-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, U6VYYcyOpX4WyIy+sT+KscCNMvqJJYFqf6nlcmLxbxf1y/VZk7FRaB+DRg7NLxSi VQicEzVuhGho99eyki7Y/A== 0000897069-96-000438.txt : 19961231 0000897069-96-000438.hdr.sgml : 19961231 ACCESSION NUMBER: 0000897069-96-000438 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961227 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: OSHKOSH TRUCK CORP CENTRAL INDEX KEY: 0000775158 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLES & PASSENGER CAR BODIES [3711] IRS NUMBER: 390520270 STATE OF INCORPORATION: WI FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 000-13886 FILM NUMBER: 96687287 BUSINESS ADDRESS: STREET 1: 2307 OREGON ST STREET 2: P O BOX 2566 CITY: OSHKOSH STATE: WI ZIP: 54903 BUSINESS PHONE: 4142359151 MAIL ADDRESS: STREET 2: 2307 OREGON ST P O BOX 2566 CITY: OSHKOSH STATE: WI ZIP: 54903 10-K405 1 FORM 10-K OSHKOSH TRUCK CORPORATION SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K (Mark One) (X) Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (Fee Required) for the fiscal year ended September 30, 1996, or ( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (No Fee Required) For the transition period from to Commission file number: 0-13886 Oshkosh Truck Corporation (Exact name of registrant as specified in its charter) Wisconsin 39-0520270 (State of other jurisdiction of (I.R.S. Employer Identification) incorporation or organization) P. O. Box 2566, Oshkosh, WI 54903-2566 (Address of principal executive offices) (zip code) Registrant's telephone number, including area code: (414) 235-9151 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Class B Common Stock (Title of Class) 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X Aggregate market value of the voting stock held by non-affiliates of the registrant as of November 15, 1996: Class A Common Stock, $.01 par value - No Established Market Value Class B Common Stock, $.01 par value - $87,509,997 Number of shares outstanding of each of the registrant's classes of common stock as of November 15, 1996: Class A Common Stock, $.01 par value - 408,958 shares Class B Common Stock, $.01 par value - 8,236,235 shares DOCUMENTS INCORPORATED BY REFERENCE Parts II and IV incorporate, by reference, portions of the Annual Report to Shareholders for the year ended September 30, 1996. Part III incorporates, by reference, portions of the Proxy Statement dated December 30, 1996. OSHKOSH TRUCK CORPORATION Index to Annual Report on Form 10-K Year ended September 30, 1996 Page PART I. ITEM 1. BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . 3 ITEM 2. PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . 7 ITEM 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . 8 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . . . . . . . . . . . . . . . . . . 8 EXECUTIVE OFFICERS OF THE REGISTRANT . . . . . . . . . . . . 8 PART II. ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS . . . . . . . . . . . . . 9 ITEM 6. SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . 9 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . 9 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . . 10 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . . . . 10 PART III. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT . . . . . . . . . . . . . . . . . . . . 10 ITEM 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . 10 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT . . . . . . . . . . . . . . . . . . 10 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . 10 PART IV. ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . 10 INDEX TO EXHIBITS . . . . . . . . . . . . . . . . . . . . . . 15 PART I Item 1. BUSINESS General The company engineers, manufactures and markets a broad range of specialized trucks and proprietary parts under the "Oshkosh" trademark, and a broad line of specialty fire apparatus under the "Pierce" trademark. As a specialized vehicle producer, the company holds a unique position in the industry, having acquired the engineering, rapid product development and lean manufacturing expertise and flexibility to profitably build specialty vehicles in competition with companies both much larger and smaller than itself. Mass producers design a vehicle to serve many markets. In contrast, the company's vehicles, manufactured in low to medium production volumes, are engineered for market niches where a unique, innovative design will meet a purchaser's requirements for use in specific, often adverse operating conditions. Many of the company's products are found operating in snow, deserts and soft or rough terrain where there is a need for high performance or high mobility. Because of the quality of its specialized vehicles, the company believes its products perform at lower life cycle costs than those that are mass-produced. Markets served by the company domestically and internationally are categorized as defense and commercial. Since 1980, specialized vehicle sales to the defense market have significantly increased and in fiscal 1996 represented 61% of the company's sales volume, after reaching a peak of 83% in fiscal 1987. The company primarily depends upon components made by suppliers for its products. The company has successfully managed its supply network, which consists of approximately 3,500 active vendors. Through its reliance on this supply network for the purchase of certain components, the company is able to avoid many of the preproduction and fixed costs associated with the manufacture of those components. While the company purchases many of the high dollar components for assembly, such as engines, transmissions and axles, it does have significant machining and fabricating capability for the manufacture of certain important proprietary components. This capability is used for the manufacture of certain axles, transfer cases, cabs, body structures, aerial ladders, and many smaller parts which add uniqueness and value to the company's products. Some of these proprietary components are marketed to other manufacturers. Acquisitions On September 18, 1996, the company acquired for cash all of the issued and outstanding stock of Pierce Manufacturing Inc. (Pierce), a leading manufacturer and marketer of fire trucks and other fire apparatus in the U.S. The acquisition price of $156.9 million, net of cash acquired, and including related costs was financed from borrowings under a new credit facility. On November 9, 1995, the company through its wholly- owned subsidiary, Summit Performance Systems, Inc. (Summit), acquired the inventory, land, buildings, machinery and equipment, and technology of Friesz Manufacturing Company (Friesz), a manufacturer of concrete mixer systems and related aftermarket replacement parts, from available cash for $3.9 million. Products and Markets The company currently manufactures seven different series of commercial trucks, and eight specialty fire apparatus models, and during fiscal 1996, had two active contracts with the U.S. Government related to production of the Palletized Load System (PLS) and Heavy Expanded Mobility Tactical Truck (HEMTT) vehicles. Within each series there is a varying number of models. Models are usually distinguished by differences in engine, transmission, axle, body configuration, pump, and ladder combinations, among others. Vehicles produced generally range in price from $60,000 to $1 million; in horsepower from 210 to 1,025; and in gross vehicle weight from 33,000 to 150,000 pounds. The company has designed vehicles to operate in the environmental extremes of arctic cold or desert heat. Most vehicles are designed with the capability to operate in both highway and off-road conditions. The company aggressively supports its products with an aftermarket parts and service organization. Defense The company manufactures a broad range of wheeled vehicles for the U.S. Department of Defense and export markets and is the free world's largest producer of heavy-duty wheeled vehicles. The company has performed major defense contracts for over 50 years, and in the year ended September 30, 1996 had defense sales of $251.5 million or 61% of its total sales. Contracts with the Department of Defense generally are multi-year contracts. Each contract typically provides that the government will purchase a base quantity of vehicles with options for additional purchases. All obligations of the government under the contracts are subject to receipt of government funding, and it is customary to expect purchases when Congress has funded the purchase through annual budget appropriations and after the government has committed the funds to the contractor. During fiscal 1996, the company primarily produced the Palletized Load System (PLS) and the Heavy Expanded Mobility Tactical Truck (HEMTT) products for the U.S. Department of Defense. During 1996, the company was awarded a contract to overhaul 274 existing HEMTT vehicles at a total value of approximately $23.2 million, of which 119 vehicles were completed in fiscal 1996. Each vehicle, along with major components and subassemblies, is disassembled. Parts are thoroughly cleaned and inspected for reuse, and for worn or damaged parts. After reassembly, the HEMTT vehicles are covered by a new vehicle warranty. The company has produced more than 14,400 of the eight wheel drive, ten ton capacity HEMTTs which are considered the backbone of the U.S. Army's heavy-duty truck fleet. Additionally during 1996, the U.S. Government awarded the company an innovative contract for the purchase of new HEMTTs and Logistic Vehicle System (LVS) front modules. Under this "family" contract, the U.S. Government plans to award sufficient sales to Oshkosh Truck to ensure a minimum production rate of 20 trucks per month for the two truck models through September 1999. The first purchase under this new contract is for 201 HEMTTs and 34 LVS modules valued at $47.1 million. Production at a rate of two vehicles per day is scheduled to begin in February 1997 and extend through August 1997. Oshkosh Truck is the first manufacturer of heavy-duty vehicles to be awarded a family contract. This new type of contract is called a family contract because it covers both the HEMTTs and LVS modules -- models which are considered members of the same vehicle family. These models are similar in design and have many common component suppliers. On November 21, 1996, the U.S. Army Tank Automotive and Armaments Command awarded each of the company and one other defense contractor, $6.9 million prototype contracts for Phase I competition of the Medium Tactical Truck Remanufacture Program (MTTR). The MTTR Program was initiated to update and modernize the 5-Ton tactical vehicle fleet of the U.S. Marine Corps. The goal of the program is to remanufacture the current configuration to a more robust design capable of carrying a much greater payload with substantially increased cross-country mobility. The current fleet of approximately 10,000 U.S. Marine Corps trucks are up to 20 years old. The new U.S. Marine Corps vehicle will have extraordinary performance and mobility exceeding that of any comparable truck in the world. The U.S. Army portion of the program is designed to increase the useful life, and decrease operation and support costs, of a portion of the U.S. Army's existing fleet of nearly 60,000 vehicles. It will include inserting current technologies, making the truck capable of performing its mission well into the next century. Phase I covers the design, development, and production of five prototype test vehicles for the U.S. Marine Corps. Five additional test vehicles for the U.S. Army are available as an option under the contract. The five Marine Corps vehicles will be ready for testing in August 1997, which will be completed in April 1998. Under Phase II of the program, up to a total of 11,500 U.S. Marine Corps and U.S. Army units will be awarded for production at a value of approximately $1.8 billion over several years. Competition for the Phase II production contract will be intense between the two Phase I contractors. Phase I testing along with the Phase II proposal will determine the single supplier of the production contract covering both the U.S. Marine Corps and U.S. Army vehicles. Commercial The company manufactures a wide variety of heavy-duty specialized trucks for vocational, airport, and municipal markets. Products are uniquely engineered for specific severe-duty requirements where innovative design provides superior performance. The fire apparatus business is conducted through the company's Pierce subsidiary headquartered in Appleton, Wisconsin. Pierce primarily serves municipal markets but also serves airports, universities and large industrial companies. The Pierce product line includes pumpers, aerials and heavy duty rescue vehicles on five different models of custom chassis and two models of commercial chassis. The company serves airport markets with products that include Aircraft Rescue and Firefighting (ARFF) and snow removal vehicles. ARFF vehicles are offered from 1000 to 3000 gallon capacities. Oshkosh also offers the innovative Snozzle/R/, an extendable turret with an integrated video camera and automated remote controls that can pierce into an aircraft interior and position the agent flow precisely at the location of the fire. Suppressant application is faster and uses up to 50% less agent than conventional mass application techniques. The all-wheel drive Oshkosh H-series snowblower keeps runways open by casting 4,000 tons of snow per hour. The H-series snowblower provides multi- purpose use with an interchangeable blower, blade plows and brooms. The all-wheel drive P-series with its heavy-duty frame has an unsurpassed reputation for durability. The construction business focuses on forward and rear discharge concrete carriers. The forward placement S-series design allows the driver to oversee faster, more accurate placement of concrete, with fewer support personnel. This leads to greater efficiency and superior customer service. A traditional rear discharge F-series is also offered as an integrated package allowing for one stop service and sales. The F-series is also sold in the utility and heavy haul transport markets. In addition, the company produces the J-series for desert oil field and extreme heavy hauling applications. The refuse business consists of two low entry, dual drive models, the NK and NL. The NL recently passed an extensive six month durability test in one of the toughest urban environments with a 97% availability status. The NK and NL feature eighteen inch step-in heights. Municipalities as well as commercial contractors look to the improved visibility and safety features a low entry low cab forward vehicle provides. Backlog The company's backlog at September 30, 1996 was $433 million, compared to $350 million at September 30, 1995. The backlog at fiscal year-end 1996 includes $272 million with respect to U.S. Government contracts, $118 million related to Pierce, and the remainder relates to other commercial products. All the company's backlog pertains to fiscal 1997 business except for defense backlog totaling $36 million with respect to fiscal 1998. Virtually all the company's revenues are derived from customer orders prior to commencing production. Stock Buyback In July 1995, the company's board of directors