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, 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 July 31, 1998: 298,823 Common Stock Outstanding as of July 31, 1998: 8,120,978
OSHKOSH TRUCK CORPORATION FORM 10-Q INDEX FOR THE QUARTER ENDED JUNE 30, 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 Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . 27 Item 5. Other Information . . . . . . . . . . . . . . . . . . . 27 Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . 27 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
<TABLE> PART I. ITEM 1. FINANCIAL INFORMATION OSHKOSH TRUCK CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) <CAPTION> Three Months Ended Nine Months Ended June 30, June 30, 1998 1997 1998 1997 ---- ---- ---- ---- (In thousands, except per share amounts) <S> <C> <C> <C> <C> Net sales $ 290,104 $ 176,596 $ 659,741 $ 497,381 Cost of sales 248,033 154,699 565,435 433,033 Gross income 42,071 21,897 94,306 64,348 Operating expenses: Selling, general and administrative 21,728 11,742 48,204 34,383 Engineering, research & development 2,313 2,211 6,656 5,957 Amortization of goodwill and other intangibles 2,721 1,117 5,559 3,352 Total operating expenses 26,762 15,070 60,419 43,692 Income from operations 15,309 6,827 33,887 20,656 Other income (expense): Interest expense (7,082) (2,848) (14,273) (9,571) Interest income 10 130 544 484 Miscellaneous, net (181) (24) (344) (93) (7,253) (2,742) (14,073) (9,180) Income from operations before income taxes, equity in earnings of unconsolidated partnership and extraordinary item 8,056 4,085 19,814 11,476 Provision for income taxes 3,639 1,293 8,378 4,586 4,417 2,792 11,436 6,890 Equity in earnings of unconsolidated partnership, net of income taxes 583 - 760 - -------- -------- -------- -------- Income before extraordinary item 5,000 2,792 12,196 6,890 Extraordinary charge for early retirement of debt, net of income tax benefit (450) - (1,185) - -------- -------- -------- -------- Net income $ 4,550 $ 2,792 $ 11,011 $ 6,890 Earnings per share: Before extraordinary item $ 0.59 $ 0.33 $ 1.45 $ 0.80 Extraordinary item (0.05) - (0.14) - Net income $ 0.54 $ 0.33 $ 1.31 $ 0.80 Earnings per share assuming dilution: Before extraordinary item $ 0.58 $ 0.33 $ 1.44 $ 0.80 Extraordinary item (0.05) - (0.14) - Net income $ 0.53 $ 0.33 $ 1.30 $ 0.80 Cash dividends: Class A Common Stock $ 0.10875 $ 0.10875 $ 0.32625 $ 0.32625 Common Stock $ 0.12500 $ 0.12500 $ 0.37500 $ 0.37500 </TABLE> The accompanying notes are an integral part of these condensed consolidated financial statements.
<TABLE> OSHKOSH TRUCK CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) <CAPTION> June 30, September 30, 1998 1997 -------- ------------- (In thousands) <S> <C> <C> ASSETS: Current assets: Cash and cash equivalents $ 24,657 $ 23,219 Receivables, net 74,280 81,235 Inventories 135,109 76,497 Prepaid expenses and other 17,550 12,884 -------- -------- Total current assets 251,596 193,835 Other long-term assets 15,423 7,727 Investment in unconsolidated partnership 12,934 - Property, plant and equipment 164,068 127,662 Less accumulated depreciation (78,006) (72,174) -------- -------- Net property, plant and equipment 86,062 55,488 Goodwill and other intangible assets, net 325,626 163,344 -------- -------- Total assets $ 691,641 $ 420,394 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 61,358 $ 48,220 Floor plan notes payable 9,073 - Customer advances 46,517 30,124 Payroll-related obligations 21,411 15,157 Other current liabilities 50,093 35,221 Current maturities of long-term debt 4,516 15,000 -------- -------- Total current liabilities 192,968 143,722 Long-term debt 294,406 120,000 Other long-term liabilities 16,818 13,320 Deferred income taxes 57,833 22,452 Shareholders' equity 129,616 120,900 -------- -------- Total liabilities and shareholders' equity $ 691,641 $ 420,394 ======== ======== </TABLE> 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, 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 $13,591 $120,085 $(12,869) $120,900 Net income -- -- 11,011 -- 11,011 Cash dividends: Class A Common Stock -- -- (121) -- (121) Common Stock -- -- (3,025) -- (3,025) Exercise of stock options -- 254 -- (223) 31 Issuance of stock under incentive compensation plan -- 398 -- 422 820 --- ------ ------- -------- ------- Balance at June 30, 1998 $93 $14,243 $127,950 $ (12,670) $129,616 === ====== ======= ======== ======= </TABLE> The accompanying notes are an integral part of these condensed consolidated financial statements.
