Oshkosh Truck Reports Second Quarter Earnings
26 April 1999
Oshkosh Truck Reports Second Quarter Earnings
OSHKOSH, Wis.--April 26, 1999--Oshkosh Truck Corporation (NASDAQ-OTRKB) today reported that net income increased 170 percent to $6.5 million, or $0.76 per share, for the second quarter of fiscal 1999 on sales of $299 million. This compares to net income of $2.4 million, or $0.28 per share, for the second quarter of fiscal 1998 on sales of $218 million. Net income for the second quarter of fiscal 1998 was impacted by after-tax charges of $1.6 million, or $0.19 per share, related to an extraordinary charge for the early retirement of debt and a charge for the early adoption of a new accounting standard related to start-up activities.Net sales for the quarter increased 37 percent. Operating income increased 51 percent to $16.9 million compared to $11.2 million in the prior year.
Sales and income growth was led by the commercial business, one of Oshkosh's three primary businesses, and by the fire and emergency business. Commercial sales jumped 95 percent, while the fire and emergency business delivered a sales increase of 24 percent.
Commenting on the company's outlook, Robert G. Bohn, president and chief executive officer, noted, "We expected strong markets for our fire and emergency and commercial products throughout the fiscal year. Our hefty earnings increase during the first half of fiscal 1999 and strong backlogs further support this view, and our outlook for the year remains excellent. An expected sales decline in our defense business was more than offset by significantly improved performance in our fire and emergency and commercial markets. Additionally, we are beginning to reap the benefits of synergies among our subsidiaries to bring savings in materials, logistics and manufacturing technology to the bottom line."
The factors affecting second quarter results for the company's three primary business segments included:
Fire and Emergency Business -- Sales increased $16.5 million, or 24 percent, to $85.8 million for the second quarter. Operating income increased 42 percent to $6.9 million compared to the same quarter of the prior year. Pierce Manufacturing Inc. delivered a 23 percent increase in sales for the quarter, while strong performance by Oshkosh's snow removal product line accounted for the remaining performance improvement.
Vigorous new product development activities continued at Pierce and for Oshkosh's snow removal line.
In addition, the first low-priced commercial pumpers were shipped from Pierce's production facility in Florida. These limited-option units are a key component of Pierce's strategy for expanding market share in the commercial apparatus segment of the fire industry. Pierce is currently the leader in North American custom apparatus sales.
Defense Business - In this market, sales declined, as expected, by $17.0 million to $44.4 million for the quarter. This is a 28 percent reduction from fiscal 1998 results which included $11.1 million in sales of the ISO-compatible palletized flatracks contract for the U.S. Army. This contract was completed in the fourth quarter of fiscal 1998. These lower sales are due to a general decline in heavy tactical truck procurement by the U.S. Department of Defense. Defense sales are expected to decline in the third quarter compared to the prior year and then increase in the fourth quarter. As previously reported, Oshkosh expects defense sales to decline by up to $30.0 million for the full year of fiscal 1999.
Operating income for the defense segment decreased $1.6 million to $4.6 million, or 10 percent of sales, for the second quarter compared to $6.2 million, or 10 percent of sales, for the same quarter in fiscal 1998.
Another major milestone in the quarter was the start of work for the next generation of medium tactical trucks for the U.S. Marine Corp. This five-year contract was awarded to Oshkosh in December 1998 and has a potential value of more than $1.2 billion, if all options are exercised. Testing of the first ten units is scheduled to begin in December 1999.
Commercial Business - Second quarter sales increased $83.0 million, or 95 percent, to $170.3 million for the quarter due to the acquisition of and strong performance by McNeilus. McNeilus sales were $122.8 million for the quarter, an increase of 21.2 percent compared to the same period last year. For the second quarter of fiscal 1998, McNeilus results were only included in Oshkosh's consolidated results for the one-month period following its acquisition on February 26, 1998.
Operating income increased $9.5 million to $13.6 million, or 8 percent of sales, compared to operating income of $4.1 million, or 5 percent of sales, for the comparable period of the preceding year. Approximately $7.9 million of this increase is attributable to McNeilus, with the balance resulting from higher sales and improved margins for the Oshkosh front-discharge concrete mixers.
