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 December 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 ___________________
Commission File Number 1-31371
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 by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes as
common stock, as of the latest practicable date.
Class A Common Stock Outstanding as of January 27, 2003: 413,425
- -----------------------------------------------------------------------
Common Stock Outstanding as of January 27, 2003: 16,643,359
- -----------------------------------------------------------------------
OSHKOSH TRUCK CORPORATION
FORM 10-Q INDEX
FOR THE QUARTER ENDED DECEMBER 31, 2002
Page
----
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Statements of Income
- Three Months Ended December 31,
2002 and 2001.........................................3
Condensed Consolidated Balance Sheets
- December 31, 2002 and September 30, 2002................4
Condensed Consolidated Statement of Shareholders' Equity
- Three Months Ended December 31, 2002....................5
Condensed Consolidated Statements of Cash Flows
- Three Months Ended December 31, 2002 and 2001...........6
Notes to Condensed Consolidated Financial Statements
- December 31, 2002.......................................7
Item 2. Management's Discussion and Analysis of Consolidated
Financial Condition and Results of Operations..........26
Item 3. Quantitative and Qualitative Disclosure of Market Risk.........38
Item 4. Controls and Procedures........................................38
Part II. Other Information
Item 1. Legal Proceedings..............................................39
Item 6. Exhibits and Reports on Form 8-K...............................39
Signatures....................................................................40
2
PART I. ITEM 1. FINANCIAL INFORMATION
OSHKOSH TRUCK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
December 31,
2002 2001
---- ----
(In thousands, except
per share amounts)
Net sales $426,336 $361,493
Cost of sales 368,697 311,469
-------- --------
Gross income 57,639 50,024
Operating expenses:
Selling, general and administrative 35,675 30,805
Amortization of purchased intangibles 1,602 1,440
-------- --------
Total operating expenses 37,277 32,245
-------- --------
Operating income 20,362 17,779
Other income (expense):
Interest expense (3,409) (6,422)
Interest income 187 285
Miscellaneous, net (276) (250)
-------- --------
(3,498) (6,387)
-------- --------
Income before provision for income taxes and
equity in earnings of unconsolidated partnership 16,864 11,392
Provision for income taxes 6,204 3,304
-------- --------
Income before equity in earnings
of unconsolidated partnership 10,660 8,088
Equity in earnings of unconsolidated
partnership, net of income taxes 632 520
-------- --------
Net income $ 11,292 $ 8,608
======== ========
Earnings per share $ 0.67 $ 0.51
Earnings per share assuming dilution $ 0.65 $ 0.50
Cash dividends:
Class A Common Stock $0.07500 $0.07500
Common Stock $0.08625 $0.08625
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
OSHKOSH TRUCK CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
December 31, September 30,
2002 2002
---- ----
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 19,367 $ 40,039
Receivables, net 138,668 142,709
Inventories 233,214 210,866
Prepaid expenses 8,255 7,414
Deferred income taxes 31,155 26,008
---------- ----------
Total current assets 430,659 427,036
Investment in unconsolidated partnership 23,088 22,274
Other long-term assets 11,013 11,625
Property, plant and equipment 265,277 261,045
Less accumulated depreciation (123,964) (120,684)
---------- ----------
Net property, plant and equipment 141,313 140,361
Purchased intangible assets, net 103,309 104,316
Goodwill 326,009 318,717
---------- ----------
Total assets $1,035,391 $1,024,329
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 101,084 $ 116,422
Floor plan notes payable 29,474 23,801
Customer advances 125,758 119,764
Payroll-related obligations 25,891 34,474
Income taxes 17,534 8,597
Accrued warranty 25,088 24,015
Other current liabilities 51,089 47,754
Revolving credit facility and current maturities
of long-term debt 9,777 18,245
---------- ----------
Total current liabilities 385,695 393,072
Long-term debt 127,997 131,713
Deferred income taxes 40,332 39,303
Other long-term liabilities 48,375 50,481
Commitments and contingencies - Note 10
Shareholders' equity 432,992 409,760
---------- ----------
Total liabilities and shareholders' equity $1,035,391 $1,024,329
========== ==========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
OSHKOSH TRUCK CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
THREE MONTHS ENDED DECEMBER 31, 2002
(Unaudited)
Accumulated
Common Stock Other
Common Paid-In Retained in Treasury Unearned Comprehensive
Stock Capital Earnings at Cost Compensation Income Total
----- ------- -------- ------- ------------ ------ -----
(In thousands)
Balance at
September 30, 2002 $ 178 $ 117,179 $ 300,713 $ (7,636) $ (4,086) $ 3,412 $ 409,760
Net income - - 11,292 - - - 11,292
Gain on derivative
instruments (net of
income taxes of $23) - - - - - 39 39
Currency translation
adjustments - - - - - 11,011 11,011
Cash dividends:
Class A Common Stock - - (30) - - - (30)
Common stock - - (1,435) - - - (1,435)
Amortization of unearned
compensation - - - - 171 - 171
Exercise of stock options - 222 - 671 - - 893
Tax benefit related to
stock options exercised - 1,291 - - - - 1,291
----- --------- --------- -------- -------- -------- ---------
Balance at December 31, 2002 $ 178 $ 118,692 $ 310,540 $ (6,965) $ (3,915) $ 14,462 $ 432,992
===== ========= ========= ======== ======== ======== =========
The accompanying notes are an integral part of these condensed consolidated financial statements
5
OSHKOSH TRUCK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
December 31,
2002 2001
-------- --------
(In thousands)
Operating activities:
Net income $ 11,292 $ 8,608
Non-cash adjustments 49 3,000
Changes in operating assets and liabilities (16,962) 31,516
-------- --------
Net cash provided from (used for) operating activities (5,621) 43,124
Investing activities:
Additions to property, plant and equipment (5,174) (1,727)
Proceeds from sale of property, plant and equipment 1,879 -
Decrease (increase) in other long-term assets 743 (757)
-------- --------
Net cash used for investing activities (2,552) (2,484)
Financing activities:
Net repayments under revolving credit facility - (37,200)
Repayment of long-term debt (12,194) (3,242)
Dividends paid (1,459) (1,437)
Other 893 5
-------- --------
Net cash used for financing activities (12,760) (41,874)
Effect of exchange rate changes on cash 261 (131)
-------- --------
Decrease in cash and cash equivalents (20,672) (1,365)
Cash and cash equivalents at beginning of period 40,039 11,312
-------- --------
Cash and cash equivalents at end of period $ 19,367 $ 9,947
======== ========
Supplementary disclosures:
Depreciation and amortization $ 6,106 $ 6,072
Cash paid for interest 1,624 5,163
Cash paid for income taxes 1,443 18,608
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
the Company management, necessary to present fairly the condensed consolidated
financial statements. Operating results for the periods presented may not be
indicative of the annual results.
Certain reclassifications have been made to the fiscal 2002 financial statements
to conform to the fiscal 2003 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 Annual Report on Form
10-K for the year ended September 30, 2002.
2. NEW ACCOUNTING STANDARDS
- ---------------------------
In November 2002, the Financial Accounting Standards Board ("FASB") issued
Financial Interpretation No. 45 ("FIN 45"), "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others." FIN 45 requires certain guarantees to be recorded at
fair value and requires a guarantor to make significant new disclosures, even
when the likelihood of making any payments under the guarantee is remote.
Generally, FIN 45 applies to certain types of financial guarantees that
contingently require the guarantor to make payments to the guaranteed party
based on changes in an underlying that is related to an asset, liability, or an
equity security of the guaranteed party; performance guarantees involving
contracts which require the guarantor to make payments to the guaranteed party
based on another entity's failure to perform under an obligating agreement;
indemnification agreements that contingently require the guarantor to make
payments to an indemnified party based on changes in an underlying that is
related to an asset, liability, or an equity security of the indemnified party;
or indirect guarantees of the indebtedness of others. The initial recognition
and initial measurement provisions of FIN 45 are applicable on a prospective
basis to guarantees issued or modified after December 31, 2002. Disclosure
requirements under FIN 45 are effective for financial statements ending after
December 15, 2002 and are applicable to all guarantees issued by the guarantor
subject to FIN 45's scope, including guarantees issued prior to FIN 45. The
Company does not expect that
7
FIN 45 will have a material effect on its financial condition, results of
operations or cash flows. See Note 11.