<TABLE> OSHKOSH TRUCK CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) <CAPTION> Nine Months Ended June 30, 1998 1997 ---- ---- (In thousands) <S> <C> <C> Net cash provided from operating activities $ 78,982 $ 31,813 Investing activities: Acquisition of businesses, net of cash acquired (217,954) -- Additions to property, plant and equipment (6,270) (4,613) Proceeds from sale of property, plant and equipment 320 333 Increase in other long-term assets (2,232) (114) --------- -------- Net cash used for investing activities (226,136) (4,394) Net cash used for discontinued operations (872) (1,079) Financing activities: Net borrowings (repayments) of long-term debt 161,069 (15,411) Debt issuance costs (8,507) -- Purchase of Common Stock and Common Stock warrants, and proceeds from exercise of stock options, net 31 (6,642) Dividends paid (3,129) (3,178) --------- -------- Net cash provided from (used for) financing activities 149,464 (25,231) --------- -------- Increase in cash and cash equivalents 1,438 1,109 Cash and cash equivalents at beginning of period 23,219 127 --------- -------- Cash and cash equivalents at end of period $ 24,657 $ 1,236 ========= ======== Supplementary disclosures: Depreciation and amortization $ 12,995 $ 10,538 Cash paid for interest 7,633 9,815 Cash paid for income taxes 7,162 2,986 </TABLE> 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 AND NEW ACCOUNTING STANDARDS ------------------------------------------------------ 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 reclassifica- tions 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. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's 1997 annual report to shareholders. In June 1998, the Financial Accounting Standards Board issued Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, which is required to be adopted in years beginning after June 15, 1999. Because of the Company's minimal use of derivatives, management does not anticipate that the adoption of the new Statement will have a significant effect on earnings or the financial position of the Company. Given the complexity of the new standard and that the impact of adoption hinges on market values at the date of adoption, it will be extremely difficult to estimate the impact of adoption unless adoption is imminent. 2. EARNINGS PER SHARE --------------------- In February 1997, the Financial Accounting Standards Board issued State- ment 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., 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: <TABLE> <CAPTION> Three Months Ended Nine Months Ended June 30, June 30, 1998 1997 1998 1997 ---- ---- ---- ---- <S> <C> <C> <C> <C> Denominator for basic earnings per share 8,419,471 8,415,102 8,391,100 8,568,496 Effect of dilutive options, warrants and incentive compensation awards 113,201 41,257 96,972 33,241 --------- --------- --------- --------- Denominator for dilutive earnings per share 8,532,672 8,456,359 8,488,072 8,601,737 ========= ========= ========= ========= </TABLE> 3. INVENTORIES -------------- Inventories consist of the following: June 30, September 30, 1998 1997 -------- ------------- (In thousands) Finished products $ 27,244 $ 6,430 Partially finished products 53,330 36,661 Raw materials, purchased chassis, and parts 63,336 44,455 -------- ------- Inventories at FIFO cost 143,910 87,546 Less: Progress payments on U.S. Government contracts -- (2,988) Excess of FIFO cost over LIFO cost (8,801) (8,061) -------- ------- $ 135,109 $ 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 (Oshkosh/McNeilus Financial Services Partnership, "the 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 Company accounts for its 50% investment in the Partnership under the equity method. 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 condensed 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: Nine Months Ended June 30, 1998 1997 ---- ---- (In thousands, except per share amounts) Net sales $ 797,935 $ 740,296 Income before extraordinary 13,752 11,356 item Net income 12,567 11,356 Earnings per share: Before extraordinary item 1.64 1.33 Net income 1.50 1.33 Earnings per share assuming dilution: Before extraordinary item 1.62 1.32 Net income 1.48 1.32 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 was for $100.0 million and matures on March 31, 2004. Term Loans B and C each were 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. From February 26, 1998 through July 31, 1998, the Company has paid from available cash $53.0 million on the Term Loan Facility. All prepayments are first applied to the next twelve months mandatory principal payments and then on a pro rata basis to the principal payments due over the remainder of the loans. All mandatory principal payments have been paid through June 1999. The outstanding balances as of July 31, 1998 on Term Loan A, Term Loan B, and Term Loan C are $87.0 million, $42.5 million, and $42.5 million, respectively, after the prepayments. 