authorized the repurchase of up to 1,000,000 shares of Class B common stock. As of November 27, 1996, the company has repurchased 461,535 shares under this program at a cost of $6.6 million. Government Contracts A significant portion of the company's sales are made to the United States Government under long-term contracts and programs in which there are significant risks, including the uncertainty of economic conditions and defense policy. The company's defense business is substantially dependent upon periodic awards of new contracts and the purchase of base vehicle quantities and the exercise of options under existing contracts. The company's existing contracts with the U.S. Government may be terminated at any time for the convenience of the government. Upon such termination, the company would be entitled to reimbursement of its incurred costs and, in general, to payment of a reasonable profit for work actually performed. There can be no assurance that the U.S. Government will continue to purchase the company's products at comparable levels. The termination of any of the company's significant contracts, failure of the government to purchase quantities under existing contracts or failure of the company to receive awards of new contracts could have a material adverse effect on the business operations of the company. Under firm fixed-price contracts with the government, the price paid the company is not subject to adjustment to reflect the company's actual costs, except costs incurred as a result of contract changes ordered by the government or for economic price adjustment clauses contained in certain contracts. The company generally attempts to negotiate with the government the amount of increased compensation to which the company is entitled for government-ordered changes which result in higher costs. In the event that the company is unable to negotiate a satisfactory agreement to provide such increased compensation, the company may file an appeal with the Armed Services Board of Contract Appeals or the U.S. Claims Court. The company has no such appeals pending. Marketing and Distribution All domestic defense products are sold direct and the company maintains a liaison office in Washington, D.C. The company also sells defense products to foreign governments direct, through representatives, or under the United States Foreign Military Sales program. The company's commercial vehicles and aftermarket parts are sold either direct to customers, or through dealers or distributors, depending upon geographic area and product line. Fire apparatus products are sold almost exclusively through a distributor network. Supplemental information relative to export shipments is incorporated by reference to Note 11 of the financial statements included in the company's Annual Report to Shareholders for the fiscal year ended September 30, 1996. Alliance On June 2, 1995, the company entered into a strategic alliance with Freightliner Corporation. The agreement provided for the marketing of certain of the company's vocational products through Freightliner's distribution system, the manufacture by the company of several series of Freightliner's severe duty trucks and the transfer of Freightliner's non- commercial military business to the company. Sales of the company's vocational products through Freightliner's distribution system in fiscal 1996 were limited, and in fiscal 1997, the company will assume control of its commercial marketing and sales. Further, Freightliner has decided not to transfer either the manufacture of any severe duty trucks or its noncommercial military business to the company. The company and Freightliner will continue to supply each other specialty products and components. Competition In all the company's markets, the competitors include smaller, specialized manufacturers as well as the larger, mass producers. The company believes that its technical strength and production capability enable it to effectively compete with other specialized manufacturers. The company also believes that its manufacturing flexibility, engineering, product development and lean manufacturing expertise in the low to middle production volumes allows it to compete effectively in its markets against mass producers. The company's principal competitors for U.S. Department of Defense contracts include AM General Corporation and Stewart & Stevenson Services, Inc. Pierce's principal fire apparatus competitors include Emergency One, Inc. (a subsidiary of Federal Signal Corporation), FWD Corporation (a subsidiary of Corsta Corporation), Kovatch Mobile Equipment Corp., American La France (a subsidiary of Freightliner Corporation), and over 75 other manufacturers. The company's principal competitors in other commercial markets include McNeilus Truck Manufacturing, Inc., CCC Industries Inc., Advance Mixer Inc., and Mack Trucks Inc. The principal method of competition for the company in the defense and municipal markets, where there is intense competition, is generally on the basis of lowest qualified bid. In the non-governmental markets, the company competes on the basis of price, innovation, quality and product performance capabilities. Engineering, Test and Development For fiscal years 1996, 1995, and 1994 the company incurred engineering, research and development expenditures of $6.3 million, $5.4 million, and $6.6 million, respectively, portions of which were recoverable from customers, principally the U.S. Government. The company does not believe that patents are a significant factor in its business success. Employees As of September 30, 1996, the company had approximately 2,700 employees of which approximately 1,300 and 1,200 employees are located at its principal facilities in Oshkosh and Appleton, Wisconsin, respectively. Production workers totaling approximately 800 employees at the company's principal facilities in Oshkosh, Wisconsin are represented by the United Auto Workers union. The company's five-year contract with the United Auto Workers extends through September 30, 2001. The company believes its relationship with employees is satisfactory. Item 2. PROPERTIES. The company's principal offices and manufacturing facilities are located in Oshkosh, Wisconsin. Space occupied encompasses 688,000 square feet, 52,000 of which is leased and the remainder is owned. One-half of the space owned by the company has been constructed since 1970. The company owns approximately 50 acres of vacant land adjacent to its existing facilities. The company's Pierce subsidiary, located in Appleton, Wisconsin, occupies 554,000 square feet of owned office and manufacturing space. The company additionally owns a 28,000 square foot manufacturing facility located in Weyauwega, Wisconsin, and owns a 287,000 sq. ft. manufacturing facility located in Bradenton, Florida. In addition, the company has a leased parts and service facility in Hartford, CT and owns a similar facility in Oshkosh, WI. The company's equipment and buildings are modern, well maintained and adequate for its present and anticipated needs. Item 3. LEGAL PROCEEDINGS. Various actions or claims have been asserted or may be asserted in the future by the government against the company. A potential action by the government against the company in connection with a grand jury investigation was commenced in 1989. In 1996, the government discontinued this investigation without any action against the company or its employees, although a civil investigation is possible. The company is engaged in litigation against Super Steel Products Corporation (SSPC), the company's former supplier of mixer systems for front discharge concrete mixer trucks under a long-term supply contract. SSPC sued the company in state court claiming the company breached the contract. The company counterclaimed for repudiation of contract. On July 26, 1996, a jury returned a verdict for SSPC awarding damages totaling $4,485,000. On October 10, 1996, the state court judge overturned the verdict against the company, granted judgment for the company on its counterclaim, and ordered a new trial for damages on the company's counterclaim. SSPC has appealed this judgment. The company is subject to environmental matters and other legal proceedings and claims which arise in the ordinary course of business. Although the final results of all such matters and claims cannot be predicted with certainty, management believes that the ultimate resolution of all such matters and claims, after taking into account the liabilities accrued with respect to such matters and claims, will not have a material adverse effect on the company's financial condition or results of operations. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year ended September 30, 1996. EXECUTIVE OFFICERS OF THE REGISTRANT The executive officers of the company are as follows: Name Age* Title R. Eugene Goodson 61 Chairman & Chief Executive Officer, Member of Executive Committee and Director Robert G. Bohn 43 President & Chief Operating Officer Timothy M. Dempsey 56 Vice President, General Counsel and Secretary Paul C. Hollowell 55 Executive Vice President Charles L. Szews 40 Vice President and Chief Financial Officer Matthew J. Zolnowski 43 Vice President-Administration *As of December 4, 1996 All of the company's officers serve terms of one year and until their successors are elected and qualified. R. EUGENE GOODSON - Mr. Goodson joined the company in 1990 in his present position. Prior thereto, Mr. Goodson served as Group Vice President and General Manager of the Automotive Systems Group of Johnson Controls, Inc., a supplier of automated building controls, automotive seating, batteries and plastic packaging, which position he held since 1985. Mr. Goodson is also a director of Donnelly Corporation. ROBERT G. BOHN - Mr. Bohn joined the company in 1992 as Vice President-Operations. He was appointed President and Chief Operating Officer in 1994. Prior to joining the company Mr. Bohn was Director- European Operations for Johnson Controls, Inc. from 1984 until 1992. He was elected a director of the company by the Board of Directors in June 1995. TIMOTHY M. DEMPSEY - Mr. Dempsey joined the company in October 1995 as Vice President, General Counsel and Secretary. Mr. Dempsey has been and continues to be a partner in the law firm of Dempsey, Magnusen, Williamson and Lampe in Oshkosh, Wisconsin. PAUL C. HOLLOWELL - Mr. Hollowell joined the company in April 1989 as Vice President-Defense Products and assumed his present position in February 1994. Mr. Hollowell was previously employed by General Motors Corporation where he served for three years as manager of their Washington, DC office for military tactical vehicle programs. He previously served 22 years in the U.S. Army from which he retired with the rank of Lieutenant Colonel. CHARLES L. SZEWS - Mr. Szews joined the company in March 1996 as Vice President and Chief Financial Officer. Mr. Szews was previously employed by Fort Howard Corporation from June 1988 until March 1996 in various positions, including Vice President and Controller from September 1994 until March 1996. MATTHEW J. ZOLNOWSKI - Mr. Zolnowski joined the company as Vice President-Human Resources in January 1992 and assumed his present position in February 1994. Before joining the company Mr. Zolnowski was Director, Human Resources and Administration at Rexene Products Company from September 1990 through January 1992 and Director, Headquarters Employee Relations at PepsiCo, Inc. from June 1982 through August 1990. PART II Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS. The information under the captions "Shareholder Information", Note 7 to the Consolidated Financial Statements, and "Financial Statistics" contained in the company's Annual Report to Shareholders for the fiscal year ended September 30, 1996, is hereby incorporated by reference in answer to this item. Item 6. SELECTED FINANCIAL DATA. The information under the caption "Financial Highlights" contained in the company's Annual Report to Shareholders for the fiscal year ended September 30, 1996, is hereby incorporated by reference in answer to this item. Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The information under the caption "Management's Discussion and Analysis of Consolidated Financial Condition and Results of Operations" contained in the company's Annual Report to Shareholders for the fiscal year ended September 30, 1996, is hereby incorporated by reference in answer to this item. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The financial statements set forth in the company's Annual Report to Shareholders for the fiscal year ended September 30, 1996, are hereby incorporated by reference in answer to this item. Data regarding quarterly results of operations included under the caption "Financial Statistics" in the company's Annual Report to Shareholders for the fiscal year ended September 30, 1996, is hereby incorporated by reference. Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES. None. PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The information under the captions "Election of Directors" and "Other Matters" of the company's definitive proxy statement for the annual meeting of shareholders on February 3, 1997, as filed with the Securities and Exchange Commission, is hereby incorporated by reference in answer to this Item. Reference is also made to the information under the heading "Executive Officers of the Registrant" included under Part I of this report. Item 11. EXECUTIVE COMPENSATION. The information under the captions "Executive Compensation" contained in the company's definitive proxy statement for the annual meeting of shareholders on February 3, 1997, as filed with the Securities and Exchange Commission is hereby incorporated by reference in answer to this item. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information under the caption "Shareholdings of Nominees and Principal Shareholders" contained in the company's definitive proxy statement for the annual meeting of shareholders on February 3, 1997, as filed with the Securities and Exchange Commission, is hereby incorporated by reference in answer to this item. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information contained under the captions "Election of Directors" and "Certain Transactions" contained in the company's definitive proxy statement for the annual meeting of shareholders on February 3, 1997, as filed with the Securities and Exchange Commission, is hereby incorporated by reference in answer to this item. PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a) 1. Financial Statements: The following consolidated financial statements of the company and the report of independent auditors included in the Annual Report to Shareholders for the fiscal year ended September 30, 1996, are incorporated by reference in Item 8: Consolidated Statements of Income (Loss) for the years ended September 30, 1996, 1995, and 1994 Consolidated Balance Sheets at September 30, 1996, and 1995 Consolidated Statements of Shareholders' Equity for the years ended September 30, 1996, 1995, and 1994. Consolidated Statements of Cash Flows for the years ended September 30, 1996, 1995, and 1994 Notes to Consolidated Financial Statements Report of Ernst & Young, LLP Independent Auditors 2. Financial Statement Schedules: Schedule II - Valuation & Qualifying Accounts All other schedules are omitted because they are not applicable, or the required information is shown in the consolidated financial statements or notes thereto. 