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, 2002.
or
( ) Transaction Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
for the Transition period from to
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Commission File Number 0-13886
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Oshkosh Truck Corporation
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[Exact name of registrant as specified in its charter]
Wisconsin 39-0520270
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[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
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[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 April 24, 2002: 417,301
Common Stock Outstanding as of April 24, 2002: 16,465,482
OSHKOSH TRUCK CORPORATION
FORM 10-Q INDEX
FOR THE QUARTER ENDED MARCH 31, 2002
Page
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Statements of Income
- Three Months and Six Months Ended
March 31, 2002 and 2001 ........................... 3
Condensed Consolidated Balance Sheets
- March 31, 2002 and September 30, 2001 ................ 4
Condensed Consolidated Statement of Shareholders' Equity
- Six Months Ended March 31, 2002 ...................... 5
Condensed Consolidated Statements of Cash Flows
- Six Months Ended March 31, 2002 and 2001 ............. 6
Notes to Condensed Consolidated Financial Statements
- March 31, 2002 ....................................... 7
Item 2. Management's Discussion and Analysis of Consolidated
Financial Condition and Results of Operations ..........24
Item 3. Quantitative and Qualitative Disclosure of Market Risk ......36
Part II. Other Information
Item 1. Legal Proceedings ...........................................37
Item 6. Exhibits and Reports on Form 8-K ............................37
Signatures .................................................................38
2
PART I. ITEM 1. FINANCIAL INFORMATION
OSHKOSH TRUCK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
March 31, March 31,
2002 2001 2002 2001
---- ---- ---- ----
(In thousands, except per share amounts)
Net sales $ 415,605 $ 343,367 $ 777,098 $ 625,895
Cost of sales 356,109 292,863 667,578 532,124
------------ ------------ ------------ ------------
Gross income 59,496 50,504 109,520 93,771
Operating expenses:
Selling, general and administrative 34,439 26,526 65,244 49,145
Amortization of goodwill and purchased
intangibles 1,475 2,946 2,915 5,810
------------ ------------ ------------ ------------
Total operating expenses 35,914 29,472 68,159 54,955
------------ ------------ ------------ ------------
Operating income 23,582 21,032 41,361 38,816
Other income (expense):
Interest expense (5,617) (5,160) (12,039) (9,818)
Interest income 271 310 556 479
Miscellaneous, net 51 5 (199) 5
------------- ------------ ------------ ------------
(5,295) (4,845) (11,682) (9,334)
------------ ------------ ------------ ------------
Income before income taxes and equity in earnings
of unconsolidated partnership 18,287 16,187 29,679 29,482
Provision for income taxes 6,706 5,292 10,010 10,667
------------ ------------ ------------ ------------
11,581 10,895 19,669 18,815
Equity in earnings of unconsolidated
partnership, net of income taxes 586 389 1,106 692
------------ ------------ ------------ ------------
Net income $ 12,167 $ 11,284 $ 20,775 $ 19,507
============ ============ ============ ============
Earnings per share $ 0.72 $ 0.68 $ 1.24 $ 1.17
=========== =========== =========== ===========
Earnings per share assuming dilution $ 0.70 $ 0.66 $ 1.21 $ 1.14
=========== =========== =========== ===========
Cash dividends:
Class A Common Stock $ 0.07500 $ 0.07500 $ 0.15000 $ 0.15000
Common Stock $ 0.08625 $ 0.08625 $ 0.17250 $ 0.17250
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
OSHKOSH TRUCK CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, September 30,
2002 2001
---- ----
(Unaudited)
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 13,024 $ 11,312
Receivables, net 164,297 211,405
Inventories 252,712 258,038
Prepaid expenses 6,893 6,673
Deferred income taxes 21,213 15,722
---------------- -----------
Total current assets 458,139 503,150
Investment in unconsolidated partnership 21,635 18,637
Other long-term assets 11,509 11,770
Property, plant and equipment 246,825 244,166
Less accumulated depreciation (110,380) (102,238)
---------------- -----------
Net property, plant and equipment 136,445 141,928
Purchased intangible assets, net 102,952 121,643
Goodwill 298,206 292,140
---------------- -----------
Total assets $ 1,028,886 $ 1,089,268
================ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 95,272 $ 107,864
Floor plan notes payable 18,646 19,271
Customer advances 91,746 58,070
Payroll-related obligations 27,996 27,084
Income taxes 11,115 25,221
Accrued warranty 18,915 18,338
Other current liabilities 46,148 46,322
Revolving credit facility and current
maturities of long-term debt 16,292 77,031
---------------- -----------
Total current liabilities 326,130 379,201
Long-term debt 265,951 282,249
Deferred income taxes 33,888 40,334
Other long-term liabilities 39,582 40,458
Commitments and contingencies
Shareholders' equity 363,335 347,026
---------------- -----------
Total liabilities and shareholders' equity $ 1,028,886 $ 1,089,268
================ ===========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
OSHKOSH TRUCK CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
SIX MONTHS ENDED MARCH 31, 2002
(Unaudited)
Accumulated
Common Stock Other
Common Paid-In Retained in Treasury Comprehensive
Stock Capital Earnings at Cost Loss Total
----- ------- -------- ------- ---- -----
(In thousands)
Balance at
September 30, 2001 $ 178 $ 110,330 $ 246,915 $ (10,195) $ (202) $ 347,026
Comprehensive
income:
Net income -- -- 20,775 -- -- 20,775
Loss on derivative
instruments (net
of income tax
benefit of $8) -- -- -- -- (15) (15)
Currency
translation
adjustments -- -- -- -- (6,081) (6,081)
---------
Comprehensive
income 14,679
---------
Cash dividends:
Class A Common
Stock -- -- (62) -- -- (62)
Common Stock -- -- (2,826) -- -- (2,826)
Exercise of stock
options -- 326 -- 1,615 -- 1,941
Tax benefit related to
stock options
exercised -- 2,577 -- -- -- 2,577
--------- --------- --------- --------- --------- ---------
Balance at
March 31, 2002 $ 178 $ 113,233 $ 264,802 $ (8,580) $ (6,298) $ 363,335
========= ========= ========= ========= ========= =========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
OSHKOSH TRUCK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
March 31,
2002 2001
---- ----
(In thousands)
Operating activities:
Net income $ 20,775 $ 19,507
Non-cash adjustments 4,597 11,714
Changes in operating assets and liabilities 60,494 (47,324)
-------- --------
Net cash provided from (used for) operating activities 85,866 (16,103)
Investing activities:
Acquisition of businesses, net of cash acquired -- (26,423)
Additions to property, plant and equipment (4,873) (9,311)
Proceeds from sale of property, plant and equipment 1 25
Increase in other long-term assets (1,305) (4,598)
-------- --------
Net cash used for investing activities (6,177) (40,307)
Financing activities:
Net borrowings (repayments) under revolving credit
facility (55,200) 54,800
Repayment of long-term debt (21,830) (4,310)
Dividends paid (2,875) (2,866)
Other 1,941 196
-------- --------
Net cash provided from (used for) financing activities (77,964) 47,820
Effect of exchange rate changes on cash (13) --
-------- --------
Increase(decrease) in cash and cash equivalents 1,712 (8,590)
Cash and cash equivalents at beginning of period 11,312 13,569
-------- --------
Cash and cash equivalents at end of period $ 13,024 $ 4,979
======== ========
Supplementary disclosures:
Depreciation and amortization $ 12,249 $ 13,441
Cash paid for interest 12,203 8,921
Cash paid for income taxes 27,495 11,291
The accompanying notes are an integral part of these condensed consolidated
financial statements.
6
OSHKOSH TRUCK CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
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 (which include normal
recurring adjustments except as disclosed herein) that are, in the opinion of
Company management, necessary to present fairly the condensed consolidated
financial statements.
Certain reclassifications have been made to the fiscal 2001 financial statements
to conform to the fiscal 2002 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 condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's 2001 annual report to
shareholders.
2. NEW ACCOUNTING STANDARDS
In October 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" ("SFAS No. 144"). SFAS No. 144
establishes a single accounting model, based on the framework established in
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets To Be Disposed Of" ("SFAS No. 121"), for long-lived assets to
be disposed of by sale, and resolves significant implementation issues related
to SFAS No. 121. The Company is currently assessing the impact of SFAS No. 144
on its operating results and financial condition. The Company is required to
adopt SFAS No. 144 no later than the first quarter of fiscal 2003.
3. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted weighted
average shares used in the denominator of the per share calculations:
Three Months Ended Six Months Ended
March 31, March 31,
--------- ---------
2002 2001 2002 2001
---- ---- ---- ----
Denominator for basic earnings per share 16,788,624 16,677,864 16,751,675 16,673,340
Effect of dilutive options and incentive
compensation awards 491,892 442,367 458,159 423,556
---------- ---------- ---------- ----------
Denominator for dilutive earnings
per share 17,280,516 17,120,231 17,209,834 17,096,896
========== ========== ========== ==========
7
4. INVENTORIES
Inventories consist of the following:
March 31, September 30,
2002 2001
---- ----
(In thousands)
Finished products $ 56,294 $ 64,049
Partially finished products 103,416 104,955
Raw materials 116,246 122,484
--------- ---------
Inventories at FIFO cost 275,956 291,488
Less: Progress/performance-based payments on
U.S. government contracts (9,475) (20,831)
Excess of FIFO cost over LIFO cost (13,769) (12,619)
--------- ---------
$ 252,712 $ 258,038
========= =========
Title to all inventories related to government contracts, which provide for
progress payments, vests with the government to the extent of unliquidated
progress/performance-based payments.
