Military trucker Oshkosh (NYSE:OSK) continued to stay one step ahead of the competition this week. While rival Pentagon contractors like General Dynamics (NYSE:GD) and Lockheed Martin (NYSE:LMT) were still busy reporting "third" quarter earnings, Oshkosh up and closed out its fiscal year with a four-quarter flush -- the whole proverbial shootin' match. So how'd it do?

Take a wild guess ... then guess again
Seeing the stock rise more than 10% yesterday, you'd probably think Oshkosh produced strong numbers -- but the that couldn't be farther from the truth: 

  • Sales for the year totaled $5.3 billion, down 24% from $6.9 billion last year.
  • Non-GAAP profits totaled $0.05 per share, down 99% from last year's $3.84 -- and even this small profit was only achieved through "excluding non-cash intangible asset impairment charges." Add those charges back in, and Oshkosh lost a staggering $15.33 per share from its continuing operations -- nearly half its own market cap.

All right, I'll bite. So where's the good news?
Not on the income statement, that's for sure. But good news there is -- you just need to look on the balance sheet and cash flow statement to find it.

First and most obviously, we saw Oshkosh slice $736 million from its debt load last year. Partly, this came at the expense of Citigroup-style dilution -- an August share issuance that provided nearly half the cash needed for debt reduction. But Oshkosh also generated more than $850 million in free cash flow -- nearly tripling its 2008 cash haul. That's bona fide good news, because ...

Where we at?
Debt remains the major monkey on Oshkosh's back. Between its recapitalizing share issuance and new cash flows from military contracts, Oshkosh exits its fiscal year with a stronger balance sheet than that with which it entered. Cash levels stand at a robust $530 million (up from $88 million.) Long-term debt levels have dropped from $2.7 billion to "only" $2 billion.

But all this still leaves Oshkosh much more heavily leveraged than civilian comparable Terex (NYSE:TEX). In military trucks, Oshkosh looks better positioned than Navistar (NYSE:NAV) to ride out the downturn -- but it's at a significant disadvantage to U.K. rival BAE Systems.

Foolish takeaway
Green shoots notwithstanding, we're not out of this rough patch yet -- a bad time to be weighed down with debt. Oshkosh tells us it anticipates "low demand at our construction-related businesses" in 2010, and will lean heavily on "strong demand for defense vehicles and armor kits." Let's hope those contracts keep coming, so Oshkosh can keep the debt going (away).

Now you know where Oshkosh is at today. Find out where it's coming from: