As filed with the Securities and Exchange Commission on September 15, 1999
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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OSHKOSH TRUCK CORPORATION
(Exact name of registrant as specified in its charter)
Wisconsin 39-0520270
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 2566
Oshkosh, Wisconsin 54903-2566
(920) 235-9151
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
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Charles L. Szews
Executive Vice President and Chief Financial Officer
Oshkosh Truck Corporation
P.O. Box 2566
Oshkosh, Wisconsin 54903-2566
(920) 235-9151
(Name, address, including zip code, and
telephone number, including area code,
of agent for service)
-------------------------------------------
Copies to:
Benjamin F. Garmer, III, Esq. John R. Sagan, Esq.
Foley & Lardner Mayer, Brown & Platt
777 East Wisconsin Avenue 190 South LaSalle Street
Milwaukee, Wisconsin 53202 Chicago, Illinois 60603
(414) 271-2400 (312) 782-0600
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Approximate date of commencement of proposed sale to the public: As soon
as practicable after this Registration Statement becomes effective.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. |_|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
of the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|
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CALCULATION OF REGISTRATION FEE
- ------------------------------------- ----------------------- ------------------- ----------------------- ---------------------
Proposed Maximum Proposed Maximum
Title of Each Class of Amount to be Offering Price Aggregate Offering Amount of
Securities to be Registered Registered(1)(2) Per Unit (3) Price (3) Registration Fee
- ------------------------------------- ----------------------- ------------------- ----------------------- ---------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value, 3,737,500 shares and
with attached Preferred Share 2,491,666.67 rights $28.40625 $106,168,359.38 $29,514.81
Purchase Rights...................
- ------------------------------------- ----------------------- ------------------- ----------------------- ---------------------
(1) Includes 487,500 shares oCommon Stock issuable upon exercise of an
over-allotment option granted to the Underwriters.
(2) Each share of Oshkosh Truck Corporation Common Stock has attached thereto
two-thirds of a Preferred Share Purchase Right.
(3) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act of 1933 based upon the
average of the high and low prices for Oshkosh Truck Corporation as
reported on the Nasdaq National Market on September 13, 1999. The value
attributable to the Rights is reflected in the price of the Common Stock.
</TABLE>
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The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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The information in this prospectus in not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED SEPTEMBER 15, 1999
3,250,000 Shares
[Logo]
Oshkosh Truck Corporation
Common Stock
-------------------
We are selling 3,000,000 shares of our common stock and the selling
shareholders named under "Selling Shareholders" are selling 250,000 shares of
our common stock. We will not receive any of the proceeds from the shares of our
common stock sold by the selling shareholders.
We have two classes of common equity: our common stock being offered by
this prospectus and our class A common stock. The holders of our common stock
are entitled to elect 25% of the members of our Board of Directors, but are not
otherwise entitled to vote except as provided by law. Each holder of a share of
our common stock will receive a dividend equal to 115% of the dividend we pay on
each share of our class A common stock, and our common stock has prior rights to
some liquidation proceeds.
The underwriters have an option to purchase a maximum of 487,500
additional shares to cover over-allotments of shares.
Our common stock is traded on the Nasdaq National Market under the symbol
"OTRKB". On September , 1999, the last reported sale price of our common
stock was $ per share.
Investing in our common stock involves risks. See "Risk Factors" on page
8.
Underwriting Proceeds to Proceeds to
Price to Discounts and Oshkosh Truck Selling
Public Commissions Corporation Shareholders
--------- ----------- ----------- ------------
Per share....... $ $ $ $
Total........... $ $ $ $
Delivery of the shares of our common stock will be made on or about
, 1999.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
Credit Suisse First Boston
Goldman, Sachs & Co.
Tucker Anthony Cleary Gull
The date of this Prospectus is , 1999
<PAGE>
[INSIDE FRONT COVER]
[Picture of Oshkosh S-Series Forward- [Picture of McNeilus Rear Loader]
Discharge Concrete Mixer]
[Oshkosh Truck Corporation Logo]
[Pierce Manufacturing Inc. Logo] [McNeilus Companies, Inc. Logo]
Building Momentum. Delivering Results.
[Picture of Pierce Quantum [Picture of Oshkosh Palletize
Pumper with Aerial ladder] Load System]
<PAGE>
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TABLE OF CONTENTS
Page Page
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FORWARD-LOOKING STATEMENTS............... 1 BUSINESS.............................. 25
PROSPECTUS SUMMARY....................... 3 MANAGEMENT AND BOARD OF DIRECTORS..... 40
RISK FACTORS............................. 8 SELLING SHAREHOLDERS.................. 42
USE OF PROCEEDS.......................... 11 DESCRIPTION OF CAPITAL STOCK.......... 43
PRICE RANGE OF COMMON STOCK AND UNDERWRITING.......................... 46
DIVIDENDS............................. 12 NOTICE TO CANADIAN RESIDENTS.......... 48
CAPITALIZATION........................... 13 WHERE YOU CAN FIND MORE
SELECTED CONSOLIDATED FINANCIAL DATA..... 14 INFORMATION........................ 49
MANAGEMENT'S DISCUSSION OF LEGAL MATTERS......................... 50
CONSOLIDATED FINANCIAL CONDITION EXPERTS............................... 50
AND RESULTS OF OPERATIONS............. 16 INDEX TO FINANCIAL STATEMENTS......... F-1
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You should rely only on the information contained in this document or to
which we have referred you. We have not authorized anyone to provide you with
information that is different. This document may only be used where it is legal
to sell these securities. The information in this document may only be accurate
on the date of the document.
In this document, "Oshkosh," "we," "us" and "our" refer to Oshkosh Truck
Corporation and its subsidiaries, including McNeilus Companies, Inc.
("McNeilus") and its subsidiaries and Pierce Manufacturing Inc. ("Pierce") and
its subsidiaries.
The "Oshkosh," "McNeilus" and "Pierce" trademarks and related logos are
registered trademarks of ours. All other product and service names referenced in
this document are the trademarks or registered trademarks of their respective
owners.
All information in this document has been adjusted to reflect the
three-for-two split of our common stock effected on August 19, 1999 in the form
of a 50% stock dividend, and assumes no exercise of the underwriters'
over-allotment option.
FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated by reference contain
statements that we believe are "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995. All statements other
than statements of historical fact, including statements regarding our future
financial position, business strategy, budgets, projected costs and plans and
objectives of management for future operations, are forward-looking statements.
When used in this prospectus, words such as "may," "will," "expect," "intend,"
"estimate," "anticipate," "believe," "should," "plan" or "continue" and similar
expressions are generally intended to identify forward-looking statements. These
forward-looking statements are not guarantees of future performance and are
subject to risks, uncertainties and other facts, some of which are beyond our
control, that could cause actual results to differ materially from those
expressed or implied by those forward-looking statements. These factors include
those described in "Risk Factors" and elsewhere in this prospectus and the
documents incorporated by reference.
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this
prospectus. This summary is not complete and does not contain all of the
information that you should consider before investing in our common stock. You
should carefully read the entire prospectus, including the documents
incorporated by reference into this prospectus.
Oshkosh Truck Corporation
Overview
We are a leading designer, manufacturer and marketer of a broad range of
specialty commercial, fire and emergency, and military trucks and truck bodies
under the "Oshkosh," "McNeilus" and "Pierce" trademarks. In 1996, we began a
strategic initiative to shed underperforming assets and to diversify our
business by making selective acquisitions in attractive specialty segments of
the commercial truck and truck body markets to complement our defense truck
business. The result of this initiative was an increase in sales from $413
million in fiscal 1996 to $903 million in fiscal 1998, with earnings from
continuing operations increasing from a loss of $0.02 per share for fiscal 1996
to earnings of $1.27 per share for fiscal 1998. We continue to actively pursue
acquisition opportunities that fit our strategic plans. For the twelve month
period ended June 30, 1999, we achieved sales of $1.1 billion and earnings from
continuing operations of $2.01 per share. During the same period, we derived 51%
of our consolidated revenues from commercial products, 30% from fire and
emergency products and 19% from defense products.
We have experienced strong growth in each of our specialty commercial and
fire and emergency truck and truck body markets through our acquisitions of
Pierce, a leading manufacturer of fire trucks, in 1996 and McNeilus, a leading
manufacturer of concrete mixers and refuse bodies, in 1998. After both of these
acquisitions, we introduced new strategies to significantly increase their
sales, and we used our expertise in purchasing and manufacturing to reduce their
costs. Our specialty commercial and fire and emergency truck and truck body
backlog was $338 million as of June 30, 1999, an increase of 28% from the prior
year.
We are the leading manufacturer of severe-duty heavy tactical trucks for
the U.S. Department of Defense. In December 1998, the Department of Defense
awarded us the Medium Tactical Truck Replacement ("MTTR") contract for the U.S.
Marine Corps., from which we expect to generate total sales of $1.2 billion from
fiscal 2000 through fiscal 2005, assuming the Department of Defense exercises
all the options under the contract as currently anticipated. We expect sales
under this contract of about $26 million in fiscal 2000, increasing to peak
sales of about $300 million in fiscal 2002. This contract represents our first
production contract for medium tactical trucks for the U.S. military.
Competitive Strengths
We believe we possess the following competitive strengths:
Strong Market Positions. We have developed leading market positions and
brand recognition in each of our core businesses, which we attribute to our
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 McNeilus and Pierce, we have
established a strong domestic and international distribution system that is
tailored to meet the unique needs of customers for specialty trucks and truck
bodies. In addition to our exclusive network of dealers and representatives, we
employ over 100 sales and service representatives.
Flexible and Efficient Manufacturing Capabilities. We believe we have
competitive advantages over larger truck manufacturers in our specialty truck
markets due to our flexible manufacturing and custom fabrication capabilities.
In addition, we believe we have competitive advantages over smaller truck and
truck body manufacturers, which comprise the majority of the competition in our
markets, due to our relatively higher volumes that permit the use of automated
assembly lines and provide purchasing power opportunities across product lines.
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Diversified Product Offering and Customer Base. Our broad product
offerings and target markets serve to diversify our revenues, mitigate the
impact of economic cycles and provide multiple platforms for both internal
growth and acquisitions. For each of our target markets, we have developed or
acquired a broad product line in order to become a single-source provider to our
customers.
Strong Management Team. Our present management team has successfully
executed a strategic repositioning of our business while significantly improving
our financial and operating performance. With each of our recent acquisitions,
we assimilated the management and culture of the acquired company, introduced
new strategies to significantly increase their sales and used our expertise in
purchasing and manufacturing to reduce their costs.
Quality Products and Customer Service. We have developed strong brand
recognition based on our demonstrated ability to meet the stringent product
quality, performance and reliability requirements of our customers and the
specialty truck markets we serve. We also strive to achieve high quality
customer service through our extensive service and parts support program, which
is available to domestic customers 365 days a year in all product lines
throughout our distribution systems.
Proprietary Components. We have developed a number of proprietary,
severe-duty components that we believe provide us with a competitive advantage
by increasing our vehicles' durability, operating efficiency and effectiveness.
Our ability to integrate many of these components across various product lines
also reduces our cost to manufacture products compared to manufacturers who
assemble purchased components.
Business Strategy
We are focused on increasing our sales, profitability and cash flow by
capitalizing on our competitive strengths and pursuing a comprehensive,
integrated business strategy.
Focusing on Specialized Truck Markets. We plan to continue to focus on
those specialized truck and truck body markets where we have or can develop
strong market positions and where we can realize synergies in purchasing,
manufacturing, technology and distribution to increase sales and profitability.
In addition to our strategies to increase market share and profitability, each
of our specialized truck and truck body markets is exhibiting opportunities for
further market growth.
Pursuing Strategic Acquisitions. Our present management team has
successfully negotiated and integrated three acquisitions since September 1996
that have significantly increased our sales and earnings. We intend to
selectively pursue additional strategic acquisitions, both domestically and
internationally, in order to enhance our product offerings and expand our
international presence in specialized truck markets. We will focus our
acquisition strategy on specialty truck and truck body markets that are growing,
with fragmented or vulnerable competition, and where we can enhance our strong
market positions and achieve significant acquisition synergies.
Expanding Distribution Domestically and Internationally. We plan to add
new distribution and service capabilities for the municipal segment of the
refuse truck body market and for targeted geographic areas in the domestic fire
apparatus market. We are developing strategies to increase international sales
through the introduction of McNeilus' refuse truck bodies, rear-discharge
concrete mixers and portable concrete batch plants to international markets, by
offering Pierce's new Contender line of low-cost commercial and custom fire
trucks to international markets and by introducing our new medium tactical
military truck to approved foreign armies. International sales have increased
67% to $75.9 million for the twelve months ended June 30, 1999 compared to the
$45.5 million achieved in fiscal 1998.