5. GOODWILL AND PURCHASED INTANGIBLE ASSETS
In June 2001, the FASB issued SFAS No. 141, "Business Combinations" and SFAS No.
142, "Goodwill and Other Intangible Assets". SFAS No. 141 requires that all
business combinations be accounted for using the purchase method of accounting
and that certain intangible assets acquired in a business combination be
recognized as assets apart from goodwill. SFAS No. 141 was effective for all
business combinations initiated after June 30, 2001. SFAS No. 142 requires
goodwill to be tested for impairment under certain circumstances, and written
down when impaired, rather than being amortized as previous standards required.
Furthermore, SFAS No. 142 requires purchased intangible assets other than
goodwill to be amortized over their useful lives unless these lives are
determined to be indefinite. Purchased intangible assets are carried at cost
less accumulated amortization. Amortization is computed over the useful lives of
the respective assets.
SFAS No. 142 is effective for fiscal years beginning after December 15, 2001;
however, the Company elected to adopt early the standard effective the beginning
of fiscal 2002. In accordance with SFAS No. 142, the Company ceased amortizing
goodwill totaling $301.5 million as of the beginning of fiscal 2002, including
the following purchased intangible assets that were subsumed into goodwill (net
of related deferred income tax liabilities of $6.0 million): $2.9 million of
assembled workforce intangible assets, $2.7 million of going concern/immediate
use intangible assets and $9.8 million of internal sales force intangible
assets. Due to indefinite lives, the Company also ceased amortizing trade names
totaling $5.4 million as of the beginning of fiscal 2002. As a result, during
the three and six month periods ended March 31, 2002, the Company did not
recognize amortization of goodwill and trade names totaling $1.7 million and
$3.2 million, respectively, that would have been recognized had the previous
standards been in effect. The following table presents the impact of SFAS No.
142 on net income and net income per share had the standard been in effect for
the
8
three and six month periods ended March 31, 2001 (in thousands, except per share
amounts):
Three Months Ended Six Months Ended
March 31, March 31,
2002 2001 2002 2001
---- ---- ---- ----
Reported net income $ 12,167 $ 11,284 $ 20,775 $ 19,507
Adjustments:
Amortization of goodwill -- 1,511 -- 2,933
Amortization of assets previously classified
as purchased intangible assets:
Assembled workforce -- 164 -- 327
Internal sales force -- 67 -- 135
Going concern/immediate use -- 18 -- 37
Trade names -- 10 -- 20
Income tax effect -- (106) -- (209)
---------- -------- ---------- --------
Net adjustments -- 1,664 -- 3,243
---------- -------- ---------- --------
Adjusted net income $ 12,167 $ 12,948 $ 20,775 $ 22,750
========== ======== ========== ========
Reported net income per share $ 0.72 $ 0.68 $ 1.24 $ 1.17
Adjusted net income per share 0.72 0.78 1.24 1.36
Reported net income per share assuming dilution 0.70 0.66 1.21 1.14
Adjusted net income per share assuming dilution 0.70 0.76 1.21 1.33
There was no impairment of goodwill upon adoption of SFAS No. 142. The Company
is required to perform goodwill impairment tests on an annual basis and between
annual tests in certain circumstances. There can be no assurance that future
goodwill impairment tests will not result in a charge to earnings.
9
The following tables present details of the Company's total purchased intangible
assets (dollars in thousands):
Weighted
Average Accumulated
March 31, 2002 Life Gross Amortization Net
-------------- ---- ----- ------------ ---
(years)
Amortizable:
Distribution network 40.0 $ 53,000 $ (7,326) $ 45,674
Non-compete 14.5 40,106 (10,857) 29,249
Technology-related 17.9 20,076 (3,464) 16,612
Other 15.0 6,800 (611) 6,189
----------- ---------- -------
26.3 119,982 (22,258) 97,724
Non-amortizable-Trade names 5,429 (201) 5,228
----------- ---------- -------
Total $ 125,411 $ (22,459) $102,952
=========== ========== =======
Weighted
Average Accumulated
September 30, 2001 Life Gross Amortization Net
------------------ ---- ----- ------------ ---
(years)
Amortizable:
Distribution network 40.0 $ 53,000 $ (6,664) $ 46,336
Non-compete 14.5 40,106 (9,400) 30,706
Technology-related 17.9 20,247 (2,867) 17,380
Assembled workforce 11.3 5,600 (2,678) 2,922
Internal sales force 40.0 10,800 (968) 9,832
Going concern/immediate use 40.0 3,000 (319) 2,681
Trade names 22.1 5,603 (201) 5,402
Other 15.0 6,800 (416) 6,384
----------- ---------- -------
Total 26.9 $ 145,156 $ (23,513) $121,643
=========== ========== =======
The Company engaged third-party business valuation appraisers to determine the
fair value of the intangible assets in connection with the Company's larger
acquisitions--specifically the acquisitions of Pierce Manufacturing Inc.
("Pierce") in fiscal 1996, McNeilus Companies, Inc. ("McNeilus") in fiscal 1998
and the Geesink Norba Group in fiscal 2001. The allocation of purchase price for
the Geesink Norba Group acquisition is tentative pending completion of
appraisals of assets acquired and finalization of certain restructuring plans.
The allocation may change following the completion of these items.
10
The estimated future amortization expense of purchased intangible assets is as
follows (in thousands):
Fiscal year Amount
----------- ------
2002 (remaining six months) $3,013
2003 5,966
2004 5,966
2005 5,920
2006 5,699
The following table presents the changes in goodwill during the first six months
of fiscal 2002 allocated to the reportable segments (in thousands):
Balance at Balance at
September 30, March 31,
Segment 2001 Acquired Adjustments 2002
------- ---- -------- ----------- ----
Commercial $ 194,963 $ 536 $ 3,365 $ 198,864
Fire and emergency 97,177 -- 2,165 99,342
Defense -- -- -- --
--------- -------- ------- ---------
Total $ 292,140 $ 536 $ 5,530 $ 298,206
========= ======== ======= =========
The adjustments during the first six months of fiscal 2002 included a reduction
of $3.9 million resulting from currency translation adjustments and
reclassification of the net book value of recorded assets subsumed into goodwill
upon adoption of SFAS No. 142, including: assembled workforce assets of $2.9
million, going-concern/immediate use assets of $2.7 million and internal sales
force asset of $9.8 million, net of related deferred tax liabilities of $6.0
million. The internal sales force asset subsumed into goodwill neither arose
from contractual or other legal rights nor was it separable.
6. BUSINESS COMBINATIONS
On July 25, 2001, the Company acquired all the outstanding capital stock of the
Geesink Norba Group. The cash purchase price of the acquisition of 156.4 million
euros, including acquisition costs of 4.0 million euros and net of cash
acquired, or $137.6 million was financed under a new Term B Loan under the
Company's senior credit facility. The Geesink Norba Group is a leading European
manufacturer of refuse collection truck bodies, mobile and stationary compactors
and transfer stations under the Geesink and Norba brands. The Geesink Norba
Group is included in the Company's commercial segment.
On October 30, 2000, the Company acquired all of the issued and outstanding
capital stock of Medtec Ambulance Corporation ("Medtec") for $14.4 million in
cash, including acquisition costs and net of cash acquired. Medtec is a U.S.
manufacturer of custom ambulances and rescue vehicles. The acquisition was
financed from available cash. Medtec is included in the Company's fire and
emergency segment.
These acquisitions were accounted for using the purchase method of accounting
and, accordingly, the operating results of the Geesink Norba
11
Group and Medtec are included in the Company's consolidated statements of income
beginning July 25, 2001 and October 30, 2000, respectively.
Proforma unaudited consolidated operating results of the Company for the six
months ended March 31, 2001, assuming the Geesink Norba Group and Medtec had
been acquired as of October 1, 2000, is summarized below (in thousands):
Net sales $690,034
Net income 20,475
Earnings per share $ 1.23
Earnings per share assuming dilution $ 1.20
7. LONG-TERM DEBT
The Company has outstanding a senior credit facility consisting of a $170.0
million revolving credit facility ("Revolving Credit Facility") with $10.0
million outstanding at March 31, 2002, a Term Loan A with $42.0 million
outstanding at March 31, 2002 and a Term Loan B with $128.3 million outstanding
at March 31, 2002. The Revolving Credit Facility and the Term Loan A mature in
January 2006 and the Term Loan B matures in January 2007.
At March 31, 2002, $10.0 million of outstanding borrowings and $26.1 million of
outstanding letters of credit reduced available capacity under the Revolving
Credit Facility to $133.9 million.
Substantially all the domestic tangible and intangible assets of the Company and
its subsidiaries (including the stock of certain subsidiaries) are pledged as
collateral under the senior credit facility. The senior credit facility includes
customary affirmative and negative covenants.
The Company has outstanding $100.0 million of 8.75% senior subordinated notes.
