Oshkosh Truck Reports Third Quarter Net Income Up 57%
OSHKOSH, Wis.--July 25, 2002--Oshkosh Truck Corporation today reported that third quarter net income increased 57.4 percent to $21.6 million, or $1.24 per share, on sales of $489.5 million for the quarter ended June 30, 2002. This compares with net income of $13.7 million, or $0.80 per share, on sales of $405.8 million for last year's third quarter. These results exceeded Oshkosh's previous earnings expectations of $0.88 per share for the quarter. Primarily as a result of the strong third quarter results, Oshkosh also increased its earnings per share estimate for the full year ending September 30, 2002 to $3.35 per share.Sales increased 20.6 percent in the third quarter. Operating income increased 39.5 percent to $38.4 million, or 7.8 percent of sales, compared to $27.5 million, or 6.8 percent of sales, in the prior year's third quarter.
The company's third quarter performance included a $4.5 million increase in operating income ($0.16 per share after tax) to record a cumulative adjustment to margins recognized on its multi-year Medium Tactical Vehicle Replacement ("MTVR") vehicle production contract. This increase was a result of events in the third quarter, including the completion of a retrofit program to bring low-rate production vehicles to final configuration, sustained positive cost performance and negotiation of a modification to the MTVR contract to include "dump and wrecker body" variants. Excluding the impact of the Geesink Norba Group acquisition (completed in the fourth quarter of fiscal 2001), the MTVR margin adjustment and adjusting for the elimination of goodwill and other indefinite-lived intangible assets as a result of the adoption of a new accounting standard ($0.10 per share after tax), earnings per share would have been up approximately 16.7% percent in the third quarter of fiscal 2002 compared to the same period in the prior year.
"This quarter all of our businesses performed quite well. However, a major factor was the aggressive cost reduction efforts on the MTVR defense truck program that permitted us to increase our MTVR margins by one percentage point. A contract modification to the MTVR contract during the quarter to include dump truck and wrecker models should assure the production of more than the base quantity volumes under the contract, assuming the government approves funding of the wrecker models. And, we expect to significantly reduce working capital commitments to support this contract as a result of `performance-based' payments that have been negotiated," commented Robert G. Bohn, chairman, president and chief executive officer.
Bohn continued, "With our debt down significantly and our backlog up about 29 percent, we believe we are well-positioned for fiscal 2003 as we approach final bids on some very significant long-term defense business in the U.S. and the U.K. The rough financial markets of recent weeks, however, cause us to approach our outlook for fiscal 2003 with caution. Accordingly, today we are initiating our estimate of fiscal 2003 earnings per share at $3.70, up approximately 10.4% over estimated fiscal 2002 earnings. This estimate assumes no further margin increase on the MTVR contract in fiscal 2003 although we continue to target higher margins under the contract."
Factors affecting third quarter results for the company's business segments included:
Fire and emergency--Fire and emergency segment sales decreased 3.8 percent, to $124.0 million, for the quarter. Operating income was up 1.3 percent, to $14.5 million, or 11.7 percent of sales, compared to prior year operating income of $14.3 million, or 11.1 percent of sales. Excluding the impact of non-amortization of goodwill, operating income would have declined 4.2 percent compared to the prior year quarter, with operating income margins consistent between periods at 11.7 percent of sales. Fire and emergency backlog was up 27.4 percent at June 30, 2002 compared to June 30, 2001, consistent with the Company's strategy to increase its backlog at its Pierce subsidiary in order to improve manufacturing efficiencies in fiscal 2003.
Defense--Defense sales increased 46.3 percent, to $162.8 million, for the quarter. Operating income was up 71.4 percent, to $15.0 million, or 9.2 percent of sales, compared to prior year operating income of $8.7 million, or 7.8 percent of sales. Results for the quarter reflect increased volume related to a full quarter of full-rate production under the MTVR contract and increased parts sales, which were shifted from the fourth to the third quarter. The Company increased margins on the MTVR long-term production contract by one percentage point to 4.3% during the quarter. Excluding the impact of the cumulative adjustment of MTVR margins during the quarter, overall defense operating income margins would have been 7.0 percent in the third quarter of fiscal 2002. Operating income and margins for the third quarter of fiscal 2002 were adversely impacted by the relatively low margins on the higher volume of MTVR sales and by increased spending for bid and proposal activities in connection with multi-year truck procurement competitions for U.S. Army and U.K. Ministry of Defence business.
Commercial--Commercial sales increased 22.9 percent, to $204.5 million, for the quarter. Operating income increased 99.4 percent to $17.7 million, or 8.7 percent of sales. Excluding the impact of the Geesink Norba Group acquisition and the impact of non-amortization of goodwill, operating income would have been up 55.6 percent compared to the prior year quarter. Operating income improved largely due to increased sales of higher-margin concrete placement products, sales of used trucks and favorable manufacturing cost and workers compensation experience.
Corporate and other--Operating expenses and inter-segment profit elimination increased $4.4 million to $8.8 million due to increased variable compensation, higher legal defense costs and expenses incurred related to acquisition investigations terminated during the quarter. Net interest expense for the quarter decreased $0.5 million to $4.9 million. Interest costs on increased borrowings to fund the acquisition of the Geesink Norba Group were more than offset by lower interest rates.