3. Exhibits: 2.1 Stock Purchase Agreement by and among Pierce Manufacturing Inc., the shareholders of Pierce Manufacturing Inc., and Oshkosh Truck Corporation dated August 7, 1996 (incorporated by reference to Exhibit 2.1 to the company's Current Report on Form 8-K dated September 18, 1996 (Commission File No. 0- 13886)). 2.2 First Amendment to Stock Purchase Agreement by and among Pierce Manufacturing Inc., the shareholders of Pierce Manufacturing Inc., and Oshkosh Truck Corporation dated September 18, 1996 (incorporated by reference to Exhibit 2.2 to the company's Current Report on Form 8-K dated September 18, 1996 (Commission File No. 0-13886)). 3.1 Restated Articles of Incorporation * 3.2 Bylaws of the company, as amended ***** 4.1 Credit Agreement dated as of September 18, 1996 among Oshkosh Truck Corporation, and certain lenders with Firstar Bank Milwaukee, N.A., as Agent (incorporated by reference to Exhibit 4 to the company's Current Report on Form 8-K dated September 18, 1996 (Commission File No. 0-13886)). 4.2 Series A Warrant to purchase shares of Class B Common Stock of Oshkosh Truck Corporation delivered to Freightliner Corporation by Oshkosh. ###### 4.3 First Amendment to Credit Agreement dated as of November 27, 1996 among Oshkosh Truck Corporation, and certain lenders with Firstar Bank Milwaukee, N.A., as Agent. 10.1 Lease with Cadence Company (formerly Mosling Realty Company) and related documents * 10.2 1990 Incentive Stock Plan for Key Employees, as amended (through January 25, 1995) #### @ 10.3 Form of Key Employee Employment and Severance Agreement with R. E. Goodson, Chairman & CEO ** @ 10.4 Employment Agreement with R. E. Goodson, Chairman & CEO as of April 16, 1990 **** @ 10.5 Restricted stock grant to R. E. Goodson, Chairman & CEO**** @ 10.6 Incentive Stock Option Agreement to R. E. Goodson, Chairman & CEO **** @ 10.7 Employment Agreement with R. E. Goodson, Chairman & CEO as of April 16, 1992 ## @ 10.8 1994 Long-Term Incentive Compensation Plan dated March 29, 1994 #### @ 10.9 Form of Key Employees Employment and Severance Agreement with Messrs. R.G. Bohn, T.M. Dempsey, P.C. Hollowell, C.L. Szews, and M.J. Zolnowski #### @ 10.10 Employment Agreement with P.C. Hollowell, Executive Vice President @ 10.11 Form of Oshkosh Truck Corporation 1990 Incentive Stock Plan, as amended, Nonqualified Stock Option Agreement.##### @ 10.12 Form of Oshkosh Truck Corporation 1990 Incentive Stock Plan, as amended, Nonqualified Director Stock Option Agreement. ##### @ 10.13 Alliance Agreement, dated as of June 2, 1995, between Freightliner and Oshkosh. ###### 10.14 Letter Agreement among J. Peter Mosling, Jr., Stephen P. Mosling, Freightliner, Oshkosh and R. Eugene Goodson. ###### 10.15 Lease extension with Cadence Company (as referenced under 10.1) (incorporated by reference to Exhibit 10.15 to the Company's Annual Report on Form 10-K for the year ended September 30, 1995 (Commission File No. 1-13886)) 10.16 Form of 1994 Long-Term Incentive Compensation Plan Award Agreement (incorporated by reference to Exhibit 10.16 to the Company's Annual Report on Form 10-K for the year ended September 30, 1995 (Commission File No. 1-13886))@ 10.17 Stock Purchase Agreement, dated April 26, 1996, among Oshkosh Truck Corporation, J. Peter Mosling, Jr. and Stephen P. Mosling, and consented to by R. Eugene Goodson. 11. Computation of per share earnings (contained in Note 1 of "Notes to Consolidated Financial Statements" of the company's Annual Report to Shareholders for the fiscal year ended September 30, 1996) 13. 1996 Annual Report to Shareholders, to the extent incorporated herein by reference 23. Consent of Ernst & Young LLP 27. Financial Data Schedule *Previously filed and incorporated by reference to the company's Form S-1 registration statement filed August 22, 1985, and amended September 27, 1985, and October 2, 1985 (Reg. No. 2-99817). **Previously filed and incorporated by reference to the company's Form 10- K for the year ended September 30, 1987. ****Previously filed and incorporated by reference to the company's Form 10-K for the year ended September 30, 1990. *****Previously filed and incorporated by reference to the company's Form 10-K for the year ended September 30, 1991. ## Previously filed and incorporated by reference to the company's Form 10-K for the year ended September 30, 1992. #### Previously filed and incorporated by reference to the company's Form 10-K for the year ended September 30, 1994. @Denotes a management contract or compensatory plan or arrangement. ##### Previously filed and incorporated by reference to the company's Form S-8 filing dated September 22, 1995. (Reg. No. 33-62687) ###### Previously filed and incorporated by reference to the company's Form 8-K filing dated June 2, 1995. (b) On October 2, 1996, the company filed a Current Report on Form 8-K dated September 18, 1996 reporting the company's acquisition of all of the issued and outstanding stock of Pierce Manufacturing Inc. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities 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 December 27, 1996 By /s/ R. Eugene Goodson R. Eugene Goodson Chairman and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities on the dates indicated. December 27, 1996 /s/ R. Eugene Goodson R. E. Goodson Chairman and Chief Executive Officer (Principal Executive Officer) December 27, 1996 /s/ R. G. Bohn R. G. Bohn President and Chief Operating Officer and Director December 27, 1996 /s/ C. L. Szews C. L. Szews Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) December 27, 1996 /s/ J. W. Andersen J. W. Andersen Director December 27, 1996 /s/ D. T. Carroll D. T. Carroll Director December 27, 1996 /s/ M. W. Grebe M. W. Grebe Director December 27, 1996 /s/ S. P. Mosling S. P. Mosling Director and Member of Executive Committee December 27, 1996 /s/ J. P. Mosling, Jr. J. P. Mosling, Jr. Director and Member of Executive Committee SCHEDULE II OSHKOSH TRUCK CORPORATION VALUATION AND QUALIFYING ACCOUNTS Years Ended September 30, 1996, 1995, and 1994 (In Thousands) Balance at Purchase Additions Balance Beginning of Charged to at End Classification of Year Pierce Expense Reductions* of Year Receivables - Allowance for doubtful accounts: 1994 $417 --- $288 $(274) $431 ==== ==== ==== ==== ==== 1995 $431 --- $143 $(97) $477 ==== ==== ==== ==== ==== 1996 $477 $509 $182 $(102) $1,066 ==== ==== ==== ==== ===== * Represents amounts written off to the reserve, net of recoveries. EXHIBIT INDEX Exhibits 3. Exhibits: 2.1 Stock Purchase Agreement by and among Pierce Manufacturing Inc., the shareholders of Pierce Manufacturing Inc., and Oshkosh Truck Corporation dated August 7, 1996 (incorporated by reference to Exhibit 2.1 to the company's Current Report on Form 8-K dated September 18, 1996 (Commission File No. 0-13886)). 2.2 First Amendment to Stock Purchase Agreement by and among Pierce Manufacturing Inc., the shareholders of Pierce Manufacturing Inc., and Oshkosh Truck Corporation dated September 18, 1996 (incorporated by reference to Exhibit 2.2 to the company's Current Report on Form 8-K dated September 18, 1996 (Commission File No. 0-13886)). 3.1 Restated Articles of Incorporation * 3.2 Bylaws of the company, as amended ***** 4.1 Credit Agreement dated as of September 18, 1996 among Oshkosh Truck Corporation, and certain lenders with Firstar Bank Milwaukee, N.A., as Agent (incorporated by reference to Exhibit 4 to the company's Current Report on Form 8-K dated September 18, 1996 (Commission File No. 0- 13886)). 4.2 Series A Warrant to purchase shares of Class B Common Stock of Oshkosh Truck Corporation delivered to Freightliner Corporation by Oshkosh. ###### 4.3 First Amendment to Credit Agreement dated as of November 27, 1996 among Oshkosh Truck Corporation, and certain lenders with Firstar Bank Milwaukee, N.A., as Agent. 10.1 Lease with Cadence Company (formerly Mosling Realty Company) and related documents * 10.2 1990 Incentive Stock Plan for Key Employees, as amended (through January 25, 1995) #### @ 10.3 Form of Key Employee Employment and Severance Agreement with R. E. Goodson, Chairman & CEO ** @ 10.4 Employment Agreement with R. E. Goodson, Chairman & CEO as of April 16, 1990 **** @ 10.5 Restricted stock grant to R. E. Goodson, Chairman & CEO**** @ 10.6 Incentive Stock Option Agreement to R. E. Goodson, Chairman & CEO **** @ 10.7 Employment Agreement with R. E. Goodson, Chairman & CEO as of April 16, 1992 ## @ 10.8 1994 Long-Term Incentive Compensation Plan dated March 29, 1994 #### @ 10.9 Form of Key Employees Employment and Severance Agreement with Messrs. R.G. Bohn, T.M. Dempsey, P.C. Hollowell, C.L. Szews, and M.J. Zolnowski #### @ 10.10 Employment Agreement with P.C. Hollowell, Executive Vice President @ 10.11 Form of Oshkosh Truck Corporation 1990 Incentive Stock Plan, as amended, Nonqualified Stock Option Agreement.##### @ 10.12 Form of Oshkosh Truck Corporation 1990 Incentive Stock Plan, as amended, Nonqualified Director Stock Option Agreement. ##### @ 10.13 Alliance Agreement, dated as of June 2, 1995, between Freightliner and Oshkosh. ###### 10.14 Letter Agreement among J. Peter Mosling, Jr., Stephen P. Mosling, Freightliner, Oshkosh and R. Eugene Goodson. ###### 10.15 Lease extension with Cadence Company (as referenced under 10.1) (incorporated by reference to Exhibit 10.15 to the Company's Annual Report on Form 10-K for the year ended September 30, 1995 (Commission File No. 1-13886)) 10.16 Form of 1994 Long-Term Incentive Compensation Plan Award Agreement (incorporated by reference to Exhibit 10.16 to the Company's Annual Report on Form 10-K for the year ended September 30, 1995 (Commission File No. 1-13886))@ 10.17 Stock Purchase Agreement, dated April 26, 1996, among Oshkosh Truck Corporation, J. Peter Mosling, Jr. and Stephen P. Mosling, and consented to by R. Eugene Goodson. 11. Computation of per share earnings (contained in Note 1 of "Notes to Consolidated Financial Statements" of the company's Annual Report to Shareholders for the fiscal year ended September 30, 1996) 13. 1996 Annual Report to Shareholders, to the extent incorporated herein by reference 23. Consent of Ernst & Young LLP 27. Financial Data Schedule *Previously filed and incorporated by reference to the company's Form S-1 registration statement filed August 22, 1985, and amended September 27, 1985, and October 2, 1985 (Reg. No. 2-99817). **Previously filed and incorporated by reference to the company's Form 10- K for the year ended September 30, 1987. ****Previously filed and incorporated by reference to the company's Form 10-K for the year ended September 30, 1990. *****Previously filed and incorporated by reference to the company's Form 10-K for the year ended September 30, 1991. ## Previously filed and incorporated by reference to the company's Form 10-K for the year ended September 30, 1992. #### Previously filed and incorporated by reference to the company's Form 10-K for the year ended September 30, 1994. @Denotes a management contract or compensatory plan or arrangement. ##### Previously filed and incorporated by reference to the company's Form S-8 filing dated September 22, 1995. (Reg. No. 33-62687) ###### Previously filed and incorporated by reference to the company's Form 8-K filing dated June 2, 1995. (b) On October 2, 1996, the company filed a Current Report on Form 8-K dated September 18, 1996 reporting the company's acquisition of all of the issued and outstanding stock of Pierce Manufacturing Inc. EX-4.3 2 FIRST AMENDMENT TO CREDIT AGREEMENT FIRST AMENDMENT TO CREDIT AGREEMENT THIS FIRST AMENDMENT TO CREDIT AGREEMENT (the "First Amendment"), dated as of November 27, 1996 but with retroactive effect to September 28, 1996, amends the Credit Agreement dated as of September 18, 1996 by and among OSHKOSH TRUCK CORPORATION, a Wisconsin corporation (the "Borrower"), those Subsidiaries identified as a "Guarantor" on the signature pages hereto and such other Subsidiaries as may from time to time become a party hereto (the "Guarantors"), the several lenders identified on the signature pages hereto and such other lenders as may from time to time become a party hereto (the "Lenders"), FIRSTAR BANK MILWAUKEE, N.A., as agent for the Lenders (in such capacity, the "Agent") and BANK ONE, MILWAUKEE, NA, NATIONSBANK, N.A. and HARRIS TRUST AND SAVINGS BANK, as co-agents (as so amended, the "Credit Agreement"). 1. Definitions. Capitalized terms not otherwise defined herein shall have the meanings assigned to them in the Credit Agreement. 2. Amendment. The parties hereby agree to amend the Credit Agreement as follows: 2.1 Section 7.9(a). Section 7.9(a) of the Credit Agreement is deleted in its entirety and replaced by the following new Section 7.9(a): (a) Consolidated Funded Debt Ratio. There shall be maintained as of the end of each fiscal quarter to occur during the periods shown below a Consolidated Funded Debt Ratio of not greater than: Period From Closing Date through December 27, 1996 4.75:1.0 December 28, 1996 through March 28, 1997 4.50:1.0 March 29, 1997 through June 27, 1997 4.25:1.0 June 28, 1997 through September 26, 1997 4.00:1.0 September 27, 1997 through September 25, 1998 3.25:1.0 September 26, 1998 through September 24, 1999 3.00:1.0 September 25, 1999 though September 29, 2000 2.50:1.0 September 30, 2000 through September 28, 2001 2.25:1.0 September 29, 2001 through September 27, 2002 2.00:1.0 September 28, 2002 and thereafter 1.75:1.0 2.2 Section 7.9(c). Section 7.9(c) of the Credit Agreement is deleted in its entirety and replaced by the following new Section 7.9(c): (c) Interest Coverage Ratio. There shall be maintained as of the end of each fiscal quarter to occur during the periods shown below an Interest Coverage Ratio of at least: Period From Closing Date through March 28, 1997 0.85:1.0 March 29, 1997 through June 27, 1997 1.00:1.0 June 28, 1997 through September 26, 1997 1.25:1.0 September 27, 1997 through December 26, 1997 1.75:1.0 December 27, 1997 through March 27, 1998 2.00:1.0 March 28, 1998 through September 25, 1998 2.25:1.0 September 26, 1998 through September 29, 2000 2.50:1.0 September 30, 2000 and thereafter 3.00:1.0 2.3 Schedule 2.1(d). Schedule 2.1(d) of the Credit Agreement is deleted in its entirety and replaced by new Schedule 2.1(d) in the form attached hereto. 3. Conditions Precedent. This First Amendment shall become effective on the date that the Agent (for the benefit of the Lenders) shall have received each of the following: (a) this First Amendment, duly executed by an authorized representative of each of the Credit Parties and the Lenders; and (b) an amendment fee in an amount equal to one-eighth of 1% of the Revolving Committed Amount and the Term Loan Committed Amount. 4. Representations and Warranties. To induce the Lenders to enter into this First Amendment, each of the Credit Parties hereby represents and warrants to the Agent and to each Lender that: (a) the representations and warranties contained in the Credit Agreement are true and correct as of the date of this First Amendment; and (b) no Default or Event of Default has occurred and is continuing as of the date of this First Amendment. 