payable -- -- -- -- -- Customer advances 353 29,771 -- -- 30,124 Payroll-related obligations 7,745 7,412 -- -- 15,157 Other current liabilities 19,227 15,994 -- -- 35,221 Current maturities of long-term debt 15,000 -- -- -- 15,000 -------- -------- -------- -------- -------- Total current liabilities 70,683 73,039 -- -- 143,722 Other liabilities 13,266 54 -- -- 13,320 Long-term debt 120,000 -- -- -- 120,000 Deferred income taxes (3,127) 25,579 -- -- 22,452 Investment by, and advances from Parent -- 138,645 -- (138,645) -- Shareholders' equity 120,900 -- -- -- 120,900 -------- -------- --------- --------- --------- Total liabilities and shareholders' equity $321,722 $237,317 $ -- $(138,645) $420,394 ======== ======== ========= ========= ========= </TABLE>
<TABLE> OSHKOSH TRUCK CORPORATION Condensed Consolidating Statement of Income For the Three Months Ended March 31, 1998 (Unaudited) <CAPTION> Subsidiary Non-Guarantor Company Guarantors Subsidiaries Eliminations Consolidated <S> <C> <C> <C> <C> <C> Sales $114,291 $103,545 $ -- $ -- $217,836 Cost of sales 100,484 87,424 -- -- 187,908 -------- -------- ------- ----- ------- Gross income 13,807 16,121 -- -- 29,928 Operating expenses: Selling, general and administrative 8,811 5,892 97 -- 14,800 Engineering, research & development 1,720 480 -- -- 2,200 Amortization of goodwill and other intangibles -- 1,712 -- -- 1,712 ------- -------- -------- -------- --------- Total operating expenses 10,531 8,084 97 -- 18,712 ------- ------- -------- -------- --------- Income from operations 3,276 8,037 (97) -- 11,216 Other income (expense): Interest expense (2,734) (1,773) (180) -- (4,687) Interest income 58 91 220 -- 369 Miscellaneous, net (155) (224) 144 -- (235) -------- -------- -------- -------- --------- (2,831) (1,906) 184 -- (4,553) -------- -------- -------- -------- --------- Income from operations before income taxes, equity in earnings of subsidiaries and unconsolidated partnership and extraordinary item 445 6,131 87 -- 6,663 Provision for income taxes 9 2,741 34 -- 2,784 -------- --------- --------- -------- -------- 436 3,390 53 -- 3,879 Equity in earnings of subsidiaries and unconsolidated partnership, net of income taxes 3,620 -- 177 (3,620) 177 -------- -------- -------- -------- -------- Income before extraordinary item 4,056 3,390 230 (3,620) 4,056 Extraordinary charge for early retirement of debt, net of income tax benefit (735) -- -- -- (735) -------- -------- --------- -------- -------- Net income $ 3,321 $ 3,390 $230 $(3,620) $ 3,321 ======== ======== ========= ======== ======== </TABLE> <TABLE> OSHKOSH TRUCK CORPORATION Condensed Consolidating Statement of Income For the Six Months Ended March 31, 1998 (Unaudited) <CAPTION> Subsidiary Non-Guarantor Company Guarantors Subsidiaries Eliminations Consolidated <S> <C> <C> <C> <C> <C> Sales $205,226 $164,411 $ -- $ -- $369,637 Cost of sales 179,173 138,229 -- -- 317,402 -------- -------- ------- ------- -------- Gross income 26,053 26,182 -- -- 52,235 Operating expenses: Selling, general and administrative 17,135 9,244 97 -- 26,476 Engineering, research & development 3,336 1,007 -- -- 4,343 Amortization of goodwill and other intangibles -- 2,838 -- -- 2,838 -------- -------- -------- -------- --------- Total operating expenses 20,471 13,089 97 -- 33,657 -------- -------- --------- --------- --------- Income from operations 5,582 13,093 (97) -- 18,578 Other income (expense): Interest expense (3,723) (3,288) (180) -- (7,191) Interest income 154 160 220 -- 534 Miscellaneous, net (133) (174) 144 -- (163) -------- -------- --------- -------- -------- (3,702) (3,302) 184 -- (6,820) -------- -------- --------- -------- -------- Income from operations before income taxes, equity in earnings of subsidiaries and unconsolidated partnership and extraordinary item 1,880 9,791 87 -- 11,758 Provision for income taxes 583 4,122 34 -- 4,739 -------- -------- -------- --------- --------- 1,297 5,669 53 -- 7,019 Equity in earnings of subsidiaries and unconsolidated partnership, net of income taxes 5,899 -- 177 (5,899) 177 -------- -------- -------- --------- --------- Income before extraordinary item 7,196 5,669 230 (5,899) 7,196 Extraordinary charge for early retirement of debt, net of income tax benefit (735) -- -- -- (735) -------- -------- -------- --------- -------- Net income $ 6,461 $ 5,669 $230 $(5,899) $ 6,461 ======== ======== ======== ========= ======== </TABLE>