In December 2002, the FASB issued Statement of Financial Accounting Standards
("SFAS") No. 148, "Accounting for Stock-Based Compensation--Transition and
Disclosure." SFAS No. 148 amends SFAS No. 123, "Accounting for Stock-Based
Compensation," to provide alternative methods of transition to SFAS No. 123's
fair value method for accounting for stock-based employee compensation. SFAS No.
148 also amends the disclosure provisions of SFAS No. 123 and Accounting
Principles Board ("APB") Opinion No. 28, "Interim Financial Reporting," to
require disclosure in the summary of significant accounting policies of the
effects of an entity's accounting policy with respect to stock-based employee
compensation on reported net income and earnings per share in annual and interim
financial statements. The Company adopted early the provisions of SFAS No. 148
as of October 1, 2002 and has included the required disclosures in Note 9 to the
Condensed Consolidated Financial Statements. Adoption of SFAS No. 148 did not
have a material impact on the Company's financial condition, results of
operations or cash flows.
In January 2003, the FASB issued Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities" with the objective of improving
financial reporting by companies involved with variable interest entities. A
variable interest entity is a corporation, partnership, trust, or any other
legal structure used for business purposes that either (a) does not have equity
investors with voting rights, or (b) has equity investors that do not provide
sufficient financial resources for the entity to support its activities.
Historically, entities generally were not consolidated unless the entity was
controlled through voting interests. FIN 46 changes that by requiring a variable
interest entity to be consolidated by a company if that company is subject to a
majority of the risk of loss from the variable interest entity's activities or
entitled to receive a majority of the entity's residual returns or both. A
company that consolidates a variable interest entity is called the "primary
beneficiary" of that entity. FIN 46 also requires disclosures about variable
interest entities that a company is not required to consolidate but in which it
has a significant variable interest. The consolidation requirements of FIN 46
apply immediately to variable interest entities created after January 31, 2003.
The consolidation requirements of FIN 46 apply to existing entities in the first
fiscal year or interim period beginning after June 15, 2003. Also, certain
disclosure requirements apply to all financial statements issued after January
31, 2003, regardless of when the variable interest entity was established.
The Company is in the process of assessing the impact of FIN 46 on the Company
and specifically as it relates to its interest in OMFSP (see Note 6). FIN 46 may
not apply to the Company's interest in OMFSP. If it is determined to apply, the
application of FIN 46 may result in the Company consolidating OMFSP in the
Company's consolidated financial statements, or alternatively, it may result in
the Company exploring alternatives such as selling or restructuring its interest
in OMFSP.
8
3. COMPREHENSIVE INCOME
- -----------------------
Total comprehensive income was as follows:
Three Months Ended
December 31,
2002 2001
---- ----
(In thousands)
Net income $11,292 $ 8,608
Currency translation adjustments 11,011 (3,763)
Gains on derivative instruments,
net of income taxes 39 (10)
------- -------
Comprehensive income $22,342 $ 4,835
======= =======
4. 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
December 31,
2002 2001
---- ----
Denominator for basic earnings per share 16,941,490 16,715,530
Effect of dilutive options and incentive
compensation awards 450,275 407,878
---------- ----------
Denominator for dilutive earnings
per share 17,391,765 17,123,408
========== ==========
Options to purchase 230,000 shares of Common Stock at $58.76 per share and
27,000 shares at $44.00 per share were outstanding in the first quarter of
fiscal 2003 and the first quarter of fiscal 2002, respectively, but were not
included in the computation of diluted earnings per share because the exercise
price of the options was greater than the average market price of the Common
Stock, and therefore, the effect would be anti-dilutive.
9
5. INVENTORIES
- --------------
Inventories consist of the following:
December 31, September 30,
2002 2002
---- ----
(In thousands)
Finished products $ 86,563 $ 67,147
Partially finished products 93,642 89,742
Raw materials 117,275 121,596
-------- --------
Inventories at FIFO cost 297,480 278,485
Less: Progress/performance-based payments on
U.S. government contracts (49,644) (54,368)
Excess of FIFO cost over LIFO cost (14,622) (13,251)
-------- --------
$233,214 $210,866
======== ========
Title to all inventories related to government contracts, which provide for
progress or performance-based payments, vests with the government to the extent
of unliquidated progress/performance-based payments.
6. INVESTMENT IN UNCONSOLIDATED PARTNERSHIP
- -------------------------------------------
The Company and an unaffiliated third party are general partners in
Oshkosh/McNeilus Financial Services Partnership ("OMFSP"), a general
partnership. OMFSP was formed in 1998 when each partner contributed existing
lease assets (and in the case of the Company, related notes payable to third
party lenders that were secured by such leases) to capitalize the partnership.
OMFSP manages the contributed assets and liabilities and engages in new vendor
lease business providing financing to customers of the Company. OMFSP purchases
trucks, truck bodies and concrete batch plants from the Company and the
Company's affiliates for lease to end customers. Banks and other third party
financial institutions lend to OMFSP a portion of the purchase price, with
recourse solely to OMFSP, secured by a pledge of lease payments due from the
user lessees. Each partner funds one-half of the equity portion of the cost of
new truck and batch plant purchases, and each partner is allocated its share of
OMFSP cash flow and taxable income as determined by the partnership agreement.
Indebtedness of OMFSP is secured by the underlying leases and assets of, and is
recourse to, OMFSP. However, such debt is nonrecourse to the Company. Each of
the two general partners have identical participating and protective rights and
responsibilities, and accordingly, the Company accounts for its equity interest
in OMFSP under the equity method.
The Company's investment in unconsolidated partnership of $23,088 at December
31, 2002 included in the Company's Condensed Consolidated Balance Sheet
represents the maximum exposure to loss as a result of the Company's ownership
interest in the partnership. This exposure would be a noncash exposure. Further,
the Company has recorded deferred income tax
10
liabilities related to its investment in the unconsolidated partnership of
$17,486 at December 31, 2002 that are included in long-term deferred income tax
liabilities in the Company's Condensed Consolidated Balance Sheet. Should the
Company's investment in the unconsolidated partnership be liquidated for any
reason, this deferred income tax liability would reverse and result in an
increase in current income taxes payable by the Company.
