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, 2000, 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: 0-13886
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)
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: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
Preferred Share Purchase Rights
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(Title of 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. [X]
Aggregate market value of the voting and nonvoting common equity held by
non-affiliates of the registrant as of November 30, 2000:
Class A Common Stock, $.01 par value - No Established Market Value
Common Stock, $.01 par value - $632,595,000
Number of shares outstanding of each of the registrant's classes of common
stock as of November 30, 2000:
Class A Common Stock, $.01 par value - 421,943 shares
Common Stock, $.01 par value - 16,246,214 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the 2001 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
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Index to Annual Report on Form 10-K
Fiscal year ended September 30, 2000
Page
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PART I.
ITEM 1. BUSINESS .........................................................3
ITEM 2. PROPERTIES ......................................................14
ITEM 3. LEGAL PROCEEDINGS................................................14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS............................................15
EXECUTIVE OFFICERS OF THE REGISTRANT ............................15
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED STOCKHOLDER MATTERS ............................16
ITEM 6. SELECTED FINANCIAL DATA..........................................17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS...............18
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK...........................................25
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA......................25
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE......................57
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
OF THE REGISTRANT ..........................................57
ITEM 11. EXECUTIVE COMPENSATION ..........................................57
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT ......................................57
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS................................................57
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K ....................................57
INDEX TO EXHIBITS................................................62
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As used herein, the "Company" refers to Oshkosh Truck Corporation,
including Pierce Manufacturing Inc. ("Pierce"), McNeilus Companies, Inc.
("McNeilus") and its other wholly-owned subsidiaries, and "Oshkosh" refers to
Oshkosh Truck Corporation, not including Pierce or McNeilus or their
wholly-owned subsidiaries.
The "Oshkosh," "McNeilus" and "Pierce" 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. There can
be no assurance that we will maintain such market positions in the future.
Forward-Looking Statements
This Annual Report on Form 10-K contains statements that the Company
believes are "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. All statements other than statements
of historical fact included in this report, including, without limitation,
statements regarding the Company's future financial position, business strategy,
budgets, targets, projected sales, costs, earnings, capital spending, debt
levels and plans and objectives of management for future operations are
forward-looking statements. In addition, forward-looking statements generally
can be identified by the use of forward-looking terminology such as "may,"
"will," "expect," "intend," "estimates," "anticipate," "believe," "should,"
"plans," or "continue," or the negative thereof or variations thereon or similar
terminology. Although the Company believes the expectations reflected in such
forward-looking statements are reasonable, it can give no assurance that such
expectations will prove to have been correct. Important factors that could cause
actual results to differ materially from the Company's expectations include,
without limitation, the following: (1) the accuracy of assumptions on which the
Company bases projected sales, costs, earnings, capital spending and debt
levels; (2) the cyclical nature of the concrete placement industry; (3) the
risks related to reductions or changes in U.S. government expenditures; (4) the
potential for actual costs to exceed projected costs under long-term,
fixed-price government contracts; (5) the risks related to suspension,
termination or audit of U.S. government contracts, including for failure to meet
performance thresholds; (6) the challenges of identifying, completing and
integrating future acquisitions; (7) competition; (8) disruptions in the supply
of parts or components from sole source suppliers and subcontractors; (9)
product liability and warranty claims; and (10) labor relations and market
conditions. 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
October 26, 2000. All subsequent written and oral forward-looking statements
attributable to the Company, or persons acting on its behalf, are expressly
qualified in their entirety by these cautionary statements.
All forward-looking statements speak only as of the date the Company files
this Annual Report on Form 10-K with the SEC. The Company has adopted a policy
that if the Company makes a determination that it expects earnings for future
periods for which projections are contained in this Annual Report on Form 10-K
to be lower than those projections, then the Company will publicly announce such
revised projections. 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.
PART I
Item 1. BUSINESS
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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," "Pierce," "McNeilus" and "MTM" trademarks. The Company began business
in 1917 and was among the early pioneers of four-wheel drive technology. In
1981, the Company was awarded the first Heavy Expanded Mobility Tactical Truck
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
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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 $1,324 million in fiscal 2000, with earnings from
continuing operations increasing from a loss of $.02 per share for fiscal 1996
to earnings of $2.96 per share for fiscal 2000.
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 Engineering Corporation (now known as Kewaunee Fabrications,
LLC, or "Kewaunee"), a fabricator of heavy-steel components such as
cranes and aerial devices, in November 1999.
o Viking Truck and Equipment, LLC ("Viking"), Oshkosh's only remaining
front-discharge concrete mixer dealer, in April 2000; and
o Medtec Ambulance Corporation ("Medtec"), a leading manufacturer of
ambulances and rescue vehicles, in October 2000.
The Company believes it has developed a reputation for excellent product
quality, performance and reliability 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
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. 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., from which the Company expects to generate
total sales of $1.2 billion from fiscal 2000 through fiscal 2005, assuming the
DoD exercises all the options under the contract as currently anticipated. The
Company expects fiscal 2001 sales under this contract to approximate $140
million, increasing to peak annual sales of approximately $295 million in fiscal
2002. This projected level of sales assumes production levels under this
contract will begin to increase from the current "low-rate" levels of initial
production to "full-rate" production following the passage of certain vehicle
performance milestones, which the Company expects to occur in early 2001. The
MTVR contract represents the Company's first production contract for medium
tactical trucks for the U.S. military.
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 and customer service.
Extensive Distribution Capabilities. With the addition of the commercial
and municipal distribution capabilities of Pierce and McNeilus, the Company has
established an extensive domestic and international distribution system for
specialty trucks and truck bodies. In addition to its network of dealers and
distributors, the Company employs over 160 in-house sales and service
representatives.
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 eight years, the
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Company has significantly increased manufacturing efficiencies. In addition, the
Company believes it has competitive advantages over smaller truck and truck body
manufacturers, which comprise the majority of the competition in its markets,
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 revenues, mitigate the
impact of economic cycles and provide multiple platforms for both internal
growth and acquisitions. For each of the Company's target markets, the Company
has developed or acquired a broad product line in order 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 of the recent
acquisitions, 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 and McNeilus 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 and Pierce. 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, independent suspension, the Sky-Arm articulating aerial ladder,
the Hercules compressed air foam system, the Command Zone multiplexing
technology, the McNeilus Auto Reach Arm, an automated side-loading refuse body,
and the Pro Pulse, hybrid drive technology. The Company believes these
proprietary components provide the Company a competitive advantage by increasing
its vehicles' 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 strong market positions and where the Company 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.
Pursuing Strategic Acquisitions. The Company's present management team has
successfully negotiated and integrated five acquisitions since September 1996
(and completed a sixth acquisition, Medtec, in October 2000) 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 refuse truck body market and in targeted geographic areas in the domestic
fire apparatus market. In fiscal 2000, the Company added two refuse service
facilities and contracted with two service agents to attract additional
municipal refuse sales. The Company is also developing strategies to increase
international sales. The Company is actively recruiting new representatives and
dealers in targeted international commercial and fire and emergency markets to
expand the international sales of
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McNeilus refuse truck bodies and rear-discharge concrete mixers and Pierce fire
apparatus. In fiscal 2000, 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 Program and because the 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 2000, the Company invested $14.1 million in development activities that
resulted in 11 major new products or product enhancements.
Developed during fiscal 2000, Oshkosh's new ProPulse Electric Drive
Technology can change the way trucks are powered and driven and significantly
improve fuel economy and reduce emissions for heavy trucks. It will be
integrated first into ARFF vehicles and snow removal vehicles, and then applied
to defense trucks and other fire apparatus.
In the fire and emergency segment, Pierce introduced its seventh custom
fire chassis, the Enforcer, during fiscal 2000. Pierce now offers more custom
fire chassis than any other manufacturer. Pierce also launched two new aerials -
a mid-mount platform and a mid-mount ladder. In addition, Pierce designed the
Husky industrial foam system to address the needs of large-scale industrial fire
suppression at oil refineries, chemical plants and petrochemical complexes.
In the commercial segment, McNeilus substantially improved its AutoReach
automated side-loader in fiscal 2000 to improve route productivity for its
refuse customers. McNeilus also pioneered a new Refuse Preventative Maintenance
("RPM") program, the first of its kind, to help haulers handle preventative
maintenance for an annual fee. For concrete placement customers, McNeilus
introduced in fiscal 2000 an upgraded Bridgemaster bridge-formula mixer with
improved productivity and simplified maintenance. The new T-21 portable,
central-mix batch plant was designed specifically to address the needs of the
concrete paving industry. The Company also launched the new Highland chassis for
the rigorous environment of the concrete placement and other vocational markets.
It combines a spacious, modern cab with a rugged, factory-built, all-wheel-drive
chassis.
In the defense segment, the Company developed an electronic parts ordering
and tracking system for the U.S. Marine Corps and introduced the Heavy Expanded
Mobility Tactical Truck ("HEMTT")-Extended Service Program ("ESP") with Load
Handling System ("LHS") in fiscal 2000.
Reducing Costs While Maintaining Quality. The Company actively benchmarks
its competitors' costs and best industry practices, and continuously seeks to
implement process improvements to increase profitability and cash flow. With
each of its 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. The Company established a $5 to $7 million
two-year cost reduction target and to date has realized approximately $11
million of cost reductions. The Company expects to set similar cost reduction
targets for its Medtec acquisition. 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.
Products
The Company is focused on the following core segments of the specialty
truck and truck body markets:
Commercial Segment. Through Oshkosh and McNeilus, the Company is a leading
domestic manufacturer of refuse truck bodies for the waste services industry and
of rear- and front-discharge concrete mixers and portable concrete batch plants
for the concrete ready-mix industry. McNeilus manufactures a wide range of
automated rear, front, side and top loading refuse truck bodies, which are
mounted on commercial chassis. McNeilus sells its refuse vehicles primarily to
commercial waste management companies, but it is building a presence with
municipal customers such as the cities of Los Angeles, Philadelphia and Phoenix
and in international markets such as England. The Company believes its refuse
vehicles have a reputation for efficient, 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 plants to concrete ready-mix
companies throughout the
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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.
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.
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 is produced for multiple end-customer applications. Pierce
primarily serves domestic government 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 it to design its vehicles to meet stringent
government regulations for safety and effectiveness.
The Company is among the leaders in sales of aircraft rescue and
firefighting vehicles to domestic and international airports. These highly
specialized vehicles are required to be in-service at most airports worldwide to
support commercial airlines in the event of an emergency. Many of the largest
airports in the world, including LaGuardia International Airport, O'Hare
International Airport and Los Angeles International Airport in the United States
and airports in the People's Republic of China, and in Montreal and Toronto,
Canada, are served by the Company's aircraft rescue and firefighting vehicles.
The Company believes that the reliability of its aircraft rescue and
firefighting vehicles contributes to the Company's strong market position.
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. 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, the Company offers two-
to ten-year municipal lease financing programs to its fire and emergency
customers in the United States. 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.
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 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 orders 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. Current family contracts expire in fiscal
2001. The Company is in negotiations to extend these family contracts for a
five-year period under a program referred to as the Family of Heavy Tactical
Vehicles ("FHTV"). The Company expects such negotiations to be completed in the
second quarter of fiscal 2001. The FHTV is a five-year requirements contract
running from fiscal 2001 to fiscal 2006 and includes the following heavy
payload products: HEMTT, HEMTT-ESP, HET, PLS, CBT, LVS and the associated
logistics and configuration management support.
With the award of the MTVR contract, the Company has become 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 independent suspension and transfer
cases, and central tire inflation to enhance off-road performance. This program
is currently expected to include the production of 5,666 trucks with options for
up to 2,502 additional trucks. The total value of this contract could reach $1.2
billion, including the options, or $850 million, exclusive of options, over
fiscal years 2000 through 2005. Testing of the initial ten trucks began in
December 1999. In fiscal 2000, production occurred at the rate of approximately
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one truck per day, and if the Company receives approval to commence full-rate
production early in fiscal 2001, then the Company anticipates production will
increase to approximately seven trucks per day in August 2001.
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, 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 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 RFP issued in
December 2000 requires retrofit of six trucks for testing. The period for
follow-on testing and submission of production pricing was extended so that a
contract award for production of approximately 14,000 FMTV trucks and trailers
is now planned by the DoD for the second quarter of fiscal 2003. While the delay
was a disappointment to the Company, the Company intends to continue to compete
aggressively for a contract award under the FMTV program.
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 Proprietary components. The Company's patented independent suspension
and transfer case enhance its trucks' off-road performance. In
addition, because these are two of the higher cost components in a
truck, the Company has a competitive cost-advantage from in-house
manufacturing of these two truck components.
o Past performance. The Company has been building trucks for the DoD for
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, the Company expanded it logistics capabilities to permit
the DoD to order parts, receive invoices and remit payments
electronically.
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 47 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.
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 trucks 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.
8
Dealers and representatives, where used, enter into agreements with the
Company that allows for termination by either party generally upon 90 days'
notice. Dealers and representatives are not permitted to market and sell
competitive products.
Commercial Segment. The Company operates 18 distribution centers with over
130 in-house sales and service representatives in the U.S. to sell and service
the refuse truck bodies, rear- and front-discharge concrete mixers and concrete
batch plants. Fourteen 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. The Company
believes this network represents one of the largest concrete mixer and refuse
truck body distribution networks in the United States.
The Company believes its direct distribution to customers is a competitive
advantage in commercial markets, particularly in the waste services industry
where principal competitors distribute through dealers and to a lesser extent in
the ready-mix concrete 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 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. The
Company opened two additional centers in fiscal 2000. Following its acquisition
and new focus in municipal markets, McNeilus has been awarded new business for
the cities of Philadelphia, Pennsylvania; Los Angeles, California; Greensboro,
North Carolina; and Waco, Texas 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 geographical 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 32 sales and service organizations with more than 275 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 72 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 Los Angeles, California; Richmond, Virginia; Tampa and
Miami, Florida; Detroit, Michigan; Chicago, Illinois and Honolulu, Hawaii among
other major cities, and continues to target other urban markets.
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.
9
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 companies in Curacao, Puerto
Rico, Mexico, Argentina and Saudi Arabia, among other countries.
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.
The Company's aircraft rescue and firefighting vehicles are marketed
through a combination of three direct sales representatives domestically and 47
representatives and distributors in international markets. In addition, the
Company has 29 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 12 dealer organizations with
approximately 30 sales people focused on the ambulance market.
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 four
international sales offices, through dealers, consultants and representatives,
and through the United States Foreign Military Sales ("FMS") program. The DoD
has begun to rely on industry for support and sustainability of its vehicles
which 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 that regularly
meets 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 fifteen 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 also employs a team of
industrial engineers that travel to all plants to study and streamline
workflows.
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 to two while increasing
Pierce's capacity by improving product 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 relocated chassis frame build-up to Oshkosh to improve
production efficiencies, and eliminated storage rooms to relocate inventory to
point 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 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.