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 0.50%, 0.50%, 1.00% and 1.25% for Base Rate loans and a margin of 1.75%, 1.75%, 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 June 30, 1998, $10.6 million of letters of credit reduced available capacity under the Company's Revolving Credit Facility to $89.4 million. Substantially all the tangible and intangible assets of the Company and its subsidiaries (including stock of subsidiaries and 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" as 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 arbitration proceeding and separate civil litigation of certain disputes between the Oshkosh Florida Division and O.V. Containers, Inc. ("OV") has been settled. The disputes arose out of the performance of a contract to deliver 690 skeletal container chassis and additional issues of, among others, warranty performance and misuse and abuse of the chassis. As part of the settlement OV has agreed to accept the chassis "as is" and the Company has agreed to pay OV $1.1 million. 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 June 30, 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 investiga- tion 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 believes that it is adequately covered through reserves established by the Company at June 30, 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 is contingently liable under bid, performance and specialty bonds totaling $86 million and open standby letters of credit issued by the Company's bank in favor of third parties totaling $10.6 million at June 30, 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"; however, the Subsidiary Guarantors do 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 June 30, 1998 (Unaudited) <CAPTION> Non- Subsidiary Guarantor Company Guarantors Subsidiaries Eliminations Consolidated ------- ---------- ------------ ------------ <S> <C> <C> <C> <C> <C> Current assets: Cash and cash $ 16,610 $ 853 $ 7,194 $ -- $ 24,657 equivalents Receivables, net 49,451 24,717 112 -- 74,280 Inventories 44,433 90,676 -- -- 135,109 Prepaid expenses and other 8,286 7,416 1,848 -- 17,550 -------- --------- --------- -------- ---------- Total current assets 118,780 123,662 9,154 -- 251,596 Other long-term assets 11,807 3,074 542 -- 15,423 Investment in and advances to: Subsidiaries 333,650 10,158 -- (343,808) -- Unconsolidated partnership -- -- 12,934 -- 12,934 Property, plant and equipment 100,368 63,700 -- -- 164,068 Less accumulated depreciation (72,564) (5,442) -- -- (78,006) -------- --------- --------- -------- ---------- Net property, plant and equipment 27,804 58,258 -- -- 86,062 Goodwill and other intangible assets, net -- 325,626 -- -- 325,626 -------- --------- --------- -------- ---------- Total assets $ 492,041 $ 520,778 $ 22,630 $(343,808) $ 691,641 ======== ========= ========= ======== ======== Current liabilities: Accounts payable $ 31,052 $ 29,696 $ 610 $ -- $ 61,358 Floor plan notes -- 9,073 -- -- 9,073 payable Customer advances 1,541 44,955 21 -- 46,517 Payroll-related 9,764 11,612 35 -- 21,411 obligations Other current 10,760 33,904 5,429 -- 50,093 liabilities Current maturities of long-term debt 4,266 250 -- -- 4,516 -------- --------- --------- -------- ---------- Total current liabilities 57,383 129,490 6,095 -- 192,968 Long-term debt 291,734 2,672 -- -- 294,406 Other long-term 15,632 1,186 -- -- 16,818 liabilities Deferred income taxes (2,324) 40,623 19,534 -- 57,833 Investment by and -- 346,807 (2,999) (343,808) -- advances from (to) Parent Shareholders' equity 129,616 -- -- -- 129,616 -------- --------- --------- -------- ---------- Total liabilities $ 492,041 $ 520,778 $ 22,630 $ (343,808) $ 691,641 and shareholders' ======== ======== ========= ========== ========== equity </TABLE>
<TABLE> OSHKOSH TRUCK CORPORATION Condensed Consolidating Balance Sheets September 30, 1997 (Unaudited) <CAPTION> Non- Subsidiary Guarantor Company Guarantors Subsidiaries Eliminations Consolidated ------- ---------- ------------ ------------ ------------ <S> <C> <C> <C> <C> <C> Current assets: Cash and cash $ 23,210 $ 9 $ -- $ -- $ 23,219 equivalents Receivables, net 68,059 13,176 -- -- 81,235 Inventories 44,605 31,892 -- -- 76,497 Prepaid expenses and other 10,051 2,833 -- -- 12,884 -------- --------- --------- -------- ---------- Total current assets 145,925 47,910 -- -- 193,835 Other long-term assets 6,882 845 -- -- 7,727 Investment in and advances to: Subsidiaries 138,645 -- -- (138,645) -- Unconsolidated -- -- -- -- -- partnership Property, plant and equipment 