5. Full Force and Effect. Except as provided herein, all of the terms and conditions set forth in the Credit Agreement, and all additional documents entered into in connection with the Credit Agreement, shall remain unchanged and shall continue in full force and effect as originally set forth, and each of the foregoing is hereby ratified and confirmed in all respects. 6. Binding Effect. This First Amendment shall be binding upon the parties hereto and their respective successors and assigns. [REMAINDER OF PAGE DELIBERATELY BLANK] IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this First Agreement to be duly executed and delivered as of the date first above written. BORROWER: OSHKOSH TRUCK CORPORATION, a Wisconsin corporation By: /s/ Charles L. Szews Title: Vice President and Chief Financial Officer GUARANTORS: PIERCE MANUFACTURING INC., a Wisconsin corporation By: /s/ Charles L. Szews Title: Vice President and Chief Financial Officer SUMMIT PERFORMANCE SYSTEMS, INC., a Wisconsin corporation By: /s/ Charles L. Szews Title: Vice President and Chief Financial Officer LENDERS: FIRSTAR BANK MILWAUKEE, N.A., in its capacity as Agent and as a Lender By: /s/ Title: First Vice President BANK ONE, MILWAUKEE, NA, in its capacity as a Co-Agent and as a Lender By: /s/ A. F. Maggione Title: Vice President NATIONSBANK, N.A., in its capacity as a Co-Agent and as a Lender By: /s/ Wallace Harris Jr. Title: Vice President HARRIS TRUST AND SAVINGS BANK, in its capacity as a Co-Agent and as a Lender By: /s/ Title: Vice President BANK OF AMERICA ILLINOIS, as Lender By: /s/ Title: Sr. Vice President LASALLE NATIONAL BANK, as Lender By: /s/ Title: FIRST BANK (N.A.), as Lender By: /s/ Title: Vice President THE NORTHERN TRUST COMPANY, as Lender By: /s/ Title: Vice President NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Lender By: /s/ Michael W. Krutoch Title: Vice President COMERICA BANK, as Lender By: /s/ Title: Vice President Schedule 2.1(d) Applicable Percentage 1. If the Interest Coverage Ratio is less than 1.00:1.0, then the Applicable Percentage shall be as specified below for Pricing Level 8. 2. If the Interest Coverage Ratio is less than 1.5:1.0 but equal to or greater than 1.0:1.0, then the Applicable Percentage shall be as specified below for Pricing Level 7. 3. If the Interest Coverage Ratio is less than 2.0:1.0 but equal to or greater than 1.5:1.0, then the Applicable Percentage shall be as specified below for Pricing Level 6. 2. If the Interest Coverage Ratio is 2.00:1.0 or greater, then the Applicable Percentage shall be determined by reference to the Consolidated Funded Debt Ratio, as specified below:
Applicable Applicable Percentage Applicable Percentage Pricing Consolidated for Revolving Loans and Percentage for Unused Level Funded Debt Ratio Letter of Credit Fee for Term Loan Facility Fee 8 >4.0:1.0 2.125 2.50 0.250 7 <4.0:1.0 but >3.5:1.0 1.875 2.25 0.250 6 <3.5:1.0 but >3.0:1.0 1.625 2.00 0.250 5 <3.0:1.0 but >2.5:1.0 1.375 1.75 0.175 4 <2.5:1.0 but >2.0:1.0 1.125 1.50 0.175 3 <2.0:1.0 but >1.5:1.0 0.875 1.25 0.175 2 <1.5:1.0 but >1.0:1.0 0.625 1.00 0.100 1 <1.0:1.0 0.375 0.750 0.100
EX-10.17 3 STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT I. The Parties The Parties to this Agreement are: 1.01 Oshkosh Truck Corporation, a Wisconsin corporation, located at 2307 Oregon Street, Oshkosh, Wisconsin ("Oshkosh"). 1.02 J. Peter Mosling, Jr., an adult resident of Pickett, Wisconsin ("Peter"). 1.03 Stephen P. Mosling, an adult resident of Oshkosh, Wisconsin ("Stephen"). II. The Recitals 2.01 The Date of this Agreement is the 26th day of April, 1996. 2.02 Peter and Stephen, together, are the individual owners of a substantial majority of the issued and outstanding shares of Class A Common Stock of Oshkosh (such shares that Peter and Stephen own individually are collectively referred to as "Shares"). 2.03 The Parties desire to establish the circumstances, terms and conditions under which Oshkosh will acquire the Shares, to impose certain limitations upon the transferability of Shares by Peter and Stephen in the interim, and to provide ultimately for conversion of all issued and outstanding shares of Class A Common Stock of Oshkosh into shares of its Class B Common Stock. 2.04 The number of issued and outstanding shares of Class A Common Stock on the Date of this Agreement are 409,503. Of these, Peter owns individually 119,813 shares, and Stephen owns individually 120,892 shares. Class A shares owned indirectly or beneficially by either of them through Cadence Company, a Wisconsin general partnership, are not intended to be subject to this Agreement. Class A shares owned by Stephen as Trustee for Melissa K. Mosling also are not intended to be subject to this Agreement. 2.05 Previously, in connection with execution by Oshkosh of a Strategic Alliance Agreement with Freightliner Corporation on June 2, 1995, Peter and Stephen agreed to certain limitations upon the transferability of their Shares, and it is the intention of the Parties that this Agreement be effective independent from the effect of that agreement. 2.06 The Class B Common Stock of Oshkosh is publicly traded on NASDAQ and registered with the Securities and Exchange Commission. The Class A Common Stock is not registered with the Securities and Exchange Commission and is publicly traded only on occasion. III. The Agreement 3.01 The Recitals. The Recitals are a part of this Agreement. 3.02 Restrictions on Sale or Transfer by Peter and Stephen. Except as provided by this Agreement, and as limited by the agreement dated June 2, 1995, Peter and Stephen agree that they will not transfer, sell or otherwise dispose of any shares which either of them now or in the future may own directly in their own names. 3.021 A pledge of Shares shall not be considered a transfer, sale or other disposition, but a levy upon or foreclosure of a pledge shall be deemed to be a sale or other disposition. 3.022 Peter and Stephen each may transfer Shares to the other, or to trusts for the respective benefit of each or the other, including voting trusts in which at least one of them serves as trustee and, as such, or as otherwise provided by the trust, shall have the full and unrestricted authority, power and discretion to vote such Shares on all matters as to which the Shares may be voted. 3.023 Peter and Stephen each may transfer Shares to trusts which are effective upon the death of the transferor, whether testamentary or otherwise, in which at least one of them serves as a trustee and, as such, or as otherwise provided by the trust, shall have the full and unrestricted authority, power and discretion to vote such Shares on all matters as to which the Shares may be voted. 3.024 Peter and/or Stephen each may transfer Shares to R. Eugene Goodson pursuant to a certain letter agreement dated June 25, 1990. 3.025 Transfers to a pledgee or Trustee, under this Section 3.02, or to Mr. Goodson shall be subject to all of the terms and conditions of this Agreement, and any further transfer of Shares by any such pledgee or Trustee or by Mr. Goodson, except to a permitted transferee under this Section shall be deemed a prohibited transfer, sale or other disposition of the Shares. 3.026 Peter and Stephen each may exchange Shares for shares of Class B Common Stock of Oshkosh at any time(s) and in any amount. To the extent that they transfer Shares as permitted by this Section 3.02, their transferees also may exchange Shares for shares of Class B Common Stock. When exchanged, such shares of Class B Common Stock shall be free from the terms and conditions of this Agreement. Notwithstanding the foregoing, Peter and/or Stephen and/or any such transferee, will not exchange Shares if, following such exchange, the remaining Shares would not constitute a majority of the outstanding Class A Common Stock on a fully diluted basis unless the amendment contemplated by Section 3.03 has been effected. 3.03 Covenant to Act to Amend the Articles of Incorporation of Oshkosh. Peter and Stephen each agree that in the event the Board of Directors of Oshkosh at any time proposes to its Shareholders that the Articles of Incorporation of Oshkosh be amended to provide a mechanism for mandatory conversion of issued and outstanding shares of Class A Common Stock so that Oshkosh will have only one issued and outstanding class of common stock, with such conversion to occur upon the earliest to occur of: 3.031 The death of the survivor of Peter and Stephen; 3.032 The legal incapacity of Peter and/or Stephen under circumstances in which neither of them has the legal capacity and capability to vote a majority of the issued and outstanding shares of Class A Common Stock of Oshkosh at that time, which incapacity thereafter continues for a period of time which includes the date of regularly-scheduled annual meeting of the shareholders of Oshkosh and two hundred seventy (270) days following such date; or 3.033 The number of issued and outstanding shares of Class A Common Stock of Oshkosh beneficially owned by Peter and/or Stephen falls for any reason below 150,000 shares, or such higher number as may be agreed upon by the Parties; they will vote their Class A Common Stock shares in favor of such an amendment, and will cause any trustee or pledgee of Shares to vote in favor of such an amendment. 3.04 Covenant to Act to Eliminate Class A Stock. Peter and Stephen each agree that in the event of the death of the survivor of them, or in the event that at an earlier time neither of them has the legal capacity and capability to vote a majority of the issued and outstanding shares of Class A Common Stock of Oshkosh, then they or their legal representatives and trustees, if any, promptly shall exert their best efforts to cause Oshkosh to do all things necessary to effect a prompt and orderly elimination, whether by conversion into shares of Class B Common Stock of Oshkosh or otherwise, of all issued and outstanding shares of Class A Common Stock of Oshkosh. They also agree that they and their legal representatives and trustees, if any, promptly shall take such actions, including the tender of Shares for shares of Class B Common Stock, as may be necessary to require the conversion of all issued and outstanding shares of Class A Common Stock of Oshkosh so that Oshkosh will have only one class of issued and outstanding common stock. 3.041 Notwithstanding anything to the contrary provided by this Section or elsewhere by this Agreement, no action shall be required of Peter, Stephen or their legal representatives or trustees which would have the effect of eliminating Shares other than in the context of a simultaneous conversion of all other issued and outstanding shares of Class A Common Stock of Oshkosh. 3.042 In the event of action by Oshkosh to amend its Articles of Incorporation as set forth in Section 3.03, Peter and Stephen each shall give Oshkosh an irrevocable notice of conversion of their Shares in a form sufficient to give effect to their covenants in this Section 3.04. 3.05 Action by Oshkosh. In the absence of prior action by Oshkosh under Section 3.03, above, Oshkosh agrees that upon receipt of a request by Peter and Stephen, or their legal representatives or trustees, or in the event of the death of either of them by the survivor of them, or his legal representatives, to undertake the cancellation and elimination of the authorization of its shares of Class A Common Stock, it will act promptly to call a meeting of the necessary shareholders of Oshkosh at an appropriate time and place for the purposes of amending the Articles of Incorporation of Oshkosh in order to eliminate from the capital structure of Oshkosh the authorization of Class A Common Stock, and for such other actions as Oshkosh shall deem necessary or appropriate in order to redeem or otherwise cancel all then issued and outstanding shares of Class A Common Stock. 3.06 Consideration. Oshkosh has determined that if Peter and Stephen were to cease to be owners of their Shares, and others were to become owners of a majority of the shares of Class A Common Stock, it would not be in the interests of the other shareholders of Oshkosh. In consideration of the agreements of Peter and Stephen set forth above, Oshkosh shall pay to each of them the sum of FIFTY THOUSAND DOLLARS ($50,000.00) upon execution of this Agreement. 3.07 Stock Certificate Legend. Upon execution of this Agreement the certificates representing the Shares shall be surrendered to Oshkosh by Peter and Stephen for the purpose of placing on each such certificate a printed legend which is appropriate to disclose the substance of the restrictions on transferability and other covenants imposed by this Agreement on the Shares, after which the certificates promptly shall be returned to Peter and Stephen. 3.08 Covenant Against Transfer. While this Agreement is in force and effect, Oshkosh shall not transfer Shares except in compliance with the provisions of this Agreement. 3.09 Specific Enforcement. Upon the death of the survivor of Peter and Stephen or the earlier legal incapacity of Peter and/or Stephen under circumstances in which neither of them has the legal capacity and capability to vote a majority of the issued and outstanding shares of Class A Common Stock of Oshkosh, if his legal representative, including any trustee, guardian, conservator or holder of an appropriate durable power, shall fail for any reason within thirty (30) days of such event to request Oshkosh to take actions contemplated under Sections 3.03 and 3.04 of this Agreement, Oshkosh may specifically enforce this Agreement, including the court appointment of such a legal representative if there be none. 3.10 Schedule 13D Filing. Peter and Stephen each shall file a Securities and Exchange Commission Schedule 13D within ten (10) days after execution of this Agreement. 3.11 Binding Agreement. This Agreement shall bind the Parties, their legal representatives, heirs, successors and assigns. Executed by the Parties on the Date of this Agreement. OSHKOSH TRUCK CORPORATION: By: /s/ R. Eugene Goodson Attest: /s/ Connie S. Stellmacher /s/ J. Peter Mosling, Jr. J. Peter Mosling, Jr. /s/ Stephen P. Mosling Stephen P. Mosling R. Eugene Goodson hereby consents, to the extent necessary in connection with the agreement dated June 25, 1990, between himself, Peter and Stephen, to be bound by the terms and conditions of the foregoing Agreement. Dated: April 26, 1996. /s/ R. Eugene Goodson R. Eugene Goodson EX-13 4 ANNUAL REPORT Financial Highlights Years ended September (In thousands, except per share amounts) 1996 1995 1994 1993 1992 Net Sales $413,455 $438,557 $581,275 $537,065 $562,361 Income (Loss) From Continuing Operations (241) 11,637 13,558 1,596(1) 13,607 Per Share (.03) 1.32 1.56 .18(1) 1.57 Discontinued Operations (2,859) (2,421) (504) (533) (4,836) Per Share (.32) (.28) (.06) (.06) (.56) Net Income (Loss) (3,100) 9,216 13,054 1,063(1) 8,771 Per Share (.35) 1.04 1.50 .12(1) 1.01 Dividends Per Share Class A .435 .435 .435 .435 .435 Class B .500 .500 .500 .500 .500 Total Assets 435,161 200,916 198,678 235,386 247,390 Expenditures for Property, Plant, and Equipment 5,355 5,347 5,178 7,697 9,494 Depreciation 7,616 7,385 8,300 7,496 6,502 Net Working Capital 67,469 91,777 82,010 100,967 118,026 Long-Term Debt (Including Current Maturities) 157,882 - 610 40,338 58,868 Shareholders' Equity 121,602 113,413 121,558 112,004 116,130 Per Share 14.08 14.82 13.96 12.89 13.37 Backlog 433,000(2) 350,000 498,000 437,000 487,000 (1) After a charge of $4.1 million, or $.47 per share, to reflect the cumulative effect of change in method of accounting for postretirement benefits. (2) Includes $118.0 million related to Pierce. Financial Statistics Common Dividends Quarterly (Payable February, May, August, November) (In thousands, except per share amounts)