10
In the third quarter of fiscal 2000, Oshkosh commenced an $8.0 million plan
to expand its existing production facilities in Oshkosh, Wisconsin to support
the MTVR contract. The project will expand 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 expects to complete this expansion in the second quarter
of fiscal 2001.
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
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. The Company expects to pursue ISO certification for
McNeilus beginning in fiscal 2001.
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 300 engineers and engineering technicians, and it regularly
outsources significant engineering activities in connection with major DoD bids
and proposals.
For fiscal years 2000, 1999 and 1998, the Company incurred engineering,
research and development expenditures of $14.1 million, $10.9 million and $9.7
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 and emergency 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, 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), Leach Company and McClain E-Z
Pack, Inc. Principal competitors of McNeilus and Oshkosh for concrete mixer
sales include Advance Mixer, Inc., Continental Manufacturing Co., London
Machinery, Inc. and Temco (a division of Trinity Industries, Inc.). Oshkosh's
principal competitor for airport snow removal sales is Stewart & Stevenson
Services, Inc. Pierce's principal competitors for fire apparatus sales include
Emergency One, Inc. (a subsidiary of Federal Signal Corporation), Kovatch Mobile
Equipment Corp., and
11
numerous small, regional manufacturers. Medtec's principal competitors for
ambulance and rescue sales include Wheeled Coach (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 AM General Corporation and
Stewart & Stevenson Services, Inc. The Company also faces competition from its
competitors for acquisition opportunities.
Several 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, profitability and cash flows.
Customers and Backlog
Sales to the U. S. Department of Defense comprised approximately 20% of the
Company's net sales in fiscal 2000. 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, 2000 was $607.5 million compared to
$486.5 million at September 30, 1999. Backlog related to the defense segment
increased by $127.6 million to $291.5 million in 2000 compared to 1999, with
approximately $87.8 million of the increase due to the multi-year MTVR contract.
Fire and emergency backlogs increased by $16.6 million to $216.9 million at
September 30, 2000 compared to the prior year. Commercial backlogs decreased by
$23.2 million to $99.1 million at September 30, 2000 compared to the prior year.
The Company believes customers placed orders for commercial products earlier in
the prior year due to tightness in the market for commercial truck chassis,
which condition no longer exists. Additionally, the Company expects overall
sales levels of the Company's concrete placement products to be lower in fiscal
2001 by approximately 10% compared to historical levels reached in fiscal 2000.
Approximately 3% of the September 30, 2000 backlog is not expected to be filled
in fiscal 2001.
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 family 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 Defense versus its sales to other customers.
Government Contracts
Approximately 20% of the Company's net sales for fiscal 2000 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 $11 million in program
year two and $5 million in program year three if the contract is terminated for
the convenience of the government.
Under firm fixed-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 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
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
12
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.
Suppliers
The Company is highly dependent on its suppliers and subcontractors in
order 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. Through its reliance on this supply network for the purchase
of certain components, the Company is able to avoid many of the preproduction
and fixed costs associated with the manufacture of those components. 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 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
deemed material to each of the Company's segments. These components include
front drive and steer axles, transfer cases, cabs, the ALL-STEER electronic
all-wheel steering system, independent suspension, the Sky-Arm articulating
aerial ladder, the McNeilus Auto Reach Arm, the Hercules compressed air foam
system, the Command Zone proprietary multiplexing system, 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 101 active domestic and 47
foreign patents. The Company believes patents for all-wheel steer and
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 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. To a lesser extent, other proprietary components provide
the Company a competitive advantage in the Company's other segments.
The Company holds trademarks for "Oshkosh," "Pierce," "McNeilus" and "MTM,"
among others. These trademarks are considered to be important to the future
success of the Company's business.
Employees
As of October 31, 2000, the Company had approximately 4,600 employees.
Approximately 925 production employees at the Company's Oshkosh facilities are
represented by the United Auto Workers union and approximately 200 employees at
the Company's Kewaunee facilities are represented by the Boilermakers, Iron
Shipbuilders, Blacksmiths, and Forgers Union ("Boilermakers"). The Company's
five-year contract with the United Auto Workers union extends through September
2001 and the Company's contract with the Boilermakers union extends through May
2002. The Company believes its relationship with employees is satisfactory.
Industry Segments
Financial information concerning the Company's industry segments is
included in Note 13 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 13 to the Consolidated Financial
Statements contained in Item 8 of this Form 10-K.
13
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 October 31,
2000, the Company operated in fifteen manufacturing facilities and owned another
facility that was not in use. The location, size and focus of the Company's
facilities is provided in the table below:
Approximate
Square Footage Principal
Location (# of facilities) Owned Leased Products Manufactured
---------------------------- ----------------- ------------------ --------------------------------------------
Oshkosh, Wisconsin(3)....... 774,000 17,000 Defense Trucks; Front-Discharge Mixers; Snow
Removal Vehicles; ARFF Vehicles
Appleton, Wisconsin(2)...... 604,000 16,000 Fire Apparatus
Dodge Center, Minnesota(1) 711,000 2,000 Rear-Discharge Mixers; Refuse Truck Bodies;
Portable Batch Plants
Bradenton, Florida(1)....... 287,000 Fire Apparatus; Defense Trucks and Truck
Bodies
Kewaunee, Wisconsin(1)...... 171,000 Aerial Devices and Heavy Steel Fabrication
Riceville, Iowa(1).......... 108,000 Components for Rear-Discharge Mixers and
Goshen, Indiana(1).......... 87,000 Ambulances
White Pigeon, Michigan(1) 58,000 Ambulances
Kensett, Iowa(1)............ 65,000 Not Currently in Use
McIntire, Iowa(1)........... 28,000 Components for Rear-Discharge Mixers and
Refuse Truck Bodies
Weyauwega, Wisconsin(1)..... 28,000 Refurbished Fire Apparatus
Ontario, California(1)...... 31,000 Refurbished Fire Apparatus
Villa Rica, Georgia(1)...... 20,000 Replacement Drums for Rear-Discharge Mixers
The Company's manufacturing facilities generally operate five days per week
on one shift, except for one-week shutdowns in July 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.
In addition to sales and service activities at the Company's manufacturing
facilities, the Company maintains sixteen 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, Illinois; Fairfield, Ohio; East Granby,
Connecticut; Houston, Texas; and Phoenix, Arizona. These facilities range in
size from approximately 2,000 square feet to approximately 46,000 square feet
and are used primarily for sales and service of concrete mixers and refuse
bodies.
The Company's facilities are pledged as collateral under the terms of the
Company's Amended and Restated 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
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 431 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, 2000.
Actual liability could vary based on results of the study, the resources of
other PRPs and the Company's final share of liability.
14
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, 2000.
However, this may change as investigations proceed by the Company, other
unrelated property owners and government entities.
The Company is subject to other environmental matters and legal proceedings
and claims, including patent, antitrust, product liability and state dealership
regulation compliance proceedings. Although the final results of all such
matters and claims cannot be predicted with certainty, management believes that
the ultimate resolution of all such matters and claims, after taking into
account the liabilities accrued with respect to such matters and claims, will
not have a material adverse effect on the Company's financial condition or
results of operations. Actual results could vary, among other things, due to the
uncertainties involved in litigation.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
---------------------------------------------------
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended September 30, 2000.
EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------
The following table sets forth certain information as of November 30, 2000
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......... 47 President, Chief Executive Officer and
Chairman of the Board
Timothy M. Dempsey..... 60 Executive Vice President, General Counsel and
Secretary
Paul C. Hollowell...... 59 Executive Vice President and President,
Defense Business
Daniel J. Lanzdorf..... 52 Executive Vice President and President,
McNeilus Companies, Inc.
John W. Randjelovic.... 56 Executive Vice President and President,
Pierce Manufacturing Inc.
Charles L. Szews....... 44 Executive Vice President and Chief Financial
Officer
Matthew J. Zolnowski... 47 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. Mr. Dempsey joined the Company in October 1995 as Vice
President, General Counsel and Secretary. Mr. Dempsey has been and continues to
be a partner in the law firm of Dempsey, Magnusen, Williamson and Lampe in
Oshkosh, Wisconsin. Mr. Dempsey was appointed Executive Vice President in
February 1999.
Paul C. Hollowell. Mr. Hollowell joined the Company in April 1989 as Vice
President-Defense Product, was appointed Executive Vice President in February
1994 and assumed his present position in February 1999.
Daniel J. Lanzdorf. Mr. Lanzdorf joined the Company in 1973 as a design
engineer and has served in various assignments including Chief 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.
15
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.
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.
--------------------------------------------------------------------
The information included in Notes 7 and 11 to the Consolidated Financial
Statements contained herein under Item 8 and the information relating to
dividends per share contained herein under Item 6 is 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, 2000, 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 2001, the terms of its Amended and
Restated 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.
The Company's Common Stock is quoted on the Nasdaq National Market. As of
September 30, 2000, there were 855 holders of record of the Company's Common
Stock and 104 holders of record of the Company's Class A Common Stock. The
following table sets forth prices reflecting actual sales as reported on the
Nasdaq National Market, as adjusted to reflect the three-for-two split of the
Company's Common Stock effected on August 19, 1999.
Fiscal 2000 Fiscal 1999
Quarter Ended High Low High Low
------------- ---- --- ---- ---
September....................... $40.00 $30.81 $38.50 $22.75
June............................ 38.50 28.75 33.58 19.33
March........................... 34.88 21.63 25.50 20.83
December........................ 34.75 24.88 23.33 14.50
*There is no established public trading market for Class A Common Stock.
16
Item 6. SELECTED FINANCIAL DATA.
-----------------------
Fiscal years ended September 30,
(In thousands, except per share amounts)
2000(4) 1999 1998(5) 1997 1996(6)
---- ---- ---- ---- ----
Net sales....................................... $1,324,026 $1,164,954 $902,792 $683,234 $413,455
Operating income (loss)......................... 98,051 76,213 48,720 28,785 (3,601)
Income (loss) from continuing operations........ 48,508 31,191 16,253 10,006 (241)
Per share assuming dilution................ 2.96 2.39 1.27 0.78 (0.02)
Income (loss) from discontinued operations(1)... 2,015 --- --- --- (2,859)
Per share assuming dilution(1)............. 0.12 --- --- --- (0.21)
Net income (loss) (2)........................... 49,703 31,131 15,068 10,006 (3,100)
Per share assuming dilution (2)............ 3.03 2.39 1.18 0.78 (0.23)
Dividends per share:
Class A Common Stock....................... .300 .292 .290 .290 .290
Common Stock............................... .345 .336 .333 .333 .333
Total assets.................................... 796,380 753,290 685,039 420,394 435,161
Expenditures for property, plant and equipment.. 22,647 17,999 13,444 6,574 5,515
Depreciation.................................... 12,200 10,743 9,515 9,382 8,627
Amortization of goodwill, other intangible assets
and deferred financing costs.............. 12,018 12,414 9,183 4,688 171
Net working capital............................. 70,461 43,505 41,137 50,113 67,469
Long-term debt (including current maturities)(3) 162,782 260,548 280,804 135,000 157,882
Shareholders' equity(3)......................... 301,057 162,880 131,296 120,900 121,602
Book value per share(3)......................... 18.06 12.70 10.39 9.70 9.39
Backlog......................................... 608,000 487,000 377,000 361,000 433,000
(1)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. In fiscal 1996,
the Company incurred after-tax charges of $1,600 arising from the write-off of receivables and other obligations related to
the Company's former chassis joint venture in Mexico and incurred additional warranty and other related costs of $1,259 with
respect to the Company's former U.S. chassis business.
(2)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.
(3)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 September 28, 2000, the Company amended and restated its Senior Credit Facility. See
Note 4 to Notes to Consolidated Financial Statements.
(4)On November 1, 1999 the Company acquired assets, assumed certain liabilities and entered into related non-compete
agreements for Kewaunee Fabrications for $5,467 in cash. On April 28, 2000, the Company acquired for cash, all of the issued
and outstanding capital stock of Viking Truck and Equipment for $1,680. See Note 3 to Notes to Consolidated Financial
Statements.
(5)On February 26, 1998, the Company acquired for cash all of the issued and outstanding capital stock of McNeilus Companies,
Inc. and entered into related non-compete and ancillary agreements for $217,581. See Note 3 to Notes to Consolidated
Financial Statements.
(6)On September 18, 1996, the Company acquired for cash all of the issued and outstanding capital stock of Pierce
Manufacturing Inc. for $156,926.
17
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION
AND RESULTS OF 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 and a wide range of automated rear, front, side and top loading
refuse truck bodies. 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 rescues 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--concrete mixer systems, refuse truck bodies, portable concrete batch
plants and truck components sold to ready-mix companies and commercial and
municipal waste haulers in the U. S. and abroad.
Fire and emergency--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. and abroad.
Defense--heavy- and medium-payload tactical trucks and supply parts sold to the
U. S. military and to other militaries around the world.
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 a 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. The
acquisition was financed from borrowings under the Company's Senior Credit
Facility.
18
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. The acquisition was financed from borrowings under the Company's
Senior Credit Facility.
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 with annual sales
of approximately $22 million. The acquisition of Medtec will be accounted for
using the purchase method of accounting and, accordingly, the operating results
of Medtec will be included in the Company's consolidated statements of income
beginning October 30, 2000 as part of the Company's fire and emergency segment.
The acquisition was financed from available cash and borrowings under the
Company's Amended and Restated Senior Credit Facility.
Results of Operations
Analysis of Consolidated Net Sales--Three Years Ended September 30, 2000
The following table presents net sales by business segment (in thousands):
Fiscal Year Ended September 30,
2000 1999 1998
---- ---- ----
Net sales to unaffiliated customers:
Commercial....................................... $ 658,329 $ 607,678 $ 354,165
Fire and emergency............................... 390,659 336,241 301,181
Defense.......................................... 275,841 222,535 247,956
Corporate and other.............................. (803) (1,500) (510)
------------ ------------ ------------
Consolidated................................. $ 1,324,026 $ 1,164,954 $ 902,792
============ ============ ============
The following table presents net sales by geographic region based on
product shipment destination (in thousands):
Fiscal Year Ended September 30,
2000 1999 1998
---- ---- ----
Net sales:
United States........................................ $ 1,221,548 $ 1,113,214 $ 857,310
Other North America.................................. 7,429 7,822 4,678
Middle East.......................................... 68,317 21,713 16,889
Other................................................ 26,732 22,205 23,915
------------ ------------ ------------
Consolidated..................................... $ 1,324,026 $ 1,164,954 $ 902,792
============ ============ ============
FISCAL 2000 COMPARED TO FISCAL 1999
Consolidated net sales increased $159.1 million, or 13.7%, to $1,324.0
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
- - defense, fire and emergency and commercial.
Commercial segment net sales increased $50.7 million, or 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 $54.4 million, or 16.2%, in
fiscal 2000 compared to fiscal 1999. Traditional fire truck sales accounted for
78.1% of the current year 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 $53.3 million, or 24.0%, in fiscal 2000
compared to fiscal 1999. Approximately one-half of the current year sales
increase was due to start-up of low rate initial production of the MTVR truck,
which began early in fiscal
19
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.