Net interest expense in the second quarter of 1999 increased $2.1 million to $6.4 million compared to $4.3 million in the prior year as a result of additional borrowings to acquire McNeilus. Total debt reached $294 million because of investments in working capital to support strong seasonal market demand for the Company's construction products.
Six-Month Results
The company reported that net income increased 88 percent to $10.5 million, or $1.21 per share, for the first six months of fiscal 1999 on sales of $521 million compared to $5.6 million, or $.65 per share, for the first six months of fiscal 1998 on sales of $370 million.
Operating income rose 60 percent to $29.7 million in the first six months of fiscal 1999 compared to $18.6 million in the first six months of fiscal 1998. The increase in earnings reflects a full six months of operations of McNeilus in fiscal 1999 compared to only one month in fiscal 1998.
Dividend Announcement
Oshkosh Truck Corporation's Board of Directors declared a quarterly dividend of $.10875 per share for Class A Common Stock and $.125 per share for Common Stock. These dividends, unchanged from the previous rate, will be payable May 13, 1999, to shareholders of record as of May 6, 1999.
Oshkosh Truck Corporation is a leading manufacturer of specialty trucks and truck bodies for the fire and emergency, defense, and commercial markets. Products are marketed under the Oshkosh, Pierce and McNeilus brand names.
Forward-Looking Statements
Forward-looking statements within this news release are made pursuant to Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact included in this release, are forward-looking statements. Such forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results and company plans and objectives to differ materially. Such risks and uncertainties included, but are not limited to, general business and economic conditions; competitive pricing pressures for the company's products; changes in material costs; the uncertainty inherent in government contracts; opportunities that may be presented to and pursued by the company; unanticipated events relating to resolving Year 2000 issues; and the ability to achieve synergistic and other cost reductions and efficiencies.
---FINANCIAL TABLES TO FOLLOW---
OSHKOSH TRUCK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
March 31, March 31,
-------------------------- -------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
(In thousands, except per share amounts)
Net sales $ 298,534 $ 217,836 $ 521,227 $ 369,637
Cost of sales 254,014 190,302 444,599 322,105
------------ ------------ ------------ ------------
Gross income 44,520 27,534 76,628 47,532
Operating expenses:
Selling, general
and administrative 24,754 14,649 41,299 26,159
Amortization of
goodwill and other
intangibles 2,890 1,669 5,625 2,795
------------ ------------ ------------ ------------
Total
operating
expenses 27,644 16,318 46,924 28,954
------------ ------------ ------------ ------------
Operating income 16,876 11,216 29,704 18,578
Other income (expense):
Interest expense (6,645) (4,687) (13,226) (7,191)
Interest income 241 369 427 534
Miscellaneous, net 198 (235) 340 (163)
------------ ------------ ------------ ------------
(6,206) (4,553) (12,459) (6,820)
------------ ------------ ------------ ------------
Income from operations
before income taxes,
equity in earnings
of unconsolidated
partnership and
extraordinary item 10,670 6,663 17,245 11,758
Provision for
income taxes 4,501 2,784 7,501 4,739
------------ ------------ ------------ ------------
6,169 3,879 9,744 7,019
Equity in earnings
of unconsolidated
partnership, net
of income taxes 380 (718) 717 (718)
------------ ------------ ------------ ------------
Income from
operations 6,549 3,161 10,461 6,301
Extraordinary charge
for early retirement of
debt, net of income
tax benefit - (735) - (735)
------------ ------------ ------------ ------------
Net income $ 6,549 $ 2,426 $ 10,461 $ 5,566
============ ============ ============ ============
Earnings
per share $ 0.77 $ 0.29 $ 1.24 $ 0.66
============ ============ ============ ============
Earnings per
share assuming
dilution $ 0.76 $ 0.28 $ 1.21 $ 0.65
============ ============ ============ ============
Cash dividends:
Class A Common
Stock $ 0.10875 $ 0.10875 $ 0.21750 $ 0.21750