Fiscal 1996 Fiscal 1995 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr. Class A Cash Dividend: Declared $ 45 $ 45 $ 44 $ 43 $ 46 $ 47 $ 49 $ 49 Per Share .10875 .10875 .10875 .10875 .10875 .10875 .10875 .10875 Class B Cash Dividend: Declared $1,019 $1,040 $1,054 $1,061 $1,073 $1,079 $1,033 $1,033 Per Share .125 .125 .125 .125 .125 .125 .125 .125
Oshkosh Truck Corporation Class B Common Stock Price* The company's common stock is quoted on the National Association of Securities Dealers Automated Quotation System (NASDAQ) National Market System. The following table sets forth prices reflecting actual sales as reported on the NASDAQ National Market System. Quarter Ended Fiscal 1996 Fiscal 1995 High Low High Low September $14-1/2 $11-1/4 $15-3/4 $12-1/4 June 15-3/8 13-7/8 13-1/2 12-1/4 March 15-3/4 13-3/8 14 10-3/4 December 15-3/4 14-1/4 11-7/8 10-5/8 *There is no established public trading market for Class A common stock. Quarterly Financial Data (Unaudited) (In thousands, except per share amounts)
Fiscal 1996 Fiscal 1995 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr. Net Sales $117,983 $111,950 $103,139 $80,383 $109,300 $126,400 $107,440 $95,417 Gross Income 4,559 7,768 12,780 10,604 14,004 15,795 12,645 11,946 Income (Loss) From Continuing Operations (1,645) (2,398) 2,230 1,572 3,278 4,098 1,762 2,499 Per Share (.19) (.27) .25 .18 .36 .46 .21 .29 Discontinued Operations (648) (2,211) - - - (1,010) (423) (988) Per Share (.07) (.25) - - - (.11) (.05) (.12) Net Income (Loss) (2,293) (4,609) 2,230 1,572 3,278 3,088 1,339 1,511 Per Share (.26) (.52) .25 .18 .36 .35 .16 .17
For the fourth quarter of 1996, continuing operations includes, on an after-tax basis, approximately $2.4 million related to the IPF subcontract and additional warranty provisions partially offset by reversal of $2.0 million of income tax provisions and related accrued interest. Discontinued operations for the fourth quarter of 1996 includes $0.6 million of after-tax charges related to adjustments of estimated warranty expenses. The fourth quarter of 1995 includes, on an after-tax basis, approximately $1.5 million of charges for inventory adjustments and additions to accrued warranty partially offset by certain adjustments to other liabilities. Quarterly results for 1995 and for the first three quarters of 1996 have been restated from amounts previously reported to conform with the presentation of certain items in the fourth quarter of 1996. Shareholder Information Annual Meeting The Annual Meeting of Shareholders of Oshkosh Truck Corporation will be held on Monday, February 3, 1997, at 10:00 a.m. at the Experimental Aircraft Museum, 3000 Poberezny Road, Oshkosh, Wisconsin 54901 Stock Listing Oshkosh Truck Corporation Class B common stock is quoted on the National Market System of the National Association of Securities Dealers Automated Quotations (NASDAQ). The trading symbol is OTRKB. Form 10-K Copies of the company's Form 10-K as filed with the Securities and Exchange Commission are available free of charge by written request to the Chief Financial Officer of the company. Transfer Agent and Registrar Firstar Trust Company P.O. Box 2077 Milwaukee, Wisconsin 53201 Independent Auditors Ernst & Young LLP 111 East Kilbourn Avenue, Suite 900 Milwaukee, Wisconsin 53202 Corporate Headquarters 2307 Oregon Street Oshkosh, Wisconsin 54901 Mailing Address and Telephone Oshkosh Truck Corporation P.O. Box 2566 Oshkosh, Wisconsin 54903-2566 414-235-9150 Oshkosh Truck Corporation Management's Discussion and Analysis of Consolidated Financial Condition and Results of Operations Results of Operations Fiscal Year 1996 Compared to Fiscal Year 1995 Oshkosh Truck Corporation (the company) reported a net loss of $3.1 million, or $0.35 per share, on sales of $413.5 million for the year ended September 30, 1996, compared to net income of $9.2 million, or $1.04 per share, on sales of $438.6 million for the year ended September 30, 1995. The fiscal year 1996 results were adversely affected by after-tax charges of $11.3 million, including $3.2 million related to a defense subcontract to Steeltech Manufacturing, Inc. (Steeltech), $3.4 million associated with the company's Mexican bus affiliates, and warranty and other related costs of $4.7 million. The company also recognized after-tax benefits of $2.0 million on the reversal of income tax provisions and related accrued interest. During the third quarter of fiscal 1995, the company sold its chassis manufacturing business in the U.S. and its interest in a joint venture in Mexico producing chassis for the Mexican market to Freightliner Corporation (Freightliner). The activities of these businesses are reported as discontinued operations and resulted in a charge to income in fiscal 1995. In fiscal 1996, further after-tax charges of $1.2 million were reported with respect to warranty and other related costs of the discontinued operations. On September 18, 1996, the company acquired Pierce Manufacturing Inc. (Pierce), a leading U.S. fire truck manufacturer, with historical annualized sales of approximately $200 million. The results of Pierce from the date of acquisition to September 30, 1996, which are not material, have been included in the consolidated results of the company. Sales of both commercial and defense products declined in fiscal 1996 compared to fiscal 1995. Commercial sales in fiscal 1996 decreased $14.8 million or 8.4% from fiscal 1995 to $162.0 million principally due to a decline in sales of commercial van trailers of $31.7 million. Sales of all other commercial product lines increased in fiscal 1996 and Pierce contributed $6.0 million of sales in fiscal 1996. Sales of defense products totaled $251.5 million in fiscal 1996, a decrease of $10.2 million or 3.9% as compared to fiscal 1995. The decrease in defense sales is a result of delays in production of ISO-Compatible Palletized Flatracks (IPF) which are being produced by Steeltech under a subcontract from the company. Defense export sales were $60.9 million in fiscal 1996 compared to $1.6 million in fiscal 1995. Commercial export sales totaled $20.4 million and $17.5 million, respectively, in fiscal 1996 and fiscal 1995. Gross income in fiscal 1996 totaled $35.7 million or 8.6% of sales compared to $54.4 million or 12.4% of sales in fiscal 1995. Fiscal 1996 margins were reduced by pre-tax charges of $5.1 million related to production delays and cost overruns associated with the IPF subcontract to Steeltech, increased warranty and other related costs of $5.5 million (pre-tax), and lower volumes. Operating expenses totaled $39.3 million or 9.5% of sales in fiscal 1996 compared to $35.1 million or 8.0% of sales in fiscal 1995. The company recognized pre-tax charges of $3.2 million in fiscal 1996 to write-off its investment in Steeltech and to write-off its remaining investments and advances associated with its Mexican bus affiliates due to prolonged weakness in the Mexican economy and continuing high losses and high leverage reported by the Mexican affiliates. Miscellaneous income increased to $1.5 million in fiscal 1996 compared to miscellaneous expense of $0.5 million in fiscal 1995 as a result of the reversal of accrued interest related to income taxes. The credit for income taxes totaled $1.7 million in fiscal 1996 benefiting from the reversal of $1.0 million in income tax provisions recognized in earlier periods, compared to a provision for income taxes of $7.3 million in fiscal 1995. The $2.9 million after-tax loss from discontinued operations ($4.7 million pre-tax) in fiscal 1996 results from the write-off of receivables of $2.6 million (pre-tax) related to the company's Mexican bus affiliates and from a $2.1 million pre-tax charge for additional warranty and other related costs with respect to the company's former U.S. chassis business which was sold in June 1995. The $2.4 million after-tax loss from discontinued operations in fiscal 1995 reflects losses on the sale of the company's former U.S. chassis business and from the sale of an interest in a former Mexican bus affiliate. Fiscal Year 1995 Compared to Fiscal Year 1994 Oshkosh Truck Corporation reported net income of $9.2 million, or $1.04 per share, on sales of $438.6 million for the year ended September 30, 1995, compared to net income of $13.1 million, or $1.50 per share, on sales of $581.3 million for the year ended September 30, 1994. The decline in earnings in the 1995 fiscal year as compared to the 1994 fiscal year was primarily related to lower defense sales. During the third quarter of fiscal 1995, the company sold its chassis manufacturing business in the U.S. and its interest in a joint venture in Mexico producing chassis for the Mexican market to Freightliner. The gain from the sale of the U.S. business was positive; however, the net result of discontinued operations was a loss of $2.4 million. Sales of commercial products increased in fiscal 1995 while sales of defense products declined from the historically high levels which existed in the 1992 through 1994 fiscal years. Sales to commercial markets increased by $20.6 million to $176.8 million during fiscal 1995 resulting from higher sales of construction and airport products which more than offset a decrease in sales of commercial van trailers as the trailer industry slowed late in the fiscal year. Sales of defense products decreased by $163.3 million to $261.7 million in fiscal 1995. Fiscal 1995 sales related, almost exclusively, to the Palletized Load System (PLS) and the Heavy Expanded Mobility Tactical Truck (HEMTT) contracts. Production under the PLS contract declined due to an anticipated contractual decrease in the production rate during fiscal 1995. Additionally, the Heavy Equipment Transporter (HET) contract ended in fiscal 1994. These decreases were partially offset by a resumption of HEMTT production which had earlier concluded midway through the 1993 fiscal year. Defense export sales were $1.6 million in fiscal 1995, compared to $3.9 million in fiscal 1994. Commercial export sales were $17.5 million and $12.1 million, respectively, in fiscal 1995 and fiscal 1994. Gross income during fiscal 1995 was $54.4 million or 12.4% of sales compared to $68.1 million or 11.7% of sales for fiscal 1994. Gross income decreased reflecting the lower sales volumes. The improved margin performance reflects improved control over material costs and manufacturing efficiencies. Operating expenses decreased 22.0% to $35.1 million or 8.0% of sales in fiscal 1995, compared to $45.0 million or 7.7% of sales during fiscal 1994. Fiscal 1994 includes pre-tax charges of $3.1 million relating to a reduction of work force in anticipation of lower levels of future business. The remaining decrease in operating expenses relates to strong controls over expense levels and decreased volumes in fiscal 1995 compared to fiscal 1994. Interest income increased from $0.3 million in fiscal 1994 to $0.8 million in fiscal 1995 due to higher average investment balances. The effective income tax rate for combined federal and state income taxes for fiscal 1995 was 38.5% compared to 38.7% in fiscal 1994. Acquisitions On September 18, 1996, the company acquired for cash all of the issued and outstanding stock of Pierce, a leading manufacturer and marketer of fire trucks and other fire apparatus in the U.S. The acquisition price of $156.9 million, net of cash acquired, and including related costs was financed from borrowings under a new bank credit facility. On November 9, 1995, the company through its wholly-owned subsidiary, Summit Performance Systems, Inc. (Summit), acquired the inventory, land, buildings, machinery and equipment, and technology of Friesz Manufacturing Company (Friesz), a manufacturer of concrete mixer systems and related aftermarket replacement parts, from available cash for $3.9 million. Financial Condition Year Ended September 30, 1996 During fiscal 1996, cash decreased $29.6 million. The acquisitions of Pierce and Friesz for $160.8 million, cash used for operating activities of $16.2 million, capital additions of $5.4 million, stock repurchases of $5.4 million and dividends of $4.4 million, were funded principally from long-term borrowings of $157.9 million and from available cash. Cash was used for operating activities in fiscal 1996 due to higher working capital requirements associated with sales in the fourth quarter of fiscal 1996 and first quarter of fiscal 1997. Year Ended September 30, 1995 During fiscal 1995, cash increased $13.9 million. Cash provided from operations of $6.2 million and net proceeds from sales of common stock and common stock warrants of $8.6 million exceeded cash requirements for capital additions of $5.3 million, dividends of $4.4 million and other uses. Liquidity and Capital Resources Following the acquisitions of Pierce and Friesz, the company's principal uses of cash for the next several years will be interest and principal payments on acquisition indebtedness, capital expenditures and potentially further acquisitions. On September 18, 1996, the company entered into a bank credit agreement (the Bank Credit Agreement) to finance the acquisition of Pierce and to refinance a previous revolving credit facility. The Bank Credit Agreement, as amended on November 27, 1996, consists of a $150 million term loan which requires annual principal payments of $15 million and a final payment of $60 million on September 25, 2003, and a $50 million revolving credit facility for working capital purposes which expires on September 25, 1999. As of September 30, 1996, $150 million of the term loan and $7.9 million of the revolving credit facility were outstanding. The borrowings under the revolving credit facility and outstanding letters of credit of $4.6 million reduced available capacity under the revolving credit facility to $37.5 million at September 30, 1996. The total of all term loan and revolving credit facility borrowings, excluding letters of credit, must be reduced to or below $160 million, $145 million, and $130 million for 60 consecutive days in fiscal 1997, 1998, and 1999, respectively. The Bank Credit Agreement limits capital expenditures to $15 million annually. Capital expenditures are projected to approximate $7 to $10 million annually for the next several years. The Bank Credit Agreement also restricts other corporate activities as described in Note 4 to the audited consolidated financial statements. The company believes that such limitations should not impair its future operating activities. The company believes its internally generated cash flow, supplemented by progress payments when applicable, and borrowings available under the Bank Credit Agreement will be adequate to meet working capital and other operating and capital requirements of the company in the foreseeable future. The company is dependent on its sales of defense