Introducing New Products. We have increased our emphasis on new product
development in recent years, and seek to expand sales by leading our core
markets in the introduction of new or improved products, either through internal
development or strategic acquisition. New products introduced in fiscal 1999
include the Contender series of low cost commercial and custom pumpers, a
substantially upgraded forward-discharge concrete mixer and a lightweight
front-end refuse loader.
Reducing Costs While Maintaining Quality. We actively benchmark our
competitors' costs and best industry practices, and continuously seek to
implement process improvements to improve profitability and increase cash
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flow. With each of our acquisitions, we have established cost reduction targets.
For our historic product lines, we also establish annual labor productivity
improvement targets, and for many product lines, we establish materials cost
reduction targets.
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The Offering
<S> <C>
Common stock offered.................................. 3,000,000 shares by us
250,000 shares by the selling shareholders
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3,250,000
==========
Common stock to be outstanding after the offering..... 15,403,831 shares
Total common stock and class A common stock to be
outstanding after the offering..................... 15,829,930 shares
Use of proceeds....................................... We intend to use the net proceeds of the offering
to repay indebtedness. We will not receive any
proceeds from the sale of shares by the selling
shareholders in the offering.
Nasdaq National Market symbol......................... OTRKB
</TABLE>
These share numbers are based on shares outstanding on August 31, 1999.
Each share of our class A common stock is convertible into one share of our
common stock at any time at the holder's option and automatically upon the
occurrence of specified events described under "Description of Capital Stock
Common Stock - Conversion." The share amounts set forth in the table above
exclude 1,288,630 shares of our common stock reserved for issuance pursuant to
our employee benefit plans, under which options to purchase 890,055 shares of
our common stock were outstanding as of August 31, 1999.
------------------
We began business in 1917 as one of the early pioneers of four-wheel
drive technology. Our business was incorporated as a Wisconsin corporation in
1930. Our principal executive offices are located at 2307 Oregon Street,
Oshkosh, Wisconsin 54903-2566, and our telephone number is (920) 235-9151.
Internet users can obtain information about Oshkosh Truck and its
products at http://www.oshkoshtruck.com. However, the information contained at
that site is not incorporated into this document.
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Summary Consolidated Financial Data
The financial data included below as of and for the fiscal years ended
September 30, 1996, 1997 and 1998 have been derived from our consolidated
financial statements, which have been audited by Ernst & Young LLP, independent
auditors. The financial data included below as of and for the nine months ended
June 30, 1998 and 1999 have been derived from our unaudited condensed
consolidated financial statements and, in our opinion, reflect all adjustments,
consisting only of normal and recurring adjustments, necessary for a fair
presentation. The results of operations below are not necessarily indicative of
the results of operations for any future period. You should read the following
information in conjunction with "Management's Discussion and Analysis of
Consolidated Financial Condition and Results of Operations" and our consolidated
financial statements and the related notes included elsewhere in this
prospectus.
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Nine Months
Fiscal Year Ended Ended
September 30, June 30,
---------------------------------------- ---------------------
1996(1) 1997 1998(2) 1998 1999
--------- -------- --------- -------- --------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales............................................... $413,455 $683,234 $902,792 $659,741 $851,048
Gross income............................................ 28,775 80,997 126,036 87,111 124,920
Operating income (loss)................................. (3,601) 28,785 48,720 33,887 53,198
Income (loss) from continuing operations................ (241) 10,006 16,253 11,301 21,006
Loss from discontinued operations, net (3).............. (2,859) --- --- --- ---
Extraordinary charge for early retirement of
debt, net........................................... --- --- (1,185) (1,185) ---
Net income (loss)....................................... (3,100) 10,006 15,068 10,116 21,006
Earnings (loss) per share from continuing
operations assuming dilution........................ (0.02) 0.78 1.27 0.88 1.62
Dividends per share on common stock..................... 0.33 0.33 0.33 0.25 0.25
Other Financial Data:
EBITDA (4).............................................. $ 9,316 $ 42,637 $ 72,350 $ 46,427 $ 69,317
EBITDA margin % (4)..................................... 2.3% 6.2% 8.0% 7.0% 8.1%
Depreciation and amortization........................... $ 8,798 $ 14,070 $ 18,698 $ 12,995 $ 17,018
Capital expenditures.................................... 5,355 6,263 8,555 6,270 6,900
Net cash provided by (used in):
Continuing operating activities.................... (16,237) 65,782 79,941 78,982 1,069
Discontinued operating activities.................. 4,743 (1,658) (1,093) (872) ---
Investing activities............................... (166,231) (7,400) (228,617) (226,136) (11,198)
Financing activities............................... 148,136 (33,632) 130,172 149,464 11,948
Balance Sheet Data:
Cash and cash equivalents............................... $ 127 $ 23,219 $ 3,622 $ 24,657 $ 5,441
Working capital (5)..................................... 67,469 50,113 41,137 59,199 44,171
Total assets............................................ 435,161 420,394 685,039 690,175 794,063
Long-term debt, including current maturities............ 157,882 135,000 280,804 298,922 294,856
Shareholders' equity.................................... 121,602 120,900 131,296 128,721 151,143
--------------------
(1) On September 18, 1996, we acquired for cash all of the issued and
outstanding stock of Pierce, a leading manufacturer and marketer of fire
trucks and other fire apparatus, for $156.9 million, including
acquisition costs and net of cash acquired. We accounted for this
acquisition using the purchase method of accounting, and accordingly, the
income statement data includes the operating results of Pierce since the
date of acquisition.
(2) On February 26, 1998, we acquired for cash all of the issued and
outstanding stock of McNeilus, a leading manufacturer and marketer of
rear-discharge concrete mixers, refuse truck bodies and portable concrete
batch plants, and entered into related non-compete and ancillary
agreements for $217.6 million, including acquisition costs and net of
cash acquired. We accounted for this acquisition using the purchase
method of accounting, and accordingly, the income statement data includes
the operating results of McNeilus since the date of acquisition.
(3) On June 2, 1995, we sold assets associated with our motor home, bus and
van chassis business. The consideration included cash of $23.8 million
and the assumption by the buyer of some liabilities. We accounted for the
disposition of the chassis business in fiscal 1995 as a discontinued
operation. During the year ended September 30, 1996, we incurred after
tax charges of $1.6 million arising from the write-off of receivables and
other obligations related to our former chassis joint venture in Mexico
and we recognized additional warranty and other related costs of $1.3
million with respect to our former U.S. chassis business.
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(4) EBITDA means operating income (loss) plus depreciation and amortization
and also includes the add-back of the non-cash write-off of assets of
$4.1 million in the fiscal year ended September 30, 1996 and $5.8 million
in the fiscal year ended September 30, 1998. For purposes of calculating
EBITDA, depreciation and amortization has been adjusted to exclude
amortization of debt issuance costs of $0.2 million in the fiscal year
ended September 30, 1997, $0.9 million in the fiscal year ended September
30, 1998, $0.5 million for the nine months ended June 30, 1998 and $0.9
million for the nine months ended June 30, 1999. EBITDA and related
information is presented as additional information because we believe it
to be a useful indicator of our operating performance given our
substantial non-cash depreciation and amortization expenses. It is not,
however, intended as an alternative measure to net income, earnings per
share or cash flow from operations, as determined in accordance with
generally accepted accounting principles. Other companies in our industry
may present EBITDA differently than we do. EBITDA margin percentage is
calculated by dividing EBITDA by net sales.
(5) Working capital represents total current assets less total current
liabilities. Working capital includes net current liabilities related to
discontinued operations of $2.0 million at September 30, 1996, $1.5
million at September 30, 1997 and $0.6 million at September 30, 1998.
Working capital includes net current liabilities related to discontinued
operations of $0.8 million at June 30, 1998 and $0.2 million at June 30,
1999.
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RISK FACTORS
You should carefully consider the risk factors set forth below before
making an investment decision. This prospectus includes forward-looking
statements. Although we believe that the plans, intentions and expectations
reflected in the forward-looking statements are reasonable, we can give no
assurance that the plans, intentions or expectations will be achieved. Important
factors that could cause our actual results to differ materially from those
included in or suggested by any forward-looking statements are set forth below
and elsewhere in this prospectus. All forward-looking statements attributable to
us or persons acting on our behalf are expressly qualified in their entirety by
the following risk factors. See "Forward-Looking Statements" for additional
information regarding forward-looking statements.
Some of our markets are cyclical and a decline in these markets could have a
material adverse effect on our operating performance.
A decline in overall customer demand in our cyclical commercial or fire
and emergency markets could have a material adverse effect on our financial
condition, profitability and cash flows. The ready-mix concrete market we serve
is highly cyclical and, in large part, impacted by the strength of the economy
generally, by prevailing interest rates and by other factors which may have an
effect on the level of construction activity, either regionally or nationally.
The U.S. construction industry has generally been expanding in recent years, but
has experienced significant downturns in the past. These downturns have
materially adversely affected the net sales, profitability and cash flow of
suppliers to the construction industry, including us, and it is likely that the
industry will experience similar downturns at some point in the future. An
economic recession similarly may adversely affect the waste management industry
and may reduce expenditures for fire and emergency equipment.
We are dependent on U.S. government contracts for a substantial portion of our
business. That business is subject to the following risks that could have a
material adverse effect on our operating performance:
Our business is susceptible to changes in the U.S. defense budget, which
may reduce revenues expected from our defense business.
The U.S. defense budget has declined significantly in recent years,
resulting in a slowing of new program starts, program delays and program
cancellations. The reduction in these budgets has caused many government
contractors, including us, to experience declining net sales, reduced operating
margins and, in some cases, net losses. U.S. defense budgets may decline again
in the future, which may reduce revenues expected from our defense business.
Sales under contracts with the Department of Defense, including sales to foreign
governments through the Department of Defense and under subcontracts that
identified the Department of Defense as the ultimate purchaser, represented $249
million of our net sales for the fiscal year ended September 30, 1998, down from
$425 million in fiscal 1994. We expect fiscal 1999 sales to the Department of
Defense to decrease by up to $30 million from fiscal 1998 levels, before
increasing in fiscal 2000 through 2002 as a result of our MTTR contract to build
medium tactical trucks for the U.S. Marine Corps.
The U.S. government may not appropriate expected funding for our U.S.
government contracts, which may prevent us from realizing revenues under
current contracts.
Congress usually appropriates funds for a given program on an annual
basis even though contract performance may take more than one year.
Consequently, at the outset of a major program, the contract is usually
partially funded, and additional monies are normally committed to the contract
by the procuring agency only as appropriations are made by Congress for future
government fiscal years. If Congress fails to appropriate expected funding for
our programs, then we may have lower revenues under our current U.S. government
contracts than we expect, which could have a material adverse effect on our
financial condition, profitability and cash flows.
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Most of our U.S. government contracts are fixed-price contracts and our
actual costs may exceed our projected costs, which could result in lower
profits or net losses under these contracts.
Substantially all of our net sales to the Department of Defense for the
fiscal year ended September 30, 1998 and for the nine months ended June 30, 1999
were derived from fixed-price contracts. Although we regularly fix a substantial
portion of the supply costs of our contracts over the life of the contract,
there is a risk that if our bid is submitted and a contract is subsequently
awarded to us, our actual costs may exceed the projected costs, which were the
basis for our bid for the fixed-price contract. To the extent that actual costs
exceed those projected costs for existing contracts or that we inaccurately
project costs on any new contracts, we may experience lower profits or net
losses as a result of these contracts, which could have a material adverse
effect on our financial condition, profitability and cash flows.
Our U.S. government contracts expire in the near future and may not be
replaced, which could reduce expected revenues from these contracts.
Some of our existing contracts with the Department of Defense involving a
number of our heavy tactical truck products expire in fiscal years 2000 and
2001. Although we believe those contracts will be extended or renewed, or
replaced with new contracts with the Department of Defense, those contracts
could expire or be cancelled and not be replaced with new contracts. We are
currently competing for an additional Department of Defense contract for medium
tactical trucks. Our failure to obtain new contracts or to extend or replace
those expiring in fiscal years 2000 and 2001 would reduce our expected revenues
from these contracts, which could have a material adverse effect on our
financial condition, profitability and cash flows.
Our U.S. government contracts could be suspended or terminated which
could prevent us from realizing expected revenues under these contracts.
Approximately 28% of our net sales in fiscal 1998 and 18% of our net
sales in the nine months ended June 30, 1999 were made to the U.S. government
under long-term contracts and programs in the defense truck and fire and
emergency markets. As a result, suspension or termination of these contracts
could prevent us from realizing revenues under these contracts, which could in
turn have a material adverse effect on our financial condition, profitability
and cash flows. Companies engaged in supplying defense-related and other
equipment and services to U.S. government agencies are subject to specialized
government business risks. These risks include the ability of the U.S.
government to unilaterally suspend its contractors from receiving new contracts
in the event of violations of some laws or regulations. Although we have not
faced any of these suspensions, we have been involved in governmental
investigations of various matters in the past. We could face a suspension in the
future as a result of governmental investigations. The U.S. government also has
the right to terminate contracts either for its convenience or upon the default
of the contractor.