FISCAL 1999 COMPARED TO FISCAL 1998
Consolidated net sales increased $262.2 million, or 29.0%, to $1,165.0
million in fiscal 1999 compared to fiscal 1998. Fiscal 1998 results included
seven months of operations of McNeilus, which was acquired in February 1998,
while fiscal 1999 results included a full twelve months of McNeilus operations.
On a pro forma basis, assuming McNeilus had been acquired at the beginning of
fiscal 1998, net sales increased $124.0 million, or 11.9%, in fiscal 1999
compared to fiscal 1998.
Commercial segment net sales increased $253.5 million, or 71.6%, in fiscal
1999 compared to fiscal 1998. Strong end markets in the concrete placement
industry, the introduction of a new cab and mixer package for Oshkosh's
front-discharge concrete mixer, and sales, marketing and distribution synergies
created through the acquisition of McNeilus contributed to a 24% increase in
concrete mixer sales compared to prior year pro forma sales. Refuse truck and
truck body sales increased 36% compared to pro forma 1998 sales, generally as a
result of commercial waste haulers accelerating the replacement of refuse
packers in their fleets and as a result of McNeilus increasing sales penetration
with both commercial and municipal accounts.
Fire and emergency segment net sales increased $35.1 million, or 11.6%, in
fiscal 1999 compared to fiscal 1998. Pierce comprises the largest share of this
segment and has increased its sales at a compound annual growth rate of 11%
since 1980. Pierce's sales increased 10.2% in fiscal 1999 compared to fiscal
1998, generally as a result of strong market demand, expanding international
sales and new product introductions.
Defense segment net sales decreased $25.4 million, or 10.3%, in fiscal 1999
compared to fiscal 1998. Defense sales declined due to the trend of lower heavy
military truck spending in the federal budget and the completion of the
ISO-Compatible Palletized Flatrack ("IPF") contract in fiscal 1998, which had
fiscal 1998 sales of $32.0 million.
Analysis of Consolidated Operating Income--Three Years Ended September 30, 2000
The following table presents operating income by business segment (in
thousands):
Fiscal Year Ended September 30,
2000 1999 1998
---- ---- ----
Operating income (loss):
Commercial....................................... $ 54,654 $ 48,995 $ 19,317
Fire and emergency............................... 32,922 26,758 25,581
Defense.......................................... 30,119 22,878 22,680
Corporate and other.............................. (19,644) (22,418) (18,858)
------------ ------------ ------------
Consolidated................................. $ 98,051 $ 76,213 $ 48,720
============ ============ ============
FISCAL 2000 COMPARED TO FISCAL 1999
Consolidated operating income increased $21.8 million, or 28.7%, in fiscal
2000 compared to fiscal 1999. Consolidated operating income divided by
consolidated sales ("operating income margin") increased from 6.5% in fiscal
1999 to 7.4% in fiscal 2000.
Commercial segment operating income increased $5.7 million, or 11.6%, in
fiscal 2000 compared to fiscal 1999. Operating income margins increased to 8.3%
of segment sales in fiscal 2000 compared to 8.1% 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 facilities expansion at the McNeilus Dodge Center location
which was completed in September 2000. In fiscal 2000, the commercial segment
experienced workforce-related health claims in excess of historical rates of
occurrence. Management does not expect these rates of occurrence to continue.
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 $6.2 million, or
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
20
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 $7.2 million, or 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 (more 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%.
FISCAL 1999 COMPARED TO FISCAL 1998
Consolidated operating income increased $27.5 million, or 56.4%, in fiscal
1999 compared to fiscal 1998. Fiscal 1998 results included seven months of
operations of McNeilus, while fiscal 1999 results included a full twelve months
of McNeilus operations. Fiscal 1999 consolidated operating income increased
$18.1 million, or 31.2% over pro forma fiscal 1998 consolidated operating
income, assuming McNeilus had been acquired at the beginning of fiscal 1998.
Commercial segment operating income increased $29.7 million, or 153.6%, in
fiscal 1999 compared to fiscal 1998. On a pro forma basis, assuming McNeilus had
been acquired at the beginning of fiscal 1998, operating income increased $20.3
million, or 70.7%, in fiscal 1999 compared to fiscal 1998. Operating income
margin increased to 8.1% of commercial segment sales in fiscal 1999 compared to
5.5% of commercial segment sales in fiscal 1998. Increased concrete mixer unit
volume and manufacturing, purchasing and distribution synergies generated as a
result of the acquisition of McNeilus contributed to the improvement in the
operating income margin. Also, fiscal 1998 results included a $1.9 million
charge related to an impairment loss on previously-acquired concrete mixer
technology.
Fire and emergency segment operating income increased $1.2 million, or
4.6%, in fiscal 1999 compared to fiscal 1998. The operating income margin
decreased from 8.5% in fiscal 1998 to 8.0% in fiscal 1999. Benefits of increased
sales volume were offset by short-term production inefficiencies following the
installation at Pierce of the final modules of a new enterprise-wide resource
planning system during the third quarter of fiscal 1999. By the end of September
1999, Pierce had significantly reduced those production inefficiencies.
Defense segment operating income was comparable in fiscal 1999 and fiscal
1998 ($0.2 million increase in fiscal 1999). However, the operating income
margin increased from 9.1% in fiscal 1998 to 10.3% in fiscal 1999. Fiscal 1998
results included the low margin IPF contract and bid-and-proposal costs on the
MTVR contract.
Corporate and other expenses increased $3.6 million to $22.4 million, or
1.9% of consolidated net sales, from $18.9 million, or 2.1% of consolidated net
sales, in fiscal 1998. Fiscal 1999 results included a $3.5 million charge in
connection with the settlement of litigation.
Analysis of Non-operating Income Statement Items--Three Years Ended September
30, 2000
FISCAL 2000 COMPARED TO FISCAL 1999
Interest expense decreased $5.8 million, or 21.6%, in fiscal 2000 compared
to fiscal 1999. Interest expense was reduced approximately $6.0 million as the
Company paid down $93.5 million of term debt 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 of the impact of the equity offering.
The provision for income taxes in fiscal 2000 was $31.3 million, or 39.9%
of pre-tax income, compared to $21.3 million, or 41.8% of pre-tax income, in
fiscal 1999. The effective tax rate was impacted by nondeductible goodwill
amortization of $5.4 million in fiscal 2000 and $5.5 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.
21
Net of tax 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 continues to decline from approximately 70% at formation in fiscal
1998 to 53% currently. 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.
Gain on disposal of discontinued operations of $3.2 million, less income
taxes of $1.2, 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.
FISCAL 1999 COMPARED TO FISCAL 1998
Interest expense increased $5.3 million, or 24.4%, in fiscal 1999 compared
to fiscal 1998. Increased interest expense generally relates to indebtedness
incurred in connection with the McNeilus acquisition being outstanding for a
full twelve months in fiscal 1999 compared to only seven months in fiscal 1998.
Interest expense as a percent of net sales dropped to 2.3% in fiscal 1999
compared to 2.4% in fiscal 1998 as the Company paid down debt during fiscal
1999.
The provision for income taxes in fiscal 1999 was $21.3 million, or 41.8%
of pre-tax income, compared to $12.7 million, or 44.2% of pre-tax income, in
fiscal 1998. The effective tax rate was impacted by nondeductible goodwill
amortization of $5.5 million in fiscal 1999 and $4.2 million in fiscal 1998
related to the acquisitions of McNeilus and Pierce. Excluding the effects of
nondeductible goodwill amortization, the Company's effective tax rate decreased
from 39.1% in fiscal 1998 to 38.0% in 1999, generally as a result of a more
efficient state tax structure associated with the McNeilus acquisition.
Equity in earnings of an unconsolidated lease financing partnership of $1.5
million in fiscal 1999 included a full twelve months of the Company's share of
the after-tax income of the lease financing partnership. Fiscal 1998 equity in
earnings of $0.3 million included seven months of operations of the lease
financing partnership since its formation in February 1998, which was offset by
the Company's share of the write-off of organization costs ($1.5 million
pre-tax, $0.9 million after-tax) in accordance with the issuance of a new
accounting standard.
The $0.1 million extraordinary charge in fiscal 1999 and the $1.2 million
extraordinary charge in fiscal 1998 related to the write-off of deferred
financing costs for that portion of debt prepaid during the respective fiscal
year.
Financial Condition
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 indebtedness under the Company's revolving credit facility
(including $7.2 million of current year advances used to fund the acquisitions
of Viking and Kewaunee) and to pay dividends of $5.4 million.
The Company's debt-to-total capital ratio at September 30, 2000 was 35.1%.
Debt-to-total capital may vary from time to time to the extent that the Company
uses debt to fund acquisitions.
Fiscal Year Ended September 30, 1999
During fiscal 1999, cash increased by $1.5 million to $5.1 million at
September 30, 1999. Cash provided from operating activities of $39.0 million
along with a $3.4 million reduction in other long-term assets was used to fund
capital expenditures of $18.0 million, reduce indebtedness by $20.3 million
(including $15.8 million of debt prepayments) and pay dividends of $4.2 million.
Cash provided from operating activities in fiscal 1999 was impacted by a $49.3
million increase in inventory. The increase in inventory is primarily the result
of the timing of truck chassis purchases at McNeilus.
22
The Company's debt-to-total-capital ratio at September 30, 1999 was 61.5%.
In November 1999, the Company completed a secondary offering of 3,795,000 shares
of Common Stock at $26.00 per share, before commissions and expenses. Proceeds
to the Company from the offering, net of underwriting discounts and commissions,
were used to prepay $93.5 million of term debt under the Company's Senior Credit
Facility. The Company's pro forma debt-to-total-capital ratio at September 30,
1999, after giving effect to the debt prepayment from proceeds of the Company's
November 1999 equity offering, was 39.5%.
Liquidity and Capital Resources
The Company had cash and cash equivalents of $13.6 million and
approximately $158.1 million of unused availability under the terms of its
Amended and Restated Senior Credit Facility (See Note 4 to Notes to Consolidated
Financial Statements) as of September 30, 2000. On October 30, 2000, the Company
used available cash and borrowings under its Amended and Restated Senior Credit
Facility to acquire all of the issued and outstanding capital stock of Medtec
for approximately $14.5 million, including acquisition costs and net of cash
acquired. The Company's primary cash requirements include working capital,
interest and principal payments on indebtedness, capital expenditures, dividends
and, potentially, future acquisitions. The primary sources of cash are expected
to be cash flow from operations and borrowings under the Company's Amended and
Restated Senior Credit Facility. Based upon current and anticipated future
operations, management believes that capital resources will be adequate to meet
future working capital, debt service and other capital requirements for fiscal
2001, including the working capital requirements associated with the ramp-up to
full-rate production under the MTVR contract and the acquisition of Medtec.
The Company's cash flow from operations has fluctuated, and will likely
continue to fluctuate, significantly from quarter to quarter due to changes in
working capital requirements arising principally from seasonal fluctuations in
sales.
The Company's Amended and Restated Senior Credit Facility and Senior
Subordinated Notes contain various restrictions and covenants that 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 or to take advantage of business opportunities, including future
acquisitions.
The Company's Amended and Restated Senior Credit Facility accrues interest
at variable rates. The Company presently has no plans to enter into interest
rate swap arrangements to limit exposure to future increases in interest rates.
Capital expenditures are expected to approximate $23 million in fiscal
2001.
Fiscal 2001 Outlook
The Company expects consolidated sales growth of approximately $156 million
in fiscal 2001 to $1,480 million. The Company estimates that consolidated
operating income margins will improve one-half of a percentage point over fiscal
2000 levels and will yield consolidated operating income of approximately $117
to $119 million in fiscal 2001. The Company anticipates consolidated income from
continuing operations of approximately $60 million in fiscal 2001, or a 23%
increase compared to fiscal 2000. The Company expects earnings per share from
continuing operations assuming dilution to increase to approximately $3.45 in
fiscal 2001.
The Company estimates that commercial segment sales will decline 4.2% in
fiscal 2001. The Company believes this decline will primarily be the result of a
slowing of concrete placement orders and lower backlogs, due to higher mortgage
rates and lower housing starts. The Company anticipates this decline will be
offset in part by growth in refuse sales as a result of increased purchases by
large commercial waste haulers. The Company expects commercial operating income
to expand to $60 to $62 million and refuse margins to double as a result of
manufacturing efficiencies the Company anticipates in McNeilus' refuse products
due to the facility expansion completed in fiscal 2000.
The Company expects fire and emergency segment sales to increase 12.7% to
$440 million in fiscal 2001 with approximately $20 million of the increase
resulting from the Medtec acquisition. The Company anticipates this growth rate
will be less than in fiscal 2000 because ARFF sales may be less in fiscal 2001
due to lower international bid activity and because of one more year of limited
snowfall affecting the Company's snow plow and blower business. The Company
estimates that fire and emergency operating income will increase 40% to $45 to
$47 million in fiscal 2001 as a result of cost reduction initiatives, recovery
from enterprise resource planning ("ERP") system-related inefficiencies and the
Medtec acquisition.
The Company estimates that defense segment sales will increase to
approximately $410 million largely due to an anticipated $115 million increase
in MTVR vehicle sales, plus higher parts sales. This projected level of sales
assumes production levels under the MTVR contract will begin to increase to
"full-rate" production following the passage of certain vehicle performance
milestones,
23
which the Company expects to occur in early 2001. The Company believes defense
operating income will increase modestly to $30 to $31 million. The Company
expects increased sales of lower-margin MTVR trucks combined with increased
engineering and bid and proposal costs in connection with the FMTV proposal
effort to contribute to these results.
Corporate and other expenses are expected to be flat in fiscal 2001
compared to fiscal 2000.
The expectations with respect to projected sales, costs and earnings in
this "Fiscal 2001 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, the Company's ability to achieve cost reductions in the fire and
emergency segment; the amount of costs for the Company to bid for the FMTV
program; the completion of performance milestones in early 2001 and commencement
of full-rate production for the MTVR program without delays or failures; the
Company's estimates for fiscal 2001 concrete placement activity and related
mortgage rates and housing starts and capital expenditures of large commercial
refuse haulers and municipalities; the Company's ability to double margins in
refuse packer manufacturing; and that the Company does not complete any
acquisitions beyond the Medtec acquisition. Although the Company believes such
assumptions are reasonable, there can be no 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 statement.
New Accounting Standards
The Financial Accounting Standards Board issued SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities," which was amended by SFAS
No. 137. Provisions of these standards are required to be adopted in years
beginning after June 15, 2000. The Company adopted SFAS No. 133, as amended, on
October 1, 2000. The impact on the Company of adoption will be a charge to
fiscal 2001 earnings of less than $0.1 million. This charge will be recorded by
the Company in the first quarter of fiscal 2001.
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin ("SAB") No. 101, which deals with revenue recognition
issues. SAB No. 101 (as modified by SAB No. 101 A and B) is required to be
adopted by the Company no later than the fourth quarter of fiscal 2001.