products to the U.S. Government which represented $251.5 million and $261.7 million of total sales during fiscal 1996 and fiscal 1995, respectively. Substantial decreases in the company's level of defense business from the current level could have an adverse effect on the company's profitability. The company expects to maintain approximately the current level of sales to the U.S. Government in fiscal 1997. On June 2, 1995, the company entered into a strategic alliance with Freightliner. The alliance agreement called for Oshkosh to market certain of its commercial products through Freightliner's distribution system and for Oshkosh to build several series of Freightliner's specialty trucks. As part of the agreement, Freightliner had agreed to transfer its military heavy truck business to Oshkosh. This would have broadened Oshkosh's military product line and strengthened its worldwide presence. Commercial sales through the Freightliner distribution system have fallen short of expectations. The company will be controlling its own commercial marketing and sales activities in fiscal 1997. Further, Freightliner has determined that it will not be transferring its military heavy truck business to Oshkosh. Backlog The company's backlog at fiscal year-end 1996 was $433 million, compared to $350 million in the previous year. The backlog at fiscal year-end 1996 includes $272 million with respect to U.S. Government contracts, $118 million related to Pierce, and the remainder relates to other commercial products. Virtually all the company's revenues are derived from customer orders prior to commencing production. Stock Buyback In July 1995, the company's board of directors authorized the repurchase of up to 1,000,000 shares of Class B common stock. As of November 27, 1996, the company has repurchased 461,535 shares under this program at a cost of $6.6 million. Oshkosh Truck Corporation Consolidated Statements of Income (Loss) Years ended September 30, (In thousands, except per share amounts) 1996 1995 1994 Continuing operations: Net sales $413,455 $438,557 $581,275 Cost of sales 377,744 384,167 513,204 ------- ------- ------- Gross income 35,711 54,390 68,071 Operating expenses: Selling, general and administrative 33,008 29,654 38,404 Engineering, research and development 6,304 5,443 6,597 ------- ------- ------- Total operating expenses 39,312 35,097 45,001 ------- ------- ------- Income (loss) from operations (3,601) 19,293 23,070 Other income (expense): Interest expense (929) (679) (1,080) Interest income 1,040 774 249 Miscellaneous, net 1,508 (466) (137) ------- ------- ------- 1,619 (371) (968) ------- ------- ------- Income (loss) from continuing operations before income taxes (1,982) 18,922 22,102 Provision (credit) for income taxes (1,741) 7,285 8,544 ------- ------- ------- Income (loss) from continuing operations (241) 11,637 13,558 Discontinued operations: Loss from discontinued operations, net of income tax benefit (provision) of $1,623 in 1995 and ($353) in 1994 - (3,137) (504) Gain (loss) on disposal of operations, net of income tax benefit of $1,827 in 1996 and $357 in 1995 (2,859) 716 - ------ ------- ------ (2,859) (2,421) (504) ------ ------- ------ Net income (loss) $ (3,100) $ 9,216 $ 13,054 ====== ======= ====== Earnings (loss) per common share: Continuing operations $ (.03) $ 1.32 $ 1.56 Discontinued operations (.32) (.28) (.06) ------ ------- ------ Net income (loss) $ (.35) $ 1.04 $ 1.50 ====== ======= ====== See accompanying notes. Oshkosh Truck Corporation Consolidated Balance Sheets September 30, (In thousands) 1996 1995 Assets Current assets: Cash and cash equivalents $ 127 $ 29,716 Receivables, net 76,624 57,339 Inventories 106,289 46,552 Prepaid expenses 3,619 3,627 Refundable income taxes 6,483 165 Deferred income taxes 7,055 4,516 Net current assets of discontinued operations - 3,273 ------- ------- Total current assets 200,197 145,188 Deferred charges 2,645 2,978 Deferred income taxes - 2,389 Other long-term assets 7,834 10,437 Property, plant and equipment: Land 7,131 5,522 Buildings 40,421 30,118 Machinery and equipment 77,485 68,630 ------- ------- 125,037 104,270 Less accumulated depreciation (67,002) (64,346) ------- ------- Net property, plant and equipment 58,035 39,924 Goodwill and other intangible assets, net 166,450 - ------- ------- Total assets $435,161 $200,916 ======= ======= Liabilities and Shareholders' Equity Current liabilities: Accounts payable $ 49,178 $ 28,266 Customer advances 27,793 672 Payroll-related obligations 12,843 5,526 Accrued warranty 8,942 3,521 Other current liabilities 16,997 15,426 Net current liabilities of discontinued operations 1,975 - Current maturities of long-term debt 15,000 - ------- ------- Total current liabilities 132,728 53,411 Long-term debt 142,882 - Postretirement benefit obligations 9,517 8,839 Other long-term liabilities 1,843 5,026 Net long-term liabilities of discontinued operations 2,581 227 Deferred income taxes 24,008 - Shareholders' equity: Common stock: Class A 4 4 Class B 89 89 Paid-in capital 16,059 16,533 Retained earnings 114,246 121,697 ------- ------- 130,398 138,323 Cost of Class B common stock in treasury (8,796) (3,403) Pension liability adjustment - (1,507) ------- ------- Total shareholders' equity 121,602 133,413 ------- ------- Total liabilities and shareholders' equity $435,161 $200,916 ======= ======= See accompanying notes. Oshkosh Truck Corporation Consolidated Statements of Shareholders' Equity
Years ended September 30, (In thousands, except share and per share amounts) Pension Common Paid-in Retained Treasury Liability Stock Capital Earnings Stock Adjustment Total Balance at September 25, 1993 $90 $ 7,399 $108,158 $(2,767) $ (876) $112,004 Net income - - 13,054 - - 13,054 Cash dividends: Class A common ($.435 per share) - - (196) - - (196) Class B common ($.500 per share) - - (4,126) - - (4,126) Exercise of stock options - 34 - 176 - 210 Incentive compensation awards - 190 - - - 190 Pension liability adjustment - - - - 422 422 ----- ------ ------- ------- ------- ------- Balance at September 30, 1994 90 7,623 116,890 (2,591) (454) 121,558 Net income - - 9,216 - - 9,216 Cash dividends: Class A common ($.435 per share) - - (191) - - (191) Class B common ($.500 per share) - - (4,218) - - (4,218) Sale of 350,000 shares of common stock 3 5,247 - - - 5,250 Sale of 1,250,000 stock warrants - 4,187 - - - 4,187 Common stock issuance costs and cost of stock restriction agreement - (863) - - - (863) Purchase of common stock for treasury - - - (933) - (933) Exercise of stock options - 12 - 121 - 133 Incentive compensation awards - 327 - - - 327 Pension liability adjustment - - - - (1,053) (1,053) ----- ------ ------- ------- ------- ------- Balance at September 30, 1995 93 16,533 121,697 (3,403) (1,507) 133,413 Net loss - - (3,100) - - (3,100) Cash dividends: Class A common ($.435 per share) - - (177) - - (177) Class B common ($.500 per share) - - (4,174) - - (4,174) Purchase of common stock for treasury - - - (5,618) - (5,618) Exercise of stock options - 43 - 225 - 268 Termination of incentive compensation awards - (517) - - - (517) Pension liability adjustment - - - - 1,507 1,507 ------ ------- ------- ------- ------- ------- Balance at September 30, 1996 $93 $16,059 $114,246 $(8,796) $ - $121,602 ====== ======= ======= ======= ======= =======
See accompanying notes. Oshkosh Truck Corporation Consolidated Statements Of Cash Flows Years ended September 30, (In thousands) 1996 1995 1994 Operating activities: Net income (loss) from continuing operations $ (241) $11,637 $13,558 Depreciation and amortization 8,798 8,409 9,278 Write-off of investments 4,125 - - Deferred income taxes (1,381) 2,577 (3,659) (Gain) loss on disposal of property, plant and equipment 77 (21) 215 Changes in operating assets and liabilities: Receivables (10,648) (4,349) 32,560 Inventories (25,071) (809) 14,494 Prepaid expenses 469 (540) 1,942 Deferred charges 333 (94) 5,244 Accounts payable 13,314 (4,314) (15,002) Customer advances 930 (1,887) 2,136 Income taxes (5,268) 636 (1,421) Payroll-related obligations 213 313 587 Accrued warranty 2,094 (639) 2,150 Other current liabilities (4,646) 11 2,886 Other long-term liabilities 665 (4,764) 2,455 ------- ------- ------- Net cash provided from (used for) operating activities (16,237) 6,166 67,423 Investing activities: Acquisitions of businesses, net of cash acquired (160,838) - - Additions to property, plant and equipment (5,355) (5,347) (5,178) Proceeds from sale of property, plant and equipment 2,086 114 285 Increase in other assets (2,124) (937) (1,243) ------- ------- ------- Net cash used for investing activities (166,231) (6,170) (6,136) Net cash provided from (used for) discontinued operations 4,743 10,482 (2,851) Financing activities: Net borrowings (repayments) of long-term debt 157,882 - (39,082) Sale of common stock and common stock warrants, net of issuance costs - 8,574 - Purchase of treasury stock and proceeds from exercise of stock options, net (5,350) (800) 210 Dividends paid (4,396) (4,372) (4,320) ------- ------- ------- Net cash provided from (used for) financing activities 148,136 3,402 (43,192) ------- ------- ------- Increase (decrease) in cash and cash equivalents (29,589) 13,880 15,244 Cash and cash equivalents at beginning of year 29,716 15,836 592 ------- ------- ------- Cash and cash equivalents at end of year $ 127 $29,716 $15,836 ======= ======= ======= Supplemental disclosures: Cash paid for interest: Continuing operations $ 538 $ 759 $ 1,168 Discontinued operations - 709 994 Cash paid for income taxes 3,116 2,114 13,972 See accompanying notes. Oshkosh Truck Corporation Notes to Consolidated Financial Statements September 30, 1996 (In thousands, except share and per share amounts) 1. Summary of Significant Accounting Policies Operations - Oshkosh Truck Corporation (the company) is a leading manufacturer of a wide variety of heavy duty specialized trucks. The company sells its products into three principal markets - fire and emergency support, defense, and other commercial truck markets. The company's fire and emergency support business is principally conducted through its wholly-owned subsidiary, Pierce Manufacturing Inc. (Pierce). Principles of Consolidation and Presentation - The consolidated financial statements include the accounts of Oshkosh Truck Corporation and all its wholly-owned subsidiaries and are prepared in conformity with U.S. generally accepted accounting principles. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. All significant intercompany accounts and transactions have been eliminated. Certain reclassifications have been made to conform prior years' data to the current format. Cash and Cash Equivalents - The company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The carrying amount of cash equivalents approximates fair value due to the short maturity of the investments. Inventories - The company values its inventories at the lower of cost, computed principally on the last-in, first-out (LIFO) method, or market. Property, Plant and Equipment - Property, plant and equipment are recorded at cost. Depreciation is provided over the estimated useful lives of the respective assets principally on accelerated methods. In 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" (SFAS No. 121). The company's adoption of SFAS No. 121, effective October 1, 1995, had no effect on the fiscal 1996 consolidated financial statements. Deferred Charges - Deferred charges include certain engineering and technical support costs incurred in connection with multi-year government contracts. These costs are charged to cost of sales when the related project is billable to the government, or are amortized to cost of sales as base units are delivered under the related contracts. Other Long-Term Assets - Other long-term assets include capitalized software and related costs which are amortized on a straight-line method over a three to five-year period, prepaid funding of pension costs and certain investments. During fiscal 1996, the company wrote off its $3,025 investment in a Mexican bus manufacturer, a $200 investment in Steeltech Manufacturing, Inc. (Steeltech) and a $900 investment in a joint venture which leases equipment to Steeltech (see Note 11). Also in fiscal 1996, the company incurred deferred financing costs totaling $1,286 in connection with the financing for the acquisition of Pierce which are amortized to interest expense over the terms of the debt. Goodwill and Other Intangible Assets - The cost of goodwill and other intangible assets is amortized on a straight-line basis over the estimated periods benefited ranging from 13 to 40 years. The realizability of goodwill and other intangibles is evaluated periodically as events or circumstances indicate a possible impairment. Such evaluations are based on various analyses, including cash flow and profitability projections, to determine the ability to recover their carrying amounts. The analyses necessarily involve significant judgment to evaluate the capacity of acquired businesses to perform within projections. Customer Advances - Customer advances principally represent amounts received in advance of the completion of a fire apparatus vehicle. Certain of these advances bear interest at variable rates approximating the prime rate. Revenue Recognition - Sales under fixed-price defense contracts are recorded as units are accepted by the government. Change orders are not invoiced until agreed upon by the government. Recognition of profit on change orders and on contracts which do not involve fixed prices is based upon estimates which may be revised during the terms of the contracts. Sales to commercial customers are recorded when the goods or services are billable at time of shipment or delivery of the trucks. Research and Development - Research and development costs are charged to expense as incurred and amounted to approximately $6,304, $5,443, and $6,597 for continuing operations during fiscal 1996, 1995, and 1994, respectively. Warranty Costs - Provisions for estimated warranty and other related costs are recorded at the time of sale and are periodically adjusted to reflect actual experience. Amounts expensed with respect to continuing operations in fiscal 1996, 1995, and 1994 were $7,741, $4,518, and $4,541, respectively. Income Taxes - Deferred income taxes are provided to recognize temporary differences between the financial reporting basis and the income tax basis of the company's assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. Earnings (Loss) Per Share - Earnings (loss) per share is computed on the basis of the weighted average number of shares of common stock outstanding (8,828,224; 8,823,766; and 8,699,846 in fiscal 1996, 1995, and 1994, respectively). Stock options, warrants and stock issuable under incentive compensation awards were not dilutive in any of the years presented. 