SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
(X) Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended September 30, 2001,2002, or
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from
____________________________ to ------- --------____________________________
Commission file number: 0-138861-31371
Oshkosh Truck Corporation
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(Exact name of registrant as specified in its charter)
Wisconsin 39-0520270
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization) Identification No.)
P. O. Box 2566, Oshkosh, WI 54903-2566
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(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (920) 235-9151
Securities registered pursuant to Section 12(b) of the Act:
NoneCommon Stock New York Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
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(Title of class) (Name of each exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
Preferred Share Purchase Rights
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(Title of Class)class)
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Aggregate market value of the voting and nonvoting common equity held by
non-affiliates of the registrant as of November 30, 2001:19, 2002:
Class A Common Stock, $.01 par value - No Established Market Value
Common Stock, $.01 par value - $695,911,534$998,704,492
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes X No __
Number of shares outstanding of each of the registrant's classes of common
stock as of November 30, 2001:19, 2002:
Class A Common Stock, $.01 par value - 417,738416,619 shares
Common Stock, $.01 par value - 16,297,69416,595,289 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the 20022003 Annual Meeting of Shareholders
(to be filed with the Commission under Regulation 14A within 120 days after the
end of the registrant's fiscal year and, upon such filing, to be incorporated by
reference into Part III).
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OSHKOSH TRUCK CORPORATION
Index to Annual Report on Form 10-K
Fiscal year ended September 30, 20012002
Page
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PART I.
ITEM 1. BUSINESS .........................................................3..........................................................4
ITEM 2. PROPERTIES ......................................................14.......................................................15
ITEM 3. LEGAL PROCEEDINGS................................................14PROCEEDINGS.................................................16
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............................................15HOLDERS...............17
EXECUTIVE OFFICERS OF THE REGISTRANT ............................15.............................17
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS ..........................16.............................................18
ITEM 6. SELECTED FINANCIAL DATA..........................................18DATA...........................................19
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.............19OPERATIONS....................21
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK.........................................27RISK......................................................35
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA......................27DATA.......................35
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.....................60DISCLOSURE..............................73
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT ..........................................60REGISTRANT................73
ITEM 11. EXECUTIVE COMPENSATION ..........................................60...........................................73
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT ......................................60AND RELATED STOCKHOLDER MATTERS.......................73
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................................................60TRANSACTIONS....................74
ITEM 14. CONTROLS AND PROCEDURES ..........................................74
PART IV.
ITEM 14.15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K ...................................60.....................................................74
INDEX TO EXHIBITS................................................65EXHIBITS.................................................81
2
As used herein, the "Company" refers to Oshkosh Truck Corporation,
including Pierce Manufacturing Inc. ("Pierce"), McNeilus Companies, Inc.
("McNeilus") and its wholly-owned subsidiaries, Viking Truck and Equipment, Inc.
("Viking"), Kewaunee Fabrications, LLC ("Kewaunee"), Medtec Ambulance
Corporation ("Medtec") and Geesink Group BV,B.V., Norba ABA.B. and Geesink Norba
LtdLimited and their wholly-owned subsidiaries (together the "Geesink Norba
Group"). "Oshkosh" refers to Oshkosh Truck Corporation, not including Pierce,
McNeilus, Viking, Kewaunee, Medtec or the Geesink Norba Group or any other
subsidiaries.
The "Oshkosh," "McNeilus," "Pierce," "Medtec," "Geesink""Geesink," "Norba,"
"Kiggen," "Revolution," "Command Zone," "All-Steer," "TAK-4," "Hawk Extreme,"
"Hercules," "Husky," "SmartPak," "Auto Reach Arm" and "Norba""Pro-Pulse" trademarks and
related logos are registered trademarks of the Company. All other product and
service names referenced in this document are the trademarks or registered
trademarks of their respective owners.
All information in this Annual Report on Form 10-K has been adjusted to
reflect the three-for-two split of the Company's Common Stock effected on August
19, 1999 in the form of a 50% stock dividend.
For ease of understanding, the Company refers to types of specialty trucks
for particular applications as "markets." When the Company refers to "market"
positions, these comments are based on information available to the Company
concerning units sold by those companies currently manufacturing the same types
of specialty trucks and truck bodies and are therefore only estimates. Unless
otherwise noted, these market positions are based on sales in the United States.
There can be no assurance that the Company will maintain such market positions
in the future.
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains "forward-looking statements"statements that the Company
believes to be "forward-looking statements" 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,
targets, projected sales, costs, earnings, capital spendingexpenditures and debt levels,
and plans and objectives of management for future operations, including those
under the caption "Fiscal 20022003 Outlook," are forward-looking statements. When
used in this Annual Report on Form 10-K, 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 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, completing and
integrating acquisitions, disruptions in the supply of parts or components from sole source suppliers and
subcontractors, competition, the challenges of identifying acquisition
candidates and integrating acquired businesses 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 November 1, 2001. 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.October 29, 2002.
All forward-looking statements, including those under the caption "Fiscal
2002 Outlook,"2003 Outlook" speak only as of December 7, 2001.November 25, 2002. 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 Annual Report on Form
10-K 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 Annual Report on Form 10-K. Except as set forth above, the Company
assumes no obligation, and disclaims any obligation, to update information
contained in this Annual Report on Form 10-K. Investors should be aware that the
Company may not update such information until the Company's next quarterly
conference call, if at all.
3
PART I
Item 1. BUSINESS
The Company
The Company is a leading designer, manufacturer and marketer of a broad
range of specialty commercial, fire and emergency and military trucks under the
"Oshkosh" and "Pierce" trademarks; truck bodies under the "McNeilus," "MTM,"
"Medtec," "Geesink" and "Norba" trademarks; and mobile and stationary compactors
under the "Geesink Kiggen" trademark. Oshkosh began business in 1917 and was
3
among the early pioneers of four-wheel drive technology. In 1981, Oshkosh was
awarded the first Heavy Expanded Mobility Tactical Truck ("HEMTT") contract for
the U.S. Department of Defense ("DoD"), and quickly developed into the DoD's
leading supplier of severe-duty heavy tactical trucks. In 1996, the Company
began a strategic initiative to shed under-performing assets and to diversify
its business by making selective acquisitions in attractive specialty segments
of the commercial truck and truck body markets to complement its defense truck
business. The result of this initiative was an increase in sales from $413
million in fiscal 1996 to $1,445$1,744 million in fiscal 2001,2002, with earnings from
continuing operations increasing from a loss of $.02 per share for fiscal 1996
to earnings of $2.98$3.45 per share forin fiscal 2001.2002.
As part of the Company's strategy, the Company has completed the following
acquisitions:
o Pierce, a leading manufacturer and marketer of fire trucks and other
fire apparatus, in September 1996;
o Nova Quintech, a manufacturer of aerial devices for fire trucks, in
December 1997;
o McNeilus, a leading manufacturer and marketer of commercial specialty
truck bodies, including rear-discharge concrete mixers and portable
concrete batch plants for the concrete ready-mix industry and refuse
truck bodies for the waste services industry, in February 1998;
o Kewaunee, a fabricator of heavy-steel components such as cranes and
aerial devices, in November 1999;
o Viking, Oshkosh's only remaining front-discharge concrete mixer
dealer, in April 2000;
o Medtec, , a leading manufacturer of ambulances and rescue vehicles, in
October 2000;
o Certain assets of TEMCO, a manufacturer of concrete mixers, batch
plants and concrete mixer parts in March 2001; and
o Geesink Norba Group, a leading European manufacturer of refuse
collection truck bodies, mobile and stationary compactors and transfer
stations, in July 2001.
The Company believes it has developed a reputation for excellent product
quality, performance and reliability at low product life cycle costs in each of
the specialty segments in which it participates. The Company has strong brand
recognition in its segments and has demonstrated design and engineering
capabilities through the introduction of several highly engineered proprietary
components that increase the Company's products' operating performance. The
Company has developed comprehensive product and service portfolios for many of
its markets in an effort to become a single-source supplier for its customers,
including customer lease financing for fire and emergency products through its
wholly-owned subsidiary, Oshkosh Equipment Finance, L.L.C., doing business as
Oshkosh Capital Corporation ("Oshkosh Capital"), and for commercial products
through the Company's interest in Oshkosh/McNeilus Financial Services
Partnership ("OMFSP"). The Company's commercial truck lines include refuse truck
bodies, and rear- and front-discharge concrete mixers.mixers and all-wheel drive truck
chassis. The Company's custom and commercial fire apparatus and emergency
vehicles include pumpers, aerial and ladder trucks, tankers, light, medium and
heavy-duty rescue vehicles, wildland rough terrain response vehicles, aircraft
rescue and firefighting ("ARFF") vehicles, ambulances and snow removal vehicles.
As the leading manufacturer of severe-duty heavy tactical trucks for the DoD,
the Company manufactures vehicles that perform a variety of demanding tasks such
as hauling tanks, missile systems, ammunition, fuel and cargo for combat units.
In December 1998, the DoD awarded Oshkosh the Medium Tactical Vehicle
Replacement ("MTVR") contract for the U.S. Marine Corps.,Corps from which the Company
expects to generate total sales of $1.2up to $1.1 billion during the period from
fiscal 2000 through fiscal 2005, assuming exercise of available options by the
DoD exercises all the options under the contract as currently anticipated.contract. The Company expects fiscal 20022003 sales under this
contract to approximate $300$295 million. The MTVR contract represents the Company's
first production contract for medium tactical trucks for the U.S. military.
4
Competitive Strengths
The following competitive strengths support the Company's business
strategy:
Strong Market Positions. The Company has developed strong market positions
and brand recognition in its core businesses, which the Company attributes to
its reputation for quality products, advanced engineering, innovation, vehicle
performance, reliability, customer service and customer service.low product life cycle costs.
Extensive Distribution Capabilities. With the addition of the commercial
and municipal distribution capabilities of Pierce, McNeilus, Medtec and the
Geesink Norba Group, theThe Company has established an
extensive domestic and international distribution system for specialty trucks
and truck bodies. In
additionbodies tailored to its networkeach market. Networks of dealers and distributors
theare utilized in markets characterized by a large, fragmented customer base. The
Company employs over
190direct in-house sales and service representatives.representatives in markets
characterized by a concentrated customer base.
Flexible and Efficient Manufacturing. The Company believes it has
competitive advantages over larger truck manufacturers in its specialty truck
markets due to its manufacturing flexibility and custom fabrication
capabilities. Over the past nineten years, the Company
4
has significantly increased
manufacturing efficiencies. In addition, the Company believes it has competitive
advantages over smaller truck and truck body manufacturers due to the Company's
relatively higher volumes that permit the use of moving assembly lines and
provide purchasing power opportunities across product lines.
Diversified Product Offering and Customer Base. The Company's broad product
offerings and target markets serve to diversify its sources of revenues,
mitigate the impact of economic cycles and provide multiple platforms for both
potential internal growth and acquisitions. For each of the Company's target
markets, the Company has developed or acquired a broad product line to become a
single-source provider to the Company's customers.
Strong Management Team. The present management team has successfully
executed a strategic repositioning of the Company's business while significantly
improving its financial and operating performance. With each prior acquisition since
1996, the Company assimilated the management and culture of the acquired
company, introduced new strategies to significantly increase sales and used the
Company's expertise in purchasing and manufacturing to reduce costs.
Quality Products and Customer Service. Oshkosh, Pierce, McNeilus, Medtec
and the Geesink Norba Group have each developed strong brand recognition based
on their commitments to meet the stringent product quality and reliability
requirements of their customers and the specialty truck markets they serve. The
Company's commitment to product quality is exemplified by the ISO 9001
certification of Oshkosh, Pierce and the Geesink Norba Group. In August 2002,
Pierce was certified under the new ISO 9001:2000 standards. McNeilus expects to
receive ISO 9001 certification in fiscal 2003. The Company also achieves high
quality customer service through its extensive service and parts support
program, which is available to domestic customers 365 days a year in all product
lines throughout the Company's distribution systems.
Proprietary Components. The Company's advanced design and engineering
capabilities have contributed to the development of proprietary, severe-duty
components that enhance truck performance, reduce manufacturing costs and
strengthen customer relationships. These proprietary components include front
drive and steer axles, transfer cases, cabs, the ALL-STEER electronic all-wheel
steering system, TAK-4 independent suspension, the Sky-Arm articulating aerial
platform ladder, the Hercules and Husky compressed air foam system,systems, the Command Zone
multiplexing technology, the McNeilus Auto Reach Arm anfor automated side-loading
refuse body,bodies, Geesink Norba Group's SmartPak bin lift system and the Pro Pulse,Pro-Pulse
hybrid electric drive technology. The Company also has an exclusive license to
manufacture and market the Revolution composite concrete mixer drum in the
Americas and holds options to acquire the technological rights worldwide. The
Company believes these proprietary components provide the Company a competitive
advantage by increasing its vehicles'products' durability, operating efficiency and
effectiveness. The integration of many of these components across various
product lines also reduces the Company's costs to manufacture its products
compared to manufacturers who simply assemble purchased components.
Business Strategy
The Company is focused on increasing its net sales, profitability and cash
flow by capitalizing on its competitive strengths and pursuing a comprehensive,
integrated business strategy. Key elements of the Company's business strategy
include:
Focusing on Specialized Truck and Truck Body Markets. The Company plans to
continue its focus on those specialized truck and truck body markets where it
has or can acquire strong market positions and where the Company believes it can
leverage synergies in purchasing, manufacturing, technology and distribution to
increase sales and profitability. The Company believes the higher sales volumes
associated with strong market positions will allow the Company to continue to
enhance productivity in manufacturing operations, fund innovative product
development and invest in further expansion. In addition to the Company's
strategies to increase market share and profitability, each of the Company's
specialized truck and truck body markets is exhibiting opportunities for further
market growth.
5
Pursuing Strategic Acquisitions. The Company's present management team has
successfully negotiated and integrated seveneight acquisitions since September 1996 that have
significantly increased the Company's sales and earnings. The Company intends to
selectively pursue additional strategic acquisitions, both domestically and
internationally, to enhance its product offerings and expand its international
presence in specialized truck and truck body markets. The Company will focus its
acquisition strategy on providing a full range of products to customers in
specialty truck and truck body markets that are growing and where the Company
can enhance its strong market positions and achieve significant acquisition
synergies.
Expanding Distribution and International Sales. The Company actively
investigates new distribution and service capabilities for municipal customers
of the domestic refuse truck body market and in targeted geographic areas in the
domestic fire apparatus market. The Company is actively recruiting new
representatives and dealers in targeted international commercial and fire and
emergency markets to expand the international sales of McNeilus refuse truck
bodies and rear-discharge concrete mixers and Pierce fire apparatus. The Company
is also expanding the capabilities of the Geesink Norba Group distribution
centers in Europe. The Company began marketing its new medium tactical military
truck to approved foreign armies. Because there have been limited sales of
medium tactical trucks to foreign armies over the last ten years under the U.S.
Foreign Military Sales ("FMS") Program and because the
5
Company's truck has significant off-road capability at an attractive price, the
Company believes that the international market for this truck may be
significant.
Introducing New Products. The Company has increased its emphasis on new
product development in recent years , as it seeks to expand sales by leading its
core markets in the introduction of new or improved products and new
technologies, either through internal development or strategic acquisitions. In
fiscal 2001,2002, the Company invested $14.3$17.9 million in development activities that
resulted in 8numerous major new products or product enhancements.
In the fire and emergency segment, Pierce first introduced its new Tak-4
Independent Suspensionbegan deliveries of units to the
fire service in fiscal 2001.2002 that included the TAK-4 independent suspension,
originally developed by Oshkosh. This system improves braking, brake life and
maintenance, handling and ride quality and lifespan of fire apparatus. Also inIn fiscal 2001,
Pierce developed an improved version of its Husky foam system.2002, Pierce
also developedbegan deliveries of the Tactical Fire Fighting Truck ("TFFT"), which was
developed in fiscal 2001 based on the eight
wheeleight-wheel drive chassis of the HEMTT
M977. The TFFT is designed to suppress and extinguish aircraft, petroleum,
wildland and structural fires. In fiscal 2002, Pierce expanded its wildland
firefighting line of products to include the Hawk Extreme on the six-wheel drive
MTVR chassis, which features TAK-4 independent suspension, a central tire
inflation system, ABS brakes and embedded diagnostics. Oshkosh developed
thedelivered its
first Striker ARFF vehicle in fiscal 2001,2002, a new truck developed in fiscal 2001
that offers better maneuverability, visibility and stability, making responses
faster and safer for the vehicle users.
In the commercial segment, McNeilus introduced the Revolution composite
mixer drum in fiscal 2002. The Revolution mixer drum is approximately 2,000
pounds lighter than a conventional concrete mixer drum. Less weight results in
improved product performance as the composite drum can carry up to 1/2 cubic
yard more concrete. Further, McNeilus believes the composite drum is more
durable and easier to clean and maintain than conventional steel mixer drums.
Also in fiscal 2002, McNeilus developed and introduced afour new "Atlantic Series" front-loading refuse packer, which is designed to meetbodies
under its Street Force line of refuse bodies for the specific requirementswaste collection industry.
This line of East Coast U.S. waste removal. This vehicle is
engineered to carry heavy loads on narrow streets.products includes rear loader, manual/automated side loader,
automated side loader and automated full-eject side loader models.
In fiscal 2001, McNeilus
introduced the T-21 portable concrete paving plant, which is engineered to be
easily moved from one site to the next and set up2002 in as little as 12 hours.
In the defense segment, Oshkosh developed the ProPulseintegrated its Pro-Pulse
hybrid electric drive system and integrated it into a heavy tactical defense truck. Oshkosh also
developed a new towdump truck modelvariant of its MTVR vehicle with Command Zone technology.
Reducing Costs While Maintaining Quality.technology
and a wrecker variant.
Tailoring Distribution and Service to Each Market. The Company actively
tailors distribution and service to each of its domestic and international
markets. Dealers and distributors are utilized in markets characterized by a
large, fragmented customer base. Company-owned or leased facilities and in-house
sales representatives are utilized in markets characterized by a concentrated
customer base, supplemented by a network of nationwide service representatives.
The Company believes that this distribution and service model provides frequent
contact with customers and timely service at a reasonable cost of capital.
Because the Company's vehicles must be ready to go to war, fight a fire, rescue,
clean up, build and perform other critical missions, the Company has actively
been expanding Company-owned service locations, encouraging dealers to expand
service locations and adding roving service vans to maintain high readiness
levels of its installed fleets.
Focusing on Operational Excellence. The Company seeks to deliver high
performance products to customers at low product life cycle costs through a
focus on operational excellence. The Company has completed several facilities
expansions in recent years to install improved production flow processes,
robotics and high-speed fabrication equipment. In September 2000, the Company
completed construction of a 100,000 square foot, $8.3 million expansion of its
Dodge Center, Minnesota manufacturing facility. The primary purpose of the
expansion was to construct two moving assembly lines with robotic welders to
significantly reduce the manufacturing costs of refuse bodies. The expansion
doubled the refuse body manufacturing and painting capacity of this facility. In
May 2001, the Company completed the $10.0 million, 110,000 square foot expansion
of its model-flexible main assembly plant in Oshkosh, Wisconsin. This expansion
significantly increased assembly capacity, refined the manufacturing process and
expanded testing capabilities. The expansion includes facilities for simulated
road tests and on-line ABS brake testing and provided improvements in cab
production and TAK-4 independent suspension production. The Company actively
benchmarks its competitors' costs and best industry practices, and continuously
seeks to implement process improvements to increase profitability and cash flow.
Approximately 80% of all materials and components company-wide are procured
through the Company's strategic purchasing group to leverage the Company's full
purchasing power. With each of its major acquisitions, the Company has
established cost reduction targets. At Pierce, the Company exceeded its two-year
cost reduction target of $6.5 million as a result of consolidating facilities,
reengineering the manufacturing process and leveraging increased purchasing
power. Similarly, the Company utilized its greater purchasing power and
manufacturing capabilities in connection with its 1998 acquisition of McNeilus. TheMcNeilus
to achieve cost reductions. In fiscal 1998, the Company established a $5$5.0 to
$7$7.0 million two-year cost reduction target and to date has realized over $11$11.0
million of cost reductions. The Company has established an annual cost reduction
target of $2.0 -to $3.5 million over the next threetwo years for the Geesink Norba
Group acquisition.acquisition and expects to meet or exceed the high-end of the target. For
historic product lines, the Company also establishes annual labor productivity
improvement targets, and for many product lines, the Company establishes
materials cost reduction targets.
In September 2000, the
Company completed an $8.3 million expansion of its Dodge Center, Minnesota
manufacturing facility. The primary purpose of the expansion was to construct
two moving assembly lines with robotic welders to significantly reduce the
manufacturing costs of refuse bodies. The expansion also doubled the paint and
refuse body manufacturing capacity of this facility. In May 2001, the Company
completed the $8.0 million, 110,000 square foot expansion of its model-flexible
main assembly plant in Oshkosh, Wisconsin. This expansion significantly
increases assembly capacity, refines the manufacturing process and expands
testing capabilities. The expansion includes facilities for simulated road tests
and on-line ABS brake testing and provided for improvements in cab production
and TAK-4 independent suspension production.6
Products
The Company is focused on the following core segments of the specialty
truck and truck body markets:
Commercial Segment.segment: Through the Geesink Norba Group and McNeilus, the
Company is a leading European and U.S. manufacturer of refuse truck bodies for
the waste services industry. Through Oshkosh and McNeilus, the Company is a
leading manufacturer of rear-front- and front-dischargerear-discharge concrete mixers and portable
concrete batch plants for the concrete ready-mix industry. McNeilus manufactures
a wide range of rear, front, automated side and top loading refuse truck bodies,
which are mounted on commercial chassis. McNeilus sells its refuse vehicles
primarily to commercial waste management companies, and it is building a
presence with municipal customers such as the cities of Los Angeles, California;
Philadelphia, Pennsylvania; Greensboro, North Carolina; and Cleveland,
Cincinnati and Columbus, OhioOhio; and in international markets such as the United
Kingdom. The Geesink Norba Group sells its refuse vehicles throughout Europe to
municipal and commercial customers. The Company believes its refuse vehicles
have a reputation for efficient, cost-effective,cost effective, dependable, low maintenance
operation that supports the Company's continued expansion into municipal and
international markets. The Company sells rear- and front-discharge concrete
mixers and portable concrete batch plantsplans to concrete ready-mix companies
throughout the United States and internationally. The Company believes it is the
only domestic concrete mixer manufacturer that markets both rear- and
front-discharge concrete mixers and portable concrete batch plants. Mixers and
batch plants are marketed on the basis of their quality, dependability,
efficiency, low maintenance and cost-effectiveness.
In March 2002, the Company introduced the Revolution concrete mixer drum,
constructed using light-weight composite materials. Since the introduction of
the first concrete mixer drum approximately 70 years ago, all commercially
successful drums worldwide have been produced utilizing steel. The Company
believes the Revolution is the first composite drum ever produced. The
Revolution drum offers improved concrete payload on a truck, easier drum
cleanout and lower noise levels. The Company sold a limited number of Revolution
drums in the U.S. in fiscal 2002. In fiscal 2003, the developer and licensor of
the Revolution technology will be producing a few hundred drums in Australia for
sale in the U.S. to McNeilus customers. By the end of fiscal 2003, the Company
plans to have a U.S. plant operational at high rate production for sales
beginning in fiscal 2004. In fiscal 2005 and 2006, the Company expects to
acquire the rights to this technology for Europe, Asia, Australia and perhaps
Africa/Middle East. The Company expects to sell the Revolution drum at
substantially higher prices and margins as the Company believes the Revolution
drum yields a quick payback to customers through lower product life cycle costs.
As the Company rolls out this technology worldwide, the Company is required to
pay to its Australian partner license fees payable per continent and royalty
fees payable per drum sold.
The Company offers four- to seven-year tax advantaged lease financing to
mixer and portable concrete batch plant customers and to commercial waste hauler
customers in the United States through OMFSP, an affiliated partnership.
Offerings include competitive lease financing rates and the ease of one-stop
shopping for customers' equipment and financing.
6
Fire and Emergency Segment. Through Pierce, the Company is a leading
domestic manufacturer of fire apparatus assembled on a custom chassis, which is designed
and manufactured by Pierce to meet the special needs of firefighters. Pierce
also manufactures fire apparatus assembled on a commercially available chassis,
which isare produced for multiple end-customer applications. Pierce's engineering
expertise allows it to design its vehicles to meet stringent government
regulations for safety and effectiveness. Pierce primarily serves domestic
governmentmunicipal customers, but also sells fire apparatus to airports, universities and
large industrial companies, and in international markets. Pierce's history of
innovation and research and development in consultation with firefighters has
resulted in a broad product line that features a wide range of innovative,
high-quality custom and commercial firefighting equipment with advanced fire
suppression capabilities. Pierce's
engineering expertise also allows itIn an effort to designbe a single-source supplier for its
customers, Pierce offers a full line of custom and commercial fire apparatus and
emergency vehicles, to meet stringent
government regulations for safetyincluding pumpers, aerial and effectiveness.ladder trucks, tankers, light,
medium and heavy-duty rescue vehicles, wildland rough terrain response vehicles,
command centers and emergency response vehicles.
Through Medtec, the Company is one of the leading U.S. manufacturers of
custom ambulances for private and public transporters and fire departments.
Medtec is among the top U.S. manufacturers of ambulances. Medtec markets a broad line of ambulances for private patient transporters, fire
departments and public transporters. Medtec manufactures a broad line of ambulances, however ittransporters, but specializes in Type I and Type III
ambulances. Type I and Type III ambulances are popular among public patient
transporters and fire departments. Type I ambulances feature a conventional
style, light- or medium-duty chassis with a modular patient transport body
mounted separately behind the truck cab. Type III ambulances are built on
light-duty van chassis with a walk-through opening into the patient transport
body which is mounted behind the vehicle cab.
The Company is among the leaders in sales of aircraft rescue and
firefightingARFF vehicles to domestic and
international airports. These highly specialized vehicles are required to be in-servicein
service at most airports worldwide to support commercial airlines in the event
of an emergency. Many of the world's largest airports, in the world, including LaGuardia
International Airport, O'Hare International Airport and Los Angeles
International Airport in the United States and airports such as Montreal and
Toronto, Canada, are served by the Company's aircraft rescue and firefightingARFF vehicles. The Company believes
that the reliability of its aircraft rescue and firefightingARFF vehicles contributes to the Company's strong
market position.position in this market.
The Company is a leader in airport snow removal in the United States. The
Company's specially designed airport snow removal vehicles can cast up to 5,000
tons of snow per hour and are used by some of the largest airports in the United
States, including Denver International Airport, LaGuardia International Airport,
Minneapolis-St. Paul International Airport and O'Hare International Airport.
7
The Company believes that the reliability of its high performance snow removal
vehicles and the speed with which they clear airport runways contributes to its
strong market position.
Through an independent third party finance company, theposition in this market.
The Company offers two- to ten-year municipal lease financing programs to
its fire and emergency customers in the United States.States through Oshkosh Capital.
Programs include competitive lease financing rates, creative and flexible
finance arrangements and the ease of one-stop shopping for Pierce's customers'
equipment and financing. The lease financing transactions are executed through a
private label arrangement with an independent third party finance company.
Defense Truck Segment. The Company has sold products to the DoD for over 70
years. The Company's proprietary military all-wheel drive product line of
heavy-payload tactical trucks includes the HEMTT, the Heavy Equipment
Transporter ("HET"), the Palletized Load System ("PLS"), Common Bridge
Transporter ("CBT") and the Logistic Vehicle System ("LVS"). The Company also
exports severe-duty heavy tactical trucks to approved foreign customers.
The Company has developed and maintained a strong relationship with the DoD
over the years that has resulted in the Company operating under "family contracts" with
the DoD for the HEMTT, HET, PLS and LVS and for DoD vehicle parts. "Family
contracts" is the term given to contracts that group similar models together to
simplify the acquisition process. Under the vehicle family contracts, the DoD
ordersas a specified range of volume of either HEMTT, HET, PLS or LVS trucks at
fixed prices, which allows the Company to predict and plan its long-term
production and delivery schedules for vehicles.proven supplier. The Company completed
negotiations in fiscal 2001 that extended these family contracts forhas a five-year
period under a program referred to as the Family of Heavy
Tactical Vehicles ("FHTV"). The FHTV is a five-year requirements contract running from fiscal 2001 to
fiscal 2006 andthat includes the following heavy-payload products: HEMTT, HEMTT-ESP
("Expanded Service Program"), HET, PLS, CBT, LVS and the associated logistics
and configuration management support. The DoD is considering a new Future
Tactical Truck System ("FTTS") program that may replace the FHTV contract in
2008 or later, so there can be no assurance of a follow-on five-year FHTV
contract.
With the award of the MTVR contract in fiscal 1999, the Company has becomebecame a
major manufacturer of medium-payload tactical trucks for the U.S. Marine Corps.
The
goal of the U.S. Marine Corps is to upgrade the current configuration to carry a
much greater payload with substantially increased cross-country mobility. MTVRs are equipped with the Company's patented TAK-4 independent suspension and
transfer cases, and central tire inflation to enhance off-road performance. ThisThe
MTVR program is currently expected to include the production oforiginally called for 5,666 trucks with options for up to 2,4892,409
additional trucks, for a total of 8,075 trucks. To date, the U.S. Marine Corps
has exercised options for 737 trucks, bringing the total contract value to $935
million and 6,403 trucks. The Company expects that the total contract value of this contract
could reach $1.2$1.1 billion including the options, or $850 million, exclusive of options, over fiscal years 2000 through 2005. Testing of2005 if the initial ten trucks began in
December 1999.U.S. Marine
Corps exercises additional option vehicles as expected, including the wrecker
variant option. In fiscal 2000, MTVR production occurred at the rate of
approximately one truck per day, and in April 2001, the Company received
approval to commence full-rate production, increasing to approximately seven
trucks per day in August 2001. Also beginning in fiscal 2001, the Company has
been marketing the MTVR truck to approved foreign governments as described in
succeeding paragraphs.
The U.S. Army commenced a competition to add a second supplier to build
Family of Medium Tactical Vehicles ("FMTV"). The Company received a $1.9 million
contract in November 1998 to compete with one other truck manufacturer to
qualify as a second source to produce three trucks for testing by the DoD under
Phase I of its second source supplier qualification plan. The three Oshkosh
FMTVs produced under this contract have successfully completed Phase I testing.
The fiscal year 2000 Defense Authorization Act cancelled the above mentioned
second source program; however,program. However, it directed the Army to go forward with a
competition for 100% of the next procurement. Initially, the FMTV competition
was scheduled to begin in October 2000 with the issuance of a request for
proposal ("RFP") to retrofit three trucks for testing, to be followed by a
period of testing, another RFP for firm production pricing and then conclude
with a contract award in March or April 2002. In late September 2000, the DoD
delayed 7
the competition to permit engine manufacturers more time to develop
engines for the FMTV that will be compliant with U.S. Environmental Protection
Agency regulations for diesel engines sold in 2004. The DoD's FMTV-Competitive
Rebuy RFP issued in December 2000 requiresrequired retrofit of eight trucks for testing.
The period for follow-on testing and submission of production pricing was
extended. In April 2001, Oshkosh was awarded a $5.6 million contract to build
eight prototype FMTV trucks. One competitor, the current incumbent on the
program, was awarded a similar contract. Following a ten-month prototype truck
build phase, the DoD will testtested the trucks built by each competitor for a period of
seven months.
Following the test period,months and issued an RFP to each contractor will submit acompetitor for production proposalpricing in
about OctoberAugust 2002. Oshkosh and its competitor submitted production proposals in
November 2002, with an anticipated production contract award to Oshkosh or its
competitor in March 2003; production2003. Production under the contract would commence in fiscal
2004 or 2005. The firstCompany expects the five-year contract under the
FMTV CompetitiveFMTV-Competitive Rebuy program
involves 14,000to involve 7,063 trucks and 3,826 trailers, and revenues
in excess of $1.0 billion. The entire programCompany is expected to run through 2020 and entail revenues in excess of
$13.0 billion. The Company intends to continue to competecompeting aggressively for a contract
award under the FMTV-Competitive Rebuy contract. The DoD competition began in
1998 as part of a twenty-year program to provide trucks. The Company understands
that the DoD is now considering a new FTTS program that may replace the FMTV
program.program in 2008 or later, so there can be no assurance of a follow-on five-year
FMTV contract for the winner of the FMTV-Competitive Rebuy contract.
In December 2001, the Company was awarded a contract to provide the U.K.
Ministry of Defence ("U.K. MoD") with 92 heavy equipment transporters ("U.K.
HETs") valued at $75 million. If the U.K. MoD exercises all options, the Company
expects that total sales under this contract could approximate $95 million. The
Company expects to begin shipping units under this contract in late fiscal 2003.
Shipments under the contract will continue through fiscal 2004. The Company has
bid on two other truck contracts with the U.K. MoD. The Company submitted its
U.K. Wheeled Tanker proposal in fiscal 2002, which includes requirements for up
to 437 systems with a contract value in excess of $200 million over a three-year
period. The Company expects a contract award to the winning bidder in fiscal
2003. The Company submitted its U.K. Cargo Support Vehicle proposal in fiscal
2002, which includes requirements for up to 8,500 vehicles with a contract value
in excess of $1.0 billion over ten years commencing in fiscal 2005. The
8
Company expects a contract award to the winning bidder in late fiscal 2003. The
Company's bids for both the U.K. Wheeled Tanker and U.K. Cargo Support Vehicle
contracts utilize the Company's high performance MTVR truck as its main truck
platform.
The Company's objective is to continue to diversify into other areas of the
U.S. defense truck market by expanding applications, uses and body styles of its
current heavy and medium tactical truck lines. As the Company enters the medium
tactical truck area of the defense market segment, management believes that the
Company has multiple competitive advantages, including:
o Truck engineering and testing. DoD truck contract competitions require
significant defense truck engineering expertise to ensure that a
company's truck excels under demanding testing conditions. The Company
has a team of 47approximately 50 engineers and draftsmen to support
current business and truck contract competitions. These personnel have
significant expertise designing new trucks, using sophisticated
computer aided tools, supporting grueling testing programs at DoD test
sites and submitting detailed, comprehensive, successful contract
proposals.
o Proprietary components. The Company's patented TAK-4 independent
suspension and patented transfer case enhance its trucks' off-road
performance. In addition, because these are two of the highest cost
components in a truck, the Company has a competitive cost-advantage
from in-house manufacturing of these two truck components. The
Company's Command Zone embedded diagnostics tool also simplifies
maintenance troubleshooting.
o Past performance. The Company has been building trucks for the DoD for
over 70 years. The Company believes that its past success in
delivering reliable, high quality trucks on time, within budget and
meeting specifications is a competitive advantage in future defense
truck procurement programs. The Company understands the special
contract procedures in use by the DoD and has developed substantial
expertise in contract management and accounting.
o Flexible manufacturing. The Company's ability to produce a variety of
truck models on the same moving assembly line permits it to avoid
facilitation costs on most new contracts and maintain competitive
manufacturing efficiencies.
o Logistics. The Company has gained significant experience in the
development of operators' manuals and training and in the delivery of
parts and services worldwide in accordance with the DoD's
expectations, which differ materially from commercial practices. In
fiscal 2000 and 2001, the Company expanded itits logistics capabilities
to permit the DoD to order parts, receive invoices and remit payments
electronically.
Marketing, Sales and Distribution
The Company believes it differentiates itself from many of its larger
competitors by tailoring its distribution to the needs of its specialized truck
markets and from its smaller competitors with its national and global sales and
service capabilities. Distribution personnel use demonstration trucks to show
customers how to use the Company's trucks and truck bodies properly. In
addition, the Company's flexible distribution is focused on meeting customers on
their terms, whether on a jobsite, in an evening public meeting or at a
municipality's offices, compared to the showroom sales approach of the typical
dealers of large truck manufacturers. The Company backs all products by same-day
parts shipment, and its service technicians are available in person or by
telephone to domestic customers 365 days a year. The Company believes its
dedication to keeping its products in-service in demanding conditions worldwide
has contributed to customer loyalty.
The Company provides its salespeople, representatives and distributors with
product and sales training on the operation and specifications of its products.
The Company's engineers, along with its product managers, develop operating
manuals and provide field support at truck delivery for some markets.
Dealers and representatives, where used, enter into agreements with the
Company that allowsallow for termination by either party generally upon 90 days'
notice. Dealers and representatives are generally not permitted to market and
sell competitive products.
Commercial Segment. The Company operates 1618 distribution centers with over
130140 in-house sales and service representatives in the U.S. to sell and service
refuse truck bodies, rear- and front-discharge concrete mixers and concrete
batch plants. These centers are in addition to sales and service activities at
the Company's manufacturing facilities. FourteenSixteen of the Company's distribution
centers provide sales, service and parts distribution to customers in their
geographic regions. Four of the distribution centers also have paint facilities
and provide significant additional paint and mounting services during peak
demand periods. Two of the centers also manufacture concrete mixer replacement
barrels.drums. The Company believes this network represents one of the largest concrete
mixer and refuse truck body distribution networks in the United States.
8
In Europe, the Company operates fourteenfifteen distribution centers with over 70160
in-house sales and serviceservices representatives in nine countries to sell and
service its refuse truck bodies and stationary compactors. TwoOne of the centers
havehas paint facilities, and mostfive of the centers provide mounting services. The
Company also operates 4950 roving service vans throughout Europe. The Company
believes this network represents one of the largest refuse truck body
distribution networks in Europe. The Geesink Norba Group also has sales and
service agents in Europe and the Middle East.
The Company believes its direct distribution to customers is a competitive
advantage in commercial markets, particularly in the U.S. waste services
industry where principal competitors distribute through dealers and to a lesser
extent in the ready-mixready mix concrete
9
industry, where several competitors in part use dealers. In addition to the
avoidance of dealer commissions, the Company believes direct distribution
permits a more focused sales force in U.S. refuse body markets, whereas dealers
frequently offer a very broad and mixed product line, and accordingly, the time
dealers tend to devote to refuse body sales activities is limited.
With respect to commercial distribution efforts, the Company has begun to
apply Oshkosh's and Pierce's sales and marketing expertise in municipal markets
to increase sales of McNeilus refuse truck bodies to municipal customers. Prior
to the Company's acquisition of McNeilus, virtually all McNeilus refuse truck
body sales were to commercial customers. While the Company believes commercial
customers represent a majority of the refuse truck body market, many
municipalities purchase their own refuse trucks. The Company believes it is
positioned to create an effective municipal distribution system in the refuse
truck body market by leveraging its existing commercial distribution
capabilities and by opening service centers in major metropolitan markets.
Following its acquisition and new focus in municipal markets, McNeilus has been
awarded new business for the cities of Cincinnati, Ohio; El Paso, Texas;
Honolulu, Hawaii; Houston, Texas; Long Beach, California; Philadelphia,
Pennsylvania; Los Angeles,
California; Greensboro, North Carolina; and Waco, TexasSacramento, California and has targeted other major
metropolitan areas.
The Company also has begun to offer McNeilus refuse truck bodies,
rear-discharge concrete mixers and concrete batch plants to Oshkosh's
international representatives and dealers for sales and service worldwide.
McNeilus' international sales have historically been limited because it had
focused on the domestic market. However, the Company believes that refuse body
exports are a significant percentage of some competitors' sales and represent a
meaningful opportunity for McNeilus. The Company is training its international
Oshkosh and Pierce representatives and dealers to sell and service the McNeilus
product line and has commenced sales of McNeilus products through these
representatives and dealers. The Company has also been actively recruiting new
refuse and rear-discharge concrete mixer representatives and dealers worldwide.
Fire and Emergency Segment. The Company believes the geographicalgeographic breadth,
size and quality of its fire apparatus sales and service organization are
competitive advantages in a market characterized by a few large manufacturers
and numerous small, regional competitors. Pierce's fire apparatus are sold
through 3334 sales and service organizations with more than 250 sales
representatives nationwide, which combine broad geographical reach with
frequency of contact with fire departments and municipal government officials.
These sales and service organizations are supported by 7675 product and marketing
support professionals and contract administrators at Pierce. The Company
believes frequency of contact and local presence are important to cultivate
major, and typically infrequent, purchases involving the city or town council
and fire department, purchasing, finance, and mayoral offices, among others,
that may participate in a fire truck bid and selection. After the sale, Pierce's
nationwide local parts and service capability is available to help
municipalities maintain peak readiness for this vital municipal service.