Summarized financial information of OMFSP is as follows (in thousands):
December 31, September 30,
2002 2002
---- ----
Cash and cash equivalents $ 4,118 $ 2,037
Investments in sales-type leases, net 200,401 209,440
Other assets 1,183 553
-------- --------
$205,702 $212,030
======== ========
Notes payable $159,714 $166,442
Other liabilities 3,481 4,146
Partners' equity 42,507 41,442
-------- --------
$205,702 $212,030
======== ========
Three Months Ended
December 31,
2002 2001
---- ----
Interest income $ 3,980 $ 4,102
Net interest income 1,106 1,035
Excess of revenues over expenses 1,241 1,015
7. PURCHASED INTANGIBLE ASSETS AND GOODWILL
- -------------------------------------------
The following tables present details of the Company's purchased intangible
assets:
December 31, 2002
Weighted- ---------------------------------------------
Average Accumulated
Life Gross Amortization Net
---- ----- ------------ ---
(Years) (In thousands)
Amortizable:
Distribution network 40.0 $ 53,000 $(8,320) $ 44,680
Non-compete 14.5 40,128 (13,116) 27,012
Technology-related 17.8 20,843 (4,424) 16,419
Other 9.9 10,344 (1,158) 9,186
-------- ------- --------
25.5 124,315 (27,018) 97,297
Non-amortizable trade names 6,012 - 6,012
-------- ------- --------
Total $130,327 $27,018) $103,309
======== ======= ========
11
September 30, 2002
Weighted- ---------------------------------------------
Average Accumulated
Life Gross Amortization Net
---- ----- ------------ ---
(Years) (In thousands)
Amortizable:
Distribution network 40.0 $ 53,000 $ (7,988) $ 45,012
Non-compete 14.5 40,120 (12,350) 27,770
Technology-related 17.8 20,554 (4,070) 16,484
Other 9.9 10,313 (979) 9,334
-------- -------- --------
25.5 123,987 (25,387) 98,600
Non-amortizable trade names 5,716 - 5,716
-------- -------- --------
Total $129,703 $(25,387) $104,316
======== ======== ========
Amortization expense recorded for the three months ended December 31, 2002 and
2001 was $1,602 and $1,440, respectively. The estimated future amortization
expense of purchased intangible assets as of December 31, 2002 is as follows:
Fiscal Year Ending Sesptember 30, Amount
- --------------------------------- ------
2003 (remaining nine months) $ 4,794
2004 6,298
2005 6,253
2006 6,032
2007 5,898
2008 5,898
Future 62,124
-------
$97,297
=======
The following table presents the changes in goodwill during the three months
ended December 31, 2002:
Balance at Foreign Currency Balance at
September 30, Translation December 31,
Segment 2002 Adjustment 2002
------- ---- ---------- ----
(In thousands)
Commercial $ 219,375 $ 7,292 $226,667
Fire and emergency 99,342 - 99,342
--------- ------- --------
Total $ 318,717 $ 7,292 $326,009
========= ======= ========
12
8. LONG-TERM DEBT
- -----------------
The Company has outstanding a senior credit facility consisting of a $170.0
million revolving credit facility ("Revolving Credit Facility") with no
borrowings outstanding at December 31, 2002 and a Term Loan A with $36.0 million
outstanding at December 31, 2002. The Revolving Credit Facility and the Term
Loan A mature in January 2006.
At December 31, 2002, $13.6 million of outstanding letters of credit reduced
available capacity under the Revolving Credit Facility to $156.4 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 13) 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 $1.8 million as of December 31, 2002.
9. STOCK-BASED EMPLOYEE COMPENSATION PLANS
- ------------------------------------------
At December 31, 2002, the Company had one stock-based employee compensation
plan, which is described more fully in Note 10 to the Notes to Consolidated
Financial Statements of the Company's Annual Report on Form 10-K for the year
ended September 30, 2002. The Company accounts for this stock-based plan under
the recognition and measurement principles of APB Opinion No. 25, "Accounting
for Stock Issued to Employees," and related Interpretations. Except for
restricted stock awards granted in September 2002, no stock-based employee
compensation cost was reflected in previously reported results for any period,
as all options granted under this plan had an exercise price equal to the market
value of the underlying Common Stock on the measurement date. The following
table illustrates the effect on net income and earnings per share if the Company
had applied the fair value recognition provisions of SFAS No. 123, "Accounting
for Stock-Based Compensation," to stock-based employee compensation.
13
Three Months Ended
December 31,
2002 2001
---- ----
(In thousands, except
per share data)
Net income, as reported $ 11,292 $ 8,608
Add: Stock-based employee compensation
expense recorded for restricted stock
awards, net of related tax effects 171 -
Deduct: Total stock-based employee
compensation expense determined
under fair value based method for all
awards, net of related tax effects (897) (541)
-------- -------
(726) (541)
-------- -------
Pro forma net income $ 10,566 $ 8,067
======== =======
Earnings per share:
As reported $ 0.67 $ 0.51
Pro forma 0.62 0.48
Earnings per share assuming dilution:
As reported $ 0.65 $ 0.50
Pro forma 0.61 0.47
10. 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 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 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 382 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,
14
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
December 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
at 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 liability, if
any, 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 the ultimate
liability associated with the TCE issue will not be materially different than
the amount of reserves established for the matter as of December 31, 2002.
However, this may change as investigations proceed by the Company, other
unrelated property owners, and the government.
In connection with the acquisition of the Geesink Norba Group, the Company
identified potential soil and groundwater contamination impacts from solvents
and metals at one of its manufacturing sites. The Company is conducting a study
to identify the source of the contamination. Based on current estimates, the
Company believes its liability at this site will not be material and any
responsibility of the Company is adequately covered through reserves established
by the Company at December 31, 2002.
The Company is subject to other environmental matters and legal proceedings and
claims, including patent, antitrust, product liability and state dealership
regulation compliance proceedings, 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, results of operations or cash flows.
Actual results could vary, among other things, due to the uncertainties involved
in litigation.
The Company is also contingently liable under bid, performance and specialty
bonds totaling approximately $147.5 million and open standby letters of credit
issued by the Company's bank in favor of third parties totaling approximately
$13.6 million at December 31, 2002.
15
11.WARRANTY AND GUARANTEE ARRANGEMENTS
- --------------------------------------
The Company's products generally carry explicit warranties that extend from six
months to two years, based on terms that are generally accepted in the
marketplace. Selected components included in the Company's end products (such as
engines, transmissions, tires, etc.) may include manufacturers' warranties.
These manufacturers' warranties are generally passed on to the end customer of
the Company's products, and the customer would generally deal directly with the
component manufacturer.
The Company's policy is to record a provision for the expected cost of
warranty-related claims at the time of the sale, and periodically adjust the
provision to reflect actual experience. The amount of warranty liability accrued
reflects management's best estimate of the expected future cost of honoring
Company obligations under the warranty plans. Historically, the cost of
fulfilling the Company's warranty obligations has principally involved
replacement parts, labor and sometimes travel for any field retrofit campaigns.
The Company's estimates are based on historical experience, the extent of
pre-production testing, the number of units involved and the extent of
features/components included in product models. Also, each quarter, the Company
reviews actual warranty claims experience to determine if there are systemic
defects that would require a field campaign.
Certain warranty and other related claims involve matters of dispute that
ultimately are resolved by negotiation, arbitration or litigation. Infrequently,
a material warranty issue can arise which is beyond the scope of the Company`s
historical experience. The Company provides for any such warranty issues as they
become known and are estimable. If the estimate of warranty costs in the first
quarter of fiscal 2003 was increased or decreased by 50%, the Company's accrued
warranty costs, costs of sales and operating income would each change by $1.9
million, or 7.7%, 0.5% and 9.5%, respectively. It is reasonably possible that
additional warranty and other related claims could arise from disputes or other
matters beyond the scope of the Company's historical experience.
16
Changes in the Company's warranty liability during the three months ended
December 31, 2002 were as follows (in thousands):
Balance at September 30, 2002 $24,015
Warranty provisions for the period 3,883
Settlements made during the period (4,900)
Changes in liability for pre-existing warranties
during the period, including expirations 1,879
Foreign currency translation adjustment 211
-------
Balance at December 31, 2002 $25,088
=======
In the fire and emergency segment, the Company provides guarantees of lease
payments by customer-lessees to a third-party lessor of equipment purchased from
the Company. The guarantee is limited to $1.0 million per year in total and is
supported by the residual value of the related equipment. The Company's actual
losses under these guarantees over the last ten years have been negligible. In
accordance with FIN 45, no liabilities for pre-January 1, 2003 guarantees have
been recorded. For all such guarantees issued after January 1, 2003, the Company
will record the fair value of the guarantee as a liability and a reduction of
the initial revenue recognized on the sale of equipment. The Company does not
expect such liability to have a material impact on the Company's financial
condition, results of operations or cash flows.