The Indenture governing the terms of the senior subordinated notes contains
customary affirmative and negative covenants. The Subsidiary Guarantors (as
defined below in Note 10) fully, unconditionally, jointly and severally
guarantee the Company's obligations under the senior subordinated notes.
Certain of the Company's subsidiaries have outstanding debt to third parties
totaling $1.9 million as of March 31, 2002.
8. COMMITMENTS AND CONTINGENCIES
As part of its routine business operations, the Company disposes of and recycles
or reclaims certain industrial waste materials, chemicals and solvents at third
party disposal and recycling facilities, which are licensed by appropriate
governmental agencies. In some instances, these facilities have been and may be
designated by the United States Environmental Protection Agency ("EPA") or a
state environmental agency for remediation. Under the Comprehensive
Environmental Response, Compensation, and Liability Act (the "Superfund" law)
and similar state laws, each
12
potentially responsible party ("PRP") that contributed hazardous substances may
be jointly and severally liable for the costs associated with cleaning up the
site. Typically, PRPs negotiate a resolution with the EPA and/or the state
environmental agencies. PRPs also negotiate with each other regarding allocation
of the cleanup cost.
As to one such Superfund site, Pierce is one of 393 PRPs participating in the
costs of addressing the site and has been assigned an allocation share of
approximately 0.04%. Currently, a report of the remedial investigation/
feasibility study is being completed, and as such, an estimate for the total
cost of the remediation of this site has not been made to date. However, based
on estimates and the assigned allocations, the Company believes its liability at
the site will not be material and its share is adequately covered through
reserves established by the Company at March 31, 2002. Actual liability could
vary based on results of the study, the resources of other PRPs, and the
Company's final share of liability.
The Company is addressing a regional trichloroethylene ("TCE") groundwater plume
on the south side of Oshkosh, Wisconsin. The Company believes there may be
multiple sources in the area. TCE was detected at the Company's North Plant
facility with testing showing the highest concentrations in a monitoring well
located on the upgradient property line. Because the investigation process is
still ongoing, it is not possible for the Company to estimate its long-term
total liability associated with this issue at this time. Also, as part of the
regional TCE groundwater investigation, the Company conducted a groundwater
investigation of a former landfill located on Company property. The landfill,
acquired by the Company in 1972, is approximately 2.0 acres in size and is
believed to have been used for the disposal of household waste. Based on the
investigation, the Company does not believe the landfill is one of the sources
of the TCE contamination. Based upon current knowledge, the Company believes its
liability associated with the TCE issue will not be material and that it has
established adequate reserves for the matter as of March 31, 2002. However, this
may change as investigations proceed by the Company, other unrelated property
owners, and the government.
The Company is subject to other environmental matters and legal proceedings and
claims, including patent, antitrust, product liability and state dealership
regulation compliance proceedings, that arise in the ordinary course of
business. Although the final results of all such matters and claims cannot be
predicted with certainty, management believes that the ultimate resolution of
all such matters and claims, after taking into account the liabilities accrued
with respect to such matters and claims, will not have a material adverse effect
on the Company's financial condition or results of operations. Actual results
could vary, among other things, due to the uncertainties involved in litigation.
The Company has guaranteed certain customers' obligations under deferred payment
contracts and lease purchase agreements totaling approximately $1.0 million at
March 31, 2002. The Company is also contingently liable under bid, performance
and specialty bonds totaling approximately $153.7 million and open standby
letters of credit issued by the Company's bank in favor of third parties
totaling approximately $26.1 million at March 31, 2002.
13
9. BUSINESS SEGMENT INFORMATION
Three Months Ended Six Months Ended
March 31, March 31,
2002 2001 2002 2001
---- ---- ---- ----
(In thousands) (In thousands)
Net sales to unaffiliated customers:
Commercial $169,978 $147,343 $299,407 $254,380
Fire and emergency 119,682 116,007 215,548 209,753
Defense 127,126 80,327 263,701 162,072
Intersegment eliminations (1,181) (310) (1,558) (310)
-------- -------- -------- --------
Consolidated $415,605 $343,367 $777,098 $625,895
======== ======== ======== ========
Operating income (loss):
Commercial $ 12,161 $ 7,640 $ 19,457 $ 13,812
Fire and emergency 11,610 10,850 19,363 18,205
Defense 5,087 6,779 13,129 15,325
Corporate and other (5,276) (4,237) (10,588) (8,526)
-------- -------- -------- --------
Consolidated operating income 23,582 21,032 41,361 38,816
Net interest expense (5,346) (4,850) (11,483) (9,339)
Miscellaneous other 51 5 (199) 5
-------- -------- -------- --------
Income before income taxes and equity in
earnings of unconsolidated partnership $ 18,287 $ 16,187 $ 29,679 $ 29,482
======== ======== ======== ========
March 31, September 30,
2002 2001
---- ----
(In thousands)
Identifiable assets:
Commercial $ 579,431 $ 594,845
Fire and emergency 317,005 315,565
Defense 126,835 168,400
Corporate and other 5,615 10,458
---------- ----------
Consolidated $1,028,886 $1,089,268
========== ==========
14
10. CONDENSED CONSOLIDATING FINANCIAL INFORMATION
The following tables present condensed consolidating financial information for:
(a) the Company; (b) on a combined basis, the guarantors of the senior
subordinated notes, which include all wholly-owned subsidiaries of the Company
("Subsidiary Guarantors") other than Geesink Norba Group, McNeilus Financial
Services, Inc., Oshkosh/McNeilus Financial Services, Inc., and Oshkosh Equipment
Finance, LLC which are the only non-guarantor subsidiaries of the Company
("Non-Guarantor Subsidiaries"), and (c) on a combined basis, the Non-Guarantor
Subsidiaries. Separate financial statements of the Subsidiary Guarantors are not
presented because the Subsidiary Guarantors are jointly, severally and
unconditionally liable under the guarantees, and the Company believes separate
financial statements and other disclosures regarding the Subsidiary Guarantors
are not material to investors.
The Company is comprised of Wisconsin and Florida manufacturing operations and
certain corporate management, information services and finance functions.
Borrowings and related interest expense under the senior credit facility and the
senior subordinated notes are charged to the Company. The Company has allocated
a portion of this interest expense to certain Subsidiary Guarantors through
formal lending arrangements. There are no management fee arrangements between
the Company and its Non-Guarantor Subsidiaries.
15
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Statements of Income
For the Three Months Ended March 31, 2002
(Unaudited)
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ ------------
(In thousands)
Net sales $ 170,201 $ 219,837 $ 32,455 $ (6,888) $ 415,605
Cost of sales 151,556 186,813 24,480 (6,740) 356,109
---------- ---------- ----------- ---------- -----------
Gross income 18,645 33,024 7,975 (148) 59,496
Operating expenses:
Selling, general and
administrative 13,626 15,449 5,364 -- 34,439
Amortization of purchased
intangibles 1 1,412 62 -- 1,475
---------- ---------- ----------- ---------- -----------
Total operating expenses 13,627 16,861 5,426 -- 35,914
---------- ---------- ----------- ---------- -----------
Operating income 5,018 16,163 2,549 (148) 23,582
Other income (expense):
Interest expense (6,237) (5,967) 12 6,575 (5,617)
Interest income 5,086 1,760 -- (6,575) 271
Miscellaneous, net 3,298 (3,353) 106 -- 51
---------- ---------- ------------ ---------- -----------
2,147 (7,560) 118 -- (5,295)
---------- ---------- ------------ ---------- -----------
Income before items noted below 7,165 8,603 2,667 (148) 18,287
Provision for income taxes 2,651 3,175 934 (54) 6,706
---------- ---------- ----------- ----------- -----------
4,514 5,428 1,733 (94) 11,581
Equity in earnings of subsidiaries
and unconsolidated partnership,
net of income taxes 7,653 306 586 (7,959) 586
---------- ----------- ----------- ---------- -----------
Net income $ 12,167 $ 5,734 $ 2,319 $ (8,053) $ 12,167
========== =========== =========== ========== ===========
16
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Statements of Income
For the Three Months Ended March 31, 2001
(Unaudited)
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ ------------
(In thousands)
Net sales $ 127,002 $ 226,434 $ -- $ (10,069) $ 343,367
Cost of sales 110,379 192,475 -- (9,991) 292,863
---------- ---------- ----------- ----------- -----------
Gross income 16,623 33,959 -- (78) 50,504
Operating expenses:
Selling, general and
administrative 10,942 15,584 -- -- 26,526
Amortization of goodwill and
purchased intangibles -- 2,946 -- -- 2,946
---------- ---------- ----------- ---------- -----------
Total operating expenses 10,942 18,530 -- -- 29,472
---------- ---------- ----------- ---------- -----------
Operating income 5,681 15,429 -- (78) 21,032
Other income (expense):
Interest expense (5,621) (6,114) -- 6,575 (5,160)
Interest income 5,075 1,810 -- (6,575) 310