Prior to its acquisition by Oshkosh, Pierce primarily focused its sales
efforts in rural and small suburban domestic markets. Due to the Company's
expertise and long-standing relationships in numerous large urban markets, the
Company has extended Pierce's sales focus into several key metropolitan areas.
As a result of this focus and since its acquisition, Pierce has been awarded new
business in the cities of Philadelphia, Pennsylvania; Los Angeles, California;
Richmond, Virginia; TampaGreensboro, North Carolina; and Miami, Florida; Detroit, Michigan; Chicago, IllinoisWaco, Texas and Honolulu, Hawaii amonghas targeted other major
cities, and continues to target other urban markets.metropolitan areas.
Prior to its acquisition by Oshkosh, Pierce had targeted premium-priced
markets where it could use its innovative technology, quality and advanced
customization capabilities. In 1999, Pierce also began targeting price sensitive
domestic and international markets through the introduction of its Contender
series of lower-priced commercial and custom pumpers. These limited-option
vehicles are being produced in the Company's Bradenton, Florida facility for
lower cost delivery to international customers.
Pierce has substantially strengthened its competitive position overseas.
Pierce's worldwide distribution network was expanded from one to 26
international representatives and dealers. This network has delivered several
new orders from government agencies and private companiescustomers in Curacao, Puerto
Rico, Mexico, Argentina and Saudi Arabia, among other countries.the Southeastern U.S.
The Company has invested in the development of sales tools for its
representatives that it believes create a competitive advantage in the sale of
fire apparatus. For example, Pierce's Pride 2000 PC-based sales tool can be used
by its sales representatives to develop the detail specifications, price the
base truck and options and draw the configured truck on the customer's premises.
The quote, if accepted, is directly interfaced into Pierce's sales order
systems.
9
system.
The Company's aircraft rescue and firefightingARFF vehicles are marketed through a combination of three
direct sales representatives domestically and 4737 representatives and
distributors in international markets. In addition, the Company has 2928 full-time
sales and service representative and distributor locations with over 100 sales
people focused on the sale of snow removal vehicles, principally to airports,
but also to municipalities, counties and other governmental entities.
The acquisition of Medtec has added sevenambulances are sold through 28 distributor organizations with approximately 42 sales peoplemore
than 115 representatives focused on sales to the ambulance market. Twenty-one of
these distributor organizations are common to Pierce.
Defense Segment. Substantially all domestic defense products are sold
directly to principal branches of the DoD. The Company maintains a liaison
office in Washington, D.C. to represent its interests with the Pentagon,
Congress and the offices of the Executive Branch. The Company also sells and
services defense products to foreign governments directly through foura limited
number of international sales offices, through dealers, consultants and
representatives and through the FMSForeign Military Sales ("FMS") program.
10
The DoD has begun to rely on industry for support and sustainability of its
vehicles. This has opened up new opportunities for maintenance, service and
contract support to the U.S. Army and U.S. Marine Corps.
The Company maintains a marketing staff of four individuals thatand engages consultants to
regularly meetsmeet with all branches of the Armed Services, Reserves and National
Guard and with representatives of key military bases to determine their vehicle
requirements and identify specialty truck variants and apparatus required to
fulfill their missions.
In addition to marketing its current truck offerings and competing for new
contracts in the medium-payload segment, the Company actively works with the
Armed Services to develop new applications for its vehicles and expand its
services.
Manufacturing
The Company manufactures trucks and truck bodies at eighteentwenty-one
manufacturing facilities. Employee involvement is encouraged to improve
production processes and product quality. To reduce production costs, the
Company maintains a continuing emphasis on the development of proprietary
components, self-sufficiency in fabrication, just-in-time inventory management,
improvement in production flows, interchangeability and simplification of
components among product lines, creation of jigs and fixtures to ensure
repeatability of quality processes, utilization of robotics, and performance
measurement to assure progress toward cost reduction targets.
The Company intends to continue to upgrade its manufacturing capabilities
by adopting best practices across its manufacturing facilities, relocating
manufacturing activities to the most efficient facility, investing in further
fixturing and robotics, re-engineering manufacturing processes and adopting lean
manufacturing management practices across all facilities.
The Company is focusing on achieving targeted synergies with each
acquisition. Within the first year following the Pierce acquisition, the Company
consolidated three Pierce manufacturing facilities down tointo two while increasing
Pierce's capacity by improving productproduction flow. In addition, among other things,
the Company reduced the number of operating shifts at the Pierce paint plant
from three to one to substantially reduce utility costs, implemented indexing of
production lines, and eliminated storage rooms to relocate inventory to
point of
usepoint-of-use thereby eliminating duplicate material handling. Likewise, at
McNeilus, the Company has installed seven additional robots and re-arranged weld
and mount activities.
In September 2000, the Company completed construction of a 100,000 square
foot, $8.3 million expansion at its McNeilus facility in Dodge Center, Minnesota facility,
which expanded paint capacity and doubled refuse body manufacturing capacity.
The primary purpose of the expansion was to construct two moving assembly lines
with robotic welders to significantly reduce the manufacturing costs of refuse
bodies. With the acquisition of Kewaunee in fiscal 2000, the Company acquired
heavy metal fabrication capabilities. In fiscal 2002 Kewaunee completed a $2.9
million expansion to add blast, prime and paint facilities that were previously
outsourced.
In fiscal 2001, Oshkosh completed an $8.0a $10.0 million plan to expand its
existing production facilities in Oshkosh, Wisconsin. The project expanded the
Company's machining, fabrication and assembly facilities, with a total addition
of approximately 110,000 square feet of space to accommodate higher levels of
production under the MTVR contract.
The Company has announced a plan for construction of a Revolution composite
concrete mixer drum facility in the U.S. in fiscal 2003. The Company expects the
associated cost of the project for the facility, robotic equipment and license
fees for North, Central and South America, South America and the Caribbean (the
"Americas") to approximate $8.5 to $12.0 million. The Company expects to incur
higher levels of expenditures in fiscal 2004 and fiscal 2005 to start-up or
acquire Revolution composite concrete mixer drum manufacturing facilities in
Europe, Asia, Australia and perhaps Africa/Middle East.
In 1994, Oshkosh commenced a program to educate and train all employees at
its Oshkosh facilities in quality principles and to seek ISO 9001 certification
to improve the Company's competitiveness in its global markets. ISO 9001 is a
set of internationally accepted quality requirements established by the
International Organization for Standardization, which indicates that a company
has established and follows a rigorous set of requirements aimed at achieving
customer satisfaction by preventing nonconformity in design, development,
production, installation and servicing of products. Employees at all levels of
the Company are encouraged to understand customer and supplier requirements,
measure performance, develop systems and procedures to prevent nonconformance
10
with requirements and produce continuous improvement in all work processes.
Oshkosh achieved ISO 9001 certification in 1995 and Pierce achieved ISO 9001
certification in 1998.1998 and was certified under the new ISO 9001: 2000 standards
in 2002. The Geesink Norba Group systems are also ISO 9001 certified. McNeilus
expects to achieve ISO 9001 certification in calendar 2003.
11
Engineering, Research and Development
The Company's extensive engineering, research and development capabilities
have been key drivers of the Company's marketplace success. The Company
maintains three facilities for new product development and testing with a staff
of 68 engineers and technicians who are responsible for improving existing
products and development and testing of new trucks, truck bodies and components.
The Company prepares annual new product development and improvement plans for
each of its markets and measures progress against those plans each month.
Virtually all of the Company's sales of fire apparatus require some custom
engineering to meet the customer's specifications and changing industry
standards. Engineering is also a critical factor in defense truck markets due to
the severe operating conditions under which the Company's trucks are utilized,
new customer requirements and stringent government documentation requirements.
In the commercial segment, product innovation is highly important to meet
customers' changing requirements. Accordingly, the Company maintains a permanent
staff of over 300350 engineers and engineering technicians, and it regularly
outsources significant engineering activities in connection with major DoD bids
and proposals.
For fiscal years 2002, 2001 2000 and 1999,2000, the Company incurred engineering,
research and development expenditures of $17.9 million, $14.3 million $14.1 million and $10.9$14.1
million, respectively, portions of which were recoverable from customers,
principally the U.S. government.
Competition
The Company operates in highly competitive markets. The Company competes
in the fire apparatus and defense truck markets principally on the basis of
lowest qualified bid. To submit a qualified bid, the bidder must demonstrate
that the fire apparatus or defense truck meets stringent specifications and, for
most defense truck contracts, passes extensive testing. In addition, decreases
in the DoD budget have resulted in a reduction in the number and size of
contracts, which has intensified the competition for remaining available
contracts. The Company and its competitors continually undertake substantial
marketing, technical and legislative actions in order to maintain existing
levels of defense business. In the refuse truck body and concrete mixer markets,
the Company also faces intense competition on the basis of price, innovation,
quality, service and product performance. As the Company seeks to expand its
sales of refuse truck bodies to municipal customers, management believes the
principal basis of competition for such business will be lowest qualified bid.
In all of the Company's market segments, competitors include smaller, specialized
manufacturers as well as large, mass producers. The Company believes that, in
its specialized truck markets, it has been able to effectively compete against
large, mass producers due to product quality, flexible manufacturing and
specialized distribution systems. The Company believes that its competitive cost
structure, strategic global purchasing capabilities, engineering expertise,
product quality and global distribution systems have enabled it to compete
effectively with other specialized manufacturers.
Principal competitors of McNeilus for refuse truck body sales include The
Heil Company (a subsidiary of Dover Corporation), Wittke (a subsidiary of
Northside Industries, Inc.) and McClain E-Z Pack, Inc. The principal competitor
for the Geesink Norba Group is Faun Umwelttechnik GmbH & Co. Principal
competitors of McNeilus and Oshkosh for concrete mixer sales include Advance
Mixer, Inc. (a subsidiary of the Prince Group), Continental Manufacturing Co.,
Kimble Mixer Co. and London Machinery, Inc. Oshkosh's principal competitor for
airport snow removal sales is Kovatch Mobile Equipment Corp. Pierce's principal
competitors for fire apparatus sales include Emergency One, Inc. (a subsidiary
of Federal Signal Corporation), Kovatch Mobile Equipment Corp., and numerous
small, regional manufacturers. Medtec's principal competitors for ambulance and
rescue sales include Wheeled Coach Industries, a subsidiary of Collins
Industries, Inc., McCoy Miller and Halcore. Oshkosh's principal competitor for
aircraft rescue and firefighting sales is Emergency One, Inc. Oshkosh's
principal competitors for DoD contracts include the MAN Group, Volvo and Stewart
& Stevenson Services, Inc. The Company also faces competition from its
competitors for acquisition opportunities.
SeveralCertain of the Company's competitors have greater financial, marketing,
manufacturing and distribution resources than the Company. There can be no
assurance that the Company's products will continue to compete successfully with
the products of competitors or that the Company will be able to retain its
customer base or to improve or maintain its profit margins on sales to its
customers, all of which could materially adversely affect the Company's
financial condition, profitabilityresults of operations and cash flows.
11Commercial Segment. The Company produces front- and rear-discharge concrete
mixers and batch plants in North America under the Oshkosh and McNeilus brands.
Competition for concrete mixer and batch plant sales is limited to a small
number of companies, including Advance Mixer, Inc., (purchased by Terex
Corporation in 2002) and Continental Manufacturing Co. Principal methods of
competition are service, product features, product quality, product availability
and price. The Company believes its competitive strengths include strong brand
recognition, large-scale and high-efficiency manufacturing, extensive product
offerings, a significant installed base of mixers in use in the marketplace and
its nation-wide, Company-owned network of sales and service centers.
McNeilus produces refuse collection truck bodies in the U.S. Competitors
include The Heil Company (a subsidiary of Dover Corporation), Wittke, Inc. and
Leach Company (both recently purchased by Federal Signal Corporation) and
McClain Industries, Inc. In Europe, the Geesink Norba Group produces refuse
collection vehicles under the Geesink, Norba and Kiggen brand names. There are a
limited number of European competitors, the largest of which is privately-owned
Faun Umwelttechnik GmbH & Co. The principal methods of competition in the U.S.
and Europe are price, service, product quality and product performance.
Increasingly, the Company is competing for municipal business in the U.S. and
Europe, which is based on lowest qualified bid. The Company believes that its
competitive strengths in the U.S. and European refuse collection markets include
strong brand recognition, comprehensive product offerings, a reputation for high
quality, innovative products, large-scale and high-efficiency manufacturing and
extensive networks of Company-owned sales and service centers located throughout
the U.S. and Europe.
Fire and Emergency Segment. The Company produces and sells custom and
commercial fire trucks in the U.S. under the Pierce brand. Competitors include
Emergency One, Inc. (a subsidiary of Federal Signal Corporation), Kovatch Mobile
Equipment Corp. and numerous smaller, regional manufacturers. Principal methods
of competition include brand awareness, single-source customer solutions,
product quality, product innovation, dealer distribution, service and support
and price. The Company believes that its competitive strengths include:
recognized, premium brand name; nation-wide network of independent Pierce
dealers; extensive product offerings which include single-source customer
solutions for aerials, pumpers and rescue units; large-scale and high-efficiency
custom manufacturing capabilities; and proprietary technologies such as TAK-4
independent suspension, Hercules and Husky foam systems and Command Zone
electronics.
Medtec is a manufacturer of ambulances. Medtec's principal competition for
ambulance sales is from Halcore Group, Inc. (owned by TransOcean Capital, Inc.),
Wheeled Coach Industries (a subsidiary of Collins Industries, Inc.) and
McCoy-Miller.
12
Principal methods of competition are price, service and product quality. The
Company believes its competitive strengths in the ambulance market include its
high-quality products and low-cost manufacturing capabilities.
Oshkosh manufactures ARFF vehicles for sale in the U.S. and abroad.
Oshkosh's principal competitor for ARFF sales is Emergency One, Inc. (a
subsidiary of Federal Signal Corporation). Oshkosh also manufactures snow
removal vehicles, principally for U.S. airports. The Company's principal
competitor for snow removal vehicle sales is Stewart & Stevenson Services, Inc.
Principal methods of competition for airport products are product quality and
innovation, product performance, price and service. The Company believes its
competitive strengths in these airport markets include its high-quality,
innovative products and low-cost manufacturing capabilities.
Defense Segment. The Company produces heavy-payload tactical wheeled
vehicles for the U.S. and other militaries. The Company also produces
medium-payload tactical wheeled vehicles for the U.S. military. Competition for
sales of these tactical wheeled vehicles is currently limited to a small number
of companies, including the MAN Group, Mercedes-Benz, Volvo, Stewart & Stevenson
Services, Inc. and Tatra, a.s. The principal method of competition in the
defense segment involves a competitive bid that takes into account factors such
as price, product performance, product quality, adherence to bid specifications,
production capability, past performance and product support. Usually, the
Company's truck systems must also pass extensive testing. The Company believes
that its competitive strengths include: strategic global purchasing capabilities
leveraged across multiple business segments; extensive pricing/costing and
defense contracting expertise; significant installed base of vehicles currently
in use throughout the world; large-scale and high-efficiency manufacturing
capabilities; patented, proprietary vehicle components such as TAK-4 independent
suspension, ALL-STEER all-wheel steering and Command Zone vehicle diagnostics;
ability to develop new and improved product capabilities responsive to the needs
of its customers; product quality and after-market parts sales and support
capabilities.
Customers and Backlog
Sales to the U. S. Department of DefenseU.S. Government comprised approximately 27%36% of the Company's
net sales in fiscal 2001.2002. 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 September 30, 20012002 was $799.5$907.8 million compared to
$607.5$799.5 million at September 30, 2000, with approximately $46.92001. Commercial backlogs increased by $4.6
million to $139.0 million at September 30, 2002 compared to the prior year.
Backlog for front-discharge concrete mixers was up $26.2 million while backlog
for domestic refuse packers was down $27.6 million. Front-discharge concrete
mixer backlog increased due to orders received in advance of an engine emissions
change effective October 1, 2002. The domestic refuse backlog progressively
weakened in fiscal 2002 due to weak economic conditions in the $192.0U.S. Fire and
emergency backlogs increased by $34.2 million to $285.5 million at September 30,
2002 compared to the prior year as Pierce adjusted its production levels to
provide more manufacturing lead time to allow for a more efficient manufacturing
flow. Also contributing to the increase related to Medtec andin backlog was the Geesink Norba Group, which
were acquired during fiscal 2001.award of a multi-unit
order for ARFF vehicles. Backlog related to the defense segment increased by
$122.2$69.6 million to $413.7 million in 2001 compared to 2000, with the
backlog increasing by approximately $154.7 million due to the multi-year MTVR
contract. Fire and emergency backlogs increased by $34.5 million ($24.9 million
excluding Medtec) to $251.3$483.3 million at September 30, 20012002 compared to 2001, due
principally to a $76.0 million contract for heavy equipment transport trucks and
trailers for the prior
year. Commercial backlogs increased by $35.3 million (declined by $2.0 million
excluding the impactU.K. MoD. This award resulted from completion of a multi-year
competition and final contract negotiations that were concluded in December
2001. Approximately 6.7% of the Geesink Norba Group acquisition) to $134.4 million
atCompany's September 30, 2001 compared to the prior year. Approximately 1% of the
September 30, 20012002 backlog is not
expected to be filled in fiscal 2002.2003.
Reported backlog excludes purchase options and announced orders for which
definitive contracts have not been executed. Additionally, backlog excludes
unfunded portions of the U. S. Department of Defense long-term familyFHTV 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 U. S. Department of DefenseDoD versus its
sales to other customers.
Government Contracts
Approximately 27%36% of the Company's net sales for fiscal 20012002 were made to
the U.S. government under long-term contracts and programs, the majority of
which were in the defense truck market. Accordingly, a significant portion of
the Company's sales are subject to risks specific to doing business with the
U.S. government, including uncertainty of economic conditions, changes in
government policies and requirements that may reflect rapidly changing military
and political developments, the availability of funds and the ability to meet
specified performance thresholds.
The Company's sales into defense truck markets are substantially dependent
upon periodic awards of new contracts and the purchase of base vehicle
quantities and the exercise of options under existing contracts. The Company's
existing contracts with the DoD may be terminated at any time for the
convenience of the government. Upon such termination, the Company would
generally be entitled to reimbursement of its incurred costs and, in general, to
payment of a reasonable profit for work actually performed.
Contractually under
the Company's MTVR contract, the Company is entitled to $5 million in program
year three if the contract is terminated for the convenience of the government.
Under firm fixed-pricefixed price contracts with the government, the price paid to the
Company is generally not subject to adjustment to reflect the Company's actual
costs, except costs incurred as a result of contract changes ordered by the
government. The Company
13
generally attempts to negotiate with the government the amount of increased
compensation to which the Company is entitled for government-ordered changes
that result in higher costs. If the Company is unable to negotiate a
satisfactory agreement to provide such increased compensation, then the Company
may file an appeal with the Armed Services Board of Contract Appeals or the U.S.
Claims Court. The Company has no such appeals pending. The Company seeks to
mitigate risks with respect to fixed price contracts by executing firm fixed
price contracts with qualified suppliers for the duration of the Company's
contracts.
The Company, as a U.S. government contractor, is subject to financial
audits and other reviews by the U.S. government of performance of, and the
accounting and general practices relating to, U.S. government contracts, and
likecontracts. Like
most large government contractors, the Company is audited and reviewed on a
continual basis. Costs and prices under such contracts may be subject to
adjustment based upon the results of such audits and reviews. Additionally, such
audits and reviews can and have led to civil, criminal or administrative
proceedings. Such proceedings could involve claims by the government for fines,
penalties, compensatory and treble damages, restitution and/or forfeitures.
Under government regulations, a company or one or more of its subsidiaries can
also be suspended or debarred from government contracts, or lose its export
privileges based on the results of such proceedings. The Company believes, based
on all available information, that the outcome of all such audits, reviews and
proceedings will not have a material adverse effect on its consolidated
financial condition,
or results of operations.operations or cash flows.
Suppliers
The Company is highly dependent on its suppliers and subcontractors to meet
commitments to its customers, and many major components are procured or subcontracted
on a sole-source basis with a number of domestic and foreign companies. Product
components for the Company's products are generally available from a number of
suppliers. The Company purchases chassis components, such as vehicle frames,
engines, transmissions, radiators, axles and tires and vehicle body options,
such as cranes, cargo bodies and trailers from third party suppliers. These body
options may be manufactured specific to the Company's requirements; however,
most of the body options could be manufactured by other suppliers or the Company
itself. Through its reliance on this supply network for the purchase of certain
components, the Company is able to avoidreduce many of the preproduction and fixed
costs associated with the manufacture of those components.these components and vehicle body
options. The Company also purchases complete vehicle chassis from truck chassis
suppliers in its commercial segment and, to a lesser extent, in its fire and
emergency segment. The Company maintains an extensive qualification, on-site
inspection, and assistance and performance measurement system to control risks
associated with such reliance on suppliers. The
12
Company occasionally experiences
problems with supplier and subcontractor performance and must identify alternate
sources of supply and/or address related warranty claims from customers.
While the Company purchases many costly components such as engines,
transmissions and axles, it manufactures certain proprietary components that are
material to each of the Company's segments.components. These
components include front drive and steer axles, transfer cases, cabs, the
ALL-STEER electronic all-wheel steering system, TAK-4 independent suspension,
the Sky-Arm articulating aerial ladder, the McNeilus Auto Reach Arm, the
Hercules compressed air foam system, the Command Zone proprietary multiplexingvehicle control and
diagnostic system technology, body structures and many smaller parts which add
uniqueness and value to the Company's products. Internal production of these
components provides a significant competitive advantage and also serves to
reduce the manufacturing costs of the Company's products.
Intellectual Property
Patents and licenses are important in the operation of the Company's
business, as one of management's key objectives is developing proprietary
components to provide the Company's customers with advanced technological
solutions at attractive prices. The Company holds 113117 active domestic and 96111
foreign patents. The Company believes patents for all-wheel steer and TAK-4
independent suspension systems, which have remaining lives of 8 to 13 years,
provide the Company with a competitive advantage in the fire and emergency
segment. In the defense segment, the TAK-4 independent suspension system was
added to the U.S. Marine Corps' MTVR program, which the Company believes
provided a performance and cost advantage in the successful competition for the
Phase II production contract. The TAK-4 independent suspension is also integral
to the Company's strategy with respect to several international defense bids. To
a lesser extent, other proprietary components provide the Company a competitive
advantage in the Company's other segments.
In fiscal 2002, the Company introduced the Revolution composite concrete
mixer drum in the U.S. The Company has purchased an exclusive, renewable license
for the rights to manufacture and market this technology in the Americas, and
holds options to acquire the technological rights worldwide. This license and
the options also require the Company to make royalty fee payments for each
Revolution drum sold. The Company believes that this license and options create
an important competitive advantage over competitors that manufacture steel
concrete mixer drums. The Revolution composite drum is approximately 2,000
pounds lighter than a steel drum permitting greater payload capacity, cleans out
easily and reduces noise levels. The Company expects to sell the Revolution
composite drum at prices substantially higher than steel drums. The Company
plans to have a U.S. production facility for the Revolution drum operational in
fiscal 2004.
The Company holds trademarks for "Oshkosh," "Pierce," "McNeilus," "MTM,"
"Medtec," "Geesink," "Norba" and "Geesink Kiggen," among others. These
trademarks are considered to be important to the future success of the Company's
business.
14
Employees
As of November 30, 2001,October 31, 2002, the Company had approximately 5,8006,100 employees.
Approximately 1,0651,075 production employees at the Company's Oshkosh facilities are
represented by the United Auto Workers ("UAW") union and approximately 200210
employees at the Company's Kewaunee facilities are represented by the
Boilermakers, Iron Shipbuilders, Blacksmiths, and Forgers Union
("Boilermakers"). The Company's five-year agreement with the United Auto WorkersUAW union extends
through September 2006 and the Company's agreement with the Boilermakers union
extends tothrough May 2002.2005. Approximately 1,000 employees at the Geesink Norba
Group are represented by separate works councils. The Company believes its
relationship with employees is satisfactory.
Industry Segments
Financial information concerning the Company's industry segments is
included in Note 1416 to the Consolidated Financial Statements contained in Item 8
of this Form 10-K.
Foreign and Domestic Operations and Export Sales
Financial information concerning the Company's foreign and domestic
operations and export sales is included in Note 1416 to the Consolidated Financial
Statements contained in Item 8 of this Form 10-K.
13
Available Information
The Company maintains a website with the address www.oshkoshtruck.com. The
Company is not including the information contained on the Company's website as a
part of, or incorporating it by reference into, this Annual Report on Form 10-K.
The Company makes available free of charge (other than an investor's own
Internet access charges) through its website its Annual Report on Form 10-K,
quarterly reports on Form 10-Q and current reports on Form 8-K, and amendments
to these reports, as soon as reasonably practicable after the Company
electronically files such material with, or furnishes such material to, the
Securities and Exchange Commission. In addition, the Company intends to disclose
on its website any amendments to, or waivers from, its code of ethics that are
required to be publicly disclosed pursuant to rules of the Securities and
Exchange Commission.
Item 2. PROPERTIES
Management believes the Company's equipment and buildings are modern, well
maintained and adequate for its present and anticipated needs. As of November
30, 2001,15, 2002, the Company operated in eighteentwenty-one manufacturing facilities and owned
another facility that was not in use. The location, size and focus of the
Company's facilities isare provided in the table below:
Approximate
Square Footage
Principal--------------------
Location (# of facilities) Owned Leased Principal Products Manufactured
- --------------------------- ------------ ------------- ------------------------------------------------------------------------ ------- ------- ----------------------------------------------------------------------------
Oshkosh, Wisconsin(3).... 774,000 17,000Wisconsin (3)........... 777,000 52,000 Defense Trucks; Front-Discharge Mixers; Snow Removal Vehicles; ARFF Vehicles
Appleton, Wisconsin(2)...Wisconsin (3).......... 604,000 16,000 Fire Apparatus
Dodge Center, Minnesota(1)Minnesota (1)...... 711,000 2,000 Rear-Discharge Mixers; Refuse Truck Bodies; Portable Batch Plants
Bradenton, Florida(1)....Florida (1)........... 287,000 Fire Apparatus; Tanker Modules for Defense Trucks and Truck
BodiesDefense Trailers
Emmeloord, Netherlands (1)....... 272,000 Refuse Truck Bodies
Kewaunee, Wisconsin(1)... 216,000Wisconsin (1).......... 212,000 Aerial Devices and Heavy Steel Fabrication Riceville, Iowa(1)....... 108,000 Components for Rear-Discharge
Riceville, Iowa (1).............. 108,000 Mixers, Concrete Batch Plants and Refuse Truck Bodies
Goshen, Indiana(1).......Indiana (1).............. 87,000 Ambulances
Maarheeze, Netherlands (1)....... 89,000 Mobile and Stationary Compactors, Refuse Transfer Stations and ContainersCompactors
Blomstermala, Sweden (1)......... 102,000 Refuse Truck Bodies
White Pigeon, Michigan(1) 58,000Michigan (1)....... 64,000 Ambulances
Kensett, Iowa(1).........Iowa (1)................ 65,000 Not Currently in Use
McIntire, Iowa(1)........Iowa (1)............... 28,000 Components for Rear-Discharge Mixers and Refuse Truck Bodies
Weyauwega, Wisconsin(1)............ 28,000 Refurbished Fire Apparatus
Ontario, California(1)...California (1).......... 31,000 Refurbished Fire Apparatus
Villa Rica, Georgia(1)...Georgia (1).......... 20,000 Replacement Drums for Rear-Discharge Mixers
Colton, California (1)........... 43,000 Replacement Drums for Rear-Discharge Mixers
Llantrisant, United Kingdom(1)... 77,000 Refuse Truck Bodies
The Company's manufacturing facilities generally operate five days per week
on one shift,or two shifts, except for one-week shutdowns in July, August and
December. Management believes the Company's manufacturing capacity could be
significantly increased with limited capital spending by working an additional
shift at each facility.
15
In addition to sales and service activities at the Company's manufacturing
facilities, the Company maintains sixteennineteen sales and service centers in the
United States. The Company owns such facilities in Grand Rapids, Michigan;
Colton, California; Commerce City, Colorado;
Villa Rica, Georgia; Lithia Springs, Georgia; Hutchins, Texas; Morgantown,
Pennsylvania; and Gahanna, Ohio. The Company leases such facilities in Milpitas,
California; Tacoma, Washington; Salt Lake City, Utah; Aurora,Sugar Grove, Illinois;
Cincinnati and Fairfield, Ohio; East Granby, Connecticut; Houston, Texas; Fort
Wayne, Indiana; Lakeland, Florida; Grand Rapids, Michigan; Milwaukee, Wisconsin;
and Phoenix, Arizona. These facilities range in size from approximately 2,0001,600
square feet to approximately 46,00053,000 square feet and are used primarily for sales
and service of concrete mixers and refuse bodies.
In addition to sales and service activities at the Geesink Norba Group's
manufacturing facilities, the Geesink Norba Group maintains eleven sales and
service centers in Europe. The Geesink Norba Group owns such facilities in Cardiff and St.
Albans, UK;UK and Copenhagen, Denmark; and leases facilities in Manchester, UK;
Mions, France; Brussels, Belgium; Hunxe, Germany; Pabianice, Poland; Milan,
ItalyItaly; Amsterdam, The Netherlands; and Madrid and Barcelona, Spain. These
facilities range in size from approximately 2,000 sq. ft.1,600 square feet. to 77,000 sq. ft.53,000 square
feet.
The Company's U.S. facilities are pledged as collateral under the terms of
the Company's senior credit facility.
Item 3. LEGAL PROCEEDINGS
The Company is subject to federal, state and local environmental laws and
regulations that impose limitations on the discharge of pollutants into the
environment and establish standards for the treatment, storage and disposal of
toxic and hazardous wastes. 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.
As to one such Superfund site, Pierce is one of 393 PRPs participating in
the costs of addressing the site and has been assigned an allocation share of
approximately 0.04%. Currently, a report of the remedial
investigation/feasibility study is being completed, and as
14
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 September 30, 2001.2002.
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 concentrationsconcentration 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 long-term
total liability 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 its
liability associated with the TCE issue will not be material and is adequately
covered through reserves established by the Company at September 30, 2001.2002.
However, this may change as investigations proceed by the Company, other
unrelated property owners and government entities.
In connection with the acquisition of the Geesink Norba Group, the Company
identified potential soil and groundwater contamination impacts from solvents
and metals at one of its manufacturing sites. The Company is conducting a study
to identify the source of the contamination. Based on current estimates, the
Company believes its liability at this site will not be material and any
responsibility of the Company is adequately covered through reserves established
by the Company at September 30, 2002.
The Company had recorded reserves of $4.6 million at September 30, 2002 for
all outstanding environmental matters.
The Company is subject to other environmental matters and legal proceedings
and claims, including patent, antitrust, product liability, warranty and state
dealership regulation compliance proceedings.proceedings that arise in the ordinary course
of business. The Company had recorded warranty reserves of $24.0 million and
product and general liability reserves of $17.0 million at September 30, 2002.
See Note 12 of the Notes to Consolidated Financial Statements. 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 all such
matters and claims of $45.6 million at September 30, 2002, will not have a
material adverse effect on the Company's consolidated financial condition or
results of operations.statements.
Actual results could vary, among other things, due to the uncertainties involved
in litigation.
16
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended September 30, 2001.2002.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information as of November 30, 200115, 2002
concerning the Company's executive officers. All of the Company's officers serve
terms of one year and until their successors are elected and qualified.
Name Age Title
---- --- -----
Robert G. Bohn.......... 48Bohn........ 49 President, Chief Executive Officer and Chairman of the Board
Timothy M. Dempsey...... 61 ExecutiveBryan J. Blankfield .. 41 Vice President, General Counsel and Secretary
Ted L. Henson........... 50Henson......... 51 Vice President, International Sales
Paul C. Hollowell....... 60Hollowell..... 61 Executive Vice President and Chief Executive Officer, Defense Business
Daniel J. Lanzdorf...... 53Lanzdorf.... 54 Executive Vice President and President, McNeilus Companies, Inc.
Mark A. Meaders......... 43Meaders....... 44 Executive Vice President and General Manager of European Operations
John W. Randjelovic..... 57Randjelovic... 58 Executive Vice President and President, Pierce Manufacturing Inc.
William J. Stoddart..... 56Stoddart... 57 Executive Vice President and President, Defense Business
Donald H. Verhoff....... 55Verhoff..... 56 Vice President, Corporate Engineering
Charles L. Szews........Szews...... 45 Executive Vice President and Chief Financial Officer
Michael J. Wuest........ 42Wuest...... 43 Vice President and Chief Procurement Officer, General Manager Airport Products
Matthew J. Zolnowski.... 48Zolnowski.. 49 Executive Vice President, Corporate Administration
Robert G. Bohn. Mr. Bohn joined the Company in 1992 as Vice
President-Operations. He was appointed President and Chief Operating Officer in
1994. He was appointed President and Chief Executive Officer in October 1997 and
Chairman of the Board in January 2000. Prior to joining the Company, Mr. Bohn
was Director-European Operations for Johnson Controls, Inc., Milwaukee,
Wisconsin, which manufactures, among other things, automotive products. He
worked for Johnson Controls from 1984 until 1992. He was elected a Director of the
Company in June 1995. He is a director of Graco, Inc.
Timothy M. Dempsey.Bryan J. Blankfield. Mr. DempseyBlankfield joined the Company in October 1995June 2002 as Vice
President, General Counsel and Secretary. Mr. Dempsey has beenHe previously served as in-house legal
counsel and continuesconsultant for Waste Management, Inc., a waste services company, and
its predecessors from 1990 to be a partner in the law firm of Dempsey, Magnusen, Williamson and Lampe in
Oshkosh, Wisconsin. Mr. Dempsey2002. He was appointed ExecutiveAssociate General Counsel
and Assistant Secretary of Waste Management, Inc. in 1995 and Vice President in
February 1999.1998.
Ted L. Henson. Mr. Henson joined the Company in January 1990 and has served
in various assignments, including Director of Airport/Municipal Products, Vice
President Sales and President of Summit Performance Systems, Inc. Mr. Henson
assumed his present position in May 1998.
15
Paul C. Hollowell. Mr. Hollowell joined the Company in April 1989 as Vice
President-Defense ProductProducts and was appointed Executive Vice President in
February 1994. In February 1999, Mr. Hollowell was appointed Executive Vice
President and President, Defense Business. Mr. Hollowell assumed his present
position in October 2001.
Daniel J. Lanzdorf. Mr. Lanzdorf joined the Company in 1973 as a design
engineer and has served in various assignments including Chief Engineer--Engineer -
Defense, Director of Defense Engineering, Director of the Defense Business Unit
and Vice President of Manufacturing Operations & General Manager Commercial
Business prior to becoming President of McNeilus Companies, Inc. in April 1998.
Mr. Lanzdorf was appointed to his present position in February 1999.
Mark A. Meaders. Mr. Meaders joined Pierce Manufacturing Inc. in September
1996 as Purchasing Manager. In January 1998, he was appointed Vice President
Corporate Purchasing, Materials and& Logistics of the Company and in July 1999 was
appointed Vice President Operations and Corporate Purchasing, Materials and
Logistics. Mr. Meaders was appointed to his current position in October 2001.
John W. Randjelovic. Mr. Randjelovic joined the Company in October 1992 as
Vice President and General Manager in charge of the Bradenton, Florida Division.
In September 1996, he was appointed Vice President of Manufacturing, Purchasing
and Materials for Pierce. In October 1997, Mr. Randjelovic was appointed Vice
President and General Manager, Pierce Manufacturing Inc. and was appointed to
his current position in February 1999.
Charles L. Szews. Mr. Szews joined the Company in March 1996 as Vice
President and Chief Financial Officer and assumed his present position in
October 1997.
Mr. Szews was previously employed by Fort Howard Corporation, a
manufacturer of tissue products, from June 1988 until March 1996 in various
positions, including Vice President and Controller from September 1994 until
March 1996.
William J. Stoddart. Mr. Stoddart joined the Company's Defense unit in
September 1995 as General Manager Medium Vehicles. In January 1999, he was
appointed Vice President, Defense Programs and assumed his present position in
October 2001.
17
Donald H. Verhoff. Mr. Verhoff joined the Company in May 1973 and has
served in various assignments, including Director Test and Development/New
Product Development and Vice President Technology and Director Corporate
Engineering. Mr. Verhoff assumed his present position in September 1998.
Michael J. Wuest. Mr. Wuest joined the Company in November 1981 as an
analyst and has served in various assignments, including Senior Buyer, Director
of Purchasing, Vice President - Manufacturing Operations, and Vice President and
General Manager of Operations of Pierce Manufacturing Inc. Mr. Wuest was
appointed to his present position in October 2001.
Matthew J. Zolnowski. Mr. Zolnowski joined the Company as Vice
President-Human Resources in January 1992, was appointed Vice President,
Administration in February 1994 and assumed his present position in February
1999.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.MATTERS
The information relating to dividends included in Notes 79 and 1113 to the
Consolidated Financial Statements contained herein under Item 8 and the
information relating to dividends per share contained herein under Item 6 isare
hereby incorporated by reference in answer to this item.
In July 1995, the Company's Board of Directors authorized the repurchase of
up to 1,500,000 shares of Common Stock. As of November 30, 2001,15, 2002, the Company has
repurchased 692,302 shares under this program at a cost of $6.6 million.
Dividends and Common Stock Price*
It is the Company's intention to declare and pay dividends on a regular
basis. However, the payment of future dividends is at the discretion of the
Company's Board of Directors and will depend upon, among other things, future
earnings, capital requirements, the Company's general financial condition,
general business conditions and other factors. When the Company pays dividends,
it pays a dividend on each share of Common Stock equal to 115% of the amount
paid on each share of Class A Common Stock. The agreements governing the
Company's subordinated debt and bank debt restrict its ability to pay dividends
on Common Stock and Class A Common Stock. For fiscal 2002,2003, the terms of the
Company's senior credit facility generally limit the aggregate amount of all
dividends the Company may pay on its common equity during that period to an
amount equal to $6 million plus 7.5% of consolidated net income.
16
The Company'sSince July 12, 2002, the Common Stock is quotedhas been listed on the Nasdaq National Market.New York Stock
Exchange ("NYSE") under the symbol OSK. As of September 30, 2001,November 19, 2002, there were 847840
holders of record of the Company's Common Stock and 9283 holders of record of the Company's Class A
Common Stock. The following table sets forth prices reflecting actual sales of
the Common Stock as reported on the Nasdaq National Market.Market prior to July 12,
2002 and on the NYSE on, and after, July 12, 2002.
Fiscal 2002 Fiscal 2001
Fiscal 2000
Quarter----------------- -----------------
Quarter/Period Ended High Low High Low
------------- ---- --- ---- ---
September...........................-------------------- ------- ------- ------- -------
September 30 n/a n/a $ 45.00 $ 34.63
Period from July 12 to September 30 $ 40.0060.22 $ 30.81
June................................46.22 n/a n/a
Period from July 1 to July 11 61.83 58.02 n/a n/a
June 30 62.55 48.65 44.75 34.75
38.50 28.75
March...............................March 31 59.55 46.11 49.38 31.88
34.88 21.63
December............................December 31 49.78 33.50 44.00 33.25
34.75 24.88
*There* There is no established public trading market for Class A Common Stock.