99,685 27,977 -- -- 127,662 Less accumulated depreciation (69,415) (2,759) -- -- (72,174) -------- --------- --------- -------- ---------- Net property, plant and equipment 30,270 25,218 -- -- 55,488 Goodwill and other intangible assets, net -- 163,344 -- -- 163,344 -------- --------- --------- -------- ---------- Total assets $ 321,722 $ 237,317 $ -- $(138,645) $ 420,394 ======== ========= ========= ======== ======== Current liabilities: Accounts payable $ 28,358 $ 19,862 $ -- $ -- $ 48,220 Floor plan notes -- -- -- -- -- payable Customer advances 353 29,771 -- -- 30,124 Payroll-related 7,745 7,412 -- -- 15,157 obligations Other current 19,227 15,994 -- -- 35,221 liabilities Current maturities of long-term debt 15,000 -- -- -- 15,000 -------- --------- --------- -------- ---------- Total current liabilities 70,683 73,039 -- -- 143,722 Long-term debt 120,000 -- -- -- 120,000 Other long-term 13,266 54 -- -- 13,320 liabilities Deferred income taxes (3,127) 25,579 -- -- 22,452 Investment by and -- 138,645 -- (138,645) -- advances from (to) Parent Shareholders' equity 120,900 -- -- -- 120,900 -------- --------- --------- -------- ---------- Total liabilities $ 321,722 $ 237,317 $ -- $ (138,645) $ 420,394 and shareholders' ======== ======== ========= ========== ========== equity </TABLE>
<TABLE> OSHKOSH TRUCK CORPORATION Condensed Consolidating Statements of Income For the Three Months Ended June 30, 1998 (Unaudited) <CAPTION> Non- Subsidiary Guarantor Company Guarantors Subsidiaries Eliminations Consolidated ------- ---------- ------------ ------------ ------------ <S> <C> <C> <C> <C> <C> Net sales $ 100,311 $ 189,793 $ -- $ -- $ 290,104 Cost of sales 90,380 157,653 -- -- 248,033 -------- -------- --------- -------- ----------- Gross income 9,931 32,140 -- -- 42,071 Operating expenses: Selling, general and administrative 10,131 11,442 155 -- 21,728 Engineering, research & development 1,635 678 -- -- 2,313 Amortization of goodwill and other intangibles -- 2,721 -- -- 2,721 -------- -------- --------- -------- ----------- Total operating expenses 11,766 14,841 155 -- 26,762 -------- -------- --------- -------- ----------- Income from operations (1,835) 17,299 (155) -- 15,309 Other income (expense): Interest expense (5,394) (1,868) 180 -- (7,082) Interest income 120 110 (220) -- 10 Miscellaneous, net (159) (242) 220 -- (181) -------- -------- --------- -------- ----------- (5,433) (2,000) (180) -- (7,253) Income from operations before income taxes, equity in earnings of (7,268) 15,299 25 -- 8,056 subsidiaries and unconsolidated partner- ship and extraordinary item Provision for income taxes (2,826) 6,462 3 -- 3,639 -------- -------- --------- -------- ----------- (4,442) 8,837 22 -- 4,417 Equity in earnings of subsidiaries and unconsolidated 9,442 -- 583 (9,442) 583 partnership, net of -------- -------- --------- -------- ---------- income taxes Income before extraordinary item 5,000 8,837 605 (9,442) 5,000 Extraordinary charge for early retirement of (450) -- -- -- (450) debt, net of income -------- -------- --------- -------- ----------- tax benefit Net income $ 4,550 $ 8,837 $ 605 $ (9,442) $ 4,550 ======== ======== ========= ======== =========== </TABLE>
<TABLE> OSHKOSH TRUCK CORPORATION Condensed Consolidating Statements of Income For the Nine Months Ended June 30, 1998 (Unaudited) <CAPTION> Non- Subsidiary Guarantor Company Guarantors Subsidiaries Eliminations Consolidated ------- ---------- ------------ ------------ ------------ <S> <C> <C> <C> <C> <C> Net sales $ 305,537 $ 354,204 $ -- $ -- $ 659,741 Cost of sales 269,553 295,882 -- -- 565,435 -------- -------- --------- -------- ----------- Gross income 35,984 58,322 -- -- 94,306 Operating expenses: Selling, general and administrative 27,266 20,686 252 -- 48,204 Engineering, research & development 4,971 1,685 -- -- 6,656 Amortization of goodwill and other intangibles -- 5,559 -- -- 5,559 -------- -------- --------- -------- ----------- Total operating expenses 32,237 27,930 252 -- 60,419 -------- -------- --------- -------- ----------- Income from operations 3,747 30,392 (252) -- 33,887 Other income (expense): Interest expense (9,117) (5,156) -- -- (14,273) Interest income 274 270 -- -- 544 Miscellaneous, net (292) (416) 364 -- (344) -------- -------- --------- -------- ----------- (9,135) (5,302) (364) -- (14,073) -------- -------- --------- -------- ----------- Income from operations before income taxes, equity in earnings of (5,388) 25,090 112 -- 19,814 subsidiaries and unconsolidated partner- ship and extraordinary item Provision for income taxes (2,243) 10,584 37 -- 8,378 -------- -------- --------- -------- ----------- (3,145) 14,506 75 -- 11,436 Equity in earnings of subsidiaries and unconsolidated 15,341 -- 760 (15,341) 760 partnership, net of -------- -------- --------- -------- ----------- income taxes Income before extraordinary item 12,196 14,506 835 (15,341) 12,196 Extraordinary charge for early retirement of (1,185) -- -- -- (1,185) debt, net of income -------- -------- --------- -------- ----------- tax benefit Net income $ 11,011 $ 14,506 $ 835 $ (15,341) $ 11,011 ======== ======== ========= ======== =========== </TABLE>