Our U.S. government contracts are subject to audit, which could result in
adjustments of our costs and prices under these contracts.
Some costs and expenses are not allowable charges under the U.S.
government contracts. As a U.S. government contractor, we are subject to
financial audits and other reviews by the U.S. government of performance under,
and the accounting and general practices relating to, our U.S. government
contracts, and like most large government contractors, we are audited and
reviewed on a continual basis. Costs and prices under our U.S. government
contracts may be adjusted based upon the results of these audits and reviews. We
have been required to pay adjustments to the government in the past.
9
<PAGE>
A substantial portion of our growth in the past three years has come through
acquisitions and we may not be able to identify, complete and integrate future
acquisitions, which could adversely affect our future growth.
Our growth strategy is based in part upon acquisitions and we may not be
able to identify suitable acquisition candidates, obtain financing for future
acquisitions or complete future acquisitions. If any future acquisitions are
completed, we may not be able to integrate the acquired businesses or operate
them profitably. Additionally, the diversion of management attention, as well as
any other difficulties which may be encountered in the continuing integration
processes, could have an adverse impact on our financial condition,
profitability and cash flows.
An interruption in the supply of some of our parts, materials, components and
final assemblies we obtain from sole source suppliers or subcontractors could
delay sales of our trucks and truck bodies.
We require specific types of engines, transmissions, pumps, cylinders and
other parts for the manufacture of our products. We obtain some of these items
from limited or single source suppliers with whom we do not have long-term
guaranteed supply agreements. We may in the future experience significant
disruption or termination of the supply of these parts, materials or components
or incur a significant increase in the cost of these parts, materials or
components, which could delay sales of our trucks and truck bodies and could
result in a material adverse effect on our financial condition, profitability
and cash flows. For some of our defense and fire and emergency contracts, we
subcontract the manufacture of trailers, flatracks, plows and blowers and the
final assembly of our trucks. We have experienced problems with suppliers and
subcontractors from time to time and have incurred additional costs and expenses
related to these problems.
If our debt level increases as a result of future acquisitions, covenants in our
debt agreements may limit our ability to borrow additional funds and make some
kinds of payments.
Our level of indebtedness may increase in the future, particularly if we
finance future acquisitions with debt. The agreements governing our subordinated
debt and bank debt contain restrictive covenants that, among other things,
restrict, but do not prohibit, our and our subsidiaries' ability to incur
additional indebtedness, pay dividends or make other restricted payments,
consummate asset sales, merge or consolidate with any other person, sell all of
our assets or prepay our indebtedness. These restrictions could, particularly in
connection with any increase in our level of indebtedness, increase our
vulnerability to general adverse economic and industry conditions and limit our
ability to obtain additional financing to fund future working capital, capital
expenditures and other general corporate requirements, or to fund future
acquisitions. In addition, the agreement governing our bank debt requires us to
maintain specified financial ratios and to satisfy financial condition tests.
The selling shareholders own a majority of our class A common stock and
therefore have voting control of the company.
We have two classes of common equity: our common stock being offered by
this prospectus and our class A common stock. The holders of our common stock
are entitled to elect 25% of our Board of Directors, but are not otherwise
entitled to vote except as required by law. Our class A common stock has the
right to elect 75% of our Board of Directors and to vote on any other matter
brought to a vote of our shareholders. Therefore, effective control of our Board
of Directors and operations is vested in the holders of our class A common
stock, which is closely held. As of August 31, 1999, on a pro forma basis that
includes the issuance of our common stock in the offering, the selling
shareholders, J. Peter Mosling, Jr. and Stephen P. Mosling, who are two of our
directors, beneficially own approximately 6.3% of our outstanding capital stock,
but effectively control 75% of our Board of Directors because they beneficially
own approximately 84.8% of our class A common stock.
10
<PAGE>
USE OF PROCEEDS
We estimate the net proceeds to us from the sale of the 3,000,000 shares
of common stock offered by us will be approximately $ million, based on an
assumed offering price of $ per share, after deducting the underwriting
discounts and commissions and the estimated offering expenses payable by us. We
will not receive any of the proceeds from the sales of shares of common stock by
the selling shareholders.
We intend to use a portion of the net proceeds to repay a total of $40.0
million of outstanding indebtedness under Term Loans B and C of our senior
credit facility, with $20.0 million applied to each loan. Term Loan B matures on
March 31, 2005 and Term Loan C matures on March 31, 2006. Term Loans B and C had
outstanding principal balances of $42.5 million each. We intend to use the
remainder of the net proceeds to repay indebtedness under Term Loan A of our
senior credit facility, which matures on March 31, 2004, and had an outstanding
principal balance of $87.0 million at August 31, 1999. The weighted-average
interest rates on borrowings outstanding at August 31, 1999 were 6.80% on Term
Loan A, 7.54% on Term Loan B and 7.79% on Term Loan C.
11
<PAGE>
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
Our common stock is traded on the Nasdaq National Market under the symbol
"OTRKB." The following table sets forth high and low closing sale prices of our
common stock as reported by the Nasdaq National Market.
High Low
---- ---
Fiscal 1997
First Quarter................................... $ 8.17 $ 6.75
Second Quarter.................................. 8.58 6.75
Third Quarter................................... 10.58 7.08
Fourth Quarter.................................. 11.67 8.83
Fiscal 1998
First Quarter................................... $ 14.17 $ 9.92
Second Quarter.................................. 13.33 11.58
Third Quarter................................... 17.42 12.67
Fourth Quarter.................................. 18.83 12.33
Fiscal 1999
First Quarter................................... $ 23.33 $ 14.50
Second Quarter.................................. 25.50 20.83
Third Quarter................................... 33.58 19.33
Fourth Quarter (through September , 1999) ... . .
On September , 1999, the last reported sale price for our common stock on
the Nasdaq National Market was $ . There is no established public trading
market for our class A common stock.
In fiscal 1997 and 1998, we paid quarterly cash dividends of $0.0833 per
share of our common stock and $0.0725 per share of our class A common stock. We
paid total cash dividends of $0.2500 per share of our common stock and $0.2175
per share of our class A common stock through the nine months ended June 30,
1999.
We intend to declare and pay dividends on a regular basis. However, the
payment of future dividends is at the discretion of our Board of Directors and
will depend upon, among other things, future earnings, capital requirements, our
general financial condition, general business conditions and other factors. When
we pay dividends, we pay a dividend on each share of our common stock equal to
115% of the amount paid on each share of our class A common stock. The
agreements governing our subordinated debt and bank debt restrict our ability to
pay dividends on our common stock and class A common stock. The aggregate amount
of all dividends we may pay on our common equity in any twelve month period is
limited by the terms of our senior credit facility. As of September 30, 1999 and
after our payments of cash dividends during fiscal 1999, we will have
approximately $1.8 million available to pay dividends on our common equity under
the terms of our senior credit facility.
12
<PAGE>
CAPITALIZATION
The following table sets forth our consolidated capitalization as of June
30, 1999 on an actual basis, and as adjusted to give effect to our sale of
3,000,000 shares of common stock at an assumed public offering price of $ per
share, after deducting the underwriting discount and estimated offering
expenses. You should read this table in conjunction with our consolidated
financial statements and the related notes included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
June 30, 1999
---------------------------------
Actual As Adjusted
--------- -----------
(dollars in thousands)
<S> <C> <C>
Cash and cash equivalents.............................................. $ 5,441 $ 5,441
========= ===========
Long-term debt, including current maturities........................... $ 294,856 $
Shareholders' equity:
Preferred stock, $.01 par value; 2,000,000 shares
authorized; none issued and outstanding......................... --- ---
Class A common stock, $.01 par value; 1,000,000 shares
authorized; 426,575 shares issued (1)........................... 4 4
Common stock, $.01 par value; 18,000,000 shares
authorized; 13,610,673 shares issued; 16,610,673
shares issued as adjusted (2)................................... 136 166
Paid-in capital................................................... 15,576
Retained earnings (3)............................................. 148,791
Common stock in treasury, at cost, 1,259,000 shares............... (11,560) (11,560)
Minimum pension liability......................................... (1,804) (1,804)
--------- -----------
Total shareholders' equity.................................... 151,143
--------- -----------
Total capitalization...................................... $ 445,999 $
========= ===========
- ---------------
(1) Each share of our class A common stock is convertible into one share of
our common stock at any time at the holder's option and automatically
upon the occurrence of specified events described under "Description of
Capital Stock - Common Stock - Conversion."
(2) Excludes 1,340,755 shares of our common stock reserved for issuance
pursuant to our employee benefit plans, under which options to purchase
942,180 shares of our common stock were outstanding as of June 30, 1999,
at a weighted-average exercise price of $12.05 per share.
(3) Reflects write-off of deferred financing costs of $ , net of
income tax benefit of $ .
</TABLE>
13
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The financial data included below as of and for the fiscal years ended
September 30, 1994, 1995, 1996, 1997 and 1998 have been derived from our
consolidated financial statements, which have been audited by Ernst & Young LLP,
independent auditors. The financial data included below as of and for the nine
months ended June 30, 1998 and 1999 have been derived from our unaudited
condensed consolidated financial statements and, in our opinion, reflect all
adjustments, consisting only of normal and recurring adjustments, necessary for
a fair presentation. The results of operations below are not necessarily
indicative of the results of operations for any future period. You should read
the following information in conjunction with "Management's Discussion and
Analysis of Consolidated Financial Condition and Results of Operations" and our
consolidated financial statements and the related notes included elsewhere in
this prospectus.
<TABLE>
<CAPTION>
Nine Months
Fiscal Year Ended Ended
September 30, June 30,
------------------------------------------------------ ---------------------
1994 1995 1996(1) 1997 1998(2) 1998 1999
--------- -------- -------- -------- --------- -------- --------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales........................................... $ 581,275 $438,557 $413,455 $683,234 $ 902,792 $659,741 $851,048
Cost of sales....................................... 519,801 390,022 384,680 602,237 776,756 572,630 726,128
--------- -------- -------- -------- --------- -------- --------
Gross income................................... 61,474 48,535 28,775 80,997 126,036 87,111 124,920
Operating expenses:
Selling, general and administrative............... 38,404 29,242 32,205 47,742 69,001 47,665 63,322
Amortization of goodwill and other intangibles.... --- --- 171 4,470 8,315 5,559 8,400
--------- -------- -------- -------- --------- -------- --------
Total operating expenses....................... 38,404 29,242 32,376 52,212 77,316 53,224 71,722
--------- -------- -------- -------- --------- -------- --------
Operating income (loss)............................. 23,070 19,293 (3,601) 28,785 48,720 33,887 53,198
Interest expense.................................... (1,080) (679) (929) (12,722) (21,490) (14,273) (19,839)
Interest income..................................... 249 774 1,040 717 1,326 544 614
Miscellaneous, net.................................. (137) (466) 1,508 (278) 92 (344) 564
--------- -------- -------- -------- --------- -------- --------
Income (loss) from continuing operations before
income taxes, equity in earnings of unconsolidated
partnership and extraordinary item................ 22,102 18,922 (1,982) 16,502 28,648 19,814 34,537
Provision (credit) for income taxes................. 8,544 7,285 (1,741) 6,496 12,655 8,378 14,700
--------- -------- -------- -------- --------- -------- --------
13,558 11,637 (241) 10,006 15,993 11,436 19,837
Equity in earnings (loss) of unconsolidated
partnership, net of income taxes.................. --- --- --- --- 260 (135) 1,169
--------- -------- -------- -------- --------- -------- --------
Income (loss) from continuing operations............ 13,558 11,637 (241) 10,006 16,253 11,301 21,006
Loss from discontinued operations, net (3).......... (504) (2,421) (2,859) --- --- --- ---
Extraordinary charge for early retirement of
debt, net....................................... --- --- --- --- (1,185) (1,185) ---
--------- -------- -------- -------- --------- -------- --------
Net income (loss)................................... $ 13,054 $ 9,216 $ (3,100) $ 10,006 $ 15,068 $ 10,116 $ 21,006
========= ======== ======== ======== ========= ======== ========
Earnings (loss) per share:
Continuing operations.......................... $ 1.04 $ 0.88 $ (0.02) $ 0.78 $ 1.29 $ 0.89 $ 1.65
Net income (loss).............................. 1.00 0.69 (0.23) 0.78 1.20 0.80 1.65
Earnings (loss) per share assuming dilution:
Continuing operations.......................... $ 1.04 $ 0.87 $ (0.02) $ 0.78 $ 1.27 $ 0.88 $ 1.62
Net income (loss).............................. 1.00 0.69 (0.23) 0.78 1.18 0.79 1.62
Dividends per share:
Class A common stock........................... $ 0.290 $ 0.290 $ 0.290 $ 0.290 $ 0.290 $ 0.2175 $ 0.2175
Common stock................................... 0.333 0.333 0.333 0.333 0.333 0.2500 0.2500
Other Financial Data:
EBITDA (4).......................................... $ 32,348 $ 27,702 $ 9,316 $ 42,637 $ 72,350 $ 46,427 $ 69,317
EBITDA margin % (4)................................. 5.6% 6.3% 2.3% 6.2% 8.0% 7.0% 8.1%
Depreciation and amortization....................... $ 9,278 $ 8,409 $ 8,798 $ 14,070 $ 18,698 $ 12,995 $ 17,018
Capital expenditures................................ 5,178 5,347 5,355 6,263 8,555 6,270 6,900
Net cash provided by (used in):
Continuing operating activities................ 67,423 6,166 (16,237) 65,782 79,941 78,982 1,069
Discontinued operating activities.............. (2,851) 10,482 4,743 (1,658) (1,093) (872) ---
Investing activities........................... (6,136) (6,170) (166,231) (7,400) (228,617) (226,136) (11,198)
Financing activities........................... (43,192) 3,402 148,136 (33,632) 130,172 149,464 11,948
Balance Sheet Data:
Cash and cash equivalents........................... $ 15,836 $ 29,716 $ 127 $ 23,219 $ 3,622 $ 24,657 $ 5,441
Working capital (5)................................. 82,010 91,777 67,469 50,113 41,137 59,199 44,171
Total assets........................................ 198,678 200,916 435,161 420,394 685,039 690,175 794,063
Long-term debt, including current maturities........ 610 --- 157,882 135,000 280,804 298,922 294,856
Shareholders' equity................................ 121,558 133,413 121,602 120,900 131,296 128,721 151,143
14
<PAGE>
--------------------
(1) On September 18, 1996, we acquired for cash all of the issued and
outstanding stock of Pierce, a leading manufacturer and marketer of fire
trucks and other fire apparatus, for $156.9 million, including
acquisition costs and net of cash acquired. We accounted for this
acquisition using the purchase method of accounting, and accordingly, the
income statement data includes the operating results of Pierce since the
date of acquisition.