1718
Item 6. SELECTED FINANCIAL DATA.DATA
Fiscal years ended September 30,
(In thousands, except per share amounts)
2001(6) 2000(7)2002(7)(8) 2001(9) 2000(10) 1999 1998(8) 1997
---- ---- ---- ---- ----1998(11)
---------- ---------- ---------- ---------- ---------
Net sales(1)....................................sales (1) $1,743,592 $1,445,293 $1,329,516 $1,170,304 $905,888 $683,877$ 905,888
Operating income................................income 111,118 98,296 98,051 76,213 48,720
28,785
Income from continuing operations(2)............operations (2) 59,598 50,864 48,508 31,191 16,253
10,006
Per share assuming dilution................dilution (2) 3.45 2.98 2.96 2.39 1.27
0.78
Income from discontinued operations(3).......... --operations (3) - - 2,015 -- -- --- -
Per share assuming dilution(3)............. --dilution (3) - - 0.12 -- -- --- -
Net income(4)...................................income (4) 59,598 50,864 49,703 31,131 15,068
10,006
PerNet income per share, assuming dilution (4)............ 3.45 2.98 3.03 2.39 1.18 0.78
Dividends per share:
Class A Common Stock....................... .300 .300 .292 .290 .290Stock 0.300 0.300 0.300 0.292 0.290
Common Stock............................... .345 .345 .336 .333 .333Stock 0.345 0.345 0.345 0.336 0.333
Total assets....................................assets 1,024,329 1,089,268 796,380 753,290 685,039 420,394
Expenditures for property, plant and equipment..equipment 15,619 18,493 22,647 17,999 13,444
6,574
Depreciation....................................Depreciation 17,527 15,510 12,200 10,743 9,515
9,382
Amortization of goodwill, otherpurchased intangible
assets and deferred financing costs............costs 7,865 12,987 12,018 12,414 9,183
4,688
Net working capital.............................capital (5) 33,964 123,949 76,500 46,709 42,030
51,483
Long-term debt (including current maturities)(5)(6) 149,958 359,280 162,782 260,548 280,804
135,000
Shareholders' equity(5).........................equity (6) 409,760 347,026 301,057 162,880 131,296
120,900
Book value per share(5).........................share (6) 24.13 20.76 18.06 12.70 10.39
9.70
Backlog......................................... 799,000 608,000 487,000 377,000 361,000Backlog 908,000 799,000 608,000 487,000 377,000
Had SFAS No. 142 been in effect for the earliest period presented, results
would have been as follows for fiscal 2001, 2000, 1999 and 1998, respectively:
operating income - $105,483, $104,580, $82,801 and $51,626; income from
continuing operations - $57,522, $54,646, $37,395 and $18,888; income from
continuing operations per share assuming dilution - $3.37, $3.33, $2.87 and
$1.48; net income - $57,522, $55,481, $37,335 and $17,703; net income per share
assuming dilution - $3.37, $3.40, $2.86, and $1.39; and amortization of
goodwill, purchased intangible assets and deferred financing costs - $5,800,
$5,489, $5,826 and $6,277.
(1)In fiscal 2001, the Company adopted provisions of EITF No. 00-10,
"Accounting for Shipping and Handling Fees and Costs." Adoption of provisions of
EITF No. 00-10 resulted in a reclassification of shipping fee revenue to sales,
from cost of sales where it had been classified as a reduction in a reclassification of shipping fee revenue to sales, from cost of sales where
it had been classified as a reduction of shipping
costs. Adoption did not have any impact on reported earnings. Sales for all
previous periods have been retroactively restated to conform with the current
year presentation. Also, see definition of net sales contained in Note 1 of the
Notes to Consolidated Financial Statements.
(2)Fiscal 2001 includes a $1,727 one-time foreign currency transaction gain in
connection with euros acquired prior to the purchase of the Geesink Norba Group
and includes a $1,400 reduction in income tax expense related to settlement of
certain income tax audits.
(3) In fiscal 2000, the Company recorded a $2,015 after-tax gain resulting from
a technology transfer agreement and collection of previously written-off
receivables related to the Company's former bus chassis joint venture in Mexico.
(4) Includes after-tax extraordinary charges of $820 ($0.05 per share) in 2000,
$60 ($0.00 per share) in 1999 and $1,185 ($0.09 per share) in 1998 related to
early retirement of debt.
(5) Cash from operating activities, including an $86,300 performance-based
payment received on September 30, 2002 on the Company's MTVR contract, was
principally used to prepay long-term debt. See (6).
(6) On November 24, 1999, the Company prepaid $93,500 of term debt under its
senior credit facility with proceeds of the sale of 3,795,000 shares of Common
Stock. On July 23, 2001, the Company amended and restated its senior credit
facility and borrowed $140,000 under a new Term Loan B in connection with the
acquisition of Geesink Norba Group. See Notes 4 and 6 of the Notes to
Consolidated Financial Statements. In fiscal 2002, the Company prepaid $6,000 of
Term Loan A and $126,250 of Term Loan B from cash generated from operating
activities. See (5).
19
(7) In fiscal 2002, the Company increased the margin percentage recognized on
the MTVR contract by one percentage point as a result of a contract modification
and favorable cost performance compared to previous estimates.. This change in
estimate, recorded as a cumulative catch-up adjustment, increased operating
income, net income and net income per share by $4,264, $3,000, and $0.17,
respectively, including $1,658, $1,044 and $0.06, respectively, relating to
prior year revenues. See Note 1 of the Geesink Norba Group and includes a $1,400 reduction in income tax expense related to settlement of certain income
tax audits.
(3)In fiscal 2000, the Company recorded a $2,015 after-tax gain resulting from a technology transfer agreement and collection of
previously written-off receivables related to the Company's former bus chassis joint venture in Mexico.
(4)Includes after-tax extraordinary charges of $820 ($0.05 per share) in 2000, $60 ($0.00 per share) in 1999 and $1,185 ($0.09 per
share) in 1998 related to early retirement of debt.
(5)On November 24, 1999, the Company prepaid $93,500 of term debt under its senior credit facility from proceeds of the sale of
3,795,000 shares of Common Stock. On July 23, 2001 the Company amended and restated its senior credit facility and borrowed
$140,000 under a new Term Loan B note in connection with the acquisition of Geesink Norba Group. See Note 4 to Notes to
Consolidated Financial Statements.
(6)On October 30, 2000, the Company acquired for $14,466 in cash all of the issued and outstanding capital stock of Medtec . On
March 6, 2001, the Company purchased certain assets from TEMCO for cash of $8,139 and credits to the seller valued at $7,558, for
total consideration of $15,697. On July 25, 2001, the Company acquired for $137,636 in cash all of the issued and outstanding
capital stock of the Geesink Norba Group. Amounts include acquisition costs and are net of cash acquired. See Note 3 to Notes to
Consolidated Financial Statements.
(7)On November 1, 1999 the Company acquired assets, assumed certain liabilities and entered into related non-compete agreements
for Kewaunee for $5,467 in cash. On April 28, 2000, the Company acquired for cash, all of the issued and outstanding capital stock
of Viking for $1,680. See Note 3 to Notes to Consolidated Financial
Statements.
(8) In fiscal 2002, the Company adopted provisions of SFAS No. 142 which
eliminated the amortization of goodwill and indefinite-lived assets.
(9) On October 30, 2000, the Company acquired for $14,466 in cash all of the
issued and outstanding capital stock of Medtec. On March 6, 2001, the Company
purchased certain assets from TEMCO for cash of $8,139 and credits to the seller
valued at $7,558, for total consideration of $15,697. On July 25, 2001, the
Company acquired for $137,636 in cash all of the issued and outstanding capital
stock of the Geesink Norba Group. Amounts include acquisition costs and are net
of cash acquired. See Note 4 of the Notes to Consolidated Financial Statements.
(10) On November 1, 1999, the Company acquired assets, assumed certain
liabilities and entered into related non-compete agreements for Kewaunee for
$5,467 in cash. On April 28, 2000, the Company acquired for cash all of the
issued and outstanding capital stock of Viking for $1,680. See Note 4 of the
Notes to Consolidated Financial Statements.
(11) On February 26, 1998, the Company acquired for cash all of the issued and
outstanding capital stock of McNeilus and entered into related non-compete and
ancillary agreements for $217,581.
1820
Item 7. MANAGEMENT'S DISCUSSIONDISCUSSIONS AND ANALYSIS OF CONSOLIDATED FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.OPERATIONS
MANAGEMENT'S DISCUSSION AND ANALYSIS
Oshkosh Truck Corporation and Subsidiaries
General
The Company is a leading designer, manufacturer and marketer of a wide
range of specialty trucks and truck bodies, including concrete mixers, refuse
bodies, fire and emergency vehicles and defense trucks. Under the "McNeilus" and
"Oshkosh" brand names, the Company manufactures rear- and front-discharge
concrete mixers. Under the "McNeilus," "Geesink" and "Norba" brand names, the
Company manufactures a wide range of automated, rear, front, side and top
loading refuse truck bodies and mobile and stationary refuse compactors and
transfer systems. Under the "Pierce" brand name, the Company is among the
leading domestic manufacturers of fire apparatus assembled on both custom and
commercial chassis. The Company manufactures aircraft rescue and firefighting
and airport snow removal vehicles under the "Oshkosh" brand name and ambulances
and
heavy-duty rescue vehicles under the "Medtec" brand name. The Company also manufactures defense trucks
under the "Oshkosh" brand name and is the leading manufacturer of severe-duty
heavy tactical trucks for the Department of Defense.
Major products manufactured and marketed by each of the Company's business
segments are as follows:
Commercial--concreteCommercial - concrete mixer systems, refuse truck bodies, mobile and stationary
compactors and waste transfer units, portable concrete batch plants and truck
components sold to ready-mix companies and commercial and municipal waste
haulers in the U. S.U.S., Europe and other international markets.
Fire and emergency--commercialemergency - commercial and custom 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.U.S. and abroad.
Defense--heavy-Defense - heavy- and medium-payload tactical trucks and supply parts sold to the
U. S.U.S. military and to other militaries around the world.
ACQUISITION HISTORY
Since 1996, the Company has selectively pursued strategic acquisitions to
enhance its product offerings and diversify its business. The Company has
focused its acquisition strategy on providing a full range of products to
customers in specialty truck and truck body markets that are growing and where
it can develop strong market positions and achieve acquisition synergies.
Identified below is information with respect to these acquisitions, all of which
have been accounted for using the purchase method of accounting and have been
included in the Company's results of operations from the date of acquisition.
On September 18, 1996, the Company acquired for cash all of the issued and
outstanding capital stock of Pierce, a leading manufacturer and marketer of fire
trucks and other emergency apparatus for $156.9 million, including acquisition
costs and net of cash acquired. The acquisition was financed from borrowings
under a subsequently retired bank credit facility.
On December 19, 1997, Pierce acquired certain inventory, machinery and
equipment, and intangible assets of Nova Quintech, a division of Nova Bus
Corporation, for $3.6 million. Nova Quintech was engaged in the manufacture and
sale of aerial devices for fire trucks.
On February 26, 1998, the Company acquired for cash all of the issued and
outstanding capital stock of McNeilus and entered into related non-compete and
ancillary agreements for $217.6 million, including acquisition costs and net of
cash acquired. McNeilus is a leading manufacturer and marketer of rear-discharge
concrete mixers and portable concrete batch plants for the concrete placement
industry and refuse truck bodies for the waste services industry in the United
States. The acquisition was financed from borrowings under the Company's senior
credit facility and the issuance of senior subordinated notes.
On November 1, 1999, the Company acquired the manufacturing assets of
Kewaunee for $5.5 million in cash plus the assumption of certain liabilities
aggregating $2.2 million. Kewaunee manufactures all of the Company's
requirements for aerial devices in its fire and emergency segment.
On April 28, 2000, the Company acquired all of the issued and outstanding
capital stock of Viking for $1.7 million, including acquisition costs and net of
cash acquired.
1921
On October 30, 2000, the Company acquired all of the issued and outstanding
capital stock of Medtec and an affiliate and certain related assets for $14.5
million in cash, including acquisition costs and net of cash acquired. Medtec is
a U.S. manufacturer of custom ambulances and rescue vehicles.ambulances. The acquisition was financed from
available cash and borrowings under the Company's senior credit facility.
On March 6, 2001, the Company acquired certain machinery and equipment,
parts inventory and certain intangible assets from TEMCO, a division of
Dallas-based Trinity Industries, Inc. ("TEMCO"). TEMCO, a manufacturer of
concrete mixers, batch plants and concrete mixer parts had discontinued its
business. Consideration for the purchase was valued at $15.7 million and
included cash of $8.1 million and credits to the seller valued at $7.6 million
for future purchasespurchase of certain concrete placement products from the Company over
the next six years. The acquisition was financed from borrowings under the
Company's senior credit facility.
On July 25, 2001, the Company acquired all of the outstanding capital stock
of Geesink Norba Group for $137.6 million, including acquisition costs, and net
of cash acquired. The Geesink Norba Group is a leading European manufacturer of
refuse collection truck bodies, mobile and stationarystation compactors and transfer
stations. The acquisition was financed from the proceeds of a new Term Loan B Loan
under the Company's senior credit facility.
RESULTS OF OPERATIONS
ANALYSIS OF CONSOLIDATED NET SALES--THREESALES - THREE YEARS ENDED SEPTEMBER 30, 20012002
The following table presents net sales (see definition of net sales
contained in Note 1 of the Notes to Consolidated Financial Statements) by
business segment (in thousands):
Fiscal Year Ended September 30,
2001 2000 1999
---- ---- ----
Net sales to unaffiliated customers:
Commercial................................ $ 559,871 $ 663,819 $ 613,028
Fire and emergency........................ 463,919 390,659 336,241
Defense................................... 423,132 275,841 222,535
Corporate and other....................... (1,629) (803) (1,500)
------------ ------------ ------------
Consolidated.......................... $ 1,445,293 $ 1,329,516 $ 1,170,304
============ ============ ============
Fiscal Year Ended September 30,
2002 2001 2000
---------- ---------- ----------
Net sales to unaffiliated customers:
Commercial $ 678,334 $ 559,871 $ 663,819
Fire and emergency 476,148 463,919 390,659
Defense 594,856 423,132 275,841
Intersegment (5,746) (1,629) (803)
---------- ---------- ----------
Consolidated $1,743,592 $1,445,293 $1,329,516
========== ========== ==========
The following table presents net sales by geographic region based on product
shipment destination (in thousands):
Fiscal Year Ended September 30,
2001 2000 1999
---- ---- ----
Net sales:
United States............................. $ 1,314,930 $ 1,227,038 $ 1,118,564
Other North America....................... 7,343 7,429 7,822
Europe and Middle East.................... 93,263 68,317 21,713
Other..................................... 29,757 26,732 22,205
------------ ------------ ------------
Consolidated.......................... $ 1,445,293 $ 1,329,516 $ 1,170,304
============ ============ ============
Fiscal Year Ended September 30,
2002 2001 2000
---------- ---------- ----------
Net sales:
United States $1,541,629 $1,314,930 $1,227,038
Other North America 7,037 7,343 7,429
Europe and Middle East 165,961 93,263 68,317
Other 28,965 29,757 26,732
---------- ---------- ----------
Consolidated $1,743,592 $1,445,293 $1,329,516
========== ========== ==========
FISCAL 2002 COMPARED TO FISCAL 2001
Consolidated net sales increased 20.6% to $1,743.6 million in fiscal 2002
compared to fiscal 2001. Excluding the impact of the Geesink Norba Group
acquisition, net sales were up 12.7% largely as a result of increased production
of MTVR vehicles and increased defense parts sales.
Commercial segment net sales increased 21.2% to $678.3 million in fiscal
2002 compared to fiscal 2001. Excluding the impact of the Geesink Norba Group
acquisition, commercial segment sales would have increased 0.2%. Concrete
placement sales were down 0.6% for the year compared to the prior year and down
27.0% from fiscal 2000 as the Company continued to be impacted by the U.S.
economic recession. U.S. refuse truck body and parts sales increased 1.8% for
the year compared to the prior year largely due to increased sales to the three
largest U.S. waste haulers while overall market shipments declined.
Fire and emergency segment net sales increased 2.6% to $476.1 million in
fiscal 2002 compared to fiscal 2001. Sales were up only slightly due to the
impact of the U.S. recession on municipal spending for fire and emergency
apparatus.
22
Defense segment net sales increased 40.6% to $594.9 million in fiscal 2002
compared to fiscal 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 fiscal 2002. During fiscal 2001, the Company was in the
process of ramping up to full-rate production on this multi-year production
contract.
FISCAL 2001 COMPARED TO FISCAL 2000
Consolidated net sales increased 8.7% to $1,445.3 million in fiscal 2001
compared to fiscal 2000. Excluding the impact of the acquisitions of Medtec and
the Geesink Norba Group, consolidated net sales increased 5.6% in fiscal 2001
compared to fiscal 2000.
Commercial segment net sales decreased 15.7% in fiscal 2001 compared to
fiscal 2000. Excluding the impact of the Geesink Norba Group acquisition,
commercial segment sales would have decreased 18.5% in fiscal 2001. Concrete
placement sales were down 26.6% while domestic refuse sales were up 15.6%, or 4.7% excluding the impact of the Geesink Norba Group acquisition.. Fiscal
2000 results were impacted by unusually strong end-markets for concrete
placement sales. In fiscal 2001, economic uncertainties caused the Company's
concrete placement customers to scale back or delay their equipment purchases.
Domestic refuse product sales increased in the period compared to fiscal 2000
levels as the Company began shipping units under a three year agreement with a
large national waste hauler.
Fire and emergency segment sales increased 18.8% in fiscal 2001 compared to
fiscal 2000. Traditional fire truck sales accounted for about one-half of the
current year increase, with sales up across all categories, including custom and commercial
pumpers, aerials, heavy dutyheavy-duty rescues and parts sales and service. Inclusion of
Medtec sales following its October 2000 acquisition 20
contributed another
one-third of the current year increase, with the balance of the current year increase generally
attributable to organic growth in Oshkosh snow removal and ARFF vehicles.
Defense segment net sales increased 53.4% in fiscal 2001 compared to fiscal
2000. Over 75% of the current year sales increase was due to increased sales of the Medium Tactical Vehicle Replacement ("MTVR")MTVR
truck. Early in fiscal 2000, Oshkosh began start-up of low-rate initial
production of the MTVR truck and in April of fiscal 2001 Oshkosh received
approval to commence full-rate production of the MTVR truck. Full-rate
production was achieved in August 2001 and is expected to continue at this level
throughoutthrough fiscal 2002 and 2003. Vehicle sales to international customers and domestic parts
sales also increased while domestic, heavy-payload vehicle sales declined.
FISCAL 2000 COMPARED TO FISCAL 1999
Consolidated net sales increased 13.6% to $1,329.5 million in fiscal 2000
compared to fiscal 1999 with approximately one-third of the overall sales growth
being generated by each of the Company's three segments - commercial, fire and
emergency and defense.
Commercial segment net sales increased 8.3% in fiscal 2000 compared to
fiscal 1999. Sales increases were balanced across the entire segment, which
includes front- and rear-discharge concrete mixers, batch plants, concrete
placement parts and service, refuse packers and refuse parts and service.
Fire and emergency segment sales increased 16.2% in fiscal 2000 compared to
fiscal 1999. Traditional fire truck sales accounted for three-fourths of the
fiscal 2000 increase, with sales up across all categories, including custom and
commercial pumpers, aerials, heavy-duty rescues and parts sales and service. The
Company experienced particular success in the launch of its new Contender Series
of commercial fire trucks. A $17.8 million reduction in international fire truck
sales in fiscal 2000 compared to fiscal 1999 was partially offset by a $7.2
million increase in international sales of ARFF vehicles. Fiscal 1999 sales
included final shipments under a large, multi-unit fire truck order which was
shipped to the Middle East in fiscal 1998 and 1999.
Defense segment net sales increased 24.0% in fiscal 2000 compared to fiscal
1999. Approximately one-half of the fiscal 2000 sales increase was due to
start-up of low rate initial production of the MTVR truck, which began early in
fiscal 2000. International shipments increased $53.7 million as a result of
several large orders to Middle East customers. Increased international vehicle
sales and domestic parts sales offset reductions in domestic, heavy-payload
vehicle sales.
ANALYSIS OF CONSOLIDATED OPERATING INCOME--THREEINCOME - THREE YEARS ENDED SEPTEMBER 30, 20012002
The following table presents operating income by business segment (in
thousands):
Fiscal Year Ended September 30,
2001 2000 1999
---- ---- ----
Operating income (loss):
Commercial................................ $ 29,891 $ 54,654 $ 48,995
Fire and emergency........................ 45,841 32,922 26,758
Defense................................... 39,545 30,119 22,878
Corporate and other....................... (16,981) (19,644) (22,418)
------------ ------------ ------------
Consolidated.......................... $ 98,296 $ 98,051 $ 76,213
============ ============ ============
Fiscal Year Ended September 30,
2002 2001 2000
---------- ---------- ----------
Operating income (loss):
Commercial $ 47,171 $ 29,891 $ 54,654
Fire and emergency 48,988 45,841 32,922
Defense 40,720 39,545 30,119
Corporate and other (25,761) (16,981) (19,644)
---------- ---------- -----------
Consolidated $ 111,118 $ 98,296 $ 98,051
========== ========== ===========
FISCAL 2002 COMPARED TO FISCAL 2001
Consolidated operating income increased 13.0% to $111.1 million, or 6.4% of
sales, in fiscal 2002 compared to $98.3 million, or 6.8% of sales, in fiscal
2001. In fiscal 2002, the Company adopted a new accounting standard that
required the elimination of amortization of goodwill and indefinite-lived
intangible assets. In fiscal 2001, the Company acquired the Geesink Norba Group
in its fourth fiscal quarter. Excluding the impact of the Geesink Norba Group
acquisition and adjusting for the change in accounting to eliminate amortization
of goodwill and indefinite-lived intangible assets, operating income would have
decreased 1.2% in fiscal 2002 compared to fiscal 2001. This decrease was largely
due to increased bid and proposal spending on U.S. and U.K. multi-year defense
truck procurement competitions, higher legal defense costs with respect to
various contract and environmental claims and lower sales of higher-margin
defense trucks sold into export markets.
Commercial segment operating income increased 57.8% to $47.2 million, or
7.0% of sales, in fiscal 2002 compared to $29.9 million, or 5.3% of sales, in
fiscal 2001. Excluding the results of the Geesink Norba Group and adjusting for
the adoption of the new accounting standard that eliminated amortization of
goodwill and indefinite-lived assets, operating income would have increased
19.8% in fiscal 2002 compared to fiscal 2001. This improvement was largely due
to sales of used trucks and favorable manufacturing and workers compensation
experience.
Fire and emergency segment operating income increased 6.9% to $49.0
million, or 10.3% of sales, for fiscal 2002 compared to $45.8 million, or 9.9%
of sales, in fiscal 2001. Excluding the impact of the adoption of the new
accounting standard that eliminated
23
amortization of goodwill and indefinite-lived intangible assets, operating
income would have declined 0.1%, on a 2.6% increase in net sales compared to
fiscal 2001, due to a slightly less favorable product mix, partially offset by
favorable manufacturing cost performance.
Defense segment operating income increased 3.0% to $40.7 million, or 6.8%
of sales, in fiscal 2002, compared to $39.5 million, or 9.3% of sales, in fiscal
2001. Fiscal 2002 results included substantially higher volume under the
Company's lower-margin MTVR contract. Fiscal 2002 results also included a $4.3
million cumulative benefit from a change in estimated margins on the MTVR
long-term production contract from 3.3% recorded in fiscal 2001 to 4.3% recorded
in fiscal 2002, including $1.7 million related to prior year shipments.
Partially offsetting these operating income increases was a decrease in sales of
higher-margin, heavy payload vehicles to international customers. Operating
income and margins in fiscal 2002 also were negatively impacted by significant
increases in spending for bid and proposal activities in connection with
multi-year truck procurement competitions with the U.S. Army and the U.K. MoD.
Consolidated selling, general and administrative expenses increased to 8.2%
of sales in fiscal 2002 compared to 7.2% of sales in fiscal 2001. Excluding the
impact of the Geesink Norba Group acquisition and corporate expenses, selling,
general and administrative expenses were 6.0% of sales in fiscal 2002 compared
to 5.9% in fiscal 2001. 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. Corporate operating expenses and inter-segment profit elimination
increased $8.8 million to $25.8 million, or 1.5% of consolidated sales, in
fiscal 2002 from $17.0 million, or 1.2% of consolidated sales, for fiscal 2001.
The increase was largely due to higher variable incentive compensation costs,
higher legal defense costs with respect to various contract and environmental
claims, investments in additional personnel and services to manage the Company's
growing businesses and costs incurred in fiscal 2002 related to acquisition
investigations that were not consummated.
FISCAL 2001 COMPARED TO FISCAL 2000
Consolidated operating income increased 0.2% in fiscal 2001 compared to
fiscal 2000. Consolidated operating income divided by consolidated sales
("operating income margin")margin decreased from 7.4% in fiscal
2000 to 6.8% in fiscal 2001.
Commercial segment operating income decreased 45.3% in fiscal 2001 compared
to fiscal 2000. Operating income margins decreased to$29.9 million, or
5.3% of segment sales, in fiscal 2001 compared to $54.7 million, or 8.2% of sales, in
fiscal 2000. Significant reductions in concrete placement sales volumes and the
related impact on fixed overhead absorption contributed to the decline in
operating income margin.income.
Fire and emergency segment operating income increased 39.2% to $45.8
million, or 9.9% of sales, in fiscal 2001 compared to $32.9 million, or 8.4% of
sales, in fiscal 2000. Excluding the impact of the Medtec acquisition, operating
income increased 32.3%. Operating income margin increased to 9.9% of
segment sales compared to 8.4% in fiscal 2000. Prior yearFiscal 2000 results were adversely affected by
inefficiencies following an enterprise-wide resource planning system
installation. Improved gross margins of the Company's ARFF and snow removal
vehicles resulting from cost reduction efforts and 21
manufacturing efficiencies
and a favorable product mix contributed most of the remaining improvement in the
segment operating income margin.income.
Defense segment operating income increased 31.3% in fiscal 2001 compared to fiscal 2000. Operating income margins decreased to$39.5 million, or 9.3%
of segment sales, in fiscal 2001 compared to $30.1 million, or 10.9% of sales, in fiscal
2000. Increased sales volume of the lower-margin MTVR vehicles was partially
offset by increased international sales of higher-margin heavy-payloadheavy payload vehicles.
The Company expects overall segment
operating income marginsConsolidated selling, general and administrative expenses increased to continue7.2%
of consolidated net sales in fiscal 2001 compared to decline7.0% in fiscal 2000.
Excluding the impact of the acquisition of the Geesink Norba Group, selling,
general and administrative expenses were 7.1% of sales in fiscal 2001 as the
Company sustains
full-rate production of its lower-margin MTVR vehicles for all of fiscal 2002,Geesink Norba Group generally has higher gross margins and investshigher selling,
general and administrative expenses than the Company's other businesses. A
decrease in bid and proposal activities for large potential contracts in the
U.S. and U.K.
Corporatecorporate and other expenses decreased $2.6 million to $17.0 million, or 1.2% of
consolidated net sales in fiscal 2001, from $19.6 million, or 1.5% of
consolidated net sales, in fiscal 2000.2000 offset most of the impact of the flat
concrete placement selling, general and administrative expenses. Lower corporate
expenses resulted from cost reduction initiatives and lower variable incentive
compensation expense.
FISCAL 2000 COMPARED TO FISCAL 1999
Consolidated operating income increased 28.7% in fiscal 2000 compared to
fiscal 1999. Consolidated operating income margin increased from 6.5% in fiscal
1999 to 7.4% in fiscal 2000.
Commercial segment operating income increased 11.6% in fiscal 2000 compared
to fiscal 1999. Operating income margins increased to 8.2% of segment sales in
fiscal 2000 compared to 8.0% in fiscal 1999. Higher front-discharge concrete
mixer margins resulting from material cost reduction efforts and lower
manufacturing overhead costs as a result of increased defense business volume
were partially offset by production inefficiencies associated with the $8.3
million expansion at the McNeilus Dodge Center facility that was completed in
September 2000. In fiscal 2000, the commercial segment experienced
workforce-related health claims in excess of historical rates of occurrence.
Expense related to these claims was offset by reductions of expense due to
settlement in fiscal 2000 of unrelated litigation.
Fire and emergency segment operating income increased 23.0% in fiscal 2000
compared to fiscal 1999. Operating income margins increased to 8.4% of segment
sales in fiscal 2000 compared to 8.0% in fiscal 1999. The acquisition of
Kewaunee contributed 0.2 percentage points to the segment operating income
margin. Improved gross margins of the Company's ARFF and snow removal vehicles
resulting from cost reduction efforts and manufacturing efficiencies contributed
most of the remaining improvement in the segment operating income margin.
Defense segment operating income margins increased 31.7% in fiscal 2000
compared to fiscal 1999. Operating income margins increased to 10.9% of segment
sales in fiscal 2000 compared to 10.3% in fiscal 1999. Favorable product mix of
higher-margin U.S. heavy-payload trucks and higher international sales, the
favorable impact of increased sales volume on fixed manufacturing overhead costs
and lower operating expenses offset the impact of $26.2 million in MTVR sales at
lower gross margins.
Corporate and other expenses decreased $2.8 million to $19.6 million, or
1.5% of consolidated net sales, from $22.4 million, or 1.9% of consolidated net
sales, in fiscal 1999. Excluding the $3.5 million charge in fiscal 1999 in
connection with the settlement of litigation, corporate and other expenses were
up $0.7 million, or 3.8%.
ANALYSIS OF NON-OPERATING INCOME STATEMENT ITEMS--THREEITEMS - THREE YEARS ENDED SEPTEMBER
30, 2002
FISCAL 2002 COMPARED TO FISCAL 2001
Net interest expense decreased $1.1 million to $20.1 million in fiscal 2002
compared to fiscal 2001. Interest costs on increased borrowings to fund the
acquisition of the Geesink Norba Group were largely offset by lower interest
rates and lower borrowings due to debt reduction associated with strong
operating cash flows and receipt of performance-based payments on defense
segment, long-term production contracts.
The effective income tax rate for fiscal 2002 was 36.1% compared to 37.3%
in 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 fiscal 2002. Excluding the impact of the $0.9 million tax
settlement in fiscal 2002, and the impact of the $1.4 million tax settlement
24
and $5.8 million of nondeductible goodwill, both in fiscal 2001, the Company's
effective income tax rate was 37.1% in fiscal 2002 and 36.5% in fiscal 2001. The
Company benefited from a lower effective tax rate in fiscal 2001 due to more
foreign sales.
Other miscellaneous expense of $1.6 million in fiscal 2002 included the
write-off of deferred financing expenses and net foreign currency exchange
losses. Other miscellaneous income of $1.8 million in fiscal 2001 included a
$1.7 million one-time foreign currency exchange gain in connection with funds
borrowed to acquire the Geesink Norba Group in July 2001.
Equity in earnings of an unconsolidated partnership, net of income taxes,
of $2.4 million in fiscal 2002 and $1.4 million in fiscal 2001 represents the
Company's equity interest in OMFSP. Increased earnings resulted from favorable
lease portfolio performance, improved interest rate spreads between lease rates
and related interest on debt to fund lease originations and gains on lease
terminations.
FISCAL 2001 COMPARED TO FISCAL 2000
InterestNet interest expense increased 6.3%$1.2 million to $21.2 million in fiscal 2001
compared to fiscal 2000. Interest on borrowings to fund the Medtec and Geesink
Norba Group acquisitions and the purchase of certain assets of TEMCO, and
increased borrowings to fund higher working capital requirements associated with
full-rate production ofunder the MTVR contract, was partially offset by a $1.9 million benefit resulting from the more
favorable short-term interest rate environment.
Miscellaneous non-operatingOther miscellaneous income increased $1.1 million to $1.8 million in fiscal
2001 compared to fiscal 2000. The Company recorded a $1.7 million one-time
foreign currency exchange gain in connection with funds borrowed to acquire the
Geesink Norba Group in July 2001. Favorable movement of the U.S. dollar compared
to the euro in the two days between the time the Company purchased euros for the
Geesink Norba Group acquisition and the time the acquisition was closed caused
the one-time gain.
The provision for income taxes in fiscal 2001 was 37.3% of pre-tax income,
compared to 39.9% of pre-tax income in fiscal 2000. The effective tax rate was
impacted by a nonrecurring reduction in tax expense of $1.4 million related to
the settlement of certain income tax audits during fiscal 2001 and nondeductible
goodwill amortization of $5.8 million in fiscal 2001 and $5.4 million in
22
fiscal
2000, primarily related to the acquisitions of McNeilus, Pierce and Medtec.
Excluding the effects of nondeductible goodwill amortization and the impact of
the tax audit settlement, the Company's effective tax rate decreased from 37.4%
in fiscal 2000 to 36.5% in fiscal 2001 due to the tax benefit related to
increased foreign sales.
Equity in earnings of an unconsolidated lease financing partnership of $1.4
million in fiscal 2001 was up from $1.2 million in fiscal 2000. The Company
recorded a lower share of increased partnership earnings as the Company's share
of pre-tax earnings of the partnership declined from 59% in fiscal 2000 to 57%
in fiscal 2001. The Company's equity in the partnership continued to decline
from approximately 70% at formation in fiscal 1998 to 52% at September 30, 2001.
Ultimately, the Company and its other partner will each share 50/50 in the
earnings of the partnership as the original "contributed" lease portfolio runs
off and is replaced with leases originated subsequent to the formation of the
partnership, in which each partner has a 50% interest.
FISCAL 2000 COMPARED TO FISCAL 1999
Interest expense decreased 21.6% in fiscal 2000 compared to fiscal 1999.
Interest expense declined approximately $6.0 million as the Company paid down
$93.5 million of term debt25
FINANCIAL CONDITION
The following a November 1999 secondary equity offering.
Interest on borrowings to fund the Kewaunee and Viking acquisitions, higher
working capital requirements associated with overall sales growth and higher
interest rates contributed to increased interest expense, exclusive oftable highlights the impact of changes in operating assets
and liabilities on cash provided from (used for) operating activities for each
of the equity offering.last three fiscal years:
Fiscal Year Ended September 30,
2002 2001 2000
---------- ---------- ----------
Cash provided from (used for) operating activities $ 263,968 $ (8,370) $ 49,683
Cash provided from (used for) changes in operating
assets and liabilities:
Receivables, net 70,588 (71,489) (9,702)
Inventories:
Progress/performance-based payments 33,537 8,518 9,362
Other 15,400 (23,353) (2,032)
--------- --------- ---------
Net change in inventory 48,937 (14,835) 7,330
--------- --------- ---------
Accounts payable 6,899 (1,156) (7,802)
Floor plan notes payable 4,530 (7,938) (2,691)
Customer advances 61,694 (892) (12,059)
Income taxes payable (12,409) 14,672 8,776
Other 4,475 (1,103) (7,217)
--------- --------- ---------
Net cash provided from (used for) changes
in operating assets and liabilities 184,714 (82,741) (23,365)
--------- --------- ---------
Operating cash flow excluding changes in
operating assets and liabilities $ 79,254 $ 74,371 $ 73,048
========= ========= =========
FISCAL YEAR ENDED SEPTEMBER 30, 2002
During fiscal 2002, cash and cash equivalents increased by $28.7 million to
$40.0 million at September 30, 2002. Cash provided from operating activities of
$264.0 million and proceeds from stock option exercises of $2.3 million were
used to fund capital expenditures of $15.6 million, pay dividends of $5.8
million, fund the increase in long-term assets (primarily increased pension
contributions) of $7.8 million, reduce current- and long-term debt by $209.3
million and fund the increase in cash and cash equivalents of $28.7 million.
In fiscal 2001, the Company was investing cash in operating assets and
liabilities to support the ramp-up under the MTVR contract to full-rate
production. The provisionramp-up from low-rate of initial production operations in April
2001 to full-rate production was achieved in August 2001 and has been
subsequently sustained through September 30, 2002. In fiscal 2002, the Company
negotiated and received a contract modification under the MTVR contract that
provides for performance-based payments, a process that allows the Company to
bill the customer upon achievement of certain contract milestones. The Company
also receives performance-based payments in connection with the FHTV contract
and certain other defense programs. Cash received on performance-based payments
is first used to "liquidate" or reduce outstanding receivables for units
accepted. Any remaining cash is then recorded as a reduction of inventory to the
extent of inventory on hand, with any remaining amount shown as a "customer
advance." The Company received its first performance-based payment on the MTVR
contract on September 30, 2002 in the amount of $86.3 million. This receipt was
applied against outstanding MTVR receivables of $20.9 million and to reduce
inventories by $24.0 million. The balance, or $41.4 million has been recorded as
a customer advance.
Reductions in receivables generated $70.6 million in operating cash flow in
fiscal 2002. Receivables were generally lower at September 30, 2002 compared to
2001 due to changes in sales mix in the defense segment to more U.S. government
sales under performance-based payment terms and fewer export sales under net 30
day payment terms. In the commercial segment, receivables were lower due to
changes in sales mix to more concrete placement sales and lower sales to large,
U.S. waste haulers. Sales to large, U.S. waste haulers and export sales to
international defense customers generally carry longer payment terms than sales
to the Company's other customers.
Timing of estimated U.S. federal income tax payments (five payments in
fiscal 2002 compared to three payments in fiscal 2001) resulted in a decrease in
income taxes payable of $12.4 million in fiscal 2002 compared to an increase in
income taxes payable of $14.7 million in fiscal 2001. Cash paid for income taxes
in fiscal 2000 was 39.9% of pre-tax income,
compared to 41.8% of pre-tax income in fiscal 1999. The effective tax rate was
impacted by nondeductible goodwill amortization of $5.4$49.8 million in fiscal 2000
and $5.52002 compared to $18.0 million in fiscal 1999 related to the acquisitions of McNeilus and
Pierce. Excluding the effects of nondeductible goodwill amortization, the
Company's effective tax rate decreased from 38.0% in fiscal 1999 to 37.4% in
fiscal 2000 as a result of certain research and development tax credits claimed
in fiscal 2000.
Equity in earnings of an unconsolidated lease financing partnership of $1.2
million in fiscal 2000 was down from $1.5 million in fiscal 1999. The Company's
share of pre-tax earnings of the partnership declined from 65% in fiscal 1999 to
59% in fiscal 2000 as the Company's equity in the partnership continued to
decline from approximately 70% at formation in fiscal 1998.
Gain on disposal of discontinued operations of $3.2 million, less income
taxes of $1.2 million, or $2.0 million in fiscal 2000 relates to a technology
transfer agreement and collection of previously written-off receivables from a
foreign affiliate. The Company exited this business in fiscal 1995.
The $0.8 million after-tax extraordinary charge in fiscal 2000 relates to
the write-off of deferred financing costs for that portion of debt prepaid
during the year.
FINANCIAL CONDITION2001.
26
FISCAL YEAR ENDED SEPTEMBER 30, 2001
During fiscal 2001, cash and cash equivalents decreased by $2.3 million to
$11.3 million at September 30, 2001. Borrowings under the Company's revolving
credit facility of $65.2 million were used to fund cash used in operating
activities of $8.4 million, capital expenditures of $18.5 million, scheduled
debt repayments of $8.9 million, the acquisition of Medtec for $14.5 million,
including acquisition costs and net of cash acquired, the cash portion of the
acquisition of certain assets from TEMCO aggregating $8.1 million and to pay
dividends of $5.7 million. The Company used proceeds from its $140.0 million
new
Term Loan B borrowing under the Company's senior credit facility to fund the
Geesink Norba Group acquisition of $137.6 million, which includes acquisition
costs and is net of cash acquired. Cash totaling $8.4 million was used in
operations in fiscal 2001. In fiscal 2000, operating activities generated cash
totaling $49.7 million. The decrease in cash provided from operating activities
in fiscal 2001 compared to fiscal 2000 principally arose from approximately
$50.9 million of receivables and inventory invested in the ramp-up of the MTVR
contract and about $21.0 million of higher domestic refuse receivables due fromto
increased business with large waste haulers. Timing of estimated income tax
payments in fiscal 2001compared2001 compared to fiscal 2000 reduced cash used in operations
in fiscal 2001 by approximately $15.6 million.
The Company's debt-to-capital ratio at September 30, 2001 was 50.9%
compared to 35.1% at September 30, 2000. Debt-to-capital may vary from time to
time to the extent that the Company uses debt to fund acquisitions.
FISCAL YEAR ENDED SEPTEMBER 30, 2000
During fiscal 2000, cash and cash equivalents increased by $8.4 million to
$13.6 million at September 30, 2000. Cash provided from operating activities of
$49.7 million was used to fund capital expenditures of $22.6 million, to repay
$12.2 million of
23
indebtedness under the Company's revolving credit facility, including $7.2
million of advances used to fund the acquisitions of Viking and Kewaunee and to
pay dividends of $5.4$14.7 million.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and cash equivalents of $11.3$40.0 million and
approximately $89.3$155.3 million of unused availability under the terms of its
senior credit facility (See Note 46 to Notes to Consolidated Financial
Statements) as of September 30, 2001.2002. The Company's primary cash requirements
include working capital, interest and principal payments on indebtedness,
capital expenditures, dividends and, potentially, future acquisitions. The
Company expects its primary sources of cash are
expected to be cash flow from operations,
cash and cash equivalents on hand at September 30, 2002 and borrowings from
unused availability under the Company's seniorrevolving credit facility. Based upon
current and anticipated future operations, managementthe Company believes that these
capital resources will be adequate to meet future working capital, debt service
and other capital requirements for fiscal 2002.2003. Debt levels and capital resource
requirements beyond fiscal 2003 are not currently estimable 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 beyond fiscal 2003 in the event of an
award of major new business arising from current competitions for new defense
contracts in the U.S. and the U.K.