Miscellaneous, net 2,180 (2,175) -- -- 5
---------- ---------- ----------- ---------- -----------
1,634 (6,479) -- -- (4,845)
---------- ---------- ----------- ---------- -----------
Income before items noted below 7,315 8,950 -- (78) 16,187
Provision for income taxes 1,483 3,839 -- (30) 5,292
---------- ---------- ---------- ----------- -----------
5,832 5,111 -- (48) 10,895
Equity in earnings of subsidiaries
and unconsolidated partnership,
net of income taxes 5,452 389 389 (5,841) 389
---------- ----------- ----------- ----------- -----------
Net income $ 11,284 $ 5,500 $ 389 $ (5,889) $ 11,284
========== -========== =========== =========== ===========
17
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Statements of Income
For the Six Months Ended March 31, 2002
(Unaudited)
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ ------------
(In thousands)
Net sales $ 331,891 $ 394,002 $ 61,740 $ (10,535) $ 777,098
Cost of sales 295,281 335,439 47,238 (10,380) 667,578
---------- ---------- ----------- ----------- -----------
Gross income 36,610 58,563 14,502 (155) 109,520
Operating expenses:
Selling, general and
administrative 26,381 28,932 9,931 -- 65,244
Amortization of purchased
intangibles 1 2,787 127 -- 2,915
---------- ---------- ----------- ---------- -----------
Total operating expenses 26,382 31,719 10,058 -- 68,159
---------- ---------- ----------- ---------- -----------
Operating income 10,228 26,844 4,444 (155) 41,361
Other income (expense):
Interest expense (13,307) (11,862) (20) 13,150 (12,039)
Interest income 10,174 3,532 -- (13,150) 556
Miscellaneous, net 6,253 (6,351) (101) -- (199)
---------- -------- ------------ ---------- ---------
3,120 (14,681) (121) -- (11,682)
---------- --------- ------------ ---------- ---------
Income before items noted below 13,348 12,163 4,323 (155) 29,679
Provision for income taxes 4,068 4,485 1,514 (57) 10,010
---------- -------- ----------- ----------- ---------
9,280 7,678 2,809 (98) 19,669
Equity in earnings of subsidiaries
and unconsolidated partnership,
net of income taxes 11,495 1,148 1,106 (12,643) 1,106
---------- -------- ----------- ----------- ---------
Net income $ 20,775 $ 8,826 $ 3,915 $ (12,741) $ 20,775
========== ======== =========== =========== =========
18
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Statements of Income
For the Six Months Ended March 31, 2001
(Unaudited)
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ ------------
(In thousands)
Net sales $ 235,118 $ 403,606 $ -- $ (12,829) $ 625,895
Cost of sales 203,668 341,359 -- (12,903) 532,124
---------- ------------ ----------- ----------- ----------
Gross income 31,450 62,247 -- 74 93,771
Operating expenses:
Selling, general and
administrative 20,311 28,903 (69) -- 49,145
Amortization of goodwill and
purchased intangibles -- 5,810 -- -- 5,810
---------- ------------ ----------- ---------- ----------
Total operating expenses 20,311 34,713 (69) -- 54,955
---------- ------------ ---------- ----------
Operating income 11,139 27,534 69 74 38,816
Other income (expense):
Interest expense (11,132) (11,836) -- 13,150 (9,818)
Interest income 10,110 3,519 -- (13,150) 479
Miscellaneous, net 4,908 (4,903) -- -- 5
---------- ------------ ----------- ---------- ----------
3,886 (13,220) -- -- (9,334)
---------- ------------- ----------- ---------- ----------
Income before items noted below 15,025 14,314 69 74 29,482
Provision for income taxes 4,249 6,365 26 27 10,667
----------- ------------ ----------- ---------- ------------
10,776 7,949 43 47 18,815
Equity in earnings of subsidiaries
and unconsolidated partnership,
net of income taxes 8,731 692 692 (9,423) 692
---------- ------------ ----------- ---------- ----------
Net income $ 19,507 $ 8,641 $ 735 $ (9,376) $ 19,507
========== ============ =========== ========== ==========
19
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Balance Sheets
March 31, 2002
(Unaudited)
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ ------------
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 7,581 $ 810 $ 4,633 $ -- $ 13,024
Receivables, net 58,143 73,440 36,888 (4,174) 164,297
Inventories 83,788 143,971 25,139 (186) 252,712
Prepaid expenses and other 17,738 9,579 789 -- 28,106
--------- ---------- --------- ------------ ------------
Total current assets 167,250 227,800 67,449 (4,360) 458,139
Investment in and advances to:
Subsidiaries 538,799 13,058 -- (551,857) --
Unconsolidated partnership -- -- 21,635 -- 21,635
Other long-term assets 6,540 4,806 163 -- 11,509
Net property, plant and equipment 34,683 84,513 17,249 -- 136,445
Goodwill and purchased intangible
assets, net 23 307,827 93,308 -- 401,158
--------- ---------- --------- ------------ ------------
Total assets $ 747,295 $ 638,004 $ 199,804 $ (556,217) $ 1,028,886
========= ========== ========= ============ ============
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 33,974 $ 40,508 $ 24,964 $ (4,174) $ 95,272
Floor plan notes payable -- 18,646 -- -- 18,646
Customer advances 5,564 86,182 -- -- 91,746
Payroll-related obligations 9,866 12,156 5,974 -- 27,996
Income taxes 8,996 -- 2,119 -- 11,115
Accrued warranty 10,681 6,727 1,507 -- 18,915
Other current liabilities 16,485 28,179 1,484 -- 46,148
Revolving credit facility and
current maturities of long-term
debt 16,000 249 43 -- 16,292
--------- ---------- --------- ------------ ------------
Total current liabilities 101,566 192,647 36,091 (4,174) 326,130
Long-term debt 264,250 1,591 110 -- 265,951
Deferred income taxes (6,090) 28,512 11,466 -- 33,888
Other long-term liabilities 24,234 15,348 -- -- 39,582
Commitments and contingencies
Investments by and advances from
(to) parent -- 399,906 152,137 (552,043) --
Shareholders' equity 363,335 -- -- -- 363,335
--------- ---------- --------- ------------ ------------
Total liabilities and shareholders'
equity $ 747,295 $ 638,004 $ 199,804 $ (556,217) $ 1,028,886
========== ========== ========= ============ ============
20
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Balance Sheets
September 30, 2001
(Unaudited)
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ ------------
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 4,726 $ 3,394 $ 3,192 $ -- $ 11,312
Receivables, net 104,662 74,814 33,633 (1,704) 211,405
Inventories 82,873 145,635 29,561 (31) 258,038
Prepaid expenses and other 11,525 9,644 1,226 -- 22,395
--------- ---------- --------- ------------ ------------
Total current assets 203,786 233,487 67,612 (1,735) 503,150
Investment in and advances to:
Subsidiaries 575,807 8,591 -- (584,398) --
Unconsolidated partnership -- -- 18,637 -- 18,637
Other long-term assets 6,940 4,729 101 -- 11,770
Net property, plant and equipment 36,286 88,783 16,859 -- 141,928
Goodwill and purchased intangible
assets, net 24 316,635 97,124 -- 413,783
--------- ---------- --------- ------------ ------------
Total assets $ 822,843 $ 652,225 $ 200,333 $ (586,133) $ 1,089,268
========= ========== ========= ============ ============
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 41,703 $ 42,143 $ 25,722 $ (1,704) $ 107,864
Floor plan notes payable -- 19,271 -- -- 19,271
Customer advances 3,568 54,502 -- -- 58,070
Payroll-related obligations 8,881 12,483 5,720 -- 27,084
Income taxes 24,013 -- 1,208 -- 25,221
Accrued warranty 8,813 7,799 1,726 -- 18,338
Other current liabilities 18,624 27,567 131 -- 46,322
Revolving credit facility and
current maturities of long-term
debt 76,600 426 5 -- 77,031
--------- ---------- --------- ------------ ------------
Total current liabilities 182,202 164,191 34,512 (1,704) 379,201
Long-term debt 280,250 1,812 187 -- 282,249
Deferred income taxes (5,764) 35,119 10,979 -- 40,334
Other long-term liabilities 23,791 16,667 -- -- 40,458
Commitments and contingencies
Investments by and advances from
(to) parent -- 434,436 154,655 (589,091) --
Shareholders' equity 342,364 -- -- 4,662 347,026
--------- ---------- --------- ------------ ------------
Total liabilities and shareholders'
Equity $ 822,843 $ 652,225 $ 200,333 $ (586,133) $ 1,089,268
========== ========== ========= ============ ============
21
OHKOSH TRUCK CORPORATION
Condensed Consolidating Statements of Cash Flows
For the Six Months Ended March 31, 2002
(Unaudited)
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ ------------
(In thousands)
Operating activities:
Net income $ 20,775 $ 8,826 $ 3,915 $(12,741) $ 20,775
Non-cash adjustments (2,994) 7,441 150 -- 4,597
Changes in operating assets and
liabilities 29,564 30,500 275 155 60,494
-------- -------- -------- -------- --------
Net cash provided from operating
activities 47,345 46,767 4,340 (12,586) 85,866
Investing activities:
Investments in and advances to
subsidiaries 34,343 (47,810) 1,168 12,299 --
Additions to property, plant and
equipment (1,161) (1,287) (2,425) -- (4,873)
Other (138) 144 (1,310) -- (1,304)
-------- -------- -------- -------- --------
Net cash provided from (used for)
investing activities 33,044 (48,953) (2,567) 12,299 (6,177)
Financing activities:
Net repayments under
revolving credit facility (55,200) -- -- -- (55,200)
Repayment of long-term debt (21,400) (398) (32) -- (21,830)
Dividends paid (2,875) -- -- -- (2,875)
Other 1,941 -- -- -- 1,941
-------- -------- -------- -------- --------
Net cash used for financing
activities (77,534) (398) (32) -- (77,964)
Effect of exchange rate changes on
cash -- -- (300) 287 (13)
-------- -------- -------- -------- --------
Increase (decrease) in cash and cash
equivalents 2,855 (2,584) 1,441 -- 1,712
Cash and cash equivalents at
beginning of period 4,726 3,394 3,192 -- 11,312
-------- -------- -------- -------- --------
Cash and cash equivalents at end of
period $ 7,581 $ 810 $ 4,633 $ -- $ 13,024
======== ======== ======== ======== ========
22
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Statements of Cash Flows