(2) On February 26, 1998, we acquired for cash all of the issued and
outstanding stock of McNeilus, a leading manufacturer and marketer of
rear-discharge concrete mixers, refuse truck bodies and portable concrete
batch plants, and entered into related non-compete and ancillary
agreements for $217.6 million, including acquisition costs and net of
cash acquired. We accounted for this acquisition using the purchase
method of accounting, and accordingly, the income statement data includes
the operating results of McNeilus since the date of acquisition.
(3) On June 2, 1995, we sold assets associated with our motor home, bus and
van chassis business. The consideration included cash of $23.8 million
and the assumption by the buyer of some liabilities. We accounted for the
disposition of the chassis business as a discontinued operation and
accordingly, the income statement data for 1994 and 1995 reflects the
chassis business as a discontinued operation. During the year ended
September 30, 1996, we incurred after-tax charges of $1.6 million arising
from the write-off of receivables and other obligations related to our
former chassis joint venture in Mexico and we recognized additional
warranty and other related costs of $1.3 million with respect to our
former U.S. chassis business.
(4) EBITDA means operating income (loss) plus depreciation and amortization
and also includes the add-back of the non-cash write-off of assets of
$4.1 million in the fiscal year ended September 30, 1996 and $5.8 million
in the fiscal year ended September 30, 1998. For purposes of calculating
EBITDA, depreciation and amortization has been adjusted to exclude
amortization of debt issuance costs of $0.2 million in the fiscal year
ended September 30, 1997, $0.9 million in the fiscal year ended September
30, 1998, $0.5 million for the nine months ended June 30, 1998 and $0.9
million for the nine months ended June 30, 1999. EBITDA and related
information is presented as additional information because we believe it
to be a useful indicator of our operating performance given our
substantial non-cash depreciation and amortization expenses. It is not,
however, intended as an alternative measure to net income, earnings per
share or cash flow from operations, as determined in accordance with
generally accepted accounting principles. Other companies in our industry
may present EBITDA differently than we do. EBITDA margin percentage is
calculated by dividing EBITDA by net sales.
(5) Working capital represents total current assets less total current
liabilities. Working capital includes net current assets (liabilities)
related to discontinued operations of $15.9 million at September 30,
1994, $3.3 million at September 30, 1995, ($2.0) million at September 30,
1996, ($1.5) million at September 30, 1997 and ($0.6) million at
September 30, 1998. Working capital includes net current (liabilities)
related to discontinued operations of ($0.8) million at June 30, 1998 and
($0.2) million at June 30, 1999.
</TABLE>
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following contains forward-looking statements. These statements are
subject to risks, uncertainties and other factors that could cause actual
results to differ materially from those described in or suggested by any such
statement. See "Forward-Looking Statements."
Overview
We are 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, we manufacture rear- and forward-discharge concrete mixers and a
wide range of automated rear, front, side and top loading refuse truck bodies.
Under the "Pierce" brand name, we are among the leading domestic manufacturers
of fire apparatus assembled on both custom and commercial chassis. We
manufacture aircraft rescue and firefighting and airport snow removal vehicles
under the "Oshkosh" brand name. We also manufacture defense trucks under the
"Oshkosh" brand name and are the leading manufacturer of severe-duty heavy
tactical trucks for the Department of Defense.
Our net sales are principally determined on the basis of lowest qualified
bid in our fire and emergency and defense truck markets. In order to qualify to
bid in these markets, the bidder must demonstrate superior quality, vehicle
performance, reliability and innovative technologies. In the refuse truck body
and concrete mixer markets, our net sales are affected by product pricing,
innovation, quality, distribution, service and product performance. In each of
our business segments, we strive to be the market leader in new product
development, product quality and reliability, and to build distribution
capabilities that are tailored to the unique needs of our customers.
The principal elements of our cost of sales are commercial chassis,
components and raw materials, labor, manufacturing overhead, engineering and
warranty costs. Nearly all our refuse truck bodies and rear-discharge concrete
mixers and some of our custom fire bodies are mounted on commercially available
truck chassis purchased from large truck manufacturers. While most customers
provide these chassis to us for mounting our truck bodies, for approximately
39.3% of our commercial net sales and 13.6% of our fire and emergency sales in
the nine months ended June 30, 1999, we bought the truck chassis and sold it to
our customers along with our truck body. Principal components included in our
trucks and truck bodies include cabs, engines, transmissions, axles, independent
suspension systems, cylinders and transfer cases. We fabricate and assemble most
of our own cabs, transfer cases and independent suspension systems and purchase
the other components from a variety of truck component manufacturers. Principal
raw materials include sheet and bar stock steel and aluminum. We strive to
negotiate firm fixed price contracts for 70% to 80% of the components and raw
materials for the full production of our large defense contracts. For the
balance of our components and raw materials, we strive to negotiate annual
pricing that is below published pricing indices. We establish annual labor
productivity improvement goals for all of our products and for some products we
also establish material cost reduction goals. In addition, costs of sales are
affected by the efficiency of production methods and manufacturing capacity
utilization.
Our operating expenses are comprised principally of labor and
distribution costs associated with our direct distribution systems. Information
systems, finance, legal and general management costs also represent significant
components of our operating expenses.
Acquisition History
Since 1996, we have selectively pursued strategic acquisitions in order
to enhance our product offerings and diversify our business. We have focused our
acquisition strategy in specialty truck and truck body markets that are growing
and where we 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 our results of operations from the date of acquisition.
16
<PAGE>
On September 18, 1996, we acquired for cash all of the issued and
outstanding capital stock of Pierce, a leading manufacturer and marketer of fire
trucks and other fire 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, we 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 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.
Results of Operations
The following table sets forth selected items from our Consolidated
Statements of Income as a percentage of net sales, for the periods indicated:
<TABLE>
<CAPTION>
Nine Months
Fiscal Year Ended Ended
September 30, June 30,
--------------------------------------- -----------------------
1996 1997 1998 1998 1999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net sales............................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales........................................... 93.0 88.1 86.0 86.8 85.3
-------- -------- -------- -------- --------
Gross income....................................... 7.0 11.9 14.0 13.2 14.7
Operating expenses:
Selling, general and administrative................ 7.9 7.0 7.7 7.2 7.4
Amortization of goodwill and other intangibles..... --- 0.7 0.9 0.9 1.0
-------- -------- -------- -------- --------
Total operating expenses........................... 7.9 7.7 8.6 8.1 8.4
-------- -------- -------- -------- --------
Operating income (loss)................................. (0.9) 4.2 5.4 5.1 6.3
Interest expense........................................ (0.2) (1.8) (2.4) (2.1) (2.3)
Interest income......................................... 0.3 0.1 0.1 --- 0.1
Miscellaneous, net...................................... 0.4 --- --- --- ---
Income tax (provision) credit........................... 0.4 (1.0) (1.4) (1.3) (1.7)
Equity in earnings of unconsolidated
partnership, net................................... 0.1 --- --- --- ---
-------- -------- -------- -------- --------
Income (loss) from continuing operations................ --- 1.5 1.7 1.7 2.5
Discontinued operations................................. (0.7) --- --- --- ---
Extraordinary charge.................................... --- --- --- (0.2) ---
-------- -------- -------- -------- --------
Net income (loss)....................................... (0.7)% 1.5% 1.7% 1.5% 2.5%
======== ======== ======== ======== ========
</TABLE>
Nine Months Ended June 30, 1999 Compared to Nine Months Ended June 30, 1998
We reported net income of $21.0 million, or $1.62 per share, on net sales
of $851.0 million for the first nine months of fiscal 1999, compared to net
income of $10.1 million, or $0.79 per share, on net sales of $659.7 million for
the first nine months of fiscal 1998.
Sales of commercial and fire and emergency products increased in the
first nine months of fiscal 1999 compared to the first nine months of fiscal
1998 while sales of defense products decreased. Commercial and fire and
emergency sales for the first nine months of fiscal 1999 increased $236.2
million, or 50.0%, from the first nine months of fiscal 1998 to $708.6 million.
An increase of $208.3 million in sales of construction and refuse vehicles and a
$27.9 million increase in sales of fire and emergency apparatus accounted for
the increase. The increase in fiscal 1999 sales resulted primarily from the
inclusion of McNeilus for a full nine
17
<PAGE>
months in fiscal 1999 compared to only four months in fiscal 1998. Construction
vehicle sales benefited in the nine-month period of fiscal 1999 from strong
construction end markets and the introduction of a new cab and mixer package for
Oshkosh's front-discharge concrete mixer. We believe that commercial waste
haulers accelerated the replacement of refuse packers in their fleets in 1998
and 1999 and that we have increased our penetration with both commercial and
municipal accounts. Sales of fire and emergency vehicles rose 13.0% due to
strong market demand and an improved product mix. Sales of defense products
totaled $147.0 million for the first nine months of fiscal 1999, a decrease of
$40.7 million, or 21.7%, compared to the first nine months of fiscal 1998.
Defense sales declined due to the trend in lower heavy military truck spending
in the federal budget and the completion of the ISO-Compatible Palletized
Flatrack contract in July 1998, which had been subcontracted to Steeltech
Manufacturing, Inc. We expect defense sales in the fourth quarter of fiscal 1999
to increase approximately $10.0 million over the fourth quarter of fiscal 1998.
Vehicle sales under the MTTR contract awarded to us in December 1998 will not
begin until fiscal 2000.
Gross income in the first nine months of fiscal 1999 totaled $124.9
million, or 14.7% of net sales, compared to $87.1 million, or 13.2% of net
sales, in the first nine months of fiscal 1998. McNeilus contributed $58.1
million of gross income for the first nine months of fiscal 1999 compared to
$26.8 million for the first nine months of fiscal 1998. Fiscal 1998 results
included only four months of McNeilus operations.
Operating expenses increased $18.5 million to $71.7 million, or 8.4% of
net sales, in the first nine months of fiscal 1999 compared to $53.2 million, or
8.1% of net sales, in the first nine months of fiscal 1998. Operating expenses
for the first nine months of fiscal 1999 included a $3.8 million non-recurring
charge for litigation, or 0.4% of net sales, and a $2.9 million increase in
amortization of goodwill and other intangibles, or 0.3% of net sales. The
remainder of the dollar increase largely reflects the operating expenses of
McNeilus, which we owned for an additional five months in fiscal 1999.
Interest expense increased to $19.8 million in the first nine months of
fiscal 1999 compared to $14.3 million in the first nine months of fiscal 1998.
The increase in interest expense was due to additional borrowings to finance the
acquisition of McNeilus, net of debt repayment.
The effective tax rate for combined federal and state income taxes for
the first nine months of fiscal 1999 was 42.6% compared to 42.3% for the first
nine months of fiscal 1998. The effective income tax rate for the first nine
months of fiscal 1999 was impacted by non-deductible goodwill amortization of
$4.2 million. The effective income tax rate for the first nine months of fiscal
1998 was impacted by non-deductible goodwill amortization of $2.8 million and by
the reversal of $0.5 million of income tax provisions recognized in earlier
periods.
