-----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, AkTo+75C4NbVmiB/Z+O43hNogQGxEB+q8WTo66BXgPAt/UKFbBSJWdNPNJgk2jV2 tsvLHby6jx/RXcFYaPo3EQ== 0000897069-02-000548.txt : 20020808 0000897069-02-000548.hdr.sgml : 20020808 20020808110332 ACCESSION NUMBER: 0000897069-02-000548 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020808 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-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-31371 FILM NUMBER: 02722437 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 1: 2307 OREGON ST P O BOX 2566 STREET 2: 2307 OREGON ST P O BOX 2566 CITY: OSHKOSH STATE: WI ZIP: 54903 10-Q 1 slp338.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) (x) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 30, 2002. or ( ) Transaction Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Transition period from to ------------- ---------------- Commission File Number 1-31371 ----------- Oshkosh Truck Corporation ---------------------------------------- [Exact name of registrant as specified in its charter] Wisconsin 39-0520270 - ------------------------------- ------------------ [State or other jurisdiction of [I.R.S. Employer incorporation or organization] Identification No.] 2307 Oregon Street, P.O. Box 2566, Oshkosh, Wisconsin 54903 - ----------------------------------------------------- --------- [Address of principal executive offices] [Zip Code] Registrant's telephone number, including area code (920) 235-9151 -------------- None - -------------------------------------------------------------------------------- [Former name, former address and former fiscal year, if changed since last report] Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- -------- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class A Common Stock Outstanding as of July 31, 2002: 417,294 Common Stock Outstanding as of July 31, 2002: 16,466,739 OSHKOSH TRUCK CORPORATION FORM 10-Q INDEX FOR THE QUARTER ENDED JUNE 30, 2002 Page Part I. Financial Information Item 1. Financial Statements (Unaudited) Condensed Consolidated Statements of Income - Three Months and Nine Months Ended June 30, 2002 and 2001 ..............................3 Condensed Consolidated Balance Sheets - June 30, 2002 and September 30, 2001...................4 Condensed Consolidated Statement of Shareholders' Equity - Nine Months Ended June 30, 2002 .......................5 Condensed Consolidated Statements of Cash Flows - Nine Months Ended June 30, 2002 and 2001 ..............6 Notes to Condensed Consolidated Financial Statements - June 30, 2002 .........................................7 Item 2. Management's Discussion and Analysis of Consolidated Financial Condition and Results of Operations ...........25 Item 3. Quantitative and Qualitative Disclosure of Market Risk .....42 Part II. Other Information Item 1. Legal Proceedings ..........................................43 Item 6. Exhibits and Reports on Form 8-K ...........................43 Signatures ..................................................................44 2 PART I. ITEM 1. FINANCIAL INFORMATION 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 =========== =========== ========== ========== Cash dividends: Class A Common Stock $ 0.07500 $ 0.07500 $ 0.22500 $ 0.22500 Common Stock $ 0.08625 $ 0.08625 $ 0.25875 $ 0.25875
The accompanying notes are an integral part of these condensed consolidated financial statements. 3 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 - Note 10 Shareholders' equity 403,193 347,026 ------------- ----------- Total liabilities and shareholders' equity $ 1,028,269 $ 1,089,268 ============== ===========
The accompanying notes are an integral part of these condensed consolidated financial statements. 4 OSHKOSH TRUCK CORPORATION CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY NINE MONTHS ENDED JUNE 30, 2002 (Unaudited)
Accumulated Common Stock Other Common Paid-In Retained in Treasury Comprehensive Stock Capital Earnings at Cost Income (Loss) Total ----- ------- -------- ------- ------------- ----- (In thousands) Balance at September 30, 2001 $178 $110,330 $246,915 $(10,195) $ (202) $347,026 Net income -- -- 42,349 -- -- 42,349 Gain on derivative instruments (net of income taxes of $37) -- -- -- -- 63 63 Currency translation adjustments -- -- -- -- 13,537 13,537 Cash dividends: Class A Common Stock -- -- (94) -- -- (94) Common Stock -- -- (4,246) -- -- (4,246) Exercise of stock options -- 334 -- 1,627 -- 1,961 Tax benefit related to stock options exercised -- 2,597 -- -- -- 2,597 ------ -------- -------- ------- ------- -------- Balance at June 30, 2002 $178 $113,261 $284,924 $(8,568) $13,398 $403,193 ====== ======== ======== ======= ======= ========
The accompanying notes are an integral part of these condensed consolidated financial statements. 5 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) Other 314 (5,401) -------- -------- 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 disclosures: Depreciation and amortization $ 18,720 $ 20,756 Cash paid for interest 14,517 12,193 Cash paid for income taxes 35,925 16,537
The accompanying notes are an integral part of these condensed consolidated financial statements. 6 OSHKOSH TRUCK CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. BASIS OF PRESENTATION The condensed consolidated financial statements included herein have been prepared by Oshkosh Truck Corporation (the "Company") without audit. However, the foregoing financial statements contain all adjustments (which include normal recurring adjustments except as disclosed herein) that are, in the opinion of Company management, necessary to present fairly the condensed consolidated financial statements. Operating results for the periods presented may not be indicative of the annual results. Certain reclassifications have been made to the fiscal 2001 financial statements to conform to the fiscal 2002 presentation. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's 2001 annual report to shareholders. 2. NEW ACCOUNTING STANDARDS In August 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard ("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS No. 144"). SFAS No. 144 establishes a single accounting model, based on the framework established in SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets To Be Disposed Of" ("SFAS No. 121"), for long-lived assets to be disposed of by sale, and resolves significant implementation issues related to SFAS No. 121. The Company adopted SFAS No. 144 on October 1, 2001. The adoption of SFAS No. 144 did not have a material effect on the consolidated financial statements. 3. COMPREHENSIVE INCOME Total comprehensive income is as follows (in thousands):
Three Months Ended Nine Months Ended June 30, June 30, 2002 2001 2002 2001 ---- ---- ---- ---- Net income $21,574 $13,709 $42,349 $33,216 Currency translation adjustments 19,618 -- 13,537 -- Gains on derivative instruments, net of income taxes 78 16 63 60 ------- ------- ------- ------- Comprehensive income $41,270 $13,725 $55,949 $33,276 ======= ======= ======= =======
7 The components of Accumulated Other Comprehensive Income (Loss) are as follows (in thousands): June 30, September 30, 2002 2001 ---- ---- Cumulative translation adjustments $17,812 $4,275 Minimum pension liability adjustments, net of income taxes (4,490) (4,490) Gains on derivative instruments, net of income taxes 76 13 ------- ------ Accumulated other comprehensive income (loss) $13,398 $ (202) ======= ====== 4. EARNINGS PER SHARE The following table sets forth the computation of basic and diluted weighted average shares used in the denominator of the per share calculations:
Three Months Ended Nine Months Ended June 30, June 30, -------- -------- 2002 2001 2002 2001 ---- ---- ---- ---- Denominator for basic earnings per share 16,883,214 16,686,732 16,795,522 16,677,804 Effect of dilutive options and incentive compensation awards 471,488 392,088 466,369 405,218 ---------- ---------- ---------- ---------- Denominator for dilutive earnings per share 17,354,702 17,078,820 17,261,891 17,083,022 ========== ========== ========== ==========
5. INVENTORIES Inventories consist of the following:
June 30, September 30, 2002 2001 ---- ---- (In thousands) Finished products $ 60,518 $ 64,049 Partially finished products 99,742 104,955 Raw materials 119,540 122,484 -------- ------- Inventories at FIFO cost 279,800 291,488 Less: Progress/performance-based payments on U.S. government contracts (31,338) (20,831) Excess of FIFO cost over LIFO cost (14,634) (12,619) -------- -------- $233,828 $258,038 ======== ========
Title to all inventories related to government contracts, which provide for progress or performance-based payments, vests with the government to the extent of unliquidated progress/performance-based payments. 6. INVESTMENTS IN UNCONSOLIDATED PARTNERSHIP The Company and an unaffiliated third party are general partners in Oshkosh/McNeilus Financial Services Partnership ("OMFSP"), a general partnership. OMFSP was formed in 1998 when each partner contributed existing lease assets (and in the case of the Company, related notes payable to third party lenders that were secured by such leases) to capitalize the partnership. OMFSP manages the contributed assets and liabilities and engages in new vendor lease business providing financing to customers of the Company. OMFSP purchases trucks, truck bodies and 8 concrete batch plants from the Company and the Company's affiliates for lease to end customers. Banks and other third party financial institutions lend to OMFSP a portion of the purchase price, with recourse solely to OMFSP, secured by a pledge of lease payments due from the user lessees. Each partner funds one-half of the equity portion of the cost of new truck and batch plant purchases, and each partner is allocated its proportionate share of OMFSP cash flow and taxable income as determined by the partnership agreement. Indebtedness of OMFSP is secured by the underlying leases and assets of, and is recourse to, OMFSP. However, such debt is nonrecourse to the Company. Each of the two general partners have identical participating and protective rights and responsibilities, and accordingly, the Company accounts for its equity interest in OMFSP of 52% at June 30, 2002 and September 30, 2001, under the equity method. Summarized financial information of OMFSP is as follows (dollars in thousands): June 30, September 30, 2002 2001 ---- ---- Cash and cash equivalents $ 1,761 $ 2,973 Investments in sales-type leases, net 208,508 204,772 Other assets 585 869 -------- -------- $210,854 $208,614 ======== ======== Notes payable $167,530 $166,635 Other liabilities 4,515 6,211 Partners' equity 38,809 35,768 -------- -------- $210,854 $208,614 ======== ======== Nine Months Ended June 30, 2002 2001 ---- ---- Interest income $12,290 $11,412 Net interest income 3,278 2,969 Excess of revenues over expenses 3,233 2,914 7. GOODWILL AND PURCHASED INTANGIBLE ASSETS In June 2001, the FASB issued SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS No. 141 requires that all business combinations be accounted for using the purchase method of accounting and that certain intangible assets acquired in a business combination be recognized as assets apart from goodwill. SFAS No. 141 was effective for all business combinations initiated after June 30, 2001. SFAS No. 142 requires goodwill to be tested for impairment under certain circumstances, and written down when impaired, rather than being amortized as previous standards required. Furthermore, SFAS No. 142 requires purchased intangible assets other than goodwill to be amortized over their useful lives unless these lives are determined to be indefinite. Purchased intangible assets are carried at cost less accumulated amortization. Amortization is computed over the useful lives of the respective assets. SFAS No. 142 is effective for fiscal years beginning after December 15, 2001; however, the Company elected to adopt early the standard effective 9 the beginning of fiscal 2002. In accordance with SFAS No. 142, the Company ceased amortizing goodwill totaling $301.5 million as of the beginning of fiscal 2002, which includes $9.4 million of purchased intangible assets that were subsumed into goodwill (net of related deferred income tax liabilities of $6.0 million) as follows: $2.9 million of assembled workforce intangible assets, $2.7 million of going concern/immediate use intangible assets and $9.8 million of internal sales force intangible assets. Due to indefinite lives, the Company also ceased amortizing trade names totaling $5.4 million as of the beginning of fiscal 2002. As a result, the Company did not recognize amortization of goodwill and trade names during the three and nine month periods ended June 30, 2002 totaling $1.7 million and $4.9 million, respectively, net-of-tax, that would have been recognized had the previous standards been in effect. The following table presents the impact of SFAS No. 142 on net income and net income per share had the standard been in effect for the three and nine month periods ended June 30, 2001 (in thousands, except per share amounts):
Three Months Ended Nine Months Ended June 30, June 30, 2002 2001 2002 2001 ---- ---- ---- ---- Reported net income $21,574 $13,709 $42,349 $33,216 Adjustments: Amortization of goodwill -- 1,506 -- 4,439 Amortization of assets previously classified as purchased intangible assets: Assembled workforce -- 163 -- 490 Internal sales force -- 68 -- 202 Going concern/immediate use -- 19 -- 56 Trade names -- 10 -- 30 Income tax effect -- (115) -- (324) ------ ------- ------ ------- Net adjustments -- 1,651 -- 4,893 ------- ------- ------- ------- Adjusted net income $21,574 $15,360 $42,349 $38,109 ======= ======= ======= ======= Reported net income per share $1.28 $ 0.82 $2.52 $ 1.99 Adjusted net income per share 1.28 0.92 2.52 2.28 Reported net income per share assuming dilution 1.24 0.80 2.45 1.94 Adjusted net income per share assuming dilution 1.24 0.90 2.45 2.23
There was no impairment of goodwill upon adoption of SFAS No. 142. The Company is required to perform goodwill impairment tests on an annual basis and between annual tests in certain circumstances. There can be no assurance that future goodwill impairment tests will not result in a charge to earnings. 10 The following tables present details of the Company's total purchased intangible assets (dollars in thousands):
Weighted Average Accumulated June 30, 2002 Life Gross Amortization Net - ------------- ---- ----- ------------ --- (years) Amortizable: Distribution network 40.0 $ 53,000 $ (7,657) $ 45,343 Non-compete 14.5 40,122 (11,590) 28,532 Technology-related 17.8 20,601 (3,764) 16,837 Other 10.0 10,205 (783) 9,422 --------- --------- -------- 25.5 123,928 (23,794) 100,134 Non-amortizable-Trade names 5,965 (201) 5,764 --------- --------- -------- Total $ 129,893 $ (23,995) $105,898 ========= ========= ======== Weighted Average Accumulated September 30, 2001 Life Gross Amortization Net - ------------------ ---- ----- ------------ --- (years) Amortizable: Distribution network 40.0 $ 53,000 $ (6,664) $ 46,336 Non-compete 14.5 40,106 (9,400) 30,706 Technology-related 17.9 20,247 (2,867) 17,380 Assembled workforce 11.3 5,600 (2,678) 2,922 Internal sales force 40.0 10,800 (968) 9,832 Going concern/immediate use 40.0 3,000 (320) 2,680 Trade names 22.1 5,603 (201) 5,402 Other 10.3 9,944 (415) 9,529 --------- --------- --------- Total 26.3 $ 148,300 $ (23,513) $ 124,787 ========= ========== =========
The Company engaged third-party business valuation appraisers to determine the fair value of the intangible assets in connection with the Company's larger acquisitions--specifically the acquisitions of Pierce Manufacturing Inc. ("Pierce") in fiscal 1996, McNeilus Companies, Inc. ("McNeilus") in fiscal 1998 and the Geesink Norba Group in fiscal 2001. The estimated future amortization expense of purchased intangible assets is as follows (in thousands): Fiscal year Amount - ----------- ------ 2002 (remaining three months) $1,648 2003 6,306 2004 6,306 2005 6,260 2006 6,040 11 The following table presents the changes in goodwill during the first nine months of fiscal 2002 allocated to the reportable segments (in thousands):
Balance at Balance at September 30, June 30, Segment 2001 Acquired Adjustments 2002 ------- ---- -------- ----------- ---- Commercial $ 194,963 $ -- $ 21,664 $ 216,627 Fire and emergency 97,177 -- 2,165 99,342 Defense -- -- -- -- ---------- ---------- --------- ---------- Total $ 292,140 $ -- $ 23,829 $ 315,969 ========== ========== ========= ==========