<TABLE> OSHKOSH TRUCK CORPORATION Condensed Consolidating Statement of Income For the Three Months Ended March 31, 1997 (Unaudited) <CAPTION> Subsidiary Non-Guarantor Company Guarantors Subsidiaries Eliminations Consolidated <S> <C> <C> <C> <C> <C> Sales $113,176 $57,289 $ -- $ -- $170,465 Cost of sales 99,734 47,863 -- -- 147,597 -------- -------- -------- -------- -------- Gross income 13,442 9,426 -- -- 22,868 Operating expenses: Selling, general and administrative 9,571 3,045 -- -- 12,616 Engineering, research & development 1,512 241 -- -- 1,753 Amortization of goodwill and other intangibles -- 1,103 -- -- 1,103 -------- -------- -------- -------- ------- Total operating expenses 11,083 4,389 -- -- 15,472 -------- -------- -------- -------- -------- Income from operations 2,359 5,037 -- -- 7,396 Other income (expense): Interest expense (1,664) (1,501) -- -- (3,165) Interest income 35 113 -- -- 148 Miscellaneous, net (70) 10 -- -- (60) -------- -------- -------- -------- -------- (1,699) (1,378) -- -- (3,077) -------- -------- -------- -------- -------- Income from operations before income taxes and equity in earnings of subsidiaries 660 3,659 -- -- 4,319 Provision for income taxes 170 1,675 -- -- 1,845 --------- --------- -------- --------- --------- 490 1,984 -- -- 2,474 Equity in earnings of subsidiaries, net of income taxes 1,984 -- -- (1,984) -- --------- --------- -------- --------- --------- Net income $ 2,474 $1,984 $ -- $(1,984) $ 2,474 ========= ========= ======== ========= ========= </TABLE>
<TABLE> OSHKOSH TRUCK CORPORATION Condensed Consolidating Statement of Income For the Six Months Ended March 31, 1997 (Unaudited) <CAPTION> Subsidiary Non-Guarantor Company Guarantors Subsidiaries Eliminations Consolidated <S> <C> <C> <C> <C> <C> Sales $208,506 $112,279 $ -- $ -- $320,785 Cost of sales 184,159 94,175 -- -- 278,334 -------- -------- ------- ------- -------- Gross income 24,347 18,104 -- -- 42,451 Operating expenses: Selling, general and administrative 16,867 5,774 -- -- 22,641 Engineering, research & development 3,274 472 -- -- 3,746 Amortization of goodwill and other intangibles -- 2,235 -- -- 2,235 --------- --------- -------- --------- -------- Total operating expenses 20,141 8,481 -- -- 28,622 --------- --------- -------- --------- -------- Income from operations 4,206 9,623 -- -- 13,829 Other income (expense): Interest expense (3,675) (3,048) -- -- (6,723) Interest income 161 193 -- -- 354 Miscellaneous, net (77) 8 -- -- (69) --------- --------- -------- --------- --------- (3,591) (2,847) -- -- (6,438) --------- --------- -------- --------- --------- Income from operations before income taxes and equity in earnings of subsidiaries 615 6,776 -- -- 7,391 Provision for income taxes 151 3,142 -- -- 3,293 --------- --------- --------- ---------- ---------- 464 3,634 -- -- 4,098 Equity in earnings of subsidiaries, net of income taxes 3,634 -- -- (3,634) -- --------- --------- -------- --------- --------- Net income $ 4,098 $ 3,634 $ -- $(3,634) $ 4,098 ========= ========= ========= ========== ========== </TABLE>
<TABLE> OSHKOSH TRUCK CORPORATION Condensed Consolidating Statements of Cash Flows For the Six Months Ended March 31, 1998 (Unaudited) <CAPTION> Subsidiary Non-Guarantor Company Guarantors Subsidiaries Eliminations Consolidated <S> <C> <C> <C> <C> <C> Net cash provided from operating activities $ 39,114 $(9,750) $ (314) $ -- $ 29,050 Investing activities: Acquisition of businesses, net of cash acquired (225,524) (3,535) 11,105 -- (217,954) Additions to property, plant and equipment (1,125) (3,230) -- -- (4,355) Investments in and advances to subsidiaries (13,423) 14,262 (839) -- -- Proceeds from sale of property, plant and equipment 96 23 -- -- 119 (Increase) decrease in other long-term assets (424) 2,490 (198) -- 1,868 -------- -------- -------- --------- -------- Net cash provided (used) for investing activities (240,400) (10,010) 10,068 -- (220,322) Net cash used for discontinued operations (811) -- -- -- (811) Financing activities: Net borrowings (repayments) of long-term debt 190,000 (37) -- -- 189,963 Debt issuance costs (8,479) -- -- -- (8,479) Purchase of Common Stock and proceeds from exercise of stock options, net 18 -- -- -- 18 Dividends paid (2,083) -- -- -- (2,083) --------- --------- -------- -------- --------- Net cash provided from (used for) financing activities 179,456 (37) -- -- 179,419 -------- --------- -------- --------- --------- Increase (decrease) in cash and cash equivalents (22,641) 223 9,754 -- (12,664) Cash and cash equivalents at beginning of period 23,210 9 -- -- 23,219 -------- -------- -------- --------- --------- Cash and cash equivalents at end of period $ 569 $ 232 $ 9,754 $ -- $ 10,555 ======== ======== ======== ========= ======== </TABLE>