The Company's cash flow from operations was positively impacted in fiscal
2002 by the receipt of performance-based payments on its MTVR and FHTV contracts
in its defense segment. The Company's cash flow from operations in fiscal 2001
was negatively impacted by the ramp-up in production of the multi-year MTVR
contract and by the initial effect of substantially higher sales to major waste
haulers who were granted longer payment terms extendedas an accommodation to certain commercial customers.obtain
their business. 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 the timing of
receipt of performance-based payments in its defense segment, changes in working
capital requirements arising from seasonal fluctuations in commercial segment
sales.sales and changes in working capital requirements associated with the start-up
of large defense contracts.
The Company's debt-to-capital ratio at September 30, 2002 was 26.8%
compared to 50.9% at September 30, 2001. Debt-to-capital at September 30, 2002
was favorably impacted by the Company's receipt of its initial performance-based
payment on its MTVR contract in the amount of $86.3 million on September 30,
2002 which was used to pay down debt of $41.1 million on that same date.
Debt-to-capital was higher at September 30, 2001 because of debt incurred to
acquire the Geesink Norba Group in July 2001 and because of working capital
incurred in connection with the ramp-up of the MTVR contract to full-rate
production. Debt-to-capital may vary from time to time as the Company borrows
under its revolving credit facility to fund seasonal or defense contract working
capital requirements and to the extent that the Company uses debt to fund
acquisitions.
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 potentially 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.
TheInterest rates on borrowings under the Company's senior credit facility accruesare
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 1.00%, 1.00% and 2.50% for IBOR Rate loans under the
Company's revolving credit facility, Term Loan A and Term Loan B, respectively,
as of September 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 variable rates.September 30, 2002 were 2.82% and
4.32% 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. There were no outstanding borrowings on the
revolving credit facility at September 30, 2002.
27
Contractual Obligations and Commercial Commitments
Following is a summary of the Company's contractual obligations and
payments due by period following September 30, 2002 (in thousands):
Payments Due by Period
------------------------------------------------------------
Contractual Obligation Total 1 Year 2-3 Years 4-5 Years After 5 Years
--------- -------- --------- --------- -------------
Debt:
Term Loan A $ 36,000 $ 6,000 $ 28,000 $ 2,000 $ -
Term Loan B (1) 12,000 12,000 - - -
Senior subordinated notes 100,000 - - - 100,000
Other debt 1,958 245 289 142 1,282
--------- -------- -------- ------- ---------
Total debt 149,958 18,245 28,289 2,142 101,282
Guaranteed residual value obligations 6,033 1,635 4,398 - -
Operating leases 24,915 5,186 7,346 4,304 8,079
Euro forward contracts 2,600 2,600 - - -
--------- -------- -------- ------- ---------
Total contractual cash obligations $ 183,506 $ 27,666 $ 40,033 $ 6,446 $ 109,361
========= ======== ======== ======= =========
(1) The Company expects capital expenditures will not exceed $25.0retired the Term Loan B in October 2002.
The Company maintains a revolving credit facility of $170.0 million which
matures in January 2006. At September 30, 2002, open standby letters of credit
totaling $14.7 million reduced the availability under the revolving credit
facility to $155.3 million. See Note 6 of the Notes to Consolidated Financial
Statements.
The following is a summary of the Company's commercial commitments (in
thousands):
Amount of Commitment Expiration Per Period
-----------------------------------------------------------
Contractual Obligation Total 1 Year 2-3 Years 4-5 Years After 5 Years
-------- -------- --------- --------- -------------
Customer lease guarantees to third parties $ 10,000 $ 1,000 $ 2,000 $ 2,000 $ 5,000
Standby letters of credit 14,651 10,960 3,691 - -
Corporate guarantees 1,414 1,414 - - -
-------- -------- ------- ------- -------
Total commercial commitments $ 26,065 $ 13,374 $ 5,691 $ 2,000 $ 5,000
======== ======== ======= ======= =======
Off-Balance Sheet Arrangements
McNeilus has a $22.3 million investment in an unconsolidated general
partnership, OMFSP, which offers lease financing to customers of the Company.
McNeilus and an unaffiliated third party, BA Leasing & Capital Corporation
("BALCAP" -- a subsidiary of Bank of America Corporation), are general partners
in OMFSP. Each of the two general partners has identical voting, participating
and protective rights and responsibilities in OMFSP. See Notes 1 and 2 of the
Notes to Consolidated Financial Statements.
OMFSP purchases trucks, truck bodies and concrete batch plants for lease to
user-lessees. The Company sold equipment totaling $62.8 million, $88.8 million
and $79.9 million to OMFSP in fiscal 2002, 2001 and 2000, respectively. Banks
and other financial institutions lend to OMFSP approximately 90% of the purchase
price of the equipment, with recourse solely to OMFSP, secured by a pledge of
lease payments due from the user-lessees. Each partner funds one-half of the
approximate 8% equity portion of the cost of the new equipment purchases.
Customers provide a 2% down payment. Each partner is allocated its proportionate
share of OMFSP cash flow and taxable income in accordance with the partnership
agreement. Indebtedness of OMFSP is secured by the underlying leases and assets
of, and is with recourse to, OMFSP. However, all OMFSP indebtedness is
non-recourse to the Company and BALCAP.
OMFSP debt financing is bid among a pool of third party banks and other
financial institutions. OMFSP's available but unused borrowing capacity with
such banks and other third party financial institutions was $92.8 million at
September 30, 2002. OMFSP lenders do not guarantee its borrowing capacity and
may withdraw such borrowing availability at any time. Should debt financing not
be available to OMFSP in the future, certain of the Company's customers would
need to find sources of lease financing other than through OMFSP, which could
have an adverse impact on the Company's sales of equipment.
28
OMFSP and its predecessor have operated since 1989, with profits in each
year. OMFSP seeks to maintain strict credit standards. Each general partner
approves each lease financing transaction. Lessee-customers guarantee the
residual value with respect to each lease. Infrequently, a customer will default
on a lease. In such instances, OMFSP has historically been successful in
disposing of the underlying equipment at values in excess of the then residual
values on the leases. Lease losses historically have not been material in any
one year, including the 2001 to 2002 recession in the U.S. In the event that
material lease losses did occur, the Company believes its losses would be
limited to its investment in OMFSP because OMFSP's debt is nonrecourse to the
Company. In addition, the Company could decide to discontinue OMFSP's leasing
activities at any time and manage an orderly winding-up of the OMFSP lease
portfolio.
Summarized financial information of OMFSP as of September 30, 2002 and 2001
and for the fiscal years ended September 30, 2002, 2001 and 2000 is as follows:
September 30,
2002 2001
--------- ---------
Cash and cash equivalents $ 2,037 $ 2,973
Investment in sales type leases, net 209,440 204,772
Other assets 553 869
--------- ---------
$ 212,030 $ 208,614
========= =========
Notes payable $ 166,442 $ 166,635
Other liabilities 4,146 6,211
Partners' equity 41,442 35,768
--------- ---------
$ 212,030 $ 208,614
========= =========
Fiscal Year Ended September 30,
2002 2001 2000
-------- -------- -------
Interest income $ 16,315 $ 15,429 $13,132
Net interest income 4,346 4,048 3,160
Excess of revenues over expenses 4,286 3,961 3,295
A proposed interpretation has been issued which may result in the Company
including the assets and liabilities (or some portion thereof) of OMFSP in its
financial statements. Alternatively, the Company may sell or restructure its
interest in OMFSP. See New Accounting Standards - Special Purpose Entities.
FISCAL 20022003 OUTLOOK
The Company expects consolidated net sales growth ofto grow approximately 11.4%3.2% in
fiscal 2002 from fiscal 2001 sales2003 to $1,610.0 million. The Company expects that
the Geesink Norba Group acquisition will contribute about $101.0 million of the
sales increase in fiscal 2002. The Company expects that consolidated operating
income margins will decline in fiscal 2002 to 6.6% compared to fiscal 2001
levels of 6.8%.$1.8 billion. The Company expects consolidated operating income
to beincrease 8.0% to approximately $107.0$120.0 million forin fiscal 2002. Excluding elimination2003, or
approximately 6.7% of amortization of goodwill and other intangible assets upon the Company's planned
adoption of Statements of Financial Accounting Standards ("SFAS") Nos. 141 and
142, effective October 1, 2001, the Company expects consolidated operating
income to be approximately $100.0 million for fiscal 2002, up 1.7% from fiscal
2001 amounts.sales. The Company expects earnings per share from
continuing operations assuming dilution of $2.98$3.70 per share in fiscal 2002. Excluding the impact of
adoption of SFAS Nos. 141 and 142, the Company expects earnings per share to
decrease to $2.60 in fiscal 2002. The Company anticipates the decrease will
largely be due to expected continued economic softness in the United States and
higher spending on the FMTV and United Kingdom bids for future defense business,
which the Company anticipates will be offset in part by the expected
contribution from the Geesink Norba Group acquisition of approximately $0.10 to
$0.15 per share in fiscal 2002.2003.
The Company estimates that commercial segment sales will increase 6.3%1.0% in
fiscal 20022003 to $595.0$685.0 million. The Company expects the Geesink Norba Group to
contribute an additional $101.0 million in fiscal 2002 over fiscal 2001 due to
inclusion for a full twelve months in fiscal 2002 compared to only two months in
fiscal 2001. The Company expects continued softness in the
concrete placement market, estimating a 21% reduction2.0% increase in concrete placement
sales in fiscal 2002
compared to2003. This assumes that concrete placement sales remain
approximately 27.0% lower than peak concrete placement sales in fiscal 2001 sales levels.2000. The
Company expects its U.S. refuse sales volume to be up 5%decline about 2.0% in fiscal 2002 over2003.
Industry volume is expected to decline about 10% in fiscal 2001 levels. The2003, but the Company
anticipates stronger salesexpects volume increases from the threeits largest domestic waste haulerscommercial customers and some estimatedother market
share gains willto offset an expected weakening in capital
spending by most U.S. commercial waste haulers and municipal customers.of the industry decline. The Company expects commercialits U.S.
refuse sales to decline approximately 10.0% in the first half of fiscal 2003
before increasing in the second half, each compared to prior year. The Company
estimates that the Geesink Norba Group sales will increase approximately 3.0% in
fiscal 2003 based on an estimated weak European economy, but aided by new
product introductions. The Company expects operating income in the commercial
segment to improveincrease approximately 20%8.1% to approximately $51.0 million in fiscal
2002 to $36.0 million, or about 6.1% of commercial sales. Due to adoption
of SFAS Nos. 141 and 142, the Company expects the elimination of amortization of
goodwill and other intangible assets to increase commercial segment operating
income by another $4.0 million from this estimate to $40.0 million, or about
6.7% of segment sales.2003. The Company projectsestimates that concrete placement operating income towill
decline about 31%approximately 10.0% in fiscal 2002 as2003, due to anticipated development
spending with respect to the Revolution composite concrete mixer drum. The
Company plans to sell a resultfew hundred Revolution drums in fiscal 2003, utilizing
the production facilities of the projected 21% declineCompany's partner in Australia. Freight costs
from Australia will limit any profit opportunity from those sales. By the end of
fiscal 2003, the Company plans to have a U.S. production facility for the
Revolution drum operational and to reach high rate of production for sales in
fiscal 2004. In fiscal 2005 and fiscal 2006, the Company plans to acquire the
rights to this technology for Europe, Asia, Australia and perhaps Africa/Middle
East. The Company expects domestic refuse operating income to be up slightly in
fiscal 2003 due to cost reduction plans in place. The Company estimates that
most of the growth in commercial operating income in fiscal 2003 will be due to
growth of the Geesink Norba Group to contribute low
double-digit operating income marginsearnings resulting from lower production costs
following a workforce reduction in fiscal 2002 and expects U.S. refuse
margins to grow one-half percentage point due to continued cost reduction
activities.2002.
29
The Company expectsestimates fire and emergency segment sales to be up 7.1% to
$510.0 million in fiscal 2003. This increase reflects a strong backlog that is
up 13.6% at September 30, 2002 compared to the prior year and extends into the
third quarter of fiscal 2003. While municipal spending remains soft, spending on
the fire service has remained stable due to an emphasis on homeland security and
increased federal spending on the fire service. The Company estimates fire and
emergency operating income to increase 6.1% to approximately $52.0 million in
fiscal 2003, consistent with the estimated sales increase.
The Company estimates defense segment sales to increase 2.5% to $610.0
million in fiscal 2002 to $475.5 million. The Company expects the growth rate in this
segment will be down sharply from fiscal 2001 because the Company believes that
municipal spending will begin to soften in this weak domestic economy. The
Company anticipates that projected market share gains and a full twelve months
of operations at Medtec should offset some of the economic weakness.2003. The Company estimates that fire and emergency
24
sales under the MTVR contract
will decline approximately $16.0 million, but that sales under a new U.K. tank
transporter contract will be approximately $46.0 million. The Company estimates
defense operating income will grow about 7%to increase 8.1% to approximately $49.0$44.0 million in
fiscal 2003. This estimate assumes significant bid and proposal spending and
pre-contract costs in fiscal 2003 at levels above fiscal 2002 or approximately 10.3% of sales.with respect to
several U.S. and U.K. defense truck programs. This estimate further assumes that
MTVR contract margins remain at 4.3% in fiscal 2003. The Company expectscontinues to
target margins of 6.0% to 6.5% over the contract life. Subject to attaining
certain milestones and cost performance, the Company estimates that cost reduction
initiatives will drive the estimated one-halfa one
percentage point improvementincrease in MTVR margins in fiscal 2003 on a full-year basis
would amount to $7.6 million in operating income, margins in fiscal 2002. Upon adoptionor $0.27 per share. 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 SFAS Nos. 141 and 142,fielded trucks. In June 2002,
the Company expectsnegotiated a modification of the eliminationMTVR 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 the testing, the timing and number
of amortization of goodwillwreckers actually funded by the U.S. Marine Corps under the contract and other
intangible assets to increase fire and emergency segment operating income by
another $3.0 million from this estimate to $52.0 million, or about 10.9% of
segment sales.
The Company estimates that defense segment sales will increase to
approximately $540.0 million in fiscal 2002 due to a planned $156.0 million
increase in MTVR sales as that contract continues at the
full-rate of production
level for the entire fiscal year, whereas fiscal 2001 production ramped up
throughout the year. The Company expects that its higher-margin, heavy-payload
international truck sales will decline in fiscal 2002, resulting in a net
increase in segment sales in fiscal 2002 over estimated fiscal 2001 levels of
approximately $117.0 million. The Company expects that defense segment operating
income will decline approximately 17% in fiscal 2002 to about $33.0 million, or
6.1% of sales. The Company anticipates that lower operating income marginscost performance on increased sales volumesthose trucks will be due to increased spending on product development
and bid and proposal activities associated with the FMTV opportunity and certain
defense truck opportunitiesimportant factors in the United Kingdom. Further,Company's
ability to achieve its targeted MTVR margins of 6.0% to 6.5% over the sales mix shift
from higher-margin, heavy-payload international sales to lower-margin MTVR sales
will also contribute tolife of
the decline in operating income in fiscal 2002 compared
to fiscal 2001contract.
The Company expects corporate expenses to increase from $17.0 million in
fiscal 2001 to $18.0 million in fiscal 2002. The Company expects interest
expense to increase $6.5 million to $28.8$25.8 million in
fiscal 2002 largely as a
result ofto $27.0 million in fiscal 2003. The increase reflects investments
planned to build the Company's management team. The Company expects net interest
expense to be approximately flat at $20.0 million in fiscal 2003. While the
Company projects debt to decline on average in fiscal 2003 following the
$140.0 million borrowing to purchase the Geesink Norba
Group, which should be offset by expectedsignificant debt reduction resulting from
operating cash flow.in fiscal 2002, the Company expects interest rates to
rise and working capital requirements to increase progressively during fiscal
2003 due to the start-up of a U.K. tank transporter contract.
The Company expects debt to decline to $285.0increase from $150.0 million at September 30,
2002, fromto approximately $175.0 million at December 31, 2002, $200.0 million at
March 31, 2003 and $210.0 million at June 30, 2003 before declining to $150.0
million at September 2001 levels.30, 2003. These fluctuations reflect seasonal working
capital requirements of the commercial segment and the start-up of a tank
transporter contract for the U.K. MoD. The Company estimates capital spending at
no more than $25.0$30.0 million in fiscal 2002, which includes estimated2003, including the required capital
requirements
associated with recent acquisitions.spending to construct a Revolution composite concrete mixer drum manufacturing
facility.
The expectations with respect to projected sales, costs, earnings and debt
levels in this "Fiscal 20022003 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, no economic recovery in U.S. and European
economies; the Company's estimates for concrete placement activity, housing
starts and the U.S. economy generally;mortgage rates; the Company's expectations as to when it will receivetiming of receipt of
sales orders and payments;payments and execution and funding of defense contracts; the
Company's ability to achieve cost reductions; the anticipated level of sales and
margins associated with the Family of Heavy Tactical VehiclesFHTV contract, international defense truck sales and
full-rate production under the MTVR program;contract; the Company's estimates for capital
expenditures of municipalities for fire and emergency and refuse products, of
airports for rescue products and of large commercial waste haulers; the 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 product development, and bid
and proposal activities and pre-contract costs with respect to defense programtruck
procurement competitions and the outcome of such competitions; anticipated
levels of sales of, and capital expenditures associated with, the Revolution
composite mixer; the Company's estimates for insurance, steel and litigation
costs; the Company's estimates for debt levels and associated interest costs;
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.
APPLICATION OF 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 financial condition, results of
operations and cash flows.
30
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.
Revenue Recognition: The Company 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 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 others 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, 2002. Under SFAS No. 142, goodwill and
indefinite-lived intangible assets are no longer amortized; however, they must
be tested for impairment periodically, or more frequently under certain
circumstances, and written down when impaired. The Company continues to record
amortization for other intangible assets with definite lives. The Company is
subject to financial statement risk to the extent that goodwill and
indefinite-lived intangible assets become impaired. Any impairment review is, by
its nature, highly judgmental as estimates of future sales, earnings and cash
flows are utilized to determine impairment. There was no impairment of goodwill
upon adoption of SFAS No. 142, nor upon the Company's subsequent testing
conducted in the fourth quarter of fiscal 2002.
Product Liability: Due to the nature of the Company's products, the Company
is subject to product liability claims 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 and fire and emergency businesses 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 increased sharply following the terrorist acts of September 11, 2001.
As of November 19, 2002, the Company maintained self-insured retentions of $1.0
million per claim 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 claims as well as to estimate the effect of the adverse development of
claims over time.
Critical Accounting Estimates
Management of the Company has discussed the development and selection of
the following critical accounting estimates with the Audit Committee of the
Company's Board of Directors and the Audit Committee has reviewed the Company's
disclosures relating to such estimates in this Management's Discussion and
Analysis.
Warranty: The Company's products generally carry explicit warranties that
extend from six months to two years, based on terms that are generally accepted
in the marketplace. Selected components included in the Company's end products
(such as engines, transmissions, tires, etc.) may include manufacturers'
warranties. These manufacturers' warranties are generally passed on to the end
customer of the Company's products and the customer would generally deal
directly with the component manufacturer.
31
The Company's policy is to record a liability for the expected cost of
warranty-related claims at the time of the sale. The amount of warranty
liability accrued reflects management's best estimate of the expected future
cost of honoring Company obligations under the warranty plans. The Company
believes that the warranty accounting estimate is a "critical accounting
estimate" because: changes in the warranty provision can materially affect net
income; the estimate requires management to forecast estimated product usage
levels by customers; in the case of new models, components or technology, there
may be a different, higher level of warranty claims experience than with
existing, mature products; and certain warranty and other related claims involve
matters of dispute that ultimately are resolved by negotiation, arbitration or
litigation. The estimate for warranty obligations is a critical accounting
estimate for each of the Company's operating segments.
Historically, the cost of fulfilling the Company's warranty obligations has
principally involved replacement parts, labor and sometimes travel for any field
retrofit campaigns. Over the past three years, the Company's warranty cost as a
percentage of sales has ranged from 0.72% of sales to 1.16% of sales. Warranty
costs tend to be higher shortly after new product introductions when field
warranty campaigns may be necessary to correct or retrofit certain items.
Accordingly, the Company must make assumptions about the number and cost of
anticipated field warranty campaigns. The Company's estimates are based on
historical experience, the extent of pre-production testing, the number of units
involved and the extent of new features/components included in new product
models.
Each quarter, the Company reviews actual warranty claims experience to
determine if there are any systemic defects which would require a field
campaign. Also, warranty provision rates on new product introductions are
established at higher than standard rates to reflect increased expected warranty
costs associated with any new product introduction.
Infrequently, a material warranty issue can arise which is beyond the scope
of the Company's historical experience, generally with respect to a new product
launch. If the estimate of warranty costs in fiscal 2002 was increased or
decreased by 50%, the Company's accrued warranty costs, costs of sales and
operating income would each change by $10.1 million, or 42.1%, 0.7% and 9.1%,
respectively.
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. Estimated contract profits are
taken into earnings in proportion to recorded sales based on estimated average
cost determined using total contract units under order. Changes in estimated
contract profits are recognized in earnings using the cumulative catch-up
method. Under this method, current estimated contract profits are compared with
previously estimated contract profits and a cumulative adjustment is recorded to
income for all previously accepted units. The Company believes that the
accounting estimate is a "critical accounting estimate" because changes in
estimated costs can materially affect net income. The estimate requires
management to forecast estimated material costs on non-quoted components, to
estimate manufacturing overhead rates which are dependent in part on sales
forecasts of non-MTVR volume, to estimate manufacturing hours per unit over a
broad spectrum of volume, including low-rate of initial production, high-rate of
production and ramp-down to the end of the contract. The estimate is a critical
accounting estimate for the Company's defense segment.
Quarterly, or upon the occurrence of a significant event impacting the
contract, Company management reviews actual contract performance to date to
determine if there are any factors that would require an adjustment of the
overall contract estimated margin. In fiscal 2002, the Company increased the
margin percentage recognized on the MTVR contract by one percentage point as a
result of a contract modification and favorable cost performance compared to
estimates. The change in estimate increased operating income by $4.3 million in
fiscal 2002, or 3.9% of consolidated operating income. The Company has targeted
margins on the MTVR contract in excess of the 4.3% margin recognized on the
contract life-to-date by initiating actions to negotiate contract modifications
and reduce contract costs. Should the Company be successful with respect to
these actions, the Company estimates that a one percentage point increase in
MTVR margins in fiscal 2003 (on a full year basis) would increase operating
income by approximately $7.6 million.
NEW ACCOUNTING STANDARDS
Accounting for Impairment: In JuneAugust 2001, the Financial Accounting
Standards Board ("FASB") issued SFAS
No. 141, "Business Combinations," and No. 142, "Goodwill and Other Intangible
Assets," effective for fiscal years beginning after December 15, 2001 (with
early adoption allowed). Under the new rules, goodwill and intangible assets
deemed to have indefinite lives will no longer be amortized but will be subject
to annual impairment tests in accordance with the Statements. Other intangible
assets will continue to be amortized over their useful lives.
The Company expects that it will apply the new rules on accounting for
goodwill and other intangible assets beginning in the first quarter of fiscal
2002. Subject to final analysis, the Company expects application of the
nonamortization provisions of SFAS Nos. 141 and 142 to result in a positive
effect on net income of approximately $6.5 million ($0.38 per share) in fiscal
2002. The Company expects to perform the first of the required impairment tests
of goodwill and indefinite-lived intangible assets during the first quarter of
fiscal 2002. The Company has not yet determined what the effect of these tests
will be on the earnings and financial position of the Company, however it does
not expect the impact to be material.
In August 2001, the FASB issued SFAS No. 144, "Accounting for Impairment or
Disposal of Long-Lived Assets," which supersedes SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of." SFAS No. 144 also supercedes the accounting and reporting provisions of APB
Opinion No. 30,31, "Reporting the Results of Operations-ReportingOperations - Reporting the Effects of
Disposal of a Segment of a Business and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions." SFAS No. 144 is intended to establish one
accounting model for long-lived assets to be disposed of by sale and to 25
address
significant implementation issues of SFAS No. 121. The Company adopted SFAS No.
144 on October 1, 2001. The Company does not expectadoption of SFAS No. 144 willdid not have a material
effect on the consolidated financial statements.
Changes to Reporting Gains and Losses from Extinguishment of Debt and Other
Technical Corrections: In April 2002, the FASB issued SFAS No 145, "Recission of
FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and
Technical Corrections." SFAS No. 145 rescinds SFAS No. 4, "Reporting Gains and
Losses from Extinguishment of Debt," and an amendment of that statement, SFAS
No. 64, "Extinguishment of Debt Made to Satisfy Sinking-Fund Requirements." SFAS
No. 145 also rescinds
32
SFAS No. 44, "Accounting for Intangible Assets of Motor Carriers," and amends
SFAS No. 13, "Accounting for Leases," eliminating the inconsistency between the
required accounting for sale-leaseback transactions and the required accounting
for certain lease modifications that have economic effects that are similar to
sale-leaseback transactions. SFAS No. 145 also amends other existing
authoritative pronouncements to make various technical corrections, clarify
meanings or describe their applicability under changed conditions. The
provisions of SFAS No. 145 related to SFAS No. 13 are effective for transactions
occurring after May 15, 2002. All other provisions of SFAS No. 145 are effective
for financial statements issued on or after May 15, 2002. The Company does not
expect that the adoption of this statement will have a material impact on its
financial condition, results of operations or cash flows.
Accounting for Exit or Disposal Activities: In June 2002, the FASB issued
SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal
Activities." SFAS No. 146 nullifies Emerging Issues Task Force Issue No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity (including Certain Costs Incurred in a Restructuring)" and
requires that a liability for a cost associated with an exit or disposal
activity be recognized when the liability is incurred. SFAS No. 146 is effective
for exit or disposal activities that are initiated after December 31, 2002. The
Company does not expect that the adoption of this statement will have a material
impact on its financial condition, results of operations or cash flows.
Special Purpose Entities: In June 2002, the FASB issued Exposure Draft
"Consolidation of Certain Special-Purpose Entities--an Interpretation of ARB No.
51." 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 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. If the
equity investment fails to meet these conditions, then the investment would be
considered 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 June 15, 2003. Disclosures would be required in financial
statements for periods ending December 31, 2002 regarding certain unconsolidated
entities in which a company holds a variable interest.
The Company is in the process of assessing the impact of this proposed
interpretation on its interest in OMFSP (see Note 2 to Notes to 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 obligation under that guarantee. The proposed
interpretation does not address the subsequent measurement of the guarantor's
recognized liability over the 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 a company's first fiscal year beginning after September 15,
2002. The cumulative effect
33
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 at this time.
CUSTOMERS AND BACKLOG
Sales to the U. S. Department of DefenseU.S. Government comprised approximately 27%36% of the Company's
net sales in fiscal 2001.2002. 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 September 30, 20012002 was $799.5$907.8 million compared to
$607.5$799.5 million at September 30, 2000, with approximately $46.92001. Commercial backlogs increased by $4.6
million to $139.0 million at September 30, 2002 compared to the prior year.
Backlog for front-discharge concrete mixers was up $26.2 million while backlog
for domestic refuse packers was down $27.6 million. Front-discharge concrete
mixer backlog increased due to orders received in advance of an engine emissions
change effective October 1, 2002. The domestic refuse backlog progressively
weakened in fiscal 2002 due to weak economic conditions in the $192.0U.S. Fire and
emergency backlogs increased by $34.2 million to $285.5 million at September 30,
2002 compared to the prior year as Pierce adjusted its production levels to
provide more manufacturing lead time to allow for a more efficient manufacturing
flow. Also contributing to the increase related to Medtec andin backlog was the Geesink Norba Group, which
were acquired during fiscal 2001.award of a multi-unit
order for ARFF vehicles. Backlog related to the defense segment increased by
$122.3$69.6 million to $413.8 million in 2001 compared to 2000, with the
backlog increasing by approximately $154.7 million due to the multi-year MTVR
contract. Fire and emergency backlogs increased by $34.4 million ($24.8 million
excluding Medtec) to $251.3$483.3 million at September 30, 20012002 compared to 2001, due
principally to a $76.0 million contract for heavy equipment transport trucks and
trailers for the prior
year. Commercial backlogs increased by $35.3 million (declined by $2.0 million
excluding the impactU.K. MoD. This award resulted from completion of a multi-year
competition and final contract negotiations that were concluded in December
2001. Approximately 6.7% of the Geesink Norba Group acquisition) to $134.4 million
atCompany's September 30, 2001 compared to the prior year. A decrease in concrete
placement products backlog of 37% was nearly offset by a 67% increase in the
domestic refuse products backlog. Approximately 1% of the September 30, 20012002 backlog is not
expected to be filled in fiscal 2002.2003.
Reported backlog excludes purchase options and announced orders for which
definitive contracts have not been executed. Additionally, backlog excludes unfunded
portions of the U. S. Department of DefenseDoD long-term familyFHTV and MTVR contracts. Backlog information and
comparisons of backlogs as of different dates may not be accurate indicators of
future sales or the ratio of the Company's future sales to the U. S. Department of DefenseDoD versus its
sales to other customers.
EURO CONVERSION
On January 1, 1999, certain members of the European Union established fixed
conversion rates between their existing national currencies and a single new
currency, the euro. For a three-year transition period, transactions can be
conducted in both the euro and national currencies. After June 30, 2002, the
euro will be sole legal tender of the participating countries. The adoption of
the euro will affect a multitude of financial systems and business applications.
The Company has operations in most, and has product sales in all, of the
countries participating in the euro conversion. The Company's European
businesses affected by the euro conversion have established plans to address the
information system issues and the potential business implications of converting
to a common currency. As part of this process, the Company has evaluated its
information technology systems and has converted to recent releases of system
software that accommodate the euro conversion. The Company believes it will be
able to modify its business activities to accommodate the conversion and
transition to the euro. The Company is unable to determine the financial impact
of the conversion on its operations, if any, given that the impact will depend
on the competitive situations that exist in the various regional markets in
which the Company participates and potential actions that may or may not be
taken by the Company's competitors and suppliers. The Company does not expect
the conversion to have a material impact on its results of operations or
financial condition.
FINANCIAL MARKET RISK
The Company is exposed to market risk from changes in foreign exchange and
interest rates. To reduce the risk from changes in foreign exchange rates, the
Company selectively uses financial instruments. The Company does not hold or
issue financial instruments for trading purposes.
Interest Rate Risk
The Company's interest expense is sensitive to changes in the interest
rates in the U.S. and off-shore markets. In this regard, changes in U.S. and
off-shore interest rates affect interest payable on the Company's long-term
borrowing under its senior credit facility. The Company has not historically
utilized derivative securities to fix variable rate interest obligations or to
make fixed-rate interest obligations variable. If short-term interest rates
averaged two percent morepercentage points higher in fiscal 20022003 than in fiscal 2001,2002, then
the Company's interest expense would increase, and pre-tax income would decrease
by approximately $2.7$3.2 million. Similarly, if interest rates increased by two
percent,percentage points, the fair value of the Company's $100 million fixed-rate,
long-term notes at September 30, 20012002 would decrease by approximately $8.9$8.4
million. These amounts are determined by considering the impact of the
hypothetical interest rates on the Company's borrowing cost, but do not consider
the effects of the reduced level of overall economic activity that could exist
in such an environment. Further, in the event of a change of such magnitude,
management would likely take actions to mitigate the Company's exposure to the
change. However, due to the uncertainty of the specific actions that would be
taken and their possible effects, the foregoing sensitivity analysis assumes no
changes in the Company's financial structure other than as noted.
26
Foreign Currency Risk
The Company's operations consist of manufacturing in the U. S.U.S., the
Netherlands, the United Kingdom and Sweden and sales and limited truck body
mounting activities throughout the U. S.U.S. and in various European jurisdictions.
ExportInternational sales were less than 7%approximately 11.6% of overall net sales in fiscal
2001.2002, including approximately 3.8% of overall net sales in fiscal 2002 which
involved export sales from the U.S. The majority of export sales in fiscal 20012002
were denominated in U.S. dollars. Sales outside of the U.S. will increasehave increased in
fiscal 2002 due to the recent acquisition of the Geesink Norba Group. For the Company's
U.S. operations, the
34
Company generally purchases materials and componentscomponent parts that are denominated
in U.S. dollars and seeks customer payment in U. S.U.S. dollars for large multi-unit
sales contracts, which span several months or years.
The Company's contract to provide tank transporters and trailers for the
U.K. MoD provides that the Company will invoice and be paid in a combination of
U.S. dollars, British Pounds Sterling and euros. The payments in different
currencies are intended to match cash flow requirements to various suppliers and
to the Company to minimize foreign currency exchange gains and losses. Due to
the inherent differences in the timing of payment for materials and components
and the timing of the receipt of payments from the customer, the Company expects
some foreign currency transaction gains and losses to occur.
The Company submitted and has outstanding firm quotes to the U.K. MoD on
the Wheeled Tanker and the Cargo Support Vehicle truck competitions. These
proposals remain outstanding and contain base quotes that are priced to the
customer in British Pounds Sterling, with alternate quotes for funding in source
currencies. Should the Company's proposals be accepted by the U.K. MoD, the
Company would be subject to foreign currency transaction risks. Similarly, the
Company has agreements with certain subcontractors in connection with these U.K.
MoD programs that have quoted supply of material and component parts in euros
and British Pounds Sterling. The Company has reflected a premium in its pricing
quoted to the U.K. MoD to reflect these foreign currency risks. If the Company
is successful in being awarded this business, it will seek to hedge its foreign
currency risks.
The Company's earnings are affected by fluctuations in the value of the
U.S. dollar against foreign currencies primarily as a result of the effects of
the translation of the Geesink Norba Group earnings from source currencies into
U.S. dollars, euro-denominated purchases of component parts from a European
supplier (approximately 12.07.6 million euros in annual requirements, or
approximately $10.9$7.5 million based on the exchange rate as of September 30, 2001)2002)
and, to a lesser extent, hedging customer orders denominated in currencies other
than the U.S. dollar. The Company may use forward foreign exchange contracts to
partially hedge against the earnings effects of such fluctuations in exchange
rates on non-U.S. dollar denominated sales.sales and purchases. At September 30, 2001,2002,
the Company had outstanding forward foreign exchange contracts to purchase 2.6
million euros ($2.6 million based on the exchange rate as of September 30, 2002)
for delivery over the next five months. At September 30, 2002, the Company had
outstanding forward foreign exchange contracts to sell 0.90.2 million Canadian
dollars for settlement in October 20012002 to hedge an outstanding firm sales
commitment. A hypothetical 10% weakening of the U.S. dollar relative to all
other currencies would not have had a material impact on the Company's fiscal
20012002 earnings or cash flows. However, to a certain extent, foreign currency
exchange rate movements may also affect the Company's competitive position, as
exchange rate changes may affect business practices, the Company's cost
structure compared to its competitors' cost structures and/or pricing strategies
of non-U.S. based competitors.
Fluctuations in currency exchange rates may also impact the Company's
shareholders' equity. Amounts invested in the Company's non-U.S. subsidiaries
are translated into U.S. dollars at the exchange rates in effect at year-end.
The resulting translation adjustments are recorded in shareholders' equity as
cumulative translation adjustments. The cumulative translation adjustments
component of shareholders' equity increased $12.2 million in fiscal 2002 and
$4.3 million since the July 2001
acquisition of the Geesink Norba Group.in fiscal 2001. Using the year-end exchange rates, the total amount
invested in non-U.S. subsidiaries at September 30, 20012002 was approximately $145$162.0
million.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information under the caption "Management's Discussion and Analysis -
Financial Market Risk" contained in Item 7 of this Form 10-K is hereby
incorporated by reference in answer to this item.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
27DATA
35
REPORT OF DELOITTE & TOUCHE LLP, INDEPENDENT AUDITORS
To the Shareholders and Board of Directors of
Oshkosh Truck Corporation
We have audited the accompanying consolidated balance sheet of Oshkosh Truck
Corporation and subsidiaries (the "Company"), as of September 30, 2002, and the
related consolidated statements of income, shareholders' equity and cash flows
for the year then ended. Our audit also included the financial statement
schedule for the year ended September 30, 2002 listed in the Index at Item
15(a)2. These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audit. The Company's financial statements as of September 30, 2001 and for
each of the two years in the period ended September 30, 2001 were audited by
other auditors who have ceased operations. Those auditors expressed an
unqualified opinion on those financial statements, in their report dated October
29, 2001.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, such 2002 financial statements present fairly, in all material
respects, the financial position of Oshkosh Truck Corporation and subsidiaries
as of September 30, 2002, and the results of their operations and their cash
flows for the year then ended in conformity with accounting principles generally
accepted in the United States of America. Also, in our opinion, such 2002
financial statement schedule, when considered in relation to the basic 2002
consolidated financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
As discussed above, the financial statements of Oshkosh Truck Corporation and
subsidiaries as of September 30, 2001, and for each of the two years in the
period ended September 30, 2001, were audited by other auditors who have ceased
operations. As described in Note 5, these financial statements have been revised
for the reclassification of certain purchased intangible assets to goodwill and
to include the transitional disclosures required by Statement of Financial
Accounting Standards (Statement) No. 142, "Goodwill and Other Intangible
Assets," which was adopted by the Company as of October 1, 2001. Our audit
procedures with respect to the disclosures in Note 5 with respect to 2001 and
2000 included (i) agreeing the previously reported amounts of the purchased
intangible assets reclassified to goodwill to the Company's underlying records
obtained from management; (ii) agreeing the previously reported net income to
the previously issued financial statements and the adjustments to reported net
income representing amortization expense (including any related tax effects)
recognized in those periods related to goodwill, intangible assets that are no
longer being amortized, deferred credits related to an excess over cost, equity
method goodwill, and changes in amortization periods for intangible assets that
will continue to be amortized as a result of initially applying Statement No.
142 (including any related tax effects) to the Company's underlying records
obtained from management; and (iii) testing the mathematical accuracy of the
reconciliation of adjusted net income to reported net income, and the related
earnings per share amounts. In our opinion, the disclosures for 2001 and 2000 in
Note 5 are appropriate and have been properly applied.
Also, as described in Note 1, the balance sheet as of September 30, 2001 has
been restated to reclassify income taxes payable from other current liabilities
to a separate component of current liabilities. We audited the adjustment
described in Note 1 that was applied to restate the 2001 balance sheet for this
reclassification. In our opinion such adjustments are appropriate and have been
properly applied.
We were not engaged to audit, review or apply any procedures to the 2001 and
2000 financial statements of the Company other than with respect to the
implementation of Statement No. 142 and the reclass of income taxes payable
noted in the two preceding paragraphs and, accordingly, we do not express an
opinion or other form of assurance on the 2001 and 2000 financial statements
taken as a whole.
/S/DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin
October 28, 2002
36
The following report is a copy of a report previously issued by Arthur Andersen
LLP in connection with the Company's Annual Report on Form 10-K for the year
ended September 30, 2001. This opinion has not been reissued by Arthur Andersen
LLP. In fiscal 2002, the Company adopted Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS No. 142"). As
discussed in Note 5 of the Notes to Consolidated Financial Statements, the
Company has presented the transitional disclosures for fiscal 2001 and 2000
required by SFAS No. 142. The Arthur Andersen LLP report does not extend to
these transitional disclosures. These disclosures are reported on by Deloitte &
Touche LLP as stated in their report appearing herein.
REPORT OF ARTHUR ANDERSEN LLP, INDEPENDENT AUDITORS
To the Shareholders and Board of Directors of
Oshkosh Truck Corporation
We have audited the accompanying consolidated balance sheets of Oshkosh Truck
Corporation (the "Company") as of September 30, 2001 and 2000 and the related
consolidated statements of income, shareholders' equity and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform our
audits to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provideaudit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of the Company as of
September 30, 2001 and 2000 and the consolidated results of its operations and
its cash flows for the years then ended in conformity with accounting principlesprincipals
generally accepted in the United States.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule listed in Part IV, Item 14(a)(2) is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly state in all material
respects the financial data required to be set forth therein in relation to the
basic financial statements taken as a whole.