The adjustments during the first nine months of fiscal 2002 included an increase of $8.8 million resulting from currency translation adjustments, a $0.3 million reduction due to income tax recoveries and a reclassification of the net book value of recorded purchased intangible assets subsumed into goodwill upon adoption of SFAS No. 142, including: assembled workforce intangible assets of $2.9 million, going-concern/immediate use intangible assets of $2.7 million and internal sales force intangible assets of $9.8 million, net of related deferred tax liabilities of $6.0 million. The internal sales force intangible assets subsumed into goodwill neither arose from contractual or other legal rights nor was it separable. In June 2002, the Company also recorded certain adjustments to goodwill to reflect the finalization of appraisals and of certain restructuring plans relating to the Geesink Norba Group acquisition. Adjustments recorded during the period net of related tax benefits aggregated $5.9 million and were recorded as an increase in goodwill. 8. BUSINESS COMBINATIONS On July 25, 2001, the Company acquired all the outstanding capital stock of the Geesink Norba Group. The cash purchase price of the acquisition of 156.4 million euros, including acquisition costs of 4.0 million euros and net of cash acquired, or $137.6 million was financed under a new Term B Loan under the Company's senior credit facility. The Geesink Norba Group is a leading European manufacturer of refuse collection truck bodies, mobile and stationary compactors and transfer stations under the Geesink and Norba brands. The Geesink Norba Group is included in the Company's commercial segment. On October 30, 2000, the Company acquired all of the issued and outstanding capital stock of Medtec Ambulance Corporation ("Medtec") for $14.4 million in cash, including acquisition costs and net of cash acquired. Medtec is a U.S. manufacturer of custom ambulances and rescue vehicles. The acquisition was financed from available cash. Medtec is included in the Company's fire and emergency segment. These acquisitions were accounted for using the purchase method of accounting and, accordingly, the operating results of the Geesink Norba Group and Medtec are included in the Company's consolidated statements of income beginning July 25, 2001 and October 30, 2000, respectively. Proforma unaudited consolidated operating results of the Company for the nine months ended June 30, 2001, assuming the Geesink Norba Group and 12 Medtec had been acquired as of October 1, 2000, is summarized below (in thousands, except per share amounts): Net sales $1,123,995 Net income 34,202 Earnings per share $ 2.05 Earnings per share assuming dilution $ 2.00 9. LONG-TERM DEBT The Company has outstanding a senior credit facility consisting of a $170.0 million revolving credit facility ("Revolving Credit Facility") with no borrowings outstanding at June 30, 2002, a Term Loan A with $36.0 million outstanding at June 30, 2002 and a Term Loan B with $62.2 million outstanding at June 30, 2002. The Revolving Credit Facility and the Term Loan A mature in January 2006 and the Term Loan B matures in January 2007. At June 30, 2002, $23.7 million of outstanding letters of credit reduced available capacity under the Revolving Credit Facility to $146.3 million. Substantially all the domestic tangible and intangible assets of the Company and its subsidiaries (including the stock of certain subsidiaries) are pledged as collateral under the senior credit facility. The senior credit facility includes customary affirmative and negative covenants. The Company has outstanding $100.0 million of 8.75% senior subordinated notes. The Indenture governing the terms of the senior subordinated notes contains customary affirmative and negative covenants. The Subsidiary Guarantors (as defined below in Note 12) fully, unconditionally, jointly and severally guarantee the Company's obligations under the senior subordinated notes. Certain of the Company's subsidiaries have outstanding debt to third parties totaling $2.0 million as of June 30, 2002. 10. COMMITMENTS AND CONTINGENCIES As part of its routine business operations, the Company disposes of and recycles or reclaims certain industrial waste materials, chemicals and solvents at third party disposal and recycling facilities, which are licensed by appropriate governmental agencies. In some instances, these facilities have been and may be designated by the United States Environmental Protection Agency ("EPA") or a state environmental agency for remediation. Under the Comprehensive Environmental Response, Compensation, and Liability Act (the "Superfund" law) and similar state laws, each potentially responsible party ("PRP") that contributed hazardous substances may be jointly and severally liable for the costs associated with cleaning up the site. Typically, PRPs negotiate a resolution with the EPA and/or the state environmental agencies. PRPs also negotiate with each other regarding allocation of the cleanup cost. 13 As to one such Superfund site, Pierce is one of 382 PRPs participating in the costs of addressing the site and has been assigned an allocation share of approximately 0.04%. Currently, the state environmental agency in charge is reviewing a draft remedial investigation/feasibility study prepared by the lead PRP group, and as such, an estimate for the total cost of the remediation of this site has not been made to date. However, based on estimates and the assigned allocations, the Company believes its liability at the site will not be material and its share is adequately covered through reserves established by the Company at June 30, 2002. Actual liability could vary based on results of the study, the resources of other PRPs, and the Company's final share of liability. The Company is addressing a regional trichloroethylene ("TCE") groundwater plume on the south side of Oshkosh, Wisconsin. The Company believes there may be multiple sources in the area. TCE was detected at the Company's North Plant facility with testing showing the highest concentrations in a monitoring well located on the upgradient property line. Because the investigation process is still ongoing, it is not possible for the Company to estimate its liability, if any, associated with this issue at this time. Also, as part of the regional TCE groundwater investigation, the Company conducted a groundwater investigation of a former landfill located on Company property. The landfill, acquired by the Company in 1972, is approximately 2.0 acres in size and is believed to have been used for the disposal of household waste. Based on the investigation, the Company does not believe the landfill is one of the sources of the TCE contamination. Based upon current knowledge, the Company believes the ultimate liability associated with the TCE issue will not be materially different than the amount of reserves established for the matter as of June 30, 2002. However, this may change as investigations proceed by the Company, other unrelated property owners, and the government. The Company is subject to other environmental matters and legal proceedings and claims, including patent, antitrust, product liability and state dealership regulation compliance proceedings, 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. Actual results could vary, among other things, due to the uncertainties involved in litigation. The Company has guaranteed certain customers' obligations under deferred payment contracts and lease purchase agreements totaling approximately $1.0 million at June 30, 2002. The Company is also contingently liable under bid, performance and specialty bonds totaling approximately $152.8 million and open standby letters of credit issued by the Company's bank in favor of third parties totaling approximately $23.7 million at June 30, 2002. 14 11. BUSINESS SEGMENT INFORMATION
Three Months Ended Nine Months Ended June 30, June 30, 2002 2001 2002 2001 ---- ---- ---- ---- (In thousands) (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 (loss): 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 operating income 38,362 27,501 79,723 66,317 Net interest expense (4,865) (5,382) (16,348) (14,721) Miscellaneous other (174) (81) (373) (76) -------- -------- ---------- ---------- Income before income taxes and equity in earnings of unconsolidated partnership $ 33,323 $ 22,038 $ 63,002 $ 51,520 ======== ======== ========== ========== June 30, September 30, 2002 2001 ---- ---- (In thousands) Identifiable assets: Commercial $ 594,305 $ 594,845 Fire and emergency 319,889 315,565 Defense 104,792 168,400 Corporate and other 9,283 10,458 ---------- ---------- Consolidated $1,028,269 $1,089,268 =========== ==========
Net sales by geographic region based on product shipment destination were as follows:
Three Months Ended Nine Months Ended June 30, June 30, 2002 2001 2002 2001 ---- ---- ---- ---- (In thousands) (In thousands) United States $433,064 $386,352 $1,121,270 $ 954,991 Other North America 582 1,928 6,174 4,835 Europe and Middle East 48,996 10,278 118,376 47,480 Other 6,890 7,232 20,810 24,379 -------- -------- ---------- ---------- Consolidated $489,532 $405,790 $1,266,630 $1,031,685 ======== ======== ========== ==========
12. CONDENSED CONSOLIDATING FINANCIAL INFORMATION The following tables present condensed consolidating financial information for: (a) the Company; (b) on a combined basis, the guarantors of the senior subordinated notes, which include all wholly-owned subsidiaries of the Company ("Subsidiary Guarantors") other than Geesink Norba Group, McNeilus Financial Services, Inc., Oshkosh/McNeilus Financial Services, Inc., and Oshkosh Equipment Finance, LLC which are the only non-guarantor subsidiaries of the Company ("Non-Guarantor Subsidiaries"), and (c) on a combined basis, the Non-Guarantor Subsidiaries. Separate financial 15 statements of the Subsidiary Guarantors are not presented because the Subsidiary Guarantors are jointly, severally and unconditionally liable under the guarantees, and the Company believes separate financial statements and other disclosures regarding the Subsidiary Guarantors are not material to investors. The Company is comprised of Wisconsin and Florida manufacturing operations and certain corporate management, information services and finance functions. Borrowings and related interest expense under the senior credit facility and the senior subordinated notes are charged to the Company. The Company has allocated a portion of this interest expense to certain Subsidiary Guarantors through formal lending arrangements. There are no management fee arrangements between the Company and its Non-Guarantor Subsidiaries. 16 OSHKOSH TRUCK CORPORATION Condensed Consolidating Statements of Income For the Three Months Ended June 30, 2002 (Unaudited)
Subsidiary Non-Guarantor Company Guarantors Subsidiaries Eliminations Consolidated ------- ---------- ------------ ------------ ------------ (In thousands) Net sales $210,339 $249,942 $ 39,081 $ (9,830) $489,532 Cost of sales 180,345 208,313 31,488 (9,874) 410,272 -------- -------- -------- -------- -------- Gross income 29,994 41,629 7,593 44 79,260 Operating expenses: Selling, general and administrative 17,315 16,973 5,104 -- 39,392 Amortization of purchased intangibles -- 1,441 65 -- 1,506 -------- -------- -------- -------- -------- Total operating expenses 17,315 18,414 5,169 -- 40,898 ------ -------- -------- -------- -------- Operating income 12,679 23,215 2,424 44 38,362 Other income (expense): Interest expense (5,910) (5,823) (51) 6,575 (5,209) Interest income 5,136 1,783 -- (6,575) 344 Miscellaneous, net 4,091 (4,213) (52) -- (174) -------- -------- -------- -------- -------- 3,317 (8,253) (103) -- (5,039) -------- -------- -------- -------- -------- Income before items noted below 15,996 14,962 2,321 44 33,323 Provision for income taxes 5,919 5,529 812 16 12,276 -------- -------- -------- -------- -------- 10,077 9,433 1,509 28 21,047 Equity in earnings of subsidiaries and unconsolidated partnership, net of income taxes 11,497 550 527 (12,047) 527 -------- -------- -------- -------- -------- Net income $ 21,574 $ 9,983 $ 2,036 $(12,019) $ 21,574 ======== ======== ======== ========= =========
17 OSHKOSH TRUCK CORPORATION Condensed Consolidating Statements of Income For the Three Months Ended June 30, 2001 (Unaudited)
Subsidiary Non-Guarantor Company Guarantors Subsidiaries Eliminations Consolidated ------- ---------- ------------ ------------ ------------ (In thousands) Net sales $ 170,547 $245,175 $ -- $(9,932) $405,790 Cost of sales 151,710 207,756 -- (9,995) 349,471 ---------- -------- ------------ -------- -------- Gross income 18,837 37,419 -- 63 56,319 Operating expenses: Selling, general and administrative 10,759 14,922 -- -- 25,681 Amortization of goodwill and purchased intangibles -- 3,137 -- -- 3,137 ---------- -------- ----------- -------- -------- Total operating expenses 10,759 18,059 -- -- 28,818 ---------- -------- ----------- -------- -------- Operating income 8,078 19,360 -- 63 27,501 Other income (expense): Interest expense (6,149) (6,036) -- 6,575 (5,610) Interest income 5,025 1,778 -- (6,575) 228 Miscellaneous, net 2,672 (2,753) -- -- (81) ---------- -------- ----------- -------- -------- 1,548 (7,011) -- -- (5,463) ---------- -------- ----------- -------- -------- Income before items noted below 9,626 12,349 -- 63 22,038 Provision for income taxes 3,572 5,082 -- 23 8,677 ---------- -------- ----------- -------- -------- 6,054 7,267 -- 40 13,361 Equity in earnings of subsidiaries and unconsolidated partnership, net of income taxes 7,655 -- 348 (7,655) 348 ---------- -------- ----------- --------- -------- Net income $ 13,709 $ 7,267 $ 348 $(7,615) $ 13,709 ========== ======== =========== ========= ========
18 OSHKOSH TRUCK CORPORATION Condensed Consolidating Statements of Income For the Nine Months Ended June 30, 2002 (Unaudited)
Subsidiary Non-Guarantor Company Guarantors Subsidiaries Eliminations Consolidated ------- ---------- ------------ ------------ ------------ (In thousands) Net sales $ 542,230 $ 643,944 $ 100,821 $ (20,365) $ 1,266,630 Cost of sales 475,626 543,752 78,726 (20,254) 1,077,850 ---------- ---------- ----------- ---------- ----------- Gross income 66,604 100,192 22,095 (111) 188,780 Operating expenses: Selling, general and administrative 43,696 45,905 15,035 -- 104,636 Amortization of purchased intangibles 1 4,228 192 -- 4,421 ---------- ---------- ----------- ---------- ----------- Total operating expenses 43,697 50,133 15,227 -- 109,057 ---------- ---------- ----------- ---------- ----------- Operating income 22,907 50,059 6,868 (111) 79,723 Other income (expense): Interest expense (19,217) (17,685) (71) 19,725 (17,248) Interest income 15,310 5,315 -- (19,725) 900 Miscellaneous, net 10,344 (10,564) (153) -- (373) ---------- ---------- ----------- ---------- ----------- 6,437 (22,934) (224) -- (16,721) ---------- ---------- ----------- ---------- ----------- Income before items noted below 29,344 27,125 6,644 (111) 63,002 Provision for income taxes 9,987 10,014 2,326 (41) 22,286 ---------- ---------- ----------- ---------- ----------- 19,357 17,111 4,318 (70) 40,716 Equity in earnings of subsidiaries and unconsolidated partnership, net of income taxes 22,992 1,698 1,633 (24,690) 1,633 ---------- ---------- ----------- ---------- ----------- Net income $ 42,349 $ 18,809 $ 5,951 $ (24,760) $ 42,349 ========== ========== =========== ========== ===========
19 OSHKOSH TRUCK CORPORATION Condensed Consolidating Statements of Income For the Nine Months Ended June 30, 2001 (Unaudited)
Subsidiary Non-Guarantor Company Guarantors Subsidiaries Eliminations Consolidated ------- ---------- ------------ ------------ ------------ (In thousands) Net sales $ 405,665 $ 648,781 $ -- $ (22,761) $1,031,685 Cost of sales 355,378 549,115 -- (22,898) 881,595 ---------- ---------- -------- ---------- ---------- Gross income 50,287 99,666 -- 137 150,090 Operating expenses: Selling, general and administrative 31,070 43,825 (69) -- 74,826 Amortization of goodwill and purchased intangibles -- 8,947 -- -- 8,947 ---------- ---------- -------- ---------- ---------- Total operating expenses 31,070 52,772 (69) -- 83,773 ---------- ---------- -------- ---------- ---------- Operating income 19,217 46,894 69 137 66,317 Other income (expense): Interest expense (17,281) (17,872) -- 19,725 (15,428) Interest income 15,135 5,297 -- (19,725) 707 Miscellaneous, net 7,580 (7,656) -- -- (76) ---------- ---------- -------- ---------- ---------- 5,434 (20,231) -- -- (14,797) ---------- ---------- -------- ---------- ---------- Income before items noted below 24,651 26,663 69 137 51,520 Provision for income taxes 7,821 11,447 26 50 19,344 ---------- ---------- -------- ---------- ---------- 16,830 15,216 43 87 32,176 Equity in earnings of subsidiaries and unconsolidated partnership, net of income taxes 16,386 -- 1,040 (16,386) 1,040 ---------- ---------- -------- ---------- ---------- Net income $ 33,216 $ 15,216 $ 1,083 $ (16,299) $ 33,216 ========== ========== ======== ========== ==========
20 OSHKOSH TRUCK CORPORATION Condensed Consolidating Balance Sheets June 30, 2002 (Unaudited)
Subsidiary Non-Guarantor Company Guarantors Subsidiaries Eliminations Consolidated ------- ---------- ------------ ------------ ------------ (In thousands) ASSETS Current assets: Cash and cash equivalents $ 12,561 $ 1,913 $ 4,568 $ -- $ 19,042 Receivables, net 56,560 62,131 41,441 (5,117) 155,015 Inventories 58,909 148,740 26,321 (142) 233,828 Prepaid expenses and other 20,129 9,663 3,458 -- 33,250 --------- ---------- --------- ------------ ------------ Total current assets 148,159 222,447 75,788 (5,259) 441,135 Investment in and advances to: Subsidiaries 550,052 11,619 -- (561,671) -- Unconsolidated partnership -- -- 20,298 -- 20,298 Other long-term assets 5,937 2,391 244 -- 8,572 Net property, plant and equipment 33,621 83,514 19,262 -- 136,397 Goodwill and purchased intangible assets, net 23 309,479 112,365 -- 421,867 --------- ---------- --------- ------------ ------------ Total assets $ 737,792 $ 629,450 $ 227,957 $ (566,930) $ 1,028,269 ========= ========== ========= ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 44,134 $ 43,128 $ 30,481 $ (5,117) $ 112,626 Floor plan notes payable -- 22,229 -- -- 22,229 Customer advances 16,406 78,297 -- -- 94,703 Payroll-related obligations 14,121 14,137 2,687 -- 30,945 Income taxes 14,000 -- 2,743 -- 16,743 Accrued warranty 10,890 7,402 4,704 -- 22,996 Other current liabilities 18,171 28,924 2,765 -- 49,860 Revolving credit facility and current maturities of long-term debt 3,158 236 49 -- 3,443 --------- ---------- --------- ------------ ------------ Total current liabilities 120,880 194,353 43,429 (5,117) 353,545 Long-term debt 195,092 1,586 117 -- 196,795 Deferred income taxes (6,441) 28,361 11,466 -- 33,386 Other long-term liabilities 25,068 13,836 2,446 -- 41,350 Commitments and contingencies Investments by and advances from (to) parent -- 391,314 170,499 (561,813) -- Shareholders' equity 403,193 -- -- -- 403,193 --------- ---------- --------- ------------ ------------ Total liabilities and shareholders' equity $ 737,792 $ 629,450 $ 227,957 $ (566,930) $ 1,028,269 ========= ========== ========= ============ ============
21 OSHKOSH TRUCK CORPORATION Condensed Consolidating Balance Sheets September 30, 2001 (Unaudited)