17
12. BUSINESS SEGMENT INFORMATION
- --------------------------------
Three Months Ended
December 31,
2002 2001
---- ----
(In thousands)
Net sales to unaffiliated customers:
Commercial $ 166,751 $ 129,429
Fire and emergency 112,956 95,866
Defense 148,609 136,575
Intersegment eliminations (1,980) (377)
--------- ---------
Consolidated $ 426,336 $ 361,493
========= =========
Operating income (loss):
Commercial $ 7,652 $ 7,296
Fire and emergency 10,025 7,753
Defense 9,588 8,042
Corporate and other (6,903) (5,312)
--------- ---------
Consolidated operating income 20,362 17,779
Net interest expense (3,222) (6,137)
Miscellaneous other (276) (250)
--------- ---------
Income before income provision for taxes and
equity in earnings of unconsolidated
partnership $ 16,864 $ 11,392
========= =========
December 31, September 30,
2002 2002
---- ----
(In thousands)
Identifiable assets:
Commercial $ 627,006 $ 593,489
Fire and emergency 325,539 325,585
Defense 75,143 75,392
Corporate and other 7,703 29,863
---------- ----------
Consolidated $1,035,391 $1,024,329
========== ==========
Net sales by geographic region based on product shipment destination were as
follows:
Three Months Ended
December 31,
2002 2001
---- ----
(In thousands)
United States $ 377,988 $ 326,449
Other North America 1,587 346
Europe and Middle East 37,642 30,295
Other 9,119 4,403
--------- ---------
Consolidated $ 426,336 $ 361,493
========= =========
18
13. 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 the 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.
19
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Statements of Income
For the Three Months Ended December 31, 2002
(Unaudited)
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ ------------
(In thousands)
Net sales $ 191,088 $ 209,513 $ 37,114 $(11,379) $ 426,336
Cost of sales 168,794 181,210 29,917 (11,224) 368,697
--------- ---------- -------- -------- ---------
Gross income 22,294 28,303 7,197 (155) 57,639
Operating expenses:
Selling, general and
administrative 15,316 14,850 5,509 - 35,675
Amortization of purchased
intangibles - 1,503 99 - 1,602
--------- ---------- -------- -------- ---------
Total operating expenses 15,316 16,353 5,608 - 37,277
--------- ---------- -------- -------- ---------
Operating income 6,978 11,950 1,589 (155) 20,362
Other income (expense):
Interest expense (5,619) (636) (12) 2,858 (3,409)
Interest income 89 2,969 (13) (2,858) 187
Miscellaneous, net 2,787 (2,957) (106) - (276)
--------- ---------- -------- -------- ---------
(2,743) (624) (131) - (3,498)
--------- ---------- -------- -------- ---------
Income before items noted below 4,235 11,326 1,458 (155) 16,864
Provision for income taxes 1,567 4,184 510 (57) 6,204
--------- ---------- -------- -------- ---------
Income before items noted below 2,668 7,142 948 (98) 10,660
Equity in earnings of subsidiaries
and unconsolidated partnership,
net of income taxes 8,624 - 632 (8,624) 632
--------- ---------- -------- -------- ---------
Net income $ 11,292 $ 7,142 $ 1,580 $ (8,722) $ 11,292
========= ========== ======== ======== =========
20
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Statements of Income
For the Three Months Ended December 31, 2001
(Unaudited)
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ ------------
(In thousands)
Net sales $ 161,690 $ 174,165 $ 29,285 $ (3,647) $ 361,493
Cost of sales 143,725 148,626 22,758 (3,640) 311,469
--------- ---------- -------- -------- ---------
Gross income 17,965 25,539 6,527 (7) 50,024
Operating expenses:
Selling, general and
administrative 12,755 13,483 4,567 - 30,805
Amortization of purchased
intangibles - 1,375 65 - 1,440
--------- ---------- -------- -------- ---------
Total operating expenses 12,755 14,858 4,632 - 32,245
--------- ---------- -------- -------- ---------
Operating income 5,210 10,681 1,895 (7) 17,779
Other income (expense):
Interest expense (7,070) (5,895) (32) 6,575 (6,422)
Interest income 5,088 1,772 - (6,575) 285
Miscellaneous, net 2,955 (2,998) (207) - (250)
--------- ---------- -------- -------- ---------
973 (7,121) (239) - (6,387)
--------- ---------- -------- -------- ---------
Income before items noted below 6,183 3,560 1,656 (7) 11,392
Provision for income taxes 1,417 1,310 580 (3) 3,304
--------- ---------- -------- -------- ---------
Income before items noted below 4,766 2,250 1,076 (4) 8,088
Equity in earnings of subsidiaries
and unconsolidated partnership,
net of income taxes 3,842 842 520 (4,684) 520
--------- ---------- -------- -------- ---------
Net income $ 8,608 $ 3,092 $ 1,596 $ (4,688) $ 8,608
========= ========== ======== ======== =========
21
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Balance Sheets
December 31, 2002
(Unaudited)
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ ------------
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 12,709 $ 2,195 $ 4,463 $ - $ 19,367
Receivables, net 51,754 53,848 39,020 (5,954) 138,668
Inventories 32,314 168,775 32,400 (275) 233,214
Prepaid expenses and other 25,907 10,824 2,679 - 39,410
--------- ---------- -------- --------- ----------
Total current assets 122,684 235,642 78,562 (6,229) 430,659
Investment in and advances to:
Subsidiaries 567,882 8,080 - (575,962) -
Unconsolidated partnership - - 23,088 - 23,088
Other long-term assets 6,969 4,044 - - 11,013
Net property, plant and equipment 34,737 87,063 19,513 - 141,313
Purchased intangible assets, net 22 94,522 8,765 - 103,309
Goodwill - 212,095 113,914 - 326,009
--------- ---------- -------- --------- ----------
Total assets $ 732,294 $ 641,446 $243,842 $(582,191) $1,035,391
========= ========== ======== ========= ==========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 35,515 $ 46,922 $ 24,557 $ (5,910) $ 101,084
Floor plan notes payable - 29,474 - - 29,474
Customer advances 41,355 83,669 734 - 125,758
Payroll-related obligations 8,928 10,102 6,861 - 25,891
Income taxes 15,859 - 1,675 - 17,534
Accrued warranty 11,996 9,531 3,561 - 25,088
Other current liabilities 22,719 25,427 2,987 (44) 51,089
Revolving credit facility and
current maturities of long-term
debt 9,500 226 51 - 9,777
--------- ---------- -------- --------- ----------
Total current liabilities 145,872 205,351 40,426 (5,954) 385,695
Long-term debt 126,500 1,375 122 - 127,997
Deferred income taxes (10,922) 30,160 21,094 - 40,332
Other long-term liabilities 37,852 7,939 2,584 - 48,375
Commitments and contingencies
Investments by and advances from
(to) parent - 396,621 179,616 (576,237) -
Shareholders' equity 432,992 - - - 432,992
--------- ---------- -------- --------- ----------
Total liabilities and shareholders'
equity $ 732,294 $641,446 $243,842 $(582,191) $1,035,391
========= ========== ======== ========= ==========
22
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Balance Sheets
September 30, 2002
(Unaudited)
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ ------------
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 32,571 $ 2,060 $ 5,408 $ - $ 40,039
Receivables, net 50,520 62,311 33,655 (3,777) 142,709
Inventories 31,060 150,042 29,884 (120) 210,866
Prepaid expenses and other 25,505 6,773 1,144 - 33,422
--------- ---------- -------- --------- ----------
Total current assets 139,656 221,186 70,091 (3,897) 427,036
Investment in and advances to:
Subsidiaries 558,410 6,259 - (564,669) -
Unconsolidated partnership - - 22,274 - 22,274
Other long-term assets 7,296 4,329 - - 11,625
Net property, plant and equipment 33,852 87,666 18,843 - 140,361
Purchased intangible assets, net 22 95,994 8,300 104,316
Goodwill - 212,095 106,622 - 318,717
--------- ---------- -------- --------- ----------
Total assets $ 739,236 $ 627,529 $226,130 $(568,566) $1,024,329
========= ========== ======== ========= ==========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 49,707 $ 48,432 $ 22,027 $ (3,744) $ 116,422
Floor plan notes payable - 23,801 - - 23,801
Customer advances 53,947 65,817 - - 119,764
Payroll-related obligations 13,518 14,848 6,108 - 34,474
Income taxes 8,064 - 533 - 8,597
Accrued warranty 11,755 9,148 3,112 - 24,015
Other current liabilities 18,148 25,457 4,182 (33) 47,754
Revolving credit facility and
current maturities of long-term