<TABLE> OSHKOSH TRUCK CORPORATION Condensed Consolidating Statement of Cash Flows For the Six Months Ended March 31, 1997 (Unaudited) <CAPTION> Subsidiary Non-Guarantor Company Guarantors Subsidiaries Eliminations Consolidated <S> <C> <C> <C> <C> <C> Net cash provided from operating activities $(1,344) $16,170 $ -- $ -- $14,826 Investing activities: Investment in and advances to subsidiaries 14,696 (14,696) -- -- -- Additions to property, plant and equipment (1,331) (1,576) -- -- (2,907) Proceeds from sale of property, plant and equipment 314 -- -- -- 314 (Increase) decrease in other long-term assets (227) 92 -- -- (135) -------- -------- --------- --------- -------- Net cash provided (used) for investing activities 13,452 (16,180) -- -- (2,728) Net cash used for discontinued operations (695) -- -- -- (695) Financing activities: Net (repayments) of long-term debt (9,354) -- -- -- (9,354) Purchase of Common Stock and proceeds from exercise of stock options, net 85 -- -- -- 85 Dividends paid (2,148) -- -- -- (2,148) --------- --------- --------- --------- --------- Net cash used for financing activities (11,417) -- -- -- (11,417) --------- --------- --------- --------- --------- Decrease in cash and cash equivalents (4) (10) -- -- (14) Cash and cash equivalents at beginning of period 108 19 -- -- 127 --------- --------- --------- --------- -------- Cash and cash equivalents at end of period $ 104 $ 9 $ -- $ -- $ 113 ========= ========= ========= ========= ======== </TABLE>
Item 2. Oshkosh Truck Corporation Management's Discussion and Analysis of Consolidated Financial Condition and Results of Operations Results of Operations Second Quarter 1998 Compared to 1997 Oshkosh Truck Corporation (the "Company") reported net income of $3.3 million, or $0.39 per share, on sales of $217.8 million for the second quarter of fiscal 1998, compared to net income of $2.5 million, or $0.28 per share, on sales of $170.5 million for the second quarter of fiscal 1997. Excluding an extraordinary charge associated with the refinancing of debt to acquire McNeilus Companies, Inc. ("McNeilus"), net income for the second quarter would have been $4.1 million, or $0.48 per share. Sales of commercial products increased in the second quarter of fiscal 1998 compared to the second quarter of fiscal 1997 while sales of defense products decreased slightly. Commercial sales in the second quarter of fiscal 1998 increased $49.1 million or 45.9% from the second quarter of fiscal 1997 to $156.1 million. An increase of $44.7 million in sales of construction and refuse vehicles and a $7.9 million increase in sales of fire apparatus was partially offset by a decrease of $4.3 million in sales of aircraft, rescue and fire fighting ("ARFF") vehicles. The acquisition of McNeilus on February 26, 1998 accounted for $37.9 million of the increase in sales of construction and refuse vehicles. Sales of defense products totaled $61.7 million in the second quarter of fiscal 1998, a decrease of $1.8 million or 2.8% as compared to the second quarter of fiscal 1997. Gross income in the second quarter of fiscal 1998 totaled $29.9 million or 13.7% of sales compared to $22.9 million or 13.4% of sales in the second quarter of fiscal 1997. McNeilus contributed gross income of $6.0 million in the second quarter of fiscal 1998. Operating expenses totaled $18.7 million or 8.6% of sales in the second quarter of fiscal 1998 compared to $15.5 million or 9.1% of sales in the second quarter of fiscal 1997. Substantially all the increase in operating expenses in the second quarter of fiscal 1998 related to the operations of McNeilus. Interest expense increased to $4.7 million in the second quarter of fiscal 1998 compared to $3.2 million in the second quarter of fiscal 1997. The increase in interest expense reflects additional borrowings to finance the acquisition of McNeilus on February 26, 1998. The effective income tax rate for