Subsidiary Non-Guarantor Company Guarantors Subsidiaries Eliminations Consolidated ------- ---------- ------------ ------------ ------------ (In thousands) ASSETS Current assets: Cash and cash equivalents $ 4,726 $ 3,394 $ 3,192 $ -- $ 11,312 Receivables, net 104,662 74,814 33,633 (1,704) 211,405 Inventories 82,873 145,635 29,561 (31) 258,038 Prepaid expenses and other 11,525 9,644 1,226 -- 22,395 --------- ---------- --------- ---------- ------------ Total current assets 203,786 233,487 67,612 (1,735) 503,150 Investment in and advances to: Subsidiaries 575,807 8,591 -- (584,398) -- Unconsolidated partnership -- -- 18,637 -- 18,637 Other long-term assets 6,940 1,585 101 -- 8,626 Net property, plant and equipment 36,286 88,783 16,859 -- 141,928 Goodwill and purchased intangible assets, net 24 319,779 97,124 -- 416,927 --------- ---------- --------- ---------- ------------ Total assets $ 822,843 $ 652,225 $ 200,333 $ (586,133) $ 1,089,268 ========= ========== ========= ========== ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 41,703 $ 42,143 $ 25,722 $ (1,704) $ 107,864 Floor plan notes payable -- 19,271 -- -- 19,271 Customer advances 3,568 54,502 -- -- 58,070 Payroll-related obligations 8,881 12,483 5,720 -- 27,084 Income taxes 24,013 -- 1,208 -- 25,221 Accrued warranty 8,813 7,799 1,726 -- 18,338 Other current liabilities 18,624 27,567 131 -- 46,322 Revolving credit facility and current maturities of long-term debt 76,600 426 5 -- 77,031 --------- ---------- --------- ---------- ------------ Total current liabilities 182,202 164,191 34,512 (1,704) 379,201 Long-term debt 280,250 1,812 187 -- 282,249 Deferred income taxes (5,764) 35,119 10,979 -- 40,334 Other long-term liabilities 23,791 16,667 -- -- 40,458 Commitments and contingencies Investments by and advances from (to) parent -- 434,436 154,655 (589,091) -- Shareholders' equity 342,364 -- -- 4,662 347,026 --------- ---------- --------- ---------- ------------ Total liabilities and shareholders' equity $ 822,843 $ 652,225 $ 200,333 $ (586,133) $ 1,089,268 ========= ========== ========= ========== ============
22 OHKOSH TRUCK CORPORATION Condensed Consolidating Statements of Cash Flows For the Nine Months Ended June 30, 2002 (Unaudited)
Subsidiary Non-Guarantor Company Guarantors Subsidiaries Eliminations Consolidated ------- ---------- ------------ ------------ ------------ (In thousands) Operating activities: Net income $ 42,349 $ 18,809 $ 5,951 $(24,760) $ 42,349 Non-cash adjustments (2,445) 10,833 162 -- 8,550 Changes in operating assets and liabilities 87,862 37,186 (888) 111 124,271 --------- --------- ------- ------- -------- Net cash provided from operating activities 127,766 66,828 5,225 (24,649) 175,170 Investing activities: Investments in and advances to subsidiaries 42,745 (64,959) (2,159) 24,373 -- Additions to property, plant and equipment (1,631) (2,515) (2,737) -- (6,883) Other (80) (419) 813 -- 314 --------- -------- ------- ------- -------- Net cash provided from (used for) investing activities 41,034 (67,893) (4,083) 24,373 (6,569) Financing activities: Net repayments under revolving credit facility (65,200) -- -- -- (65,200) Repayment of long-term debt (93,400) (416) (39) -- (93,855) Dividends paid (4,326) -- -- -- (4,326) Other 1,961 -- -- -- 1,961 --------- --------- ------- ------- -------- Net cash used for financing activities (160,965) (416) (39) -- (161,420) Effect of exchange rate changes on cash -- -- 273 276 549 --------- --------- ------- ------- -------- Increase (decrease) in cash and cash equivalents 7,835 (1,481) 1,376 -- 7,730 Cash and cash equivalents at beginning of period 4,726 3,394 3,192 -- 11,312 --------- --------- ------- ------- -------- Cash and cash equivalents at end of period $ 12,561 $ 1,913 $ 4,568 $ -- $ 19,042 ========= ========= ======= ======= ========
23 OSHKOSH TRUCK CORPORATION Condensed Consolidating Statements of Cash Flows For the Nine Months Ended June 30, 2001 (Unaudited)
Subsidiary Non-Guarantor Company Guarantors Subsidiaries Eliminations Consolidated ------- ---------- ------------ ------------ ------------ (In thousands) Operating activities: Net income $ 33,216 $ 15,216 $ 1,083 $(16,299) $ 33,216 Non-cash adjustments 1,687 14,706 (2,334) -- 14,059 Changes in operating assets and liabilities (42,961) (36,047) 115 (137) (79,030) ---------- --------- ---------- -------- -------- Net cash used for operating activities (8,058) (6,125) (1,136) (16,436) (31,755) Investing activities: Acquisition of businesses, net of cash acquired (4,583) (21,840) -- -- (26,423) Investments in and advances to subsidiaries (54,446) 35,806 2,204 16,436 -- Additions to property, plant and equipment (10,320) (2,428) -- -- (12,748) Other (1,222) (3,131) (1,048) -- (5,401) ---------- --------- ---------- ---------- -------- Net cash provided from (used for) investing activities (70,571) 8,407 1,156 16,436 (44,572) Financing activities: Net borrowings under revolving credit facility 77,900 -- -- -- 77,900 Repayment of long-term debt (6,000) (419) (56) -- (6,475) Dividends paid (4,300) -- -- -- (4,300) Other 196 -- -- -- 196 ---------- --------- ---------- -------- -------- Net cash provided from (used for) financing activities 67,796 (419) (56) -- 67,321 ---------- --------- ---------- -------- -------- Increase (decrease) in cash and cash equivalents (10,833) 1,863 (36) -- (9,006) Cash and cash equivalents at beginning of period 13,034 499 36 -- 13,569 ---------- --------- ---------- -------- -------- Cash and cash equivalents at end of period $ 2,201 $ 2,362 $ -- $ -- $ 4,563 ========== ========= ========== ======== ========
24 Item 2. Oshkosh Truck Corporation Management's Discussion and Analysis of Consolidated Financial Condition and Results of Operations FORWARD-LOOKING STATEMENTS This Management's Discussion and Analysis of Consolidated Financial Condition and Results of Operations and other sections of this Form 10-Q contain "forward-looking statements" that Oshkosh Truck Corporation (the "Company" or "Oshkosh") believes to be within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this report, including, without limitation, statements regarding the Company's future financial position, business strategy, budgets, targets, projected sales, costs, earnings, capital spending and debt levels, and plans and objectives of management for future operations, including those under the caption "Fiscal 2002 Outlook" and "Fiscal 2003 Outlook," are forward-looking statements. When used in this Form 10-Q, words such as the Company "may," "will," "expects," "intends," "estimates," "anticipates," "believes," "should" or "plans" or the negative thereof or variations thereon or similar terminology are generally intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, assumptions and other factors, some of which are beyond the Company's control, that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These factors include the cyclical nature of the Company's markets, risks related to reductions in government expenditures, the uncertainty of government contracts, the challenges of identifying, completing and integrating future acquisitions, the ultimate outcome of pending or threatened claims and litigation, disruptions in the supply of parts or components, competition and risks associated with international operations and sales, including foreign currency fluctuations. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained from time to time in the Company's SEC filings, including, but not limited to the Company's Current Report on Form 8-K filed with the SEC on July 25, 2002. All subsequent written and oral forward-looking statements attributable to the Company, or persons acting on its behalf, are expressly qualified in their entirety by these cautionary statements. All forward-looking statements speak only as of the date the Company files this Quarterly Report on Form 10-Q with the SEC. The Company has adopted a policy that if the Company makes a determination that it expects earnings for future periods for which projections are contained in this Quarterly Report on Form 10-Q to be lower than those projections, then the Company will publicly announce that fact. The Company's policy also provides that the Company does not intend to make such a public announcement if the Company makes a determination that it expects earnings for future periods to be at or above the projections contained in this Quarterly Report on Form 10-Q. Except as set forth above, the Company assumes no obligation, and disclaims any obligation, to update information contained in this Quarterly Report on Form 10-Q. Investors should be aware that the Company may not update such information until the Company's next quarterly conference call, if at all. 25 General The major products manufactured and marketed by each of the Company's business segments are as follows: Commercial -- concrete mixer systems, refuse truck bodies, mobile and stationary refuse compactors, refuse transfer stations, portable concrete batch plants and truck components sold to commercial ready-mix companies and commercial and municipal waste haulers in the U. S. and abroad. Fire and emergency -- custom and commercial fire trucks, aircraft rescue and firefighting trucks, snow removal trucks, ambulances and other emergency vehicles primarily sold to fire departments, airports and other governmental units in the U. S. and abroad. Defense-- heavy- and medium-payload tactical trucks and supply parts sold to the U. S. Military and to other militaries around the world. Results of Operations Analysis of Consolidated Net Sales The following table presents net sales by business segment(in thousands):
Third Quarter First Nine Months Fiscal Fiscal 2002 2001 2002 2001 ---- ---- ---- ---- 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 ======== ======== ========== ==========
Third Quarter Fiscal 2002 Compared to 2001 Consolidated net sales increased 20.6% to $489.5 million for the third quarter of fiscal 2002 compared to the third quarter of fiscal 2001. The Company's fiscal 2002 third quarter included the results of the Geesink Norba Group, which the Company acquired in July 2001. During the third quarter of fiscal 2002, the Company recorded a cumulative adjustment of revenues of $12.7 million as a result of a contract modification during the quarter on its multi-year Medium Tactical Vehicle Replacement ("MTVR") contract. Excluding the impact of the Geesink Norba Group acquisition and the MTVR contract modification, net sales would have increased 7.9%, largely as a result of full-rate of production in fiscal 2002 on the MTVR contract and increased defense parts sales. Commercial segment net sales increased 22.9% to $204.5 million for the third quarter of fiscal 2002 compared to the third quarter of fiscal 2001. Excluding the impact of the Geesink Norba Group acquisition, commercial sales would have decreased 0.6%. Concrete placement product sales were up 1.8% in 2002 compared to 2001, following several quarters of declines due to the U.S. economic recession. U.S. refuse truck body and parts sales 26 decreased 6.4% for the quarter, primarily because prior year results included higher package sales involving both a refuse body and truck chassis. Refuse body unit sales were down only slightly. Fire and emergency segment net sales decreased 3.8% to $124.0 million for the third quarter of fiscal 2002 compared to the third quarter of fiscal 2001. These results were due to lower U.S. municipal spending for fire apparatus in the first nine months of fiscal 2002 and the Company's plan to increase backlog at Pierce Manufacturing Inc.("Pierce")in order to improve manufacturing efficiencies in fiscal 2003. Defense segment net sales increased 46.3% to $162.8 million for the third quarter of fiscal 2002 compared to the third quarter of fiscal 2001 largely as a result of a full quarter of full-rate production under the MTVR contract to supply medium-payload trucks to the U.S. Marines, the previously-mentioned MTVR contract modification and parts sales accelerated from the fourth quarter to the third quarter to meet customer requirements. During the third quarter ended June 30, 2001, the Company was in the process of ramping-up to full-rate production. First Nine Months Fiscal 2002 Compared to 2001 Consolidated net sales increased 22.8% to $1,266.6 million for the nine months ended June 30, 2002 compared to the nine months ended June 30, 2001. Excluding the impact of the Geesink Norba Group acquisition and the previously-mentioned MTVR contract modification, net sales were up 11.8%, largely as a result of increased production of MTVR vehicles and increased defense parts sales, offset by a decline in concrete placement product sales. Commercial segment net sales increased 19.8% to $503.9 million for the nine months ended June 30, 2002 compared to the same period in the prior year. Excluding the impact of the Geesink Norba Group acquisition, commercial segment sales would have decreased 4.2%. Concrete placement sales were down 9.3% for the period compared to the same period in the prior year as the Company was impacted by the U.S. economic recession. U.S. refuse truck body and parts sales increased 7.2% for the period compared to the same period in the prior year and were favorably impacted by increased "body only" sales to the three largest U.S. waste haulers. Fire and emergency segment net sales increased 0.3% to $339.5 million for the first nine months of fiscal 2002 compared to the first nine months of fiscal 2001. Strong sales of ambulances, aircraft rescue and firefighting vehicles and snow vehicles were offset in part by lower U.S. municipal spending for fire apparatus. Defense segment net sales increased 56.0% to $426.5 million for the nine months ended June 30, 2002 compared to the nine months ended June 30, 2001. Increased production and sales of MTVR trucks and increased parts sales were the major factors contributing to the defense segment sales increase. The Company produced at full-rate production under its MTVR contract for the entire nine months ended June 30, 2002. During the nine month period ended June 30, 2001 the Company was in the process of ramping-up to full-rate production. 27 Analysis of Consolidated Operating Income The following table presents operating income by business segment (in thousands):
Third Quarter First Nine Months Fiscal Fiscal 2002 2001 2002 2001 ---- ---- ---- ---- 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 operating income $ 38,362 $ 27,501 $ 79,723 $ 66,317 ============ ============ ============ ========
Third Quarter Fiscal 2002 Compared to 2001 Consolidated operating income increased 39.5% to $38.4 million, or 7.8% of sales, in the third quarter of fiscal 2002, compared to $27.5 million, or 6.8% of sales, in the third quarter of fiscal 2001. During the third quarter of fiscal 2002, the Company recorded a cumulative catch-up adjustment to increase its margins on its multi-year MTVR production contract by one percentage point to 4.3%. 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. The impact of this adjustment increased operating income for the quarter by $4.5 million, including $3.6 million related to shipments in prior quarters. Excluding the impact of the Geesink Norba Group acquisition, the MTVR margin adjustment and adjusting for the elimination of $1.8 million of amortization of goodwill and other indefinite-lived intangible assets as a result of the adoption of a new accounting standard, operating income would have been up 7.6% compared to the third quarter of fiscal 2001. Commercial segment operating income increased 99.4% to $17.7 million, or 8.7% of sales, in the quarter compared to $8.9 million, or 5.3% of sales, in the prior year quarter. Excluding the impact of the Geesink Norba Group acquisition and adjusting for the adoption of the new accounting standard on goodwill and indefinite-lived assets, operating income would have been up 55.6% in the third quarter of fiscal 2002 compared to the prior year third quarter. This improvement was largely due to increased sales of higher-margin concrete placement products, sales of used trucks and favorable manufacturing cost and workers compensation cost experience. Fire and emergency operating income increased 1.3% to $14.5 million, or 11.7% of sales, in the quarter compared to $14.3 million, or 11.1% of sales, in the prior year third quarter. Excluding the impact of the adoption of the new accounting standard on accounting for goodwill and indefinite-lived intangible assets, operating income would have been down 4.2% compared to the prior year quarter on lower sales volume, but operating income margins would have been consistent at 11.7% of sales in both the current and prior year quarters. 