For the Six Months Ended March 31, 2001
(Unaudited)
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ ------------
(In thousands)
Operating activities:
Net income $ 19,507 $ 8,641 $ 735 $ (9,376) $ 19,507
Non-cash adjustments 3,991 9,514 (1,791) -- 11,714
Changes in operating assets and
liabilities (33,910) (13,455) 115 (74) (47,324)
-------- -------- -------- -------- --------
Net cash provided from (used for)
operating activities (10,412) 4,700 (941) (9,450) (16,103)
Investing activities:
Acquisition of businesses, net of
cash acquired (4,583) (21,840) -- -- (26,423)
Investments in and advances to
subsidiaries (34,607) 23,265 1,892 9,450 --
Additions to property, plant and
equipment (7,794) (1,517) -- -- (9,311)
Other (417) (3,225) (931) -- (4,573)
-------- -------- -------- -------- --------
Net cash provided from (used for)
investing activities (47,401) (3,317) 961 9,450 (40,307)
Financing activities:
Net borrowings under revolving
credit facility 54,800 -- -- -- 54,800
Repayment of long-term debt (4,000) (254) (56) -- (4,310)
Dividends paid (2,866) -- -- -- (2,866)
Other 196 -- -- -- 196
-------- -------- -------- -------- --------
Net cash provided from (used for)
financing activities 48,130 (254) (56) -- 47,820
-------- -------- -------- -------- --------
Increase (decrease) in cash and cash
equivalents (9,683) 1,129 (36) -- (8,590)
Cash and cash equivalents at
beginning of period 13,034 499 36 -- 13,569
-------- -------- -------- -------- --------
Cash and cash equivalents at end of
period $ 3,351 $ 1,628 $ -- $ -- $ 4,979
======== ======== ======== ======== ========
23
Item 2. Oshkosh Truck Corporation
Management's Discussion and Analysis of
Consolidated Financial Condition and Results of Operations
FORWARD-LOOKING STATEMENTS
This Management's Discussion and Analysis of Consolidated Financial Condition
and Results of Operations and other sections of this Form 10-Q contain
"forward-looking statements" that Oshkosh Truck Corporation (the "Company" or
"Oshkosh") believes to be within the meaning of the Private Securities
Litigation Reform Act of 1995. All statements other than statements of
historical fact included in this report, including, without limitation,
statements regarding the Company's future financial position, business strategy,
budgets, targets, projected sales, costs, earnings, capital spending and debt
levels, and plans and objectives of management for future operations, including
those under the caption "Fiscal 2002 Outlook," are forward-looking statements.
When used in this Form 10-Q, words such as the Company "may," "will," "expects,"
"intends," "estimates," "anticipates," "believes," "should" or "plans" or the
negative thereof or variations thereon or similar terminology are generally
intended to identify forward-looking statements. These forward-looking
statements are not guarantees of future performance and are subject to risks,
uncertainties, assumptions and other factors, some of which are beyond the
Company's control, that could cause actual results to differ materially from
those expressed or implied by such forward-looking statements. These factors
include the cyclical nature of the Company's commercial and fire and emergency
markets, risks related to reductions in government expenditures, the uncertainty
of government contracts, the challenges of identifying, completing and
integrating future acquisitions, disruptions in the supply of parts or
components from sole source suppliers and subcontractors, competition and risks
associated with international operations and sales, including foreign currency
fluctuations. Additional information concerning factors that could cause actual
results to differ materially from those in the forward-looking statements is
contained from time to time in the Company's SEC filings, including, but not
limited to the Company's Current Report on Form 8-K filed with the SEC on April
25, 2002. All subsequent written and oral forward-looking statements
attributable to the Company, or persons acting on its behalf, are expressly
qualified in their entirety by these cautionary statements.
All forward-looking statements speak only as of the date the Company files this
Quarterly Report on Form 10-Q with the SEC. The Company has adopted a policy
that if the Company makes a determination that it expects earnings for future
periods for which projections are contained in this Quarterly Report on Form
10-Q to be lower than those projections, then the Company will publicly announce
that fact. The Company's policy also provides that the Company does not intend
to make such a public announcement if the Company makes a determination that it
expects earnings for future periods to be at or above the projections contained
in this Quarterly Report on Form 10-Q. Except as set forth above, the Company
assumes no obligation, and disclaims any obligation, to update information
contained in this Quarterly Report on Form 10-Q. Investors should be aware that
the Company may not update such information until the Company's next quarterly
conference call, if at all.
24
General
The major products manufactured and marketed by each of the Company's business
segments are as follows:
Commercial -- concrete mixer systems, refuse truck bodies, mobile and stationary
refuse compactors, refuse transfer stations, portable concrete batch plants and
truck components sold to commercial ready-mix companies and commercial and
municipal waste haulers in the U. S. and abroad.
Fire and emergency -- commercial and custom fire trucks, aircraft rescue and
firefighting trucks, snow removal trucks, ambulances and other emergency
vehicles primarily sold to fire departments, airports and other governmental
units in the U. S. and abroad.
Defense -- heavy- and medium-payload tactical trucks and supply parts sold to
the U. S. Military and to other militaries around the world.
Impact of September 11, 2001
The Company believes that the effects of the terrorist acts of September 11,
2001 on the Company may include an increase in customer orders for fire and
emergency and defense vehicles and related parts if federal and municipal
governments increase spending on defense and homeland security. Although the
Company has received additional orders for such products as a result of the
September 11 events, such orders to date have not been material and the Company
cannot predict whether such orders will increase or decrease, or the timing of
any potential orders arising from these events. Further, the Company believes
that the impact of September 11 will include global increases in the costs of
insurance for all businesses, including the Company, principally beginning in
fiscal 2003. It is not possible to estimate the impact of anticipated insurance
cost increases at this time.
Results of Operations
Analysis of Consolidated Net Sales
The following table presents net sales by business segment:
Second Quarter First Six Months
Fiscal Fiscal
2002 2001 2002 2001
---- ---- ---- ----
(In thousands) (In thousands)
Net sales to unaffiliated customers:
Commercial $169,978 $147,343 $299,407 $254,380
Fire and emergency 119,682 116,007 215,548 209,753
Defense 127,126 80,327 263,701 162,072
Intersegment eliminations (1,181) (310) (1,558) (310)
-------- -------- -------- --------
Consolidated $415,605 $343,367 $777,098 $625,895
======== ======== ======== ========
25
Second Quarter Fiscal 2002 Compared to 2001
Consolidated net sales increased 21.0% to $415.6 million for the second quarter
of fiscal 2002 compared to the second quarter of fiscal 2001. The Company's
fiscal 2002 second quarter included the results of the Geesink Norba Group,
which the Company acquired in July 2001. Excluding the impact of the Geesink
Norba Group acquisition, net sales would have increased 11.6%. Consistent with a
year-long trend, the Company had lower sales of higher-margin concrete placement
products in its commercial segment and higher sales of lower-margin Medium
Tactical Vehicle Replacement ("MTVR") trucks in its defense segment.
Commercial segment net sales increased 15.4% to $170.0 million for the second
quarter of fiscal 2002 compared to the second quarter of fiscal 2001. Excluding
the impact of the Geesink Norba Group acquisition, commercial sales would have
decreased 6.7%. Concrete placement product sales were down 11.8% in 2002
compared to 2001 as the Company was impacted by the U.S. economic recession.
U.S. refuse truck body and parts sales increased 5.7% for the quarter and were
favorably impacted by higher "body only" sales (truck body sales without the
truck chassis) to the three largest U.S. waste haulers.
Fire and emergency segment net sales increased 3.2% to $119.7 million for the
second quarter of fiscal 2002 compared to the second quarter of fiscal 2001.
These results are consistent with the Company's estimate of lower U.S. municipal
spending for fire apparatus in the first half of fiscal 2002.
Defense segment net sales increased 58.3% to $127.1 million for the second
quarter of fiscal 2002 compared to the second quarter of fiscal 2001 largely as
a result of a full quarter of full-rate production under the MTVR contract to
supply medium-payload trucks to the U.S. Marines and increased parts sales. The
Company produced at full-rate production under its MTVR contract for the
entire second quarter ended March 31, 2002. During the second quarter ended
March 31, 2001, the Company was in the process of ramping-up to full-rate
production.
First Six Months Fiscal 2002 Compared to 2001
Consolidated net sales increased 24.2% to $777.1 million for the six months
ended March 31, 2002 compared to the six months ended March 31, 2001. Excluding
the impact of the Geesink Norba Group acquisition, net sales were up 14.3%.