combined federal and state income taxes for the second quarter of fiscal 1998 was 41.8% compared to 42.7% for the second quarter of fiscal 1997. Fiscal 1998 benefitted from the reversal of $0.2 million of income tax provisions recognized in earlier periods. First Six Months 1998 Compared to 1997 The Company reported net income of $6.5 million, or $0.77 per share, on sales of $369.6 million for the first six months of fiscal 1998, compared to net income of $4.1 million, or $0.47 per share, on sales of $320.8 million for the first six months of fiscal 1997. Excluding an extraordinary charge associated with the refinancing of debt to acquire McNeilus, net income for the first six months of fiscal 1998 would have been $7.2 million, or $0.86 per share. Sales of both commercial and defense products increased in the first six months of fiscal 1998 compared to the first six months of fiscal 1997. Commercial sales in the first six months of fiscal 1998 increased $46.4 million or 24.4% from the first six months of fiscal 1997 to $236.6 million. An increase of $39.1 million in sales of construction and refuse vehicles and a $13.7 million increase in sales of fire apparatus was partially offset by a decrease of $4.0 million in sales of ARFF vehicles and the elimination of $2.7 million of sales of commercial van trailers as the Company exited this line of business. The acquisition of McNeilus accounted for $37.9 million of the increase in sales of construction and refuse vehicles. Sales of defense products totaled $133.0 million in the first six months of fiscal 1998, an increase of $2.4 million or 1.8% as compared to the first six months of fiscal 1997. Gross income in the first six months of fiscal 1998 totaled $52.2 million or 14.1% of sales compared to $42.5 million or 13.2% of sales in the first six months of fiscal 1997. Since its acquisition on February 26, 1998, McNeilus contributed gross income of $6.0 million. Margins for the first six months of fiscal 1997 were adversely affected by increased warranty costs and other costs related to the discontinuation of Oshkosh's refuse chassis sales. Operating expenses totaled $33.7 million or 9.1% of sales in the first six months of fiscal 1998 compared to $28.6 million or 8.9% of sales in the first six months of fiscal 1997. Operating expenses increased $2.9 million due to the inclusion of McNeilus since the date of acquisition. Interest expense increased to $7.2 million in the first six months of fiscal 1998 compared to $6.7 million in the first six months of fiscal 1997. The increase in interest expense reflects additional borrowings to finance the acquisition of McNeilus on February 26, 1998. The effective income tax rate for combined federal and state income taxes for the first six months of fiscal 1998 was 40.3% compared to 44.6% for the first six months of fiscal 1997. Fiscal 1998 benefitted from the reversal of $0.5 million of income tax provisions recognized in earlier periods. Financial Condition First Six Months of 1998 During the first six months of fiscal 1998, cash decreased by $12.7 million. Cash available at the beginning of the period of $23.2 million and cash provided from operations during the period of $29.0 million, or a total of $52.2 million was used primarily to fund $42.3 million of debt repayments, the acquisition of Nova Quintech for $3.5 million, capital additions of $4.4 million and to pay dividends of $2.1 million. The Company borrowed approximately $342.5 million in February 1998 ($225.0 million under a multi-tranche senior term loan facility, $100.0 million of senior subordinated notes and $17.5 million under a new $100.0 million revolving credit facility). Borrowings of $224.0 million were utilized to close the McNeilus acquisition ($249.5 million purchase price less cash acquired of $35.1 million, or $214.4 million, plus restricted cash of $9.6 million), refinance $110.0 million of outstanding indebtedness under the Company's previous credit facility and to pay $8.5 million in debt issuance costs. In March 1998, the Company realized approximately $5.5 million from the disposition of certain McNeilus assets. First Six Months of 1997 During the first six months of fiscal 1997, cash remained virtually unchanged. Cash provided from operations of $14.8 million was used to fund the repayment of long-term debt of $9.4 million, capital additions