debt 18,000 226 19 - 18,245
--------- ---------- -------- --------- ----------
Total current liabilities 173,139 187,729 35,981 (3,777) 393,072
Long-term debt 130,000 1,586 127 - 131,713
Deferred income taxes (10,071) 27,445 21,929 - 39,303
Other long-term liabilities 36,408 11,654 2,419 - 50,481
Commitments and contingencies
Investments by and advances from
(to) parent - 399,115 165,674 (564,789) -
Shareholders' equity 409,760 - - - 409,760
--------- ---------- -------- --------- ----------
Total liabilities and shareholders'
equity $ 739,236 $ 627,529 $226,130 $(568,566) $1,024,329
========= ========== ======== ========= ==========
23
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Statements of Cash Flow
For the Three Months Ended December 31, 2002
(Unaudited)
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ ------------
(In thousands)
Operating activities:
Net income $ 11,292 $ 7,142 $ 1,580 $ (8,722) $ 11,292
Non-cash adjustments (1,163) 2,331 (1,119) - 49
Changes in operating assets and
liabilities (17,325) 3,270 (3,062) 155 (16,962)
--------- ---------- -------- -------- ---------
Net cash provided from (used for)
operating activities (7,196) 12,743 (2,601) (8,567) (5,621)
Investing activities:
Investments in and advances to
subsidiaries 1,600 (11,457) 1,290 8,567 -
Additions to property, plant and
equipment (2,537) (2,535) (102) - (5,174)
Other 837 1,595 190 - 2,622
--------- ---------- -------- -------- ---------
Net cash provided from (used for)
investing activities (100) (12,397) 1,378 8,567 (2,552)
Financing activities:
Repayment of long-term debt (12,000) (211) 17 - (12,194)
Dividends paid (1,459) - - - (1,459)
Other 893 - - - 893
--------- ---------- -------- -------- ---------
Net cash provided from (used for)
financing activities (12,566) (211) 17 - (12,760)
Effect of exchange rate changes on
cash - - 261 - 261
--------- ---------- -------- -------- ---------
Increase (decrease) in cash and
cash equivalents (19,862) 135 (945) - (20,672)
Cash and cash equivalents at
beginning of period 32,571 2,060 5,408 - 40,039
--------- ---------- -------- -------- ---------
Cash and cash equivalents at
end of period $ 12,709 $ 2,195 $ 4,463 $ - $ 19,367
========= ========== ======== ======== =========
24
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Statements of Cash Flow
For the Three Months Ended December 31, 2001
(Unaudited)
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ ------------
(In thousands)
Operating activities:
Net income $ 8,608 $ 3,092 $ 1,596 $ (4,688) $ 8,608
Non-cash adjustments (194) 3,698 (504) - 3,000
Changes in operating assets and
liabilities 10,659 20,478 372 7 31,516
--------- ---------- -------- -------- ---------
Net cash provided from operating
activities 19,073 27,268 1,464 (4,681) 43,124
Investing activities:
Investments in and advances to
subsidiaries 20,891 (29,169) 3,718 4,560 -
Additions to property, plant and
equipment (412) (446) (869) - (1,727)
Other 50 188 (995) - (757)
--------- ---------- -------- -------- ---------
Net cash provided from (used for)
investing activities 20,529 (29,427) 1,854 4,560 (2,484)
Financing activities:
Net repayments under
revolving credit facility (37,200) - - - (37,200)
Repayment of long-term debt (2,850) (376) (16) - (3,242)
Dividends paid (1,437) - - - (1,437)
Other 5 - - - 5
--------- ---------- -------- -------- ---------
Net cash used for financing
activities (41,482) (376) (16) - (41,874)
Effect of exchange rate changes on
cash - - (252) 121 (131)
--------- ---------- -------- -------- ---------
Increase (decrease) in cash and
cash equivalents (1,880) (2,535) 3,050 - (1,365)
Cash and cash equivalents at
beginning of period 4,726 3,394 3,192 - 11,312
--------- ---------- -------- -------- ---------
Cash and cash equivalents at
end of period $ 2,846 $ 859 $ 6,242 $ - $ 9,947
========= ========== ======== ======== =========
25
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
statements that Oshkosh Truck Corporation (the "Company" or "Oshkosh") believes
to be "forward-looking statements" 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,
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 2003 Outlook," are forward-looking statements. When used in
this Form 10-Q, words such as the Company "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 outcome of defense truck
procurement competitions, 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, disruptions in the supply
of parts or components from sole source suppliers and subcontractors,
competition, the challenges of identifying, completing, and integrating acquired
businesses 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 January 23, 2003.
All forward-looking statements, including those under the caption "Fiscal 2003
Outlook" 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
26
may not update such information until the Company's next quarterly conference
call, if at all.
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 and waste transfer stations, portable concrete batch plants
and truck components sold to ready-mix companies and commercial and municipal
waste haulers in the U.S., Europe and other international markets.
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.
Results of Operations
Analysis of Consolidated Net Sales
The following table presents net sales by business segment (in thousands):
First Quarter
Fiscal
2003 2002
---- ----
Net sales to unaffiliated customers:
Commercial $166,751 $129,429
Fire and emergency 112,956 95,866
Defense 148,609 136,575
Intersegment eliminations (1,980) (377)
-------- --------
Consolidated $426,336 $361,493
======== ========
First quarter Fiscal 2003 Compared to 2002
Consolidated net sales increased 17.9% to $426.3 million for the first quarter
of fiscal 2003 compared to the first quarter of fiscal 2002. Net sales increases
were recorded in all segments.
Commercial segment net sales increased 28.8% to $166.8 million for the first
quarter of fiscal 2003 compared to the first quarter of fiscal 2002. Increased
"package" sales (body and chassis) compared to "body-only" sales contributed
most of the sales volume increase. Concrete placement product sales were up
66.8% in 2003 compared to 2002, as Company sales were favorably impacted by
availability of Company-owned commercial chassis containing engines manufactured
prior to the October 1, 2002 effective
27
date for new environmental regulations. Refuse product sales were up 4.1%
compared to 2002. U.S. refuse truck body and parts sales decreased 9.4% for the
quarter, primarily due to substantially lower sales to large, U.S. commercial
waste-haulers in spite of higher package sales. European refuse product sales
were up 26.7% compared to 2002, generally as a result of increased package sales
which are now being emphasized by the Company.
Fire and emergency segment net sales increased 17.8% to $113.0 million for the
first quarter of fiscal 2003 compared to the first quarter of fiscal 2002.
Increased sales volume and an improved product sales mix at the Company's Pierce
Manufacturing Inc. ("Pierce") subsidiary were responsible for most of the
segment revenue growth for the quarter compared to the prior year.
Defense segment net sales increased 8.8% to $148.6 million for the first quarter
of fiscal 2003 compared to the first quarter of fiscal 2002 due to increased
sales of heavy-payload vehicles under the Company's Family of Heavy Tactical
Vehicles ("FHTV") contract, which were partially offset by lower parts sales.
Analysis of Consolidated Operating Income
The following table presents operating income by business segment (in
thousands):
First Quarter
Fiscal
2003 2002
---- ----
Operating income (loss):
Commercial $ 7,652 $ 7,296
Fire and emergency 10,025 7,753
Defense 9,588 8,042
Corporate and other (6,903) (5,312)
------- -------
Consolidated operating income $20,362 $17,779
======= =======
First Quarter Fiscal 2003 Compared to 2002
Consolidated operating income increased 14.5% to $20.4 million, or 4.8% of
sales, in the first quarter of fiscal 2003, compared to $17.8 million, or 4.9%
of sales, in the first quarter of fiscal 2002, consistent with the consolidated
sales increase for the quarter.
