|OSHKOSH TRUCK REPORTS FISCAL YEAR 2002 EPS OF $3.45; AFFIRMS FISCAL YEAR 2003 EPS ESTIMATE OF $3.70|
OSHKOSH, WIS. (October 29, 2002)—Oshkosh Truck Corporation (NYSE:OSK), a leading manufacturer of specialty trucks and truck bodies, today reported that net income increased 17.2 percent to $59.6 million, or $3.45 per share, for its fiscal year ended September 30, 2002, on sales of $1.74 billion. This compares to net income of $50.9 million, or $2.98 per share, for fiscal 2001 on sales of $1.45 billion. Had the company adopted a new accounting standard that eliminated amortization of goodwill and other indefinite-lived intangible assets ($0.39 per share after tax in fiscal 2001) effective in fiscal 2001 rather than in fiscal 2002, earnings per share would have been up $0.08 per share, or 2.4 percent, in fiscal 2002. These results exceeded Oshkosh's most recent earnings expectations of $3.35 per share for fiscal 2002. Oshkosh also affirmed its previous expectations for fiscal 2003 earnings per share of $3.70.
Sales increased 15.3 percent in the fourth quarter to $477.0 million. Net income was down 2.3 percent in the fourth quarter to $17.2 million, or $0.99 per share, compared to $17.6 million, or $1.03 per share, in the prior year quarter. Significant bid and proposal costs, higher legal defense costs and lower sales of defense trucks to export markets contributed to lower net income. The acceleration of defense parts sales of $0.09 per share from the fourth to the third quarter of fiscal 2002 to meet customer requirements affected the year over year comparison. Earnings in the fourth quarter of fiscal 2001 benefited from a one-time gain of $0.10 per share related to a foreign currency exchange gain arising from the purchase of Euros in anticipation of the acquisition of the Geesink Norba Group. Such earnings also included a charge of $0.10 per share for amortization of goodwill and certain intangible assets that was eliminated from fiscal 2002 results due to adoption of the new accounting standard.
“Improved earnings in fiscal 2002 in a sluggish economy reflect the success of our balanced diversification strategy. We invested heavily in fiscal 2002 on bid and proposal spending on large, multi-year defense truck procurement competitions. We launched several new products and technologies such as our Revolutionä composite mixer drum. We believe that these investments have strengthened our company, and they cause me to look forward to fiscal 2003 with cautious optimism,” commented Robert G. Bohn, chairman, president and chief executive officer.
Bohn continued, “Our stated commitment to debt reduction has been very successful. We repaid $209 million of debt throughout fiscal 2002. I'm pleased with the financial flexibility this affords us in fiscal 2003.”
Factors affecting fourth quarter results for the company's business segments included:
Fire and emergency segment—Sales increased by 9.0 percent to $136.6 million for the quarter. Operating income was up 13.5 percent to $15.2 million, or 11.1 percent of sales, compared to prior year operating income of $13.4 million, or 10.7 percent of sales. Excluding the impact of non-amortization of goodwill, operating income was up 7.3 percent. Favorable manufacturing cost performance during the quarter was offset in part by a slightly unfavorable product mix associated with the sales increase.
Defense segment—Fourth quarter defense sales increased 12.4 percent to $168.4 million due to full-rate production for the entire quarter under the company's contract to supply medium payload trucks to the U.S. Marines Corps under the Medium Tactical Vehicle Replacement (“MTVR”) contract. In the prior year fourth quarter, the company was in the process of ramping up to full-rate production under the MTVR contract. The prior year fourth quarter results also included strong export sales.
Operating income decreased 18.5 percent to $12.6 million, or 7.5 percent of sales, compared to prior year operating income of $15.5 million, or 10.3 percent of sales. Operating income margins for the segment were negatively impacted by increased spending during the quarter for bid and proposal activities in connection with multi-year truck procurement competitions for the U.S. Army and U.K. Ministry of Defence. Lower sales of higher-margin trucks to export markets and increased sales volume under the lower-margin MTVR contract also adversely impacted defense margins during the fourth quarter.
Commercial segment—Fourth quarter commercial sales increased 25.4 percent (15.7 percent excluding the impact of the Geesink Norba Group acquisition) to $174.4 million. U.S. refuse products sales declined 12.4 percent during the quarter, but concrete placement product sales rose 35.3 percent, primarily due to a higher mix of chassis and concrete mixer package sales in advance of a change in engine emission requirements effective October 1, 2002.
Operating income increased 38.8 percent (22.6 percent exclusive of the impact of the Geesink Norba Group acquisition and non-amortization of goodwill) to $10.0 million, or 5.7 percent of sales, compared to prior year operating income of $7.2 million, or 5.2 percent of sales. Favorable product mix contributed to the increase in operating income margin.
Corporate and other—Corporate expenses and inter-segment profit elimination increased from $4.0 million to $6.4 million largely as a result of higher variable incentive compensation, higher legal defense costs and investments in people and services. Non-operating income in the fourth quarter of fiscal 2001 included a $1.7 million one-time foreign currency exchange gain incurred in connection with funds borrowed to acquire the Geesink Norba Group. Net interest expense for the quarter decreased to $3.8 million compared to $6.5 million in the prior year quarter. Strong operating cash flow combined with substantially lower interest rates reduced interest costs during the quarter.
Total debt decreased to $150.0 million at September 30, 2002 compared to $359.3 million at September 30, 2001. The decrease is primarily attributable to strong operating cash flow and higher performance-based payments on defense contracts.