28 Defense operating income increased 71.4% to $15.0 million, or 9.2% of sales, compared to $8.7 million, or 7.8% of sales, in the prior year third quarter. Results for the current year quarter reflect operating income improvements due to increased volume related to a full quarter of full-rate production under the Company's lower-margin MTVR contract and increased parts sales. The Company was in the process of ramping up to full-rate production in the third quarter of fiscal 2001. The Company increased recorded margins on the multi-year MTVR production contract during the quarter one percentage point to 4.3%. Excluding the impact of the increase in MTVR margins during the quarter, operating income as a percent of sales would have been 7.0%. Operating income and margins for the third quarter of fiscal 2002 were negatively impacted by the relatively low margins on the higher volume of MTVR sales and by increases in 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. Consolidated selling, general and administrative expenses increased to 8.0% of sales in the third quarter of fiscal 2002 compared to 6.3% of sales in the third quarter of fiscal 2001. Excluding such expenses of the Geesink Norba Group, selling, general and administrative expenses would have been 7.6% of sales in the third quarter of fiscal 2002. The Geesink Norba Group was acquired in the fourth quarter of fiscal 2001 and generally has higher gross margins and higher selling, general and administrative expenses than the Company's other businesses. The remaining increase in selling, general and administrative expenses related to higher corporate expenses and increased bid and proposal costs related to long-term truck procurement competitions in the Company's defense segment. Corporate operating expenses and inter-segment profit elimination increased $4.4 million to $8.8 million, or 1.8% of consolidated sales, for the third quarter of fiscal 2002 from $4.4 million, or 1.1% of consolidated sales, for the third quarter of 2001. The increase was largely due to increased variable compensation, higher legal defense costs and expenses incurred related to acquisition investigations terminated during the quarter. First Nine Months of Fiscal 2002 Compared to 2001 Consolidated operating income increased 20.2% to $79.7 million, or 6.3% of sales, for the first nine months of fiscal 2002 compared to $66.3 million, or 6.4% of sales, for the first nine months of fiscal 2001. Excluding the impact of the increase in margins on the MTVR contract, the impact of the Geesink Norba Group acquisition and adjusting for the elimination of $5.2 million of amortization of goodwill and indefinite-lived intangible assets, operating income would have decreased 4.4% compared to the prior year period. This decrease was largely due to increased corporate expenses, increased sales of lower-margin MTVR defense vehicles, increased bid and proposal spending on U.S. and U.K. multi-year defense truck procurement competitions and lower sales of higher-margin concrete placement products. Commercial segment operating income increased 63.8% to $37.2 million, or 7.4% of sales, for the first nine months of fiscal 2002 compared to $22.7 million, or 5.4% of sales, in the prior year period. Excluding the impact of the Geesink Norba Group acquisition and adjusting for the adoption of the new accounting standard on goodwill and indefinite-lived assets, operating income would have been up 19.0% in the first nine months of 29 fiscal 2002 compared to the prior year period. This improvement was largely due to sales of used trucks and favorable manufacturing cost and workers compensation cost experience. Fire and emergency operating income increased 4.1% to $33.8 million, or 10.0% of sales, for the first nine months of fiscal 2002 compared to $32.5 million, or 9.6% of sales, in the prior year period. Excluding the impact of the adoption of the new accounting standard on accounting for goodwill and indefinite-lived intangible assets, operating income would have been down 3.1% on a 0.3% increase in net sales compared to the prior year period, reflecting a less favorable product mix in fiscal 2002. Defense operating income increased 16.8%, to $28.1 million, or 6.6% of sales, in the first nine months of fiscal 2002, compared to $24.1 million, or 8.8% of sales, in the prior year period. Fiscal 2002 results include increased volume related to full-rate production under the Company's lower-margin MTVR contract and higher parts sales. The Company was in the process of ramping up to full-rate production in the first nine months of fiscal 2001. The Company cumulatively adjusted margins on the multi-year MTVR production contract from 3.3% of sales to 4.3% of sales ($4.5 million increase) during the first nine months of fiscal 2002. Excluding the impact of the MTVR cumulative margin adjustment, segment operating income margins declined to 5.7% of sales from 8.8% in the prior year. Operating income and margins for the first nine months of fiscal 2002 were negatively impacted by increases in 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 and by lower international truck sales. Consolidated selling, general and administrative expenses increased to 8.3% of sales for the first nine months of fiscal 2002 compared to 7.3% of sales for the first nine months of fiscal 2001. Excluding the impact of the Geesink Norba Group acquisition, selling and administrative expenses would have been 7.7% of sales for the first nine months of fiscal 2002. The Geesink Norba Group was acquired in the fourth quarter of fiscal 2001 and generally carries higher gross margins and higher selling, general and administrative expenses than the Company's other businesses. The remaining increase in selling, general and administrative expenses related to higher corporate expenses and increased bid and proposal costs related to long-term truck procurement competitions in the Company's defense segment. Corporate operating expenses and inter-segment profit elimination increased $6.5 million to $19.4 million, or 1.5% of consolidated sales, for the first nine months of fiscal 2002 from $12.9 million, or 1.3% of consolidated sales, for the prior year period. The increase was largely due to higher variable compensation costs, legal defense costs and acquisition investigation costs. Analysis of Non-Operating Income Statement Items Third Quarter Fiscal 2002 Compared to 2001 Net interest expense decreased $0.5 million to $4.9 million in the third quarter of fiscal 2002 compared to the third quarter of fiscal 2001. Interest costs on increased borrowings to fund the acquisition of the Geesink Norba Group were more than offset by lower interest rates. 30 The effective income tax rate for the third quarter of fiscal 2002 was 36.8% compared to 39.4% for the third quarter of fiscal 2001. Excluding the impact of $1.5 million of nondeductible goodwill in the third quarter of fiscal 2001, the Company's effective income tax rate was 36.9% in 2001. Equity in earnings of an unconsolidated partnership of $0.5 million in the third quarter of fiscal 2002 and $0.3 million in the third quarter of fiscal 2001 represent the Company's equity interest in a lease financing partnership. First Nine Months of Fiscal 2002 Compared to 2001 Net interest expense increased $1.6 million to $16.3 million in the first nine months of fiscal 2002 compared to the first nine months of fiscal 2001. Interest costs on increased borrowings to fund the acquisition of the Geesink Norba Group were largely offset by lower interest rates. The effective income tax rate for the first nine months of fiscal 2002 was 35.4% compared to 37.5% for the first nine months of fiscal 2001. In December 2001, the Company concluded an audit settlement of a research and development tax credit claim resulting in a $0.9 million credit to income tax expense in the first nine months of fiscal 2002. Excluding the impact of the $0.9 million tax settlement in the first nine months of fiscal 2002, and the impact of a $1.3 million tax settlement and $4.5 million of nondeductible goodwill in the first nine months of fiscal 2001, the Company's effective income tax rate was 36.8% in 2002 and 36.9% in 2001. Equity in earnings of an unconsolidated partnership of $1.6 million in the first nine months of fiscal 2002 and $1.0 million in the first nine months of fiscal 2001 represent the Company's equity interest in a lease financing partnership. Financial Condition First Nine Months of Fiscal 2002 During the first nine months of fiscal 2002, cash increased by $7.7 million to $19.0 million at June 30, 2002. Cash provided from operating activities of $175.2 million was used to fund capital expenditures of $6.9 million, pay dividends of $4.3 million and reduce short- and long-term debt by $159.1 million. In the first nine months ending June 30, 2002, net cash provided from operating activities of $175.2 million was significantly different than the $31.8 million of net cash used in operating activities in the first nine months of fiscal 2001. This variance between periods is primarily due to cash flows associated with changes in operating assets and liabilities. The following table presents cash flows associated with changes in operating assets and liabilities: 31 First Nine Months Fiscal 2002 2001 ---- ---- Receivables, net $ 59,886 $(45,362) Inventories 25,755 (59,913) Accounts payable 2,205 (984) Floor plan notes payable 2,958 4,655 Customer advances 36,633 8,344 Income taxes (4,934) 8,508 Other 1,768 5,722 -------- -------- Source (use) of cash $124,271 $(79,030) ======== ======== The change from a $79.0 million use of cash in the first nine months of fiscal 2001 to a $124.3 million source of cash in the first nine months of fiscal 2002, primarily resulted from working capital invested in fiscal 2001 in the ramp-up to full-rate production on the MTVR contract and, in fiscal 2002, the Company's planned actions to reduce cash invested in working capital, principally receivables and inventories, in light of the recession in the U.S. economy, whereas the Company was building such assets in the first half of fiscal 2001 until it became evident that the Company was operating in a recessionary economy. Cash provided from customer advances also increased $28.3 million more in the first nine months of fiscal 2002 than in the first nine months of fiscal 2001 commensurate with the increase in fire and emergency backlog and as a higher percentage of customers took advantage of prepayment programs. Fiscal 2002 results also include an increase of $8.5 million in performance-based payments on the Company's Family of Heavy Tactical Vehicle ("FHTV") program, all of which was incremental over fiscal 2001. Income tax payments increased to $35.9 million in the first nine months of fiscal 2002 compared to $16.5 million in the first nine months of fiscal 2001. Fiscal 2002 payments include $17.7 million in fourth quarter fiscal 2001 estimated tax payments made in the first quarter of fiscal 2002, consistent with recent U.S. tax legislation which provided for this one-time deferral. Adjusting for this one-time item, income taxes payable would have increased $12.8 million in the period compared to increasing $8.5 million for the nine months ended June 30, 2001, with the change from the prior year period due to higher taxable income in the third quarter of fiscal 2002. The Company's debt-to-total capital ratio at June 30, 2002 was 33.2% compared to 50.9% at September 30, 2001. First Nine Months of Fiscal 2001 During the first nine months of fiscal 2001, cash decreased by $9.0 million to $4.6 million at June 30, 2001. Seasonal working capital increases related to the Company's commercial segment contributed to the $31.8 million in cash used for operating activities for the period. Operating cash requirements, capital expenditures of $12.7 million, an increase in other long-term assets of $5.4 million, scheduled term debt reductions of $6.5 million, payment of $4.3 million in cash dividends and the cash portion of the acquisitions of Medtec Ambulance Corporation common stock ($14.4 million) and TEMCO assets ($12.0 million) were funded through the use of $9.0 million of available cash and $77.9 million in borrowings under the Company's revolving credit facility. During the period, accounts 32 receivable increased $45.4 million, largely due to the seasonal sales growth of the commercial segment and increased refuse product sales to major national waste haulers and municipalities that typically carry longer payment terms. Inventories increased $59.9 million during the period, including $18.8 million in the commercial segment as a result of seasonal build requirements. Fire and emergency inventories increased $4.8 million. Defense inventories increased $36.3 million during the period as a result of inventory associated with an international order and due to costs associated with the MTVR contract. Overall increases in inventory were partially offset by a $4.7 million increase in floor plan notes payable, an $8.3 million increase in customer advances, and an $8.5 million increase in income taxes payable. Liquidity and Capital Resources The Company had $146.3 million of unused availability under the terms of its revolving credit facility as of June 30, 2002. The Company's primary cash requirements include working capital, interest and principal payments on indebtedness, capital expenditures, dividends, and, potentially, future acquisitions. The primary sources of cash are expected to be cash flow from operations and borrowings under the Company's senior credit facility. The Company's cash flow from operations has fluctuated, and will likely continue to fluctuate, significantly from quarter to quarter due to changes in working capital requirements arising principally from seasonal fluctuations in sales and due to the timing of receipt of individually large progress and performance-based payments from the U.S. Department of Defense ("DoD"). The Company's senior credit facility and senior subordinated notes contain various restrictions and covenants, including (1) limits on payments of dividends and repurchases of the Company's stock; (2) requirements that the Company maintain certain financial ratios at prescribed levels; (3) restrictions on the ability of the Company to make additional borrowings, or to consolidate, merge or otherwise fundamentally change the ownership of the Company; and (4) limitations on investments, dispositions of assets and guarantees of indebtedness. These restrictions and covenants could limit the Company's ability to respond to market conditions, to provide for unanticipated capital investments, to raise additional debt or equity capital, to pay dividends or to take advantage of business opportunities, including future acquisitions. Interest rates on borrowings under the Company's senior credit facility are variable and are equal to the "Base Rate" (which is equal to the higher of a bank's reference rate and the federal funds rate plus 0.5%) or the "IBOR Rate" (which is a bank's inter-bank offered rate for U.S. dollars in off-shore markets) plus a margin of 1.375%, 1.375% and 2.500% for IBOR Rate loans under the Company's revolving credit facility, Term Loan A and Term Loan B, respectively, as of June 30, 2002. The margins are subject to adjustment, up or down, based on whether certain financial criteria are met. The weighted average interest rates on borrowings outstanding at June 30, 2002 were 3.205% and 4.330% for Term Loans A and B, respectively. The Company presently has no plans to enter into interest rate swap arrangements to limit exposure to future increases in interest rates. 33 Based upon current and anticipated future operations, the Company believes that capital resources will be adequate to meet future working capital, debt service and other capital requirements for fiscal 2002 and fiscal 2003. See "Fiscal 2002 Outlook" and "Fiscal 2003 Outlook." Capital resource requirements may change, however, because the Company maintains an active acquisitions strategy and the capital requirements of this strategy cannot be reasonably estimated. In addition, the Company could face significant working capital requirements in the event of an award of major new business arising from current truck procurement competitions for new defense contracts in the U.S. and the U.K. Critical Accounting Policies The Company prepares its consolidated financial statements in conformity with generally accepted accounting principles in the United States of America ("U.S. GAAP"). This requires management to make estimates and judgments that affect reported amounts and related disclosures. Actual results could differ from those estimates. The Company considers the following policies to be the most critical in understanding the judgments that are involved in the preparation of the Company's consolidated financial statements and the uncertainties that could impact the Company's results of operations, financial condition and cash flows. Revenue Recognition: The Company generally recognizes and earns revenue when all of the following circumstances are satisfied: persuasive evidence of an arrangement exists, the price is fixed or determinable, collectibility is reasonably assured and delivery has occurred or services have been rendered. The Company generally records revenues under long-term, fixed-price defense contracts using the percentage-of-completion method of accounting. The Company records revenues and anticipated profits under the MTVR multi-year, fixed-price production contract on a percentage-of-completion basis, generally using units accepted as the measurement basis for effort accomplished. The Company records estimated contract profits in earnings in proportion to recorded revenues based on the estimated average cost determined using total contract units under order (including exercised options). The Company records revenues under certain long-term, fixed price defense contracts which, among other things, provide for delivery of minimal quantities or require a significant amount of development effort in relation to total contract value, using the percentage-of-completion method upon achievement of performance milestones, or using the cost-to-cost method of accounting where sales and profits are recorded based on the ratio of costs incurred to estimated total costs at completion. The Company includes amounts representing contract change orders, claims or other items in sales only when they can be reliably estimated and realization is probable. The Company reflects adjustments in contract value or estimated costs on contracts accounted for using the percentage-of-completion method in earnings in the current period as a cumulative catch-up adjustment. The Company charges anticipated losses on contracts or programs in progress to earnings when identified. Goodwill and Other Intangible Assets: The Company adopted Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets" effective October 1, 2001. Under SFAS No. 142, goodwill is no longer amortized; however, it must be tested for impairment at least annually. The Company continues to record amortization for other 34 intangible assets with definite lives. The Company is subject to financial statement risk to the extent that goodwill and indefinite-lived assets become impaired. Any impairment review is, by its nature, highly judgmental as estimates of future sales, earnings and cash flows are required to be established. Product Liability: Due to the nature of the Company's products, the Company is subject to product liability claims and lawsuits in the normal course of business. A substantial portion of these claims and lawsuits involve the Company's concrete placement and domestic refuse businesses, while such lawsuits in the Company's defense business have historically been rare. To the extent permitted under applicable law, the Company maintains insurance to reduce or eliminate risk to the Company. Most insurance coverage includes self-insured retentions that vary by business segment and by year. Such self-insured retentions were increased sharply following the terrorist acts of September 11, 2001. As of July 31, 2002, the Company maintained self-insured retentions of $1.0 million