Equity in earnings of an unconsolidated lease financing partnership
increased to $1.2 million for the first nine months of fiscal 1999 compared to a
loss of $0.1 million for the first nine months of fiscal 1998. The first nine
months of fiscal 1998 included a $0.9 million after-tax charge due to the early
adoption of a new accounting standard related to start-up activities of the
partnership. Also, results for the first nine months of fiscal 1998 included
only four months of operations of the partnership following its formation on
February 26, 1998.
The extraordinary charge of $1.2 million in the first nine months of
fiscal 1998 was due to the early retirement of debt incurred in connection with
the acquisition of McNeilus.
Fiscal Year Ended September 30, 1998 Compared to Fiscal Year Ended September 30,
1997
We reported net income of $15.1 million, or $1.18 per share, on net sales
of $902.8 million for the year ended September 30, 1998, compared to net income
of $10.0 million, or $0.78 per share, on net sales of $683.2 million for the
year ended September 30, 1997. Fiscal 1998 results include seven months of sales
and earnings of McNeilus, a leading manufacturer and marketer of rear-discharge
concrete mixers and portable concrete batch plants for the construction industry
and refuse truck bodies for the waste services industry in the
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United States, which was acquired on February 26, 1998. Fiscal 1998 results were
adversely affected by after-tax charges of $5.6 million, including $1.2 million
related to early repayment of debt, $3.5 million related to impairment losses
with respect to our Florida manufacturing facilities and our Summit Performance
Systems, Inc. brand rear-discharge mixer system technology intangible asset and
$0.9 million of organization start-up costs incurred in connection with
establishing a lease financing partnership. See Note 13 to Notes to Consolidated
Financial Statements. These charges were partially offset by a $2.1 million
after-tax gain on the sale of an interest in a Mexican bus manufacturer.
Sales of commercial and fire and emergency products in fiscal 1998 were
$653.8 million, an increase of $259.2 million, or 65.7%, from fiscal 1997,
largely as a result of the inclusion of McNeilus sales of $240.0 million since
the date of its acquisition and a $25.6 million increase in sales of Pierce.
Commercial and fire and emergency export sales increased $13.9 million to $34.6
million in fiscal 1998 compared to fiscal 1997, primarily as a result of
increases in exports of fire apparatus by Pierce following the introduction of
Pierce products to Oshkosh's international dealer network. Sales of defense
products totaled $249.0 million in fiscal 1998, a decrease of $39.6 million, or
13.7%, compared to fiscal 1997. The decrease in defense sales was primarily due
to a decline in heavy tactical truck procurement by the U.S. Department of
Defense. Fiscal 1998 defense sales included $32.0 million of ISO-Compatible
Palletized Flatracks that were produced by Steeltech compared to $41.4 million
of these sales in fiscal 1998. This contract was completed in July 1998. Defense
export sales decreased to $0.5 million in fiscal 1998 compared to $16.6 million
in fiscal 1997. Fiscal 1997 defense export sales included $13.0 million from a
sale of Heavy Expanded Mobility Tactical Truck vehicles to Taiwan. We expect
that our defense-related sales will decline by approximately $20.0 to $30.0
million in fiscal 1999.
Gross income in fiscal 1998 totaled $126.0 million, or 14.0% of net
sales, compared to $81.0 million, or 11.9% of net sales, in fiscal 1997. The
increase in gross income and gross margins in fiscal 1998 was principally due to
inclusion of McNeilus operating results since the date of its acquisition.
Operating expenses totaled $77.3 million, or 8.6% of net sales, in fiscal
1998 compared to $52.2 million, or 7.7% of net sales in fiscal 1997. The
increase principally reflects the expenses of McNeilus since the date of its
acquisition. Operating expenses also were adversely impacted by net pre-tax
charges of $2.4 million involving the impairment of our Florida manufacturing
facility ($3.9 million) and the impairment of our Summit brand mixer system
technology intangible asset ($1.9 million), which were partially offset by the
gain on sale of our interest in a Mexican bus manufacturer ($3.4 million).
Interest expense increased to $21.5 million in fiscal 1998 compared to
$12.7 million in fiscal 1997 as a result of financing the McNeilus acquisition.
The provision for income taxes in fiscal 1998 was $12.7 million, or 44.2%
of pre-tax income, compared to $6.5 million, or 39.4% of pre-tax income, in
fiscal 1997. The effective income tax rate in fiscal 1998 was adversely affected
by non-deductible goodwill of $4.2 million related to the acquisitions of Pierce
in September 1996 and McNeilus in February 1998. The effective income tax rate
in fiscal 1997 was adversely impacted by non-deductible goodwill of $2.6 million
related to the acquisition of Pierce in September 1996 and benefited from the
reversal of $0.9 million of prior years' provisions for income taxes.
Equity in earnings of an unconsolidated lease financing partnership of
$0.3 million in fiscal 1998 represents our after-tax share of income of the
lease financing partnership. These results include our share of the write-off of
organization costs ($1.5 million pre-tax, $0.9 million after-tax) incurred by
the partnership in fiscal 1998. See Note 12 to Notes to Consolidated Financial
Statements.
The $1.2 million after-tax extraordinary charge recorded in fiscal 1998
represents the write-off of deferred financing costs for that portion of debt
prepaid during the year.
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Fiscal Year Ended September 30, 1997 Compared to Fiscal Year Ended September 30,
1996
We reported net income of $10.0 million, or $0.78 per share, on net sales
of $683.2 million for the year ended September 30, 1997, compared to a net loss
of $3.1 million, or $0.23 per share, on net sales of $413.5 million for the year
ended September 30, 1996. The fiscal 1997 results include a full year of sales
and earnings of Pierce, a leading manufacturer and marketer of fire trucks and
other fire apparatus in the U.S., which was acquired on September 18, 1996. The
fiscal 1996 results were adversely affected by after-tax charges of $11.3
million, including $3.2 million related to the ISO-Compatible Palletized
Flatrack subcontract to Steeltech, $3.5 million associated with our Mexican bus
affiliates, and warranty and other related costs of $4.6 million. In fiscal
1996, we also recognized after-tax benefits of $2.0 million on the reversal of
income tax provisions and related accrued interest.
Sales of commercial, fire and emergency and defense products increased in
fiscal 1997 compared to fiscal 1996. Commercial and fire and emergency sales in
fiscal 1997 were $394.6 million, an increase of $232.6 million, or 143.6% from
1996, principally due to inclusion of a full year of Pierce sales in fiscal
1997. Commercial and fire and emergency export sales totaled $20.7 million in
fiscal 1997 and $20.4 million in fiscal 1996. Sales of defense products totaled
$288.6 million in fiscal 1997, an increase of $37.2 million, or 14.8%, compared
to fiscal 1996. The increase in defense sales was primarily due to an increase
in ISO-Compatible Palletized Flatrack sales that were produced by Steeltech,
which increased from $8.7 million in fiscal 1996 to $41.4 million in fiscal
1997. Defense export sales also increased to $16.6 million in fiscal 1997
compared to $2.1 million in fiscal 1996.
Gross income in fiscal 1997 totaled $81.0 million, or 11.9% of net sales,
compared to $28.8 million, or 7.0% of net sales, in fiscal 1996. The increase in
gross income in fiscal 1997 was principally due to increased sales volume as a
result of the acquisition of Pierce. In addition, fiscal 1996 gross income was
reduced by pre-tax charges of $5.1 million related to production delays and cost
overruns associated with the ISO-Compatible Palletized Flatrack subcontract to
Steeltech and increased warranty and other related costs of $5.5 million
(pre-tax).
Operating expenses totaled $52.2 million, or 7.7% of net sales, in fiscal
1997 compared to $32.4 million, or 7.9% of net sales, in fiscal 1996. The
increase in operating expenses in fiscal 1997 related principally to the
operating expenses of Pierce and amortization of goodwill and other intangible
assets associated with the acquisition of Pierce. We recognized pre-tax charges
of $3.2 million in fiscal 1996 to write off our investment in Steeltech and to
write off our remaining investments and advances associated with our Mexican bus
affiliates due to prolonged weakness in the Mexican economy and continuing high
losses and high leverage reported by the Mexican affiliates.
Interest expense increased to $12.7 million in fiscal 1997 compared to
$0.9 million in fiscal 1996 as a result of the financing for the Pierce
acquisition.
Miscellaneous expense was $0.3 million in fiscal 1997 compared to
miscellaneous income of $1.5 million in fiscal 1996. The miscellaneous income in
fiscal 1996 arose primarily from the reversal of accrued interest related to
income taxes.
The provision for income taxes in fiscal 1997 was $6.5 million, or 39.4%
of pre-tax income, compared to a credit for income taxes of $1.7 million in
fiscal 1996. Fiscal 1997 benefited from the reversal of $0.9 million of prior
years' provisions for income taxes and fiscal 1996 benefited from $1.0 million
of these reversals. In addition, the effective income tax rate in fiscal 1997
was adversely affected by non-deductible goodwill of $2.6 million arising from
the Pierce acquisition.
The $2.9 million after-tax loss from discontinued operations ($4.7
million pre-tax) in fiscal 1996 resulted from the write-off of receivables of
$2.6 million (pre-tax) related to our Mexican bus affiliates and from a $2.1
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million pre-tax charge for additional warranty and other related costs with
respect to our former U.S. chassis business which was sold in June 1995.
Financial Condition
Nine Months Ended June 30, 1999
During the first nine months of fiscal 1999, cash increased by $1.8
million. Equipment and software purchases of $6.9 million, dividends of $3.2
million, increases in long-term assets of $4.4 million generally related to the
Pierce enterprise resource planning system installed in fiscal 1999 and
additional equity investments in our leasing partnership of $1.0 million were
funded by cash from operations of $1.1 million, a $14.3 million increase in
borrowings under our revolving credit facility and $1.1 million of proceeds from
the exercise of common stock options under our Incentive Stock Plan.
Fiscal Year Ended September 30, 1998
During fiscal 1998, cash decreased by $19.6 million to $3.6 million at
September 30, 1998. Cash available at the beginning of the year of $23.2
million, $11.1 million of cash equivalents acquired from McNeilus and not used
to reduce the McNeilus acquisition indebtedness, and cash provided from
operations of $79.9 million were used primarily to fund $78.0 million of debt
repayments (including $25.0 million prior to the acquisition of McNeilus), a
$16.3 million reduction of our revolving credit facility, the acquisition of
Nova Quintech for $3.6 million, property, plant and equipment additions of $8.6
million and dividends of $4.2 million. We borrowed $347.3 million in February
1998, including $225.0 million under a multi-tranche senior credit facility,
$100.0 million of senior subordinated notes and $22.3 million under a new $100.0
million revolving credit facility. We used borrowings to refinance outstanding
indebtedness of $110.0 million under our previous credit facility and to pay
$8.6 million of debt issuance costs. We also used borrowings to close the
McNeilus transaction for $249.5 million consideration plus $6.0 million in
acquisition costs less cash acquired of $37.9 million, $11.1 million of which
was temporarily invested at the acquisition date.
Fiscal Year Ended September 30, 1997
During fiscal 1997, cash increased $23.1 million. Cash provided from
operating activities of $65.8 million was used primarily to fund $6.3 million of
property, plant and equipment additions, $1.7 million of payments related to
discontinued operations, $22.9 million of long-term debt and revolving credit
payments, $6.5 million of purchases of our common stock and common stock
warrants, net of stock option exercise proceeds, and $4.2 million of dividends.
Liquidity and Capital Resources
We had approximately $70.4 million of unused availability under the terms
of our revolving credit facility as of June 30, 1999. Our 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 our senior credit facility. Based upon current
and anticipated future operations, we believe capital resources will be adequate
to meet future working capital, debt service and other capital requirements for
fiscal years 1999 and 2000, including the effects of the MTTR contract. There
can be no assurance, however, that our business will generate cash flow that,
together with the other sources of capital, will enable us to meet those
requirements.
Our cash flow from operations has fluctuated, and will likely continue to
fluctuate, significantly from quarter to quarter due to changes in working
capital arising principally from seasonal fluctuations in sales. The MTTR
contract will likely entail increases in our working capital needs as it will
require working capital to produce vehicles or other equipment for shipment.
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Our senior credit facility and senior subordinated notes contain various
restrictions and covenants on us that could potentially limit our 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. See Note 4 to Notes to Consolidated Financial Statements.
Our senior credit facility accrues interest at variable rates. We
presently have no plans to enter into interest rate swap arrangements to limit
our exposure to future increases in interest rates.
Our capital expenditures for fiscal years 1999 through 2001 are expected
to be approximately $15 to $17 million annually.
Year 2000
General. We commenced a corporate-wide Year 2000 project in 1997 to
address issues with respect to the ability of computer programs and embedded
computer chips to distinguish between the years 1900 and 2000. The Year 2000
project is on schedule in all material respects. We believe that all of our
principal enterprise resource planning systems are Year 2000 ready. Other
information systems that we believe pose lesser risks in the event of Year 2000
failure are scheduled to be upgraded or replaced by October 31, 1999.