Management does not anticipate that the adoption of SAB No. 101, 101A or 101B
will have a significant effect on the results of operations or on the financial
position of the Company.
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 Amended and Restated 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 more in fiscal 2001 than in fiscal 2000, the
Company's interest expense would increase, and pre-tax income would decrease by
approximately $1.7 million. Similarly, if interest rates increased by two
percent, the fair value of the Company's $100 million fixed rate, long-term
notes at September 30, 2000 would decrease by approximately $9.4 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.
FOREIGN CURRENCY RISK
The Company's operations consist of manufacturing in the U. S. and sales
activities in the U. S. and in various foreign jurisdictions. Export sales were
less than eight percent of overall net sales in fiscal 2000. Generally, the
Company purchases materials and components denominated in U.S. dollars and
attempts to seek payment in U. S. dollars for large multi-unit sales contracts
which span several months or years.
24
The Company's earnings are affected by fluctuations in the value of the
U.S. dollar against foreign currencies primarily as a result of euro-denominated
purchases of component parts from a European supplier (approximately 14.0
million euros in annual requirements, or approximately $12.3 million based on
the exchange rate as of September 30, 2000) and, to a lesser extent, to hedge
customer orders denominated in currencies other than the U.S. dollar. Forward
foreign exchange contracts may be used to partially hedge against the earnings
effects of such fluctuations. At September 30, 2000, the Company had the
following foreign currency denominated firm sales commitments and purchase
obligations and forward foreign exchange contracts outstanding with the fair
value gain (loss) as shown:
Weighted Average
Contract Rate Fair Value
Notional (US$/Foreign Gain (Loss) At
Description Value Currency) September 30, 2000
----------- ----- --------- ------------------
(in thousands) (in thousands of U.S. $)
Firmly committed sales
contracts denominated in
Canadian $ 532
Forward contracts to sell
Canadian $ for US $ 532 .678 $ 6
Firmly committed purchase
obligations denominated in
euros 4,804
Forward contracts to buy
euros for US $ 4,804 .912 (125)
All of the above contracts expire within the next five months.
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.
-------------------------------------------
25
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 sheet of Oshkosh Truck
Corporation (the "Company") as of September 30, 2000 and the related
consolidated statements of income, shareholders' equity and cash flows for the
year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements 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 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, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of the Company as of
September 30, 2000 and the consolidated results of its operations and its cash
flows for the year then ended in conformity with accounting principles 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 23, 2000, except for Note 15,
as to which the date is October 30, 2000
26
REPORT OF ERNST & YOUNG 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 (the "Company") as of September 30, 1999 and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the two years in the period ended September 30, 1999. Our audits also
included the financial statement schedule listed in the Index of Item 14(a) for
each of the two years in the period ended September 30, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements 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 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 audits provide 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 at
September 30, 1999 and the consolidated results of its operations and its cash
flows for each of the two years in the period 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 each of the
two years in the period 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
27
OSHKOSH TRUCK CORPORATION
Consolidated Statements of Income
Fiscal Year Ended September 30,
-------------------------------
2000 1999 1998
---- ---- ----
(In thousands, except per share amounts)
Net sales................................................. $1,324,026 $1,164,954 $ 902,792
Cost of sales............................................ 1,121,092 991,573 776,756
----------- ----------- ---------
Gross income......................................... 202,934 173,381 126,036
Operating expenses:
Selling, general and administrative.................. 93,724 85,996 69,001
Amortization of goodwill and other intangibles....... 11,159 11,172 8,315
----------- ----------- ---------
Total operating expenses....................... 104,883 97,168 77,316
----------- ----------- ---------
Operating income.......................................... 98,051 76,213 48,720
Other income (expense):
Interest expense...................................... (20,956) (26,744) (21,490)
Interest income....................................... 893 760 1,326
Miscellaneous, net.................................... 661 730 92
----------- ----------- ---------
(19,402) (25,254) (20,072)
----------- ------------ ---------
Income before items noted below........................... 78,649 50,959 28,648
Provision for income taxes................................ 31,346 21,313 12,655
----------- ----------- ---------
47,303 29,646 15,993
Equity in earnings of unconsolidated partnership, net of
income taxes of $738, $948 and $167.................... 1,205 1,545 260
----------- ----------- ---------
Income from continuing operations......................... 48,508 31,191 16,253
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, $37 and $757............... (820) (60) (1,185)
----------- ----------- ---------
Net income................................................ $ 49,703 $ 31,131 $ 15,068
=========== =========== =========
Earnings (loss) per share:
Continuing operations................................. $ 3.01 $ 2.45 $ 1.29
Discontinued operations............................... 0.13 -- --
Extraordinary item.................................... (0.05) -- (0.09)
----------- ----------- ---------
Net income............................................ $ 3.09 $ 2.45 $ 1.20
=========== =========== =========
Earnings (loss) per share assuming dilution:
Continuing operations................................. $ 2.96 $ 2.39 $ 1.27
Discontinued operations............................... 0.12 -- --
Extraordinary item.................................... (0.05) -- (0.09)
----------- ----------- ---------
Net income............................................ $ 3.03 $ 2.39 $ 1.18
=========== =========== =========
See accompanying notes.
28
OSHKOSH TRUCK CORPORATION
Consolidated Balance Sheets
September 30,
2000 1999
---- ----
(In thousands, except share
Assets and per share amounts)
Current assets:
Cash and cash equivalents............................................. $ 13,569 $ 5,137
Receivables, net...................................................... 106,805 93,186
Inventories........................................................... 194,931 198,446
Prepaid expenses...................................................... 5,424 4,963
Deferred income taxes................................................. 14,708 14,558
-------- --------
Total current assets............................................... 335,437 316,290
Investment in unconsolidated partnership.................................. 15,179 12,335
Other long-term assets.................................................... 16,274 11,824
Property, plant and equipment:
Land and land improvements............................................ 8,359 7,885
Equipment on operating lease to others................................ 11,915 --
Buildings............................................................. 69,494 64,246
Machinery and equipment............................................... 111,591 90,637
Construction in progress.............................................. 5,148 5,850
-------- --------
206,507 168,618
Less accumulated depreciation......................................... (87,748) (75,598)
-------- --------
Net property, plant and equipment.................................. 118,759 93,020
Goodwill and other intangible assets, net................................. 310,731 319,821
-------- --------
Total assets.............................................................. $796,380 $753,290
======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable...................................................... $ 84,215 $ 84,727
Floor plan notes payable.............................................. 23,925 26,616
Customer advances..................................................... 59,996 68,364
Payroll-related obligations........................................... 23,465 20,990
Accrued warranty...................................................... 16,320 14,623
Other current liabilities............................................. 48,511 52,206
Revolving credit facility and current maturities of long-term debt.... 8,544 5,259
-------- --------
Total current liabilities........................................ 264,976 272,785
Long-term debt............................................................ 154,238 255,289
Deferred income taxes..................................................... 46,414 44,265
Other long-term liabilities............................................... 29,695 18,071
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 - 422,207 in 2000 and 425,985 in 1999...................... 4 4
Common Stock, $.01 par value; authorized 60,000,000 shares;
issued - 17,409,822 in 2000 and 13,611,044 in 1999................ 174 136
Paid-in capital....................................................... 109,740 15,997
Retained earnings..................................................... 201,791 157,810
Common Stock in treasury, at cost: 1,163,872 shares in 2000 and
1,206,874 shares in 1999.......................................... (10,652) (11,067)
-------- --------
Total shareholders' equity........................................ 301,057 162,880
-------- --------
Total liabilities and shareholders' equity................................ $796,380 $753,290
======== ========
See accompanying notes.
29
OSHKOSH TRUCK CORPORATION
Consolidated Statements of Shareholders' Equity
Common Minimum
Stock in Pension
Common Paid-In Retained Treasury Liability
Stock Capital Earnings at Cost Adjustment Total
---------- ---------- ---------- ---------- ----------- ----------
(In thousands, except share and per share amounts)
Balance at September 30, 1997.................. $140 $13,544 $ 120,085 $ (12,869) $ -- $120,900
Comprehensive income:
Net income................................. -- -- 15,068 -- -- 15,068
Minimum pension liability adjustment (net
of tax benefit of $1,153)............. -- -- -- -- (1,804) (1,804)
--------
Comprehensive income................... 13,264
Cash dividends:
Class A Common Stock
($.29000 per share).................... -- -- (153) -- -- (153)
Common Stock ($.33333 per share)........... -- -- (4,041) -- -- (4,041)
Purchase of Common Stock for treasury.......... -- -- -- (1,424) -- (1,424)
Exercise of stock options...................... -- 255 -- 1,207 -- 1,462
Tax benefit related to stock options exercised. -- 468 -- -- -- 468
Issuance of Common Stock under incentive
compensation plan.......................... -- 398 -- 422 -- 820
---- ------- --------- --------- ------- ---------
Balance at September 30, 1998.................. 140 14,665 130,959 (12,664) (1,804) 131,296
Comprehensive income:
Net income................................. -- -- 31,131 -- -- 31,131
Minimum pension liability adjustment (net
of tax benefit of $1,153)............. -- -- -- -- 1,804 1,804
--------
Comprehensive income................... 32,935
Cash dividends:
Class A Common Stock
($.29250 per share).................... -- -- (125) -- -- (125)
Common Stock ($.33625 per share)........... -- -- (4,155) -- -- (4,155)
Exercise of stock options...................... -- (156) -- 1,597 -- 1,441
Tax benefit related to stock options exercised. -- 1,496 -- -- -- 1,496
Other.......................................... -- (8) -- -- -- (8)
---- ------- --------- --------- ------- ----------
Balance at September 30, 1999.................. 140 15,997 157,810 (11,067) -- 162,880
Net income and comprehensive income............ -- -- 49,703 -- -- 49,703
Cash dividends:
Class A Common Stock
($.30000 per share).................... -- -- (127) -- -- (127)
Common Stock ($.34500 per share)........... -- -- (5,595) -- -- (5,595)
Exercise of stock options...................... -- (55) -- 415 -- 360
Net proceeds of Common Stock offering.......... 38 93,364 -- -- -- 93,402
Tax benefit related to stock options exercised. -- 434 -- -- -- 434
---- ------- --------- --------- ------- ---------
Balance at September 30, 2000.................. $178 $109,740 $ 201,791 $ (10,652) $ -- $ 301,057
==== ======== ========= ========== ======= =========
See accompanying notes.
30
OSHKOSH TRUCK CORPORATION
Consolidated Statements of Cash Flows
Fiscal Year Ended September 30,
2000 1999 1998
----------- ----------- -----------
(In thousands)
Operating activities:
Income from continuing operations........................... $ 48,508 $ 31,191 $ 16,253
Provision for impairment of assets.......................... -- -- 5,800
Depreciation and amortization............................... 24,218 23,157 18,698
Gain from sale of investments............................... -- -- (3,375)
Deferred income taxes....................................... 2,277 (3,370) 26
Equity in earnings of unconsolidated partnership............ (1,943) (2,493) (427)
(Gain) loss on disposal of property, plant and
equipment............................................. (12) 59 122
Changes in operating assets and liabilities:
Receivables, net........................................ (9,702) (12,204) 20,900
Inventories............................................. 11,250 (49,255) 9,958
Prepaid expenses........................................ (436) (1,195) (260)
Other long-term assets.................................. (3,664) (2,017) 725
Accounts payable........................................ (7,802) 19,556 956
Floor plan notes payable................................ (2,691) 14,971 (11,377)
Customer advances....................................... (10,556) 23,449 10,718
Payroll-related obligations............................. 1,639 1,582 452
Accrued warranty........................................ 1,624 (2,264) (1,883)
Other current liabilities............................... (3,250) (2,875) 9,778
Other long-term liabilities............................. 223 756 2,877
-------- -------- --------
Net cash provided from operating activities 49,683 39,048 79,941
Investing activities:
Acquisitions of businesses, net of cash acquired............ (7,147) -- (221,144)
Additions to property, plant and equipment.................. (22,647) (17,999) (13,444)
Proceeds from sale of investments........................... -- -- 3,375
Proceeds from sale of property, plant and equipment......... 52 158 1,524
Decrease (increase) in other long-term assets............... (2,417) 3,357 1,072
-------- -------- --------
Net cash used for investing activities................ (32,159) (14,484) (228,617)
Net cash provided from (used for) discontinued operations 2,015 -- (1,093)
Financing activities:
Net borrowings (repayments) under revolving credit facility. (5,000) (1,000) 6,000
Proceeds from issuance of long-term debt.................... 30,913 -- 325,000
Repayment of long-term debt................................. (124,595) (19,256) (188,049)
Debt issuance costs......................................... (795) -- (8,641)
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.......................... 360 1,433 38
Dividends paid.............................................. (5,392) (4,226) (4,176)
-------- -------- --------
Net cash provided from (used for) financing
activities.......................................... (11,107) (23,049) 130,172
-------- -------- --------
Increase (decrease) in cash and cash equivalents............ 8,432 1,515 (19,597)
Cash and cash equivalents at beginning of year.............. 5,137 3,622 23,219
-------- -------- --------
Cash and cash equivalents at end of year.................... $ 13,569 $ 5,137 $ 3,622
======== ======== ========
Supplemental disclosures:
Cash paid for interest (net of amount capitalized)...... $ 22,148 $ 26,142 $ 17,240
Cash paid for income taxes.............................. 22,438 26,859 11,097
See accompanying notes.
31
OSHKOSH TRUCK CORPORATION
Notes to Consolidated Financial Statements
September 30, 2000
(In thousands, except share and per share amounts)
1. Summary of Significant Accounting Policies
Operations -- Oshkosh Truck Corporation and its wholly-owned subsidiaries
(the "Company" or "Oshkosh") is a leading manufacturer of a wide variety of
medium and heavy duty specialized trucks and truck bodies predominately for the
U.S. market. The Company sells its products into three principal truck markets
- -- commercial, fire and emergency, and defense. The Company's commercial truck
business is principally conducted through its wholly-owned subsidiary, McNeilus
Companies, Inc. ("McNeilus"). The Company's fire and emergency business is
principally conducted through its wholly-owned subsidiary, Pierce Manufacturing
Inc. ("Pierce"). The defense business and certain fire and emergency and
commercial truck businesses are conducted through the operations of the parent
company. 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 have identical participating and
protective rights and responsibilities and, accordingly, the Company accounts
for its equity interest in OMFSP of 53% at September 30, 2000 and 57% at
September 30, 1999, under the equity method.
Principles of Consolidation and Presentation -- The consolidated financial
statements include the accounts of Oshkosh Truck Corporation and all of its
wholly-owned subsidiaries and are prepared in conformity with U.S. generally
accepted accounting principles. The Company records its interest in OMFSP under
the equity method. The preparation of financial statements in conformity with
generally accepted accounting principles 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 time deposits and money
market instruments, totaled $13,000 and $2,150 at September 30, 2000 and 1999,
respectively. The cost of these securities, which are considered "available for
sale" for financial reporting purposes, approximates fair value at September 30,
2000 and 1999.