for each of its businesses. The Company establishes product liability reserves for its self-insured retention portion of any known outstanding matters based on the likelihood of loss and the Company's ability to reasonably estimate such loss. There is inherent uncertainty as to the eventual resolution of unsettled matters due to the unpredictable nature of litigation. The Company makes estimates based on available information and the Company's best judgment after consultation with appropriate experts. The Company periodically revises estimates based upon changes to facts or circumstances. The Company also utilizes actuarial methodologies to calculate reserves required for estimated incurred but not reported ("IBNR") claims as well as to estimate the effect of the adverse development of claims over time. Warranty: Sales of the Company's products generally carry typical explicit manufacturer's warranties based on terms that are generally accepted in the Company's marketplaces. The Company records provisions for estimated warranty and other related costs at the time of sale based on historical warranty loss experience and periodically adjusts these provisions to reflect actual experience. Certain warranty and other related claims involve matters of dispute that ultimately are resolved by negotiation, arbitration or litigation. Infrequently, a material warranty issue can arise which is beyond the scope of the Company's historical experience. The Company provides for any such warranty issues as they become known and estimable. It is reasonably possible that from time to time additional warranty and other related claims could arise from disputes or other matters beyond the scope of the Company's historical experience. New Accounting Standards Special Purpose Entities: In June 2002, the Financial Accounting Standards Board ("FASB") issued Exposure Draft "Consolidation of Certain Special-Purpose Entities - an Interpretation of ARB No. 51" ("Proposed Interpretation"). The Proposed Interpretation is intended to provide consolidation accounting guidance for special purpose entities, recognizing that existing consolidation accounting guidance involving a control-based approach contained in Accounting Research Board ("ARB") Statement No. 51 and FASB Statement No. 94 does not adequately consider the uniqueness of special purpose entities in which controlling rights may not be 35 substantive. The Proposed Interpretation would explain how to identify a special purpose entity that is not subject to control through voting ownership interests and would require each enterprise involved with a special purpose entity to determine whether it provides financial support to the special purpose entity through a variable interest. Variable interests may arise from financial instruments, service contracts, minority ownership interests or other arrangements. If an entity holds a majority of the variable interests, or a significant variable interest that is significantly more than any other party's variable interest, that entity would be the primary beneficiary. The primary beneficiary would be required to include the assets, liabilities and results of activities of the special purpose entity in its consolidated financial statements. A special purpose entity would be evaluated for consolidation based on voting interests, rather than provisions of this Proposed Interpretation, if one or more parties hold equity investments that meet certain conditions. An equity investment that fails to meet these conditions would consider the investment to be a variable interest to be assessed under the provisions of the Proposed Interpretation. An equity investment would be presumed to be insufficient to allow the special purpose entity to finance its own activities without relying on support by the variable interest holders (i.e., presumed to lack sufficient independent economic substance) unless the investment is equal to at least 10% of the special purpose entity's total assets. The Proposed Interpretation would require existing unconsolidated special purpose entities that lack sufficient independent economic substance to be consolidated by primary beneficiaries if they do not effectively disperse risks among parties involved. Special purpose entities that effectively disperse risks would not be consolidated unless a single party holds an interest or combination of interests that effectively recombines risks that were previously dispersed. The Proposed Interpretation would be applied immediately to special purpose entities created after the issuance date of the final interpretation. For special purpose entities created before that date, the provisions of the Proposed Interpretation would be applied to those special purpose entities still existing as of the beginning of the first fiscal year or interim period beginning after March 15, 2003. The Company is in the process of assessing the impact of this Proposed Interpretation on its interest in Oshkosh/McNeilus Financial Services Partnership ("OMFSP" -- see Note 6 to Notes to Unaudited Condensed Consolidated Financial Statements). A final interpretation may result in the Company including the assets and liabilities (or some portion thereof) of OMFSP in its consolidated financial statements. Alternatively, the Company may sell or restructure its interest in OMFSP. Guarantee Obligations: In May 2002, the FASB issued a proposed interpretation that would clarify and expand on existing disclosure requirements for guarantees, including loan guarantees. It also would require that, at the inception of a guarantee, the Company must recognize a liability for the fair value, or market value, of its obligations under that guarantee. The proposed interpretation does not address the subsequent measurement of the guarantor's recognized liability over the 36 term of the guarantee. The proposed interpretation also would incorporate, without change, the guidance in FASB Interpretation No. 34, "Disclosure of Indirect Guarantees of Indebtedness of Others," which is being superseded. The provisions related to recognizing a liability at inception for the fair value of the guarantor's obligations would not apply to product warranties or to guarantees accounted for as derivatives. It is currently proposed that the new recognition and initial measurement provisions of the proposed interpretation would be applied to all previously issued guarantees in the first fiscal year beginning after September 15, 2002. The cumulative effect of initially applying those provisions would be reported as a change in accounting principle in the first interim period of the year of adoption. The disclosure requirements would be effective for financial statements of interim or annual periods ending after October 15, 2002. The Company is assessing the potential impact of this proposed interpretation on the Company's financial statements. The Company may be required to estimate the fair value of its contingent obligations and record such value in its balance sheet with a corresponding charge to earnings upon implementation of the proposed accounting standard. Because the proposed interpretation does not provide guidance regarding appropriate methodologies to value such contingent obligations, the Company is unable to estimate the impact of this proposed interpretation. Customers and Backlog Sales to the DoD comprised approximately 33% of the Company's sales in the first nine months of fiscal 2002. No other single customer accounted for more than 10% of the Company's net sales for this period. A substantial majority of the Company's net sales are derived from customer orders prior to commencing production. The Company's backlog at June 30, 2002 increased 28.8% to $1,065.1 million compared to $826.7 million at June 30, 2001. Commercial segment backlog increased 108.2% to $160.5 million at June 30, 2002 compared to June 30, 2001. Excluding backlog related to the Geesink Norba Group acquisition, commercial and total Company backlog would have increased 55.7% and 23.9%, respectively, at June 30, 2002 compared to June 30, 2001. The commercial segment backlog was up as a result of increased orders of concrete mixers and lower orders for domestic refuse packers. After several quarters of weak orders, concrete placement orders rose sharply in the third quarter of fiscal 2002, while domestic refuse orders continued to be soft relative to the prior year. Fire and emergency segment backlog increased 27.4% to $290.7 million at June 30, 2002 compared to June 30, 2001 due to a decision to increase Pierce's backlog in an effort to improve manufacturing efficiencies, and due to a multi-unit award of aircraft rescue and firefighting vehicles. The defense segment backlog increased 17.7% to $614.0 million at June 30, 2002 compared to June 30, 2001. During the nine month period ended June 30, 2002, the Company recorded $76 million in orders for heavy equipment transport trucks and trailers for the U.K. Ministry of Defence. This award resulted from completion of a multi-year effort and final contract negotiations that were concluded in December 2001. Also, prior year defense backlog reflected the planned low-rate of 37 initial production under the MTVR contract. Defense backlog at June 30, 2002 includes higher, "full-rate" production requirements called for and funded under the MTVR multi-year contract. Approximately 61% of the June 30, 2002 backlog is not expected to be filled in fiscal 2002. Reported backlog excludes purchase options and announced orders for which definitive contracts have not been executed. Additionally, backlog excludes unfunded portions of the DoD FHTV and MTVR contracts. Backlog information and comparisons thereof as of different dates may not be accurate indicators of future sales or the ratio of the Company's future sales to the DoD versus its sales to other customers. Fiscal 2002 Outlook The Company believes that fiscal 2002 net sales will approximate $1,700.0 million, up approximately 17.6% from fiscal 2001. The Company expects that consolidated net sales will be approximately $433.4 million in the fourth quarter of fiscal 2002. The Company expects that commercial segment sales will increase approximately 16.1% in fiscal 2002 to approximately $650.0 million, or $26.0 million higher than previous estimates due to increased concrete placement sales in the third quarter. All previous estimates referred to in this Report on Form 10-Q reflect those estimates included in the Form 8-K the Company filed on April 25, 2002. The Company estimates that the Geesink Norba Group will contribute all of the segment's sales increase. Fiscal 2001 results included two months of operations of the Geesink Norba Group following its July 25, 2001 acquisition. The Company estimates annual Geesink Norba Group sales in fiscal 2002 to be approximately $130.0 million. The Company expects that the fire and emergency segment sales will be up 2.4% from prior year at $475.0 million in fiscal 2002. There is no change in the Company's estimate of fire and emergency sales from previous estimates. The Company believes that defense segment net sales will increase from previous estimates by approximately $15.0 million to approximately $580.0 million in fiscal 2002, largely due to the impact on sales of the contract modification signed in the third quarter on the Company's MTVR contract which added a "dump body" variant to this long-term contract. This new estimate reflects an estimated 37.1% increase in defense sales in fiscal 2002, primarily due to a full year of full-rate production under the Company's MTVR contract. The Company estimates that its consolidated operating income will approximate $109.0 million in fiscal 2002, or 6.4% of sales. The Company expects commercial segment operating income to approximate $46.0 million, or 7.1% of sales, for fiscal 2002. This estimate is up by $6.0 million from previous estimates. The Company realized approximately $4.0 million of this increase in the third quarter and the Company anticipates that another $2.0 million of operating income will result from increased concrete placement sales and solid cost performance in the fourth quarter. The Company believes that fire and emergency segment operating income will approximate $48.0 million in fiscal 2002, or about 10.1% of sales. This is 38 down about $2.0 million from previous estimates due to an estimated unfavorable product mix in the fourth quarter of fiscal 2002. The Company estimates that defense segment operating income should approximate $40.0 million, or 6.9% of sales, which is up $5.0 million from the Company's previous estimates. This change reflects the $5.3 million annual impact of the one percentage point increase in margins on the Company's MTVR contract to 4.3%. The Company expects corporate expenses to approximate $25.0 million in fiscal 2002, up from $17.0 million for fiscal 2001. This increase largely reflects higher variable compensation, legal defense costs, insurance costs, and acquisition integration and investigation costs. The Company is also projecting $22.0 million in net interest costs in fiscal 2002, which is down by $2.5 million from previous estimates as a result of lower borrowings. The Company estimates net income of approximately $15.5 million in the fourth quarter and $58.0 million for fiscal 2002. The Company estimates earnings per share to be $0.90 and $3.35 for the fourth quarter and for fiscal 2002, respectively. In mid-June 2002, the Company negotiated "performance-based" payments under the MTVR contract. The Company expects this award to result in a substantial acceleration of cash flow under the contract in the fourth quarter of fiscal 2002 and for the duration of the contract, based on attaining certain pre-determined milestones. Because of this contract modification and the Company's expectation that it will build working capital in the fourth quarter of fiscal 2002, the Company expects that its debt will decline to approximately $150.0 million by September 30, 2002. The Company estimates total capital spending for fiscal 2002 at $15.0 million. Fiscal 2003 Outlook The Company estimates that consolidated net sales will approximate $1,775.0 million, up 4.4% from estimated fiscal 2002 net sales. No acquisitions are assumed in any of the Company's fiscal 2003 estimates. The Company estimates that commercial sales will increase about 2.3% to $665.0 million in fiscal 2003. The Company is projecting a modest increase in concrete placement sales of 3.0% in fiscal 2003 as recent financial market news has caused the Company to be cautious about the timing and strength of the U.S. economic recovery. The Company is projecting domestic refuse sales to decline 10.0% in the first half of fiscal 2003 before firming in the second half. For the year, the Company expects domestic refuse sales to decline approximately 3%. The Company expects that Geesink Norba Group refuse product sales will grow approximately 8.0% in fiscal 2003 based on a recovering European economy and new product introductions. The Company expects that fire and emergency sales will be up 6.3% to $505.0 million. The Company expects Pierce sales to be strong based on the current backlog of open orders, which extends into February 2003. However, the Company expects that another year of little snow and reduced airport funding will limit snow blower and plow sales in the fire and emergency segment. 39 The Company is projecting defense sales to increase 5.2% to $610.0 million. The Company expects MTVR sales to decline about $16.0 million in fiscal 2003, consistent with contract requirements, while the Company expects to realize approximately $46.0 million in sales as the Company initiates shipments in fiscal 2003 under the Company's contract to provide tank transporter systems to the United Kingdom Ministry of Defence. By quarter, the Company estimates that fiscal 2003 sales will approximate $387.0 million in quarter one, $426.0 million in quarter two, $497.0 million in quarter three and $465.0 million in quarter four. The Company is projecting consolidated operating income to be up 10.1% to about $120.0 million in fiscal 2003. In the commercial segment, the Company projects operating income to increase 10.9% to $51.0 million. In this segment, concrete placement results are projected to be flat in fiscal 2003. The Company will ramp up the sale of its new "Revolution" composite mixer drum slowly in fiscal 2003, and the Company expects no appreciable benefit until fiscal 2004. The Company expects domestic refuse results to be up slightly due to cost reduction plans in place. The Company expects that most of the growth in commercial segment operating income will result from recovery of European refuse product operating results following the restructuring of that business in fiscal 2002. The Company is projecting fire and emergency segment operating income to increase 8.3% to $52.0 million in fiscal 2003, largely consistent with the estimated sales increase in the segment. The Company is projecting defense operating income to increase 10.0% to $44.0 million in fiscal 2003. This estimate assumes significant bid and proposal spending with respect to several United Kingdom defense truck procurement programs and significant pre-contract costs. The Company has identified additional opportunities to bid, plus certain U.K. competitions are being extended, thereby increasing the Company's competition costs. Further, the Company may need to incur pre-contract costs, which are expensed as incurred, to meet contract requirements in the event of a positive award of certain of these contracts to the Company. Defense operating income estimates assume no further margin improvement on the multi-year MTVR contract in fiscal 2003. The Company's margin on this contract is currently at 4.3%. Subject to attaining certain milestones and cost performance, the Company continues to target margins of 6.0% to 6.5% over the contract life. A one percentage point change in MTVR margins in fiscal 2003 would impact the Company's operating income by $7.6 million, or $0.27 per share, after tax. The Company reviews its estimated costs to complete the MTVR long-term production contract periodically or as events change, based on