Commercial segment operating income increased 4.9% to $7.7 million, or 4.6% of
sales, in the quarter compared to $7.3 million, or 5.6% of sales, in the prior
year quarter. Operating income margins were generally lower due to a higher
percentage of package sales versus body-only sales in the current year quarter
compared to the previous year. The Company earns a lower overall operating
income margin on sales that include purchased commercial chassis. First quarter
results in fiscal 2003 also benefited from a $0.5 million gain on the sale of
certain operating equipment.
28
Fire and emergency segment operating income increased 29.3% to $10.0 million, or
8.9% of sales, in the quarter compared to $7.8 million, or 8.1% of sales, in the
prior year first quarter. Increased sales volume, an improved product sales mix
and favorable manufacturing cost performance at Pierce compared to the prior
year were responsible for most of the improved earnings in this segment.
Defense segment operating income increased 19.2% to $9.6 million, or 6.5% of
sales, compared to $8.0 million, or 5.9% of sales, in the prior year first
quarter. Increased sales of higher-margin, heavy-payload vehicles under the FHTV
contract contributed to the increase in operating income in the quarter compared
to the prior year. Margins on the Company's Medium Tactical Vehicle Replacement
("MTVR") contract were 3.3% in the first quarter of fiscal 2002. Margins on the
MTVR contract were increased in the third quarter of fiscal 2002 to 4.3% and
have remained at that level since then, including the current quarter. The
difference in the margin percentage added approximately $0.7 million to the
operating income for the quarter compared to the prior year quarter. Bid and
proposal efforts continued at a high rate during the quarter as the Company
submitted its initial bid on the multi-year Family of Medium Tactical Vehicles
("FMTV") contract in November 2002 and pursued other defense programs in the
United Kingdom.
Consolidated selling, general and administrative expenses decreased to 8.4% of
sales in the first quarter of fiscal 2003 compared to 8.5% of sales in the first
quarter of fiscal 2002. Substantially higher package sales of commercial chassis
and truck bodies during the first quarter of fiscal 2003 muted the impact on
selling, general and administrative expenses as a percentage of sales of
increased bid and proposal costs in the Company's defense segment with respect
to long-term truck procurement competitions and higher corporate expenses.
Corporate operating expenses and inter-segment profit elimination increased $1.6
million to $6.9 million, or 1.6% of consolidated sales, for the first quarter of
fiscal 2003 from $5.3 million, or 1.5% of consolidated sales, for the first
quarter of 2002. The increase in corporate operating expenses was largely due to
a previously reported plan to increase investments in people and services.
Analysis of Non-Operating Income Statement Items
First Quarter Fiscal 2003 Compared to 2002
Net interest expense decreased $2.9 million to $3.2 million in the first quarter
of fiscal 2003 compared to the first quarter of fiscal 2002, largely as a result
of debt reductions in fiscal 2002 as a result of performance-based payments on
the MTVR and FHTV contracts and free cash flow from operations.
The effective income tax rate for the first quarter of fiscal 2003 was 36.8%
compared to 29.0% for the first quarter of fiscal 2002. The
29
provision for income taxes in the first quarter of fiscal 2002 included a $0.9
million, or $0.05 per share, credit related to audit settlements in December
2001 of research and development tax credit claims. Excluding the impact of the
settlements, the Company's effective income tax rate was 36.6% in the first
quarter of fiscal 2002.
Equity in earnings of an unconsolidated partnership of $0.6 million in the first
quarter of fiscal 2003 and $0.5 million in the first quarter of fiscal 2002
represents the Company's equity interest in a lease financing partnership.
Financial Condition
First Quarter of Fiscal 2003
During the quarter, cash decreased by $20.7 million to $19.4 million at December
31, 2002. The reduction in cash during the quarter was largely due to cash used
in operating activities of $5.6 million, capital expenditures of $5.2 million,
dividends of $1.5 million and repayments of long-term debt of $12.2 million.
In the first quarter of fiscal 2003, net cash used in operating activities of
$5.6 million was significantly different than the $43.1 million of net cash
provided from operating activities in the first quarter of fiscal 2002. This
variance between periods was 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.
First Quarter
Fiscal
2003 2002
---- ----
Receivables, net $ 6,481 $60,398
Inventories (20,282) 7,279
Accounts payable (16,890) (35,483)
Floor plan notes payable 5,673 (7,120)
Customer advances 5,961 24,752
Income taxes 10,142 (10,925)
Other (8,047) (7,385)
-------- -------
Source (use) of cash $(16,962) $31,516
======== =======
During the first quarter of fiscal 2003, the Company was building inventories in
anticipation of an expected increase in sales in the second half of fiscal 2003.
During the first quarter of fiscal 2002, the Company was liquidating significant
receivables from a large commercial waste- hauler related to a higher
concentration of sales in the previous quarter. In addition, the Company was
liquidating significant receivables and inventories associated with a large
foreign military sale.
30
The Company's debt-to-total capital ratio at December 31, 2002 was 24.1%
compared to 26.8% at September 30, 2002.
Liquidity and Capital Resources
The Company had $156.4 million of unused availability under the terms of its
Revolving Credit Facility as of December 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 Revolving Credit Facility.
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,
the start-up or conclusion of large defense contracts and the timing of receipt
of individually large progress and performance-based payments from the U.S.
Department of Defense ("DoD").
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 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 0.50%) or the "IBOR Rate"
(which is the bank's inter-bank offered rate for U.S. dollars in off-shore
markets) plus a margin of 1.00% and 1.00% for IBOR Rate loans under the
Company's Revolving Credit Facility and Term Loan A, respectively, as of
December 31, 2002. The margins are subject to adjustment, up or down, based on
whether certain financial criteria are met. The weighted average interest rate
on borrowings outstanding at December 31, 2002 was 2.40% for Term Loan A. 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 2003. See "Fiscal 2003 Outlook."
Capital resource requirements may change, however, because
31
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 in the event of an
award of major new business arising from current truck procurement competitions
for new defense contracts in the U.S. and the U.K.
Contractual Obligations and Commercial Commitments
The Company's contractual obligations and commercial commitments disclosures in
its Annual Report on Form 10-K for the year ended September 30, 2002 have not
materially changed since that report was filed, except for the addition of two
operating leases in connection with a manufacturing facility and in connection
with certain equipment with combined total minimum rentals of $13.6 million;
with payments due of $0.8 million for the remainder of fiscal 2003, $1.2 million
annually in fiscal 2004 through fiscal 2007 and $8.0 million thereafter.
Application of Critical Accounting Policies
The Company's application of critical accounting policies disclosures in its
Annual Report on Form 10-K for the year ended September 30, 2002 have not
materially changed since that report was filed.
Critical Accounting Estimates
The Company's disclosures of critical accounting estimates in its Annual Report
on Form 10-K for the year ended September 30, 2002 have not materially changed
since that report was filed.
New Accounting Standards
Guarantee Obligations: In November 2002, the Financial Accounting Standards
Board ("FASB") issued Financial Interpretation No. ("FIN") 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others." FIN 45 requires certain guarantees to be
recorded at fair value and requires a guarantor to make significant new
disclosures, even when the likelihood of making any payments under the guarantee
is remote. Generally, FIN 45 applies to certain types of financial guarantees
that contingently require the guarantor to make payments to the guaranteed party
based on changes in an underlying that is related to an asset, liability, or an
equity security of the guaranteed party; performance guarantees involving
contracts which require the guarantor to make payments to the guaranteed party
based on another entity's failure to perform under an obligating agreement;
indemnification agreements that contingently require the guarantor to make
payments to an indemnified party based on changes in an underlying that is
related to an asset, liability, or an equity security of the indemnified party;
or indirect guarantees of the indebtedness of others. The initial recognition
and initial measurement provisions of FIN 45 are applicable on
32
a prospective basis to guarantees issued or modified after December 31, 2002.