Full Year Results
The company also reported that net income increased 17.2 percent to $59.6 million, or $3.45 per share, for the year on sales of $1.74 billion compared to net income of $50.9 million, or $2.98 per share, for fiscal 2001, on sales of $1.45 billion. Operating income rose 13.0 percent to $111.1 million, or 6.4 percent of sales, compared to $98.3 million, or 6.8 percent of sales, in fiscal 2001. Excluding the impact of the non-amortization of goodwill and certain intangible assets and of the Geesink Norba Group acquisition, operating income would have declined 1.2 percent in fiscal 2002.
Factors affecting fiscal 2002 results for the company's business segments included:
Fire and emergency segment—Sales increased 2.6 percent to $476.1 million for the year. Operating income increased 6.9 percent (decreased 0.1 percent excluding the impact of the non-amortization of goodwill) to $49.0 million, or 10.3 percent of sales, compared to prior year operating income of $45.8 million, or 9.9 percent of sales. Operating results were flat due to the impact of the recession on municipal spending for fire and emergency products.
Defense segment—Sales increased 40.6 percent to $594.9 million during the year. The company commenced full-rate production under its MTVR contract with the U.S. Marines in the fourth quarter of fiscal 2001. This contributed most of the sales increase in fiscal 2002. Operating income increased 3.0 percent to $40.7 million, or 6.8 percent of sales, compared to prior year operating income of $39.5 million, or 9.3 percent of sales. Fiscal 2002 results included a $4.8 million benefit from a change in estimated operating income margins from 3.3 percent recorded in fiscal 2001 to 4.3 percent recorded in fiscal 2002, including $1.7 million related to previous year's sales. Increased bid and proposal costs, lower sales of higher-margin export trucks and higher sales of lower-margin MTVR trucks contributed to the decline in the operating income margins compared to the prior year.
Commercial segment—Sales increased 21.2 percent (0.2 percent exclusive of Geesink Norba Group sales) to $678.3 million during the year. The company reported a 0.6 percent decrease in concrete placement sales in fiscal 2002, offset by a 1.8 percent increase in domestic refuse sales. Operating income increased 57.8 percent (19.8 percent exclusive of the impact of the Geesink Norba Group acquisition and the non-amortization of goodwill) to $47.2 million, or 7.0 percent of sales, during the year compared to prior year operating income of $29.9 million, or 5.3 percent of sales. The increase in operating income, excluding the impact of the acquisition of the Geesink Norba Group and of the non-amortization of goodwill, was primarily due to favorable manufacturing cost performance and lower workers compensation costs.
Corporate and other—Corporate expenses and inter-segment profit elimination increased $8.8 million to $25.8 million in fiscal 2002 due to higher variable incentive compensation, higher legal defense costs and investments in people and services. Non-operating income in fiscal 2001 included a $1.7 million one-time foreign currency exchange gain. Net interest expense decreased $1.1 million to $20.1 million in fiscal 2002. The favorable impact of lower interest rates on variable rate debt and reductions in debt due to strong operating cash flow and receipt of performance-based payments on defense contracts more than offset additional interest incurred to fund the acquisition of the Geesink Norba Group.
Oshkosh Truck Corporation's Board of Directors declared a quarterly dividend of $0.07500 per share for Class A Common Stock and $0.08625 per share for Common Stock. These dividends, unchanged from the prior quarter, will be payable November 13, 2002, to shareholders of record as of November 6, 2002.
Oshkosh Truck Corporation is a leading designer, manufacturer and marketer of a broad range of specialty commercial, fire and emergency and military trucks and truck bodies under the Oshkosh, McNeilus, Pierce, Medtec, Geesink and Norba brand names. Oshkosh's products are valued worldwide by fire and emergency units, defense forces, municipal and airport support services, concrete placement and refuse businesses where high quality, superior performance, rugged reliability and long-term value are paramount.
Oshkosh Truck Corporation officials will comment on fourth quarter earnings and their current outlook for fiscal 2003 during a live conference call at 11:00 a.m. Eastern Standard Time today. The call will be available simultaneously via a webcast over the Internet as a service to investors. It will be listen-only format for on-line listeners. To access the webcast, investors should go to www.oshkoshtruck.com at least 15 minutes prior to the event and follow instructions for listening to the broadcast. An audio replay of such conference call and related question and answer session will be available for thirty days at this website.
This press release contains statements that the company believes are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact, including statements regarding the company's future financial position, business strategy, targets, projected sales, costs, earnings, capital spending and debt levels, and plans and objectives of management for future operations, are forward-looking statements. When used in this press release, words such as the company “expects,” “intends,” “estimates,” “anticipates,” or “believes” and similar expressions are generally intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, assumptions and other factors, some of which are beyond the company's control, that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These factors include the outcome of defense truck procurement competitions, the extent of economic recovery, if any, in 2003 in the U.S. and Europe, the cyclical nature of the company's commercial and fire and emergency markets, risks related to reductions in government expenditures, the uncertainty of government contracts, the challenges of identifying acquisition candidates and integrating acquired businesses and risks associated with international operations and sales, including foreign currency fluctuations. In addition, the company's expectations for fiscal 2003 are based in part on certain assumptions made by the company, including those relating to concrete placement activity; the performance of the U.S. and European economies generally; when the company will receive sales orders and payments; achieving cost reductions; production and margin levels under the MTVR contract, the Family of Heavy Tactical Vehicles contract and for international defense trucks; capital expenditures of municipalities and large waste haulers; targets for Geesink Norba sales and operating income; spending on bid and proposal activities; and interest costs. Additional information concerning these and other factors is contained in the company's filings with the Securities and Exchange Commission, including the Form 8-K filed today.