Year 2000 Project. Our Year 2000 project addresses four principal areas:
infrastructure and applications software; company-produced trucks and equipment;
process controls and instrumentation; and third-party suppliers and customers.
The project phases common to each area include:
o development of an inventory of Year 2000 risks;
o assignment of priorities to identified risks;
o assessment of Year 2000 compliance and impact of noncompliance;
o tests to determine whether any upgrade or replacement is required;
o upgrade or replacement of items that are determined not to be Year
2000 compliant if the impact of noncompliance is material; and
o design and implementation of contingency and business continuation
plans for each organization and facility.
At August 31, 1999, the initial four phases for each of the four areas of
the Year 2000 project and remediation of all principal enterprise resource
planning systems are believed to have been completed. Material items are those
believed by us to have a risk involving the safety of individuals, or that may
cause damage to property or affect revenues and expenses.
Infrastructure and Applications Software. As we address our
infrastructure and applications software, we test and then upgrade or replace
the affected hardware and systems software, as necessary. We maintain two
enterprise resource planning computer systems at our Oshkosh operations and one
system each at our Pierce and McNeilus operations. In May 1999, we consolidated
our Florida computer operations into Oshkosh's computer operations. We installed
an upgraded release of software, which is certified by the software vendor as
being Year 2000 ready, to our enterprise resource planning system for truck
operations in Oshkosh in July 1998. Programming to upgrade the remaining Oshkosh
enterprise resource planning system for our parts operations was completed in
December 1998. In April 1999, Pierce completed the replacement of all of its
hardware and business systems with a new, enterprise resource planning system
and related hardware, which are certified by the vendors as being Year 2000
ready. McNeilus installed upgraded releases to its enterprise resource planning
systems in August and September 1998 and August 1999. Validation testing at
McNeilus to assure that the upgrades are Year 2000 ready is scheduled for
completion by October 31, 1999.
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We believe other infrastructure and applications software, including
engineering systems, pose lesser risks in the event of Year 2000 noncompliance
due to a wider range of less disruptive commercial options available to cure
noncompliance. We have extended our plans to upgrade or replace all such
non-compliant systems to October 31, 1999.
Company-Produced Trucks and Equipment. We have communicated with
suppliers that are critical to the manufacture of our products to verify whether
computer chips embedded in our trucks and equipment are Year 2000 ready, and
have issued service bulletins to customers with respect to the findings. We have
not identified any material issues with respect to computer chips embedded into
our products. Nevertheless, there can be no assurance at this time that our
investigation was complete or that material warranty and product liability
issues will not develop with respect to this matter. To the extent that our
suppliers experience Year 2000 problems and we are unable to source alternate
suppliers, changes to our products may be necessary to avoid warranty and
liability, both as to products already in use, and as to products to be shipped
in the future.
Process Controls and Instrumentation. To our knowledge, all of our
process controls and instrumentation have been upgraded to be Year 2000 ready,
if necessary. It is possible that our testing and investigation of our process
controls and instrumentation was incomplete given the magnitude of this task,
but we believe that all material equipment and systems will function properly in
the year 2000.
External Parties. We have surveyed critical parts and all chassis
suppliers to assess the Year 2000 readiness of their products and business
systems. Our largest suppliers are large public companies and, as such,
generally have significant projects completed or underway similar to our Year
2000 project. There can be no assurance that these suppliers or our smaller
suppliers will not have Year 2000 issues with their processes or business
systems that ultimately could have a material effect on us in spite of those
projects. Where suppliers are deemed to pose significant risk to us, we are
developing alternate suppliers or contingency plans.
We do not maintain significant computer interfaces with our customers,
except with the Department of Defense, where invoices and remittances are sent
by electronic data interchange. The Department of Defense is an extremely large
organization. Some departments within the Department of Defense that interface
with us have communicated that they were Year 2000 compliant as of March 31,
1999. However, the Department of Defense has not provided us with any assurances
that all of its systems will be Year 2000 compliant, or whether Department of
Defense computer interfaces with other U.S. government entities will be Year
2000 ready. Should the Department of Defense encounter Year 2000 difficulties,
our financial condition, profitability and cash flows could be materially
adversely affected. Additionally, our other customers could lose business or
otherwise encounter Year 2000 issues that could ultimately affect our financial
condition, profitability and cash flows.
Costs. Based on our activities to date and considering known items, we do
not expect the total cost associated with required hardware equipment and
software modifications to become Year 2000 ready to be material to our financial
position. The total estimated capital costs of the Year 2000 project, which
would have been incurred regardless of Year 2000 issues and which have the
incidental consequence of Year 2000 readiness, are $8.8 million. Period expenses
of the Year 2000 project are $0.9 million. As of June 30, 1999, we had expended
$8.4 million of these capital costs and $0.6 million of these period expenses.
Approximately $7.9 million of the estimated capital costs relate to the
replacement of all the hardware and business systems at Pierce, which was
completed in April 1999. To date, none of our other information systems projects
have been delayed due to the Year 2000 project.
Risks. Under the Year 2000 project, as in any project of this magnitude
and scope, the risk of underestimating the tasks and difficulties to be
encountered, or in obtaining necessary personnel, exist. Risk also exists in
that the failure to correct a material Year 2000 problem could result in an
interruption in, or a failure of, normal business activities or operations.
Those failures could materially and adversely affect our financial condition,
profitability and cash flows. Due to the general uncertainty of the Year 2000
problem, resulting in part from the uncertainty of the Year 2000 readiness of
third-party suppliers and customers, we are
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unable to determine at this time whether the consequences of Year 2000 failures
will have a material impact on our financial condition, profitability and cash
flows. The Year 2000 project is expected to significantly reduce our level of
uncertainty about the Year 2000 problem and, in particular, about the Year 2000
compliance and readiness of our material third-party suppliers and customers. We
believe that, with the installation of new or upgraded enterprise resource
planning systems and completion of the Year 2000 project as scheduled, the
possibility of significant interruptions of normal operations should be reduced.
In fact, many of our business systems, including sales order, materials planning
and purchasing systems, have been properly processing year 2000 transactions for
several months. We are in the process of establishing contingency plans in the
event that any unexpected issues arise when the Year 2000 arrives. We expect
contingency planning for material risks to be complete by October 31, 1999.
New Accounting Standards
The Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards ("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. Because of our minimal use of derivatives, we do not
anticipate that the adoption of the new statement will have a significant effect
on our financial condition, profitability and cash flows.
In June 1997, the FASB also issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." SFAS No. 131 establishes the
standards for the manner in which public enterprises are required to report
financial and descriptive information about their operating segments. In
addition, this statement requires the annual disclosure of information
concerning revenues derived from the enterprise's products or services,
countries in which it earns revenue or holds assets, and major customers. The
statement is effective for fiscal years beginning after December 15, 1997. We
expect to adopt this statement in the fourth quarter of fiscal 1999. The
adoption of SFAS No. 131 will not affect our financial condition, profitability
or cash flows, but will affect the disclosure of our segment information.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." SFAS No. 130 establishes the standards for reporting and displaying
comprehensive income and its components, which are revenues, expenses, gains and
losses, as part of a full set of financial statements. We adopted SFAS No. 130
on October 1, 1998. Comprehensive income has been included in our Consolidated
Statement of Shareholders' Equity for the nine months ended June 30, 1999 and
prior period amounts have been reclassified to conform to SFAS No. 130
requirements. Since this statement applies only to the presentation of
comprehensive income, it does not have any impact on our financial condition,
profitability or cash flows.
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BUSINESS
Overview
We are a leading designer, manufacturer and marketer of a broad range of
specialty commercial, fire and emergency, and military trucks and truck bodies
under the "Oshkosh," "McNeilus" and "Pierce" trademarks. We began business in
1917 and were among the early pioneers of four-wheel drive technology. In 1981,
we were awarded the first Heavy Expanded Mobility Tactical Truck contract for
the U.S. Department of Defense and quickly developed into their leading supplier
of severe-duty heavy tactical trucks. In 1996, we began a strategic initiative
to diversify our business by making selective acquisitions in attractive
specialty segments of the commercial truck and truck body markets to complement
our defense truck business. The result of this initiative was an increase in
sales from $413 million in fiscal 1996 to $903 million in fiscal 1998, with
earnings from continuing operations increasing from a loss of $.02 per share for
fiscal 1996 to earnings of $1.27 per share for fiscal 1998.
As part of our strategy, we have completed the following acquisitions:
o Pierce, a leading manufacturer and marketer of fire trucks and
other fire apparatus in the United States, in September 1996;
o Nova Quintech, a manufacturer of aerial devices for fire trucks,
in December 1997; and
o McNeilus, a leading manufacturer and marketer of commercial
specialty truck bodies, including rear-discharge concrete mixers
and portable concrete batch plants for the construction industry
and refuse truck bodies for the waste services industry, in
February 1998.
After both of these acquisitions, we introduced new strategies to
significantly increase their sales and we used our expertise in purchasing and
manufacturing to reduce their costs. Our specialty commercial and fire and
emergency truck and truck body backlog was $338 million as of June 30, 1999, an
increase of 28% from the prior year. We continue to actively pursue acquisition
opportunities that fit our strategic plans. For the twelve month period ended
June 30, 1999, we achieved sales of $1.1 billion and earnings from continuing
operations of $2.01 per share. During the same period, we derived 51% of our
consolidated revenues from commercial products, 30% from fire and emergency
products and 19% from defense products.
We believe we have developed a reputation for excellent product quality,
performance and reliability in each of the markets in which we participate. We
have strong brand recognition in our markets and have demonstrated our design
and engineering capabilities through the introduction of several highly
engineered proprietary components that increase our products' operating
performance. We have developed comprehensive product portfolios for each of our
markets in an effort to become a single-source supplier for our customers. Our
commercial product lines include refuse truck bodies, rear- and
forward-discharge concrete mixers and portable concrete batch plants. Our fire
and emergency vehicles include pumpers, aerial and ladder trucks, tankers,
heavy-duty rescue vehicles, wildland rough terrain response vehicles, aircraft
rescue and firefighting vehicles and airport snow removal vehicles. We are the
leading manufacturer of severe-duty heavy tactical trucks for the U.S.
Department of Defense, which perform a variety of demanding tasks such as
hauling tanks, missile systems, ammunition, fuel and cargo for combat and combat
support units. In December 1998, the Department of Defense awarded us the MTTR
contract for the U.S. Marine Corps., from which we expect to generate total
sales of $1.2 billion from fiscal 2000 through fiscal 2005, assuming the
Department of Defense exercises all the options under the contract as currently
anticipated. We expect sales under this contract of about $26 million in fiscal
2000, increasing to peak sales of about $300 million in fiscal 2002. This
contract represents our first production contract for medium tactical trucks for
the U.S. military.
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Competitive Strengths
We believe we possess the following competitive strengths:
Strong Market Positions. We have developed leading market positions and
brand recognition in each of our core businesses, which we attribute to our
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 McNeilus and Pierce, we have
established a strong domestic and international distribution system that is
tailored to meet the unique needs of customers for specialty trucks and truck
bodies. In addition to our exclusive network of dealers and representatives, we
employ over 100 sales and service representatives.
Flexible and Efficient Manufacturing Capabilities. We believe we have
competitive advantages over larger truck manufacturers in our specialty truck
markets due to our flexible manufacturing and custom fabrication capabilities.
In addition, we believe we have competitive advantages over smaller truck and
truck body manufacturers, which comprise the majority of the competition in our
markets, due to our 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. Our broad product
offerings and target markets serve to diversify our revenues, mitigate the
impact of economic cycles and provide multiple platforms for both internal
growth and acquisitions. For each of our target markets, we have developed or
acquired a broad product line in order to become a single-source provider to our
customers.
Strong Management Team. Our present management team has successfully
executed a strategic repositioning of our business while significantly improving
our financial and operating performance. With each of our recent acquisitions,
we assimilated the management and culture of the acquired company, introduced
new strategies to significantly increase their sales and used our expertise in
purchasing and manufacturing to reduce their costs.
Quality Products and Customer Service. We have developed strong brand
recognition based on our demonstrated commitment to meet the stringent product
quality, performance and reliability requirements of our customers and the
specialty truck markets we serve. We also strive to achieve high quality
customer service through our extensive service and parts support program, which
is available to domestic customers 365 days a year in all product lines
throughout our distribution systems.
Proprietary Components. We have developed a number of proprietary,
severe-duty components that we believe provide us with a competitive advantage
by increasing our vehicles' durability, operating efficiency and effectiveness.
Our ability to integrate many of these components across various product lines
also reduces our costs to manufacture products compared to manufacturers who
assemble purchased components. 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 systems, the Command Zone multiplexing
technology and the McNeilus Auto Reach Arm, an automated side-loading refuse
body. See "- Products and Markets" for further discussion of these products and
technologies.