Common Stock $ 0.12500 $ 0.12500 $ 0.25000 $ 0.25000
OSHKOSH TRUCK CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
Mar. 31, Sept. 30,
1999 1998
----------------- -----------------
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 4,386 $ 3,622
Receivables, net 118,674 80,982
Inventories 210,374 149,191
Prepaid expenses 4,311 3,768
Deferred income taxes 21,583 12,281
----------------- -----------------
Total current assets 359,328 249,844
Investment in unconsolidated
partnership 14,461 13,496
Other long-term assets 16,066 14,198
Property, plant and equipment 161,394 156,783
Less accumulated depreciation (80,369) (75,947)
----------------- -----------------
Net property, plant and
equipment 81,025 80,836
Goodwill and other intangible
assets, net 327,166 326,665
----------------- -----------------
Total assets $ 798,046 $ 685,039
================= =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 88,484 $ 65,171
Floor plan notes payable 47,639 11,645
Customer advances 64,780 44,915
Payroll-related obligations 21,704 24,124
Accrued warranty 15,119 15,887
Other current liabilities 57,597 43,498
Current maturities of
long-term debt and revolving
credit facility 23,198 3,467
----------------- -----------------
Total current liabilities 318,521 208,707
Long-term debt 270,665 277,337
Deferred income taxes 47,861 47,832
Other long-term liabilities 19,817 19,867
Shareholders' equity 141,182 131,296
----------------- -----------------
Total liabilities and
shareholders' equity $ 798,046 $ 685,039
================= =================
OSHKOSH TRUCK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
March 31,
----------------------------------------
1999 1998
----------------------------------------
(In thousands)
Operating activities:
Income from operations $ 10,461 $ 6,301
Non-cash adjustments 4,252 12,422
Changes in operating assets
and liabilities (18,560) 10,327
----------------- -----------------
Net cash provided from
(used for) operating
activities (3,847) 29,050
Investing activities:
Acquisition of businesses,
net of cash acquired - (217,954)
Additions to property,
plant and equipment (4,712) (4,355)
Proceeds from sale of
property, plant and equipment 30 119
(Increase) decrease in other
long-term assets (2,482) 1,868
----------------- -----------------
Net cash used for
investing activities (7,164) (220,322)
Net cash used for discontinued
operations - (811)
Financing activities:
Net borrowings under
revolving credit facility 13,300 -
Net borrowings (repayments)
of long-term debt (241) 189,963
Debt issuance costs - (8,479)
Dividends paid (2,103) (2,083)
Other 819 18
----------------- -----------------
Net cash provided from
financing activities 11,775 179,419
----------------- -----------------
Increase (decrease) in cash
and cash equivalents 764 (12,664)
Cash and cash equivalents at
beginning of period 3,622 23,219
----------------- -----------------
Cash and cash equivalents at
end of period $ 4,386 $ 10,555
================= =================
Supplementary disclosure:
Depreciation and
amortization $ 11,085 $ 7,398
OSHKOSH TRUCK CORPORATION
SEGMENT INFORMATION
(Unaudited)
Three Months Ended
March 31,
1999 1998
---- ----
(In thousands)
Net sales:
Fire and Emergency $ 85,781 $ 69,307
Defense 44,405 61,426
Commercial 170,309 87,274
Intersegment eliminations (1,961) (171)
---------------- ---------------
Total net sales $ 298,534 $ 217,836
================ ================
Operating income:
Fire and Emergency $ 6,878 $ 4,857
Defense 4,605 6,154
Commercial 13,624 4,065
Corporate and other (a) (8,231) (3,860)
---------------- ---------------
Total operating income $ 16,876 $ 11,216
================ ================
Six Months Ended
March 31,
1999 1998
---- ----
Net sales:
Fire and Emergency $ 159,630 $ 136,171
Defense 96,430 132,101
Commercial 268,108 101,664
Intersegment eliminations (2,941) (299)
---------------- ---------------
Total net sales $ 521,227 $ 369,637
=============== ===============
Operating income:
Fire and Emergency $ 11,697 $ 10,099
Defense 10,769 12,282
Commercial 18,418 2,778
Corporate and other (a) (11,180) (6,581)
---------------- ---------------
Total operating income $ 29,704 $ 18,578
================ ===============
(a) Results for the three and six months ended March 31, 1999
include a $3,750 nonrecurring charge for litigation.