factors such as the cost performance achieved to date and the durability of fielded trucks. In June 2002, the Company negotiated a modification of the MTVR contract to replace bare chassis with requirements for vehicles with a dump or a wrecker variant. The wrecker variants are complex vehicles that will undergo significant testing. The U.S. Marine Corps has until January 2004 to fund the wrecker requirements under the contract. How these wreckers perform in testing, the timing and number of wreckers actually funded by the U.S. Marine Corps under the contract and cost performance on these trucks will be important factors in the Company's 40 ability to achieve its targeted MTVR margins of 6.0% to 6.5% over the life of the contract. The Company expects corporate expenses to approximate $27.0 million in fiscal 2003, up from $25.0 million estimated for fiscal 2002. This increase reflects investments planned to build the Company's management team in preparation for additional acquisitions and/or defense contract awards. The Company is projecting net interest costs to decline $2.0 million to $20.0 million in fiscal 2003. The Company expects debt to be lower in fiscal 2003 than in fiscal 2002 and interest rates to increase modestly. Also, the Company is estimating a working capital build and related use of cash/increase in debt associated with potential major defense contract awards. By quarter, the Company expects that net income will approximate $8.0 million in quarter one, $14.5 million in quarter two, $21.0 million in quarter three and $21.5 million in quarter four. Based on an estimated 17.65 million average diluted shares outstanding for the year, these net income estimates result in earnings per share estimates of $0.45 in quarter one, $0.83 in quarter two, $1.19 in quarter three, and $1.21 in quarter four. First quarter estimates include heavy defense bid and proposal spending. Assuming no acquisitions, the Company estimates that debt will rise in the first half of fiscal 2003 compared to forecasted September 30, 2002 levels due to seasonal working capital demands of the concrete placement business and then remain relatively high for the remainder of the year even as such demands subside due to working capital requirements associated with production under the U.K. tank transporter contract in the second half of fiscal 2003. Specific debt estimates are $175.0 million at December 31, 2002, $200.0 million at March 31, 2003, $210.0 million at June 30, 2003 and $150.0 million at September 30, 2003. If the Company were to win a major defense contract, then debt levels would rise in the start-up phases of the contracts. The Company expects capital spending to increase to approximately $30.0 million in fiscal 2003 due to the planned start-up of a U.S. production facility for the Revolution composite mixer drum. The Company believes that the impact of the terrorist acts on September 11, 2001 on the Company will include increases in the costs of insurance for all global businesses, including the Company, principally beginning in fiscal 2003. The Company has estimated the impact of such insurance cost increases and reflected such expectations in its estimates of fiscal 2003 earnings per share. The expectations with respect to projected sales, costs, earnings and debt levels in this "Fiscal 2002 Outlook" and "Fiscal 2003 Outlook" are forward-looking statements and are based in part on certain assumptions made by the Company, some of which are referred to in, or as part of, the forward-looking statements. These assumptions include, without limitation, anticipation of a modest economic recovery in U.S. and European economies in fiscal 2003; the Company's expectations as to timing of receipt of sales orders and payments and execution and funding of defense contracts; the Company's ability to achieve cost reductions; the Company's anticipated level of sales and margins associated with international defense truck sales and the MTVR program; the Company's estimates for capital 41 expenditures of municipalities for fire and emergency and refuse products, of airports for fire and rescue products and of commercial waste haulers; the Company's estimates of concrete placement activity, housing starts and mortgage rates; the Company's expected level of sales and operating income of the Geesink Norba Group; the Company's ability to sustain market share gains by its fire and emergency and refuse products businesses; the Company's planned spending on bid and proposal activities for U.S. and U.K. defense truck procurement competitions; the Company's anticipated level of sales of, and capital expenditures associated with, the Revolution(TM) composite mixer; the Company's estimates for steel and insurance costs; the Company's estimates for debt levels, interest costs and working capital needs; and that the Company does not complete any acquisitions. The Company cannot provide any assurance that the assumptions referred to in the forward-looking statements or otherwise are accurate or will prove to have been correct. Any assumptions that are inaccurate or do not prove to be correct could have a material adverse effect on the Company's ability to achieve the forward-looking statements. Item 3. Quantitative and Qualitative Disclosure of Market Risk The Company's quantitative and qualitative disclosures about market risk for changes in interest rates and foreign exchange risk are incorporated by reference in Item 7A of the Company's Annual Report on Form 10-K for the year ended September 30, 2001 and have not materially changed since that report was filed. 42 OSHKOSH TRUCK CORPORATION PART II. OTHER INFORMATION FORM 10-Q JUNE 30, 2002 ITEM 1 LEGAL PROCEEDINGS None. ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits (10.1) Oshkosh Truck Corporation Deferred Compensation Plan for Directors and Executive Officers. (10.2) Form of Key Executive Employment and Severance Agreement between Oshkosh Truck Corporation and Bryan J. Blankfield (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000 (File No. 0-13886)). (99.1) Written Statement of the Chairman, President and Chief Executive Officer, pursuant to 18 U.S.C.ss.1350, dated August 8, 2002. (99.2) Written Statement of the Executive Vice President and Chief Financial Officer, pursuant to 18 U.S.C.ss.1350, dated August 8, 2002. (b) Reports on Form 8-K Current Report on Form 8-K dated April 25, 2002 reporting the announcement of the Company's earnings for the second quarter ended March 31, 2002. Current Report on Form 8-K dated June 14, 2002 reporting the appointment of Deloitte & Touche LLP as independent auditors for the Company for the year ended September 30, 2002. 43 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. OSHKOSH TRUCK CORPORATION August 8, 2002 /S/ R. G. Bohn ------------------------------------ R. G. Bohn Chairman, President and Chief Executive Officer (Principal Executive Officer) August 8, 2002 /S/ C. L. Szews ------------------------------------ C. L. Szews Executive Vice President and Chief Financial Officer (Principal Financial Officer) August 8, 2002 /S/ T. J. Polnaszek ------------------------------------ T. J. Polnaszek Vice President and Controller (Principal Accounting Officer) 44 EXHIBIT INDEX Exhibit No. Description (10.1) Oshkosh Truck Corporation Deferred Compensation Plan for Directors and Executive Officers. (10.2) Form of Key Executive Employment and Severance Agreement between Oshkosh Truck Corporation and Bryan J. Blankfield (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000 (File No. 0-13886)). (99.1) Written Statement of the Chairman, President and Chief Executive Officer, pursuant to 18 U.S.C ss.1350, dated August 8, 2002. (99.2) Written Statement of the Executive Vice President and Chief Financial Officer, pursuant to 18 U.S.C.ss.1350, dated August 8, 2002. 45 EX-10.1 3 slp338c.txt DEFERRED COMPENSATION PLAN OSHKOSH TRUCK CORPORATION DEFERRED COMPENSATION PLAN FOR DIRECTORS AND EXECUTIVE OFFICERS (As Restated Effective January 1, 2002) OSHKOSH TRUCK CORPORATION DEFERRED COMPENSATION PLAN FOR DIRECTORS AND EXECUTIVE OFFICERS Table of Contents Page INTRODUCTION ..................................................................1 ARTICLE I. DEFINITIONS .......................................................2 Section 1.1. Administrator.......................................2 Section 1.2. Board...............................................2 Section 1.3. Change in Control...................................2 Section 1.4. Company.............................................2 Section 1.5. Company Match Account...............................2 Section 1.6. Deferred Benefit Account............................2 Section 1.7. Deferred Compensation Agreement or Agreement........2 Section 1.8. Director............................................2 Section 1.9. Exchange Act........................................2 Section 1.10. Investment Election Change Form.....................3 Section 1.11. Investment Program..................................3 Section 1.12. Oshkosh Stock.......................................3 Section 1.13. Participant.........................................3 Section 1.14. Plan................................................3 Section 1.15. Plan Year...........................................3 Section 1.16. Plan Interest Rate..................................3 Section 1.17. Retainer Fee........................................4 Section 1.18. Rule 16b-3..........................................4 Section 1.19. Share Program.......................................4 Section 1.20. Termination.........................................4 Section 1.21. Transfer Election Form..............................4 ARTICLE II. ELIGIBILITY AND PARTICIPATION.....................................5 Section 2.1. Eligibility.........................................5 Section 2.2. Participation.......................................5 Section 2.3. Deferred Compensation Agreements....................5 Section 2.4. Modifications Due to Hardship.......................6 Section 2.5. Beneficiary Designations............................6 Section 2.6. Effect of Change in Control.........................7 ARTICLE III. ACCOUNTS UNDER THE PLAN..........................................8 Section 3.1. Investment Program..................................8 -i- Section 3.2. Share Program.......................................8 Section 3.3. Participant Investment Directions...................8 Section 3.4. Accounting for Deferred Benefit Accounts............9 Section 3.5. Payroll Tax Withholding.............................9 Section 3.6. Company Match Accounts..............................9 Section 3.7. Participant Statements.............................10 ARTICLE IV. DISTRIBUTIONS ...................................................11 Section 4.1. Form of Distribution...............................11 Section 4.2. Timing of Distribution.............................11 Section 4.3. Benefits Upon Death................................11 Section 4.4. Installment Payment Election.......................12 Section 4.5. Changes to Payment Periods.........................12 Section 4.6. Annual Payment Date................................13 Section 4.7. Hardship Payments..................................13 Section 4.8. Scheduled Distributions While Employed.............13 Section 4.9. Nonalienation......................................13 Section 4.10. Not a Contract of Employment.......................13 Section 4.11. Minimum Size of Accounts to Be Maintained..........13 Section 4.12. Exchange Act Compliance............................13 ARTICLE V. OSHKOSH STOCK ....................................................15 Section 5.1. General............................................15 Section 5.2. No Rights as Shareholder...........................15 Section 5.3. Restrictions on Subsequent Transfer................15 ARTICLE VI. MISCELLANEOUS ...................................................16 Section 6.1. Relation to Other Benefit Plans....................16 Section 6.2. Amendment and Termination..........................16 Section 6.3. Administration of the Plan.........................16 Section 6.4. Rights of Participants.............................16 Section 6.5. Plan is Unfunded...................................17 Section 6.6. Costs of the Plan..................................17 Section 6.7. Severability.......................................17 Section 6.8. Governing Law......................................17 Section 6.9. Binding Upon Successors............................17 DEFINITION OF "CHANGE IN CONTROL" AND RELATED TERMS...........................18 -ii- INTRODUCTION Oshkosh Truck Corporation created the Deferred Compensation Plan for Directors and Executive Officers, effective May 19, 1997, to assist eligible executive officers and nonemployee directors of Oshkosh Truck Corporation and its affiliates to defer income, typically until retirement, death, or termination of employment or cessation of service as a member of the Board of Directors of Oshkosh Truck Corporation. The Plan is amended and restated effective January 1, 2002, as set forth herein. ARTICLE I. DEFINITIONS Section 1.1. Administrator. "Administrator" means the Human Resources Committee of the Board of Directors of Oshkosh Truck Corporation. The Executive Vice President, Corporate Administration, or such Vice President's delegate, is charged with the day-to-day responsibility of administration of the Plan. Section 1.2. Board. "Board" means the board of directors of Oshkosh Truck Corporation. Section 1.3. Change in Control. "Change in Control" has the meaning assigned to this term in Exhibit A, attached hereto and incorporated by this reference. Section 1.4. Company. "Company" means Oshkosh Truck Corporation. Section 1.5. Company Match Account. The "Company Match Account" is the Account described in Section 3.6. All Company Match Accounts are subject to the vesting rules of the Oshkosh Truck Corporation and Affiliates Tax Deferred Investment Plan (the "Company 401(k) Plan"). Section 1.6. Deferred Benefit Account. "Deferred Benefit Account" means the Account established for each Participant under the Plan comprised of deferred Retainer Fees or compensation amounts, as adjusted to reflect the net investment return associated with such amounts, as determined under the Plan. Each Deferred Benefit Account shall have subaccounts representing the portions of a Participant's Deferred Benefit Account that are held in the Investment Program and in the Share Program. All Deferred Benefit Accounts under the Plan are immediately vested and nonforfeitable. Section 1.7. Deferred Compensation Agreement or Agreement. "Deferred Compensation Agreement" or "Agreement" is the agreement described in Section 2.3. Section 1.8. Director. "Director" means any individual who is a nonemployee member of the Board. Section 1.9. Exchange Act. "Exchange Act" means the Securities Exchange Act of 1934, as amended. Section 1.10. Investment Election Change Form. "Investment Election Change Form" means an investment election form provided by the Administrator for this purpose, properly completed and signed by a Participant who wishes to change the Participant's investment election prospectively as to new deposits or credits to the Participant's Account. Section 1.11. Investment Program. The "Investment Program" is the program described in Section 3.1. Former "Cash Accounts" under the Plan are deemed to be included in the Investment Program as of January 1, 2002. - 2 - Section 1.12. Oshkosh Stock. "Oshkosh Stock" means the common stock of the Company, the value of which shall be determined at any relevant time by the Administrator, taking into account the value at which shares of Oshkosh Stock are traded on the date in question in representative trades reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the Nasdaq National Market on such date, or if no Oshkosh Stock is traded on such date, the most recent date on which Oshkosh Stock was traded. Section 1.13. Participant. "Participant" means each Director and each executive employee of the Company and its affiliates who is designated by the Administrator to be eligible and for whom an Account is maintained under the Plan. Any person with an Account in the Plan who would otherwise no longer be eligible to be a Participant shall nonetheless continue to be a Participant with respect to such Account until the Account is fully paid out. Section 1.14. Plan. "Plan" means the Oshkosh Truck Corporation Deferred Compensation Plan for Directors and Executive Officers. Section 1.15. Plan Year. "Plan Year" means the 12-month period beginning each October 1 and is the fiscal year of the Company. The period from January 1, 2002, to September 30, 2002, is a short Plan Year. Section 1.16. Plan Interest Rate. The "Plan Interest Rate" in effect for a Plan Year quarter is the prime rate on the last business day of the immediately preceding Plan Year quarter plus one percent (1%). "Prime rate" for this purpose means the prime rate published for such date in The Wall Street Journal. This definition of Plan Interest Rate shall be effective as of January 1, 2002, and thereafter, for any portion of an Account held in the Investment Program. Section 1.17. Retainer Fee. "Retainer Fee" means those fees paid by the Company to Directors for services rendered on the Board or any committee of the Board, including attendance fees and fees for serving as committee chair. Any Retainer Fee payable for services during a month is deemed to accrue to the Director on the first day of such month for Plan purposes. Section 1.18. Rule 16b-3. "Rule 16b-3" means Rule 16b-3 of the General Rules and Regulations under the Exchange Act as promulgated by the Securities and Exchange Commission or its successors, as amended and in effect from time to time. Section 1.19. Share Program. The "Share Program" is the program described in Section 3.2. The former "Share Accounts" under the Plan are deemed to be included in the Share Program as of January 1, 2002. Interests in the Share Program are measured in units of Oshkosh Stock and are sometimes referred to herein as "Oshkosh Stock units." Section 1.20. Termination. "Termination," for a