of $2.9 million, and dividends of $2.1 million. Liquidity and Capital Resources The Company's primary cash requirements are expected to 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. Based upon current and anticipated future operations, the Company believes that capital resources will be adequate to meet future working capital, debt service and other capital requirements for the foreseeable future. Backlog The Company's backlog as of March 31, 1998 was $477 million, compared to $390 million at March 31, 1997. The backlog at March 31, 1998 includes $193 million with respect to U.S. Government contracts, $173 million related to Pierce, $54 million with respect to McNeilus and the remainder relates to other commercial products. Most of the Company's revenues are derived from customer orders prior to commencing production. Year 2000 Certain of the Company's older computer programs were written using two digits rather than four to define the applicable year. As a result, those computer programs may misinterpret a date using "00" as the year 1900 rather than the year 2000. This could cause a system failure, miscalculations or other disruptions in the business. The Company maintains two primary computer systems at its Oshkosh operations and one at its Pierce operations. The Company is planning to install upgrades to its present computer systems at Oshkosh by December 31, 1998. At Pierce, the Company has commenced a project, with outside consultants, to install new hardware and software by February 1, 1999, to replace an obsolete hardware and software system. The total cost of these projects during fiscal 1998 and 1999 is estimated at approximately $6.6 million which includes $6.3 million for the purchase of new hardware and software that will be capitalized and $.3 million that will be expensed as incurred. The Company believes that following the conclusions of these projects, the year 2000 issue will not pose significant disruptions to its business; however, if such projects are not completed on a timely basis, the year 2000 could have a material impact on the operations of the Company. McNeilus has entered into an agreement with an outside consultant to upgrade its present computer systems by August 1998. The total cost of this upgrade, which is intended to, among other things, prevent any disruptions related to year 2000 issues, is estimated at approximately $400,000 and will be expensed. The Company believes that following the conclusion of this upgrade, the year 2000 issue will not pose significant disruptions to McNeilus' business; however, if such upgrades are not completed on a timely basis, the year 2000 could have a material impact on the operations of McNeilus.
OSHKOSH TRUCK CORPORATION PART II. OTHER INFORMATION FORM 10-Q March 31, 1998 ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS At the annual meeting of shareholders held on February 2, 1998, all of the persons nominated as directors were elected. The following table sets forth certain information with respect to such election. Shares Shares Withholding Other Shares Name of Nominee Voted For Authority Not Voted Class A Nominees M.W. Grebe 387,651 23 18,754 F.M. Franks 387,651 23 18,754 S.P. Mosling 387,674 0 18,754 J.P. Mosling, Jr. 387,674 0 18,754 J.W. Andersen 384,674 0 18,754 R.G. Bohn 384,674 0 18,754 K.J. Hempel 387,651 23 18,754 Common Stock Nominees D.T. Carroll 6,791,147 47,048 2,113,542 R.G. Sim 6,790,389 47,806 2,113,542 ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit 27 - Financial Data Schedule (b) Reports on Form 8-K (i) On February 6, 1998 the Company filed a current report on Form 8-K dated February 6, 1998 providing certain information relating to the Company's pending acquisition of McNeilus Companies, Inc. (ii) On March 11, 1998 the Company filed a current report on Form 8-K dated February 26, 1998 relating to the Company's acquisition of McNeilus Companies, Inc.
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 May 15, 1998 /S/ R. G. Bohn R. G. Bohn President and Chief Executive Officer (Principal Executive Officer) May 15, 1998 /S/ C. L. Szews C. L. Szews Executive Vice President and Chief Financial Officer (Principal Financial Officer) May 15, 1998 /S/ T. J. Polnaszek T. J. Polnaszek Corporate Controller (Principal Accounting Officer)
EXHIBIT INDEX Exhibit No. Description 27 Financial Data Schedule