<TABLE> OSHKOSH TRUCK CORPORATION Condensed Consolidating Statements of Income For the Three Months Ended June 30, 1997 (Unaudited) <CAPTION> Non- Subsidiary Guarantor Company Guarantors Subsidiaries Eliminations Consolidated ------- ---------- ------------ ------------ ------------ <S> <C> <C> <C> <C> <C> Net sales $ 113,631 $ 62,965 $ -- $ -- $ 176,596 Cost of sales 102,534 52,165 -- -- 154,699 -------- -------- --------- -------- ----------- Gross income 11,097 10,800 -- -- 21,897 Operating expenses: Selling, general and administrative 8,624 3,118 -- -- 11,742 Engineering, research & development 1,954 257 -- -- 2,211 Amortization of goodwill and other intangibles -- 1,117 -- -- 1,117 -------- -------- --------- -------- ----------- Total operating expenses 10,578 4,492 -- -- 15,070 -------- -------- --------- -------- ----------- Income from operations 519 6,308 -- -- 6,827 Other income (expense): Interest expense (1,300) (1,548) -- -- (2,848) Interest income 74 56 -- -- 130 Miscellaneous, net (24) -- -- -- (24) -------- -------- --------- -------- ----------- (1,250) (1,492) -- -- (2,742) Income from operations before income taxes, equity in earnings of (731) 4,816 -- -- 4,085 subsidiaries and unconsolidated partner- ship and extraordinary item Provision for income taxes (834) 2,127 -- -- 1,293 -------- -------- --------- -------- ---------- 103 2,689 -- -- 2,792 Equity in earnings of subsidiaries and unconsolidated 2,689 -- -- (2,689) -- partnership, net of -------- -------- --------- -------- ---------- income taxes Income before extraordinary item 2,792 2,689 -- (2,689) 2,792 Extraordinary charge for early retirement of -- -- -- -- -- debt, net of income -------- -------- --------- -------- ----------- tax benefit Net income $ 2,792 $ 2,689 $ -- $ (2,689) $ 2,792 ======== ======== ========= ======== =========== </TABLE>
<TABLE> OSHKOSH TRUCK CORPORATION Condensed Consolidating Statements of Income For the Nine Months Ended June 30, 1997 (Unaudited) <CAPTION> Non- Subsidiary Guarantor Company Guarantors Subsidiaries Eliminations Consolidated ------- ---------- ------------ ------------ ------------ <S> <C> <C> <C> <C> <C> Net sales $ 322,137 $ 175,244 $ -- $ -- $ 497,381 Cost of sales 286,693 146,340 -- -- 433,033 -------- -------- --------- -------- ----------- Gross income 35,444 28,904 -- -- 64,348 Operating expenses: Selling, general and administrative 25,491 8,892 -- -- 34,383 Engineering, research & development 5,228 729 -- -- 5,957 Amortization of goodwill and other intangibles -- 3,352 -- -- 3,352 -------- -------- --------- -------- ----------- Total operating expenses 30,719 12,973 -- -- 43,692 -------- -------- --------- -------- ----------- Income from operations 4,725 15,931 -- -- 20,656 Other income (expense): Interest expense (4,975) (4,596) -- -- (9,571) Interest income 235 249 -- -- 484 Miscellaneous, net (101) 8 -- -- (93) -------- -------- --------- -------- ----------- (4,841) (4,339) -- -- (9,180) -------- -------- --------- -------- ----------- Income from operations before income taxes, equity in earnings of (116) 11,592 -- -- 11,476 subsidiaries and unconsolidated partner- ship and extraordinary item Provision for income taxes (683) 5,269 -- -- 4,586 -------- -------- --------- -------- ---------- 567 6,323 -- -- 6,890 Equity in earnings of subsidiaries and unconsolidated 6,323 -- -- (6,323) -- partnership, net of -------- -------- --------- -------- ----------- income taxes Income before extraordinary item 6,890 6,323 -- (6,323) 6,890 Extraordinary charge for early retirement of -- -- -- -- -- debt, net of income -------- -------- --------- -------- ----------- tax benefit Net income $ 6,890 $ 6,323 $ 0 $ (6,323) $ 6,890 ======== ======== ========= ======== =========== </TABLE>