Disclosure requirements under FIN 45 are effective for financial statements
ending after December 15, 2002 and are applicable to all guarantees issued by
the guarantor subject to FIN 45's scope, including guarantees issued prior to
FIN 45. The Company does not expect that FIN 45 will have a material effect on
its financial condition, results of operations or cash flows. See Note 11.
Accounting for Stock-Based Compensation: In December 2002, the FASB issued
SFAS No. 148, "Accounting for Stock-Based Compensation--Transition and
Disclosure." SFAS No. 148 amends SFAS No. 123, "Accounting for Stock-Based
Compensation," to provide alternative methods of transition to SFAS No. 123's
fair value method for accounting for stock-based employee compensation. SFAS No.
148 also amends the disclosure provisions of SFAS No. 123 and Accounting
Principles Board ("APB") Opinion No. 28, "Interim Financial Reporting," to
require disclosure in the summary of significant accounting policies of the
effects of an entity's accounting policy with respect to stock-based employee
compensation on reported net income and earnings per share in annual and interim
financial statements. The Company adopted early the provisions of SFAS No. 148
as of October 1, 2002 and has included the required disclosures in Note 9 to the
Condensed Consolidated Financial Statements. Adoption of SFAS No. 148 did not
have a material impact on the Company's financial condition, results of
operations or cash flows.
Variable Interest Entities: In January 2003, the FASB issued FIN 46,
"Consolidation of Variable Interest Entities" with the objective of improving
financial reporting by companies involved with variable interest entities. A
variable interest entity is a corporation, partnership, trust, or any other
legal structure used for business purposes that either (a) does not have equity
investors with voting rights, or (b) has equity investors that do not provide
sufficient financial resources for the entity to support its activities.
Historically, entities generally were not consolidated unless the entity was
controlled through voting interests. FIN 46 changes that by requiring a variable
interest entity to be consolidated by a company if that company is subject to a
majority of the risk of loss from the variable interest entity's activities or
entitled to receive a majority of the entity's residual returns or both. A
company that consolidates a variable interest entity is called the "primary
beneficiary" of that entity. FIN 46 also requires disclosures about variable
interest entities that a company is not required to consolidate but in which it
has a significant variable interest. The consolidation requirements of FIN 46
apply immediately to variable interest entities created after January 31, 2003.
The consolidation requirements of FIN 46 apply to existing entities in the first
fiscal year or interim period beginning after June 15, 2003. Also, certain
disclosure requirements apply to all financial statements issued after January
31, 2003, regardless of when the variable interest entity was established.
The Company is in the process of assessing the impact of FIN 46 on the Company
and specifically as it relates to its interest in OMFSP (see Note
33
6). FIN 46 may not apply to the Company's interest in OMFSP. If it is determined
to apply, the application of FIN 46 may result in the Company consolidating
OMFSP in the Company's consolidated financial statements, or alternatively, it
may result in the Company exploring alternatives such as selling or
restructuring its interest in OMFSP.
Customers and Backlog
Sales to the DoD comprised approximately 38% of the Company's sales in the first
quarter of fiscal 2003. 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 December 31, 2002 increased 26.4% to $1,074.3 million
compared to $849.7 million at December 31, 2001. Commercial segment backlog
increased 13.3% to $152.4 million at December 31, 2002 compared to December 31,
2001. Backlog for front-discharge concrete mixers was up 59.6% million while
backlog for rear-discharge concrete mixers was down 7.9%. Backlog for refuse
packers was down 25.0% domestically but up 41.1% in Europe. Front-discharge
concrete mixer backlog increased due to strong orders in recent quarters.
Rear-discharge concrete mixer backlog decreased slightly in the quarter compared
to the prior year quarter due to higher shipments in the first quarter of fiscal
2003. The domestic refuse backlog was lower due to fewer orders from large, U.S.
commercial waste-haulers. European refuse backlog increased due to a higher mix
of chassis and body orders versus body-only orders and a stronger euro compared
to the U.S. dollar. Fire and emergency segment backlog increased 2.6% to $315.8
million at December 31, 2002 compared to December 31, 2001. The defense segment
backlog increased 48.8% to $606.0 million at December 31, 2002 compared to
December 31, 2001. During the first quarter of fiscal 2003, the Company recorded
$213.7 million in orders for heavy-payload vehicles under the FHTV contract. In
the prior year, orders for the succeeding program year under the FHTV contract
were not received until the second fiscal quarter. Approximately 19.0% of the
December 31, 2002 backlog is not expected to be filled in fiscal 2003.
Reported backlog excludes purchase options and announced orders for which
definitive contracts have not been executed. Additionally, backlog excludes
unfunded portions of the DoD FHTV 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 2003 Outlook
The Company estimates that consolidated net sales will grow approximately 3.2%
in fiscal 2003 to $1.8 billion. The Company expects consolidated operating
income to increase 6.2% to approximately $118.0 million in fiscal 2003, or
approximately 6.6% of sales. The Company expects earnings
34
per share from continuing operations assuming dilution of $3.70 per share in
fiscal 2003.
The Company estimates that commercial segment sales will increase 1.0% in fiscal
2003 to $685.0 million. The Company expects a slight improvement in the concrete
placement market, estimating a 4.5% increase in concrete placement sales in
fiscal 2003, attributable to higher package sales. The Company expects its U.S.
refuse sales to decline about 2.0% in fiscal 2003. The Company expects industry
volume to decline about 10% in fiscal 2003, but the Company expects volume
increases from its largest commercial waste customers and other market share
gains to offset most of the industry decline. The Company expects its U.S.
refuse sales to decline approximately 10.0% in the first half of fiscal 2003
before increasing in the second half, each compared to the prior year. The
Company estimates that the Geesink Norba Group sales will decline approximately
4.5% in fiscal 2003 based on an estimated weak European economy.
The Company estimates that commercial segment operating income will increase
approximately 3.9% in fiscal 2003 to $49.0 million. The Company expects concrete
placement operating income to increase 3.5% reflecting a strong order rate for
front-discharge concrete mixers and favorable manufacturing cost performance,
offset in part by anticipated development spending with respect to the
Revolution(TM) composite concrete mixer drum. The Company plans to sell a few
hundred Revolution drums in fiscal 2003, utilizing the production facilities of
the Company's partner in Australia. Freight costs from Australia will limit any
profit opportunity from those sales. The Company plans to have a U.S. production
facility for the Revolution drum operational by the end of fiscal 2003, and to
reach high rate of production for sales in fiscal 2004. In fiscal 2005 and
fiscal 2006, the Company plans to acquire the rights to this technology for
Europe, Asia, Australia and perhaps Africa/Middle East. The Company expects
domestic refuse operating income to be down slightly in fiscal 2003 due
primarily to a weaker product mix involving more package sales of chassis and
packer bodies and fewer body-only sales. Whereas previously the Company had
expected most of the increase in commercial segment operating income to come
from cost reductions implemented at the Geesink Norba Group, the Company is now
projecting Geesink Norba Group operating income to increase only about 16.0% in
fiscal 2003. Most of the cost reduction implemented at the Geesink Norba Group
in fiscal 2002 is being offset by weaker end markets. Several European refuse
markets, most notably Germany, have weakened sharply in the last three months.
The Company expects that fire and emergency segment sales will be up 7.1% to
$510.0 million in fiscal 2003. This increase reflects strong first quarter sales
and about a 4.5% increase in sales for the remainder of the fiscal year. During
the first fiscal quarter, the Company believes that municipal spending on fire
apparatus began to slow. The Company believes that it may have lost some orders
during the last six months of calendar 2002 as Pierce increased prices much
faster than competitors to pass through engine price increases resulting from
new environmental regulations that became effective on October 1, 2002. The
Company expects
35
this order slowdown to have a minimal effect on fiscal 2003 results because
Pierce's backlog extends through mid-August for most products and into September
for many products. The Company estimates fire and emergency operating income to
increase about 4.0% for the balance of the fiscal year, resulting in an 8.2%
increase to approximately $53.0 million in fiscal 2003, consistent with the
estimated sales increase.