/S/ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
October 29, 2001
28Milwaukee, Wisconsin
37
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the ShareholdersOSHKOSH TRUCK CORPORATION
Consolidated Statements of Income
Fiscal Year Ended September 30,
2002 2001 2000
---------- ---------- ----------
(In thousands, except per share amounts)
Net sales $1,743,592 $1,445,293 $1,329,516
Cost of sales 1,483,126 1,230,800 1,126,582
---------- ---------- ----------
Gross income 260,466 214,493 202,934
Operating expenses:
Selling, general and Boardadministrative 143,330 104,022 93,724
Amortization of Directorsgoodwill and
purchased intangibles 6,018 12,175 11,159
---------- ---------- ----------
Total operating expenses 149,348 116,197 104,883
---------- ---------- ----------
Operating income 111,118 98,296 98,051
Other income (expense):
Interest expense (21,266) (22,286) (20,956)
Interest income 1,160 1,050 893
Miscellaneous, net (1,555) 1,753 661
---------- ---------- ----------
(21,661) (19,483) (19,402)
---------- ---------- ----------
Income before provision for income
taxes and items noted below 89,457 78,813 78,649
Provision for income taxes 32,285 29,361 31,346
---------- ---------- ----------
Income before items noted below 57,172 49,452 47,303
Equity in earnings of Oshkosh Truck Corporation
We have audited the accompanying consolidated statementsunconsolidated
partnership, net of income shareholders' equitytaxes of
$1,425, $829 and cash flows$738 2,426 1,412 1,205
---------- ---------- ----------
Income from continuing operations 59,598 50,864 48,508
Gain on disposal of Oshkosh Truck Corporation (the "Company")discontinued
operations, net of income taxes of
$1,235 - - 2,015
Extraordinary charge for the years ended September 30, 1999. Our audit also included the financial
statement schedule listed in the Indexearly
retirement of Item 14(a) for the year ended
September 30, 1999. These financial statements and schedule are the
responsibilitydebt, net of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are freeincome
tax benefit of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated results of operations and cash flows of
the Company for the year ended September 30, 1999, in conformity with accounting
principles generally accepted in the United States. Also, in our opinion, the
related financial statement schedule, for the year ended September 30, 1999,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
Milwaukee, Wisconsin /S/ERNST & YOUNG LLP
October 23, 1999
29
OSHKOSH TRUCK CORPORATION
Consolidated Statements of Income
Fiscal Year Ended September 30,
------------------------------
2001 2000 1999
---- ---- ----
(In thousands, except per share amounts)
Net sales................................................. $1,445,293 $1,329,516 $1,170,304
Cost of sales............................................ 1,230,800 1,126,582 996,923
---------- ---------- ----------
Gross income......................................... 214,493 202,934 173,381
Operating expenses:
Selling, general and administrative.................. 104,022 93,724 85,996
Amortization of goodwill and other intangibles....... 12,175 11,159 11,172
---------- ---------- ----------
Total operating expenses....................... 116,197 104,883 97,168
---------- ---------- ----------
Operating income.......................................... 98,296 98,051 76,213
Other income (expense):
Interest expense...................................... (22,286) (20,956) (26,744)
Interest income....................................... 1,050 893 760
Miscellaneous, net.................................... 1,753 661 730
---------- ---------- ----------
(19,483) (19,402) (25,254)
---------- ---------- ----------
Income before items noted below........................... 78,813 78,649 50,959
Provision for income taxes................................ 29,361 31,346 21,313
---------- ---------- ----------
49,452 47,303 29,646
Equity in earnings of unconsolidated partnership, net of
income taxes of $829, $738 and $948.................... 1,412 1,205 1,545
---------- ---------- ----------
Income from continuing operations......................... 50,864 48,508 31,191
Gain on disposal of discontinued operations, net of
income taxes of $1,235................................ -- 2,015 --
Extraordinary charge for early retirement of debt, net of
income tax benefit of $503 and $37 ....................... -- (820) (60)
---------- ---------- ----------
Net income................................................$503 - - (820)
---------- ---------- ----------
Net income $ 59,598 $ 50,864 $ 49,703 $ 31,131
========== ========== ==========
Earnings (loss) per share:
Continuing operations................................. $ 3.05 $ 3.01 $ 2.45
Discontinued operations............................... -- 0.13 --
Extraordinary charge.................................. -- (0.05) --
---------- ---------- ----------
Net income............................................ $ 3.05 $ 3.09 $ 2.45
========== ========== ==========
Earnings (loss) per share assuming dilution:
Continuing operations................................. $ 2.98 $ 2.96 $ 2.39
Discontinued operations............................... -- 0.12 --
Extraordinary charge.................................. -- (0.05) --
---------- ---------- ----------
Net income............................................ $ 2.98 $ 3.03 $ 2.39
========== ========== ==========
Earning (loss) per share:
Continuing operations $ 3.54 $ 3.05 $ 3.01
Discontinued operations - - 0.13
Extraordinary charge - - (0.05)
---------- ---------- ----------
Net income $ 3.54 $ 3.05 $ 3.09
========== ========== ==========
Earnings (loss) per share assuming
dilution:
Continuing operations $ 3.45 $ 2.98 $ 2.96
Discontinued operations - - 0.12
Extraordinary charge - - (0.05)
---------- ---------- ----------
Net income $ 3.45 $ 2.98 $ 3.03
========== ========== ==========
See accompanying notes.
38
OSHKOSH TRUCK CORPORATION
Consolidated Balance Sheets
September 30,
OSHKOSH TRUCK CORPORATION
Consolidated Balance Sheets
September 30,
-------------
2001 2000
---- ----
(In thousands, except share
Assets and per share amounts)
Current assets:
Cash and cash equivalents............................................ $ 11,312 $ 13,569
Receivables, net..................................................... 211,405 106,517
Inventories.......................................................... 258,038 201,210
Prepaid expenses..................................................... 6,673 5,424
Deferred income taxes................................................ 15,722 14,708
---------- --------
Total current assets.............................................. 503,150 341,428
Investment in unconsolidated partnership................................. 18,637 15,179
Other long-term assets................................................... 10,276 10,283
Property, plant and equipment:
Land and land improvements........................................... 13,355 8,359
Equipment on operating lease to others............................... 11,476 11,915
Buildings............................................................ 86,224 69,494
Machinery and equipment.............................................. 130,780 111,591
Construction in progress............................................. 2,331 5,148
---------- --------
244,166 206,507
Less accumulated depreciation........................................ (102,238) (87,748)
---------- --------
Net property, plant and equipment................................. 141,928 118,759
Goodwill and other intangible assets, net................................ 415,277 310,731
---------- --------
Total assets............................................................. $1,089,268 $796,3802002 2001
---------- ----------
(In thousands, except
per share amounts)
Assets
Current assets:
Cash and cash equivalents $ 40,039 $ 11,312
Receivables, net 142,709 211,405
Inventories 210,866 258,038
Prepaid expenses 7,414 6,673
Deferred income taxes 26,008 15,722
---------- ----------
Total current assets 427,036 503,150
Investment in unconsolidated partnership 22,274 18,637
Other long-term assets 11,625 8,626
Property, plant and equipment:
Land and land improvements 14,390 13,355
Equipment on operating lease to others 10,164 11,476
Buildings 90,769 86,224
Machinery and equipment 145,722 130,780
Construction in progress - 2,331
---------- ----------
261,045 244,166
Less accumulated depreciation (120,684) (102,238)
---------- ----------
Net property, plant and equipment 140,361 141,928
Purchased intangible assets, net 104,316 124,787
Goodwill 318,717 292,140
---------- ----------
Total assets $1,024,329 $1,089,268
========== ==========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 116,422 $ 107,864
Floor plan notes payable 23,801 19,271
Customer advances 119,764 58,070
Payroll-related obligations 34,474 27,084
Income taxes 8,597 25,221
Accrued warranty 24,015 18,338
Other current liabilities 47,754 46,322
Revolving credit facility and current maturities
of long-term debt 18,245 77,031
---------- ----------
Total current liabilities 393,072 379,201
Long-term debt 131,713 282,249
Deferred income taxes 39,303 40,334
Other long-term liabilities 50,481 40,458
Commitments and contingencies
Shareholders' equity:
Preferred stock, $.01 par value; authorized
2,000,000 shares; none issued and outstanding - -
Class A Common Stock, $.0l par value; authorized
1,000,000 shares; issued - 416,619 in 2002 and
418,199 in 2001 4 4
Common Stock, $.01 par value; authorized
60,000,000 shares; issued - 17,415,410 in 2002
and 17,413,830 in 2001 174 174
Paid-in capital 117,179 110,330
Retained earnings 300,713 246,915
Common Stock in treasury, at cost; 851,621 shares
in 2002 and 1,116,597 shares in 2001 (7,636) (10,195)
Unearned compensation (4,086) -
Accumulated other comprehensive income (loss) 3,412 (202)
---------- ----------
Total shareholders' equity 409,760 347,026
---------- ----------
Total liabilities and shareholders' equity $1,024,329 $1,089,268
========== ========== ========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable..................................................... $ 107,864 $ 84,215
Floor plan notes payable............................................. 19,271 23,925
Customer advances.................................................... 58,070 58,493
Payroll-related obligations.......................................... 27,084 23,465
Accrued warranty..................................................... 18,338 15,519
Other current liabilities............................................ 71,543 50,767
Revolving credit facility and current maturities of long-term debt... 77,031 8,544
---------- --------
Total current liabilities....................................... 379,201 264,928
Long-term debt........................................................... 282,249 154,238
Deferred income taxes.................................................... 40,334 46,414
Other long-term liabilities.............................................. 40,458 29,743
Commitments and contingencies............................................
Shareholders' equity:
Preferred Stock, $.01 par value; authorized - 2,000,000 shares;
none issued and outstanding...................................... -- --
Class A Common Stock, $.01 par value; authorized - 1,000,000 shares;
issued - 418,199 in 2001 and 422,207 in 2000..................... 4 4
Common Stock, $.01 par value; authorized 60,000,000 shares;
issued - 17,413,830 in 2001 and 17,409,822 in 2000............... 174 174
Paid-in capital...................................................... 110,330 109,740
Retained earnings.................................................... 246,915 201,791
Common Stock in treasury, at cost: 1,116,597 shares in 2001 and
1,163,872 shares in 2000......................................... (10,195) (10,652)
Accumulated other comprehensive loss................................. (202) --
---------- --------
Total shareholders' equity....................................... 347,026 301,057
---------- --------
Total liabilities and shareholders' equity............................... $1,089,268 $796,380
========== ========
See accompanying notes.
3139
OSHKOSH TRUCK CORPORATION
Consolidated Statements of Shareholders' Equity
Common Accumulated
Stock in Other
Common Paid-In Retained Stock in OtherTreasury Unearned Comprehensive
Stock Capital Earnings Treasury Comprehensive Total
-------- --------- ---------- at Cost Loss ----------Compensation Income (Loss) Total
------ --------- --------- --------- ------------ ------------- ---------
(In thousands, except per share amounts)
Balance at September 30, 1998.................. $1401999 $ 14,665 $130,959140 $ (12,664)15,997 $ (1,804) $131,296
Comprehensive income:
Net income................................. -- -- 31,131 -- -- 31,131
Minimum pension liability adjustment
(net of income taxes of $1,153)........ -- -- -- -- 1,804 1,804
--------
Comprehensive income............... 32,935
--------
Cash dividends:
Class A Common Stock
($.29250 per share).................... -- -- (125) -- -- (125)
Common Stock ($.33625 per share)........... -- -- (4,155) -- -- (4,155)
Exercise of stock options...................... -- (156) -- 1,597 -- 1,441
Tax benefit related to stock options exercised. -- 1,496 -- -- -- 1,496
Other.......................................... -- (8) -- -- -- (8)
---- -------- -------- --------- -------- --------
Balance at September 30, 1999.................. 140 15,997 157,810 $ (11,067) --$ - $ - $ 162,880
Net income and comprehensive income............ -- --income - - 49,703 -- --- - - 49,703
Cash dividends:
Class A Common Stock ($.30000.300 per
share).................... -- -- - - (127) -- --- - - (127)
Common Stock ($.34500.345 per share). -- -- - - (5,595) -- --- - - (5,595)
Exercise of stock options...................... --options - (55) --- 415 --- - 360
Net proceeds of Common Stock offering..........offering 38 93,364 -- -- --- - - - 93,402
Tax benefit related to stock options
exercised. --exercised - 434 -- -- --- - - - 434
---- -------- -------------- --------- -------- ----------------- --------- ------- ------- ---------
Balance at September 30, 2000..................2000 178 109,740 201,791 (10,652) --- - 301,057
Comprehensive income:
Net income................................. -- --income - - 50,864 -- --- - - 50,864
Gain onChange in fair value of derivative
instruments (net of income taxes
of $7).................... -- -- -- -- - - - - - 13 13
Minimum pension liability
adjustment (net of income tax
benefit of $2,637).. -- -- -- -- - - - - - (4,490) (4,490)
CumulativeCurrency translation adjustment -- -- --- - - - - 4,275 4,275
-----------------
Comprehensive income................... -- -- -- -- --income 50,662
-----------------
Cash dividends:
Class A Common Stock ($.30000.300 per
share).................... -- -- - - (126) -- --- - - (126)
Common Stock ($.34500.345 per share)........... -- -- - - (5,614) -- --- - - (5,614)
Exercise of stock options...................... --options - 23 --- 457 --- - 480
Tax benefit related to stock options
exercised. --exercised - 567 -- -- --- - - - 567
---- -------- -------------- --------- -------- ----------------- --------- ------- ------- ---------
Balance at September 30, 2001.................. $178 $110,330 $246,9152001 178 110,330 246,915 (10,195) - (202) 347,026
Comprehensive income:
Net income - - 59,598 - - - 59,598
Change in fair value of derivative
instruments (net of income taxes
of $48) - - - - - 82 82
Gains reclassified into earnings
from other comprehensive income
(net of income taxes of $36) - - - - - (62) (62)
Minimum pension liability
adjustment (net of income tax
benefit of $5,075) - - - - - (8,640) (8,640)
Currency translation adjustment - - - - - 12,234 12,234
---------
Comprehensive income 63,212
---------
Cash dividends:
Class A Common Stock ($.300 per
share) - - (125) - - - (125)
Common Stock ($.345 per share) - - (5,675) - - - (5,675)
Issuance of restricted stock - 3,440 - 673 (4,113) - -
Amortization of unearned compensation - - - - 27 - 27
Exercise of stock options - 368 - 1,886 - - 2,254
Tax benefit related to stock options
exercised - 3,041 - - - - 3,041
------ --------- --------- --------- ------- ------- ---------
Balance at September 30, 2002 $ (10,195)178 $ (202) $347,026
==== ======== ========117,179 $ 300,713 $ (7,636) $(4,086) $ 3,412 $ 409,760
====== ========= ======== ================= ========= ======= ======= =========
See accompanying notes.
3240
OSHKOSH TRUCK CORPORATION
Consolidated Statements of Cash Flows
Fiscal Year Ended September 30,
2001 2000 1999
--------- --------- ---------
(In thousands)
Operating activities:
Income from continuing operations................................ $ 50,864 $ 48,508 $ 31,191
Depreciation and amortization.................................... 28,497 24,218 23,157
Deferred income taxes............................................ (2,697) 2,277 (3,370)
Equity in earnings of unconsolidated partnership................. (2,241) (1,943) (2,493)
Loss (gain) on disposal of property, plant and
equipment.................................................. (52) (12) 59
Changes in operating assets and liabilities:
Receivables, net............................................. (71,489) (9,702) (12,204)
Inventories.................................................. (14,835) 7,330 (51,272)
Prepaid expenses............................................. 311 (436) (1,195)
Other long-term assets....................................... 174 256 --
Accounts payable............................................. (1,156) (7,802) 19,556
Floor plan notes payable..................................... (7,938) (2,691) 14,971
Customer advances............................................ (892) (12,059) 23,449
Payroll-related obligations.................................. (1,924) 1,639 1,582
Accrued warranty............................................. 641 1,600 (2,289)
Other current liabilities.................................... 14,956 (638) (3,144)
Other long-term liabilities.................................. (589) (862) 1,050
--------- --------- ---------
Net cash provided from (used for) operating activities... (8,370) 49,683 39,048
Investing activities:
Acquisitions of businesses, net of cash acquired................. (160,241) (7,147) --
Additions to property, plant and equipment....................... (18,493) (22,647) (17,999)
Proceeds from sale of property, plant and equipment 238 52 158
Decrease (increase) in other long-term assets.................... (4,867) (2,417) 3,357
--------- --------- ---------
Net cash used for investing activities....................... (183,363) (32,159) (14,484)
Net cash provided from discontinued operations................... -- 2,015 --
Financing activities:
Net borrowings (repayments) under revolving credit facility...... 65,200 (5,000) (1,000)
Proceeds from issuance of long-term debt......................... 140,000 30,913 --
Repayment of long-term debt...................................... (8,908) (124,595) (19,256)
Debt issuance costs.............................................. (1,183) (795) --
Proceeds from Common Stock offering.............................. -- 93,736 --
Costs of Common Stock offering................................... -- (334) --
Purchase of Common Stock and proceeds from
exercise of stock options, net............................... 480 360 1,433
Dividends paid................................................... (5,735) (5,392) (4,226)
--------- --------- ---------
Net cash provided from (used for) financing
activities............................................... 189,854 (11,107) (23,049)
Effect of exchange rate changes on cash.......................... (378) -- --
--------- --------- ---------
Increase (decrease) in cash and cash equivalents................. (2,257) 8,432 1,515
Cash and cash equivalents at beginning of year................... 13,569 5,137 3,622
--------- --------- ---------
Cash and cash equivalents at end of year......................... $ 11,312 $ 13,569 $ 5,137
========= ========= =========
Supplemental disclosures:
Cash paid for interest (net of amount capitalized)........... $ 20,068 $ 22,148 $ 26,142
Cash paid for income taxes...................................OSHKOSH TRUCK
Consolidated Statements of Cash Flows
Fiscal Year Ended September 30,
2002 2001 2000
---------- ---------- ----------
(In thousands)
Operating activities:
Income from continuing operations $ 59,598 $ 50,864 $ 48,508
Depreciation and amortization 25,392 28,497 24,218
Deferred income taxes (1,898) (2,697) 2,277
Equity in earnings of unconsolidated
partnership (3,851) (2,241) (1,943)
Loss (gain) on disposal of property,
plant and equipment 13 (52) (12)
Changes in operating assets and
liabilities:
Receivables, net 70,588 (71,489) (9,702)
Inventories 48,937 (14,835) 7,330
Prepaid expenses (1,168) 311 (436)
Other long-term assets 75 174 256
Accounts payable 6,899 (1,156) (7,802)
Floor plan notes payable 4,530 (7,938) (2,691)
Customer advances 61,694 (892) (12,059)
Payroll-related obligations 6,911 (1,924) 1,639
Income taxes (12,409) 14,672 8,776
Accrued warranty 3,484 641 1,600
Other current liabilities (1,782) 284 (9,414)
Other long-term liabilities (3,045) (589) (862)
---------- ---------- ----------
Net cash provided from (used for)
operating activities 263,968 (8,370) 49,683
Investing activities:
Acquisitions of businesses, net of
cash acquired - (160,241) (7,147)
Additions to property, plant and
equipment (15,619) (18,493) (22,647)
Proceeds from sale of property,
plant and equipment 8 238 52
Increase in other long-term assets (7,824) (4,867) (2,417)
---------- ---------- ----------
Net cash used for investing
activities (23,435) (183,363) (32,159)
Net cash provided from discontinued
operations - - 2,015
Financing activities:
Net borrowings (repayments) under
revolving credit facility (65,200) 65,200 (5,000)
Proceeds from issuance of long-term
debt - 140,000 30,913
Repayment of long-term debt (144,134) (8,908) (124,595)
Debt issuance costs - (1,183) (795)
Proceeds from Common Stock offering - - 93,736
Costs of Common Stock offering - - (334)
Proceeds from exercise of stock
options 2,254 480 360
Dividends paid (5,777) (5,735) (5,392)
---------- ---------- ----------
Net cash provided from (used for)
financing activities (212,857) 189,854 (11,107)
Effect of exchange rate changes on
cash 1,051 (378) -
---------- ---------- ----------
Increase (decrease) in cash and
cash equivalents 28,727 (2,257) 8,432
Cash and cash equivalents at
beginning of year 11,312 13,569 5,137
---------- ---------- ----------
Cash and cash equivalents at end
of year $ 40,039 $ 11,312 $ 13,569
========== ========== ==========
Supplemental disclosures:
Cash paid for interest (net of
amount capitalized) $ 20,964 $ 20,068 $ 22,148
Cash paid for income taxes 49,813 17,959 22,438 26,859
See accompanying notes.
3341
OSHKOSH TRUCK CORPORATION
Notes to Consolidated Financial Statements
September 30, 20012002
(In thousands, except share and per share amounts)
1. Summary of Significant Accounting Policies
Operations --- Oshkosh Truck Corporation, andwith its wholly-owned subsidiaries
(the "Company"), is a leading manufacturer of a wide variety of medium- and
heavy-duty specialized
trucks and truck bodies predominately for the U.S. and European markets.
"Oshkosh" refers to Oshkosh Truck Corporation, not including its subsidiaries.
The Company sells its products into three principal truck markets --- commercial,
fire and emergency and defense. The Company's commercial business is principally
conducted through its wholly-owned subsidiaries, McNeilus Companies, Inc.
("McNeilus"), Viking Truck and Equipment, Inc. ("Viking"), Geesink Group BV,B.V.,
Norba ABA.B. and Geesink Norba LtdLimited and their wholly-owned subsidiaries
(together, the "Geesink Norba Group") and the commercial division of Oshkosh.
The Company's fire and emergency business is principally conducted through its
wholly-owned subsidiary, Pierce Manufacturing Inc. ("Pierce"), the airport
products division of Oshkosh and the Company's wholly-owned subsidiaries,
Kewaunee Fabrications, LLC ("Kewaunee") and Medtec Ambulance Corporation
("Medtec"). The defense business is conducted through the operations of Oshkosh.
McNeilus is one of two general partners in Oshkosh/McNeilus Financial Services
Partnership ("OMFSP"), which provides lease financing to the Company's
customers. Each of the two general partners havehas identical voting, participating
and protective rights and responsibilities, and accordingly, the Company
accounts for its equity interest in OMFSP of 54% at September 30, 2002 and 52%
at September 30, 2001, and 53% at September 30, 2000, under the equity method.
Principles of Consolidation and Presentation --- The consolidated financial
statements include the accounts of Oshkosh and all of its wholly-owned
subsidiaries and are prepared in conformity with U.S. generally accepted
accounting principles.principles ("U.S. GAAP"). The Company records its interest in OMFSP
under the equity method. The preparation of financial statements in conformity
with generally accepted accounting principlesU.S. GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates. All significant intercompany accounts and
transactions have been eliminated.
Cash and Cash Equivalents --- The Company considers all highly liquid
investments with a maturity of three months or less when purchased to be cash
equivalents. Cash equivalents, consisting principally of short-term commercial
paper, time deposits and money market instruments, totaled $3,770$32,458 and $13,000$3,770 at
September 30, 20012002 and 2000,2001, respectively. The cost of these securities
which are considered "available for
sale" for financial reporting purposes, approximates fair value at September 30,
2001 and 2000.due to the short-term nature of the investments.
Receivables --- Receivables consist of amounts billed and currently due from
customers and unbilled costs and accrued profits related to revenues on
long-term contracts that have been recognized for accounting purposes but not
yet billed to customers.
Inventories --- Approximately 74.3%85.0% and 85.5%74.3% of the Company's inventories at
September 30, 20012002 and 2000,2001, respectively, were valued at the lower of cost,
computed on the last-in, first-out ("LIFO") method, or market. The remaining
inventories are valued at the lower of cost, computed on the first-in, first-out
("FIFO") method, or market. If the FIFO inventory valuation method had been used
exclusively, inventories would have increased by $12,619$13,251 and $10,988$12,619 at
September 30, 20012002 and 2000,2001, respectively.
Property, Plant and Equipment --- Property, plant and equipment are recorded
at cost. Depreciation is provided over the estimated useful lives of the
respective assets using accelerated and straight-line methods. The estimated
useful lives range from 10 to 50 years for buildings and improvements, from 4 to
25 years for machinery and equipment and from 3 to 10 years for capitalized
software and related costs. Depreciation expense was $17,527, $15,510 $12,200 and
$10,743$12,200 in fiscal 2002, 2001 2000 and 1999,2000, respectively. The Company capitalizes
interest on borrowings during the active construction period of major capital
projects. Capitalized interest is added to the cost of the underlying assets and
is amortized over the useful lives of the assets. The Company capitalized
interest of $173 and $270 in fiscal 2001 and 2000, respectively. There was no
capitalized interest in fiscal 1999.2002. Equipment on operating lease to others
represents the cost of vehicles sold to customers for which the Company has
guaranteed the residual value. These transactions are accounted for as operating
leases with the related assets capitalized and depreciated over their estimated
economic life of 10 years. Cost less accumulated depreciation for equipment on
operating lease at September 30, 2002 and 2001 was $7,497 and 2000 was $9,703, and $11,309,
respectively.
Other Long-Term Assets --- Other long-term assets include deferred financing
costs, which are amortized using the interest method over the term of the debt,
prepaid funding of pension costs and certain investments. 34
Amortization expense
was $1,848, $812 and $859 in fiscal 2002, 2001 and 2000, respectively.
Impairment of Long-Lived Assets --- Property, plant and equipment and other
long-term assets and goodwill and other(including amortizable intangible assetsassets) are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. If the sum of the expected undiscounted
cash flows is less than the carrying value of the related asset or group of
assets, a loss is recognized for the difference between the fair value and
carrying value of the asset or group of assets. Such analyses necessarily
involve significant judgment.
42
In August 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for
Impairment or Disposal of Long-Lived Assets," which supersedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of." SFAS No. 144 also supercedes the accounting and reporting
provisions of Accounting Principles Board ("APB") Opinion No. 30, "Reporting the
Results of Operations-Reporting the Effects of Disposal of a Segment of a
Business and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions." SFAS No. 144 is intended to establish one accounting model for
long-lived assets to be disposed of by sale and to address significant
implementation issues of SFAS No. 121. The Company expects to adoptadopted SFAS No. 144
effective October 1, 2001. The Company does not expectAdoption of SFAS No. 144 willdid not have a material
effect on the consolidatedCompany's financial statements.condition, results of operations or cash
flows.
Floor Plan Notes Payable --- Floor plan notes payable represent liabilities
related to the purchase of commercial truck chassis upon which the Company
mounts its manufactured refuse bodies and rear-discharge concrete mixers, refuse bodies, ambulance
packages and certain fire apparatus. Floor plan notes payable are non-interest
bearing for terms ranging from 90 to 180 days and must be repaid upon the sale
of the vehicle to a customer. The Company's practice is to repay all floor plan
notes for which the non-interest bearing period has expired without sale of the
vehicle to a customer.
Customer Advances --- Customer advances principally represent amounts
received in advance of the completion of fire and emergency and commercial
vehicles. Most of these advances bear interest at variable rates approximating
the prime rate. Advances also include any Performance-Based Paymentsperformance-based payments received
from the U.S. Department of Defense ("DoD") in excess of the value of related
inventory. Advances from the DoD are non-interest bearing. See discussion on
Performance-Based Paymentsperformance-based payments that follows.
Performance-Based Payments --- The Company's five-year contractcontracts with the
U.S. DoD
to deliver heavy-payload vehicles (Future(Family of Heavy Tactical Vehicle or "FHTV") includes,
and medium-payload vehicles (Medium Tactical Vehicle Replacement or "MTVR")
include requirements for "Performance-Based Payments"."performance-based payments." The Performance-Based Payments provisionperformance-based
payment provisions in the contract requirescontracts require the DoD to pay the Company based on
the completion of certain pre-determined events in connection with the
production of vehicles under the FHTV contract. Performance Based
Paymentsthese contracts. Performance-based payments
received are first applied to reduce outstanding receivables for units accepted,
with any remaining amount shown as a contra-inventory amount, to the extent of
FHTV and MTVR inventory on hand. Amounts received in excess of FHTV and MTVR
receivables and inventory are included in liabilities as customer advance liabilities.advances.
Guaranteed Residual Value Obligations and Deferred Income --- Prior to
acquisition, the Company's wholly-owned subsidiary, Viking, entered into "sales"
transactions with customers that provided for residual value guarantees. In
accordance with SFAS No. 13 "Accounting For Leases," these transactions have
been recorded as operating leases. Net proceeds received in connection with the
initial transactions have been recorded as residual value liabilities to the
extent of Viking's guarantee. Proceeds received in excess of the guarantee
amount have been recorded as deferred income and are being accreted to income on
a straight-line basis over the period to the first exercise date of the
guarantee. Amounts outstanding at September 30, 20012002 and 20002001 and included in
other liabilities were:
September 30, 2001
------------------2002
Current Long-Term Total
------- --------- ------------
Deferred revenue............... $1,276 $1,719revenue $ 2,9951,112 $ 607 $ 1,719
Residual value guarantees...... 981guarantees 1,635 4,398 6,033
7,014
------ ------ ------- $2,257 $7,752 $10,009
====== ======--------- -------
$ 2,747 $ 5,005 $ 7,752
======= ========= =======
September 30, 2000
------------------2001
Current Long-Term Total
------- --------- ------------
Deferred revenue............... $1,503 $2,570revenue $ 4,0731,276 $ 1,719 $ 2,995
Residual value guarantees...... 1,495 6,114 7,609
------ ------guarantees 981 6,033 7,014
------- $2,998 $8,684 $11,682
====== ======--------- -------
$ 2,257 $ 7,752 $10,009
======= ========= =======
Residual value guarantees are first exercisable by the customer as follows:
2002 - $981; 2003 - $1,635; 2004 - $4,090; 2005 - $308.
Net Sales - Net sales (other than sales under long-term, fixed-priced
production contracts - see "Revenue Recognition and Long-Term Contracts" which
follows) includes amounts invoiced to the Company's customers net of any amounts
invoiced for taxes imposed on the customer such as excise or value-added taxes.
Revenue Recognition and Long-Term Contracts --- In December 1999, the
Securities and Exchange Commission issued Staff Accounting Bulletin ("SAB") No.
101, which deals with revenue recognition issues, excluding revenue accounted
for using the percentage-of-completion method. The Company adopted SAB No. 101
(as modified by SAB No. 101 A101A and 101 B) was adopted by the Company101B) in the fourth quarter of fiscal 2001. The
adoption of SAB No. 101 did not have a significant effect on the Company's
financial condition, results of operations or on the financial position of the Company.
35cash flows.
43
In conformity with SAB No. 101, revenue is generally recognized and earned 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.
Sales under fixed-price defense contracts generally are recorded using the
percentage-of-completionpercentage-of -completion method of accounting. Sales and anticipated profits
under the Medium Tactical Vehicle Replacement ("MTVR")MTVR long-term fixed-price production contract are recorded on a
percentage-of-completion basis, generally using units accepted as the
measurement basis for effort accomplished. Estimated contract profits are taken
into earnings in proportion to recorded sales based on estimated average cost
determined using total contract units under order (including exercised options
of 426)737) of 6,092,6,403, of which 1,1733,264 units have been completed as of September 30,
2001.2002.
Sales 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,
are recorded 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. Amounts representing contract change orders, claims
or other items are included in sales only when they can be reliably estimated
and realization is probable. When adjustments in contract value or estimated
costs are determined, any changes from prior estimates are reflected in earnings
in the current period. Anticipated losses on contracts or programs in progress
are charged to earnings when identified.
Margins recorded on the MTVR contract are subject to change based on a
number of factors, including actual cost performance and product warranty
experience compared to estimated amounts and changes or contract modifications
agreed to by the Company and its customer. In fiscal 2002, the Company increased
the margin percentage recognized on the MTVR contract by one percentage point to
4.3% as a result of a contract modification and favorable cost performance
compared to estimates. This change in estimate increased fiscal 2002 operating
income by $4,264, net income by $3,000 and earnings per share by $0.17,
including $1,658, $1,044 and $0.06, respectively, relating to prior year
revenues.
The Company has targeted higher margins on the MTVR contract by initiating
actions to negotiate contract modifications and reduce contract costs. Should
the Company be successful with respect to these actions, the Company estimates a
one percentage point increase in MTVR margins in fiscal 2003 including amounts
related to prior year revenues would increase operating income, net income and
net income per share by approximately $7,600, $4,800 and $0.27, respectively.
Research and Development and Similar Costs --- Except for certain
arrangements described below, research and development costs are generally
expensed as incurred and included as part of cost of sales. Research and
development costs charged to expense amounted to approximately$17,866, $14,321 $14,137
and $10,868,$14,137,
during fiscal 2002, 2001 and 2000, and 1999, respectively. Customer-sponsoredCustomer sponsored research and
development costs incurred pursuant to contracts are accounted for as contract
costs.
Warranty --- Provisions for estimated warranty and other related costs are
recorded in cost of sales at the time of sale and are periodically adjusted to
reflect actual experience. Amounts expensed were $20,263, $12,278 and $9,648,
respectively, in fiscal 2002, 2001 2000 and 1999 were
$12,278, $9,648 and $7,573, respectively.2000.
Advertising --- Advertising costs are included in selling, general and
administrative expense and are expensed as incurred. These expenses totaled
$3,001, $2,616 $2,132 and $1,804$2,132 in fiscal 2002, 2001 and 2000, respectively.
Shipping and 1999, respectively.Handling Fees and Costs - Revenue received from shipping and
handling fees is reflected in net sales. Shipping fee revenue was insignificant
for all periods presented. Shipping and handling costs are included in cost of
sales.
Foreign Currency Translation --- The financial statements of foreign
subsidiaries have been translated into U.S. dollars in accordance with SFAS No.
52, Foreign Currency Translation. All balance sheet accounts have been
translated using the exchange rates in effect at the balance sheet date. Income
statement amounts have been translated using the average exchange rate forduring
the year.period in which the transactions occurred. Resulting translation adjustments
are included in "accumulated other comprehensive income (loss)." The Company
recorded a $1,727 foreign currency transaction gain in miscellaneous other
income in fiscal 2001 related to the purchase of euros prior to the acquisition
of the Geesink Norba Group in July 2001. All other foreign currency transaction
gains and losses were insignificant for all years presented.
Income Taxes --- Deferred income taxes are provided to recognize temporary
differences between the financial reporting basis and the income tax basis of
the Company's assets and liabilities using currently enacted tax rates and laws.
Income taxes are provided currently on financial statement earnings of non-U.S.
subsidiaries expected to be repatriated. The Company intends to determine
annually the amount of undistributed non-U.S. earnings to invest indefinitely in
its non-U.S. operations.
Financial Instruments -- The- Based on Company estimates, the carrying amounts of
cash equivalents, receivables, accounts payable, accrued liabilities and
variable rate debt approximated fair value as of September 30, 20012002 and 2000.2001.
The fair value of the Company's $100,000, 8 3/4%, senior subordinated notes
(based on published market information) was approximately $98,000$103,000 and $95,000$98,000
at September 30, 2002 and 2001, and 2000, respectively.
44
Concentration of Credit Risk --- Financial instruments which potentially
subject the Company to significant concentrations of credit risk consist
principally of cash equivalents, trade accounts receivable, and OMFSP leases
receivable.receivable and guarantees of certain customers' obligations under deferred
payment contracts and lease purchase agreements.
The Company maintains cash and cash equivalents, and certain other financial
instruments, with various major financial institutions. The Company performs
periodic evaluations of the relative credit standing of these financial
institutions and limits the amount of credit exposure with any institution.
Concentration of credit risk with respect to trade accounts and leases
receivable is limited due to the large number of customers and their dispersion
across many geographic areas. However, a significant amount of trade receivablesand leases
receivable are with the U.S. government, with companies in the ready-mix
concrete industry, municipalities and with several large waste haulers in the
United States. The Company does not currently foresee a significant credit risk
associated with these receivables.
36
Derivative Financial Instruments --- As of October 1, 2000, the Company
adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," which was amended by SFAS No. 137 and SFAS No. 138 (collectively
referred to as SFAS No. 133). As a result of adoption of SFAS No. 133, the
Company recognizes all derivative financial instruments, such as foreign
exchange contracts, in the consolidated financial statements at fair value
regardless of the purpose or intent for holding the instrument. Changes in the
fair value of derivative financial instruments are either recognized
periodically in income or in shareholders' equity as a component of
comprehensive income depending on whether the derivative financial instrument
qualifies for hedge accounting, and if so, whether it qualifies as a fair value
hedge or cash flow hedge. Generally, changes in fair values of derivatives
accounted for as fair value hedges are recorded in income along with the
portions of the changes in the fair values of the hedged items that relate to
the hedged risks. Changes in fair values of derivatives accounted for as cash
flow hedges, to the extent they are effective as hedges, are recorded in other
comprehensive income, net of deferred taxes. Hedge ineffectiveness was
insignificant for all periods reported. Changes in fair value of derivatives not
qualifying as hedges are reported in income.
To protect against increases in cost of purchases of certain manufactured
components which are payable in foreign currency over a six-month period, the
Company has instituted a foreign currency cash flow hedging program. The Company
hedges portions of its estimated cash flows associated with foreign currency
payments with forward contracts.
The Company expects to reclassify $33 of net gains on derivative
instruments from accumulated other comprehensive income at September 30, 2002 to
earnings during the next twelve months due to sales of inventory.
Upon adoption of SFAS No. 133 on October 1, 2000, the Company recorded a
$119 charge to cost of sales as required under the standard.
Stock-Based Compensation --- The Company measures compensation cost for
stock-based compensation plans using the intrinsic value method of accounting as
prescribed in APB Opinion No. 25, "Accounting for Stock Issued to Employees,"
and related interpretations. The Company has adopted those provisions of SFAS
No. 123, "Accounting for Stock-Based Compensation," which require disclosure of
the pro forma effect on net earnings and earnings per share as if compensation
cost had been recognized based upon the estimated fair value at the date of
grant for options awarded.
Environmental Remediation Costs --- The Company accrues for losses associated
with environmental remediation obligations when such losses are probable and
reasonably estimable. Costs of future expenditures for environmental remediation
obligations are not discounted to their present value. Recoveries of
environmental remediation costs from other parties are recorded as assets when
their receipt is deemed probable. The accruals are adjusted as further
information develops or circumstances change.
Business Combinations and Goodwill and Other Intangible Assets -
Historically, the cost of goodwill and other intangible assets has been
amortized to expense on a straight line basis over the estimated periods
benefited, which ranged from 5 to 40 years.
In June 2001, the FASB issued SFAS No. 141, "Business Combinations," and
No. 142, "Goodwill and Other Intangible Assets" effective for fiscal years
beginning after December 15, 2001 (with early adoption allowed). Application of
SFAS No. 141 iswas required for purchase business combinations completed after
June 30, 2001. Under the new rules, goodwill and intangible assets deemed to
have indefinite lives will no longer be amortized but will be subject to
annual
impairment tests at least annually in accordance with the Statements. Other
intangible assets will continue to be amortized over their useful lives.
The Company adopted the new rules on accounting for goodwill and other
intangible assets in the first quarter of fiscal 2002. Subject2002 (see Note 5).
New Accounting Standards - In April 2002, the FASB issued SFAS No. 145
"Recission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No.
13 and Technical Corrections." SFAS No. 145 rescinds SFAS No. 4, "Reporting
Gains and Losses from Extinguishment of Debt," and an amendment of that
statement, SFAS No. 64, "Extinguishment of Debt Made to final
analysis,Satisfy Sinking-Fund
Requirements." SFAS No. 145 also rescinds SFAS No. 44, "Accounting for
Intangible Assets of Motor Carriers," and amends SFAS No. 13, "Accounting for
Leases," eliminating the Company expects application ofinconsistency between the non-amortizationrequired accounting for
sale-leaseback transactions and the required accounting for certain lease
modifications that have economic effects that are similar to sale-leaseback
transactions.
45
SFAS No. 145 also amends other existing authoritative pronouncements to make
various technical corrections, clarify meanings or describe their applicability
under changed conditions. The provisions of the StatementsSFAS No. 145 related to result in a positive effectSFAS No. 13
are effective for transactions occurring after May 15, 2002. All other
provisions of SFAS No. 145 are effective for financial statements issued on operating income of
approximately $7,000 and net income of approximately $6,500 ($0.38 per share) in
fiscalor
after May 15, 2002. The Company does not expect that the adoption of this
statement will performhave a material impact on its financial condition, results of
operations or cash flows.