Commercial segment net sales increased 17.7% to $299.4 million for the six
months ended March 31, 2002 compared to the same period in the prior year.
Excluding the impact of the Geesink Norba Group acquisition, commercial segment
sales would have decreased 6.6%. Concrete placement sales were down 17.0% for
the period compared to the same period in the prior year as the Company was
impacted by the U.S. economic recession. U.S. refuse truck body and parts sales
increased 15.2% for the period compared to the same period in the prior year and
were favorably impacted by increased "body only" sales to the three largest U.S.
waste haulers.
26
Fire and emergency segment net sales increased 2.8% to $215.5 million for the
first six months of fiscal 2002 compared to the first six months of fiscal 2001.
Strong sales of aircraft rescue and firefighting vehicles and snow vehicles were
offset in part by lower U.S. municipal spending for fire apparatus.
Defense segment net sales increased 62.7% to $263.7 million for the six months
ended March 31, 2002 compared to the six months ended March 31, 2001. Increased
production and sales of MTVR trucks and increased parts sales were the major
factors behind the defense segment sales increase. The Company produced at
full-rate production under its MTVR contract for the entire six months
ended March 31, 2002. During the six month period ended March 31, 2001 the
Company was in the process of ramping-up to full-rate production.
Analysis of Consolidated Operating Income
The following table presents operating income by business segment:
Second Quarter First Six Months
Fiscal Fiscal
2002 2001 2002 2001
---- ---- ---- ----
(In thousands) (In thousands)
Operating income (expense):
Commercial $ 12,161 $ 7,640 $ 19,457 $13,812
Fire and emergency 11,610 10,850 19,363 18,205
Defense 5,087 6,779 13,129 15,325
Corporate and other (5,276) (4,237) (10,588) (8,526)
---------- ---------- ---------- --------
Consolidated operating
income $ 23,582 $ 21,032 $ 41,361 $ 38,816
========== ========== ========== ========
Second Quarter Fiscal 2002 Compared to 2001
Consolidated operating income increased 12.1% to $23.6 million, or 5.7% of
sales, in the second quarter of fiscal 2002, compared to $21.0 million, or 6.1%
of sales, in the second quarter of fiscal 2001. Excluding the impact of the
Geesink Norba Group acquisition and adjusting for the elimination of goodwill
and other indefinite-lived intangible assets as a result of the adoption of a
new accounting standard, operating income would have been down 7.8%. Consistent
with a year-long trend, the Company had lower sales of higher-margin concrete
placement products in its commercial segment and higher sales of lower-margin
MTVR trucks in its defense segment.
Commercial segment operating income increased 59.2% to $12.2 million, or 7.2% of
sales, in the quarter compared to $7.6 million, or 5.2% of sales, in the prior
year quarter. Excluding the results of the Geesink Norba Group and adjusting for
the adoption of the new accounting standard on goodwill and indefinite-lived
assets, operating income would have been up 12.2%, to 7.0% of sales, in the
second quarter of fiscal 2002 compared to 5.8% of sales in the prior year second
quarter. This improvement was largely due to higher margins on domestic refuse
product sales resulting from improved manufacturing cost performance.
27
Fire and emergency operating income increased 7.0% to $11.6 million, or 9.7% of
sales, in the quarter compared to $10.9 million, or 9.4% of sales, in the prior
year second quarter. Excluding the impact of the adoption of the new accounting
standard on accounting for goodwill and indefinite-lived intangible assets,
operating income would have been flat compared to the prior year quarter and
operating income margins would have been 9.7% for the quarter compared to 10.0%
in the second quarter of the prior year.
Defense operating income decreased 25.0% to $5.1 million, or 4.0% of sales,
compared to $6.8 million, or 8.4% of sales, in the prior year second quarter.
Results for the current year quarter include increased volume related to a full
quarter of full-rate production under the Company's lower-margin MTVR contract.
The Company was in the process of ramping up to full-rate production in the
second quarter of fiscal 2001. Margins on the MTVR long-term production contract
during the quarter remained at prior year levels of 3.3%. Operating income and
margins for the second quarter of fiscal 2002 were negatively impacted by
increases in spending for bid and proposal activities in connection with
multi-year truck procurement competitions with the U.S. Army and the U.K.
Ministry of Defence.
Consolidated selling, general and administrative expenses increased to 8.3% of
sales in the second quarter of fiscal 2002 compared to 7.7% of sales in the
second quarter of fiscal 2001. Excluding the Geesink Norba Group, selling,
general and administrative expenses were 7.6% of sales in the second quarter of
fiscal 2002. The Geesink Norba Group was acquired in the fourth quarter of
fiscal 2001 and generally has higher gross margins and higher selling, general
and administrative expenses than the Company's other businesses.
Corporate operating expenses and inter-segment profit elimination increased $1.1
million to $5.3 million, or 1.3% of consolidated sales, for the second quarter
of fiscal 2002 from $4.2 million, or 1.2% of consolidated sales, for the second
quarter of 2001. The $1.1 million increase was largely due to higher insurance
costs, acquisition integration costs and adjustments of variable compensation
expense.
First Six Months of Fiscal 2002 Compared to 2001
Consolidated operating income increased 6.6% to $41.4 million, or 5.3% of sales,
for the first six months of fiscal 2002 compared to $38.8 million, or 6.2% of
sales, for the first six months of fiscal 2001. Excluding the impact of the
Geesink Norba Group acquisition and adjusting for the elimination of
amortization of goodwill and indefinite-lived intangible assets, operating
income would have declined 12.7% to 5.2% of sales compared to 6.8% of sales in
the prior year period. This decrease was largely due to increased sales of
lower-margin MTVR defense vehicles and increased bid and proposal spending on
U.S. and U.K. multi-year defense truck procurement competitions and lower sales
of higher-margin concrete placement products.
Commercial segment operating income increased 40.9% to $19.5 million, or 6.5% of
sales, for the first six months of fiscal 2002 compared to $13.8 million, or
5.4% of sales, in the prior year period. Excluding the results of the Geesink
Norba Group and adjusting for the adoption of the new accounting standard on
goodwill and indefinite-lived assets, operating
28
income would have been down 4.1% to 6.3% of sales in the first six months of
fiscal 2002 compared to 6.2% in the prior year period.
Fire and emergency operating income increased 6.4% to $19.4 million, or 9.0% of
sales, for the first six months of fiscal 2002 compared to $18.2 million, or
8.7% of sales, in the prior year period. Excluding the impact of the adoption of
the new accounting standard on accounting for goodwill and indefinite-lived
intangible assets, operating income would have been flat compared to the prior
year period and operating income margins would have been 9.0% for the first six
months of fiscal 2002 compared to 9.4% in the prior year period.
Defense operating income decreased 14.3%, to $13.1 million, or 5.0% of sales, in
the first six months of fiscal 2002, compared to $15.3 million, or 9.5% of
sales, in the prior year period. Fiscal 2002 results include increased volume
related to full-rate production under the Company's lower-margin MTVR contract.
The Company was in the process of ramping up to full-rate production in the
first six months of fiscal 2001. Margins on the MTVR long-term production
contract remained at prior year levels of 3.3% during the first six months of
fiscal 2002. Operating income and margins for the first six months of fiscal
2002 were negatively impacted by increases in spending for bid and proposal
activities in connection with multi-year truck procurement competitions with the
U.S. Army and the U.K. Ministry of Defence.
Consolidated selling, general and administrative expenses increased to 8.4% of
sales for the first six months of fiscal 2002 compared to 7.9% of sales for the
first six months of fiscal 2001. Excluding the impact of the Geesink Norba Group
acquisition, selling and administrative expenses were 7.7% of sales for the
first six months of fiscal 2002. The Geesink Norba Group was acquired in the
fourth quarter of fiscal 2001 and generally carries higher gross margins and
higher selling, general and administrative expenses than the Company's other
businesses.
Corporate operating expenses and inter-segment profit elimination increased $2.1
million to $10.6 million, or 1.4% of consolidated sales, for the first six
months of fiscal 2002 from $8.5 million, or 1.4% of consolidated sales, for the
prior year period. The increase was largely due to higher insurance costs,
acquisition integration costs and adjustments of variable compensation expense.
Analysis of Non-Operating Income Statement Items
Second Quarter Fiscal 2002 Compared to 2001
Net interest expense increased $0.5 million to $5.3 million in the second
quarter of fiscal 2002 compared to the second quarter of fiscal 2001. Interest
costs on increased borrowings to fund the acquisition of the Geesink Norba Group
of approximately $1.7 million were largely offset by lower interest rates.
The effective income tax rate for the second quarter of fiscal 2002 was 36.7%
compared to 32.7% for the second quarter of fiscal 2001. The Company recorded a
nonrecurring reduction in tax expense of $1.3 million for the second quarter of
fiscal 2001 related to the settlement of certain income
29
tax audits during that quarter. Excluding the impact of the $1.3 million tax
settlement in fiscal 2001 and $1.4 million of nondeductible goodwill in the
second quarter of fiscal 2001, the Company's effective income tax rate was 36.7%
in 2002 and 37.5% in 2001.
Equity in earnings of an unconsolidated partnership of $0.6 million in the
second quarter of fiscal 2002 and $0.4 million in the second quarter of fiscal
2001 represents the Company's equity interest in a lease financing partnership.