<TABLE> OSHKOSH TRUCK CORPORATION Condensed Consolidating Statements of Cash Flows For the Nine Months Ended June 30, 1998 (Unaudited) <CAPTION> Non- Subsidiary Guarantor Company Guarantors Subsidiaries Eliminations Consolidated ------- ---------- ------------ ------------ ------------ <S> <C> <C> <C> <C> <C> Net cash provided from (used for) operating $ 22,466 $ 59,764 $ (3,248) $ -- $ 78,982 activities Investing activities: Acquisition of business, net of (225,524) (3,535) 11,105 -- (217,954) cash acquired Investments in and advances to 48,966 (48,846) (120) -- -- subsidiaries Additions to property, plant and equipment (1,406) (4,864) -- -- (6,270) Proceeds from sale of property, plant and equipment 297 23 -- -- 320 (Increase) decrease in other long-term assets 110 (1,799) (543) -- (2,232) --------- --------- -------- ------- --------- Net cash provided from (used for) investing activities (177,557) (59,021) 10,442 -- (226,136) Net cash used for discontinued operations (872) -- -- -- (872) Financing activities: Net borrowings of long-term debt 160,968 101 -- -- 161,069 Debt issuance costs (8,507) -- -- -- (8,507) Purchase of Common Stock and Common Stock warrants, and 31 -- -- -- 31 proceeds from exercise of stock options, net Dividends paid (3,129) -- -- -- (3,129) --------- --------- -------- ------- --------- Net cash provided from financing activities 149,363 101 -- -- 149,464 --------- --------- -------- ------- --------- Increase (decrease) in cash and cash equivalents (6,600) 844 7,194 -- 1,438 Cash and cash equivalents at beginning of period 23,210 9 -- -- 23,219 --------- --------- -------- ------- --------- Cash and cash equivalents at end of period $ 16,610 $ 853 $ 7,194 $ -- $ 24,657 ========= ========= ======== ======= ========= </TABLE>
<TABLE> OSHKOSH TRUCK CORPORATION Condensed Consolidating Statements of Cash Flows For the Nine Months Ended June 30, 1997 (Unaudited) <CAPTION> Non- Subsidiary Guarantor Company Guarantors Subsidiaries Eliminations Consolidated ------- ---------- ------------ ------------ ------------ <S> <C> <C> <C> <C> <C> Net cash provided from operating activities $ 12,318 $ 19,495 $ -- $ -- $ 31,813 Investing activities: Investments in and advances to 16,864 (16,864) -- -- -- subsidiaries Additions to property, plant and equipment (1,885) (2,728) -- -- (4,613) Proceeds from sale of property, plant and equipment 333 -- -- -- 333 (Increase) decrease in other long-term assets (201) 87 -- -- (114) --------- --------- -------- ------- --------- Net cash provided from (used for) investing activities 15,111 (19,505) -- -- (4,394) Net cash used for discontinued operations (1,079) -- -- -- (1,079) Financing activities: Net repayments of long-term debt (15,411) -- -- -- (15,411) Purchase of Common Stock and Common Stock warrants, and (6,642) -- -- -- (6,642) proceeds from exercise of stock options, net Dividends paid (3,178) -- -- -- (3,178) --------- --------- -------- ------- --------- Net cash used for financing activities (25,231) -- -- -- (25,231) --------- --------- -------- ------- --------- Increase (decrease) in cash and cash equivalents 1,119 (10) -- -- 1,109 Cash and cash equivalents at beginning of period 108 19 -- -- 127 --------- --------- -------- ------- --------- Cash and cash equivalents at end of period $ 1,227 $ 9 $ -- $ -- $ 1,236 ========= ========= ======== ======= ========= </TABLE>
All statements other than statements of historical fact included in this Form 10-Q are forward-looking statements intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," will," "expect," "intend," "estimates," "anticipate," "believe," "should," "plans" or "continue" or the negative thereof or variations thereon or similar terminology. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from the Company's expectations include, without limitation, the consequences of financial leverage, the cyclical nature of the construction industry, the risks related to reductions or changes in government expenditures, the uncertainty inherent in governmental contracts, the challenges of integration of parts or components from sole source suppliers and subcontractors, product liability and warranty claims and labor relations and market conditions. Item 2. Oshkosh Truck Corporation Management's Discussion and Analysis of Consolidated Financial Condition and Results of Operations ------------------------------------------------------------------ Results of Operations Third Quarter 1998 Compared to 1997 Oshkosh Truck Corporation (the "Company" or "Oshkosh") reported net income of $4.6 million, or $0.54 per share, on sales of $290.1 million for the third quarter of fiscal 1998, compared to net income of $2.8 million, or $0.33 per share, on sales of $176.6 million for the third quarter of fiscal 1997. Excluding an extraordinary charge associated with the early repayment of debt incurred in connection with the acquisition of McNeilus Companies, Inc. ("McNeilus") on February 26, 1998, net income for the third quarter of fiscal 1998 would have been $5.0 million, or $0.59 per share. Sales of commercial products increased in the third quarter of fiscal 1998 compared to the third quarter of fiscal 1997 while sales of defense products decreased. Commercial sales in the third quarter of fiscal 1998 increased $132.9 million, or 131.1%, from the third quarter of fiscal 1997 