Business Strategy
We are focused on increasing our sales, profitability and cash flow by
capitalizing on our competitive strengths and pursuing a comprehensive,
integrated business strategy.
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Focusing on Specialized Truck Markets. We plan to continue to focus on
those specialized truck and truck body markets where we have or can develop
strong market positions and where we can realize synergies in purchasing,
manufacturing, technology and distribution to increase sales and profitability.
We believe the higher sales volumes associated with our market leadership will
allow us to continue to enhance productivity in manufacturing operations, fund
innovative product development and invest in further expansion. In addition to
our strategies to increase market share and profitability, each of our
specialized truck and truck body markets is exhibiting opportunities for further
market growth.
Pursuing Strategic Acquisitions. Our present management team has
successfully negotiated and integrated three acquisitions since September 1996
that have significantly increased our sales and earnings. We intend to
selectively pursue additional strategic acquisitions, both domestically and
internationally, in order to enhance our product offerings and expand our
international presence in specialized truck markets. We will focus our
acquisition strategy on specialty truck and truck body markets that are growing
and where we can enhance our strong market positions and achieve significant
acquisition synergies.
Expanding Distribution Domestically and Internationally. We plan to add
new distribution and service capabilities for the municipal segment of the
refuse truck body market and for targeted geographic areas in the domestic fire
apparatus market. For example, in fiscal 1999, we added two refuse service
facilities and one fire apparatus service facility and began providing refuse
service at three existing mixer distribution facilities to attract additional
municipal sales. We plan to open additional service facilities in fiscal 2000.
We are developing strategies to increase international sales. We are actively
recruiting new representatives and dealers in targeted international commercial
markets to expand the international sales of McNeilus' refuse truck bodies and
rear-discharge concrete mixers. In the summer of 1999, we began offering our new
Contender line of custom and commercial fire trucks to Pierce's extensive
international dealer network. This line of fire trucks is more appropriately
priced for international sales than Pierce's historically premium-priced product
line. In fiscal 2000, we plan to begin marketing our new medium tactical
military truck to approved foreign armies when the U.S. Department of Defense
concludes testing of the initial production units. 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 our truck has
significant off-road capability at an attractive price, we believe that the
international market for this truck will be significant. International sales
have increased 67% to $75.9 million for the twelve months ended June 30, 1999
compared to $45.5 million achieved in fiscal 1998.
Introducing New Products. We have increased our emphasis on new product
development in recent years, and seek to expand sales by leading our core
markets in the introduction of new or improved products, either through internal
development or strategic acquisition. For example, in December 1997, we
purchased the aerial fire apparatus product line of Nova Quintech. This
acquisition broadened Pierce's aerial product line and provided Pierce with
three new products in fiscal 1998. In addition, Pierce introduced seven other
new products in fiscal 1998 and 1997, including the Dash 2000 and Lance 2000
chassis with Pierce's proprietary Command Zone multiplexing technology and a new
Hercules compressed air foam system. In January 1999, Pierce introduced its
Contender series of limited option fire apparatus produced at our Bradenton,
Florida facility and mounted on a commercially available or custom chassis, to
compete in price segments Pierce did not previously serve. In the commercial
market, we introduced a substantially upgraded forward-discharge concrete mixer
in fiscal 1999 to combine a new cab engineered and produced by Oshkosh and a new
mixer package produced by McNeilus. For refuse customers, McNeilus introduced a
new lightweight front-end loader in August 1999 targeted for the large West
Coast market where McNeilus did not have a suitable product offering. In the
defense market, we recently received our first medium tactical truck contract
with the award of the MTTR contract and we continue to expand our heavy tactical
truck offerings.
Reducing Costs While Maintaining Quality. We actively benchmark our
competitors' costs and best industry practices, and continuously seek to
implement process improvements to improve profitability and increase cash flow.
With each of our acquisitions, we have established cost reduction targets. At
Pierce, we exceeded our two-year cost reduction target of $6.5 million as a
result of consolidating facilities, reengineering the manufacturing process and
leveraging increased purchasing power. We are planning for additional cost
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savings at Pierce in fiscal 2000. Similarly, we are taking advantage of our
greater purchasing power and manufacturing capabilities in connection with our
February 1998 acquisition of McNeilus, for which we established a $5 to $7
million two-year cost reduction target. In the first sixteen months following
the McNeilus acquisition, we realized approximately $7 million of cost
reductions, and we believe that we ultimately could save another $3 million. For
our historic product lines, we also establish annual labor productivity
improvement targets, and for many product lines, we establish materials cost
reduction targets. In July 1999, we announced plans for McNeilus to invest more
than $8.3 million to expand its Dodge Center, Minnesota manufacturing facility.
The primary purpose of the expansion is to construct two moving assembly lines
with robotic welders to significantly reduce the manufacturing costs of refuse
bodies. The expansion will also double the paint and refuse body manufacturing
capacity of this facility.
Industry Trends and Outlook
Refuse Trucks and Bodies. We believe that domestic commercial waste
haulers significantly increased their new truck purchases during fiscal 1998 and
1999 as McNeilus refuse body unit sales increased 40% during fiscal 1998 and 37%
in the nine months ended June 30, 1999. Although general economic conditions can
have an impact on our customers' expenditures for new refuse equipment, we
believe that the relatively old age of commercial and municipal fleets and
industry trends involving the consolidation of commercial waste haulers and the
privatization of municipal fleets create opportunities for continued strong
refuse body sales for McNeilus in fiscal 2000. McNeilus has the manufacturing
capacity and a direct distribution network to capitalize on these trends. At
June 30, 1999, McNeilus' refuse body backlog in units was up 26% compared to
June 30, 1998.
Concrete Mixers. This market is cyclical and is impacted by the strength
of the economy generally, by prevailing interest rates and other factors that
may have an effect on the level of construction activity. In our opinion, the
favorable economic, interest rate and construction environments present in
September 1999 are expected to generally support strong construction spending
and thus, strong demand for our mixers in fiscal 2000. As of June 30, 1999, our
backlog in units of front-discharge concrete mixers was up 84% and our backlog
in units of rear-discharge concrete mixers was up 157% compared to June 30,
1998. The federal Transportation Equity Act for the 21st Century, enacted in May
1998, represented a 40% increase in funding for transportation infrastructure
from the predecessor act. The funds from this Act are just beginning to be
authorized for spending in the second half of 1999. Much of the increased
highway and bridge construction that is expected to occur as a result of the
Act's passage will involve concrete, which is expected to create additional
demand for rear- and forward-discharge concrete mixers and portable concrete
batch plants, such as those manufactured under the McNeilus and Oshkosh brand
names.
Fire and Emergency Trucks. We expect demand for new fire apparatus in the
United States to continue to grow in fiscal 2000 due to population growth and
acceleration of replacement of obsolete fire trucks with new trucks with
state-of-the-art components to utilize new fire suppression technologies, such
as compressed air foam systems, and improved rescue and safety features. Pierce,
which accounts for a substantial majority of our sales in fire and emergency
markets, has increased its sales at a compound annual growth rate of 11% per
year since 1980, including growth of 18% in fiscal 1997, 11% in fiscal 1998, and
by 12% in the nine months ended June 30, 1999. In addition to continued growth
among our traditional customers, in 1997 we implemented programs to market
Pierce's products more aggressively to larger urban fire departments and in 1999
introduced the new Contender product line geared toward cost-conscious domestic
and international customers, each of which previously were not target customers
for Pierce. We believe that the importance of fire and emergency products in
meeting municipalities' safety concerns will have a stabilizing effect on fire
truck sales in the event of future downturns in economic activity. We believe
that during downturns in economic activity in the 1980's that unit sales of fire
trucks declined by 1-2% annually, but that during downturns in the 1990's that
unit sales increased 1-2% annually.
Defense Trucks. While Department of Defense budgets have been declining
in recent years, we believe there is a growing sentiment in the U.S. Congress to
begin to increase defense spending, particularly for
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expenditures that maintain defense readiness levels, such as heavy tactical
trucks. In addition, the Department of Defense commenced two medium tactical
truck competitions in recent years, a segment of the defense truck market we had
not previously served. We were awarded an initial production contract under the
MTTR program in December 1998, which will benefit our sales in fiscal years 2000
through 2005. We are also competing vigorously to become a second source or
primary supplier for the $15.6 billion Family of Medium Tactical Vehicles
program for the U.S. Army, which is expected to extend through the year 2020.
Our contracts with the Department of Defense are generally for a specified range
of truck volumes at fixed prices, which allows us to predict and plan our
long-term production and delivery schedule for vehicles.
Products and Markets
Commercial Markets. We believe we are a leading domestic manufacturer of
refuse truck bodies for the waste services industry and of rear- and
forward-discharge concrete mixers and portable concrete batch plants for the
construction industry. Through McNeilus, we manufacture a wide range of
automated rear, front, side and top loading refuse truck bodies, which we mount
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 and Philadelphia and in
international markets such as England. In the nine months ended June 30, 1999,
we increased our sales to municipal customers to 6% of total refuse body sales
from 3% in the twelve months ended June 30, 1998. We believe our refuse vehicles
have a reputation for efficient, cost-effective, dependable, low maintenance
operation that supports our continued expansion into municipal and international
markets. We sell rear- and forward-discharge concrete mixers and portable
concrete batch plants to construction companies throughout the United States and
internationally. We believe we are one of the only domestic concrete mixer
manufacturers that markets both rear- and forward-discharge concrete mixers and
portable concrete batch plants. Our mixers and batch plants are marketed on the
basis of their quality, dependability, efficiency, low maintenance and
cost-effectiveness.
Through Oshkosh/McNeilus Financial Services Partnership, an affiliated
partnership, we offer four- to seven-year tax advantaged lease financing to our
mixer and portable concrete batch plant customers and to our commercial waste
hauler customers in the United States. We offer competitive lease financing
rates and the ease of one-stop shopping for our customers' equipment and
financing. Our new lease origination volume increased by $17.1 million, or 64%,
during the nine months ended June 30, 1999 compared to the same period in 1998.
Fire and Emergency Markets. Through Pierce, we are among the leading
domestic manufacturers 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 governmental markets, 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.
We are among the leaders in the sale 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 Montreal and Toronto, Canada, are served
by our aircraft rescue and firefighting vehicles. We believe the reliability of
our aircraft rescue and firefighting vehicles contributes to our strong market
position.
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We are also among the leading domestic manufacturers of snow removal
vehicles for airports. Our specially designed airport snow removal vehicles can
cast up to 4,000 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. We believe the reliability of our high performance snow
removal vehicles and the speed with which they clear airport runways contributes
to our leading market position. In fiscal 1999, we introduced a downsized
all-wheel drive snow removal vehicle for municipal markets to take advantage of
our strong brand name and meet the needs of heavy snow regions of the United
States.
Through an independent third party finance company, we offer two- to
ten-year municipal lease financing programs to our fire and emergency customers
in the United States. We offer competitive lease financing rates, creative and
flexible finance programs and the ease of one-stop shopping for our customers'
equipment and financing.
Defense Truck Market. We have sold products to the Department of Defense
for over 70 years and are the leading manufacturer of severe-duty heavy tactical
trucks for the Department of Defense. Our proprietary military all-wheel drive
product line includes the Heavy Expanded Mobility Tactical Truck ("HEMTT"), the
Heavy Equipment Transporter ("HET"), the Palletized Load System ("PLS") and the
Logistic Vehicle System ("LVS"). We also export our severe-duty heavy tactical
trucks to approved foreign customers.
We have developed a strong relationship with the Department of Defense
over the years that has resulted in us operating under "family contracts" with
the Department of Defense for the HEMTT, HET, PLS and LVS and for Department of
Defense 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 Department of Defense orders a specified range of
volume of either HET and PLS trucks or HEMTT and LVS trucks at fixed prices,
which allows us to predict and plan our long-term production and delivery
schedules for vehicles. Our current family contracts expire in fiscal years 2000
and 2001.
With the award of the MTTR contract, we have now become a major
manufacturer of medium 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. These
trucks are equipped with our 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 the
fiscal years 2000 through 2005. Testing of the initial ten trucks begins in
December 1999. In early 2000, production is scheduled to be one truck per day,
ultimately increasing to eight trucks per day in August 2001.
The U.S. Army has commenced a competition to add a second supplier to
build Family of Medium Tactical Vehicles. We received a $1.9 million contract in
October 1998 to compete with one other truck manufacturer to qualify as a second
source to produce three trucks for testing by the Department of Defense under
Phase I of its second source supplier qualification plan. The winner of the
competition would be awarded an initial Phase II production contract for
approximately 500 to 1,000 vehicles. Upon completion of this production contract
and the current supplier's present contract, the U.S. Army would conduct a
competition between these two manufacturers with the low bidder receiving 60%
and the high bidder receiving 40% of the production of approximately 50,000
Family of Medium Tactical Vehicles remaining to be produced in the program under
Phase III contracts. In August 1999, the Appropriations Committees of the U.S.