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 -- The Company values approximately 85% of its inventories 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
$10,988 and $9,716 at September 30, 2000 and 1999, 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 40 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 $12,200, $10,743 and $9,515
in fiscal 2000, 1999 and 1998, 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 $270 in fiscal 2000. There was no capitalized interest in fiscal 1999 or
1998. 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,
2000 was $11,309.
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, certain investments and deferred charges.
Deferred charges include certain engineering and technical support costs
incurred in connection with multi-year government contracts, including $6,623
and $2,322 at September 30, 2000 and 1999, respectively, related to the
Company's Medium Tactical Vehicle Replacement
32
("MTVR") contract. These costs are charged to cost of sales when the related
project is billable to the government, or are amortized to cost of sales as base
units are delivered under the related contracts.
Goodwill and Other Intangible Assets -- The cost of goodwill and other
intangible assets is amortized on a straight-line basis over the estimated
periods benefited ranging from 5 to 40 years.
Impairment of Long-Lived Assets -- Property, plant and equipment, other
long-term assets and goodwill and other intangible assets 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. See Note 12.
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 cement mixers and
certain fire apparatus. Floor plan notes payable are non-interest bearing for
terms ranging from 90 to 120 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.
Guaranteed Residual Value Obligations and Deferred Income - Prior to
acquisition, the Company's wholly-owned subsidiary, Viking Truck and Equipment
("Viking"), entered into "sales" transactions with customers that provided for
residual value guarantees. In accordance with Statement of Financial Accounting
Standards ("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. Any proceeds received in excess of the guarantee
amount has been recorded as deferred income and is 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, 2000 and included in other liabilities
were:
Current Long-Term Total
------- --------- -----
Deferred revenue.................... $1,503 $2,570 $ 4,073
Residual value guarantees........... 1,495 6,114 7,609
------ ------ -------
$2,998 $8,684 $11,682
====== ====== =======
Residual value guarantees are first exercisable by the customer as follows:
2001 - $1,495; 2002 - $700; 2003 - $1,635; 2004 - $3,471; 2005 - $308.
Revenue Recognition and Long-Term Contracts -- Sales to commercial and fire
and emergency customers are recorded when the goods or services are billable at
time of shipment or delivery of the trucks. Sales under fixed-price defense
contracts generally are recorded as units are accepted by the U.S. government.
Sales and anticipated profits under the 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 122) of 5,788, of which 189 units have been
completed as of September 30, 2000. 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 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.
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin ("SAB") No. 101, which deals with revenue recognition
issues. SAB No. 101 (as modified by SAB No. 101 A and B) is required to be
adopted by the Company no later than the fourth quarter of fiscal 2001.
Management does not anticipate that the adoption of SAB No. 101, 101A or 101B
will have a significant effect on the results of operations or on the financial
position of the Company.
33
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 $14,137, $10,868,
and $9,681 during fiscal 2000, 1999 and 1998, respectively. Customer-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 in fiscal 2000, 1999 and 1998 were
$9,648, $7,573, and $8,383, respectively.
Advertising -- Advertising costs are included in selling, general and
administrative expense and are expensed as incurred. These expenses totaled
$2,132, $1,804 and $1,286 in fiscal 2000, 1999 and 1998, respectively.
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.
Financial Instruments -- The carrying amounts of cash equivalents,
receivables, accounts payable and debt approximated fair value as of September
30, 2000 and 1999.
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 leases receivable
of OMFSP.
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 receivables
are with the U.S. government, with companies in the ready-mix concrete industry
and with several large waste haulers in the United States. The Company does not
currently foresee a significant credit risk associated with these receivables.
Derivative Financial Instruments -- The Company uses derivative financial
instruments to manage its foreign currency exposures. Forward foreign exchange
contracts are designated as qualifying hedges of firm commitments. Gains and
losses on these contracts are recognized in income when the hedged transactions
occur. To the extent that hedges are deemed ineffective, amounts are charged to
income. At September 30, 2000, the Company had outstanding forward foreign
exchange contracts to purchase 4,804 million euros over a period of five months
and contracts to sell 532 Canadian dollars over a period of two months. At
September 30, 2000 the deferred loss on these contracts at fair value totaled
$119. The Company does not hold or issue derivative financial instruments for
trading purposes.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which was
amended by SFAS No. 137 and SFAS No. 138. This new standard became effective for
the Company on October 1, 2000, and requires companies to record derivatives on
the balance sheet as assets or liabilities, measured at fair value. Any fair
value changes will be recorded in net income or comprehensive income. Upon
adoption of this standard on October 1, 2000, the Company recorded a $119 charge
to income before income tax benefit of $45, or $74 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 Accounting Principles Board ("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.
34
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,
2000 1999 1998
------------ ----------- ----------
Denominator for basic earnings per
share......................... 16,073,684 12,727,141 12,597,598
Effect of dilutive options and
incentive compensation awards. 330,389 324,713 161,901
----------- ----------- ----------
Denominator for dilutive earnings per
share......................... 16,404,073 13,051,854 12,759,499
=========== =========== ==========
Reclassifications -- Certain reclassifications have been made to the fiscal
1999 and 1998 financial statements to conform to the fiscal 2000 presentation.
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 2000 1999
----------------------------------------- --------- ---------
U.S. government:
Amounts billed....................... $ 35,932 $ 25,816
Costs and profits not billed......... 5,038 --
--------- ---------
40,970 25,816
Commercial customers..................... 65,754 66,999
Other.................................... 2,528 2,575
--------- ---------
109,252 95,390
Less allowance for doubtful accounts..... (2,447) (2,204)
--------- ---------
$ 106,805 $ 93,186
========= =========
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, including First Article Test which is expected in fiscal 2001.
September 30,
Inventories 2000 1999
----------------------------------------- --------- ---------
Finished products $ 53,068 $ 59,649
Partially finished products 75,667 62,047
Raw materials 89,497 89,417
--------- ---------
Inventories at FIFO cost 218,232 211,113
Less: Progress payments on U.S. government
contracts (12,313) (2,951)
Excess of FIFO cost over LIFO cost (10,988) (9,716)
--------- ----------
$ 194,931 $ 198,446
========= =========
Title to all inventories related to government contracts, which provide for
progress payments, vests with the government to the extent of unliquidated
progress payments. Inventory includes the following costs related to the
Company's MTVR contract:
September 30,
2000 1999
--------- ---------
Tooling.................................. $ 3,570 $ 2,417
Logistics support development costs...... 3,399 945
Test, training and other................. 1,105 439
--------- ---------
$ 8,074 $ 3,801
========= =========
35
September 30,
Goodwill and Other Intangible Assets 2000 1999
----------------------------------------- --------- ---------
Useful Lives
---------------
Goodwill 15 - 40 Years.... $ 220,433 $ 218,614
Distribution network 40 Years......... 63,800 63,800
Non-compete agreements 5 - 15 Years..... 38,250 38,000
Other 5 - 40 Years..... 23,320 23,320
--------- ---------
345,803 343,734
Less accumulated amortization............ (35,072) (23,913)
--------- ---------
$ 310,731 $ 319,821
========= =========
The Company engaged third party business valuation appraisers to determine
the fair value of the distribution network in connection with its acquisition of
Pierce. 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 distribution network is based on a historical turnover
analysis.
On February 26, 1998, concurrent with the Company's acquisition of McNeilus
(see Note 3), the Company and BA Leasing & Capital Corporation ("BALCAP") formed
OMFSP, a general partnership, for the purpose of offering lease financing to
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 customers of the Company. OMFSP
purchases trucks and concrete batch plants for lease to user-customers. 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 plant purchases, and each partner is allocated its
proportionate share of OMFSP cash flow and taxable income. Indebtedness of OMFSP
is secured by the underlying leases and assets of, and is with recourse to,
OMFSP. However, such indebtedness is non-recourse to the Company.
Summarized financial information of OMFSP as of September 30, 2000 and
1999, the fiscal years ended September 30, 2000 and 1999 and for the period
February 26, 1998 (the date OMFSP was formed) to September 30, 1998, is as
follows:
September 30,
2000 1999
---- --------
Cash and cash equivalents................ $ 1,867 $ 1,383
Investment in sales type leases, net..... 172,255 140,912
Other assets............................. 491 278
-------- --------
$174,613 $142,573
======== ========
Notes payable............................ $141,565 $119,156
Other liabilities........................ 4,368 1,799
Partners' equity......................... 28,680 21,618
-------- --------
$174,613 $142,573
======== ========
Fiscal Year Ended September 30, Period From
February 26, 1998 to
2000 1999 September 30, 1998
---- ---- -------------------
Interest income......................... $13,132 $11,624 $ 6,605
Net interest income..................... 3,160 3,499 1,622
Excess of revenues over expenses........ 3,295 3,854 644
Excess of revenues over expenses in fiscal 1998 includes a $1,466 pre-tax,
nonrecurring charge related to the organization of OMFSP in fiscal 1998. This
charge has been included in the consolidated statements of income under the
caption "Equity in earnings of unconsolidated partnership, net of income taxes."
36
3. Acquisitions
On November 1, 1999, the Company acquired the manufacturing assets of
Kewaunee Engineering Corporation ("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. On April 28, 2000,
the Company acquired all of the capital stock of Viking Truck & Equipment, Inc.
and its affiliates (collectively "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. The acquisitions were financed from
borrowings under the Company's Senior Credit Facility.
The Kewaunee and Viking acquisitions were accounted for using the purchase
method of accounting and, accordingly, the operating results of Kewaunee and
Viking were included in the Company's consolidated statements of income
beginning November 1, 1999 and April 28, 2000, respectively. The excess of the
purchase price, including acquisition costs, of the Kewaunee and Viking
acquisitions over the estimated fair value of the assets acquired and
liabilities assumed amounted to $160 and $1,659, respectively, which has been
recorded as goodwill and is being amortized on a straight-line basis over 20 and
25 years, respectively. The purchase price allocation for these acquisitions is
preliminary and further refinements, which are not expected to be material, are
likely to be made. Had the acquisitions occurred on October 1, 1999 or 1998,
there would have been no material pro forma impact on the Company's consolidated
net sales, net income or earnings per share in fiscal 2000 or 1999.
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, including acquisition costs and net of cash
acquired. McNeilus is a leading manufacturer and marketer of rear-discharge
concrete mixers for the construction industry and refuse truck bodies for the
waste services industry in the United States. The acquisition was financed from
borrowings under a Senior Credit Facility and the issuance of Senior
Subordinated Notes.
The McNeilus acquisition was accounted for using the purchase method of
accounting and, accordingly, the operating results of McNeilus are included in
the Company's consolidated statements of income since the date of acquisition.
The purchase price, including acquisition costs, was initially allocated based
on the estimated fair values of the assets acquired and liabilities assumed at
the date of the acquisition and was subsequently adjusted during fiscal 1999.
Approximately $60,985 of the purchase price was allocated to intangible assets,
including non-competition agreements. The excess of the purchase price over the
estimated fair value of net assets acquired amounted to $114,727, which has been
accounted for as goodwill.
On December 19, 1997, the Company, through Pierce, acquired certain
inventory, machinery and equipment, and intangible assets of Nova Quintech, a
division of Nova Bus Corporation ("Nova Quintech") using available cash for
$3,563. Nova Quintech was engaged in the manufacture and sale of aerial devices
for fire trucks. Approximately $1,849 of the purchase price has been allocated
to intangible assets, principally aerial device designs and technology. The Nova
Quintech products have been integrated into Pierce's product line and are being
manufactured at Pierce. The Nova Quintech acquisition was accounted for using
the purchase method of accounting, and accordingly, the operating results of
Nova Quintech are included in the Company's statements of income since the date
of the acquisition.
4. Revolving Credit Facility, Long-Term Debt and Extraordinary Charge for Early
Retirement of Debt
The Company recorded an after-tax extraordinary charge of $581 in November
1999 and $239 in September 2000 to record the write-off of deferred financing
costs related to the prepayment of $93,500 of debt from proceeds of a common
stock offering (See Note 7) and the prepayment of $30,413 of debt in connection
with the amendment and restatement of its Senior Credit Facility (see discussion
following), respectively. Fiscal 1999 and 1998 operating results include
after-tax extraordinary charges of $60 and $1,185 related to the write-off of
deferred financing costs due to early repayment of debt, including $735 related
to refinancing the Company's credit facility in connection with the acquisition
of McNeilus in fiscal 1998. See Note 3.
On September 28, 2000, the Company amended its Senior Credit Facility. The
Senior Credit Facility was comprised of a $100,000 revolving credit facility
(with no borrowings at September 28, 2000) maturing in February 2004 and three
term loans (Term Loans A, B and C), which had remaining outstanding balances of
$32,500, $13,500 and $13,500, and maturity dates of March 2004, 2005 and 2006,
respectively. As part of the amendment, the Company increased its amended Term
Loan A ("Term Loan") to $60,000. Borrowings of $30,913 under amended Term Loan A
were used to repay amounts due to lenders exiting Term Loan A ($3,413), to
prepay amounts outstanding under Term Loans B and C ($13,500 each) and for
general corporate purposes ($500). The amended Senior Credit Facility ("Amended
and Restated Senior Credit Facility") is comprised of a $60,000 Term Loan and a
37
$170,000 Revolving Credit Facility (no borrowings outstanding at September 30,
2000), both of which mature in January 2006. The amended Term Loan requires
principal payments of $8,000 in fiscal 2001, $10,000 in fiscal 2002, $12,000 in
fiscal 2003, $14,000 in both 2004 and 2005, with the balance of $2,000 payable
in fiscal 2006. Principal payments are due in quarterly installments.
At September 30, 2000, letters of credit of $11,883 reduced available
capacity under the Company's Revolving Credit Facility to $158,117.
Interest rates on borrowings under the Amended and Restated Senior Credit
Facility are variable and are equal to the "Base Rate" (which is equal to the
higher of a bank's reference rate and the federal funds rate plus 0.5%) or the
"IBOR Rate" (which is a bank's inter-bank offered rate for U.S. dollars in
off-shore markets) plus a margin of 1.125% for IBOR Rate loans under the Amended
and Restated Revolving Credit Facility, and Term Loan as of September 30, 2000.
The margins are subject to adjustment, up or down, based on whether certain
financial criteria are met. The weighted average interest rate on borrowings
outstanding at September 30, 2000 was 9.50%.
The Company is charged a 0.25% annual fee with respect to any unused
balance under its Amended and Restated Revolving Credit Facility, and a 1.125%
annual fee with respect to any letters of credit issued under the Amended and
Restated Revolving Credit Facility. These fees are subject to adjustment if
certain financial criteria are met.
Substantially all the tangible and intangible assets of the Company and its
subsidiaries (including the stock of certain subsidiaries) are pledged as
collateral under the Amended and Restated Senior Credit Facility. Among other
restrictions, the Amended and Restated 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 $100,000 of 83/4% Senior Subordinated Notes due March 1,
2008 ("Senior Subordinated Notes"). The Senior Subordinated Notes were issued
pursuant to an Indenture dated February 26, 1998 (the "Indenture"), between the
Company, the Subsidiary Guarantors (as defined below) and Firstar Trust Company,
as trustee. The Indenture contains customary affirmative and negative covenants.