First Six Months of Fiscal 2002 Compared to 2001
Net interest expense increased $2.1 million to $11.5 million in the first six
months of fiscal 2002 compared to the first six months of fiscal 2001. Interest
costs on increased borrowings to fund the acquisition of the Geesink Norba Group
of approximately $3.4 million were largely offset by lower interest rates.
The effective income tax rate for the first six months of fiscal 2002 was 33.7%
compared to 36.2% for the first six months of fiscal 2001. In December 2001, the
Company concluded an audit settlement of a research and development tax credit
claim resulting in a $0.9 million credit to income tax expense in the first six
months of fiscal 2002. Excluding the impact of the $0.9 million tax settlement
in the first six months of fiscal 2002, and the impact of the $1.3 million tax
settlement and $2.7 million of nondeductible goodwill in the first six months of
fiscal 2001, the Company's effective income tax rate was 36.8% in 2002 and 37.2%
in 2001.
Equity in earnings of an unconsolidated partnership of $1.1 million in the first
six months of fiscal 2002 and $0.7 million in the first six months of fiscal
2001 represents the Company's equity interest in a lease financing partnership.
Financial Condition
First Six Months of Fiscal 2002
During the first six months of fiscal 2002, cash increased by $1.7 million to
$13.0 million at March 31, 2002. Cash provided from operating activities of
$85.9 million was used to fund capital expenditures of $4.9 million, pay
dividends of $2.9 million and reduce short- and long-term debt by $77.0 million.
In the first six months ending March 31, 2002, net cash provided from operating
activities of $85.9 million was substantially higher than the $16.1 million of
net cash used in operating activities in the first six months of fiscal 2001.
This $102.0 million variance between periods is primarily due to cash flows
associated with changes in operating assets and liabilities. The following table
presents cash flows associated with changes in operating assets and liabilities:
30
First Six Months
Fiscal
2002 2001
---- ----
Receivables, net $45,554 $(29,695)
Inventories 4,099 (76,868)
Accounts payable (11,376) 22,609
Floor plan notes payable (625) 13,088
Customer advances 33,676 22,845
Income taxes payable (10,261) 453
Other (573) 244
------- --------
Source (use) of cash $60,494 $(47,324)
======= =========
The change from a $47.3 million use of cash in the first six months of fiscal
2001 to a $60.5 million source of cash in the first six months of fiscal 2002,
or a $107.8 million variance, primarily resulted from the Company's planned
actions to reduce cash invested in working capital, principally receivables and
inventories, in fiscal 2002 in light of the recession in the U.S. economy,
whereas the Company was building such assets in the first half of fiscal 2001
until it became evident that the Company was operating in a recessionary
economy. Excluding the effects of acquired receivables and inventories in
connection with the acquisitions of Medtec Ambulance Corporation and the Geesink
Norba Group, receivables and inventories decreased $45.6 million and $4.1
million, respectively, in the first six months of fiscal 2002 while receivables
and inventories increased $29.7 million and $76.9 million in the first six
months of fiscal 2001. Cash provided from customer advances also increased $10.8
million more in the first six months of fiscal 2002 than in the first six months
of fiscal 2001 as a higher percentage of customers took advantage of prepayment
programs. Declines in accounts payable of $11.4 million and income taxes payable
of $10.3 million in the first six months of fiscal 2002 compared to an increase
in accounts payable of $22.6 million and income taxes payable of $0.5 million in
the first six months of fiscal 2001 reduced cash provided from operating
activities in fiscal 2002 compared to fiscal 2001. Accounts payable declined as
inventories were reduced. Income taxes payable decreased in the first six months
of fiscal 2002 due to increases in income tax payments made during the period.
Income tax payments increased to $27.5 million in the first six months of fiscal
2002 compared to $11.3 million in the first six months of fiscal 2001 largely
due to a delay in estimated tax payments from the fourth quarter of fiscal 2001
to the first quarter of fiscal 2002 resulting from a one-time benefit from
recent U.S. tax legislation.
The Company's debt-to-total capital ratio at March 31, 2002 was 43.7% compared
to 50.9% at September 30, 2001.
First Six Months of Fiscal 2001
During the first six months of fiscal 2001, cash decreased by $8.6 million to
$5.0 million at March 31, 2001. Seasonal working capital increases related to
the Company's commercial segment contributed to the $16.1 million in cash used
for operating activities for the period. Operating cash requirements, capital
expenditures of $9.3 million, an increase in other long-term assets of $4.6
million, scheduled term debt reductions of
31
$4.3 million, payment of $2.9 million in cash dividends and the cash portion of
the acquisitions of Medtec common stock ($14.4 million) and TEMCO assets ($12.0
million) were funded through the use of $8.6 million of available cash and $54.8
million in borrowings under the Company's revolving credit facility. During the
period, inventories increased $76.9 million, including $56.2 million in the
commercial segment as a result of seasonal build requirements. Fire and
emergency inventories increased $9.8 million. Defense inventories increased
$10.9 million during the period as a result of inventory associated with an
international order and due to costs associated with the MTVR contract. Overall
increases in inventory were partially offset by a $22.6 million increase in
trade payables, a $13.1 million increase in floor plan notes payable and a $22.8
million increase in customer advances. Accounts receivable increased $29.7
million during the period, largely due to the seasonal sales growth of the
commercial segment and increased refuse product sales to major national waste
haulers and municipalities that typically carry longer payment terms.
Liquidity and Capital Resources
The Company had $133.9 million of unused availability under the terms of its
revolving credit facility as of March 31, 2002. The Company's primary cash
requirements include working capital, interest and principal payments on
indebtedness, capital expenditures, dividends, and, potentially, future
acquisitions. The primary sources of cash are expected to be cash flow from
operations and borrowings under the Company's senior credit facility.
The senior credit facility requires quarterly principal payments. Based upon
current and anticipated future operations, management believes that capital
resources will be adequate to meet future working capital, debt service and
other capital requirements for fiscal 2002 assuming no acquisitions by the
Company. Debt levels and capital resource requirements beyond fiscal 2002 are
dependent, in part, on the impact of future acquisitions and the outcome of
large defense truck procurement competitions.
The Company's cash flow from operations has fluctuated, and will likely continue
to fluctuate, significantly from quarter to quarter due to changes in working
capital requirements arising principally from seasonal fluctuations in sales and
due to the timing of receipt of individually large progress payments and
performance-based payments from the U.S. Department of Defense ("DoD").
The Company expects that capital expenditures will not exceed $15-$20 million in
fiscal 2002, including estimated capital expenditures associated with recent
acquisitions.
The Company's senior credit facility and senior subordinated notes contain
various restrictions and covenants, including (1) limits on payments of
dividends and repurchases of the Company's stock; (2) requirements that the
Company maintain certain financial ratios at prescribed levels; (3) restrictions
on the ability of the Company to make additional borrowings, or to consolidate,
merge or otherwise fundamentally change the ownership of the Company; and (4)
limitations on investments, dispositions of assets and guarantees of
indebtedness. These restrictions and covenants could limit
32
the Company's ability to respond to market conditions, to provide for
unanticipated capital investments, to raise additional debt or equity capital,
to pay dividends or to take advantage of business opportunities, including
future acquisitions.
Interest rates on borrowings under the Company's senior credit facility are
variable and 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 1.375%, 1.375% and 2.500% for IBOR Rate loans under
the Company's revolving credit facility, Term Loan A and Term Loan B,
respectively, as of March 31, 2002. The margins are subject to adjustment, up or
down, based on whether certain financial criteria are met. The weighted average
interest rates on borrowings outstanding at March 31, 2002 were 3.750% on the
revolving credit facility and 3.633% and 4.560% for Term Loans A and B,
respectively. The Company presently has no plans to enter into interest rate
swap arrangements to limit exposure to future increases in interest rates.
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 fiscal 2002. Debt levels and capital resource
requirements beyond fiscal 2002 are not currently estimable because the Company
maintains an active acquisitions strategy and the capital requirements of this
strategy cannot be reasonably estimated. In addition, the Company could face
significant working capital requirements beyond fiscal 2002 in the event of an
award of major new business arising from current competitions for new defense
contracts in the U.S. and the U.K.
Customers and Backlog
Sales to the DoD comprised approximately 34% of the Company's sales in the first
half of fiscal 2002. No other single customer accounted for more than 10% of the
Company's net sales for this period. A substantial majority of the Company's net
sales are derived from customer orders prior to commencing production.
The Company's backlog at March 31, 2002 increased 18.6% to $879.4 million
compared to $741.6 million at March 31, 2001. Commercial segment backlog
increased 23.9% to $154.8 million at March 31, 2002 compared to March 31, 2001.
Excluding backlog related to the Geesink Norba Group acquisition, commercial and
total Company backlog would have decreased 7.8% and increased 13.2%,
respectively, at March 31, 2002 compared to March 31, 2001. The commercial
segment backlog would have declined primarily due to lower orders of concrete
mixers and domestic refuse packers due to the U.S. recession. Fire and emergency
segment backlog increased 16.7% to $301.8 million at March 31, 2002 compared to
March 31, 2001 due to a decision to increase Pierce Manufacturing Inc.'s
("Pierce") backlog in an effort to improve manufacturing efficiencies, and due
to a multi-unit award of aircraft rescue and firefighting vehicles. The defense
segment backlog increased 18.1% to $422.8 million at March 31, 2002 compared to
March 31, 2001. During the six month period ended March 31, 2002, the Company
recorded $76 million in orders for heavy equipment transport trucks and trailers
for the U.K.