In June 2002, the first ofFASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." SFAS No. 146 nullifies Emerging
Issues Task Force Issue No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring)" and requires that a liability for a cost
associated with an exit or disposal activity be recognized when the required impairment tests
of goodwill and indefinite lived intangible assets during the first quarter of
fiscalliability is
incurred. SFAS No. 146 is effective for exit or disposal activities that are
initiated after December 31, 2002. The Company has not yet determined what the effect of these tests
will be on the earnings and financial position of the Company, however it does not expect that the adoption
of this statement will have a material impact to be material.on its financial condition,
results of operations or cash flows.
Earnings Per Share --- The following table sets forth the computation of
basic and diluted weighted average shares used in the per share calculations:
Fiscal Year Ended September 30,
2001 2000 1999
----------- ----------- -----------
Fiscal Year Ended September 30,
2002 2001 2000
---------- ---------- ----------
Denominator for basic earnings per share 16,821,221 16,681,000 16,073,684
Effect of dilutive options and incentive
compensation awards 463,954 407,063 330,389
---------- ---------- ----------
Denominator for diluted earnings per share 17,285,175 17,088,063 16,404,073
========== ========== ==========
Options to purchase 30,000 shares, 5,000 shares and 230,000 shares of
Common Stock at $55.00 per share, $58.56 per share and $58.76 per share,
respectively, and 70,000 shares of restricted Common Stock granted at $58.76 per
share were outstanding in fiscal 2002 and options to purchase 27,000 shares at
$44.00 per share and 241,500 shares at $33.125 per share were outstanding in
fiscal 2001 and fiscal 2000, respectively, but were not included in the
computation of diluted earnings per share.............................. 16,681,000 16,073,684 12,727,141
Effectshare because the exercise price of dilutive optionsthe
option was greater than the average market price of the Common Stock and,
incentive compensation awards...... 407,063 330,389 324,713
----------- ----------- -----------
Denominator for dilutive earnings per
share................................ 17,088,063 16,404,073 13,051,854
=========== =========== ===========therefore, the effect would be anti-dilutive.
Reclassifications --- Certain reclassifications have been made to the fiscal
20002001 and 19992000 financial statements to conform to the fiscal 20012002 presentation.
In the fourth quarter ofFor fiscal 2002 and 2001, the Company adopted provisionsseparately identified income taxes payable
on the face of the Emerging Issues Task Force ("EITF") of the FASB Abstract No. 00-10, "Accounting
for Shipping and Handling Fees and Costs." Adoption of the provisions of EITF
00-10 resulted in a
37balance sheet.
46
reclassification of shipping fee revenue to sales, from cost of sales where it
had been classified as a reduction of shipping costs. Amounts reclassified only
impacted the commercial segment and totaled $5,490 and $5,350 for fiscal 2000
and 1999, respectively.
Common Stock Split - On July 23, 1999, the Board of Directors of the
Company authorized a three-for-two split of the Company's Common Stock in the
form of a 50% stock dividend. The stock split was effected on August 19, 1999
for shareholders of record at the close of business on August 5, 1999. All
references in the Consolidated Financial Statements and the Notes to
Consolidated Financial Statements to numbers of shares, per share amounts, stock
option data and market prices of the Company's stock have been restated to
reflect the stock split.
2. Balance Sheet Information
September 30,
Receivables 2002 2001
2000
- ----------------------------------------- --------- --------------------------------------------- ---------- ----------
U.S. government:
Amounts billed.......................billed $ 38,274 $ 78,626
$ 35,932
CostsCost and profits not billed.........billed 6,305 1,512 5,038
--------- ---------
44,579 80,138
40,970
Commercial customers.....................customers 97,782 126,033
65,754
Other....................................Other 4,906 9,062 2,240
--------- ---------
147,267 215,233 108,964
Less allowance for doubtful accounts.....accounts (4,558) (3,828) (2,447)
--------- ---------
$ 211,405142,709 $ 106,517211,405
========= =========
In accordance with industry practice, recoverable costs and profits not
billed include amounts relating to programs and contracts with multi-year terms,
a portion of which is not expected to be realized in one year. Costs and profits
not billed generally will become billable upon the Company achieving certain
milestones.
September 30,
InventoriesReceivables 2002 2001
2000
- --------------------------------------------- --------- --------------------------------------------- ---------- ----------
Finished products............................products $ 67,147 $ 64,049
$ 53,068
Partially finished products..................products 89,742 104,955
75,667
Raw materials................................materials 121,596 122,484 95,776
--------- ---------
Inventories at FIFO cost.....................cost 278,485 291,488 224,511
Less: Progress/performance-based payments
on U.S. government contracts...........contracts (54,368) (20,831) (12,313)
Excess of FIFO cost over LIFO cost.....cost (13,251) (12,619) (10,988)
--------- ---------
$ 258,038210,866 $ 201,210258,038
========= =========
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/progress or performance-based payments.
Inventory includes the following costsamounts related to the Company's MTVR contract:
September 30,
2002 2001
2000
--------- ---------
Tooling..................................---------- ----------
Tooling $ 2,050 $ 3,340
$ 3,571
Deferred productionProduction and retrofit costs...costs recognized
in excess of average expected costs 3,385 262 479
Logistics support development costs......costs 2,297 3,727
3,888
Engineering..............................Engineering 3,012 6,446 5,942
Test, training and other.................other (1,830) 954 817
--------- ---------
$ 14,7298,914 $ 14,69714,729
========= =========
September 30,
Goodwill and Other Intangible Assets 2001 2000
- ----------------------------------------- --------- ---------
Useful Lives
--------------
Goodwill 15 - 40 Years..... $ 315,875 $ 220,433
Distribution network 40 Years.......... 63,800 63,800
Non-compete agreements 5 - 15 Years...... 40,106 38,250
Other 5 - 40 Years...... 42,744 23,320
--------- ---------
462,525 345,803
Less accumulated amortization............... (47,248) (35,072)
--------- ---------
$ 415,277 $ 310,731
========= =========
38
On February 26, 1998, concurrent with the Company's acquisition of
McNeilus, the Company and an unaffiliated third party, BA Leasing & Capital
Corporation ("BALCAP"), formed OMFSP, a general partnership, for the purpose of
offering lease financing to certain customers of the Company. Each partner
contributed existing lease assets (and, in the case of the Company, related
notes payable to third party lenders which were secured by such leases) to
capitalize the partnership. Leases and related notes payable contributed by the
Company were originally acquired in connection with the McNeilus acquisition.
OMFSP manages the contributed assets and liabilities and engages in new
vendor lease business providing financing to certain customers of the Company.
OMFSP
purchasesThe Company sells trucks, truck bodies and concrete batch plants to OMFSP for
lease to user-customers. Company sales to OMFSP were $62,860, $88,845 and
$79,857 in fiscal 2002, 2001 and 2000, respectively. Banks and other 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 the new truck and
batch
47
plant purchases, and each partner is allocated its proportionate share of OMFSP
cash flow and taxable income.income in accordance with the partnership agreement.
Indebtedness of OMFSP is secured by the underlying leases and assets of, and is
with recourse to, OMFSP. However, suchall OMFSP indebtedness is non-recourse to the
Company.Company or BALCAP.
Summarized financial information of OMFSP as of September 30, 20012002 and
20002001 and for the fiscal years ended September 30, 2002, 2001 2000 and 1999,2000 is as
follows:
September 30,
2002 2001
2000
---- -------------- ----------
Cash and cash equivalents....................equivalents $ 2,9732,037 $ 1,8672,973
Investment in sales type leases, net.........net 209,440 204,772
172,255
Other assets.................................assets 553 869
491
-------- -------
$208,614 $174,613
======== ========---------- ----------
$ 212,030 $ 208,614
========== ==========
Notes payable................................ $166,635 $141,565payable $ 166,442 $ 166,635
Other liabilities............................liabilities 4,146 6,211
4,368
Partners' equity.............................equity 41,442 35,768
28,680
-------- -------
$208,614 $174,613
======== ========---------- ----------
$ 212,030 $ 208,614
========== ==========
Fiscal Year Ended September 30,
2002 2001 2000
1999
---- ---- ------------ -------- --------
Interest income.............................. $15,429 $13,132 $11,624income $ 16,315 $ 15,429 $ 13,132
Net interest income..........................income 4,346 4,048 3,160 3,499
Excess of revenues over expenses.............expenses 4,286 3,961 3,295
3,854
3. Accumulated Other Comprehensive Income (Loss)
The components of accumulated other comprehensive income (loss) are as
follows:
Minimum Derivative
Currency Pension Financial
Translation Liability Instruments
Adjustments Adjustments Gains Total
----------- ----------- ----------- --------
Balance at September 30, 2000 $ - $ - $ - $ -
Currency translation adjustments 4,275 - - 4,275
Minimum pension liability
adjustment, net of taxes of $2,637 - (4,490) - (4,490)
Change in fair value of derivatives,
net of taxes of $7 - - 13 13
-------- --------- ----- --------
Balance at September 30, 2001 4,275 (4,490) 13 (202)
Currency translation adjustments 12,234 - - 12,234
Minimum pension liability
adjustment, net of taxes of $5,075 - (8,640) - (8,640)
Gains reclassified into earnings
from other comprehensive income,
net of taxes of $36 - - (62) (62)
Change in fair value of derivatives,
net of taxes of $48 - - 82 82
-------- --------- ----- --------
Balance at September 30, 2002 $ 16,509 $ (13,130) $ 33 $ 3,412
======== ========= ===== ========
48
4. Acquisitions
On July 25, 2001, the Company acquired from Powell Duffryn Limited all of
the outstanding capital stock of the Geesink Norba Group to expand the Company's
presence in Europe to include manufacturing and direct distribution
capabilities. The cash purchase price for the acquisition of 156,422 euros,
including acquisition costs of 3,954 euros and net of cash acquired, or $137,636
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.
The operating results of the Geesink Norba Group have been included in the
Company's consolidated statements of income from the date of acquisition. The
purchase price, including acquisition costs, was allocated based on the
estimated fair values of the assets acquired and liabilities assumed at the date
of acquisition with any excess purchase price allocated to goodwill. The
allocation of the purchase price is tentative pendingwas adjusted in June and July 2002 upon
completion of appraisals on assets acquired and finalization of certain
restructuring plans. The
allocation may change following the completion of these items. Under SFAS Nos. 141 and 142, no goodwill amortization has
been recorded for the Geesink Norba Group acquisition in fiscal 2002 or 2001.
39
The Company engaged a third party business valuation appraiser to value the
intangible assets of the Geesink Norba Group. Gessink Norba Group's revenues are
generated through an internal sales force located at Company-owned branch
facilities located throughout Europe. In accordance with SFAS No. 141, no
separate value has been attributed to this internal sales force intangible asset
because it neither arises from contractual or legal rights, nor is it separable
from the business.
Due to the nature of the Geesink Norba Group's products, sales are to a
limited number of customers that are easily identified through trade
associations. Much of the Geesink Norba Group's revenue is generated from sales
to municipalities, where business is awarded through publicly-announced
competitive bid and proposal efforts. The Geesink Norba Group did not have any
material long-term contracts with existing customers beyond amounts in its
backlog at the time of acquisition that required separate valuation.
The Company wrote-up inventory and property, plant and equipment to fair
market values as of the date of the Geesink Norba Group acquisition.
Upon acquisition of the Geesink Norba Group, the Company began to formulate
a plan to transfer refuse body mounting activities from branch sales offices in
Europe to Geesink Norba Group manufacturing plants. Upon finalization of this
restructuring plan in fiscal 2002, the Company recorded an adjustment to
goodwill of $1,171 (net of related tax benefits of $631) to record employee
termination liabilities related to 123 employees. All affected employees have
been notified of this action. During fiscal 2002, the Company paid $788 for
employee terminations and charged this amount against the employee termination
liability. The remaining liability for these costs will be paid in fiscal 2003.
Following is a summary of the estimatedrecorded fair values of the assets acquired
and liabilities assumed as of the date of acquisition, on a preliminary basis:acquisition:
Current assets, excluding cash of $2,044...$2,044 $ 62,40462,754
Property, plant and equipment..............equipment 16,189
Intangible assets..........................assets 7,761
Goodwill................................... 86,213
-------Goodwill 95,616
----------
Total assets acquired.................... 172,567acquired 182,320
Current liabilities........................ 34,409liabilities 38,938
Other long-term liabilities................ 323
Debt.......................................liabilities 5,547
Debt 199
-------------
Total liabilities assumed.............. 34,931
------assumed 44,684
----------
Net assets acquired........................acquired $ 137,636
=================
The preliminary valuation of intangible assets consistconsists of $3,889 in assets subject to
amortization and $3,872 assigned to trademarks not subject to amortization. The
intangible assets subject to amortization consist of $3,783 in
internally-developed technology with a 15 year life and $106 of non-compete
agreements with a two year life. All the goodwill was assigned to the Company's
commercial segment and is expected to benot deductible for incomelocal tax purposes.
On March 6, 2001, the Company purchased certain machinery and equipment,
parts inventory and certain intangible assets from TEMCO, a division of
Dallas-based Trinity Industries, Inc ("TEMCO"). TEMCO, a manufacturer of
concrete mixers, batch plants and concrete mixer parts, had discontinued its
business. Consideration for the purchase was valued at $15,697 and included cash
of $8,139 and credits to the seller valued at $7,558 for future purchases of
certain concrete placement products from the Company over the next six years.six-year period
ending March 5, 2007.
On October 30, 2000, the Company acquired all of the issued and outstanding
capital stock of Medtec for approximately $14,466, including acquisition costs
and net of cash acquired. Medtec is a U.S. manufacturer of custom ambulances and
rescue vehicles with manufacturing facilities in Indiana and Michigan. The
acquisition was financed from available cash and borrowings under the Company's
revolving credit facility.
49
On April 28, 2000, the Company acquired all of the capital stock of Viking
for $1,680 in cash (net of cash acquired). Viking is a dealer of new and used
equipment primarily in the Company's commercial products segment. On November 1,
1999, the Company acquired the manufacturing assets of Kewaunee and entered into
related non-competition agreements for $5,467 in cash plus the assumption of
certain liabilities aggregating $2,211. Kewaunee is a fabricator of heavy-steel
components for cranes, aerial devices and other equipment. The acquisitions wereacquisition was
financed from borrowings under the Company's senior credit facility.
The Geesink Norba Group, Medtec, Viking and Kewaunee acquisitions were
accounted for using the purchase method of accounting and, accordingly, their
respective operating results were included in the Company's consolidated
statements of income beginning July 25, 2001, October 30, 2000, April 28, 2000
and November 1, 1999, respectively. The excess of the purchase price, including
acquisition costs, of the Geesink Norba Group, Medtec, Viking and Kewaunee
acquisitions over the estimated fair value of the assets acquired and
liabilities assumed amounted to $86,213,$95,616, $6,498, $2,135 and $115, respectively,
which has been recorded as goodwill. The purchase price allocation for the
Geesink Norba Group acquisition is preliminary and further refinements, which
are not expected to be material, are likely to be made.
Pro forma unaudited condensed consolidated operating results of the
Company, assuming the Geesink Norba Group, Medtec, Viking and Kewaunee had been
acquired as of October 1, 1999, are summarized below:
Fiscal 2001 Fiscal 2000
----------- -----------
Net sales............................sales $ 1,546,996 $ 1,459,4191,459,418
Income before extraordinary charge...charge 51,613 45,996
Net income...........................income 51,613 47,191
Earnings per share:
Before extraordinary charge........charge $ 3.09 $ 2.86
Net income.........................income 3.09 2.94
Earnings per share assuming dilution:
Before extraordinary charge......charge $ 3.02 $ 2.81
Net income.......................income 3.02 2.88
5. 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 periodically, or more frequently 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 the
beginning of fiscal 2002. In accordance with SFAS No. 142, the Company ceased
amortizing goodwill totaling $301,555 as of the beginning of fiscal 2002,
including the following purchased intangible assets that were subsumed into
goodwill (net of related deferred income tax liabilities of $6,019): $2,922 of
assembled workforce intangible assets, $2,680 of going concern/immediate use
intangible assets and $9,832 of internal sales force intangible assets. Due to
indefinite lives, the Company also ceased amortizing trade names totaling $5,402
as of the beginning of fiscal 2002. The following table presents the impact of
SFAS No. 142 on net income and net income per share had the new standard been in
effect for the years ended September 30, 2001 and 2000:
50
Fiscal Year Ended
September 30,
2002 2001 2000
-------- -------- --------
Reported net income $ 59,598 $ 50,864 $ 49,703
Adjustments:
Amortization of goodwill - 6,149 5,491
Amortization of assets previously classified
as purchased intangible assets:
Assembled workforce - 653 653
Internal sales force - 270 270
Going concern/immediate use - 75 75
Amortization of trade names - 40 40
Income tax effect - (529) (391)
-------- -------- --------
Net adjustments - 6,658 6,138
-------- -------- --------
Adjusted net income $ 59,598 $ 57,522 $ 55,841
======== ======== ========
Net income per share:
As reported $ 3.54 $ 3.05 $ 3.09
As adjusted 3.54 3.45 3.47
Net income per share assuming dilution:
As reported 3.45 2.98 3.03
As adjusted 3.45 3.37 3.40
There was no impairment of goodwill upon adoption of SFAS No. 142, nor upon
the Company's subsequent testing conducted in the fourth quarter of fiscal 2002.
The Company is required to perform goodwill impairment tests on an annual basis
and between annual tests in certain circumstances. The Company expects that it
will perform future annual tests for impairment in its fourth fiscal quarter.
There can be no assurance that future goodwill impairment tests will not result
in a charge to earnings.
51
4.The following tables present details of the Company's total purchased
intangible assets:
September 30, 2002
---------------------------------------------------
Weighted Accumulated
Average Life Gross Amortization Net
------------ --------- ------------ ---------
(Years)
Amortizable:
Distribution network 40.0 $ 53,000 $ (7,988) $ 45,012
Non-compete 14.5 40,120 (12,350) 27,770
Technology-related 17.8 20,554 (4,070) 16,484
Other 9.9 10,313 (979) 9,334
--------- -------- ---------
25.5 123,987 (25,387) 98,600
Non-amortizable tradenames 5,716 - 5,716
--------- -------- ---------
Total $ 129,703 $(25,387) $ 104,316
========= ======== =========
September 30, 2001
-----------------------------------------------
Average Accumulated
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
Tradenames 22.1 5,603 (201) 5,402
Other 15.0 9,944 (415) 9,529
--------- -------- ---------
Total $ 148,300 $(23,513) $ 124,787
========= ======== =========
The Company engaged third-party business appraisers to determine the fair
value of the intangible assets in connection with the Company's larger
acquisitions - specifically the acquisitions of Pierce in fiscal 1996, McNeilus
in fiscal 1998 and the Geesink Norba Group in fiscal 2001. A 40-year life was
assigned to the value of the Pierce distribution network ($53,000). The Company
believes Pierce maintains the largest North American fire apparatus distribution
network and has exclusive contracts with each distributor related to the fire
apparatus product offerings manufactured by Pierce. The useful life of the
Pierce distribution network was based on a historical turnover analysis.
Non-compete intangible asset lives are based on terms of the applicable
agreements. The allocation of purchase price for the Geesink Norba Group
acquisition at September 30, 2001 was tentative pending finalization of certain
restructuring plans and receipt of certain appraisal valuations, which were
finalized in fiscal 2002.
Total amortization expense recorded was $6,017, $12,175 and $11,159 in
fiscal 2002, 2001 and 2000, respectively. The estimated future amortization
expense of purchased intangible assets for the five years succeeding September
30, 2002, are as follows: 2003 - $6,389; 2004 - $6,295; 2005 - $6,250; 2006 -
$6,029 and 2007 - $5,895.
The following table presents the changes in goodwill during fiscal 2002
allocated to the reportable segments:
Balance at Balance at
Segment September 30, 2001 Adjustments September 30, 2002
- ------- ------------------ ----------- ------------------
Commercial $ 194,963 $ 24,412 $ 219,375
Fire and emergency 97,177 2,165 99,342
--------- -------- ---------
Total $ 292,140 $ 26,577 $ 318,717
========= ======== =========
The adjustments in fiscal 2002 included $8,073 resulting from currency
translation adjustments, certain adjustments to goodwill to reflect the
finalization of appraisals and restructuring plans relative to the Geesink Norba
Group acquisition aggregating $9,403, including deferred tax liabilities of
$1,255, a $314 reduction due to income tax recoveries and reclassification of
the net book value of recorded assets subsumed into goodwill upon adoption of
SFAS No. 142, including: assembled workforce assets of $2,922,
going-
52
concern/immediate use assets of $2,680 and internal sales force assets of
$9,832, net of related deferred tax liabilities of $6,019. The internal sales
force assets subsumed into goodwill neither arose from contractual or other
legal rights nor were such assets separable.
6. Revolving Credit Facility, Long-Term Debt and Extraordinary Charge for
Early Retirement of Debt
To finance the Geesink Norba Group acquisition, the Company entered into a
Second Amended and Restated Credit Agreement, dated July 23, 2001, which added a
$140,000 Term Loan B ($139,650 outstanding at September 30, 2001) to its senior
credit facility. The Term Loan B provides for quarterly principal payments of
$350, with the balance due in January 2007.
On September 28, 2000, the Company amended its senior credit facility. TheCompany's amended senior credit facility is comprised of a $60,000 Term
Loan A, with balances outstanding of $52,000$36,000 and $60,000$52,000 at September 30, 20012002
and 2000,2001, respectively, and a $170,000 revolving credit facility ($65,2000 and $0$65,200
outstanding at September 30, 20012002 and 2000,2001, respectively), both of which mature
in January 2006. Term Loan A requires principal payments of $10,000 in fiscal
2002, $12,000$6,000 in fiscal
2003, $14,000 in both fiscal 2004 and fiscal 2005, with the balance of $2,000
payable in fiscal 2006. Principal payments are due in quarterly installments.
The amended senior credit facility also contains a $140,000 Term Loan B, which
matures in January 2007, with balances outstanding of $12,000 and $139,650 at
September 30, 2002 and 2001, respectively. Term Loan B was retired in October
2002.
The Company recorded an after-tax extraordinary chargecharges of $581 in November
1999 and $239 in
Septemberfiscal 2000 to record the write-off of deferred financing costs related to the
prepayment of $93,500 of debt from proceeds of a common
stockCommon Stock offering (see Note
7)9) and the prepayment of $30,413 of debt in connection with the amendment and
restatement of its senior credit facility, respectively.
Fiscal 1999 operating results include an after-tax extraordinary charge of $60
related to the write-off of deferred financing costs due to early repayment of
debt.
At September 30, 2001, outstanding borrowings of $65,200 and2002, outstanding letters of credit of $15,526 which$14,651 reduced
available capacity under the Company's revolving credit facility to $89,274.$155,349.
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 0.625%1.00%, 0.625%1.00% and 1.25%2.50% for IBOR Rate loans under the
Company's revolving credit facility, Term Loan A and Term Loan B, respectively,
as of September 30, 2001.2002. 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 September 30, 20012002 were 6.287% on
the revolving credit facility2.82% and
4.545% and 5.160%4.32% for Term Loans A and B, respectively. There were no outstanding borrowings
on the revolving credit facility at September 30, 2002.
The Company is charged a 0.40%0.20% annual fee with respect to any unused
balance under its revolving credit facility, and a 1.875% annual fee with
respect to any letters of credit issued under the revolving credit facility.
These fees are subject to adjustment if certain financial criteria are met.
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 Second Amended and Restated Senior Credit
Facility.Company's amended senior credit facility. Among
other restrictions, the Second Amended and Restated Senior
Credit Facility:amended senior credit facility: (1) limits payments of
dividends and purchases of the Company's stock, (2) requires that certain
financial ratios be maintained at prescribed levels; (3) restricts the ability
of the Company to make additional borrowings, or to consolidate, merge or
otherwise fundamentally change the ownership of the Company; and (4) limits
investments, dispositions of assets and guarantees of indebtedness. The Company
believes that such limitations should not impair its future operating
activities.
The Company has outstanding $100,000 of 8 3/4% Senior Subordinated Notes
due March 1, 2008 ("Senior Subordinated Notes"). The indenture governing the
terms of the Senior Subordinated Notes contains customary affirmative and
negative covenants. The Company is in compliance with these covenants. The Senior Subordinated Notes
can be redeemed by the Company for a premium after March 1, 2003.covenants at
September 30, 2002. In addition to the Company, certain of the Company's
subsidiaries fully, unconditionally, jointly and severally guarantee the
Company's obligations under the Senior Subordinated Notes (see Note 15)17). The
Senior Subordinated Notes are not redeemable by the Company prior to March 1,
2003. Thereafter, the Senior Subordinated Notes are redeemable at a premium
during the twelve month period ending March 1, as follows: 2004 - 4.375%; 2005 -
2.917%; and 2006 - 1.458%. The Senior Subordinated Notes are redeemable at par
after March 1, 2006.
McNeilus has unsecured notes payable to several of its former shareholders
aggregating $1,812 at September 30, 2002 and $2,052 at September 30, 2001 and $2,289 at September 30, 2000.2001.
Interest rates on these notes range from 5.7% to 8.0% with annual principal and
interest payments ranging from $21 to $155 with maturities through October 2033.
Debt at September 30, 2001 and 2000 of $186 and $493, respectively, was assumed as part of the Viking
acquisition. This debt maturesmatured in fiscal 2002. The interest rates on these notes range from 7.60% to 9.25%. Geesink Norba Group hashad debt
of $146 and $192 at September 30, 2002 and September 30, 2001, respectively,
which was assumed as part of the acquisition. This debt matures in March 2008
with interest rates ranging fromat 6.75% to
10.50%.
The aggregate annual maturities of long-term debt for the five years
succeeding September 30, 2001,2002, are as follows: 2002 -- $11,831; 2003 -- $13,695;- $18,245; 2004 -- $15,620;- $14,221;
2005 -- $15,466- $14,068; 2006 - $2,070 and 2006 -- $3,468.
412007 - $72.
53
5.7. Income Taxes
PretaxPre-tax income from continuing operations for the fiscal years ended
September 30 was taxed in the following jurisdictions:
Fiscal Year Ended September 30,
2002 2001 2000
1999
--------- --------- ---------
Domestic............................ $ 77,558 $ 78,649 $ 50,959
Foreign.............................------- ------- -------
Domestic $81,724 $77,558 $78,649
Foreign 7,733 1,255 -- --
--------- --------- ---------
$ 78,813 $ 78,649 $ 50,959
========= ========= =========-
------- ------- -------
$89,457 $78,813 $78,649
======= ======= =======
Significant components of the provision (credit) for income taxes are as
follows:
Fiscal Year Ended September 30,
2002 2001 2000
1999
--------- --------- ---------------- ------- -------
Allocated to Income from Continuing
Operations Before Equity in Earnings
of Unconsolidated Partnership
Current:
Federal.............................. $ 28,857 $ 26,021 $ 22,654
Foreign..............................Federal $29,021 $28,857 $26,021
Foreign 975 439 -- --
State................................-
State 4,187 2,762 3,048
2,029
--------- --------- ---------------- ------- -------
Total current.....................current 34,183 32,058 29,069
24,683
Deferred:
Federal..............................Deferred
Federal (1,874) (2,402) 1,935
(2,882)
Foreign..............................Foreign 444 201 -- --
State................................-
State (468) (496) 342
(488)
--------- --------- ---------------- ------- -------
Total deferred....................deferred (1,898) (2,697) 2,277
(3,370)
--------- --------- ---------
$ 29,361 $ 31,346 $ 21,313
========= ========= =========------- ------- -------
$32,285 $29,361 $31,346
======= ======= =======
Allocated to Other Comprehensive Income
Deferred:
FederalDeferred federal and state....................state $(4,884) $(2,630) $ (2,630) $ -- $ 1,153
========= ========= =========-
======= ======= =======
The reconciliation of income tax computed at the U.S. federal statutory tax
rates to income tax expense is:
Fiscal Year Ended September 30,
2002 2001 2000
1999
-------- --------------- ------- -------
Effective Rate Reconciliation
U.S. federal tax rate 35.0% 35.0% 35.0%
U.S. federal tax rate...............
Goodwill amortization...............amortization - 2.6 2.5 3.8
State income taxes, net.............net 2.2 2.1 2.8 2.9
Settlement of tax audits............audits (1.0) (1.8) -- ---
Foreign sales corporation...........corporation (0.4) (0.8) (0.6)
(0.5)
Other, net..........................net 0.3 0.2 0.2
0.6
-------- -------- ------------ ---- ----
36.1% 37.3% 39.9%
41.8%
======== ======== ========
42==== ==== ====
54
Deferred income tax assets and liabilities are comprised of the following:
September 30,
2002 2001
2000
--------- ----------------- --------
Deferred Tax Assets and Liabilities
Deferred tax assets:
Other current liabilities..................liabilities $ 10,795 $ 9,355
$ 8,679
Other long-term liabilities................liabilities 13,845 9,436
7,885Inventories 6,535 -
Accrued warranty...........................warranty 8,072 6,235
5,540
Payroll-related obligations................obligations 5,145 3,524
4,035
Other......................................Excess foreign tax credit 1,419 -
Other 404 598
--
--------- ----------------- --------
Total deferred tax assets..............assets 46,215 29,148 26,139
Deferred tax liabilities:
Intangible assets..........................assets 22,175 28,273 29,079
Investment in unconsolidated partnership...partnership 18,489 10,024 10,819
Property, plant and equipment..............equipment 14,322 9,602
8,849
Inventories................................Inventories - 4,509 5,367
Other long-term assets.....................assets 1,546 1,078
2,419
Other......................................Other 1,559 274
1,312
--------- ----------------- --------
Total deferred tax liabilities.........liabilities 58,091 53,760
57,845
--------- ----------------- --------
Net deferred tax liability............. $liability (11,876) (24,612)
$ (31,706)
========= =========Valuation allowance on excess foreign tax credit (1,419) -
-------- --------
Net deferred tax liability $(13,295) $(24,612)
======== ========
The net deferred tax liability is classified in the consolidated balance
sheet as follows:
September 30,
2002 2001
2000
--------- ----------------- --------
Current net deferred tax asset.................asset $ 15,72226,008 $ 14,70815,722
Non-current net deferred tax liability.........liability (39,303) (40,334)
(46,414)
------- -------
$ (24,612) $ (31,706)
========= =========-------- --------
$(13,295) $(24,612)
======== ========
Undistributed earnings of the Company's foreign subsidiaries amounted to
approximately $6,400 and $800 at September 30, 2001.2002 and 2001, respectively.
Because the Company plans on distributing those earnings in the form of
dividends, or otherwise, the Company has provided for U.S. income taxes, net of
any foreign tax credits, on these foreign earnings.
6.55
8. Employee Benefit Plans
The Company and certain of its subsidiaries sponsor multiple defined
benefit pension plans and postretirement benefit plans covering certain Oshkosh
and Pierce employees and certain Oshkosh and Kewaunee retirees and their
spouses, respectively. The pension plans provide benefits based on compensation,
years of service and date of birth. The postretirement benefit plans providesprovide
health benefits based on years of service and date of birth. The Company's
policy is to fund the pension plans in amounts that comply with contribution
limits imposed by law. Requirements of the Company's postretirement benefit
plans are funded as benefit payments are made. 43
Details regarding the Company's
defined benefit pension plans and postretirement benefit plans and amounts
recorded in the consolidated financial statements are as follows:
Pension Benefits Postretirement Benefits
2002 2001 20002002 2001
2000
---------- ---------- ---------- ------------------- --------- --------- ---------
Change in benefit obligation
Benefit obligationobligations at October 1.............................. $ 45,392 $ 41,816 $ 9,883 $ 8,744
Service cost................................................. 1,861 1,741 421 349
Interest cost................................................ 3,654 3,203 678 694
Actuarial (gains) losses..................................... 2,278 170 (15) 306
Acquisition of Kewaunee...................................... -- -- -- 262
Benefits paid by the Company................................. -- -- (426) (472)
Benefits paid from plan assets............................... (1,549) (1,538) -- --
---------- ---------- ---------- ----------
Benefit obligation at September 30...........................1 $ 51,636 $ 45,392 $ 10,541 $ 9,883
========== ========== ========== ==========Service cost 2,524 1,861 468 421
Interest cost 4,269 3,654 772 678
Actuarial (gains) losses 6,516 2,278 497 (15)
Plan amendments 4,959 -- -- --
Benefits paid by the Company -- -- (489) (426)
Benefits paid from plan assets (1,616) (1,549) -- --
-------- -------- -------- --------
Benefit obligation at September 30 $ 68,288 $ 51,636 $ 11,789 $ 10,541
======== ======== ======== ========
Change in plan assets
Fair value of plan assets at October 1.......................1 $ 51,87442,533 $ 45,95351,874 $ -- $ --
Actual return on plan assets.................................assets (5,211) (9,841) 4,966 -- --
Company contributions........................................contributions 9,416 2,049 2,493489 426 472
Benefits paid from plan assets...............................assets (1,616) (1,549) (1,538) -- --
Benefits paid by the Company.................................Company -- -- (489) (426)
(472)
---------- ---------- ---------- ------------------ -------- -------- --------
Fair value of plan assets at September 30....................30 $ 42,53345,122 $ 51,87442,533 $ -- $ --
========== ========== ========== ================== ======== ======== ========
Reconciliation of funded status
Funded status of plan - over (under) funded..................funded $(23,166) $ (9,103) $ 6,482 $ (10,541) $ (9,883)$(11,789) $(10,541)
Unrecognized net actuarial (gains) losses....................losses 30,078 13,653 (3,072)(1,933) (2,517) (2,654)
Unrecognized transition asset................................asset (257) (324) (392) -- --
Unamortized prior service cost...............................cost 6,057 1,520 1,652 -- --
---------- ---------- ---------- ------------------ -------- -------- --------
Prepaid (accrued) benefit cost...............................cost $ 12,712 $ 5,746 $ 4,670 $ (13,058) $ (12,537)
========== ========== ========== ==========$(13,722) $(13,058)
======== ======== ======== ========
Recognized in consolidated balance sheet at September 30
Prepaid benefit cost recorded in other long-term assets......assets $ 1,024-- $ 4,6701,024 $ -- $ --
Intangible assets............................................assets included in other long-term assets 6,057 1,495 -- -- --
Accrued benefit cost recorded in other long-term liabilities.liabilities (14,187) (3,900) --(13,722) (13,058) (12,537)
Accumulated other comprehensive loss ........................20,842 7,127 -- --
--
---------- ---------- ---------- ------------------ -------- -------- --------
Prepaid (accrued) benefit cost...............................cost $ 12,712 $ 5,746 $ 4,670 $ (13,058) $ (12,537)
========== ========== ========== ==========$(13,722) $(13,058)
======== ======== ======== ========
Weighted-average assumptions as of September 30
Discount rate................................................rate 7.00% 7.50% 7.75%7.00% 7.50% 7.75%
Expected return on plan assets............................... 9.25assets 8.75 9.25 n/a n/a
Rate of compensation increase................................increase 4.50 4.50 n/a n/a
56
Pension Benefits Postretirement Benefits
Fiscal Year Ended September 30, Fiscal Year Ended September 30,
2002 2001 2000 19992002 2001 2000
1999
---------- ---------- ---------- ---------- ---------- ----------
Components of net periodic benefit cost---- ---- ---- ---- ---- ----
Components of net periodic benefit cost
Service cost............................cost $ 2,524 $ 1,861 $ 1,741 $ 1,828468 $ 421 $ 349
$ 461
Interest cost...........................cost 4,269 3,654 3,203 2,853772 678 694 708
Expected return on plan assets..........assets (4,779) (4,605) (4,023) (3,450) -- -- --
Amortization of prior service cost...... 131cost 422 131 131 -- -- --
Amortization of transition asset........asset (67) (67) (67) -- -- --
Amortization of net actuarial (gains) losses................................losses 81 -- -- 155(88) (152) (111)
--
--------- --------- --------- ---------- --------- ---------------- ------- ------- ------- ------- -------
Net periodic benefit cost...............cost $ 2,450 $ 974 $ 985 $ 1,4501,152 $ 947 $ 932
$ 1,169
========= ========= ========= ========= ========== ================ ======= ======= ======= ======= =======
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation for the Company was 10.0%9.5% in fiscal 2001,2002,
declining to 5.5% in fiscal 2010.2011. If the health care cost trend rate was
increased by 1%, the accumulated postretirement benefit obligation at September
30, 20012002 would increase by $721$842 and net periodic postretirement benefit cost for
fiscal 20012002 would increase by $113.$125. A corresponding decrease of 1% would
decrease the accumulated postretirement benefit obligation at September 30, 20012002
by $653$763 and net periodic postretirement benefit cost for fiscal 20012002 would
decrease by $101.$112.
As part of the Company's acquisition of the Geesink Norba Group, the
Company agreed to establish a retirement plan for employees of a subsidiary in
the United Kingdom. Previously, employees of this subsidiary participated in the
seller's
defined benefit retirement plan of the subsidiary's former parent company.
During fiscal 2002, the Company established a defined benefit retirement plan
for certain employees of this subsidiary in the United Kingdom. Participation in
the defined benefit plan is limited to those employees that agree to transfer
plan assets from the existing plan of the former parent company to the Company's
new plan. The Company expects that it will have a
replacement plan inany such transfer would take place sometime in mid fiscal 2002. Until then, the Geesink
Norba Group will continue to make contributions to the seller's retirement plan.
Contributions made in fiscal
2001 were $26.
44
2003.
The Company maintains supplemental executive retirement plans ("SERPs") for
certain executive officers of the Company and its subsidiaries that are
unfunded. Expense related to the plans of $664, $531 $409 and $660$409 was recorded in
fiscal 2002, 2001 2000 and 1999,2000, respectively. Amounts accrued as of September 30,
20012002 and 20002001 related to the plans were $2,650$3,286 and $2,145,$2,650, respectively.
The Company has defined contribution 401(k) plans covering substantially
all employees. The plans allow employees to defer 2% to 19% of their income on a
pre-tax basis. Each employee who elects to participate is eligible to receive
Company matching contributions which are based on employee contributions to the
plans, subject to certain limitations. Amounts expensed for Company matching
contributions were $2,451, $2,243 ,and $2,120 and $1,684 in fiscal 2002, 2001 and 2000,
and 1999,
respectively.
7.9. Shareholders' Equity
On February 1, 1999, the Board of Directors of the Company adopted a
shareholder rights plan and declared a rights dividend of two-thirds of one
Preferred Share Purchase Right ("Right") for each share of Common Stock and
40/69 of one Right for each share of Class A Common Stock outstanding on
February 8, 1999, and provided that two-thirds of one Right and 40/69 of one
Right would be issued with each share of Common Stock and Class A Common Stock,
respectively, thereafter issued. The Rights are exercisable only if a person or
group acquires 15% or more of the Common Stock and Class A Common Stock or
announces a tender offer for 15% or more of the Common Stock and Class A Common
Stock. Each Right entitles the holder thereof to purchase from the Company one
one-hundredth share of the Company's Series A Junior Participating Preferred
Stock at an initial exercise price of $145 per one one-hundredth of a share
(subject to adjustment), or upon the occurrence of certain events, Common Stock
or common stock of an acquiring company having a market value equivalent to two
times the exercise price. Subject to certain conditions, the Rights are
redeemable by the Board of Directors for $.01 per Right and are exchangeable for
shares of Common Stock. The Board of Directors is also authorized to reduce the
15% thresholds referred to above to not less than 10%. The Rights have no voting
power and initially expire on February 1, 2009.
The Company has a stock restriction agreement with two shareholders owning
the majority of the Company's Class A Common Stock. The agreement is intended to allow for
an orderly transition of Class A Common Stock into Common Stock. The agreement
provides that at the time of death or incapacity of the survivor of them, the
two shareholders will exchange all of their Class A Common Stock for Common
Stock. At that time, or at such earlier time as there are no more than 150,000
shares of Class A Common Stock issued and outstanding, the Company's Articles of
Incorporation provide for a mandatory conversion of all Class A Common Stock
into Common Stock.
Each share of Class A Common Stock is convertible into Common Stock on a
one-for-one basis.one-for-one-basis. During fiscal 2002 and 2001, 1,580 and 2000, 4,008 and 3,778 shares of Class
A Common Stock were converted into Common Stock. As of September 30, 2001,
418,1992002,
416,619 shares of Common Stock are reserved for issuance upon the conversion of
Class A Common Stock.
In July 1995, the Company authorized the buyback of up to 1,500,000 shares
of the Company's Common Stock. As of September 30, 20012002 and 2000,2001, the Company
had purchased 692,302 shares of its Common Stock at an aggregate cost of $6,551.