Nine-Month Results
The company reported that net income increased 27.5 percent to $42.3 million, or $2.45 per share, for the first nine months of fiscal 2002 on sales of $1,266.6 million compared to $33.2 million, or $1.94 per share, for the first nine months of fiscal 2001 on sales of $1,031.7 million.
Operating income increased 20.2 percent to $79.7 million in the first nine months of fiscal 2002 compared to $66.3 million in the first nine months of fiscal 2001. Excluding the impact of the cumulative adjustment of MTVR margins, the impact of the acquisition of the Geesink Norba Group and adjusting for the non-amortization of goodwill ($0.29 per share after tax), earnings per share would have declined by $0.01 per share compared to the prior year. Increased corporate expenses and bid and proposal spending on U.S. and U.K. multi-year defense truck procurement competitions, combined with lower sales of higher-margin concrete placement products, contributed to this decline.
The company will comment on third quarter earnings and expectations for the remainder of fiscal 2002 and fiscal 2003 during a live conference call at 11:00 a.m. Eastern Daylight Time this morning. The call will be available simultaneously via a webcast over the Internet as a service to investors. It will be listen-only format for on-line listeners. To access the webcast, investors should go to www.oshkoshtruck.com at least 15 minutes prior to the event and follow instructions for listening to the broadcast. An audio replay of such conference call and related question and answer session will be available for thirty days at this website.
Dividend Announcement
Oshkosh Truck Corporation's Board of Directors declared a quarterly dividend of $0.07500 per share for Class A Common Stock and $0.08625 per share for Common Stock. These dividends, unchanged from the prior quarter, will be payable August 13, 2002 to shareholders of record as of August 6, 2002.
Oshkosh Truck Corporation is a leading manufacturer of specialty trucks and truck bodies for the defense, fire and emergency, concrete placement and refuse hauling markets. Oshkosh Truck is a Fortune 1000 company with products marketed under the Oshkosh, Pierce, McNeilus, Geesink, Norba and Medtec brand names. The company is headquartered in Oshkosh, Wis., and had annual sales of $1.45 billion in fiscal 2001.
Forward-Looking Statements
This press release contains statements that the company believes are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact, including statements regarding the company's future financial position, business strategy, targets, projected sales, costs, earnings, capital spending and debt levels, and plans and objectives of management for future operations, are forward-looking statements. When used in this press release, words such as the company "expects," "intends," "estimates," "anticipates," "believes" or "should" and similar expressions are generally intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, assumptions and other factors, some of which are beyond the company's control, that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These factors include the cyclical nature of the company's markets, risks related to reductions in government expenditures, the uncertainty of government contracts, the challenges of identifying, completing and integrating future acquisitions, disruptions in the supply of parts or components, competition, and risks associated with international operations and sales, including foreign currency fluctuations. In addition, the company's expectations for fiscal 2002 and fiscal 2003 are based in part on certain assumptions made by the company, including those relating to a modest economic recovery anticipated in U.S. and European economies, timing of receipt of sales orders and payments and execution and funding of defense contracts, achieving targeted cost reductions, production and margin levels under the MTVR contract, estimated bid and proposal spending on defense truck procurement competitions, concrete placement activity, capital expenditures of large commercial waste haulers, municipalities and airports, market share growth expectations, estimated Geesink Norba Group sales and operating income, anticipated debt levels, interest costs and working capital needs, and assuming no acquisitions in fiscal 2002 or 2003. The inaccuracy of these or other assumptions could have a material adverse effect on the company's ability to achieve the company's expectations. Additional information concerning these and other factors is contained in the company's filings with the Securities and Exchange Commission, including the Form 8-K filed today.