The Senior Subordinated Notes can be redeemed by the Company for a premium after
March 1, 2003. In addition to the Company, certain of the Company's
subsidiaries, including Pierce Manufacturing Inc., Summit Performance Systems,
Inc., McNeilus Companies, Inc., McNeilus Truck & Manufacturing, Inc., Iowa
Contract Fabricators, Inc., McIntire Fabricators, Inc., Kensett Fabricators,
Inc. McNeilus Financial, Inc., Pierce Western Region Refurbishment Center, Inc.,
Kewaunee Fabrications, LLC, McNeilus Rescue Corporation, Viking Truck &
Equipment Sales, Inc. (Ohio) and Viking Truck & Equipment Sales Inc. (Michigan)
(collectively, the "Subsidiary Guarantors") fully, unconditionally, jointly and
severally guarantee the Company's obligations under the Senior Subordinated
Notes (see Note 14).
McNeilus has unsecured notes payable to several of its former shareholders
aggregating $2,289 at September 30, 2000 and $2,548 at September 30, 1999.
Interest rates on these notes range from 5.7% to 8.0% with annual principal and
interest payments ranging from $20 to $155 with maturities through October 2033.
Debt at September 30, 2000 of $493 was assumed as part of the Viking
acquisition. This debt requires principal payments of $307 in fiscal 2001 and
$186 in fiscal 2002. The interest rates on these notes range from 7.60% to
9.25%.
The aggregate annual maturities of long-term debt for the five years
succeeding September 30, 2000, are as follows: 2001 -- $8,544; 2002 -- $10,426;
2003 -- $12,226; 2004 -- $14,201 and 2005 -- $14,046.
38
5. Income Taxes
Fiscal Year Ended September 30,
2000 1999 1998
---------- ---------- ---------
Income Tax Provision (Credit)
Current:
Federal.............................. $ 26,021 $ 22,654 $ 10,555
State................................ 3,048 2,029 2,074
--------- --------- --------
Total current..................... 29,069 24,683 12,629
Deferred:
Federal.............................. 1,935 (2,882) 35
State................................ 342 (488) (9)
--------- ---------- --------
Total deferred.................... 2,277 (3,370) 26
--------- ---------- --------
$ 31,346 $ 21,313 $ 12,655
========= ========= ========
Fiscal Year Ended September 30,
2000 1999 1998
---------- ---------- ---------
Effective Rate Reconciliation
U.S. federal tax rate................... 35.0% 35.0% 35.0%
State income taxes, net................. 2.8 2.9 4.9
Foreign sales corporation............... (0.6) (0.5) (1.5)
Goodwill amortization................... 2.5 3.8 5.1
Other, net.............................. 0.2 0.6 0.7
-------- -------- ------
39.9% 41.8% 44.2%
======== ======== ======
September 30,
2000 1999
Deferred Tax Assets and Liabilities ---------- ----------
Deferred tax assets:
Other current liabilities..................... $ 8,965 $ 11,979
Other long-term liabilities................... 7,290 5,768
Accrued warranty.............................. 5,849 5,496
Payroll-related obligations................... 4,035 2,842
Other......................................... -- 1,067
---------- ---------
Total deferred tax assets................. 26,139 27,152
Deferred tax liabilities:
Intangible assets............................. 29,079 30,233
Investment in unconsolidated partnership...... 10,819 13,301
Property, plant and equipment................. 8,849 8,802
Other long-term assets........................ 4,819 1,423
Inventories................................... 2,855 2,717
Other......................................... 1,424 383
---------- ---------
Total deferred tax liabilities............ 57,845 56,859
---------- ---------
Net deferred tax liability................$ (31,706) $(29,707)
========== ========
The net deferred tax liability is classified in the consolidated balance
sheet as follows:
September 30,
2000 1999
---- ----
Current net deferred tax asset.................... $ 14,708 $ 14,558
Noncurrent net deferred tax liability............. (46,414) (44,265)
------- --------
$(31,706) $(29,707)
======== ========
39
6. 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 provides
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.
Pension Benefits Postretirement Benefits
2000 1999 2000 1999
---------- ---------- ---------- ---------
Change in benefit obligation
Benefit obligation at October 1.............................. $ 41,816 $ 41,860 $ 8,744 $ 10,071
Service cost................................................. 1,741 1,828 349 461
Interest cost................................................ 3,203 2,853 694 708
Actuarial losses (gains)..................................... 170 (3,402) 306 (2,207)
Acquisition of Kewaunee...................................... -- -- 262 --
Benefits paid by the Company................................. -- -- (472) (289)
Benefits paid from plan assets............................... (1,538) (1,323) -- --
--------- --------- --------- ---------
Benefit obligation at September 30........................... $ 45,392 $ 41,816 $ 9,883 $ 8,744
========= ========= ========= =========
Change in plan assets
Fair value of plan assets at October 1....................... $ 45,953 $ 37,769 $ -- $ --
Actual return on plan assets................................. 4,966 8,231 -- --
Company contributions........................................ 2,493 1,276 472 289
Benefits paid from plan assets............................... (1,538) (1,323) -- --
Benefits paid by the Company................................. -- -- (472) (289)
--------- --------- --------- ---------
Fair value of plan assets at September 30.................... $ 51,874 $ 45,953 $ -- $ --
========= ========= ========= =========
Funded status of plan - over (under) funded.................. $ 6,482 $ 4,137 $ (9,883) $ (8,744)
Unrecognized net actuarial gains............................. (3,072) (2,299) (2,654) (3,071)
Unrecognized transition asset................................ (392) (459) -- --
Unamortized prior service cost............................... 1,652 1,783 -- --
--------- --------- --------- ---------
4,670 3,162 (12,537) (11,815)
Prepaid benefit cost recorded in other long-term assets...... 4,670 3,162 -- --
--------- --------- --------- ---------
Accrued benefit cost recorded in other long-term liabilities. $ -- $ -- $ (12,537) $ (11,815)
========= ========= ========= ==========
Weighted-average assumptions as of September 30
Discount rate................................................ 7.75% 7.75% 7.75% 7.75%
Expected return on plan assets............................... 9.25 9.25 n/a n/a
Rate of compensation increase................................ 4.50 4.50 n/a n/a
Pension Benefits Postretirement Benefits
Fiscal Year Ended September 30, Fiscal Year Ended September 30,
2000 1999 1998 2000 1999 1998
--------- -------- --------- --------- --------- --------
Components of net periodic benefit cost
Service cost................................. $ 1,741 $ 1,828 $ 1,744 $ 349 $ 461 $ 397
Interest cost................................ 3,203 2,853 2,751 694 708 676
Expected return on plan assets............... (4,023) (3,450) (3,185) -- -- --
Amortization of prior service cost........... 131 131 131 -- -- --
Amortization of transition asset............. (67) (67) (67) -- -- --
Amortization of net actuarial (gains)/losses. -- 155 193 (111) -- (13)
--------- -------- -------- --------- --------- ---------
Net periodic benefit cost.................... $ 985 $ 1,450 $ 1,567 $ 932 $ 1,169 $ 1,060
========= ======== ======== ========= ========= =========
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation for the Company was 9.0% in fiscal 2000,
declining to 5.5% in fiscal 2008. If the health care cost trend rate was
increased by 1%, the accumulated postretirement benefit obligation at September
30, 2000 would increase by $758 and net periodic postretirement benefit cost for
fiscal 2000 would increase by $122. A corresponding decrease of 1% would
decrease the accumulated postretirement benefit obligation at September 30, 2000
by $656 and net periodic postretirement benefit cost for fiscal 2000 would
decrease by $101.
The Company maintains supplemental executive retirement plans ("SERPs") for
certain executive officers of the Company and its subsidiaries which are
unfunded. Expense related to the plans of $409, $660 and $1,125 was recorded in
fiscal 2000, 1999 and 1998, respectively. Amounts accrued as of September 30,
2000 and 1999 related to the plans were $2,145 and $1,765, respectively.
40
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 $2,120, $1,684 and $1,345, in fiscal 2000, 1999 and 1998,
respectively.
7. 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
225,000 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. During fiscal 2000, 3,778 shares of Class A Common Stock were
converted into Common Stock. As of September 30, 2000, 422,207 shares of Common
Stock are reserved for 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, 2000 and 1999, the Company had purchased 692,302
shares of its Common Stock at an aggregate cost of $6,551.
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 Amended and Restated 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 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.
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).
41
8. Stock Options and Common Stock Reserved
The Company has reserved 2,145,628 shares of Common Stock at September 30,
2000 (including 900,000 shares for which approval from the holders of the Class
A Common Stock will be sought at the Company's 2001 Annual Shareholders'
Meeting) to provide for the exercise of outstanding stock options and the
issuance of Common Stock under incentive compensation awards and 422,207 shares
of Common Stock at September 30, 2000 to provide for conversion of Class A
Common Stock to Common Stock, for a total of 2,567,835 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.
The following table summarizes the transactions under the Plan for the
three-year period ended September 30, 2000.
Number of Weighted-Average
Options Exercise Price
----------- ----------------
Unexercised options outstanding September 30, 1997................................. 656,852 $ 7.43
Options granted............................................................... 621,000 13.57
Options exercised............................................................. (208,800) 7.00
Options forfeited............................................................. (1,500) 9.25
--------
Unexercised options outstanding September 30, 1998................................. 1,067,552 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
========= =======
Price range $5.25-- $11.17 (weighted-average contractual life of 5.5 years)........ 363,553 $ 9.33
Price range $12.75-- $15.75 (weighted-average contractual life of 7.8 years)....... 456,000 14.41
Price range $25.17-- $33.13 (weighted-average contractual life of 9.6 years)....... 476,000 31.49
Exercisable options at September 30, 2000.......................................... 688,193 13.54
Shares available for grant at September 30, 2000................................... 850,075
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,
2000 1999 1998
---- ---- ----
Pro forma:
Net income....................... $48,387 $30,313 $14,681
Per share:
Net income..................... 3.01 2.38 1.17
Net income assuming dilution... 2.95 2.32 1.15
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 5.99% in 2000, 5.82%
in 1999, and 5.22% in 1998; dividend yields of 1.05% in 2000, 1.13% in 1999, and
2.51% in 1998; expected common stock market price volatility factor of .325 in
2000, .335 in 1999, and .308 in 1998; and a weighted-average expected life of
the options of six years. The weighted-average fair value of options granted in
2000, 1999 and 1998 was $12.64, $11.57 and $4.07 per share, respectively.
42
9. Operating Leases and Related Party Transactions
Total rental expense for plant and equipment charged to operations under
noncancelable operating leases was $1,723, $937 and $1,114 in fiscal 2000, 1999
and 1998, respectively. Minimum rental payments due under operating leases for
subsequent fiscal years are: 2001 -- $1,880; 2002 -- $1,297; 2003 -- $859; 2004
- -- $725; and 2005 -- $191.
Included in rental expense are charges of $128 in fiscal 1998 relating to a
building lease between the Company and certain shareholders. In September 1998,
the Company purchased the building, which had been leased from such
shareholders, for $773. The purchase price was based on the average of two
independent appraisals.
10. Contingencies, Significant Estimates and Concentrations
The Company was engaged in litigation against Super Steel Products
Corporation ("SSPC"), the Company's former supplier of mixer systems for front
discharge concrete mixer trucks under a long-term supply contract. SSPC sued the
Company in state court claiming that the Company breached the contract. The
Company counterclaimed for repudiation of contract. On July 26, 1996, a jury
returned a verdict for SSPC awarding damages totaling $4,485. On October 10,
1996, the state court judge overturned the verdict against the Company, granted
judgment for the Company on its counterclaim, and ordered a new trial for
damages on the Company's counterclaim. Both SSPC and the Company appealed the
state court judge's decision. On December 8, 1998, the Wisconsin Court of
Appeals ordered a state court judge to reinstate the jury verdict against the
Company awarding damages totaling $4,485 plus interest to SSPC. On April 6,
1999, the Company's petition for review of this decision by the Wisconsin
Supreme Court was denied. On April 12, 1999, the Company petitioned the state
court judge to act on the Company's previous motion for a retrial. This petition
was denied on June 18, 1999 and the state court judge directed that judgment be
entered. In lieu of further appeals, the Company paid $5.75 million on July 27,
1999 in final settlement of the matter.
McNeilus was a defendant in litigation, which was commenced in 1993 prior
to the acquisition of McNeilus by the Company, in the U.S. District Court for
the Northern District of Alabama. The litigation, which was brought by The Heil
Co. ("Heil"), a McNeilus competitor, sought damages and claimed that McNeilus
infringed certain aspects of its patent for refuse packer design. The patent
referenced in the matter was allowed by Heil to lapse in 1995. The Company
denied infringement and asserted that the patent was invalid, both on the basis
of prior art and on a defective application. The matter was settled in January
2000 for payment of an amount previously accrued.
The Company was engaged in the arbitration of certain disputes between the
Oshkosh Florida Division and O.V. Containers, Inc., ("OV") which arose out of
the performance of a contract to deliver 690 trailers. The Company contested
warranty and other claims made against it, and reached a settlement in June
1998, which included payment by the Company of $1,000 to OV.
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 431 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, 2000.
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
43
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, 2000.
However, this may change as investigations proceed by the Company, other
unrelated property owners, and the government.
The Company is subject to other environmental matters and legal proceedings
and claims, including patent, antitrust, product liability and state dealership
regulation compliance proceedings, 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, will not have a material adverse effect
on the Company's financial condition or results of operations. Actual results
could vary, among other things, due to the uncertainties involved in litigation.
The Company has guaranteed certain customers' obligations under deferred
payment contracts and lease purchase agreements totaling approximately $1,000 at
September 30, 2000. The Company is also contingently liable under bid,
performance and specialty bonds totaling approximately $123,595 and open standby
letters of credit issued by the Company's bank in favor of third parties
totaling $12,133 at September 30, 2000.
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, 2000 and 1999, the Company has reserved $16,320 and $14,623,
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. During fiscal
1998 the Company recorded warranty and other related costs for matters beyond
the Company's historical experience totaling $3,200. The additional charges in
fiscal 1998 principally related to a dispute with or involving the Company's
former trailer manufacturing operations, which was settled in fiscal 1998 (see
above), and secondarily to repair certain matters related to refuse and
front-discharge chassis. 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 per claim. Accordingly, a reserve is
maintained for the estimated costs of such claims. At September 30, 2000 and
1999, the reserve for product and general liability claims was $11,475 and
$13,001, 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.