to $234.3 million. An increase of $119.7 million in sales of construction and refuse vehicles and an $8.5 million increase in sales of fire apparatus accounted for substantially all of the increase. Sales by McNeilus accounted for all the increase in sales of construction and refuse vehicles. Sales of defense products totaled $55.8 million in the third quarter of fiscal 1998, a decrease of $19.4 million, or 25.8%, compared to the third quarter of fiscal 1997. Defense sales declined due to the trend in lower heavy military truck spending in the federal budget. Gross income in the third quarter of fiscal 1998 totaled $42.1 million, or 14.5% of sales, compared to $21.9 million, or 12.4% of sales, in the third quarter of fiscal 1997. McNeilus contributed $20.8 million of the increase in gross income in the third quarter of fiscal 1998 compared to fiscal 1997. During the third quarter of fiscal 1998, the Company settled litigation with O.V. Containers, Inc. ("OV") incurring a $1.1 million charge. Operating expenses totaled $26.8 million, or 9.2% of sales, in the third quarter of fiscal 1998 compared to $15.1 million, or 8.5% of sales, in the third quarter of fiscal 1997. Substantially all the increase in operating expenses in the third quarter of fiscal 1998 related to the operations of McNeilus. Interest expense increased to $7.1 million in the third quarter of fiscal 1998 compared to $2.8 million in the third quarter of fiscal 1997. The increase in interest expense is primarily due to additional borrowings to finance the acquisition of McNeilus, net of debt repayment. The effective income tax rate for combined federal and state income taxes for the third quarter of fiscal 1998 was 45.2% compared to 31.7% for the third quarter of fiscal 1997. The effective income tax rate for the third quarter of fiscal 1998 was impacted by non-deductible goodwill of $1.3 million. The effective income tax rate for the third quarter of fiscal 1997 was impacted by non-deductible goodwill of $0.6 million and the reversal of $0.5 million of prior years' provisions for income taxes. First Nine Months 1998 Compared to 1997 The Company reported net income of $11.0 million, or $1.31 per share, on sales of $659.7 million for the first nine months of fiscal 1998, compared to 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. Excluding an extra- ordinary charge associated with the refinancing and early repayment of debt to acquire McNeilus, net income for the first nine months of fiscal 1998 would have been $12.2 million, or $1.45 per share. Sales of commercial products increased in the first nine months of fiscal 1998 compared to the first nine months of fiscal 1997 while sales of defense products decreased. Commercial sales in the first nine months of fiscal 1998 increased $179.3 million, or 61.5%, from the first nine months of fiscal 1997 to $470.9 million. Increases of $158.8 million in sales of construction and refuse vehicles and $22.3 million in sales of fire apparatus were partially offset by the elimination of $2.7 million of sales of commercial van trailers as the Company exited this line of business. Sales by McNeilus accounted for all the increase in sales of construction and refuse vehicles. Sales of defense products totaled $188.8 million in the first nine months of fiscal 1998, a decrease of $17.0 million, or 8.3%, as compared to the first nine months of fiscal 1997. Defense sales declined due to the trend in lower heavy military truck spending in the federal budget. Gross income in the first nine months of fiscal 1998 totaled $94.3 million, or 14.3% of sales, compared to $64.3 million, or 12.9% of sales, in the first nine months of fiscal 1997. McNeilus contributed $26.8 million of the increase in gross income for the first nine months of fiscal 1998 compared to the comparable period in fiscal 1997. Operating expenses totaled $60.4 million, or 9.2% of sales, in the first nine months of fiscal 1998 compared to $43.7 million, or 8.8% of sales, in the first nine months of fiscal 1997. Operating expenses increased $12.0 million due to the inclusion of McNeilus since the date of acquisition. Interest expense increased to $14.3 million in the first nine months of fiscal 1998 compared to $9.6 million in the first nine months of fiscal 1997. The increase in interest expense reflects additional borrowings to finance the acquisition of McNeilus. The effective income tax rate for combined federal and state income taxes for the first nine months of fiscal 1998 was 42.3% compared to 40.0% for the first nine months of fiscal 1997. The effective income tax rate was impacted by the reversal of $0.5 million of prior years' provisions for income taxes in each of the nine months ended June 30, 1998 and 1997. In addition, the