Director, means cessation of service as a Director. "Termination," for any other Participant, means their disability, within the meaning of Internal Revenue Code Section 22(e)(3), or their termination of employment with the Company and its affiliates for any reason other than death. - 3 - Section 1.21. Transfer Election Form. "Transfer Election Form" means a transfer election form in the form provided by the Administrator, properly completed and signed by a Participant who wishes to transfer funds from the Investment Program to the Share Program, or the reverse. - 4 - ARTICLE II. ELIGIBILITY AND PARTICIPATION Section 2.1. Eligibility. Directors and executive officers elected by the Board are automatically eligible to participate. The Administrator may designate other key executive employees as being eligible to participate, in the Administrator's discretion. Key executive employee means, for this purpose, a person who is a member of a select group of management or highly compensated employees of the Company or its affiliates. The Plan is intended to be a top-hat deferred compensation plan, exempt from the eligibility, vesting, and funding requirements of the Employee Retirement Income Security Act of 1974, as amended. Section 2.2. Participation. (a) Eligible persons must complete a written agreement in order to participate. This Agreement is called Deferred Compensation Agreement. Deferred Compensation Agreements must be completed and filed with the Administrator before the beginning of the Plan Year for which they are initially effective, or by March 31, 2002, if later, except Deferred Compensation Agreements completed by newly-eligible persons within thirty (30) days of becoming eligible for the first time under the Plan may be effective immediately, but only as to compensation or Retainer Fees earned after the date the Agreement is completed and filed with the Administrator. Notwithstanding these general rules, however, no Deferred Compensation Agreement shall be effective with regard to bonus compensation for services and performance during a Plan Year unless such Deferred Compensation Agreement has been completed and filed with the Administrator before March 31 of the Plan Year to which the services and performance relate or, if later, within thirty (30) days of becoming eligible for bonus consideration. (b) A person who ceases to be eligible for Plan participation, but remains employed, cannot elect any new deferrals under the Plan. Deferred Compensation Agreements in effect at the time eligibility for Plan participation ceases may remain in effect in accordance with their terms and the rules of the Plan through the end of the Plan Year in which eligibility to participate ended. (c) The Administrator makes all final decisions regarding eligibility and compliance with the participation requirements. Section 2.3. Deferred Compensation Agreements. (a) Deferred Compensation Agreements of Directors must designate the amount of Retainer Fees that is to be deferred in accordance with Administrator rules and procedures, using forms that may be supplied by the Administrator for this purpose. Deferred Compensation Agreements of persons other than Directors must designate the amount of compensation that is to be deferred and indicate whether the deferred amount is to be deducted from salary or bonus, or from both. Salary, for this purpose, refers to base pay before reduction for deferred compensation amounts but exclusive of bonus or incentive compensation, special fees or awards, allowances or amounts designated by the Company as payments toward or for reimbursement of expenses. Bonuses, for this purpose, mean the annual incentive compensation payable in a Plan Year for services and performance during the preceding Plan Year. - 5 - (b) Each Deferred Compensation Agreement shall also specify the initial Plan Year during which the compensation deferral is to take place and the portion of the deferred compensation amount that is to be directed to the Investment Program and the Share Program. Deferred Compensation Agreements shall remain in effect from Plan Year to Plan Year, subject to the right of the Participant to make changes in the Participant's Agreement that are prospectively effective as of the first day of the Plan Year commencing after the date the change is completed in accordance with Administrator rules. (c) The maximum aggregate deferral under each Deferred Compensation Agreement shall not exceed the following limits: Retainer Fees--100%; salary--25%; bonus--100%. The minimum aggregate deferral amount that may be permitted to be elected for a Plan Year shall not be less than five thousand dollars ($5,000). The Administrator may, however, adjust these maximum and minimum limits on a prospective basis in a uniform manner applied to all similarly situated Participants. (d) The Company, in the case of Directors, and otherwise the Participant's employer, will make the corresponding reductions in Retainer Fees or compensation and the Company will credit such amount to the Participant's Deferred Benefit Account, making appropriate records to distinguish amounts held under the Investment Program and the Share Program. Section 2.4. Modifications Due to Hardship. A Participant's deferral election for a Plan Year is irrevocable during the Plan Year except for substantial financial need of a Participant due to serious and unanticipated family health, education, or housing needs ("hardship"). The Administrator, in the Administrator's discretion, upon demonstration of hardship, may permit prospective reduction of the Participant's compensation deferral election for a Plan Year. A request for reduction in the deferral amount due to hardship must be submitted in writing, with evidence of hardship, to the Administrator. If the Administrator approves the request for change, then it will be prospectively effective only. Section 2.5. Beneficiary Designations. Each Participant shall complete a designation of beneficiary when initially completing a Deferred Compensation Agreement. The beneficiary designation may subsequently be revised by the Participant. The designated beneficiary of a Participant may include multiple beneficiaries. If the beneficiary dies before receiving all payments due such beneficiary, then any remaining payments will be made to the designated beneficiary's estate unless a contingent beneficiary was designated by the Participant as to such amounts. If there is a contingent beneficiary, then payments will be made to the contingent beneficiary and, if such contingent beneficiary dies, any remaining payments will be made to the contingent beneficiary's estate. If there is no beneficiary designation in force when Plan benefits become payable upon the death of a Participant, payment shall be made to the Participant's spouse, or if no spouse is then living, to the Participant's estate, as the Participant's deemed beneficiary. All beneficiary designations must be made in writing and acknowledged by the Administrator. Section 2.6. Effect of Change in Control. Upon the occurrence of a Change in Control: - 6 - (a) All deferrals under the Plan of Retainer Fees and compensation shall cease. Amounts that would otherwise be deferred will, instead, be paid to Participants currently as Retainer Fees or compensation. (b) The Accounts of all Participants (whether employed or terminated, including any whose Accounts are in pay status) shall be paid out in a single lump sum cash payment to all such Participants within ten (10) business days after the Change in Control. (c) Notwithstanding other Plan provisions regarding the timing of Account valuations, upon the occurrence of a Change in Control, Investment Program subaccounts shall be updated to the date of payment for earnings and Share Program subaccounts shall be valued using the higher of the value of Oshkosh Stock determined on the date of the Change in Control or the highest price per share of Oshkosh Stock paid in the transaction giving rise to the Change in Control. If payment is delayed beyond the payment deadline described in (b) above, for any reason, the balance to be paid out shall become fixed as of such scheduled payment date, except that such amount shall be increased in an amount equivalent to interest on such fixed amount, to the date of actual payment, at a rate equal to two times the Plan Interest Rate. - 7 - ARTICLE III. ACCOUNTS UNDER THE PLAN Section 3.1. Investment Program. Under the Investment Program, a Participant's deferred compensation amounts not directed to the Share Program and any deemed dividends on Company stock directed to the Investment Program as described in Section 3.2 are deemed to earn interest at the Plan Interest Rate, compounded quarterly. Section 3.2. Share Program. (a) Under the Share Program, a Participant's deferred compensation amounts directed to the Share Program are deemed to be invested in shares of Oshkosh Stock. If cash dividends are paid on Oshkosh Stock, a corresponding deemed dividend amount shall be credited to the Investment Program Account of each Participant having an Account balance in the Share Program on the applicable dividend record date. Such deemed dividend amounts are directed to the Investment Program to simplify Plan recordkeeping and administration. If the Administrator determines that it is administratively feasible to reinvest such deemed dividend amounts in the Participant's Share Program Account, the Administrator may do so, uniformly for all Participants, after giving notice to all Participants of the change in administrative practice. (b) All amounts credited to a subaccount in the Share Program shall be converted to Oshkosh Stock units, taking into account the timing rules of Section 3.4. No actual shares of Oshkosh Stock shall be purchased or earmarked for purposes of the Plan. (c) Participants shall have no rights as a shareholder pertaining to Oshkosh Stock in relation to their Share Program subaccounts and the Oshkosh Stock units credited to such subaccounts. Section 3.3. Participant Investment Directions. (a) In connection with a Participant's initial Deferred Compensation Agreement and thereafter, from time to time as determined by the Participant in accordance with Administrator rules, each Participant shall provide written investment directions indicating the portion of such Participant's deferred amount that is to be allocated to the Investment Program and the Share Program. Any apportionment of newly deposited funds to such Programs shall be in ten percent (10%) increments, unless other incremental amounts are established by Administrator rule on a prospective basis, uniformly applied to similarly situated participants. (b) An investment direction contained in an initial Deferred Compensation Agreement shall become effective on the first day of the Plan Year quarter following the completion of the initial Agreement. An investment direction contained in an Investment Election Change Form shall become effective on the October 1 or April 1 following the completion of the Investment Election Change Form in accordance with Administrator rules. (c) Subject to the restrictions in (d), below, a Participant may transfer amounts from the Investment Program to the Share Program, or the reverse, in ten percent (10%) increments (unless other incremental amounts are established by Administrator rule on a - 8 - prospective basis, uniformly applied to similarly situated participants) of the amounts credited to a Program by completing a Transfer Election Form, in accordance with Administrator rules. Such transfers among Programs shall become effective on the first day of the Plan Year quarter following the completion of the Transfer Election Form. (d) A Participant who is subject to Section 16 of the Securities Exchange Act of 1934, as amended, may make transfers of existing balances into or out of the Share Program if the transfer is effected pursuant to an election made at least six (6) months after the date of the Participant's most recent opposite-way election making a transfer of existing Account balances out of or into the Share Program or existing account balances out of or into an Oshkosh Stock fund under any other Company plan, or more frequently as permitted by the Administrator. Section 3.4. Accounting for Deferred Benefit Accounts. (a) Deferred Benefit Accounts shall be established for each Participant including subaccounts in the Investment Program and the Share Program, as applicable. Credits for deferred Retainer Fees and compensation shall be made not later than the last day of the Plan Year quarter in which such amounts would otherwise have been received by the Participant. (b) Subaccounts established for Participants shall be deemed to be fully invested at all times in the investment program to which the subaccount is assigned, taking into account the following timing rules. Amounts credited to a Participant's subaccount in the Investment Program or the Share Program (whether as deferred Retainer Fees or compensation, or as deemed dividends) are deemed invested as of the first day of the Plan Year quarter coincident with or immediately following the date of the crediting of such amounts to the subaccount. Distributions from an Account, on the other hand, are deemed made on the first day of the Plan Year quarter in which the distribution is made. Section 3.5. Payroll Tax Withholding. A Participant's employer may deduct from non-deferred compensation any taxes it is required to withhold on deferred amounts unless such amounts are withheld directly from amounts paid out hereunder. Section 3.6. Company Match Accounts. (a) For a Participant other than a Director, who is making pretax contributions to the Company 401(k) Plan, the Company shall credit to the Participant's Company Match Account a Company matching contribution on amounts deferred under this Plan in the same relative amount as is made to the Participant's pretax savings account in the Company 401(k) Plan on amounts the Participant has elected to defer under that plan.. This credit will be made not less frequently than annually following the close of the 401(k) Plan year (the calendar year). Contributions to a Company Match Account under this Plan shall not be deemed to be Company matching contributions to the Company 401(k) Plan for any nondiscrimination testing purposes. (b) For any 401(k) Plan year, a Participant will not be credited with an aggregate Company matching amount under this Plan and the Company 401(k) Plan that is larger than the rate of matching applicable under the Company 401(k) Plan multiplied by the maximum - 9 - allowable elective deferral amount permitted for the 401(k) Plan year pursuant to Internal Revenue Code Section 402(g). (c) Except as described in paragraph (a), a Company Match Account shall be administered in every respect the same as a subaccount in the Investment Program under the Plan. Section 3.7. Participant Statements. Following the close of each year the Administrator will provide statements of account to each Participant. - 10 - ARTICLE IV. DISTRIBUTIONS Section 4.1. Form of Distribution. (a) All distributions to Participants from subaccounts in the Investment Program shall be in cash. All distributions to Participants from subaccounts in the Share Program shall be in shares of Oshkosh Stock except that cash shall be distributed in lieu of fractional shares, and except in the case of a Change in Control such payment shall be in cash as provided in Section 2.6. Unless a Participant has reached any other agreement in advance with the Administrator, all distributions shall be deemed to be made from each Program pro rata. (b) Shares of Oshkosh Stock delivered hereunder shall be previously issued shares reacquired and held by the Company. (c) All Accounts maintained for the benefit of beneficiaries (i.e., persons other than Participants) shall be converted within one year of the Participant's death to be solely maintained as Investment Program subaccounts and shall be paid in cash. The timing of the conversion of Share Program accounts to Investment Program accounts shall be in the sole discretion of the Administrator. Section 4.2. Timing of Distribution. Upon the Termination of a Participant, the Participant's Account shall be determined as of the last day of the Plan Year quarter immediately preceding the quarter in which such Termination occurred. Payment of such amount shall be made in a single lump sum amount within thirty (30) days following the Termination, or as soon thereafter as is administratively feasible. Section 4.3. Benefits Upon Death. (a) Upon the death of a Participant prior to Termination and before any periodic payments have started, the Company will pay to the designated beneficiary an installment death benefit over ten (10) years. The amount to be distributed annually shall be determined by multiplying the aggregate amount of the deceased Participant's Accounts as of the last day of the Plan Year quarter preceding the installment payment date by a fraction, the numerator of which is one (1) and the denominator of which is the number of years remaining for the payments to be made (e.g., 1/10, 1/9, 1/8, etc.). Additional interest (and dividends prior to the conversion of such subaccounts to Investment Program subaccounts pursuant to Section 4.1) are to be credited to amounts during the installment payment period in the same way such amounts are credited prior to Termination. (b) Upon the death of a Participant after Termination and after the commencement of periodic payments under Section 4.3, such payments shall continue to be made to the beneficiary until the payment schedule is completed. (c) Under either (a) or (b), however, the beneficiary may request to receive a lump sum payment of any unpaid amounts. If such request is approved by the Administrator, in its sole discretion, the accelerated lump sum payment to the beneficiary shall be made. The - 11 - Administrator has full discretion to determine whether or not to allow such acceleration of payment to the beneficiary. Section 4.4. Installment Payment Election. (a) A Participant may select the number of years over which the aggregate amount of the Participant's Accounts is to be paid to the Participant