57
Dividends are required to be paid on both the Class A Common Stock and
Common Stock at any time that dividends are paid on either. Each share of Common
Stock is entitled to receive 115% of any dividend paid on each share of Class A
Common Stock, rounded up or down to the nearest $0.0025 per share. Agreements
governing the Company's senior credit facility and senior subordinated notes
restrict the Company's ability to pay dividends. Under these agreements, the
Company generally may pay dividends in an amount not to exceed $6,000 plus 7.5%
of net income.
Holders of the Common Stock have the right to elect or remove as a class
25% of the entire Board of Directors of the Company rounded to the nearest whole
number of directors, but not less than one. Holders of Common Stock are not
entitled to vote on any other Company matters, except as may be required by law
in connection with certain significant actions such as certain mergers and
amendments to the Company's Articles of Incorporation, and are entitled to one
vote per share on all matters upon which they are entitled to vote. Holders of
Class A Common Stock are entitled to elect the remaining directors (subject to
any rights granted to any series of Preferred Stock) and are entitled to one
vote per share for the election of directors and on all matters presented to the
shareholders for vote.
The holders of Common Stock shareholders are entitled to receive a liquidation
preference of $5.00 per share before any payment or distribution to holders of
the Class A Common Stock. Thereafter, holders of the Class A Common Stock are
entitled to receive $5.00 per share before any further payment or distribution
to holders of the Common Stock. Thereafter, holders of the Class A Common Stock
and Common Stock share on a pro rata basis in all payments or distributions upon
liquidation, dissolution or winding up of the Company.
45
On November 24, 1999, the Company completed the offer and sale of 3,795,000
shares of its Common Stock at $26.00 per share. Proceeds from the offering, net
of underwriting discounts and commissions, totaled $93,736 with $93,500 used to
repay indebtedness under the Company's senior credit facility (see Note 4)6).
8.10. Stock Options, Restricted Stock and Common Stock Reserved
The Company has reserved 2,098,3531,833,377 shares of Common Stock at September 30,
20012002 to provide for the exercise of outstanding stock options and the issuance
of Common Stock under incentive compensation awards and 418,199416,619 shares of Common
Stock at September 30, 20012002 to provide for conversion of Class A Common Stock to
Common Stock, for a total of 2,516,5522,249,996 shares of Common Stock reserved. Under
the 1990 Incentive Stock Plan, for Key Employees, as amended (the "Plan"), officers, other key
employees and directors may be granted options to purchase shares of the
Company's Common Stock at not less than the fair market value of such shares on
the date of grant. Participants may also be awarded grants of restricted stock
under the Plan. The Plan expires on September 19, 2010. Options become
exercisable ratably on the first, second and third anniversary of the date of
grant. Options to purchase shares expire not later than ten years and one month
after the grant of the option.
In fiscal 2002, the Company granted certain officers 70,000 shares of
restricted Common Stock under the Plan. Shares were valued at $4,113 upon
issuance and vest in fiscal 2008 after a six-year retention period. The Company
has recorded the issuance of the restricted stock as unearned compensation and
will amortize to expense the grant-date value of the restricted stock ($27
expensed in fiscal 2002) on a straight-line basis over the six-year service
period. Unearned compensation has been reflected as a reduction in shareholders'
equity.
58
The following table summarizes the transactionsoption activity under the Plan for the
three-year period ended September 30, 2001.2002.
Number of Weighted-Average
Options Exercise Price
------- --------------
Options outstanding September 30, 1999 1,076,555 $ 15.47
Options granted 265,500 32.75
Options exercised (43,002) 8.39
Options forfeited (3,500) 12.30
---------
Options outstanding September 30, 2000 1,295,553 19.26
Options granted 260,000 39.62
Options exercised (47,275) 10.15
Options forfeited -- --
---------
Options outstanding September 30, 2001 1,508,278 23.05
Options granted 265,000 58.33
Options exercised (194,976) 11.56
Options forfeited -- --
--------- ---------
Options outstanding September 30, 2002 1,578,302 $ 30.40
========= =========
Exercisable stock options and related weighted-average exercise price as of
September 30, 2002, 2001 and 2000 were as follows: 1,051,469 at $21.64 per
share, 1,001,113 at $16.56 per share and 688,193 at $13.54 per share,
respectively.
Stock options outstanding and exercisable as of September 30, 2002 were as
follows:
Options Outstanding Options Exercisable
------------------------------------- -----------------------------------
Weighted Average Number of Weighted-AverageWeighted Average Number of Weighted Average
Price Range Contractual Life Options Exercise Price ----------Options Exercise Price
----------- ---------------- ------- -------------- ------- --------------
Unexercised options outstanding September 30, 1998.............................. 1,067,552
$7.25 - $11.17 3.4 Years 222,802 $ 11.08
Options granted............................................................ 210,500 29.89
Options exercised.......................................................... (199,622) 7.22
Options forfeited.......................................................... (1,875) 10.43
---------
Unexercised options outstanding September 30, 1999.............................. 1,076,555 15.47
Options granted............................................................ 265,500 32.75
Options exercised.......................................................... (43,002) 8.39
Options forfeited.......................................................... (3,500) 12.30
---------
Unexercised options outstanding September 30, 2000.............................. 1,295,553 19.26
Options granted............................................................8.98 222,802 $ 8.98
$12.75 - $15.75 5.9 Years 355,000 14.77 355,000 14.77
$25.17 - $33.13 7.6 Years 475,500 31.49 387,000 31.20
$39.11 - $44.00 9.0 Years 260,000 39.62 Options exercised.......................................................... (47,275) 10.15
Options forfeited.......................................................... -- --86,667 39.62
$55.00 - $58.76 10.0 Years 265,000 58.33 - -
--------- -------
Unexercised options outstanding September 30, 2001.............................. 1,508,278---------
1,578,302 $ 23.0530.40 1,051,469 $ 21.64
========= ======= Price range $6.08-- $11.17 (weighted-average contractual life of 4.6 years)..... 319,778 $ 9.27
Price range $12.75-- $15.75 (weighted-average contractual life of 6.8 years).... 452,500 14.40
Price range $25.17-- $33.13 (weighted-average contractual life of 8.6 years).... 476,000 31.49
Price range $39.11-- $44.00 (weighted-average contractual life of 10.0 years)... 260,000 39.62
Exercisable options at September 30, 2001....................................... 1,001,113 16.56
Shares available for grant at September 30, 2001................................ 590,075========= =======
Shares available for grant at September 30, 2002 were 255,075.
As allowed by SFAS No. 123, "Accounting for Stock-Based Compensation," the
Company has elected to continue to follow APB No. 25, "Accounting for Stock
Issued to Employees" and related interpretations in accounting for the Plan.
Accordingly, no compensation expense has been recognized for grants under the
stock option plan. Had compensation cost for the Plan been determined consistent
with SFAS No. 123, the Company's net income and earnings per share would have
been reduced to the following pro forma amounts:
Fiscal Year Ended September 30,
2002 2001 2000 1999
---- ---- ----
Pro forma:
Net income...............................income $56,725 $48,971 $48,387 $30,313
Per share:
Net income...........................income 3.37 2.94 3.01 2.38
Net income assuming dilution.........dilution 3.28 2.87 2.95 2.32
During the initial phase-in period, as required by SFAS No. 123, the pro
forma amounts were determined based on stock option grants subsequent to
September 30, 1995. Therefore, the pro forma amounts may not be indicative of
the effects of compensation cost on net earnings and earnings per share in
future years. The fair value of each stock option grant was estimated on the
date of grant using the Black-Scholes option pricing model with the following
weighted-average assumptions: risk-free interest rates of 3.30% in 2002, 3.88%
in 2001 and 5.99% in 2000 and 5.82% in 1999;2000; dividend yields of 0.59% in 2002, 0.87% in 2001 and
1.05% in 2000 and
1.13% in 1999;2000; expected common stock market price volatility factor of .310 in
2002, .328 in 2001 and .325 in 2000 and .335 in 1999;2000; and a weighted-average expected life of the
options
59
of six years. The weighted-average fair value of options granted in 2002, 2001,
and 2000 was $19.88, $14.06 and 1999 was $14.06, $12.64 and $11.57 per share, respectively.
46
9.11. Operating Leases
Total rental expense for plant and equipment charged to operations under
noncancelable operating leases was $4,579, $2,775 $1,723 and $937$1,723 in fiscal 2002,
2001 2000
and 1999,2000, respectively. Minimum rental payments due under operating leases
for subsequent fiscal years are: 2002 -- $3,434; 2003 -- $2,317;- $5,186; 2004 -- $1,629;- $4,296; 2005 -- $612;- $3,050;
2006 - $2,393; 2007 - $1,911 and 2006 -- $206.
10.$8,079 thereafter. Minimum rental payments
include approximately $1,000 due annually under variable rate leases. Payments
are adjusted based on changes to the one-month LIBOR rate (1.81% at September
30, 2002).
12. Contingencies, Significant Estimates and Concentrations
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 these sites. 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.
As to one such Superfund site, Pierce is one of 393 PRPs participating in
the costs of addressing the site and has been assigned an allocation share of
approximately 0.04%. Currently, a report of the remedial investigation/feasibility study is being completed, 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 September 30, 2001.2002. 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 long-term
total liability 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 its
liability associated with the TCE issue will not be material and is adequately
covered through reserves established by the Company at September 30, 2001.2002.
However, this may change as investigations proceed by the Company, other
unrelated property owners, and the government.
In connection with the acquisition of the Geesink Norba Group, the Company
identified potential soil and groundwater contamination impacts from solvents
and metals at one of its manufacturing sites. The Company is subjectconducting a study
to other environmental matters and legal proceedings
and claims, including patent, antitrust, productidentify the source of the contamination. Based on current estimates, the
Company believes its liability and state dealership
regulation compliance proceedings that 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,at this site will not have abe material adverse effect onand any
responsibility of the Company's financial condition or results of operations. Actual results could
vary, among other things, due toCompany is adequately covered through reserves established
by the uncertainties involved in litigation.Company at September 30, 2002.
At September 30, 2002 and 2001, the Company had reserved $4,586 and $1,549,
respectively for environmental matters.
The Company has guaranteed certain customers' obligations under deferred
payment contracts and lease purchase agreements totaling approximatelyagreement. The Company's guarantee is
limited to $1,000 at
September 30, 2001.per year during the period in which the customer obligations
are outstanding. The Company is also contingently liable under bid, performance
and specialty bonds totaling approximately $122,280$140,688 and open standby letters of
credit issued by the Company's bank in favor of third parties totaling $15,526$14,651
at September 30, 2001.2002.
Provisions for estimated warranty and other related costs are recorded at
the time of sale and are periodically adjusted to reflect actual experience. At
September 30, 20012002 and 2000,2001, the Company hashad reserved $18,338$24,015 and $15,519,$18,338
respectively, for warranty claims. 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. It is
reasonably possible that additional warranty and other related claims could
arise from disputes or other matters beyond the scope of the Company's
historical experience.
Product and general liability claims arise against the Company from time to
time in the ordinary course of business. The Company is generally self-insured
for future claims up to $250 to $750$1,000 per claim. Accordingly, a reserve is maintained
for the estimated costs of such claims. At September 30, 20012002 and 2000,2001, the
reserve for product and general liability claims was $13,817$17,020 and $12,276,$13,817,
respectively, based on available information. There is inherent uncertainty as
to the eventual resolution of unsettled claims. Management, however, believes
that any losses in excess of established reserves will not have a material
effect on the Company's financial condition, or results of operations.
47operations or cash
flows.
60
The Company is subject to other environmental matters and legal proceedings
and claims, including patent, antitrust, product liability, warranty and state
dealership regulation compliance proceedings that 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 will not have a material adverse effect on the
Company's financial condition, results of operations or cash flows. Actual
results could vary, among other things, due to the uncertainties involved in
litigation.
At September 30, 2002, approximately 37% of the Company's workforce was
covered under collective bargaining agreements.
The Company's defense segment derives a significant portion of its revenue
from the U.S. DoD, as follows:
Fiscal Year Ended September 30,
2002 2001 2000
1999
----------- ----------- --------
U.S. DoD.................---- ---- ----
DoD $ 590,490 $ 390,172 $ 259,614
$ 218,017
Export...................Export 4,366 32,960 16,227
4,518
---------- ---------- ------------------- --------- ---------
Total Defense Sales...Sales $ 594,856 $ 423,132 $ 275,841
$ 222,535
========== ========== ==========
U.S.========= ========= =========
DoD sales include $25,774, $42,179 $42,207 and $180$42,207 in fiscal 2002, 2001 2000 and
1999,2000, respectively, for products sold internationally under the Foreign Military
Sales ("FMS") Program.
Inherent in doing business with the U.S. DoD are certain risks, including
technological changes and changes in levels of defense spending. All U.S. DoD
contracts contain a provision that they may be terminated at any time at the
convenience of the government. In such an event, the Company is entitled to
recover allowable costs plus a reasonable profit earned to the date of
termination. 11.No other customer represented more than 10% of sales for fiscal
2002, 2001 and 2000.
13. Unaudited Quarterly Results
Fiscal Year Ended September 30, 20012002 Fiscal Year Ended September 30, 2000
-------------------------------------------------- --------------------------------------------------2001
------------------------------------------ ------------------------------------------------
4th Quarter 3rd Quarter 2nd Quarter1st 4th 3rd 2nd 1st
Quarter 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------Quarter Quarter Quarter
------- ------- ------- ------- ------- ------- ------- -------
Net sales................sales $ 476,962 $ 489,532 $ 415,605 $ 361,493 $ 413,608 $ 405,790 $ 343,367 $ 282,528
$ 359,181 $ 393,215 $ 332,177 $ 244,943
Gross income.............income 71,686 79,260 59,496 50,024 64,403 56,319 50,504 43,267
54,394 58,802 49,761 39,977
Income from continuing
operations..............Net income 17,249 21,574 12,167 8,608 17,648 13,709 11,284 8,223
14,625 15,274 11,913 6,696
Discontinued operations.. -- -- -- -- -- -- 2,015 --
Extraordinary charge..... -- -- -- -- (239) -- -- (581)
Net income............... 17,648 13,709 11,284 8,223 14,386 15,274 13,928 6,115
Earnings per share:
Continuing operations...share $ 1.02 $ 1.28 $ 0.72 $ 0.51 $ 1.06 $ 0.82 $ 0.68 $ 0.49
$ 0.87 $ 0.92 $ 0.72 $ 0.46
Discontinued operations. -- -- -- -- -- -- 0.12 --
Extraordinary charge.... -- -- -- -- (0.01) -- -- (0.04)
Net income.............. 1.06 0.82 0.68 0.49 0.86 0.92 0.84 0.42
Earnings per share assuming
dilution:
Continuing operations...dilution $ 0.99 $ 1.24 $ 0.70 $ 0.50 $ 1.03 $ 0.80 $ 0.66 $ 0.48 0.86 0.90 0.70 0.46
Discontinued operations. -- -- -- -- -- -- 0.12 --
Extraordinary charge.... -- -- -- -- (0.01) -- -- (0.04)
Net income.............. 1.03 0.80 0.66 0.48 0.85 0.90 0.82 0.42
Dividends per share:share
Class A Common Stock....Stock $ 0.07500 $ 0.07500 $ 0.07500 $ 0.07500 $ 0.07500 $ 0.07500 $ 0.07500 $ 0.07500
Common Stock............Stock 0.08625 0.08625 0.08625 0.08625 0.08625 0.08625 0.08625 0.08625
Had SFAS No. 142 been in effect for fiscal 2001, results would have been as
follows for the fourth, third, second and first fiscal quarters of 2001,
respectively: net income - $19,412, $15,360, $12,948 and $9,802; earnings per
share - $1.16, $0.92, $0.78 and $0.59; and earnings per share assuming dilution:
$1.14, $0.90, $0.76 and $0.57.
In the fourththird quarter of fiscal 2001,2002, the Company adopted provisions of EITF No.
00-10, "Accounting for Shippingincreased the estimated
margin percentage on its MTVR long-term production contract by one percentage
point. This change in estimate, recorded as a cumulative catch-up adjustment in
the third quarter, increased net income and Handling Feesnet income per share by $2,545 and
Costs" (see Note 1). All$0.15, respectively, including $1,044 and $0.06, respectively, related to prior
periods presented have been retroactively restated to conform with the
current presentation.year revenues.
In the fourth quarter of fiscal 2001, the Company recorded a $1,727 foreign
currency transaction gain related to the movement in the exchange rate for euros
compared to the U.S. dollar during the two-day period the Company held euros
prior to the acquisition of the Geesink Norba Group.
In the fourth quarter of fiscal 2000, the Company recorded a $385 non-cash
charge ($239 after-tax) for the write-off of deferred financing costs related to
debt which was prepaid on September 28, 2000 in connection with the refinancing
of the Company's senior credit facility. The after-tax amount has been recorded
as an extraordinary charge.
12.61
14. Discontinued Operations
In fiscal 2000, the Company entered into a technology transfer agreement
and collected certain previously written-off receivables from a foreign
affiliate, as part of the disposition of a business that the Company exited in
1995. Gross proceeds of $3,250 less income taxes of $1,235, or $2,015 has been
recorded as a gain on disposal of discontinued operations.
48
13.15. Financial Instruments
Derivative Financial Instruments--TheInstruments - The Company uses derivatives for hedging
purposes. Following is a summary of the Company's risk management strategies and
the effect of these strategies on the Company's consolidated financial
statements.
Fair Value Hedging Strategy--TheStrategy - The Company enters into forward exchange
contracts to hedge certain firm commitments denominated in foreign currencies,
primarily Canadian dollars. The purpose of the Company's foreign currency
hedging activities is to protect the Company from risk that the eventual
dollar-equivalent cash flows from the sale of products to international
customers will be adversely affected by changes in the exchange rates. During
fiscal 2001, netNet
losses related to hedge ineffectiveness included in income was immaterial.insignificant for
all years presented.
At September 30, 2001,2002, the Company had outstanding forward foreign exchange
contracts to sell 927189 Canadian dollars over a period of two months.in October 2002.
Cash Flow Hedging Strategy--ToStrategy - To protect against an increase in cost of
forecasted purchases of foreign-sourced component parts denominated in euros
over a 12-month period, the Company has instituted a foreign currency cash flow
hedging program. The Company hedges portions of its forecasted purchases
denominated in euros with forward contracts. When the U.S. dollar weakens
against the euro, increased foreign currency payments are offset by gains in the
value of the forward contracts. Conversely, when the U.S. dollar strengthens
against the euro, reduced foreign currency payments are offset by losses in the
value of the forward contracts.
The Company does not have anyhas forward foreign exchange contracts outstanding at September
30, 2001. During2002 to purchase 2,635 euros. These contracts mature in fiscal 2001, net2003. Net
losses related to hedge ineffectiveness included in income was immaterial.were insignificant
for all years presented. At September 30, 2001,2002, the Company expects to
reclassify $13$33 of net gains on derivative instruments from accumulated other
comprehensive income to earnings during the next twelve months due to sales of
product containing foreign-sourced component parts.
14.16. Business Segment Information
The Company is organized into three reportable segments based on the
internal organization used by management for making operating decisions and
measuring performance and based on the similarity of customers served, common
use of facilities and economic results attained. Segments are as follows:
Commercial: This segment includes McNeilus, the Geesink Norba Group, Viking
and the commercial division of Oshkosh. McNeilus and Oshkosh manufacture, market
and distribute concrete mixer systems, portable concrete batch plants and truck
components. McNeilus and the Geesink Norba Group manufacture, market and
distribute refuse truck bodies and the Geesink Norba Group manufactures and
markets waste collection systems. Viking sells and distributes concrete mixer
systems. Sales are made to commercial and municipal customers in the U.S. and
abroad.
Fire and emergency: This segment includes Pierce, Medtec, the aircraft
rescue and firefighting and snow removal divisions of Oshkosh and Kewaunee
Fabrications, LLC. These units manufacture and market commercial and custom fire
trucks and emergency vehicles primarily for fire departments, airports and other
governmental units in the U.S. and abroad.
Defense: This segment consists of a division of Oshkosh that manufactures
heavy- and medium-payload tactical trucks and supply parts for the U.S. military
and to other militaries around the world.
The Company evaluates performance and allocates resources based on profit
or loss from segment operations before interest income and expense, income taxes
and non-recurring items. Intersegment sales are not significant. The accounting
policies of the reportable segments are the same as those described in Note 1 of
the Notes to Consolidated Financial Statements.
49
Summarized financial information concerning the Company's reportable
segments is shown in the following table. The caption "Corporate and other"
includes corporate related items, results of insignificant operations,
intersegment eliminations and income and expense not allocated to reportable
segments.
62
Selected financial data by business segment is as follows:
Fiscal Year Ended September 30,
2002 2001 2000
1999
---- ---- ---------- ------ ------
Net sales to unaffiliated customers:
Commercial.......................................Commercial $ 678,334 $ 559,871 $ 663,819
$ 613,028
Fire and emergency...............................emergency 476,148 463,919 390,659
336,241
Defense..........................................Defense 594,856 423,132 275,841
222,535
Corporate and other..............................Intersegment (5,746) (1,629) (803)
(1,500)
------------ ------------ ------------
Consolidated.................................----------- ----------- -----------
Consolidated $ 1,743,592 $ 1,445,293 $ 1,329,516
$ 1,170,304
============ ============ ======================= =========== ===========
Intersegment sales are primarily from the fire and emergency segment to the
defense segment.
Fiscal Year Ended September 30,
2002 2001 2000
---- ---- ----
Operating income (expense):
Commercial.......................................Commercial $ 47,171 $ 29,891 $ 54,654
$ 48,995
Fire and emergency...............................emergency 48,988 45,841 32,922
26,758
Defense..........................................Defense 40,720 39,545 30,119
22,878
Corporate and other..............................other (25,761) (16,981) (19,644)
(22,418)
------------ ------------ ----------------------- ----------- -----------
Consolidated operating income................income 111,118 98,296 98,051
76,213
Net interest expense.............................expense (20,106) (21,236) (20,063)
(25,984)
Miscellaneous other..............................other (1,555) 1,753 661
730
------------ ------------ ----------------------- ----------- -----------
Income from continuing operations before
income taxes, equity in earnings of
unconsolidated partnership and
extraordinary charge.......................................charge $ 89,457 $ 78,813 $ 78,649
$ 50,959
============ ============ ======================= =========== ===========
Fiscal Year Ended September 30,
2002 2001 2000 1999
---- ---- ----
Depreciation and amortization:
Commercial.......................................Depreciation and amortization:
Commercial $ 13,391 $ 14,241 $ 11,547
$ 10,949
Fire and emergency...............................emergency 6,692 9,973 8,979
8,156
Defense..........................................Defense 3,461 3,471 2,833
2,810
Corporate and other..............................other 1,848 812 859
1,242
------------ ------------ ------------
Consolidated.................................----------- ----------- -----------
Consolidated $ 25,392 $ 28,497 $ 24,218
$ 23,157
============ ============ ======================= =========== ===========
Capital expenditures:
Commercial.......................................Commercial $ 5,971 $ 5,555 $ 11,053
$ 9,317
Fire and emergency...............................emergency 7,648 5,813 5,016
6,125
Defense..........................................Defense 2,000 7,125 6,578
2,557
------------ ------------ ------------
Consolidated.................................----------- ----------- -----------
Consolidated $ 15,619 $ 18,493 $ 22,647
$ 17,999
============ ============ ======================= =========== ===========
September 30,
2002 2001 2000 1999
---- ---- ----
Identifiable assets:
Commercial:......................................
Identifiable assets:
Commercial:
U.S. (a)..................................... $ 389,633 $ 413,149 $ 385,622
$ 381,199
Netherlands..................................Netherlands 129,398 114,859 --
--
Other European...............................European 74,458 66,837 --
--
------------ ------------ ----------------------- ----------- -----------
Total Commercial..........................Commercial 593,489 594,845 385,622
381,199
Fire and emergency--U.S...........................emergency - U.S. 325,585 315,565 288,904
276,692
Defense--U.S......................................Defense - U.S. 75,392 168,400 108,528
85,796
Corporate and other--U.S..........................other - U.S. 29,863 10,458 13,326
9,603
------------ ------------ ------------
Consolidated.................................----------- ----------- -----------
Consolidated $ 1,024,329 $ 1,089,268 $ 796,380
$ 753,290
============ ============ ======================= =========== ===========
(a)Includes investment in unconsolidated partnership.
5063
The following table presents net sales by geographic region based on product
shipment destination.
Fiscal Year Ended September 30,
2002 2001 2000 1999
---- ---- ----
Net sales:
United States....................................States $ 1,541,629 $ 1,314,930 $ 1,227,038
$ 1,118,564
Other North America..............................America 7,037 7,343 7,429 7,822
Europe and Middle East...........................East 165,961 93,263 68,317
21,713
Other............................................Other 28,965 29,757 26,732
22,205
------------ ------------ ------------
Consolidated.................................----------- ----------- -----------
Consolidated $ 1,743,592 $ 1,445,293 $ 1,329,516
$ 1,170,304
============ ============ ======================= =========== ===========
15.17. Subsidiary Guarantors
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 of the wholly-owned subsidiaries of the
Company ("Subsidiary Guarantors") other than the Geesink Norba Group, McNeilus
Financial Services, Inc. and Oshkosh/McNeilus Financial Services, Inc., 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 statements of the Subsidiary Guarantors are not presented
because the 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 Company's 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 presently no
management fee arrangements between the Company and its Non-Guarantor
Subsidiaries.
5164
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Statement of Income
Fiscal Year Ended September 30, 2002
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ ------------
Net sales $ 751,555 $ 883,363 $ 136,095 $ (27,421) $ 1,743,592
Cost of sales 657,369 745,005 108,085 (27,333) 1,483,126
----------- ----------- ----------- ----------- -----------
Gross income 94,186 138,358 28,010 (88) 260,466
Operating expenses:
Selling, general and administrative 61,530 62,179 19,621 -- 143,330
Amortization of goodwill and other intangibles 2 5,726 290 -- 6,018
----------- ----------- ----------- ----------- -----------
Total operating expenses 61,532 67,905 19,911 -- 149,348
----------- ----------- ----------- ----------- -----------
Operating income 32,654 70,453 8,099 (88) 111,118
Other income (expense):
Interest expense (27,247) (13,340) (104) 19,425 (21,266)
Interest income 10,394 10,160 31 (19,425) 1,160
Miscellaneous, net 10,977 (12,239) (293) -- (1,555)
----------- ----------- ----------- ----------- -----------
(5,876) (15,419) (366) -- (21,661)
----------- ----------- ----------- ----------- -----------
Income before items noted below 26,778 55,034 7,733 (88) 89,457
Provision for income taxes 10,670 20,333 1,314 (32) 32,285
----------- ----------- ----------- ----------- -----------
16,108 34,701 6,419 (56) 57,172
Equity in earnings of subsidiaries and
unconsolidated partnership, net of income taxes 43,490 -- 2,426 (43,490) 2,426
----------- ----------- ----------- ----------- -----------
Net income $ 59,598 $ 34,701 $ 8,845 $ (43,546) $ 59,598
=========== =========== =========== =========== ===========
65
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Statement of Income
Fiscal Year Ended September 30, 2001
(In thousands)
Company
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- Guarantors Subsidiaries---------- ------------ ------------
---------- ------------
Net sales................................sales $ 588,590 $ 864,170 $ 18,860 $ (26,327) $ 1,445,293
Cost of sales............................sales 511,363 731,055 14,887 (26,505) 1,230,800
--------- ---------- ----------- --------------------- ----------- ----------- -----------
Gross income.............................income 77,227 133,115 3,973 178 214,493
Operating expenses:
Selling, general and administrative..administrative 43,949 57,460 2,613 -- 104,022
Amortization of goodwill and other intangibles....................intangibles 1 12,130 44 -- 12,175
--------- ---------- ----------- --------------------- ----------- ----------- -----------
Total operating expenses.................expenses 43,950 69,590 2,657 -- 116,197
--------- ---------- ----------- --------------------- ----------- ----------- -----------
Operating income.........................income 33,277 63,525 1,316 178 98,296
Other income (expense):
Interest expense.....................expense (24,310) (23,885) (1,656) 27,565 (22,286)
Interest income......................income 20,252 6,697 1,666 (27,565) 1,050
Miscellaneous, net...................net 12,177 (10,422) (2) -- 1,753
--------- ---------- ----------- --------------------- ----------- ----------- -----------
8,119 (27,610) 8 -- (19,483)
--------- ---------- ----------- --------------------- ----------- ----------- -----------
Income before items noted below..........below 41,396 35,915 1,324 178 78,813
Provision for income taxes...............taxes 13,445 15,385 465 66 29,361
--------- ---------- ----------- --------------------- ----------- ----------- -----------
27,951 20,530 859 112 49,452
Equity in earnings of subsidiaries and
unconsolidated partnership, net of income taxes.........................taxes 22,913 1,467 1,412 (24,380) 1,412
--------- ---------- ----------- --------------------- ----------- ----------- -----------
Net income...............................income $ 50,864 $ 21,997 $ 2,271 $ (24,268) $ 50,864
========= ========== =========== ===================== =========== =========== ===========
5266
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Statement of Income
Fiscal Year Ended September 30, 2000
(In thousands)
Company
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- Guarantors Subsidiaries---------- ------------ ------------
---------- ------------
Net sales................................sales $ 479,349 $ 875,027 $ -- $ (24,860) $ 1,329,516
Cost of sales............................sales 412,630 738,603 -- (24,651) 1,126,582
--------- ---------- ----------- --------------------- ----------- ----------- -----------
Gross income.............................income 66,719 136,424 -- (209) 202,934
Operating expenses:
Selling, general and administrative..administrative 41,108 52,260 356 -- 93,724
Amortization of goodwill and other intangibles....................intangibles -- 11,159 -- -- 11,159
--------- ---------- ----------- --------------------- ----------- ----------- -----------
Total operating expenses.................expenses 41,108 63,419 356 -- 104,883
--------- ---------- ----------- --------------------- ----------- ----------- -----------
Operating income (loss).................. 25,611 73,005 (356) (209) 98,051
Other income (expense):
Interest expense.....................expense (18,863) (8,368) (25) 6,300 (20,956)
Interest income......................income 267 6,855 71 (6,300) 893
Miscellaneous, net...................net 11,836 (11,763) 588 -- 661
--------- ---------- ----------- --------------------- ----------- ----------- -----------
(6,760) (13,276) 634 -- (19,402)
--------- ---------- ----------- --------------------- ----------- ----------- -----------
Income before items noted below..........below 18,851 59,729 278 (209) 78,649
Provision for income taxes...............taxes 6,564 24,755 106 (79) 31,346
--------- ---------- ----------- --------------------- ----------- ----------- -----------
12,287 34,974 172 (130) 47,303
Equity in earnings of subsidiaries and
unconsolidated partnership, net of income taxes.........................taxes 36,221 1,377 1,205 (37,598) 1,205
--------- ---------- ----------- --------------------- ----------- ----------- -----------
Income from continuing operations........operations 48,508 36,351 1,377 (37,728) 48,508
Gain on disposal of discontinued operations...........................operations 2,015 -- -- -- 2,015
Extraordinary charge.....................charge (820) -- -- -- (820)
--------- ---------- ----------- --------------------- ----------- ----------- -----------
Net income...............................income $ 49,703 $ 36,351 $ 1,377 $ (37,728) $ 49,703
========= ========== =========== ==========-=========== =========== =========== ===========
53
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Statement of Income
Fiscal Year Ended September 30, 1999
(In thousands)
Company Subsidiary Non-Guarantor Eliminations Consolidated
------- Guarantors Subsidiaries ------------ ------------
---------- ------------
Net sales................................ $ 411,089 $ 771,899 $ -- $ (12,684) $ 1,170,304
Cost of sales............................ 360,191 649,416 -- (12,684) 996,923
--------- ---------- ----------- ---------- -----------
Gross income............................. 50,898 122,483 -- -- 173,381
Operating expenses:
Selling, general and administrative.. 41,100 44,567 329 -- 85,996
Amortization of goodwill and other
intangibles.................... -- 11,172 -- -- 11,172
--------- ---------- ----------- ---------- -----------
Total operating expenses................. 41,100 55,739 329 -- 97,168
--------- ---------- ----------- ---------- -----------
Operating income (loss).................. 9,798 66,744 (329) -- 76,213
Other income (expense):
Interest expense..................... (24,817) (8,227) -- 6,300 (26,744)
Interest income...................... 282 6,725 53 (6,300) 760
Miscellaneous, net................... 95 205 430 -- 730
--------- ---------- ----------- ---------- -----------
(24,440) (1,297) 483 -- (25,254)
--------- ---------- ----------- ---------- -----------
Income (loss) before items noted below... (14,642) 65,447 154 -- 50,959
Provision (credit) for income taxes...... (5,706) 26,961 58 -- 21,313
--------- ---------- ----------- ---------- -----------
(8,936) 38,486 96 -- 29,646
Equity in earnings of subsidiaries and
unconsolidated partnership, net of
income taxes......................... 40,127 1,641 1,545 (41,768) 1,545
--------- ---------- ----------- ---------- -----------
Income before extraordinary charge....... 31,191 40,127 1,641 (41,768) 31,191
Extraordinary charge..................... (60) -- -- -- (60)
--------- ---------- ----------- ---------- -----------
Net income............................... $ 31,131 $ 40,127 $ 1,641 $ (41,768) $ 31,131
========= ========== =========== ========== ===========
5467
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Balance Sheet
September 30, 2001
(In thousands)2002
Company Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- Guarantors Subsidiaries---------- ------------ ------------
---------- ------------
Assets
Current assets:
Cash and cash equivalents..............equivalents $ 32,571 $ 2,060 $ 5,408 $ -- $ 40,039
Receivables, net 50,520 62,311 33,655 (3,777) 142,709
Inventories 31,060 150,042 29,884 (120) 210,866
Prepaid expenses and other 25,505 6,773 1,144 -- 33,422
---------- ---------- ---------- ---------- ----------
Total current assets 139,656 221,186 70,091 (3,897) 427,036
Investment in and advances to:
Subsidiaries 558,410 6,259 -- (564,669) --
Unconsolidated partnership -- -- 22,274 -- 22,274
Other long-term assets 7,296 4,329 -- -- 11,625
Net property, plant and equipment 33,852 87,666 18,843 -- 140,361
Goodwill and purchased intangible assets, net 22 308,089 114,922 -- 423,033
---------- ---------- ---------- ---------- ----------
Total assets $ 739,236 $ 627,529 $ 226,130 $ (568,566) $1,024,329
========== ========== ========== ========== ==========
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable $ 49,707 $ 48,432 $ 22,027 $ (3,744) $ 116,422
Floor plan notes payable -- 23,801 -- -- 23,801
Customer advances 53,947 65,817 -- -- 119,764
Payroll-related obligations 13,518 14,848 6,108 -- 34,474
Accrued warranty 11,755 9,148 3,112 -- 24,015
Other current liabilities 26,212 25,457 4,715 (33) 56,351
Revolving credit facility and current
maturities of long-term debt 18,000 226 19 -- 18,245
---------- ---------- ---------- ---------- ----------
Total current liabilities 173,139 187,729 35,981 (3,777) 393,072
Long-term debt 130,000 1,586 127 -- 131,713
Deferred income taxes (10,071) 27,445 21,929 -- 39,303
Other long-term liabilities 36,408 11,654 2,419 -- 50,481
Investment by and advances from (to) Parent -- 399,115 165,674 (564,789) --
Shareholders' equity 409,760 -- -- -- 409,760
---------- ---------- ---------- ---------- ----------
Total liabilities and shareholders' equity $ 739,236 $ 627,529 $ 226,130 $ (568,566) $1,024,329
========== ========== ========== ========== ==========
68
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Balance Sheet
September 30, 2001
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ ------------
Assets
Current assets:
Cash and cash equivalents $ 4,726 $ 3,394 $ 3,192 $ -- $ 11,312
Receivables, net.......................net 104,662 74,814 33,633 (1,704) 211,405
Inventories............................Inventories 82,873 145,635 29,561 (31) 258,038
Prepaid expenses and other.............other 11,525 9,644 1,226 -- 22,395
--------- ---------- ----------- ---------- --------------------- ---------- ----------
Total current assets................assets 203,786 233,487 67,612 (1,735) 503,150
Investment in and advances to:
Subsidiaries...........................Subsidiaries 575,807 8,591 -- (584,398) --
Unconsolidated partnership.............partnership -- -- 18,637 -- 18,637
Other long-term assets..................... 6,080 4,095assets 6,940 1,585 101 -- 10,2768,626
Net property, plant and equipment..........equipment 36,286 88,783 16,859 -- 141,928
Goodwill and other intangible assets, net.. 884 317,269net 24 319,779 97,124 -- 415,277
---------416,927
---------- ----------- ---------- --------------------- ---------- ----------
Total assets...............................assets $ 822,843 $ 652,225 $ 200,333 $ (586,133) $ 1,089,268
=========$1,089,268
========== =========== ========== ===================== ========== ==========
Liabilities and Shareholders' Equity
Current liabilities:liabilities
Accounts payable.......................payable $ 41,703 $ 42,143 $ 25,722 $ (1,704) $ 107,864
Floor plan notes payable...............payable -- 19,271 -- -- 19,271
Customer advances......................advances 3,568 54,502 -- -- 58,070
Payroll-related obligations............obligations 8,881 12,483 5,720 -- 27,084
Accrued warranty.......................warranty 8,813 7,799 1,726 -- 18,338
Other current liabilities..............liabilities 42,637 27,567 1,339 -- 71,543
Revolving credit facility and current -- --
maturities of long-term debt.......debt 76,600 426 5 -- 77,031
--------- ---------- ----------- ---------- --------------------- ---------- ----------
Total current liabilities.......liabilities 182,202 164,191 34,512 (1,704) 379,201
Long-term debt.............................debt 280,250 1,812 187 -- 282,249
Deferred income taxes......................taxes (5,764) 35,119 10,979 -- 40,334
Other long-term liabilities ............... 23,791 16,667 -- -- 40,458
Investment by and advances from (to) Parent.................................Parent -- 434,436 154,655 (599,137)(589,091) --
Shareholders' equity.......................equity 342,364 -- -- 4,662 347,026
--------- ---------- --------------------- ---------- ---------- ----------
Total liabilities and shareholders' equity.equity $ 822,843 $ 652,225 $ 200,333 $ (586,133) $ 1,089,268
=========$1,089,268
========== =========== ========== ===================== ========== ==========
5569
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Balance SheetStatement of Cash Flows
Fiscal Year Ended September 30, 2000
(In thousands)2002
Company Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- Guarantors Subsidiaries---------- ------------ ------------
---------- ------------
Assets
Current assets:Operating activities:
Net income $ 59,598 $ 34,701 $ 8,845 $ (43,546) $ 59,598
Non-cash adjustments (5,470) 17,281 7,845 -- 19,656
Changes in operating assets and liabilities 160,080 28,177 (3,631) 88 184,714
--------- --------- --------- --------- ---------
Net cash provided from (used for)
operating activities 214,208 80,159 13,059 (43,458) 263,968
Investing activities:
Investments in and advances to
subsidiaries 31,354 (65,795) (9,017) 43,458 --
Additions to property, plant and equipment (3,334) (9,144) (3,141) -- (15,619)
Other (2,010) (6,128) 322 -- (7,816)
--------- --------- --------- --------- ---------
Net cash provided from (used for)
investing activities 26,010 (81,067) (11,836) 43,458 (23,435)
Financing activities:
Net repayments under revolving credit
facility (65,200) -- -- -- (65,200)
Repayment of long-term debt (143,650) (426) (58) -- (144,134)
Dividends paid (5,777) -- -- -- (5,777)
Other 2,254 -- -- -- 2,254
--------- --------- --------- --------- ---------
Net cash used for financing activities (212,373) (426) (58) -- (212,857)
Effect of exchange rate changes on cash -- -- 1,051 -- 1,051
--------- --------- --------- --------- ---------
Increase (decrease) in cash and cash
equivalents 27,845 (1,334) 2,216 -- 28,727
Cash and cash equivalents..............equivalents at beginning of
year 4,726 3,394 3,192 -- 11,312
--------- --------- --------- --------- ---------
Cash and cash equivalents at end of year $ 13,03432,571 $ 4992,060 $ 365,408 $ -- $ 13,569
Receivables, net....................... 60,868 47,473 272 (2,096) 106,517
Inventories............................ 59,552 141,867 -- (209) 201,210
Prepaid expenses and other............. 12,153 7,836 143 -- 20,132
--------- ---------- ----------- ---------- -----------
Total current assets................ 145,607 197,675 451 (2,305) 341,428
Investment in and advances to:
Subsidiaries........................... 382,723 4,308 -- (387,031) --
Unconsolidated partnership............. -- -- 15,179 -- 15,179
Other long-term assets..................... 8,019 1,980 284 -- 10,283
Net property, plant and equipment.......... 30,196 88,563 -- -- 118,759
Goodwill and other intangible assets, net.. -- 310,731 -- -- 310,731
--------- ---------- ----------- ---------- -----------
Total assets............................... $ 566,545 $ 603,257 $ 15,914 $ (389,336) $ 796,38040,039
========= ========== =========== ========== ===========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable....................... $ 39,602 $ 46,704 $ 5 $ (2,096) $ 84,215
Floor plan notes payable............... -- 23,925 -- -- 23,925
Customer advances...................... 3,114 55,353 26 -- 58,493
Payroll-related obligations............ 10,642 12,792 31 -- 23,465
Accrued warranty....................... 6,867 8,652 -- -- 15,519
Other current liabilities.............. 25,908 24,695 164 -- 50,767
Revolving credit facility and current
maturities of long-term debt....... 8,000 237 307 -- 8,544
--------- ---------- ----------- ---------- -----------
Total current liabilities....... 94,133 172,358 533 (2,096) 264,928
Long-term debt............................. 152,000 2,052 186 -- 154,238
Deferred income taxes...................... (905) 36,432 10,887 -- 46,414
Other long-term liabilities ............... 20,260 9,483 -- -- 29,743
Investment by and advances from (to)
Parent................................. -- 382,932 4,308 (387,240) --
Shareholders' equity....................... 301,057 -- -- -- 301,057
--------- ---------- ----------- ---------- -----------
Total liabilities and shareholders' equity. $ 566,545 $ 603,257 $ 15,914 $ (389,336) $ 796,380
========= ========== =========== ========== ==================== ========= =========
5670
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Statement of Cash Flows
Fiscal Year Ended September 30, 2001
(In thousands)
Company
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- Guarantors Subsidiaries---------- ------------ ------------
---------- ------------
Operating activities:
Net income..............................income $ 50,864 $ 21,997 $ 2,271 $ (24,268) $ 50,864
Non-cash adjustments....................adjustments 4,612 20,59220,952 (2,057) -- 23,507
Changes in operating assets and liabilities.........................liabilities (48,063) (34,810) 310 (178) (82,741)
--------- ---------- ----------- ---------- -------------------- --------- --------- ---------
Net cash provided from (used for)
operating activities................activities 7,413 8,139 524 (24,446) (8,370)
Investing activities:
Acquisition of businesses, net of cash
acquired............................acquired (3,954) (22,580) (133,707) -- (160,241)
Investments in and advances to
subsidiaries........................subsidiaries (189,846) 26,885 138,515 24,446 --
Additions to property, plant and equipment...........................equipment (11,875) (6,113) (505) -- (18,493)
Other...................................Other (458) (2,948) (1,223) -- (4,629)
--------- ---------- ----------- ---------- -------------------- --------- --------- ---------
Net cash provided from (used for)
investing activities................activities (206,133) (4,756) 3,080 24,446 (183,363)
Financing activities:
Net borrowings under revolving credit
Facility............................facility 65,200 -- -- -- 65,200
Proceeds from issuance of long-term
Debt................................debt 140,000 -- -- -- 140,000
Repayment of long-term debt.............debt (8,350) (488) (70) -- (8,908)
Debt issuance costs.....................costs (1,183) -- -- -- (1,183)
Dividends paid..........................paid (5,735) -- -- -- (5,735)
Other...................................Other 480 -- -- -- 480
--------- ---------- ----------- ---------- -------------------- --------- --------- ---------
Net cash provided from (used for)
financing activities................activities 190,412 (488) (70) -- 189,854
Effect of exchange rate changes on cash.....cash -- -- (378) -- (378)
--------- ---------- ----------- ---------- -------------------- --------- --------- ---------
Increase (decrease) in cash and cash
equivalents.............................equivalents (8,308) 2,895 3,156 -- (2,257)
Cash and cash equivalents at beginning of
year....................................year 13,034 499 36 -- 13,569
--------- ---------- ----------- ---------- -------------------- --------- --------- ---------
Cash and cash equivalents at end of year....year $ 4,726 $ 3,394 $ 3,192 $ -- $ 11,312
========= ========== =========== ========== ==================== ========= ========= =========
5771
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Statement of Cash Flows
Fiscal Year Ended September 30, 2000
(In thousands)
Company
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- Guarantors Subsidiaries---------- ------------ ------------
---------- ------------
Operating activities:activities
Income from continuing operations.......operations $ 48,508 $ 36,351 $ 1,377 $ (37,728) $ 48,508
Non-cash adjustments....................adjustments 5,967 18,999 (426) -- 24,540
Changes in operating assets and liabilities.........................liabilities 100 (13,434) (10,240) 209 (23,365)
--------- ---------- ----------- ---------- -------------------- --------- --------- ---------
Net cash provided from (used for)
operating activities................activities 54,575 41,916 (9,289) (37,519) 49,683
Investing activities:
Acquisition of businesses, net of cash acquired............................acquired (5,467) (1,752) 72 -- (7,147)
Investments in and advances to subsidiaries........................subsidiaries (19,681) (28,359) 10,521 37,519 --
Additions to property, plant and equipment...........................equipment (10,962) (11,685) -- -- (22,647)
Other...................................Other (719) (699) (947) -- (2,365)
--------- ---------- ----------- ---------- -------------------- --------- --------- ---------
Net cash provided from (used for)
investing activities................activities (36,829) (42,495) 9,646 37,519 (32,159)
Net cash provided from discontinued operations..............................operations 2,015 -- -- -- 2,015
Financing activities:
Net repayments under revolving credit facility............................facility (5,000) -- -- -- (5,000)
Proceeds from issuance of long-term debt................................debt 30,913 -- -- -- 30,913
Repayment of long-term debt.............debt (123,913) (259) (423) -- (124,595)
Debt issuance costs.....................costs (795) -- -- -- (795)
Proceeds from Common Stock Offering.....Offering 93,736 -- -- -- 93,736
Costs of Common Stock Offering..........Offering (334) -- -- -- (334)
Dividends paid..........................paid (5,392) -- -- -- (5,392)
Other...................................Other 360 -- -- -- 360
--------- ---------- ----------- ---------- -------------------- --------- --------- ---------
Net cash used for financing activities..activities (10,425) (259) (423) -- (11,107)
--------- ---------- ----------- ---------- -------------------- --------- --------- ---------
Increase (decrease) in cash and cash equivalents.............................equivalents 9,336 (838) (66) -- 8,432
Cash and cash equivalents at beginning of year....................................year 3,698 1,337 102 -- 5,137
--------- ---------- ----------- ---------- -------------------- --------- --------- ---------
Cash and cash equivalents at end of year....year $ 13,034 $ 499 $ 36 $ -- $ 13,569
========= ========== =========== ========== ==================== ========= ========= =========
58
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Statement of Cash Flows
Fiscal Year Ended September 30, 1999
(In thousands)
Company Subsidiary Non-Guarantor Eliminations Consolidated
------- Guarantors Subsidiaries ------------ ------------
---------- ------------
Operating activities:
Income before extraordinary charge...... $ 31,191 $ 40,127 $ 1,641 $ (41,768) $ 31,191
Non-cash adjustments.................... 4,005 18,491 (5,143) -- 17,353
Changes in operating assets and
liabilities......................... (11,739) 3,893 (1,650) -- (9,496)
--------- ---------- ----------- ---------- -----------
Net cash provided from (used for)
operating activities................ 23,457 62,511 (5,152) (41,768) 39,048
Investing activities:
Investments in and advances to
subsidiaries........................ 5,992 (47,872) 112 41,768 --
Additions to property, plant and
equipment........................... (4,261) (13,738) -- -- (17,999)
Other................................... 238 (287) 3,564 -- 3,515
--------- ---------- ----------- ---------- -----------
Net cash provided from (used for)
investing activities................ 1,969 (61,897) 3,676 41,768 (14,484)
Financing activities:
Net repayments under
revolving credit facility........... (1,000) -- -- -- (1,000)
Repayment of long-term debt............. (19,000) (256) -- -- (19,256)
Dividends paid.......................... (4,226) -- -- -- (4,226)
Other................................... 1,433 -- -- -- 1,433
--------- ---------- ----------- ---------- -----------
Net cash used for
financing activities............... (22,793) (256) -- -- (23,049)
--------- ---------- ----------- ---------- -----------
Increase (decrease) in cash and cash
equivalents............................ 2,633 358 (1,476) -- 1,515
Cash and cash equivalents at
beginning of year...................... 1,065 979 1,578 -- 3,622
--------- ---------- ----------- ---------- -----------
Cash and cash equivalents at end of year.... $ 3,698 $ 1,337 $ 102 $ -- $ 5,137
========= ========== =========== ========== ===========
5972
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES.