effective income tax rate was adversely affected by non- deductible goodwill of $2.8 million and $1.9 million, respectively. Financial Condition First Nine Months of 1998 During the first nine months of fiscal 1998, cash increased by $1.4 million. Cash available at the beginning of the period of $23.2 million and cash provided from operations during the period of $79.0 million, or a total of $102.2 million, was used primarily to fund $61.5 million of debt repayments (including $25.0 million prior to the acquisition of McNeilus), the acquisition of Nova Quintech for $3.5 million, capital additions of $6.3 million and to pay dividends of $3.1 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), to 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 Nine Months of 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 repay- ment of long-term debt of $15.4 million, the repurchase of common stock and warrants from Freightliner Corporation ("Freightliner") of $6.8 million in connection with the termination of the Strategic Alliance formed with Freightliner on June 2, 1995, capital additions of $4.6 million and dividends of $3.2 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 June 30, 1998 was $421 million, compared to $401 million at June 30, 1997. The backlog at June 30, 1998 includes $161 million with respect to U.S. Government contracts, $165 million related to Pierce Manufacturing Inc. ("Pierce"), $56 million with respect to McNeilus and the remainder relates to other commercial products. Approximately 95% of the Company's backlog will be consumed in the next 12 months. 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, miscalcula- tions or other disruptions in the business. The Company maintains two computer systems at its Oshkosh operations and one at its Pierce operations. The Company installed an upgrade to its primary computer system at Oshkosh in July 1998. The secondary computer system is expected to be updated 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 at Oshkosh or Pierce; 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 31, 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 is being expensed as incurred. 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. Stock Buy Back In July 1995, the Company's board of directors authorized the repurchase of up to 1,000,000 shares of Common Stock. There were no stock repurchases under this program in the first nine months of fiscal 1998. As of June 30, 1998 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 Common Stock from Freightliner on May 2, 1997 did not impact the number of shares available for repurchase under this program.
OSHKOSH TRUCK CORPORATION PART II. OTHER INFORMATION FORM 10-Q June 30, 1998 ITEM 1 LEGAL PROCEEDINGS ------------------------ The arbitration proceeding and separate civil litigation of certain disputes between the Oshkosh Florida Division and O.V. Containers, Inc. ("OV") has been settled. The disputes arose out of the performance of a contract to deliver 690 skeletal container chassis and additional issues of, among others, warranty performance and misuse and abuse of the chassis. As part of the settlement OV has agreed to accept the chassis "as is" and the Company has agreed to pay OV $1.1 million. ITEM 5 OTHER INFORMATION ------------------------ All shareholder proposals for presentation at the 1999 Annual Meeting pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended ("Rule 14a-8"), must be received at the offices of the Company, P.O. Box 2566, Oshkosh, Wisconsin 54903, by August 18, 1998, for inclusion in the 1999 proxy statement. After November 14, 1998, notice to the Company of a shareholder proposal submitted otherwise than pursuant to Rule 14a-8 will be considered untimely, and the persons named in proxies solicited by the Board of Directors of the Company for the 1999 Annual Meeting may exercise discretionary voting power with respect to such proposal. ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K ---------------------------------------- (a) Exhibits ------------- Exhibit 27 - Financial Data Schedule (b) Reports on Form 8-K ------------------------ (i) On May 7, 1998 the Company filed a current report on Form 8-K dated May 6, 1998 announcing the Company's second quarter earnings.
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 August 14, 1998 /s/ R. G. Bohn R. G. Bohn President and Chief Executive Officer (Principal Executive Officer) August 14, 1998 /s/ C. L. Szews C. L. Szews Executive Vice President and Chief Financial Officer (Principal Financial Officer) August 14, 1998 /s/ T. J. Polnaszek T. J. Polnaszek Corporate Controller (Principal Accounting Officer)
EXHIBIT INDEX Exhibit No. Description ----------- ----------- 27 Financial Data Schedule