The Company subcontracted production under an $85,000 ISO-Compatible
Palletized Flatracks ("IPF") contract for the U.S. Army to Steeltech
Manufacturing, Inc. ("Steeltech"), a minority-owned firm, pursuant to Department
of Defense regulations under the IPF contract. Due to financial difficulties
encountered by Steeltech, the Company advanced working capital requirements to
Steeltech. As a result of delays in the start-up of full-scale production under
the IPF contract, the Company wrote off certain of its advances and an
investment in Steeltech totaling $3,300 in prior years. Such charges were
determined based on the amount of advances that were deemed to be unrealizable
based on a projection of Steeltech's cash flows through completion of the IPF
contract. Steeltech's IPF production was completed in July 1998. The Company
also wrote off an investment of $900 in a joint venture, which leases equipment
to Steeltech, and accrued $1,084 for the satisfaction of a guarantee of 50% of
the outstanding indebtedness of the joint venture which was paid in full in
fiscal 1999. Such charges were based on a projection of Steeltech's cash flows,
which indicated that Steeltech could not sustain its lease payments to the joint
venture, and because the Company believed that there was not a market for the
sale of the leased equipment. Given the completion of the IPF contract, and
Steeltech's filing for bankruptcy under Chapter 7 of the U.S. Bankruptcy code in
October 1999, the Company is attempting to dispose of its investment in the
joint venture. The Company believes that it is adequately reserved at September
30, 2000, for any matters relating to the disposition of such investment.
The Company's defense segment derives a significant portion of its revenue
from the U.S. Department of Defense, as follows:
Fiscal Year Ended September 30,
2000 1999 1998
----------- ----------- --------
U.S. Department of Defense.... $ 259,614 $ 218,017 $ 248,577
Export........................ 16,227 4,518 452
---------- ---------- ---------
Total Defense Sales........ $ 275,841 $ 222,535 $249,029
========== ========== ========
44
U.S. Department of Defense sales include $42,207, $180 and $10,437 in
fiscal 2000, 1999 and 1998, respectively, for products sold internationally
under the Foreign Military Sales ("FMS") Program.
Inherent in doing business with the U.S. Department of Defense are certain
risks, including technological changes and changes in levels of defense
spending. All U.S. Department of Defense 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. Unaudited Quarterly Results
Fiscal Year Ended September 30, 2000 Fiscal Year Ended September 30, 1999
---------------------------------------------------- --------------------------------------------------
4th Quarter 3rd Quarter 2nd Quarter 1st Quarter 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter
------------ ----------- ----------- ----------- ----------- ----------- ----------- -----------
Net sales................. $ 357,968 $ 391,667 $ 330,524 $ 243,867 $ 313,906 $ 329,821 $ 298,534 $ 222,693
Gross income.............. 54,394 58,802 49,761 39,977 48,461 48,292 44,520 32,108
Income from continuing
operations.............. 14,625 15,274 11,913 6,696 10,185 10,545 6,549 3,912
Discontinued operations... -- -- 2,015 -- -- -- -- --
Extraordinary item........ (239) -- -- (581) (60) -- -- --
Net income................ 14,386 15,274 13,928 6,115 10,125 10,545 6,549 3,912
Earnings per share:
Continuing operations... $ 0.87 $ 0.92 $ 0.72 $ 0.46 $ .79 $ .83 $ .51 $ .31
Discontinued operations -- -- 0.12 -- -- -- -- --
Extraordinary item...... (0.01) -- -- (0.04) -- -- -- --
Net income.............. 0.86 0.92 0.84 0.42 .79 .83 .51 .31
Earnings per share assuming
dilution:
Continuing operations. 0.86 0.90 0.70 0.46 .77 .81 .50 .30
Discontinued
operations.......... -- -- 0.12 -- -- -- -- --
Extraordinary item.... (0.01) -- -- (0.04) -- -- -- --
Net income............ 0.85 0.90 0.82 0.42 .77 .81 .50 .30
Dividends per share:
Class A Common Stock.... $ 0.07500 $ 0.07500 $ 0.07500 $ 0.07500 $ 0.07500 $ 0.07250 $ 0.07250 $ 0.07250
Common Stock............ 0.08625 0.08625 0.08625 0.08625 0.08625 0.08333 0.08333 0.08333
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. Discontinued Operations, Impairment Losses and Gain on Sale of Affiliate
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 have been
recorded as a gain on disposal of discontinued operations.
Following the acquisition of McNeilus and after conducting an internal
study to determine how to integrate the concrete mixer businesses of the Company
and McNeilus, the Company revised its plans regarding the use of the Company's
Florida manufacturing facility and of previously acquired concrete mixer
technology. The Florida manufacturing facility was originally acquired in
connection with the Company's acquisition of assets and the business of a
manufacturer of truck trailers in fiscal 1991. In 1996, the Company exited the
manufacture of truck trailers but retained the Florida facility to manufacture
products for the U.S. military and the Company's Summit brand of rear-discharge
cement mixers. During the fourth quarter of fiscal 1998, following the
completion of the internal study, management determined that all of the
Company's U.S. requirements for rear-discharge concrete mixers would be sourced
through the McNeilus manufacturing facilities due to the quality of the McNeilus
brand and the efficient manufacturing processes at its facilities. In the fourth
quarter of fiscal 1998, the Company further decided to begin to consolidate all
its U.S. defense-related manufacturing in its Oshkosh, Wisconsin facility due to
available capacity in Oshkosh and the ability to improve management of defense
programs from this facility. As a result, management determined that Oshkosh's
Florida facility and the Summit intangible asset may be impaired. Management
estimated the projected undiscounted future cash flows from the Florida facility
and the acquired concrete mixer technology and determined that such cash flows
were less than the carrying value of the assets. Accordingly, pre-tax impairment
losses of $3,865 and $1,935 included in selling, general and administrative
expenses of corporate and the commercial segment, respectively, were recognized
in fiscal 1998 based on the excess of their carrying values over the fair values
of the assets. The fair value of the Florida facility was based on a third party
appraisal. The fair value of the mixer intangible asset was determined based on
the absence of future cash flows.
45
In previous years, the Company wrote off (as a charge to selling, general
and administrative expense) its $3,025 equity investment in and advances to a
Mexican bus manufacturer due to prolonged weakness in the Mexican economy and
continuing high losses and high leverage reported by the Mexican affiliate. In
fiscal 1998, the Company sold its 5.0% ownership interest in the Mexican bus
manufacturer and recorded a pre-tax gain of $3,375. This gain was recorded as a
reduction of selling, general and administrative expense in fiscal 1998.
13. 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. The Company's eight operating units have been aggregated
into the three reportable segments of commercial, fire and emergency, and
defense based on similar customers served and similar economic results attained.
Commercial: This segment consists of three operating units--McNeilus,
Viking and the commercial division of Oshkosh. McNeilus and Oshkosh manufacture,
market and distribute concrete mixer systems, refuse truck bodies, portable
concrete batch plants and truck components. 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 consists of four operating units--Pierce,
the aircraft, rescue and firefighting ("ARFF") 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 one operating unit (a division of
Oshkosh), which 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.
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.
Selected financial data by business segment is as follows:
Fiscal Year Ended September 30,
2000 1999 1998
---- ---- ----
Net sales to unaffiliated customers:
Commercial....................................... $ 658,329 $ 607,678 $ 354,165
Fire and emergency............................... 390,659 336,241 301,181
Defense.......................................... 275,841 222,535 247,956
Corporate and other.............................. (803) (1,500) (510)
------------- ------------ ------------
Consolidated................................. $ 1,324,026 $ 1,164,954 $ 902,792
============ ============ ============
Operating income (loss):
Commercial....................................... $ 54,654 $ 48,995 $ 19,317
Fire and emergency............................... 32,922 26,758 25,581
Defense.......................................... 30,119 22,878 22,680
Corporate and other.............................. (19,644) (22,418) (18,858)
------------ ------------ ------------
Consolidated operating income................ 98,051 76,213 48,720
Net interest expense............................. (20,063) (25,984) (20,164)
Miscellaneous other.............................. 661 730 92
------------ ------------ ------------
Income from continuing operations before
income taxes, equity in earnings of
unconsolidated partnership and extraordinary
item......................................... $ 78,649 $ 50,959 $ 28,648
============ ============ ============
46
Fiscal Year Ended September 30,
2000 1999 1998
---- ---- ----
Depreciation and amortization:
Commercial....................................... $ 11,547 $ 10,949 $ 7,273
Fire and emergency............................... 8,979 8,156 7,286
Defense.......................................... 2,833 2,810 3,271
Corporate and other.............................. 859 1,242 868
---------- ---------- ----------
Consolidated................................. $ 24,218 $ 23,157 $ 18,698
========== ========== ==========
Capital expenditures:
Commercial....................................... $ 11,053 $ 9,317 $ 2,206
Fire and emergency............................... 5,016 6,125 9,439
Defense.......................................... 6,578 2,557 1,799
---------- ---------- ----------
Consolidated................................. $ 22,647 $ 17,999 $ 13,444
========== ========== ==========
September 30,
2000 1999 1998
---- ---- ----
Identifiable assets(a):
Commercial (b)................................... $ 385,622 $ 381,199 $ 329,036
Fire and emergency............................... 288,904 276,692 273,188
Defense.......................................... 108,528 85,796 73,917
Corporate and other.............................. 13,326 9,603 8,898
---------- ---------- ----------
Consolidated................................. $ 796,380 $ 753,290 $ 685,039
========== ========== ==========
(a)The Company has no significant long-lived assets in foreign countries.
(b)Includes investment in unconsolidated partnership.
The following table presents net sales by geographic region based on
product shipment destination.
Fiscal Year Ended September 30,
2000 1999 1998
---- ---- ----
Net sales:
United States.................................... $ 1,221,548 $1,113,214 $857,310
Other North America.............................. 7,429 7,822 4,678
Europe and Middle East........................... 68,317 21,713 16,889
Other............................................ 26,732 22,205 23,915
----------- ----------- ---------
Consolidated................................. $ 1,324,026 $1,164,954 $902,792
=========== ========== ========
14. 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 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 Amended and Restated 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 a formal lending arrangement. There are presently
no management fee arrangements between the Company and its Non-Guarantor
Subsidiaries.
47
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Statement of Income
Fiscal Year Ended September 30, 2000
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ ------------
(In thousands)
Net sales................................ $ 478,569 $ 870,317 $ -- $ (24,860) $ 1,324,026
Cost of sales............................ 411,850 733,893 -- (24,651) 1,121,092
---------- ---------- ----------- ---------- -----------
Gross income............................. 66,719 136,424 -- (209) 202,934
Operating expenses:
Selling, general and administrative.. 41,108 52,260 356 -- 93,724
Amortization of goodwill and other
intangibles.................... -- 11,159 -- -- 11,159
---------- ---------- ----------- ---------- -----------
Total operating expenses................. 41,108 63,419 356 -- 104,883
---------- ---------- ----------- ---------- -----------
Operating income (loss).................. 25,611 73,005 (356) (209) 98,051
Other income (expense):
Interest expense..................... (18,863) (8,368) (25) 6,300 (20,956)
Interest income...................... 267 6,855 71 (6,300) 893
Miscellaneous, net................... 11,836 (11,763) 588 -- 661
---------- ---------- ----------- ---------- -----------
(6,760) (13,276) 634 -- (19,402)
---------- ---------- ----------- ---------- -----------
Income before items noted below.......... 18,851 59,729 278 (209) 78,649
Provision (credit) for income 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......................... 36,221 -- 1,205 (36,221) 1,205
---------- ---------- ----------- ---------- -----------
Income from continuing operations........ 48,508 34,974 1,377 (36,351) 48,508
Gain from disposal of discontinued
operations........................... 2,015 -- -- -- 2,015
Extraordinary charge..................... (820) -- -- -- (820)
---------- ---------- ----------- ---------- -----------
Net income............................... $ 49,703 $ 34,974 $ 1,377 $ (36,351) $ 49,703
========== ========== =========== ==========- ===========
48
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Statement of Income
Fiscal Year Ended September 30, 1999
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ ------------
(In thousands)
Net sales................................ $ 410,197 $ 767,441 $ -- $ (12,684) $ 1,164,954
Cost of sales............................ 359,299 644,958 -- (12,684) 991,573
---------- ---------- ----------- ----------- -----------
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 -- 1,545 (40,127) 1,545
---------- ---------- ----------- ---------- -----------
Income before extraordinary charge....... 31,191 38,486 1,641 (40,127) 31,191
Extraordinary charge..................... (60) -- -- -- (60)
---------- ---------- ----------- ---------- -----------
Net income............................... $ 31,131 $ 38,486 $ 1,641 $ (40,127) $ 31,131
========== ========== =========== ========== ===========
49
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Statement of Income
Fiscal Year Ended September 30, 1998
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ ------------
(In thousands)
Net sales................................ $ 393,720 $ 509,072 $ -- $ -- $ 902,792
Cost of sales............................ 350,139 426,617 -- -- 776,756
---------- ---------- ----------- ---------- -----------
Gross income............................. 43,581 82,455 -- -- 126,036
Operating expenses:
Selling, general and administrative.. 37,861 31,117 23 -- 69,001
Amortization of goodwill and other
intangibles.................... -- 8,315 -- -- 8,315
---------- ---------- ----------- ---------- -----------
Total operating expenses................. 37,861 39,432 23 -- 77,316
---------- ---------- ----------- ---------- -----------
Operating income (loss).................. 5,720 43,023 (23) -- 48,720
Other income (expense):
Interest expense..................... (16,878) (7,195) (180) 2,763 (21,490)
Interest income...................... 418 3,248 423 (2,763) 1,326
Miscellaneous, net................... (96) 18 170 -- 92
---------- ---------- ----------- ---------- -----------
(16,556) (3,929) 413 -- (20,072)
---------- ---------- ----------- ---------- -----------
Income (loss) before items noted below... (10,836) 39,094 390 -- 28,648
Provision (credit) for income taxes...... (4,075) 16,578 152 -- 12,655
---------- ---------- ----------- ---------- -----------
(6,761) 22,516 238 -- 15,993
Equity in earnings of subsidiaries and
unconsolidated partnership, net of
income taxes......................... 23,014 -- 260 (23,014) 260
---------- ---------- ----------- ---------- -----------
Income before extraordinary charge....... 16,253 22,516 498 (23,014) 16,253
Extraordinary charge..................... (1,185) -- -- -- (1,185)
---------- ---------- ----------- ---------- -----------
Net income............................... $ 15,068 $ 22,516 $ 498 $ (23,014) $ 15,068
========== ========== =========== ========== ===========
50
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Balance Sheet
September 30, 2000
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ ------------
(In thousands)
Assets
Current assets:
Cash and cash equivalents.............. $ 13,034 $ 499 $ 36 $ -- $ 13,569
Receivables, net....................... 61,156 47,473 272 (2,096) 106,805
Inventories............................ 53,273 141,867 -- (209) 194,931
Prepaid expenses and other............. 12,153 7,836 143 -- 20,132
--------- ---------- --------- ------------ ------------
Total current assets................ 139,616 197,675 451 (2,305) 335,437
Investment in and advances to:
Subsidiaries........................... 382,723 4,308 -- (387,031) --
Unconsolidated partnership............. -- -- 15,179 -- 15,179
Other long-term assets..................... 14,010 1,980 284 -- 16,274
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) $ 796,380
========= ========== ========= ============ ============