2. Balance Sheet Information Receivables 1996 1995 U.S. Government: Amounts billed, net $27,353 $33,330 Amounts unbilled 4,918 5,198 ------ ------ 32,271 38,528 Commercial customers 41,510 17,407 Other 3,909 1,881 ------ ------ 77,690 57,816 Less allowance for doubtful accounts (1,066) (477) ------ ------ $76,624 $57,339 ====== ====== The unbilled amounts represent estimated claims for government-ordered changes which will be invoiced upon completion of negotiations and price adjustment provisions which will be invoiced when they are agreed upon by the government. Inventories 1996 1995 Finished products $ 15,208 $ 3,368 Partially finished products 51,533 15,132 Raw materials 47,580 35,106 ------- ------ Inventories at FIFO cost 114,321 53,606 Less: Progress payments on U.S. Government contracts - (81) Excess of FIFO cost over LIFO cost (8,032) (6,973) ------- ------ $106,289 $46,552 ======= ====== Title to all inventories related to government contracts which provide for progress payments vests in the government to the extent of unliquidated progress payments. Goodwill and Other Intangible Assets 1996 1995 Useful Lives Goodwill 40 Years $102,523 $ - Distribution network 40 Years 53,000 - Other 13-40 Years 11,098 - ------- ----- 166,621 - Less accumulated amortization (171) - ------- ----- $166,450 $ - ======= ===== 3. Acquisitions On September 18, 1996, the company acquired for cash all of the issued and outstanding stock of Pierce, a leading manufacturer and marketer of fire trucks and other fire apparatus in the U.S. The acquisition price of $156,926, including acquisition costs and net of cash acquired, was financed from borrowings under a new bank credit facility (see Note 4). The acquisition has been accounted for using the purchase method of accounting and, accordingly, the operating results of Pierce are included in the company's consolidated statement of income (loss) since the date of acquisition. The purchase price including acquisition costs was allocated based on the estimated fair values of the assets acquired and liabilities assumed at the date of the acquisition. Approximately $62,000 of the purchase price has been allocated to the distribution network and other intangible assets. The excess of the purchase price over the estimated fair value of net assets acquired amounted to $102,523 which has been accounted for as goodwill. This allocation was based on preliminary estimates and may be revised at a later date. Pro forma unaudited consolidated operating results of the company, assuming Pierce had been acquired as of October 1, 1995 and 1994, are summarized below: 1996 1995 Net sales $605,439 $618,555 Income (loss) from continuing operations (1,262) 7,699 Net income (loss) (4,121) 4,901 Earnings (loss) per share: Continuing operations $ (.14) $ .87 Net income (loss) (.47) .56 These pro forma results have been prepared for informational purposes only and include certain adjustments to depreciation expense related to acquired plant and equipment, amortization expense arising from goodwill and other intangible assets, interest expense on acquisition debt, elimination of certain non-recurring expenses incurred by Pierce prior to the acquisition, and the estimated related income tax effects of all such adjustments. Anticipated efficiencies from the consolidation of Pierce's manufacturing facilities and from the synergies related to the consolidation of certain purchasing functions among Pierce and the company are not fully determinable and therefore have been excluded from the amounts included in the pro forma operating results. These pro forma results do not purport to be indicative of the results of operations which would have resulted had the combination been in effect as of October 1, 1995 and 1994 or of the future results of operations of the consolidated entities. On November 9, 1995, the company through its wholly-owned subsidiary, Summit Performance Systems, Inc. (Summit), acquired the inventory, land, buildings, machinery and equipment, and technology of Friesz Manufacturing Company (Friesz) from available cash for $3,912. Friesz is engaged in the manufacture and sale of concrete mixer systems and related aftermarket replacement parts. Approximately $2,150 of the purchase price has been allocated to intangible assets, principally designs and related technology. The acquisition was accounted for using the purchase method of accounting and, accordingly, the operating results of Friesz are included in the company's consolidated statement of income (loss) since the date of acquisition. Had the acquisition occurred as of October 1, 1995 or 1994, there would have been no material pro forma effects on the net sales, net income (loss) or earnings (loss) per share of the company in fiscal 1996 or 1995. 4. Long-Term Debt On September 18, 1996, the company entered into a bank credit agreement (the Bank Credit Agreement) to finance the acquisition of Pierce (see Note 3) and to refinance a previous revolving credit facility. The Bank Credit Agreement, as amended on November 27, 1996, consists of a $150,000 term loan which requires annual principal payments of $15,000 and a final payment of $60,000 on September 25, 2003, and a $50,000 revolving credit facility for working capital purposes which expires on September 25, 1999. As of September 30, 1996, $150,000 of the term loan and $7,882 of the revolving credit facility were outstanding. The total of all term loan and revolving credit facility borrowings, excluding letters of credit, must be reduced to or below $160,000, $145,000, and $130,000 for 60 consecutive days in fiscal 1997, 1998, and 1999, respectively. Interest on the term loan and the revolving credit facility is payable at prime or at the applicable Eurodollar rate plus 2.5% and 2.125%, respectively, subject to downward adjustment if certain financial criteria are met (at a weighted average rate of 8.25% and 8.25%, respectively, at September 30, 1996). The company is charged a 0.25% fee with respect to any unused balance under its revolving credit facility, and a 1.625% fee with respect to any letters of credit issued under the revolving credit facility. These fees are subject to downward adjustment if certain financial criteria are met. At September 30, 1996, $7,882 of borrowings and $4,570 of letters of credit reduced available capacity under the revolving credit facility to $37,548. At September 30, 1996, substantially all the tangible and intangible assets of the company and its subsidiaries are pledged as collateral under the terms of the Bank Credit Agreement. Among other restrictions, the Bank Credit Agreement: (1) limits payments of dividends, purchases of the company's stock, and capital expenditures; (2) requires that certain financial ratios be maintained at prescribed levels; (3) restricts the ability of the company to make additional borrowings, or to consolidate, merge or otherwise fundamentally change the ownership of the company; and (4) limits investments, dispositions of assets and guarantees of indebtedness. The company believes that such limitations should not impair its future operating activities. The aggregate annual maturities of long-term debt for the five years succeeding September 30, 1996, are as follows: 1997 - $15,000; 1998 - $15,000; 1999 - $22,882; 2000 - $15,000; and 2001 - $15,000. Fair Market Value Disclosures Due to the proximity of the date of issuance of the company's long-term debt on September 18, 1996 to the company's fiscal year end, the aggregate fair value of the long-term debt approximates its carrying value of $157,882 at September 30, 1996. 5. Income Taxes Income Tax Provision 1996 1995 1994 Current: Federal $ 2,988 $5,572 $12,550 State 368 873 1,889 ------ ----- ------ Total current 3,356 6,445 14,439 Deferred: Federal (4,630) 763 (5,391) State (467) 77 (504) ------ ----- ------ Total deferred (5,097) 840 (5,895) ------ ----- ------ $(1,741) $7,285 $ 8,544 ====== ===== ====== Effective Rate Reconciliation 1996 1995 1994 U.S. federal tax rate (34.0)% 35.0% 35.0% State income taxes, net (5.0) 3.5 3.3 Reduction of prior years' excess tax provisions (50.5) - - Foreign sales corporation (5.2) (0.6) (0.4) Other, net 6.9 0.6 0.7 ---- ----- ---- (87.8)% 38.5% 38.6% ==== ===== ===== Deferred Tax Assets and Liabilities 1996 1995 Deferred tax assets: Other current liabilities $ 6,625 $ 4,030 Postretirement benefit obligations 3,674 4,380 Accrued warranty 3,194 1,068 Investments 1,801 160 Payroll-related obligations 818 1,388 Other 419 1,723 ------ ------ Total deferred tax assets 16,531 12,749 Deferred tax liabilities: Intangible assets 24,150 - Property, plant and equipment 5,972 5,549 Inventories 1,922 392 Deferred charges 1,091 (902) Other 349 805 ------ ------ Total deferred tax liabilities 33,484 5,844 ------ ------ Net deferred tax asset (liability) $(16,953) $ 6,905 ======= ====== The company has not recorded a valuation allowance with respect to any deferred tax assets. 6. Employee Benefit Plans The company has defined benefit pension plans covering substantially all employees. The plans provide benefits based on compensation, years of service and date of birth. The company's policy is to fund the plans in amounts which comply with contribution limits imposed by law. Components of net periodic pension cost for these plans for fiscal 1996, 1995, and 1994, including costs of discontinued operations which are not significant in any year presented but excluding Pierce pension costs due to the proximity of its acquisition to the company's fiscal year- end, are as follows: 1996 1995 1994 Service cost benefits earned during year $1,149 $1,140 $1,227 Interest cost on projected benefit obligations 1,979 1,862 1,684 Actual return on plan assets (3,347) (2,505) (296) Net amortization and deferral 1,232 438 (1,523) ----- ----- ----- 1,013 935 1,092 Curtailment charge related to reduction in work force - - 560 ----- ----- ----- Net periodic pension cost $1,013 $ 935 $1,652 ===== ===== ===== The following table summarizes the funded status of the pension plans and the amounts recognized in the company's consolidated balance sheets at September 30, 1996 and 1995: 1996 1995 1995 Assets Exceed Assets Exceed Accumulated Accumulated Accumulated Benefits Benefits Benefits Exceed Assets Actuarial present value of benefit obligations: Vested $26,009 $11,847 $ 8,288 Nonvested 602 561 458 ------ ------ ------ Accumulated benefit obligations 26,611 12,408 8,746 Adjustment for projected benefit obligations 4,731 6,039 - ------ ------ ------ Projected benefit obligations 31,342 18,447 8,746 Plan assets at fair value 31,089 16,229 7,148 ------ ------ ------ Projected benefit obligations in excess of plan assets (253) (2,218) (1,598) Unrecognized net transition asset (661) (237) (491) Unrecognized net loss 4,811 4,155 3,002 Unrecognized prior service cost 345 33 340 Adjustment required to recognize minimum liability - - (2,851) ------ ------ ------ Prepaid pension asset (liability) $ 4,242 $ 1,733 $(1,598) ====== ====== ====== The increase in projected benefit obligations and plan assets from September 30, 1995 to September 30, 1996 principally results from the inclusion of the Pierce pension plan in the reported amounts. Generally accepted accounting principles require the recognition of an additional minimum liability for each defined benefit plan for which the accumulated benefit obligation exceeds plan assets. This amount is recorded as a long-term liability of $2,851 in 1995 with an offsetting intangible asset of $340 to the extent of unrecognized prior service cost. In addition, the company has recorded a reduction of shareholders' equity of $1,507 in 1995, net of income tax benefits of $1,004. The plans' assets are comprised of investments in commingled equity and fixed income funds and individually managed equity portfolios. Actuarial assumptions are as follows: 1996 1995 1994 Discount rate 7.75% 7.50% 8.25% Rate of increase in compensation 4.50 4.50 4.50 Expected long-term rate of return on plan assets 9.25 9.25 9.25 In addition to providing pension benefits for the majority of its employees, the company provides health benefits to certain of its retirees and their eligible spouses. Approximately 50% of the company's employees become eligible for these benefits if they reach normal retirement age while working for the company. The following table summarizes the status of the postretirement benefit plan and the amounts recognized in the company's consolidated balance sheets at September 30, 1996 and 1995: 1996 1995 Postretirement benefit obligations: Retirees $2,929 $2,859 Fully eligible active participants 397 387 Other active participants 4,865 4,749 ------ ------ 8,191 7,995 Unrecognized net gain 1,326 844 ------ ------ Postretirement benefit obligations $9,517 $8,839 ====== ====== Net periodic postretirement benefit cost for fiscal 1996, 1995, and 1994, including discontinued operations which is not significant in any year presented, includes the following components: 1996 1995 1994 Service cost $353 $372 $ 472 Interest cost on the accumulated postretirement benefit obligation 580 610 658 Amortization of unrecognized loss - - 26 ---- ---- ------ Net periodic postretirement benefit cost $933 $982 $1,156 ==== ==== ====== Net change in postretirement benefit obligations includes the following: 1996 1995 Balance at beginning of year $8,839 $8,159 Benefits paid (255) (207) Net periodic postretirement benefit cost 933 982 Curtailment gain related to reduction in workforce - (95) ----- ----- Balance at end of year $9,517 $8,839 ===== ===== The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation was 11.5% in fiscal 1996, declining to 6.5% in fiscal 2007. The weighted average discount rate used in determining the postretirement benefit obligation was 7.75% in fiscal 1996 and 7.50% in fiscal 1995. If the health care cost trend rate was increased by 1%, the postretirement benefit obligation at September 30, 1996 would increase by $724 and net periodic postretirement benefit cost for fiscal 1996 would increase by $114. The company has defined contribution 401(k) plans covering substantially all employees. The plans allow employees to defer 2% to 19% of their income on a pre-tax basis. Each employee who elects to participate is eligible to receive company matching contributions. Amounts expensed for company matching contributions for continuing operations were $401, $407, and $435 in fiscal 1996, 1995, and 1994, respectively. 