NoneThe Company had no disagreements with its accountants during the last two
fiscal years. On June 14, 2002, the Company engaged Deloitte & Touche LLP to act
as its independent auditors as successor to Arthur Andersen LLP. All information
relating to such change in accountants is incorporated by reference from the
Company's Current Report on Form 8-K, dated June 14, 2002.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.REGISTRANT
The information to be included under the captions "Governance of the
Company - The Board of Directors" and "Stock Ownership - Compliance with Section
16(a) Beneficial Ownership Reporting" in the Company's definitive proxy
statement for the annual meeting of shareholders on February 8, 2002,4, 2003, to be
filed with the Securities and Exchange Commission, is hereby incorporated by
reference in answer to this item. Reference is also made to the information
under the heading "Executive Officers of the Registrant" included under Part I
of this report. In addition, the information included under the caption
"Available Information" in Item 1 of Part I of this report is hereby
incorporated by reference in answer to this item.
Item 11. EXECUTIVE COMPENSATION.COMPENSATION
The information to be included under the captions "Governance of the
Company - Compensation of Directors," "Stock Price Performance Graph" and
"Executive Compensation" contained in the Company's definitive proxy statement
for the annual meeting of shareholders on February 8, 2002,4, 2003, to be filed with the
Securities and Exchange Commission, is hereby incorporated by reference in
answer to this item.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The information to be included under the caption "Stock Ownership - Stock
Ownership of Directors, Executive Officers and Other Large Shareholders" in the
Company's definitive proxy statement for the annual meeting of shareholders on
February 8, 2002,4, 2003, to be filed with the Securities and Exchange Commission, is
hereby incorporated by reference in answer to this item.
Equity Compensation Plan Information
The following table provides information about the Company's equity
compensation plans as of September 30, 2002.
Number of securities remaining
Number of securities to be available for future issuance
issued upon the exercise of Weighted-average exercise under equity compensation plans
outstanding options, warrants price of outstanding options, (excluding securities reflected
Plan category and rights (1) warrants and rights in the first column) (2)
- ------------- ----------------------------- ----------------------------- --------------------------------
Equity compensation
plans approved by
security holders 1,578,302 $30.40 255,075
Equity compensation
plans not approved by
security holders - n/a -
--------- -------
Total 1,578,302 $30.40 255,075
========= =======
(1) Represents options to purchase the Company's Common Stock granted under the 1990 Incentive Stock Plan,
as amended, which was approved by the Company's shareholders.
(2) Excludes 70,000 shares of restricted Common Stock previously issued under the Company's 1990 Incentive
Stock Plan, as amended, subject to vesting after a six-year retention period.
73
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.TRANSACTIONS
The information to be included under the captions "Governance of the
Company - The Board of Directors" and "Executive Compensation - Executive
Employment and Severance Agreements and Other Agreements" in the Company's
definitive proxy statement for the annual meeting of shareholders on February 8,
2002,4,
2003, to be filed with the Securities and Exchange Commission, is hereby
incorporated by reference in answer to this item.
Item 14. CONTROLS AND PROCEDURES.
(a) Evaluation of disclosure controls and procedures. In accordance with
Rule 13a-15(b) of the Securities Exchange Act of 1934 (the "Exchange Act"),
within 90 days prior to the filing date of this annual report on Form 10-K, an
evaluation was carried out under the supervision and with the participation of
the Company's management, including the Company's Chairman of the Board,
President and Chief Executive Officer and Executive Vice President and Chief
Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures (as defined in Rule 13a-14(c) under
the Exchange Act). Based upon their evaluation of these disclosures controls and
procedures, the Chairman of the Board, President and Chief Executive Officer and
the Executive Vice President and Chief Financial Officer concluded that the
disclosure controls and procedures were effective as of the date of such
evaluation to ensure that material information relating to the Company,
including its consolidated subsidiaries, was made known to them by others within
those entities, particularly during the period in which this Annual Report on
Form 10-K was being prepared.
(b) Changes in internal controls. There were not any significant changes in
the Company's internal controls or other factors that could significantly affect
these controls subsequent to the date of their evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
PART IV
Item 14.15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.8-K
(a) 1. Financial Statements: The following consolidated financial
statements of the Company and the report of independent auditors included in the
Annual Report to Shareholders for the fiscal year ended September 30, 2001,2002, are
contained in Item 8:
Report of Arthur AndersenDeloitte & Touche LLP, Independent Auditors
Report of Ernst & YoungArthur Andersen LLP, Independent Auditors
Consolidated Statements of Income for the years ended September 30,
2002, 2001 2000 and 19992000
Consolidated Balance Sheets at September 30, 20012002 and 20002001
Consolidated Statements of Shareholders' Equity for the years ended
September 30, 2002, 2001, 2000 and 19992000
Consolidated Statements of Cash Flows for the years ended September 30,
2002, 2001 2000 and 19992000
Notes to Consolidated Financial Statements
2. Financial Statement Schedules:
Schedule II - Valuation & Qualifying Accounts
All other schedules are omitted because they are not applicable, or the required
information is included in the consolidated financial statements or notes
thereto.
6074
3. Exhibits:
(a) 3.1 Restated Articles of Incorporation of Oshkosh Truck Corporation
(incorporated by reference to Exhibit 3.2 to the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 2000
(File No. 0-13886)).
3.2 By-Laws of Oshkosh Truck Corporation, as amended.amended (incorporated by
reference to Exhibit 3.1 to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 2002 (File No. 0-13886)).
4.1 Second Amended and Restated Credit Agreement, dated July 23, 2001,
among Oshkosh Truck Corporation, Bank of America, N.A., as Agent
and Swing Line Lender, Bank One, NA, as Syndication Agent, and the
other financial institutions party thereto (incorporated by
reference to Exhibit 4.1 to the Company's Current Report on Form
8-K dated July 25, 2001 (File No. 01-3886)0-13886)).
4.2 Indenture, dated February 26, 1998, among Oshkosh Truck
Corporation, the Subsidiary Guarantors and Firstar Trust Company
(incorporated by reference to Exhibit 4.2 to the Company's Current
Report on Form 8-K dated February 26, 1998 (File No. 0-13886)).
4.3 Form of 8 3/83/4% Senior Subordinated Note due 2008 (incorporated by
reference to Exhibit 4.3 to the Company's Registration Statement
on Form S-4 (Reg. No. 333-47931)).
4.4 Form of Note Guarantee (incorporated by reference to Exhibit 4.4
to the Company's Registration Statement on Form S-4 (Reg. No.
333-47931)).
4.5 Rights Agreement, dated as of February 1, 1999, between Oshkosh
Truck Corporation and Computershare Investor Services, LLC (as
successor to Firstar Bank, N.A.) (incorporated by reference to
Exhibit 4.1 to the Company's Registration Statement on Form 8-A,
dated as of February 1, 1999 (File No. 013886)0-13886)).
4.6 First Supplemental Indenture, dated September 21, 2000, among the
GuaranteeingGuarantor Subsidiaries, Oshkosh Truck Corporation, the other
Subsidiary Guarantors and FirstarU.S. Bank, National Association as(as
successor in interest to Firstar Trust Company, as trustee underBank, N.A.) (incorporated by reference to
Exhibit 4.6 to the Indenture.Company's Annual Report on Form 10-K for the
year ended September 30, 2001 (File No. 0-13886)).
4.7 Second Supplemental Indenture, dated October 30, 2000, among
Medtec Ambulance Corporation, Oshkosh Truck Corporation, the other
Subsidiary Guarantors and FirstarU.S. Bank, National Association as(as
successor in
interest to Firstar Trust Company,Bank, N.A.)(incorporated by reference to
Exhibit 4.7 to the Company's Annual Report on Form 10-K for the
year ended September 30, 2001 (File No. 0-13886)).
4.8 First Amendment to Rights Agreement, dated as trustee under the Indenture.of November 1, 2002,
between Oshkosh Truck Corporation, U.S. Bank National Association
and Computershare Investor Services, LLC.
10.1 Oshkosh Truck Corporation 1990 Incentive Stock Plan, as amended.amended
(incorporated by reference to Exhibit 10.1 to the Company's Annual
Report on Form 10-K for the year ended September 30, 2001 (File
No. 0-13886)).*
10.2 1994 Long-Term Incentive Compensation Plan, dated March 29, 1994
(incorporated by reference to Exhibit 10.12 to the Company's
Annual Report on Form 10-K for the year ended September 30, 1994)1994
(File No. 0-13886)).*
10.3 Form of Oshkosh Truck Corporation 1990 Incentive Stock Plan, as
amended, Nonqualified Stock Option Agreement (incorporated by
reference to Exhibit 4.2 to the Company's Registration Statement
on Form S-8 (Reg. No. 33-6287)33-62687)).*
10.4 Form of Oshkosh Truck Corporation 1990 Incentive Stock Plan, as
amended, Nonqualified Director Stock Option Agreement
(incorporated by reference to Exhibit 4.3 to the Company's
Registration Statement on Form S-8 (Reg. No. 33-6287)33-62687)).*
10.5 Form of 1994 Long-Term Incentive Compensation Plan Award Agreement
(incorporated by reference to Exhibit 10.16 to the Company's
Annual Report on Form 10-K for the year ended September 30, 19951999
(File No. 0-13886)).*
10.6 Stock Purchase Agreement, dated April 26, 1996, among Oshkosh
Truck Corporation, J. Peter Mosling, Jr. and Stephen P. Mosling
(incorporated by reference to Exhibit 10.17 to the Company's
Annual Report on Form 10-K for the year ended September 30, 1996
(File No. 0-13886)).
10.7 Employment Agreement, dated as of October 15, 1998, between Oshkosh
Truck Corporation and Robert G. Bohn (incorporated by reference to
Exhibit 10.9 to the Company's Annual Report on Form 10-K for the year
ended September 30, 1998 (File No. 0-13886)).*
61
10.8 Employment Agreement, dated April 24, 1998, between McNeilus
Companies, Inc. and Daniel J. Lanzdorf (incorporated by reference to
Exhibit 10.9 to the Company's Annual Report on Form 10-K for the year
ended September 30, 1999 (File No. 0-13886)).*
10.9 Oshkosh Truck Corporation Executive Retirement Plan (incorporated by
reference to Exhibit 10.1 to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 2000).*
10.10 Form of Key Executive Employment and Severance Agreement between
Oshkosh Truck Corporation and each of Robert G. Bohn, Timothy M.
Dempsey, Paul C. Hollowell, Daniel J. Lanzdorf, John W. Randjelovic,
Charles L. Szews and Matthew J. Zolnowski (incorporated by reference
to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 2000).*
10.11 Employment Agreement, dated September 16, 1996, between Pierce
Manufacturing Inc. and John W. Randjelovic (incorporated by reference
to Exhibit 10.12 to the Company's Annual Report on Form 10-K for the
year ended September 30, 2000 (File No. 0-13886)).*
10.12 Amendment effective July 1, 2000 to Employment Agreement, dated as of
October 15, 1998, between Oshkosh Truck Corporation and Robert G. Bohn
(incorporated by reference to Exhibit 10.13 to the Company's Annual
Report on Form 10-K for the year ended September 30, 2000 (File No.
0-13886)).*
10.13 Second Amendment effective December 31, 2000 to Employment Agreement,
dated as of October 15, 1998, between Oshkosh Truck Corporation and
Robert G. Bohn (incorporated by reference to Exhibit 10 to the
Company's Quarterly Report on Form 10-Q for the quarter ended December
31, 2000 (File No. 0-13886)).*
11. Computation of per share earnings (contained in Note 1 of "Notes to
Consolidated Financial Statements" of the Company's Annual Report on
Form 10-K for the fiscal year ended September 30, 2001).
21. Subsidiaries of Registrant.
23. Consent of Arthur Andersen LLP
23.1 Consent of Ernst & Young LLP
*Denotes a management contract or compensatory plan or arrangement.
(b) The Company filed a Current Report on Form 8-K, dated July 25, 2001,
relating to the Company's acquisition of the Geesink Norba Group and a
Current Report on Form 8-K, dated July 27, 2001, reporting a
conference call for analysts held in connection with the announcement
of the Company's earnings for the third quarter ended June 30, 2001.
62
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
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
December 7, 2001 By /S/ Robert G. Bohn
--------------------------------------------------
Robert G. Bohn, President, Chief Executive Officer
and Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities on the dates indicated.
December 7, 2001 /S/ R. G. Bohn
-----------------------------------------------------
R. G. Bohn, President, Chief Executive Officer and
Chairman of the Board
(Principal Executive Officer)
December 7, 2001 /S/ C. L. Szews
-----------------------------------------------------
C. L. Szews, Executive Vice President and Chief
Financial Officer
(Principal Financial Officer)
December 7, 2001 /S/ T. J. Polnaszek
-----------------------------------------------------
T. J. Polnaszek, Vice President and Controller
(Principal Accounting Officer)
December 7, 2001 /S/ J. W. Andersen
-----------------------------------------------------
J. W. Andersen, Director
December 7, 2001 /S/ D. T. Carroll
-----------------------------------------------------
D. T. Carroll, Director
December 7, 2001
-----------------------------------------------------
R. M. Donnelly, Director
December 7, 2001
-----------------------------------------------------
D. V. Fites, Director
December 7, 2001 /S/ General (Ret.) F. M. Franks, Jr.
-----------------------------------------------------
General (Ret.) F. M. Franks, Jr., Director
December 7, 2001
-----------------------------------------------------
M. W. Grebe, Director
December 7, 2001 /S/ K. J. Hempel
-----------------------------------------------------
K. J. Hempel, Director
December 7, 2001 /S/ S. P. Mosling
-----------------------------------------------------
S. P. Mosling, Director
December 7, 2001 /S/ J. P. Mosling, Jr.
-----------------------------------------------------
J. P. Mosling, Jr., Director
December 7, 2001 /S/ R. G. Sim
-----------------------------------------------------
R. G. Sim, Director
63
SCHEDULE II
OSHKOSH TRUCK CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
Allowance for Doubtful Accounts
Years Ended September 30, 2001, 2000 and 1999
(In Thousands)
Balance at Acquisitions Additions
Beginning of of Charged to Balance at
Fiscal Year Year Businesses Expense Reductions* End of Year
----------- ---- ---------- ------- ---------- -----------
Receivables -
Allowance for doubtful accounts:
1999 $2,068 -- $201 $ (65) $2,204
====== ----- ==== ===== ======
2000 $2,204 $ 5 $255 $ (17) $2,447
====== ===== ==== ===== ======
2001 $2,447 $1,063 $423 $(105) $3,828
====== ===== ==== ===== ======
* Represents amounts written off to the reserve, net of recoveries.
64
INDEX TO EXHIBITS
3.1 Restated Articles of Incorporation of Oshkosh Truck Corporation
(incorporated by reference to Exhibit 3.2 to the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 2000 (File No.
0-13886)).
3.2 By-Laws of Oshkosh Truck Corporation, as amended.
4.1 Second Amended and Restated Credit Agreement, dated July 23, 2001,
among Oshkosh Truck Corporation, Bank of America, N.A., as Agent and
Swing Line Lender, Bank One, NA, as Syndication Agent, and the other
financial institutions party thereto (incorporated by reference to
Exhibit 4.1 to the Company's Current Report on Form 8-K, dated July
25, 2001 (File No. 01-3886)).
4.2 Indenture, dated February 26, 1998, among Oshkosh Truck Corporation,
the Subsidiary Guarantors and Firstar Trust Company (incorporated by
reference to Exhibit 4.2 to the Company's Current Report on Form 8-K
dated February 26, 1998 (File No. 0-13886)).
4.3 Form of 8 3/4% Senior Subordinated Note due 2008 (incorporated by
reference to Exhibit 4.3 to the Company's Registration Statement on
Form S-4 (Reg. No. 333-47931)).
4.4 Form of Note Guarantee (incorporated by reference to Exhibit 4.4 to
the Company's Registration Statement on Form S-4 (Reg. No.
333-47931)).
4.5 Rights Agreement, dated as of February 1, 1999, between Oshkosh Truck
Corporation and Firstar Bank, N.A. (incorporated by reference to
Exhibit 4.1 to the Company's Registration Statement on Form 8-A, dated
as of February 1, 1999 (File No. 013886)).
4.6 First Supplemental Indenture, dated September 21, 2000, among the
Guaranteeing Subsidiaries, Oshkosh Truck Corporation, the other
Subsidiary Guarantors and Firstar Bank, National Association, as
successor in interest to Firstar Trust Company, as trustee under the
Indenture.
4.7 Second Supplemental Indenture, dated October 30, 2000, among Medtec
Ambulance Corporation, Oshkosh Truck Corporation, the other Subsidiary
Guarantors and Firstar Bank, National Association, as successor in
interest to Firstar Trust Company, as trustee under the Indenture.
10.1 Oshkosh Truck Corporation 1990 Incentive Stock Plan, as amended.*
10.2 1994 Long-Term Incentive Compensation Plan, dated March 29, 1994
(incorporated by reference to Exhibit 10.12 to the Company's Annual
Report on Form 10-K for the year ended September 30, 1994) (File No.
0-13886)).*
10.3 Form of Oshkosh Truck Corporation 1990 Incentive Stock Plan, as
amended, Nonqualified Stock Option Agreement (incorporated by
reference to Exhibit 4.2 to the Company's Registration Statement on
Form S-8 (Reg. No. 33-6287)).*
10.4 Form of Oshkosh Truck Corporation 1990 Incentive Stock Plan, as
amended, Nonqualified Director Stock Option Agreement (incorporated by
reference to Exhibit 4.3 to the Company's Registration Statement on
Form S-8 (Reg. No. 33-6287)).*
10.5 Form of 1994 Long-Term Incentive Compensation Plan Award Agreement
(incorporated by reference to Exhibit 10.16 to the Company's Annual
Report on Form 10-K for the year ended September 30, 1995 (File No.
0-13886)).*
10.6 Stock Purchase Agreement, dated April 26, 1996, among Oshkosh Truck
Corporation, J. Peter Mosling, Jr. and Stephen P. Mosling
(incorporated by reference to Exhibit 10.17 to the Company's Annual
Report on Form 10-K for the year ended September 30, 1996 (File No.
0-13886)).
65
10.7 Employment Agreement, dated as of October 15, 1998 between Oshkosh
Truck Corporation and Robert G. Bohn (incorporated by reference to
Exhibit 10.9 to the Company's Annual Report on Form 10-K for the
year ended September 30, 1998 (File No. 0-13886)).*
10.8 Employment Agreement, dated April 24, 1998, between McNeilus
Companies, Inc. and Daniel J. Lanzdorf (incorporated by reference
to Exhibit 10.9 to the Company's Annual Report on Form 10-K for
the year ended September 30, 1999 (File No. 0-13886)).*
10.9 Oshkosh Truck Corporation Executive Retirement Plan (incorporated
by reference to Exhibit 10.1 to the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 2000).*
10.10 Form of Key Executive Employment and Severance Agreement between
Oshkosh Truck Corporation and each of Robert G. Bohn, Timothy M.
Dempsey,Bryan J.
Blankfield, Ted L. Henson, Paul C. Hollowell, Daniel J. Lanzdorf,
Mark A. Meaders, John W. Randjelovic, Charles L. Szews and Matthew
J.
75
Zolnowski (incorporated by reference to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 2000).*
10.11 Employment Agreement, dated September 16, 1996, between Pierce
Manufacturing Inc. and John W. Randjelovic (incorporated by
reference to Exhibit 10.12 to the Company's Annual Report on Form 10-K for the
year ended September 30, 2000 (File No. 0-13886)).*
10.12 Amendment effective July 1, 2000 to Employment Agreement, dated as
of October 15, 1998, between Oshkosh Truck Corporation and Robert
G. Bohn (incorporated by reference to Exhibit 10.13 to the
Company's Annual Report on Form 10-K for the year ended September
30, 2000 (File No. 0-13886)).*
10.13 Second Amendment effective December 31, 2000 to Employment
Agreement, dated as of October 15, 1998, between Oshkosh Truck
Corporation and Robert G. Bohn (incorporated by reference to
Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the
quarter ended December 31, 2000 (File No. 0-13886)).*
10.14 Oshkosh Truck Corporation Deferred Compensation Plan for Directors
and Executive Officers (incorporated by reference to Exhibit 10.1
to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2002 (File No. 1-31371)).*
11. Computation of per share earnings (contained in Note 1 of "Notes
to Consolidated Financial Statements" of the Company's Annual
Report on Form 10-K for the fiscal year ended September 30, 2001)2002).
21. Subsidiaries of Registrant.
23. Consent of Arthur AndersenDeloitte & Touche, LLP
23.1 Consent99.1 Written Statement of Ernst & Young LLPthe Chairman, President and Chief Executive
Officer, pursuant to 18 U.S.C. ss. 1350, dated November 25, 2002.
99.2 Written Statement of the Executive Vice President and Chief
Financial Officer, pursuant to 18 U.S.C. ss. 1350, dated November
25, 2002.
*Denotes a management contract or compensatory plan or arrangement.
66(b) The Company filed a Current Report on Form 8-K, dated July 25,
2002, reporting under Items 7 and 9 a conference call for analysts
held in connection with the announcement of the Company's earnings
for the third quarter ended June 30, 2002. The Company filed a
Current Report on Form 8-K, dated August 8, 2002, reporting under
Items 7 and 9 that the Company's principal executive officer and
principal financial officer each filed with the Securities and
Exchange Commission a written statement under oath pursuant to
Securities and Exchange Commission Order No. 4-460.
76
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
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
November 25, 2002 By /S/ Robert G. Bohn
------------------------------------------------
Robert G. Bohn, Chairman, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities on the dates indicated.
November 25, 2002 By /S/ R. G. Bohn
-------------------------------------------------
R. G. Bohn, President, Chairman, President and
Chief Executive Officer (Principal Executive
Officer)
November 25, 2002 By /S/ C. L. Szews
-------------------------------------------------
C. L. Szews, Executive Vice President and Chief
Financial Officer (Principal Financial
Officer)
November 25, 2002 By /S/ T. J. Polnaszek
-------------------------------------------------
T. J. Polnaszek, Vice President and Controller
(Principal Accounting Officer)
November 25, 2002 By /S/ J. W. Andersen
-------------------------------------------------
J. W. Andersen, Director
November 25, 2002 By /S/ D. T. Carroll
-------------------------------------------------
D. T. Carroll, Director
November 25, 2002 By /S/ R. M. Donnelly
-------------------------------------------------
R. M. Donnelly, Director
November 25, 2002 By /S/ D. V. Fites
-------------------------------------------------
D. V. Fites, Director
November 25, 2002 By /S/ General (Ret.) F.M. Franks, Jr.
-------------------------------------------------
General (Ret.) F.M. Franks, Jr. Director
November 25, 2002 By /S/ M. W. Grebe
-------------------------------------------------
M. W. Grebe, Director
November 25, 2002 By /S/ K. J. Hempel
-------------------------------------------------
K. J. Hempel, Director
November 25, 2002 By /S/ S. P. Mosling
-------------------------------------------------
S. P. Mosling, Director
November 25, 2002 By /S/ J. P. Mosling, Jr.
-------------------------------------------------
J. P. Mosling, Jr., Director
November 25, 2002 By /S/ R. G. Sim
-------------------------------------------------
R. G. Sim, Director
77
CERTIFICATIONS
I, Robert G. Bohn, certify that:
1. I have reviewed this annual report on Form 10-K of Oshkosh Truck
Corporation;
2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
(a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this annual report (the "Evaluation Date"); and
(c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability
to record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
(b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in
this annual report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
November 25, 2002 /S/ Robert G. Bohn
------------------------------------------------
Robert G. Bohn
Chairman, President and Chief Executive Officer
78
I, Charles L. Szews, certify that:
1. I have reviewed this annual report on Form 10-K of Oshkosh Truck
Corporation;
2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
(a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this annual report (the "Evaluation Date"); and
(c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability
to record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
(b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in
this annual report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
November 25, 2002 /S/ Charles L. Szews
------------------------------------------------
Charles L. Szews
Executive Vice President and Chief Financial
Officer
79
SCHEDULE II
OSHKOSH TRUCK CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
Allowance for Doubtful Accounts
Years Ended September 30, 2002, 2001 and 2000
(In thousands)
Balance at Acquisitions Additions
Beginning of of Charged to Balance at
Fiscal Year Year Businesses Expense Reductions* End of Year
----------- ---- ---------- ------- ----------- -----------
2000 $2,204 $ 5 $255 $ (17) $2,447
====== ====== ==== ===== ======
2001 $2,447 $1,063 $423 $(105) $3,828
====== ====== ==== ===== ======
2002 $3,828 $ 556 $452 $(278) $4,558
====== ====== ==== ===== ======
* Represents amounts written off to the reserve, net of recoveries.
80
INDEX TO EXHIBITS
-----------------
3.1 Restated Articles of Incorporation of Oshkosh Truck Corporation
(incorporated by reference to Exhibit 3.2 to the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 2000
(File No. 0-13886)).
3.2 By-Laws of Oshkosh Truck Corporation, as amended (incorporated by
reference to Exhibit 3.1 to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 2002 (File No. 0-13886)).
4.1 Second Amended and Restated Credit Agreement, dated July 23, 2001,
among Oshkosh Truck Corporation, Bank of America, N.A., as Agent
and Swing Line Lender, Bank One, NA, as Syndication Agent, and the
other financial institutions party thereto (incorporated by
reference to Exhibit 4.1 to the Company's Current Report on Form
8-K dated July 25, 2001 (File No. 0-13886)).
4.2 Indenture, dated February 26, 1998, among Oshkosh Truck
Corporation, the Subsidiary Guarantors and Firstar Trust Company
(incorporated by reference to Exhibit 4.2 to the Company's Current
Report on Form 8-K dated February 26, 1998 (File No. 0-13886)).
4.3 Form of 83/4% Senior Subordinated Note due 2008 (incorporated by
reference to Exhibit 4.3 to the Company's Registration Statement
on Form S-4 (Reg. No. 333-47931)).
4.4 Form of Note Guarantee (incorporated by reference to Exhibit 4.4
to the Company's Registration Statement on Form S-4 (Reg. No.
333-47931)).
4.5 Rights Agreement, dated as of February 1, 1999, between Oshkosh
Truck Corporation and Computershare Investor Services, LLC (as
successor to Firstar Bank, N.A.) (incorporated by reference to
Exhibit 4.1 to the Company's Registration Statement on Form 8-A,
dated as of February 1, 1999 (File No. 0-13886)).
4.6 First Supplemental Indenture, dated September 21, 2000, among the
Guarantor Subsidiaries, Oshkosh Truck Corporation, the other
Subsidiary Guarantors and U.S. Bank, National Association (as
successor to Firstar Bank, N.A.) (incorporated by reference to
Exhibit 4.6 to the Company's Annual Report on Form 10-K for the
year ended September 30, 2001 (File No. 0-13886)).
4.7 Second Supplemental Indenture, dated October 30, 2000, among
Medtec Ambulance Corporation, Oshkosh Truck Corporation, the other
Subsidiary Guarantors and U.S. Bank, National Association (as
successor to Firstar Bank, N.A.)(incorporated by reference to
Exhibit 4.7 to the Company's Annual Report on Form 10-K for the
year ended September 30, 2001 (File No. 0-13886)).
4.8 First Amendment to Rights Agreement, dated as of November 1, 2002,
between Oshkosh Truck Corporation, U.S. Bank National Association
and Computershare Investor Services, LLC.
10.1 Oshkosh Truck Corporation 1990 Incentive Stock Plan, as amended
(incorporated by reference to Exhibit 10.1 to the Company's Annual
Report on Form 10-K for the year ended September 30, 2001 (File
No. 0-13886)).*
10.2 1994 Long-Term Incentive Compensation Plan, dated March 29, 1994
(incorporated by reference to Exhibit 10.12 to the Company's
Annual Report on Form 10-K for the year ended September 30, 1994
(File No. 0-13886)).*
10.3 Form of Oshkosh Truck Corporation 1990 Incentive Stock Plan, as
amended, Nonqualified Stock Option Agreement (incorporated by
reference to Exhibit 4.2 to the Company's Registration Statement
on Form S-8 (Reg. No. 33-62687)).*
10.4 Form of Oshkosh Truck Corporation 1990 Incentive Stock Plan, as
amended, Nonqualified Director Stock Option Agreement
(incorporated by reference to Exhibit 4.3 to the Company's
Registration Statement on Form S-8 (Reg. No. 33-62687)).*
10.5 Form of 1994 Long-Term Incentive Compensation Plan Award Agreement
(incorporated by reference to Exhibit 10.16 to the Company's
Annual Report on Form 10-K for the year ended September 30, 1999
(File No. 0-13886)).*
10.6 Stock Purchase Agreement, dated April 26, 1996, among Oshkosh
Truck Corporation, J. Peter Mosling, Jr. and Stephen P. Mosling
(incorporated by reference to Exhibit 10.17 to the Company's
Annual Report on Form 10-K for the year ended September 30, 1996
(File No. 0-13886)).
10.7 Employment Agreement, dated as of October 15, 1998 between Oshkosh
Truck Corporation and Robert G. Bohn (incorporated by reference to
Exhibit 10.9 to the Company's Annual Report on Form 10-K for the
year ended September 30, 1998 (File No. 0-13886)).*
81
10.8 Employment Agreement, dated April 24, 1998, between McNeilus
Companies, Inc. and Daniel J. Lanzdorf (incorporated by reference
to Exhibit 10.9 to the Company's Annual Report on Form 10-K for
the year ended September 30, 1999 (File No. 0-13886)).*
10.9 Oshkosh Truck Corporation Executive Retirement Plan (incorporated
by reference to Exhibit 10.1 to the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 2000).*
10.10 Form of Key Executive Employment and Severance Agreement between
Oshkosh Truck Corporation and each of Robert G. Bohn, Bryan J.
Blankfield, Ted L. Henson, Paul C. Hollowell, Daniel J. Lanzdorf,
Mark A. Meaders, John W. Randjelovic, Charles L. Szews and Matthew
J. Zolnowski (incorporated by reference to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 2000).*
10.11 Employment Agreement, dated September 16, 1996, between Pierce
Manufacturing Inc. and John W. Randjelovic (incorporated by
reference to Exhibit 10.12 to the Company's Annual Report on Form
10.12 Amendment effective July 1, 2000 to Employment Agreement, dated as
of October 15, 1998, between Oshkosh Truck Corporation and Robert
G. Bohn (incorporated by reference to Exhibit 10.13 to the
Company's Annual Report on Form 10-K for the year ended September
30, 2000 (File No. 0-13886)).*
10.13 Second Amendment effective December 31, 2000 to Employment
Agreement, dated as of October 15, 1998, between Oshkosh Truck
Corporation and Robert G. Bohn (incorporated by reference to
Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the
quarter ended December 31, 2000 (File No. 0-13886)).*
10.14 Oshkosh Truck Corporation Deferred Compensation Plan for Directors
and Executive Officers (incorporated by reference to Exhibit 10.1
to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2002 (File No. 1-31371)).*
11. Computation of per share earnings (contained in Note 1 of "Notes
to Consolidated Financial Statements" of the Company's Annual
Report on Form 10-K for the fiscal year ended September 30, 2002).
21. Subsidiaries of Registrant.
23. Consent of Deloitte & Touche, LLP
99.1 Written Statement of the Chairman, President and Chief Executive
Officer, pursuant to 18 U.S.C. ss. 1350, dated November 25, 2002.
99.2 Written Statement of the Executive Vice President and Chief
Financial Officer, pursuant to 18 U.S.C. ss. 1350, dated November
25, 2002.
*Denotes a management contract or compensatory plan or arrangement.
82