OSHKOSH TRUCK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Nine Months Ended
June 30, June 30,
--------------------------------------------
2002 2001 2002 2001
--------------------- ---------------------
(In thousands, except per share amounts)
Net sales $ 489,532 $ 405,790 $1,266,630 $1,031,685
Cost of sales 410,272 349,471 1,077,850 881,595
---------- ---------- ---------- ----------
Gross income 79,260 56,319 188,780 150,090
Operating expenses:
Selling, general and
administrative 39,392 25,681 104,636 74,826
Amortization of
goodwill and
purchased intangibles 1,506 3,137 4,421 8,947
---------- ---------- ---------- ----------
Total operating expenses 40,898 28,818 109,057 83,773
---------- ---------- ---------- ----------
Operating income 38,362 27,501 79,723 66,317
Other income (expense):
Interest expense (5,209) (5,610) (17,248) (15,428)
Interest income 344 228 900 707
Miscellaneous, net (174) (81) (373) (76)
---------- ---------- ---------- ----------
(5,039) (5,463) (16,721) (14,797)
---------- ---------- ---------- ----------
Income before income taxes
and equity in earnings
of unconsolidated
partnership 33,323 22,038 63,002 51,520
Provision for
income taxes 12,276 8,677 22,286 19,344
---------- ---------- ---------- ----------
21,047 13,361 40,716 32,176
Equity in earnings of
unconsolidated
partnership, net of
income taxes 527 348 1,633 1,040
---------- ---------- ---------- ----------
Net income $ 21,574 $ 13,709 $ 42,349 $ 33,216
========== ========== ========== ==========
Earnings per share $ 1.28 $ 0.82 $ 2.52 $ 1.99
Earnings per share
assuming dilution $ 1.24 $ 0.80 $ 2.45 $ 1.94
Weighted average
shares outstanding:
Basic 16,883 16,687 16,796 16,678
Assuming dilution 17,355 17,079 17,262 17,083
Cash dividends:
Class A Common Stock $ 0.07500 $ 0.07500 $ 0.22500 $ 0.22500
Common Stock $ 0.08625 $ 0.08625 $ 0.25875 $ 0.25875
OSHKOSH TRUCK CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, September 30,
2002 2001
------------- -------------
(Unaudited)
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 19,042 $ 11,312
Receivables, net 155,015 211,405
Inventories 233,828 258,038
Prepaid expenses 7,678 6,673
Deferred income taxes 25,572 15,722
------------- -------------
Total current assets 441,135 503,150
Investment in unconsolidated partnership 20,298 18,637
Other long-term assets 8,572 8,626
Property, plant and equipment 251,429 244,166
Less accumulated depreciation (115,032) (102,238)
------------- -------------
Net property, plant and equipment 136,397 141,928
Purchased intangible assets, net 105,898 124,787
Goodwill 315,969 292,140
------------- -------------
Total assets $ 1,028,269 $ 1,089,268
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 112,626 $ 107,864
Floor plan notes payable 22,229 19,271
Customer advances 94,703 58,070
Payroll-related obligations 30,945 27,084
Income taxes 16,743 25,221
Accrued warranty 22,996 18,338
Other current liabilities 49,860 46,322
Revolving credit facility and current
maturities of long-term debt 3,443 77,031
------------- -------------
Total current liabilities 353,545 379,201
Long-term debt 196,795 282,249
Deferred income taxes 33,386 40,334
Other long-term liabilities 41,350 40,458
Commitments and contingencies
Shareholders' equity 403,193 347,026
------------- -------------
Total liabilities and
shareholders' equity $ 1,028,269 $ 1,089,268
============= =============
OSHKOSH TRUCK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
June 30,
--------------------------------
2002 2001
-------------- --------------
(In thousands)
Operating activities:
Net income $ 42,349 $ 33,216
Non-cash adjustments 8,550 14,059
Changes in operating assets
and liabilities 124,271 (79,030)
-------------- --------------
Net cash provided from
(used for) operating
activities 175,170 (31,755)
Investing activities:
Acquisition of businesses,
net of cash acquired - (26,423)
Additions to property,
plant and equipment (6,883) (12,748)
Proceeds from sale of
property, plant and
equipment 5 25
Decrease (increase) in
other long-term assets 309 (5,426)
-------------- --------------
Net cash used for investing
activities (6,569) (44,572)
Financing activities:
Net borrowings (repayments)
under revolving credit
facility (65,200) 77,900
Repayment of long-term debt (93,855) (6,475)
Dividends paid (4,326) (4,300)
Other 1,961 196
-------------- --------------
Net cash provided from
(used for) financing
activities (161,420) 67,321
Effect of exchange rate
changes on cash 549 -
-------------- --------------
Increase (decrease) in cash
and cash equivalents 7,730 (9,006)
Cash and cash equivalents at
beginning of period 11,312 13,569
-------------- --------------
Cash and cash equivalents at
end of period $ 19,042 $ 4,563
============== ==============
Supplementary disclosure:
Depreciation and
amortization $ 18,720 $ 20,756
OSHKOSH TRUCK CORPORATION
SEGMENT INFORMATION
(Unaudited)
Three Months Ended Nine Months Ended
June 30, June 30,
--------------------- --------------------------
2002 2001 2002 2001
---------- ---------- ------------- ------------
(In thousands)
Net sales to unaffiliated customers:
Commercial $ 204,535 $ 166,370 $ 503,942 $ 420,750
Fire and emergency 123,956 128,850 339,504 338,603
Defense 162,774 111,284 426,475 273,356
Intersegment
eliminations (1,733) (714) (3,291) (1,024)
---------- ---------- ------------- ------------
Consolidated $ 489,532 $ 405,790 $ 1,266,630 $ 1,031,685
========== ========== ============= ============
Operating income (expense):
Commercial $ 17,747 $ 8,898 $ 37,204 $ 22,710
Fire and emergency 14,461 14,281 33,824 32,486
Defense 14,965 8,730 28,094 24,055
Corporate and other (8,811) (4,408) (19,399) (12,934)
---------- ---------- ------------- ------------
Consolidated $ 38,362 $ 27,501 $ 79,723 $ 66,317
========== ========== ============= ============
Period-end Backlog:
Commercial $ 160,485 $ 77,072
Fire and emergency 290,657 228,069
Defense 613,980 521,554
------------- ------------
Consolidated $ 1,065,122 $ 826,695
============= ============