7. Shareholders' Equity The company is authorized to issue 1,000,000 shares of $.01 par value Class A common stock of which 409,258 shares and 427,262 shares were issued and outstanding at September 30, 1996 and 1995, respectively. The company is authorized to issue 18,000,000 shares of $.01 par value Class B common stock. At September 30, 1996, 8,948,907 and 8,227,770 Class B shares were issued and outstanding, respectively. At September 30, 1995, 8,930,903 and 8,577,286 Class B shares were issued and outstanding, respectively. The company is also authorized to issue up to 2,000,000 shares of $.01 par value preferred stock, none of which were issued or outstanding at September 30, 1996 or 1995. On June 2, 1995, Freightliner Corporation (Freightliner) purchased 350,000 shares of the company's Class B common stock for $15.00 per share and warrants for the purchase of 1,250,000 additional shares of Class B common stock exercisable at $16.50 per share through June 2, 2003. During 1995, the company entered into a stock restriction agreement with two shareholders owning the majority of the company's Class A common stock. The agreement is intended to allow for an orderly transition of Class A common stock into Class B common stock. The agreement provides that at the time of death or incapacity of the survivor of them, the two shareholders will exchange all of their Class A common stock for Class B common stock, and at that time, if not earlier, will support an amendment to the Articles of Incorporation which will provide for a mandatory conversion of all Class A common stock into Class B common stock. Dividends are required to be paid on both the Class A and Class B common stock at any time that dividends are paid on either. Each share of Class B common stock is entitled to receive 115% of any dividend paid on each share of Class A common stock, rounded up or down to the nearest $0.0025 per share. The Class B common stock shareholders are entitled to receive a liquidation preference of $7.50 per share before any payment or distribution to holders of the Class A common stock. Thereafter, holders of the Class A common stock are entitled to receive $7.50 per share before any further payment or distribution to holders of the Class B common stock. Thereafter, holders of the Class A common stock and Class B common stock share on a pro rata basis in all payments or distributions upon liquidation, dissolution or winding up of the company. During 1995, the company announced an offer to the holders of the company's Class A common stock to convert any or all Class A common stock to Class B common stock on a one-for-one basis. As of September 30, 1996, 40,112 Class A common shares have been converted to Class B. In addition, in July 1995, the company authorized the buy back of up to one million shares of the company's Class B common stock. As of September 30, 1996, the company had purchased 461,535 shares of its Class B common stock at a total price of $6,551. 8. Stock Option and Performance Share Award Plans The company has reserved 2,026,402 shares of Class B common stock at September 30, 1996 to provide for the exercise of outstanding stock options and warrants, and the issuance of common stock under incentive compensation awards. Under the 1990 Incentive Stock Plan for Key Employees (the Plan), officers, other key employees and directors may be granted options to purchase up to an aggregate of 825,000 shares of the company's Class B common stock at not less than the fair market value of such shares on the date of grant. Participants may also be awarded grants of restricted stock under the Plan. The Plan expires on April 9, 2000. Options become exercisable ratably on the first, second and third anniversary of the date of grant. Options to purchase shares expire not later than ten years and one month after the grant of the option. The following table sets forth information with respect to the Plan: Number of Exercise Price Options Per Option Outstanding at September 25, 1993 178,417 $ 7.88 - 15.25 Options granted 242,400 9.13 - 10.50 Options exercised (5,750) 7.88 Options canceled (14,418) 7.88 - 15.25 ------- Outstanding at September 30, 1994 400,649 7.88 - 15.25 Options granted 100,500 11.25 - 14.00 Options exercised (14,250) 7.88 - 9.75 Options canceled (9,831) 9.38 - 15.25 ------- Outstanding at September 30, 1995 477,068 7.88 - 15.25 Options granted 14,500 13.88 - 15.25 Options exercised (24,515) 7.88 - 10.50 Options canceled (6,251) 9.38 - 15.25 ------- Outstanding at September 30, 1996 460,802 $ 7.88 - 15.25 ======= Exercisable at September 30, 1996 310,062 $ 7.88 - 15.25 ======= Shares available for grant at September 30, 1996 315,600 ======= In October 1995, SFAS No. 123, "Accounting for Stock-Based Compensation" was issued. Beginning in fiscal 1997, the company will make pro forma disclosures of stock-based compensation cost utilizing the fair value based method of accounting pursuant to SFAS No. 123, but currently intends to continue to report stock-based compensation expense in its consolidated financial statements for subsequent years under the intrinsic value based method under Accounting Principles Board Opinion No. 25. In fiscal 1996, the company terminated the 1994 Long-Term Incentive Compensation Plan. There were no payouts under this plan in fiscal 1996, 1995, or 1994. 9. Operating Leases Total rental expense for plant and equipment charged to continuing operations under noncancellable operating leases was $797, $1,004, and $955 in fiscal 1996, 1995, and 1994, respectively. Minimum rental payments due under operating leases for subsequent fiscal years are: 1997-$660; 1998-$445; 1999-$218; 2000-$10; and 2001-$9. Included in rental expense are charges of $128, $215, and $304 in fiscal 1996, 1995, and 1994, respectively, relating to leases between the company and certain shareholders. 10. Discontinued Operations On June 2, 1995, Freightliner acquired certain assets of the company's motor home, bus and van chassis business. The consideration included cash of $23,815 and the assumption by Freightliner of certain liabilities. The assets sold to Freightliner consisted of inventories, property, plant and equipment and the company's ownership interest in a Mexican chassis manufacturer. The liabilities assumed by Freightliner included warranty obligations related to previously produced chassis and industrial revenue bonds that were secured by the underlying real estate. The disposition of the chassis business has been accounted for as a discontinued operation. Revenues of the chassis business for fiscal 1995 (through the date of sale) and fiscal 1994 were $55,804 and $109,032, respectively. The net assets or liabilities of the discontinued operations have been segregated in the consolidated balance sheets. Details of such amounts at September 30, 1996 and 1995, are as follows: 1996 1995 Receivables $ 66 $ 3,871 Inventories 92 1,421 Accounts payable - (326) Accrued warranty (1,862) (1,450) Other, net (271) (243) ------ ------ Net current assets (liabilities) of discontinued operations $ (1,975) $ 3,273 ====== ====== Receivable from joint venture in Mexico $ - $ 3,165 Accrued warranty (2,181) (2,694) Other, net (400) (698) ------ ------ Net long-term liabilities of discontinued operations $ (2,581) $ (227) ======= ====== In fiscal 1996, the company incurred charges totaling approximately $2,623 arising from the write-off of receivables and other obligations related to the company's former joint venture in Mexico. In addition, in fiscal 1996, the company recognized additional warranty and other related costs totaling $2,063 with respect to the company's former U.S. chassis business. The company has allocated interest on the debt which was assumed by Freightliner to discontinued operations. Interest expense included in discontinued operations totaled $685 and $1,000 in fiscal 1995 and 1994, respectively. 11. Contingencies, Significant Estimates and Concentrations The company is engaged in litigation against Super Steel Products Corporation (SSPC), the company's former supplier of mixer systems for front discharge concrete mixer trucks under a long-term supply contract. SSPC sued the company in state court claiming the company breached the contract. The company counterclaimed for repudiation of contract. On July 26, 1996, a jury returned a verdict for SSPC awarding damages totaling $4,485. On October 10, 1996, the state court judge overturned the verdict against the company, granted judgment for the company on its counterclaim, and ordered a new trial for damages on the company's counterclaim. The company expects SSPC to appeal this judgment. The company is subject to environmental matters and other legal proceedings and claims which arise in the ordinary course of business. Although the final results of all such matters and claims cannot be predicted with certainty, management believes that the ultimate resolution of all such matters and claims, after taking into account the liabilities accrued with respect to such matters and claims, will not have a material adverse effect on the company's financial condition or results of operations. Pierce has guaranteed certain customers' obligations under deferred payment contracts and lease purchase agreements totaling $5,504 at September 30, 1996. Pierce and the company also are contingently liable under bid and performance bonds totaling approximately $81,000 at September 30, 1996. Provisions for estimated warranty and other related costs are recorded at the time of sale and are periodically adjusted to reflect actual experience. As of September 30, 1996, the company has accrued $8,942 for warranty and other related claims. 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. During fiscal 1996, the company recorded warranty and other related costs for matters beyond the company's historical experience totaling $5,502 with respect to continuing operations and $2,063 with respect to discontinued operations (see Note 10). 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. The company subcontracted production under an $85,000 ISO-Compatible Palletized Flatracks (IPF) contract for the U.S. Army to Steeltech, a minority-owned firm, pursuant to Department of Defense regulations under the IPF contract. Due to financial difficulties encountered by Steeltech, the company advanced working capital requirements to Steeltech in fiscal 1995 and fiscal 1996. As a result of delays in the start-up of full scale production under the IPF contract, the company wrote-off certain of its advances and an investment in Steeltech totaling $3,300 in fiscal 1996. Steeltech's IPF production passed first article testing in July 1996 and production is expected to be completed in 1998. As of September 30, 1996 and 1995, the company had outstanding advances due from Steeltech of $2,855 and $736, respectively. In fiscal 1996, the company also wrote-off an investment of $900 in a joint venture which leases equipment to Steeltech and accrued $1,084 for the potential satisfaction of a guarantee of 50% of the outstanding indebtedness of the joint venture. The company is further contingently liable for Department of Defense progress payments that have been advanced to Steeltech totaling $5,380 at September 30, 1996 in the event of incomplete performance under the IPF contract. While management currently expects the company to realize its remaining advances to Steeltech at September 30, 1996, it is reasonably possible that a portion of the advances will not be realized. The company derives a significant portion of its revenue from the U.S. Department of Defense, as follows: 1996 1995 1994 Defense: U.S. Department of Defense $249,413 $260,112 $423,795 Export 2,059 1,623 1,236 ------- ------- ------- 251,472 261,735 425,031 Commercial: Domestic 141,540 159,326 144,133 Export 20,443 17,496 12,111 ------- ------- ------- 161,983 176,822 156,244 ------- ------- ------- Net sales $413,455 $438,557 $581,275 U.S. Department of Defense sales include $58,855 and $2,619 in fiscal 1996 and 1994, respectively, for products sold internationally under the Foreign Military Sales Program. Inherent in doing business with the U.S. Department of Defense are certain risks, including technological changes and changes in levels of defense spending. All U.S. Department of Defense contracts contain a provision that they may be terminated at any time at the convenience of the government. In such an event, the company is entitled to recover allowable costs plus a reasonable profit earned to the date of termination. Various actions or claims have been asserted or may be asserted in the future by the government against the company. A potential action by the government against the company in connection with a grand jury investigation was commenced in 1989. In 1996, the government discontinued this investigation without any action against the company or its employees, although a civil investigation is possible. On June 2, 1995, the company entered into a strategic alliance with Freightliner. The agreement provided for the marketing of certain of the company's vocational products through Freightliner's distribution system, the manufacture by the company of several series of Freightliner's severe duty trucks and the transfer of Freightliner's non-commercial military business to the company. Sales of the company's vocational products through Freightliner's distribution system in fiscal 1996 were limited and in fiscal 1997, the company will assume control of its commercial marketing and sales. Further, Freightliner has decided not to transfer either the manufacture of any severe duty trucks or its non-commercial military business to the company. The company and Freightliner will continue to supply each other specialty products and components. As of September 30, 1996, the company has receivables totaling $5,274 due from Freightliner, principally related to the sales of refuse and concrete mixer trucks. Report of Ernst & Young LLP, Independent Auditors Board of Directors Oshkosh Truck Corporation We have audited the accompanying consolidated balance sheets of Oshkosh Truck Corporation (the company) as of September 30, 1996 and 1995, and the related consolidated statements of income (loss), shareholders' equity and cash flows for each of the three years in the period ended September 30, 1996. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the company at September 30, 1996 and 1995, and the consolidated results of its operations and its cash flows for each of the three years in the period ended September 30, 1996, in conformity with generally accepted accounting principles. ERNST & YOUNG LLP November 8, 1996, except for Note 4, as to which the date is November 27, 1996 Milwaukee, Wisconsin Oshkosh Truck Corporation P.O. Box 2566 - Oshkosh, Wisconsin 54903-2566 414-235-9150 /R/Oshkosh and the Oshkosh logo are registered trademarks, and /TM/phoenix is a trademark of Oshkosh Truck Corporation. /R/Pierce, Quantum and Lance are registered trademarks of Pierce Manufacturing Inc. EX-23 5 CONSENT CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS We consent to the incorporation by reference in this Annual Report on Form 10-K of Oshkosh Truck Corporation of our report dated November 8, 1996, except for Note 4, as to which the date is November 27, 1996, included in the 1996 Annual Report to Shareholders of Oshkosh Truck Corporation. Our audits also included the financial statement schedule of Oshkosh Truck Corporation listed in Item 14(a). This schedule is the responsibility of the company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. We also consent to the incorporation by reference in the Registration Statements (Form S-8 No. 33-38822 and No. 33-62687) pertaining to the Oshkosh Truck Corporation 1990 Incentive Stock Plan of our report dated November 8, 1996, except for Note 4, as to which the date is November 27, 1996, with respect to the consolidated financial statements and schedule of Oshkosh Truck Corporation included or incorporated by reference in the Annual Report (Form 10-K) for the year ended September 30, 1996. Ernst & Young LLP Milwaukee, Wisconsin December 27, 1996 EX-27 6 FINANCIAL DATA SCHEDULE
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF OSHKOSH TRUCK CORPORATION AS OF AND FOR THE YEAR ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR SEP-30-1996 JUN-30-1996 SEP-30-1996 127 0 77,690 1,066 106,289 200,197 125,037 67,002 435,161 132,728 142,882 93 0 0 121,509 435,161 413,455 413,455 377,744 377,744 0 186 929 (1,982) (1,741) (241) (2,859) 0 0 (2,859) (.35) (.35)
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