The Company estimates defense segment sales to increase 2.5% to $610.0 million
in fiscal 2003. The Company estimates that sales under the MTVR contract will
decline approximately $16.0 million, but that sales under a new U.K. tank
transporter contract will be approximately $46.0 million. The Company estimates
defense segment operating income to increase 8.1% to approximately $44.0 million
in fiscal 2003. This estimate assumes significant bid and proposal spending and
pre-contract costs in fiscal 2003 at levels above fiscal 2002 with respect to
several U.S. and U.K. defense truck programs. This estimate further assumes that
MTVR contract margins remain at 4.3% in fiscal 2003. The Company continues to
target margins of 6.0% to 6.5% over the contract life. Subject to attaining
certain milestones and cost performance, the Company estimates that a one
percentage point increase in MTVR margins in fiscal 2003 on a full-year basis
would amount to $7.6 million in operating income, or $0.27 per share. The
Company reviews its estimated costs to complete the MTVR long-term production
contract periodically, or as events change, based on factors such as the cost
performance achieved to date and the durability of fielded trucks. In June 2002,
the Company negotiated a modification of the MTVR contract to replace a bare
chassis with requirements for vehicles with a dump or a wrecker variant. The
wrecker variants are complex vehicles that will undergo significant testing. The
U.S. Marine Corps has until January 2004 to fund the wrecker requirements under
the contract. How these wreckers perform in the testing, the timing and number
of wreckers actually funded by the U.S. Marine Corps under the contract and the
cost performance on those trucks will be important factors in the Company's
ability to achieve its targeted MTVR margins of 6.0% to 6.5% over the life of
the contract.
The Company was named the preferred bidder on a major defense program for the
United Kingdom on January 10, 2003 to provide 350 wheeled tankers that supply
fuel and water on missions worldwide. Including parts and service, the Company
expects the contract value to approximate $250 million over the next fifteen
years. The contract negotiations with respect to the opportunity are expected to
take approximately two to three months and could potentially be terminated at
any time. During that period, the Company expects to incur significant
pre-contract costs that would be expensed as incurred. If a contract is
negotiated, sales are not expected until fiscal 2004, and then would extend
through fiscal 2006.
The Company expects corporate expenses to increase from $25.8 million in fiscal
2002 to $28.0 million in fiscal 2003. The increase reflects investments planned
to build the Company's management team.
36
The Company expects net interest expense to approximate $18.0 million in fiscal
2003. The Company projects debt to decline on average in fiscal 2003 following
the significant debt reduction in fiscal 2002; however, the Company expects
interest rates to rise and working capital requirements to increase
progressively during fiscal 2003 due to the start-up of the U.K. tank
transporter contract and potential work on the U.K. wheeled tanker contract.
The Company expects debt to increase from $137.8 million at December 31, 2002 to
$175.0 million at March 31, 2003 and $200.0 million at June 30, 2003 before
declining to $150.0 million at September 30, 2003. These fluctuations reflect
seasonal working capital requirements of the commercial segment and the start-up
of the U.K. tank transporter contract. The Company estimates capital spending at
no more than $30.0 million in fiscal 2003, including the required capital
spending to construct a Revolution composite concrete mixer drum manufacturing
facility.
The expectations set forth in this "Fiscal 2003 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 assumptions include, without limitation, no economic recovery or recession
in U.S. and European economies; the Company's estimates for concrete placement
activity, housing starts and mortgage rates; the Company's expectations as to
timing of receipt of sales orders and payments and execution and funding of
defense contracts; the Company's ability to achieve cost reductions; the
anticipated level of sales and margins associated with the FHTV contract,
international defense truck sales and production under the MTVR contract; the
Company's planned spending on product development, bid and proposal activities
and pre-contract costs with respect to defense truck procurement competitions
and the outcome of such competitions; the Company's estimates for capital
expenditures of municipalities for fire and emergency and refuse products, of
airports for rescue products and of large commercial waste haulers; the expected
level of sales and operating income of the Geesink Norba Group; the Company's
ability to sustain market share gains by its fire and emergency and refuse
products businesses; anticipated levels of sales of, and capital expenditures
associated with, the Revolution composite mixer drum; the Company's estimates
for insurance, steel and litigation costs; the impact of environmental
regulations relating to diesel engines on sales of the Company's commercial and
fire and emergency products; the Company's estimates for debt levels, interest
costs and working capital needs; 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.
37
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, 2002 and have not materially changed since that report was
filed.
Item 4. Controls and Procedures
(a) Evaluation of disclosure controls and procedures. In accordance
with Rule 13a-15(b) of the Securities Exchange Act of 1934 (the "Exchange Act"),
within 90 days prior to the filing date of this Quarterly Report on Form 10-Q,
an evaluation was carried out under the supervision and with the participation
of the Company's management, including the Company's Chairman of the Board,
President and Chief Executive Officer and Executive Vice President and Chief
Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures (as defined in Rule 13a-14(c) under
the Exchange Act). Based upon their evaluation of these disclosure controls and
procedures, the Chairman of the Board, President and Chief Executive Officer and
the Executive Vice President and Chief Financial Officer concluded that the
disclosure controls and procedures were effective as of the date of such
evaluation to ensure that material information relating to the Company,
including its consolidated subsidiaries, was made known to them by others within
those entities, particularly during the period in which this Quarterly Report on
Form 10-Q was being prepared.
(b) Changes in internal controls. There were no significant changes
in the Company's internal controls or other factors that could significantly
affect these controls subsequent to the date of their evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
38
OSHKOSH TRUCK CORPORATION
PART II. OTHER INFORMATION
FORM 10-Q
DECEMBER 31, 2002
ITEM 1 LEGAL PROCEEDINGS
- ------------------------
None.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
- ----------------------------------------
(a) Exhibits
- --------------
(99.1) Written Statement of the Chairman, President and Chief Executive
Officer, pursuant to 18 U.S.C. ss.1350, dated January 29, 2003.
(99.2) Written Statement of the Executive Vice President and Chief
Financial Officer, pursuant to 18 U.S.C. ss.1350, dated January 29,
2003.
(b) Reports on Form 8-K
- -----------------------
Current Report on Form 8-K dated October 29, 2002 reporting the
announcement of the Company's earnings for the fourth quarter and fiscal
year ended September 30, 2002, a conference call in connection with such
announcement and risk factors for the Company.
39
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
January 29, 2003 /s/ R. G. Bohn
----------------------------------------------
R. G. Bohn
Chairman, President and
Chief Executive Officer
(Principal Executive Officer)
January 29, 2003 /s/ C. L. Szews
----------------------------------------------
C. L. Szews
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
January 29, 2003 /s/ T. J. Polnaszek
----------------------------------------------
T. J. Polnaszek
Vice President and Controller
(Principal Accounting Officer)
40
CERTIFICATIONS
I, Robert G. Bohn, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Oshkosh Truck
Corporation;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in
this quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
January 29, 2003 /s/ Robert G. Bohn
----------------------------------------------
Robert G. Bohn
Chairman, President and Chief Executive Officer
41
I, Charles L. Szews, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Oshkosh Truck
Corporation;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in
this quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
January 29, 2003 /s/ Charles L. Szews
---------------------------------------
Charles L. Szews
Executive Vice President and Chief Financial
Officer
42
EXHIBIT INDEX
- -------------
Exhibit No. Description
- ----------- -----------
(99.1) Written Statement of the Chairman, President and Chief
Executive Officer, pursuant to 18 U.S.C ss.1350, dated
January 29, 2003.
(99.2) Written Statement of the Executive Vice President and
Chief Financial Officer, pursuant to 18 U.S.C.ss.1350,
dated January 29, 2003.
43