33
Ministry of Defence. This award resulted from completion of a multi-year effort
and final contract negotiations that were concluded in December 2001. Also,
prior year defense backlog reflected the planned low-rate of initial production
under the MTVR contract. Defense backlog at March 31, 2002 includes higher,
full-rate production requirements called for and funded under the MTVR
multi-year contract. Approximately 23% of the March 31, 2002 backlog is not
expected to be filled in fiscal 2002.
Reported backlog excludes purchase options and announced orders for which
definitive contracts have not been executed. Additionally, backlog excludes
unfunded portions of the DoD Family of Heavy Tactical Vehicles and MTVR
contracts. Backlog information and comparisons thereof as of different dates may
not be accurate indicators of future sales or the ratio of the Company's future
sales to the DoD versus its sales to other customers.
Fiscal 2002 Outlook
The Company believes that fiscal 2002 net sales will approximate $1,660.0
million, up approximately 14.9% from fiscal 2001. By quarter, the Company
expects that consolidated net sales will be approximately $450.0 million in the
third quarter and $432.9 million in the fourth quarter of fiscal 2002.
The Company expects that the fire and emergency segment sales will be up 2.4%
from prior year at $475.0 million in fiscal 2002. This represents a $10.0
million increase from the Company's previous estimate due to higher aircraft
rescue and firefighting vehicle sales and higher fire apparatus sales at the
Company's Pierce subsidiary, both resulting from a strong order book in the
second quarter.
The Company believes that defense segment net sales will increase to
approximately $565.0 million in fiscal 2002 due to a $156.0 million increase in
MTVR sales in fiscal 2002 compared to fiscal 2001 as the Company operates at
full-rate production under that contract for a full year and higher than
expected parts sales. However, the Company expects its higher-margin
international heavy truck sales to decline, resulting in a net defense sales
increase of approximately $142.0 million. Fiscal 2002 sales estimates are up
from previous quarters' estimates of $555 million due to higher expected parts
sales.
The Company expects that commercial segment sales will increase approximately
11.5% in fiscal 2002 to approximately $624.0 million. The Company estimates that
the Geesink Norba Group will contribute all of the segment's sales increase by
increasing approximately $97.0 million in fiscal 2002. Fiscal 2001 results
included two months of operations of the Geesink Norba Group following its July
25, 2001 acquisition. The Company estimates annual Geesink Norba Group sales in
fiscal 2002 to be $116.0 million. The Company estimates concrete placement sales
to be down 21% in units in fiscal 2002 but only 12% in dollars due to higher
package sales of the mixer and chassis. The Company projects domestic refuse
sales to be up 5% in fiscal 2002. The Company expects strong sales to the three
largest U.S. waste haulers and some market share gains to offset a weakening in
capital spending by most commercial waste haulers and municipal customers.
The Company estimates that its consolidated operating income will approximate
$104.0 million in fiscal 2002, or 6.3% of sales. The Company
34
believes that fire and emergency segment operating income will approximate $50.0
million in fiscal 2002, or about 10.5% of sales. Defense segment operating
income should approximate $35.0 million, or 6.2% of sales. This assumes no
margin improvement on the MTVR contract from the current 3.3% operating income
margin. The Company continues to target higher margins under the MTVR program.
The Company expects commercial segment operating income to approximate $40.0
million, or 6.4% of sales, for fiscal 2002. The Company anticipates that
improved cost performance in its domestic refuse business will contribute the
$1.0 million increase in segment operating income from the Company's previous
estimate.
The Company expects corporate expenses to approximate $21.0 million in fiscal
2002, up from $17.0 million for fiscal 2001. This increase largely reflects
higher insurance costs, acquisition integration costs and variable compensation.
The Company is also projecting $24.5 million in net interest costs in fiscal
2002, respectively.
The Company believes that earnings per share, will approximate $3.05 per share
in fiscal 2002. By quarter, the Company expects diluted earnings per share to
approximate $0.88 and $0.96 for the third and fourth quarters, respectively, of
fiscal 2002.
The Company believes that potential downsides to its current estimates include
lower concrete placement sales if the U.S. economic recession is more severe
than assumed. Also, the Company may be unable to sustain market share gains in
refuse product and fire and emergency product sales in fiscal 2002. Potential
upsides to the Company's estimates include potential margin improvements on the
MTVR production contract. A one percentage point movement in MTVR margins in
fiscal 2002 would approximate $0.17 per share for the full year. If the Company
is able to successfully conclude negotiations on modifications to the MTVR
contract to incorporate inclusion of requirements for dump and wrecker variants,
the Company expects that related incremental revenue under the contract could
result in an upward adjustment of the estimated margins to be realized over the
entire life of the MTVR contract of up to one percentage point from the 3.3%
currently recognized.
Fiscal 2001 operating cash flow was negatively impacted by the ramp-up in
production of the multi-year MTVR contract and by the initial effect of certain
domestic refuse sales and related receivables outstanding at the end of fiscal
2001, which carried longer than standard payment terms. As noted above, the
Company expects that collection of receivables is expected to improve cash flow
from operations in fiscal 2002. In addition, the Company has implemented actions
intended to reduce inventories in fiscal 2002. Through March 31, 2002, these
initiatives have enabled the Company to repay $77 million of its $75 million
debt reduction target for fiscal 2002. The Company expects capital spending in
fiscal 2002 to be no more than $15-$20 million, which includes estimated capital
expenditures associated with recent acquisitions. The Company now estimates that
debt will decline to $260.0 million at June 30, 2002 and then increase to $270.0
million at September 30, 2002 as customer advances decline with seasonal
factors.
The expectations with respect to projected sales, costs, earnings and debt
levels in this "Fiscal 2002 Outlook" are forward-looking statements and are
based in part on certain assumptions made by the Company, some of which are
referred to in, or as part of, the forward-looking statements. These
35
assumptions include, without limitation, the Company's estimates for concrete
placement activity, housing starts and the U.S. and European economies
generally; the Company's expectations as to when it will receive sales orders
and payments; the Company's ability to achieve cost reductions, including in its
fire and emergency and domestic refuse businesses; the anticipated level of
sales and margins associated with international defense truck sales and
full-rate production under the MTVR program; the Company's estimates for capital
expenditures of municipalities for fire and emergency and refuse products and of
commercial waste haulers; the expected level of sales and operating income of,
and success of integration measures relating to, the Geesink Norba Group; the
Company's ability to sustain market share gains by its fire and emergency and
refuse products businesses; the Company's planned spending on bid and proposal
activities for U.S. and U.K. defense truck procurement competitions; anticipated
increased defense spending as a result of the war on terrorism; anticipated
level of sales of, and capital expenditures associated with the Revolution(TM)
composite mixer; the Company's estimates for debt levels and associated interest
costs; and that the Company does not complete any acquisitions. The Company
cannot provide any assurance that the assumptions referred to in the
forward-looking statements or otherwise are accurate or will prove to have been
correct. Any assumptions that are inaccurate or do not prove to be correct could
have a material adverse effect on the Company's ability to achieve the
forward-looking statements.
Item 3. Quantitative and Qualitative Disclosure of Market Risk
The Company's quantitative and qualitative disclosures about market risk for
changes in interest rates and foreign exchange risk are incorporated by
reference in Item 7A of the Company's Annual Report on Form 10-K for the year
ended September 30, 2001 and have not materially changed since that report was
filed.
36
OSHKOSH TRUCK CORPORATION
PART II. OTHER INFORMATION
FORM 10-Q
MARCH 31, 2002
ITEM 1 LEGAL PROCEEDINGS
None.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
At the annual meeting of shareholders held on February 8, 2002, 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 Common Stock Nominee
----------------------------
J. W. Andersen 409,939 0 7,799
R. G. Bohn 409,939 0 7,799
F. M. Franks, Jr. 409,939 0 7,799
M. W. Grebe 409,939 0 7,799
K. J. Hempel 409,939 0 7,799
S. P. Mosling 409,939 0 7,799
J. P. Mosling, Jr. 409,939 0 7,799
Common Stock Nominees
---------------------
D. T. Carroll 14,562,732 81,413 1,654,050
D. V. Fites 14,559,243 84,902 1,654,050
R. G. Sim 14,562,784 81,361 1,654,050
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(3.1) By-laws of Oshkosh Truck Corporation, as amended.
(b) Reports on Form 8-K
Current Report on Form 8-K dated January 29, 2002 reporting the
announcement of the Company's earnings for the first quarter ended
December 31, 2001.
37
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 1, 2002 /S/ R. G. Bohn
----------------------------------------
R. G. Bohn
Chairman, President and
Chief Executive Officer
(Principal Executive Officer)
May 1, 2002 /S/ C. L. Szews
----------------------------------------
C. L. Szews
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
May 1, 2002 /S/ T. J. Polnaszek
----------------------------------------
T. J. Polnaszek
Vice President and Controller
(Principal Accounting Officer)
38
EXHIBIT INDEX
Exhibit No. Description
(3.1) By-laws of Oshkosh Truck Corporation, as amended
39