upon Termination, up to a maximum of ten (10) years. Such election must be made in the form required by the Administrator and be filed with the Administrator prior to the initial deferral of any amount hereunder or, if later, by March 31, 2002, in order to give current Participants a reasonable time period to make this election. A Participant may change the Participant's benefit payment election as described in Section 4.5. If no valid installment payment election is in effect when distribution is to be made, then payment of the Participant's Accounts shall be made in a lump sum, as provided in Section 4.1. (b) The amount to be distributed annually is determined by multiplying the aggregate balance (aggregate units for Share Program subaccounts) of the Participant's Accounts as of the last day of the Plan Year quarter preceding the installment payment date by a fraction, the numerator of which is one (1) and the denominator of which is the number of years remaining for the payments to be made (e.g., 1/10, 1/9, 1/8, etc.). Additional interest and dividends are to be credited during the installment payment period in the same way interest and dividends are credited prior to Termination. (c) Prior to January 1, 2002, each separate Deferred Compensation Agreement separately permitted the election of an installment payment period. The number of possible different elections that may be in effect for a Participant after several years of Plan participation presented complex administrative challenges that required simplification. Accordingly, effective January 1, 2002, only a Participant's most recent valid benefit payment election will be recognized hereunder and it will apply to the Participant's Accounts in the aggregate. All benefit payment elections made before the most recent valid election are void and of no effect as of January 1, 2002, for any Participant not then currently in pay status (i.e., already receiving installment payments prior to January 1, 2002). Notwithstanding the foregoing simplification of the payment period election process, any Participant affected by this change may elect in writing filed with the Administrator before March 31, 2002, a different payment period (up to the maximum of ten (10) annual payments) to apply to the Participant's Accounts. Section 4.5. Changes to Payment Periods. (a) A Participant who has not previously made an installment payment election, or who has an installment payment election already in effect, may make or revoke the election or change the installment payment period, selecting a payment period of from one (1) to ten (10) years. (b) Except as provided in Section 4.4 for certain elections that are to be made by March 31, 2001, any election or change of an installment payment election must be completed in accordance with Administrator rules not less than twelve (12) months before the date of the Participant's Termination. - 12 - Section 4.6. Annual Payment Date. All installment payments by the Company hereunder will be made each year on a January or February payroll date, as determined by the Administrator, on the basis of Account values determined as of the immediately preceding December 31. The Administrator may make payments on other dates where necessary due to hardship, other special circumstances, or where authorized by Administrator rule. Section 4.7. Hardship Payments. The Administrator may, in its sole discretion, upon the finding that the Participant has suffered a hardship (as described in Section 2.4), distribute to the Participant any portion of the Participant's Accounts as of such date that is appropriate to the need created by the hardship. Section 4.8. Scheduled Distributions While Employed. Any withdrawals pursuant to this Section that are to be made to a Participant who is subject to Section 16 of the Exchange Act must be approved by the Administrator. A Participant may elect to receive, from the Participant's Deferred Benefit Account, one or more lump sum distributions while employed. A Participant's election under this Section must be made in writing and filed with the Administrator not less than twelve (12) months before the date on which a distribution is to be made. Elections under this Section cannot be revoked less than twelve (12) months before the scheduled distribution date. Except as otherwise set forth in any election, amounts shall be distributed proportionately from the Participant's subaccounts of the Deferred Benefit Account. The Administrator may establish minimum amounts and limit the frequency of such elections as needed to assure convenient administration of the Plan. Section 4.9. Nonalienation. The right of a Participant or any other person to the payment of Accounts under this Plan shall not be assigned, transferred, pledged, or encumbered. Section 4.10. Not a Contract of Employment. This Plan may not be construed as giving any person the right to be retained as an employee of the Company, or any of its subsidiaries or affiliates, or a Director. Section 4.11. Minimum Size of Accounts to Be Maintained. If a balance in a Participant's subaccount in either the Investment Program or the Share Program is less than five thousand dollars ($5,000) at the time a payment is to be made, then such amount shall be paid out in full at the time such payment is due. Section 4.12. Exchange Act Compliance. The Administrator may adopt any additional rules and modify existing Plan rules, procedures, and forms, as necessary to assure compliance with the insider trading liability rules under Section 16 of the Exchange Act. - 13 - ARTICLE V. OSHKOSH STOCK Section 5.1. General. (a) The amount of Oshkosh Stock units which may be allocated to Participants' Accounts under the Plan is determined by the amount of Retainer Fees and compensation deferred under the Plan and the investment directions provided by Participants. (b) In the event of any merger, share exchange, reorganization, consolidation, recapitalization, stock dividend, stock split or other change in corporate structure affecting Oshkosh Stock, appropriate adjustments shall be made to the Oshkosh Stock units in the subaccounts in the Share Program for each Participant, except that any such adjustments to subaccounts for each Participant subject to Section 16 of the Exchange Act shall be only such as is necessary to maintain the proportionate interest of such Participant and preserve, without exceeding, the value reflected by such Participant's subaccount in the Share Program. Section 5.2. No Rights as Shareholder. Participants shall have no rights as a shareholder pertaining to Oshkosh Stock units credited to their Share Program Accounts. No Oshkosh Stock units hereunder or any right or interest of a Participant under the Plan in any Oshkosh Stock units may be assigned, encumbered, or transferred, except by will or the laws of descent and distribution. The rights of a Participant hereunder with respect to any Oshkosh Stock or deemed units of Oshkosh Stock are exercisable during the Participant's lifetime only by the Participant or the Participant's guardian or legal representative. Section 5.3. Restrictions on Subsequent Transfer. Any shares of Oshkosh Stock distributed to Participants under the Plan shall be subject to such stock transfer orders and other restrictions as the Administrator may deem advisable under the rules, regulations and other requirements of the Company, any stock exchange upon which Oshkosh Stock is then listed and any applicable Federal, state or foreign securities law, and the Administrator may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. - 14 - ARTICLE VI. MISCELLANEOUS Section 6.1. Relation to Other Benefit Plans. Compensation deferred under the Plan is not compensation for purposes of any tax-qualified defined benefit plans of the Company or any affiliate. Nothing in this Plan, however, shall restrict the recognition of compensation deferred hereunder as "compensation" under the terms of the Company's Executive Retirement Plan and as compensation for welfare benefit plans, such as life and disability insurance programs sponsored by the Company and its affiliates. Section 6.2. Amendment and Termination. The Company may, at any time, modify, amend, or terminate the Plan. The Company may not, however, reduce any benefit payment obligation to a Participant based on deferrals already made, without the Participant's consent. Plan amendments adopted pursuant to this section shall govern all Deferred Compensation Agreements and all Accounts uniformly except to the extent otherwise specifically provided by such amendment. Action by the Company may be taken by the Board or the Plan Administrator. There shall be no time limit on the duration of the Plan. This Section shall not restrict the right of the Board to cause all Accounts to be distributed in the event of Plan termination, provided all Participants and beneficiaries are treated in a uniform and nondiscriminatory manner. Section 6.3. Administration of the Plan. The Administrator shall administer and interpret the Plan, and supervise preparation of Agreements, forms, and any amendments thereto. Interpretation of the Plan shall be within the sole discretion of the Administrator and shall be final and binding upon each Participant and any beneficiary. The Administrator may adopt and modify rules and regulations relating to the Plan as it deems necessary or advisable for the administration of the Plan. If at any time the Administrator is not composed solely of two or more "Non-Employee Directors" within the meaning of Rule 16b-3, then all determinations affecting participation by persons subject to Section 16 of the Exchange Act shall be made by the Board. Headings are given to the sections of the Plan solely as a convenience to facilitate reference. The reference to any statute, regulation, or other provision of law shall be construed to refer to any amendment to or successor of such provision of law. Section 6.4. Rights of Participants. The right of the Participant or a Participant's beneficiary to receive a distribution hereunder shall be an unsecured claim against the general assets of the Company or any affiliate and neither the Participant nor any beneficiary shall have any rights in or against any amount credited to the Participant's Account or any other specific assets of the Company or any affiliate. The right of a Participant or beneficiary to the payment of benefits under this Plan shall not be assigned, encumbered, or transferred, except by will or the laws of descent and distribution. The rights of a Participant hereunder are exercisable during the Participant's lifetime only by the Participant or the Participant's guardian or legal representative. Section 6.5. Plan is Unfunded. This Plan is unfunded and is maintained by the Company and its affiliates primarily for the purpose of providing deferred compensation for nonemployee directors of the Company and a select group of management and highly compensated employees. Nothing contained in this Plan and no action taken pursuant to its - 15 - terms shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company or any affiliate and any Participant or beneficiary, or any other person. The Company may authorize the creation of one or more trusts or other arrangements to assist the Company and its affiliates in meeting the obligations created under the Plan. Any liability to any person with respect to the Plan shall be based solely upon any contractual obligations that may be created pursuant to the Plan. No obligation of the Company or any affiliate hereunder shall be deemed to be secured by any pledge of, or other encumbrance on, any property of the Company or any affiliate. Section 6.6. Costs of the Plan. Costs of establishing and administering the Plan will be paid by the Company and its affiliates in such proportion as determined by the Administrator. Section 6.7. Severability. If any of the provisions of the Plan shall be held to be invalid, or shall be determined to be inconsistent with the purpose of the Plan, the remainder of the Plan shall not be affected thereby. Section 6.8. Governing Law. The Plan is to be construed under the laws of the State of Wisconsin. Section 6.9. Binding Upon Successors. This Plan is binding upon the Company and Participants and their respective successors, assigns, heirs, executors, and beneficiaries. OSHKOSH TRUCK CORPORATION By -------------------------------- Date: ------------------------------- - 16 - Exhibit A DEFINITION OF "CHANGE IN CONTROL" AND RELATED TERMS A "Change in Control" shall be deemed to have occurred if the event set forth in any one of the following paragraphs shall have occurred: (a) at any time that either no shares of Class A Common Stock of the Company are issued and outstanding or Excluded Persons (as defined below) have ceased to beneficially own a majority of the outstanding shares of Class A Common Stock of the Company, any Person (other than (A) the Company or any of its subsidiaries, (B) a trustee or other fiduciary holding securities under any employee benefit plan of the Company or any of its subsidiaries, (C) an underwriter temporarily holding securities pursuant to an offering of such securities, (D) a corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock in the Company or (E) an Exempt Person ("Excluded Persons")) is or becomes the "Beneficial Owner" (as such term is defined in Rule 13d-3 under the Act), directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its Affiliates after January 31, 2000, pursuant to express authorization by the Board that refers to this exception) representing 25% or more of (1) the combined voting power of the Company's then outstanding voting securities or (2) the then outstanding shares of common stock of the Company; or (b) the following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on January 31, 2000, constituted the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company, as such terms are used in Rule 14a-11 of Regulation 14A under the Act) whose appointment or election by the Board or nomination for election by the Company's shareholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on January 31, 2000 or whose appointment, election or nomination for election was previously so approved; or (c) the shareholders of the Company approve a merger, consolidation or share exchange of the Company with any other corporation or approve the issuance of voting securities of the Company in connection with a merger, consolidation or share exchange of the Company (or any direct or indirect subsidiary of the Company) pursuant to applicable stock exchange requirements, other than (A) a merger, consolidation or share exchange that would result in the voting securities of the Company outstanding immediately prior to such merger, consolidation or share exchange continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof) at least 50% of the combined voting power of the voting securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger, consolidation or share exchange, (B) a merger, consolidation or share exchange effected to implement a recapitalization of the Company (or similar transaction) in which no Person (other than an Excluded Person) is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including - 17 - in the securities beneficially owned by such Person any securities acquired directly from the Company or its Affiliates after January 31, 2000, pursuant to express authorization by the Board that refers to this exception) representing 25% or more of (1) the combined voting power of the Company's then outstanding voting securities or (2) the then outstanding shares of common stock of the Company or (C) a merger, consolidation or share exchange immediately following the effectiveness of which shares of Class A Common Stock of the Company will remain issued and outstanding and Excluded Persons will continue to beneficially own a majority of the outstanding shares of Class A Common Stock of the Company; or (d) the shareholders of the Company approve a plan of complete liquidation or dissolution of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets (in one transaction or a series of related transactions within any period of 24 consecutive months), other than a sale or disposition by the Company of all or substantially all of the Company's assets to an entity at least 75% of the combined voting power of the voting securities of which are owned by Persons in substantially the same proportions as their ownership of the Company immediately prior to such sale. Notwithstanding the foregoing, no "Change in Control" shall be deemed to have occurred if there is consummated any transaction or series of integrated transactions immediately following which the record holders of the common stock of the Company immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity that owns all or substantially all of the assets of the Company immediately following such transaction or series of transactions. - 18 - EX-99.1 4 slp338a.txt STATEMENT OF CEO Exhibit (99.1) Written Statement of the Chairman, President and Chief Executive Officer Pursuant to 18 U.S.C. ss.1350 Solely for the purposes of complying with 18 U.S.C. ss.1350, I, the undersigned Chairman, President and Chief Executive Officer of Oshkosh Truck Corporation (the "Company"), hereby certify, to the best of my knowledge, that the Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2002 (the "Report") fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Robert G. Bohn - ------------------------------------ Robert G. Bohn August 8, 2002 EX-99.2 5 slp338b.txt STATEMENT OF CFO Exhibit (99.2) Written Statement of the Executive Vice President and Chief Financial Officer Pursuant to 18 U.S.C. ss.1350 Solely for the purposes of complying with 18 U.S.C. ss.1350, I, the undersigned Executive Vice President and Chief Financial Officer of Oshkosh Truck Corporation (the "Company"), hereby certify, to the best of my knowledge, that the Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2002 (the "Report") fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/Charles L. Szews - ------------------------------------ Charles L. Szews August 8, 2002 -----END PRIVACY-ENHANCED MESSAGE-----