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 56,856 26 -- 59,996
Payroll-related obligations............ 10,642 12,792 31 -- 23,465
Accrued warranty....................... 7,668 8,652 -- -- 16,320
Other current liabilities.............. 26,433 21,914 164 -- 48,511
Revolving credit facility and current
maturities of long-term debt....... 8,000 237 307 -- 8,544
--------- ---------- --------- ------------ ------------
Total current liabilities....... 95,459 171,080 533 (2,096) 264,976
Long-term debt............................. 152,000 2,052 186 -- 154,238
Deferred income taxes...................... (905) 36,432 10,887 -- 46,414
Other long-term liabilities ............... 18,934 10,761 -- -- 29,695
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
========= ========== ========= ============ ============
51
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Balance Sheet
September 30, 1999
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ ------------
(In thousands)
Assets
Current assets:
Cash and cash equivalents.............. $ 3,698 $ 1,337 $ 102 $ -- $ 5,137
Receivables, net....................... 49,311 43,837 38 -- 93,186
Inventories............................ 49,988 148,458 -- -- 198,446
Prepaid expenses and other............. 7,609 7,695 4,217 -- 19,521
--------- ---------- --------- ------------ ------------
Total current assets................ 110,606 201,327 4,357 -- 316,290
Investment in and advances to:
Subsidiaries........................... 357,575 (7,590) -- (349,985) --
Unconsolidated partnership............. -- -- 12,335 -- 12,335
Other long-term assets..................... 10,745 1,027 52 -- 11,824
Net property, plant and equipment.......... 23,960 69,060 -- -- 93,020
Goodwill and other intangible assets, net.. -- 319,821 -- -- 319,821
--------- ---------- --------- ------------ ------------
Total assets............................... $ 502,886 $ 583,645 $ 16,744 $ (349,985) $ 753,290
========= ========== ========= ============= ============
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable....................... $ 34,261 $ 50,234 $ 232 $ -- $ 84,727
Floor plan notes payable............... -- 26,616 -- -- 26,616
Customer advances...................... 1,669 66,695 -- -- 68,364
Payroll-related obligations............ 9,172 11,788 30 -- 20,990
Accrued warranty....................... 6,785 7,838 -- -- 14,623
Other current liabilities.............. 17,940 23,638 10,628 -- 52,206
Revolving credit facility and current
maturities of long-term debt....... 5,000 259 -- -- 5,259
--------- ---------- --------- ------------ ------------
Total current liabilities....... 74,827 187,068 10,890 -- 272,785
Long-term debt............................. 253,000 2,289 -- -- 255,289
Deferred income taxes...................... (5,407) 36,228 13,444 -- 44,265
Other long-term liabilities ............... 17,586 485 -- -- 18,071
Investment by and advances from (to)
Parent................................. -- 357,575 (7,590) (349,985) --
Shareholders' equity....................... 162,880 -- -- -- 162,880
--------- ---------- --------- ------------ ------------
Total liabilities and shareholders' equity. $ 502,886 $ 583,645 $ 16,744 $ (349,985) $ 753,290
========= ========== ========= ============= ============
52
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Statement of Cash Flows
Fiscal Year Ended September 30, 2000
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ ------------
(In thousands)
Operating activities:
Income from continuing operations
before extraordinary item........... $ 48,508 $ 34,974 $ 1,377 $(36,351) $ 48,508
Non-cash adjustments.................... 5,967 18,999 (426) -- 24,540
Changes in operating assets and
liabilities......................... 100 (13,434) (10,240) 209 (23,365)
--------- --------- ---------- -------- ----------
Net cash provided from (used for)
operating activities................ 54,575 40,539 (9,289) (36,142) 49,683
Investing activities:
Acquisition of businesses, net of cash
acquired............................ (5,467) (1,752) 72 -- (7,147)
Investments in and advances to
subsidiaries........................ (19,681) (26,982) 10,521 36,142 --
Additions to property, plant and
equipment........................... (10,962) (11,685) -- -- (22,647)
Other................................... (719) (699) (947) -- (2,365)
--------- --------- ---------- -------- ----------
Net cash provided from (used for)
investing activities................ (36,829) (41,118) 9,646 36,142 (32,159)
Net cash provided from discontinued
operations.............................. 2,015 -- -- -- 2,015
Financing activities:
Net repayments under revolving credit
facility............................ (5,000) -- -- -- (5,000)
Proceeds from issuance of long-term
debt................................ 30,913 -- -- -- 30,913
Repayment of long-term debt............. (123,913) (259) (423) -- (124,595)
Debt issuance costs..................... (795) -- -- -- (795)
Proceeds from Common Stock Offering..... 93,736 -- -- -- 93,736
Costs of Common Stock Offering.......... (334) -- -- -- (334)
Dividends paid.......................... (5,392) -- -- -- (5,392)
Other................................... 360 -- -- -- 360
--------- --------- ---------- -------- ----------
Net cash used for financing activities.. (10,425) (259) (423) -- (11,107)
--------- --------- ---------- -------- ----------
Increase (decrease) in cash and cash
equivalents............................. 9,336 (838) (66) -- 8,432
Cash and cash equivalents at beginning of
year.................................... 3,698 1,337 102 -- 5,137
--------- --------- ---------- -------- ----------
Cash and cash equivalents at end of year.... $ 13,034 $ 499 $ 36 $ -- $ 13,569
========= ========= ========== ======== ==========
53
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Statement of Cash Flows
Fiscal Year Ended September 30, 1999
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ ------------
(In thousands)
Operating activities:
Income before extraordinary item........ $ 31,191 $ 38,486 $ 1,641 $(40,127) $ 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 60,870 (5,152) (40,127) 39,048
Investing activities:
Investments in and advances to
subsidiaries........................ 5,992 (46,231) 112 40,127 --
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 (60,256) 3,676 40,127 (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
========= ========= ========== ======== ==========
54
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Statement of Cash Flows
Fiscal Year Ended September 30, 1998
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ ------------
(In thousands)
Operating activities:
Income before extraordinary item........ $ 16,253 $ 22,516 $ 498 $(23,014) $ 16,253
Non-cash adjustments.................... 9,707 14,293 (3,156) -- 20,844
Changes in operating assets and
liabilities......................... 40,800 4,533 (2,489) -- 42,844
--------- --------- ----------- -------- ----------
Net cash provided from (used for)
operating activities................ 66,760 41,342 (5,147) (23,014) 79,941
Investing activities:
Acquisitions of businesses, net of
cash acquired....................... (229,876) (3,563) 12,295 -- (221,144)
Investments in and advances to
subsidiaries........................ 10,250 (28,181) (5,083) 23,014 --
Additions to property, plant and
equipment........................... (2,997) (10,447) -- -- (13,444)
Other................................... 4,590 1,868 (487) -- 5,971
--------- --------- ----------- -------- ----------
Net cash provided from (used for)
investing activities................ (218,033) (40,323) 6,725 23,014 (228,617)
Net cash used for discontinued
operations.............................. (1,093) -- -- -- (1,093)
Financing activities:
Net borrowings under revolving credit
facility............................ 6,000 -- -- -- 6,000
Proceeds from issuance of long-term
debt................................ 325,000 -- -- -- 325,000
Repayment of long-term debt............. (188,000) (49) -- -- (188,049)
Debt issuance costs..................... (8,641) -- -- -- (8,641)
Dividends paid.......................... (4,176) -- -- -- (4,176)
Other................................... 38 -- -- -- 38
--------- --------- ---------- -------- ----------
Net cash provided from (used for)
financing activities................ 130,221 (49) -- -- 130,172
--------- ---------- ---------- -------- ----------
Increase (decrease) in cash and cash
equivalents............................. (22,145) 970 1,578 -- (19,597)
Cash and cash equivalents at beginning of
year.................................... 23,210 9 -- -- 23,219
--------- --------- ---------- -------- ----------
Cash and cash equivalents at end of year.... $ 1,065 $ 979 $ 1,578 $ -- $ 3,622
========= ========= ========== ======== ==========
55
15. Subsequent Event
On October 30, 2000, the Company acquired all of the issued and outstanding
capital stock of Medtec Ambulance Corporation ("Medtec") for approximately
$14,500, 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 Amended and Restated Revolving Credit Facility. The acquisition will
be accounted for using the purchase method of accounting and, accordingly, the
operating results of Medtec will be included in the Company's consolidated
statements of income beginning October 30, 2000. The excess of the purchase
price over the estimated fair value of net assets acquired amounted to
approximately $5,800, which will be accounted for as goodwill and amortized over
a 25 year period. The purchase price allocation for the Medtec acquisition is
preliminary and further adjustments are likely based on final valuations.
56
Item 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
-------------------------------------------------------------------------
DISCLOSURES.
-----------
The Company had no disagreements with its accountants during the last two
fiscal years. On May 9, 2000, the Company engaged Arthur Andersen LLP, to act as
its independent auditors as successor to Ernst & Young LLP. All information
relating to such change in accountants is incorporated by reference to the
Company's Current Report on Form 8-K, dated May 9, 2000.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE 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 5, 2001, 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.
Item 11. EXECUTIVE 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 5, 2001, 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.
--------------------------------------------------------------
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 5, 2001, to be filed with the Securities and Exchange Commission, is
hereby incorporated by reference in answer to this item.
Item 13. CERTAIN RELATIONSHIPS AND RELATED 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 5,
2001, to be filed with the Securities and Exchange Commission, is hereby
incorporated by reference in answer to this item.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 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, 2000, are
contained in Item 8:
Report of Arthur Andersen LLP, Independent Auditors
Report of Ernst & Young LLP, Independent Auditors
Consolidated Statements of Income for the years ended September 30, 2000,
1999 and 1998
Consolidated Balance Sheets at September 30, 2000 and 1999
Consolidated Statements of Shareholders' Equity for the years ended
September 30, 2000, 1999 and 1998
Consolidated Statements of Cash Flows for the years ended September 30,
2000, 1999 and 1998
Notes to Consolidated Financial Statements
57
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.
3. 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 Amended and Restated Credit Agreement dated as of September
28, 2000, among Oshkosh Truck Corporation, Bank of America,
N.A., as Agent and Swing Line Lender, and certain other
financial institutions.
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)).
10.1 1990 Incentive Stock Plan for Key Employees, 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,
1998 (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 Key Employees Employment and Severance Agreement
with Messrs. R.G. Bohn, T.M. Dempsey, P.C. Hollowell, C.L.
Szews, and M.J. Zolnowski (incorporated by reference to
Exhibit 10.13 to the Company's Annual Report on Form 10-K
for the year ended September 30, 1994 (File No. 0-13886)).*
10.4 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)).*
10.5 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)).*
10.6 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)).*
10.7 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)).
58
10.8 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)).*
10.9 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)).*
10.10 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).*
10.11 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).*
10.12 Employment Agreement, dated September 16, 2996, between
Pierce Manufacturing Inc. and John W. Randjelovic.*
10.13 Amendment effective July 1, 2000 to Employment Agreement,
dated as of October 15, 1998, between Oshkosh Truck
Corporation and Robert G. Bohn.*
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, 2000).
21. Subsidiaries of Registrant.
23. Consent of Arthur Andersen LLP
23.1 Consent of Ernst & Young LLP
27. Financial Data Schedule
*Denotes a management contract or compensatory plan or arrangement.
(b) The Company filed Current Report on Form 8-K, dated July 25, 2000,
reporting a conference call for analysts held in connection with the
announcement of the Company's earnings for the third quarter ended
June 30, 2000.
59
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 12, 2000 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 12, 2000 /S/ R. G. Bohn
---------------------------------------------------
R.G. Bohn, President, Chief Executive Officer and
Chairman of the Board
(Principal Executive Officer)
December 12, 2000 /S/ C. L. Szews
---------------------------------------------------
C.L. Szews, Executive Vice President and Chief
Financial Officer
(Principal Financial Officer)
December 12, 2000 /S/ T. J. Polnaszek
---------------------------------------------------
T.J. Polnaszek, Vice President and Controller
(Principal Accounting Officer)
December 12, 2000 /S/ J. W. Andersen
---------------------------------------------------
J.W. Andersen, Director
December 12, 2000 /S/ D. T. Carroll
---------------------------------------------------
D.T. Carroll, Director
December 12, 2000 /S/ D. V. Fites
---------------------------------------------------
D.V. Fites, Director
December 12, 2000 /S/ General (Ret.) F. M. Franks, Jr.
---------------------------------------------------
General (Ret.) F. M. Franks, Jr., Director
December 12, 2000 /S/ M. W. Grebe
---------------------------------------------------
M.W. Grebe, Director
December 12, 2000 /S/ K. J. Hempel
---------------------------------------------------
K.J. Hempel, Director
December 12, 2000 /S/ S. P. Mosling
---------------------------------------------------
S.P. Mosling, Director
December 12, 2000 /S/ J. P. Mosling, Jr.
---------------------------------------------------
J.P. Mosling, Jr., Director
December 12, 2000 /S/ R. G. Sim
---------------------------------------------------
R.G. Sim, Director
60
SCHEDULE II
OSHKOSH TRUCK CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
Years Ended September 30, 2000, 1999 and 1998
(In Thousands)
Balance at Acquisitions Additions
Beginning of of Charged to Balance at
Classification Year Businesses Expense Reductions* End of Year
-------------- ---- ---------- ------- ---------- -----------
Receivables -
Allowance for doubtful accounts:
1998 $1,970 $173 $124 $(199) $2,068
====== ==== ==== ====== ======
1999 $2,068 --- $201 $(65) $2,204
====== === ==== ===== ======
2000 $2,204 $ 5 $255 $(17) $2,447
====== === ==== ===== ======
* Represents amounts written off to the reserve, net of recoveries.
61
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 Amended and Restated Credit Agreement dated as of September
28, 2000, among Oshkosh Truck Corporation, Bank of America,
N.A., as Agent and Swing Line Lender, and certain other
financial institutions.
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)).
10.1 1990 Incentive Stock Plan for Key Employees, 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,
1998 (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 Key Employees Employment and Severance Agreement
with Messrs. R.G. Bohn, T.M. Dempsey, P.C. Hollowell, C.L.
Szews, and M.J. Zolnowski (incorporated by reference to
Exhibit 10.13 to the Company's Annual Report on Form 10-K
for the year ended September 30, 1994 (File No. 0-13886)).*
10.4 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)).*
10.5 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)).*
10.6 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)).*
10.7 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)).
10.8 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)).*
10.9 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)).*
62
10.10 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).*
10.11 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).*
10.12 Employment Agreement, dated September 16, 1996, between
Pierce Manufacturing Inc. and John W. Randjelovic.*
10.13 Amendment effective July 1, 2000 to Employment Agreement,
dated as of October 15, 1998, between Oshkosh Truck
Corporation and Robert G. Bohn.*
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, 2000).
21. Subsidiaries of Registrant.
23. Consent of Arthur Andersen LLP
23.1 Consent of Ernst & Young LLP
27. Financial Data Schedule
*Denotes a management contract or compensatory plan or arrangement.
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