Congress commenced deliberations to consider the cancellation of the U.S. Army's
second source supplier qualification plan in favor of a direct competition
between the current supplier, our company, and another defense truck
manufacturer. The winner of the competition would receive 100% of the production
under the Family of Medium Tactical Vehicles program commencing in 2003,
following the completion of the current supplier's present contract. While the
size of either of these potential contract alternatives is substantial, we
cannot give any assurance that the Department of Defense will proceed with
either of these two competition
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alternatives or that federal budgets will provide future funding for the Family
of Medium Tactical Vehicles program.
Our objective is to continue to diversify into other areas of the U.S.
defense truck market by expanding applications, uses and body styles of our
current heavy and medium tactical truck lines and by competing for the next
generation of light tactical trucks, which is expected to be opened for
competition early in the next decade. As we enter the medium tactical truck and
seek to enter the light tactical truck areas of the defense market, we believe
that we have multiple competitive advantages, including:
o Proprietary components. Our patented independent suspension and
transfer cases enhance our trucks' off-road performance. In
addition, because these are two of the highest cost components in
a truck, we have a competitive cost-advantage from in-house
manufacturing of these two truck components.
o Past performance. We have been building trucks for the Department
of Defense for 70 years. We believe that our 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. We understand the special
contract procedures in use by the Department of Defense and have
developed substantial expertise in contract management and
accounting.
o Flexible manufacturing. Our ability to produce a variety of truck
models on the same moving assembly line permits us to avoid
facilitation costs on most new contracts and maintain competitive
manufacturing efficiencies.
o Logistics. We have gained significant experience in the
development of operators' manuals and training and in the delivery
of parts and services worldwide in accordance with the Department
of Defense's expectations, which differ materially from commercial
practices.
o Truck engineering and testing. Department of Defense truck
contract competitions require significant defense truck
engineering expertise to ensure that a company's truck excels
under demanding testing conditions. We have a team of 48 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 Department of Defense test sites and
submitting detailed, comprehensive, successful contract proposals.
Marketing, Sales and Distribution
We believe we differentiate ourselves from many of our larger competitors
by tailoring our distribution to meet the needs of our specialized truck markets
and from our smaller competitors with our national and global sales and service
capabilities. Distribution personnel use demonstration trucks to show customers
how to use our trucks and truck bodies properly. In addition, our flexible
distribution is focused on meeting customers on their terms, whether at a job
site, an evening public meeting or a municipality's offices, compared to the
showroom sales approach of the typical dealers of large truck manufacturers. We
back all products by same-day parts shipment, and our service technicians are
available in person or by telephone to domestic customers 365 days a year. We
believe that our dedication to keeping our trucks in-service in demanding
conditions worldwide has contributed to customer loyalty.
We provide our salespeople, representatives and distributors with product
and sales training on the operation and specifications of our products. Our
engineers, along with our product managers, develop operating manuals and
provide field support at truck delivery for some markets.
Dealers and representatives, where used, enter into agreements with us
that allow for termination by either party generally upon 90 days' notice.
Dealers and representatives are not permitted to market and sell competitive
products.
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Commercial Markets. We operate fifteen distribution centers with 95
in-house sales and service representatives in the United States to sell and
service our refuse truck bodies, rear- and forward-discharge concrete mixers and
concrete batch plants. We also use one independent distributor for
forward-discharge concrete mixers. Eleven of our 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. We
believe that this network represents one of the largest refuse truck body and
concrete mixer distribution networks in the United States. In fiscal 2000, we
plan on adding one additional distribution center and to begin manufacturing
concrete mixer replacement barrels at a third center.
We believe that our direct distribution to customers is a competitive
advantage in commercial markets, particularly in the waste services industry
where our 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, we believe that
direct distribution permits a more focused sales force in refuse body markets
where the dealers frequently offer a very broad product line, and accordingly,
the time they devote to refuse body sales activities is limited.
With respect to our commercial market distribution efforts, we have begun
to:
o 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 our acquisition of
McNeilus, virtually all McNeilus refuse truck body sales were to
commercial customers. While we believe that commercial customers
represent a majority of the refuse truck body market, many
municipalities purchase their own refuse trucks. We believe that
we are positioned to create an effective municipal distribution
system in the refuse truck body market by leveraging our existing
municipal distribution capabilities and by opening service centers
in major metropolitan markets. We opened two centers in fiscal
1999. Following its acquisition and new focus in municipal
markets, McNeilus has been awarded new business for the City of
Los Angeles and has targeted other major metropolitan areas.
o Offer McNeilus refuse truck bodies, rear-discharge concrete mixers
and ready-mix batch plants to Oshkosh's international
representatives and dealers for sales and service worldwide.
McNeilus' international sales have historically been limited
because McNeilus has focused on the domestic market. However, we
believe that refuse body exports are a significant percentage of
some competitors' sales and represent a meaningful opportunity for
us. We are training our international Oshkosh and Pierce
representatives and dealers to sell and service the McNeilus
product line and have commenced sales of McNeilus products through
these representatives and dealers in the first sixteen months
following the acquisition. We have also been actively recruiting
new refuse and rear-discharge concrete mixer representatives and
dealers worldwide.
Fire and Emergency Market. We believe that the geographical breadth, size
and quality of our 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 37
indirect sales and service organizations with more than 240 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 65 product and marketing
support professionals and contract administrators at Pierce. We believe that
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.
Pierce primarily focused its sales efforts in rural and small suburban
domestic markets prior to its acquisition by us. Due to our expertise and
long-standing relationships in numerous large urban markets, we
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have extended Pierce's sales focus into several key metropolitan areas. As a
result of this focus, Pierce has been awarded new business since we acquired
Pierce in the cities of Los Angeles, California; Richmond, Virginia; Tampa and
Miami, Florida; and Honolulu, Hawaii; among other major cities, and continues to
target other urban markets.
Prior to its acquisition by us, Pierce had targeted premium-priced
markets where it could use its innovative technology, quality and advanced
customization capabilities. In January 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 our Bradenton, Florida facility
for lower cost delivery to international customers.
Pierce substantially strengthened its competitive position overseas in
fiscal 1998 and 1999. Pierce's worldwide distribution network was expanded from
one to 25 international representatives and dealers. This network has delivered
several new orders in fiscal 1998 and 1999 from government agencies and private
companies in Egypt, the Philippines, Latin America and South Africa, among other
countries.
We have invested in the development of sales tools for our
representatives that we believe 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 transmitted directly into Pierce's sales order
systems.
Our aircraft rescue and firefighting vehicles are marketed through a
combination of three direct sales representatives domestically and 53
representatives and dealers in international markets. In addition, we maintain
23 full-time sales and service representative and dealer organizations which
have over 100 sales people focused on the sale of snow removal vehicles,
principally to airports, but also to municipalities, counties and other
governmental entities.
Defense Market. Substantially all domestic defense products are sold
directly to principal branches of the Department of Defense. We maintain a
liaison office in Washington, D.C. to represent our interests with the Pentagon,
Congress and offices of the Executive Branch. We also sell and service defense
products to foreign governments directly through four international sales
offices, through dealers, consultants and representatives, and through the U.S.
Foreign Military Sales program. The Department of Defense 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.
We maintain 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 our current truck offerings and competing for
new contracts in the medium- and light-duty segments, we actively work with the
Armed Services to develop new applications for our vehicles and expand our
services.
Manufacturing
We manufacture trucks and truck bodies at eleven manufacturing
facilities. We encourage employee involvement to improve production processes
and product quality. In order to reduce production costs, we maintain 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. We also employ a team of industrial
engineers that travel to all plants to study and streamline work flows.
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We have continually upgraded our manufacturing capabilities by adopting
best practices across our 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.
We are drawing upon our recent experience with the Pierce acquisition in
integrating the McNeilus manufacturing facilities. Within the first year
following the Pierce acquisition, we consolidated three Pierce manufacturing
facilities down to two while increasing Pierce's capacity by improving product
flow. In addition, among other things, we 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 activities 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, we have
installed seven additional robots and re-arranged weld and mount activities. In
the summer of 1999, we began construction of a 100,000 square foot, $8.3 million
expansion at our Dodge Center, Minnesota facility, which expands our paint
capacity and doubles our refuse body manufacturing capacity. The primary purpose
of the expansion is to construct two moving assembly lines with robotic welders
to significantly reduce the manufacturing costs of refuse bodies.
In 1994, we began a program to educate and train all employees at our
Oshkosh facilities in quality principles and to seek ISO 9001 certification to
improve our competitiveness in our 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 our 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 March 1998. We are evaluating whether to pursue ISO 9001
certification for McNeilus. Although we do not consider this certification
essential for McNeilus' domestic markets, we may conclude it is valuable in
marketing to some international customers.
Engineering, Research and Development
Our extensive engineering, research and development capabilities have
been key drivers of our marketplace success. We maintain three facilities for
new product development and testing with a staff of 51 engineers and technicians
who are responsible for improving existing products and development and testing
of new trucks, truck bodies and components. We prepare annual new product
development and improvement plans for each of our markets and measure progress
against those plans each month.
Virtually all of our sales of fire and emergency vehicles 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 our trucks are used, new customer
requirements and stringent government documentation requirements. In the
commercial markets, product innovation is highly important to meet customers'
changing requirements. Accordingly, we maintain a permanent staff of over 300
engineers and engineering technicians, and we regularly outsource significant
engineering activities in connection with major Department of Defense bids and
proposals.
We incurred engineering, research and development expenditures of $6.3
million in fiscal 1996, $7.8 million in fiscal 1997 and $9.7 million in fiscal
1998, portions of which were recoverable from customers, principally the U.S.
government.
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Competition
We operate in highly competitive industries. We compete in the fire
apparatus and defense truck markets principally on the basis of lowest qualified
bid. To submit a qualified bid, the bidder must demonstrate that the fire
apparatus or defense truck meets stringent specifications and, for most defense
truck contracts, passes extensive testing. In addition, decreases in the
Department of Defense budget have resulted in a reduction in the number and size
of contracts, which has intensified the competition for remaining available
contracts. We and our 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, we also
face intense competition on the basis of price, innovation, quality, service and
product performance. As we seek to expand our sales of refuse truck bodies to
municipal customers, we believe the principal basis of competition for that
business will be lowest qualified bid.
In all of our markets, competitors include smaller, specialized
manufacturers as well as large, mass producers. We believe that, in our
specialized truck markets, we have been able to effectively compete against
large mass producers because of our product quality, flexible manufacturing and
specialized distribution systems. We believe that our competitive cost
structure, engineering expertise, product quality and global distribution
systems have enabled us to compete effectively with other smaller, specialized
manufacturers.
Principal competitors of McNeilus in the refuse truck body market include
The Heil Company (a subsidiary of Dover Corporation), Leach Company and McClain
E-Z Pack, Inc. Principal competitors of McNeilus and Oshkosh in concrete mixer
markets include Advance Mixer, Inc., London Machinery, Inc., Rexworks, Inc. and
T.L. Smith Machine Co., Inc. Pierce's principal competitors in the fire
apparatus market include Emergency One, Inc. (a subsidiary of Federal Signal
Corporation), Kovatch Mobile Equipment Corp. and numerous small, regional
manufacturers. Oshkosh's principal competitor in the airport snow removal market
is Stewart & Stevenson Services, Inc. Oshkosh's principal competitor for
aircraft rescue and firefighting sales is Emergency One, Inc. Oshkosh's
principal competitors for Department of Defense contracts include AM General
Corporation and Stewart & Stevenson Services, Inc.
Several of our competitors have greater financial, marketing,
manufacturing and distribution resources than us. There can be no assurance that
our products will continue to compete successfully with the products of
competitors or that we will be able to retain our customer base or to improve or
maintain our profit margins on sales to our customers, all of which could
adversely affect our financial condition, profitability and cash flows.
Customers and Backlog
Sales to the Department of Defense comprised approximately 28% of our net
sales for fiscal 1998 and 17% of our net sales for the nine months ended June
30, 1999. No other single customer accounted for more than 2% of our net sales
for these periods. A substantial majority of our net sales are derived from
customer orders prior to commencing production.
Our backlog at June 30, 1999 was $455 million compared to $421 million at
June 30, 1998. The backlog at June 30, 1999 includes $129 million with respect
to U.S. government contracts, including $45 million for the funded portion of
the MTTR contract, $200 million with respect to fire and emergency apparatus and
$126 million with respect to commercial products. Approximately 44% of our
backlog will not be filled in fiscal 1999.
Reported backlog excludes purchase options and announced orders for which
definitive contracts have not been executed. Additionally, backlog excludes
unfunded portions of Department of Defense long-term family contracts. Backlog
information and comparisons thereof as of different dates may not be accurate
indicators of future sales or the ratio of our future sales to the Department of
Defense versus our sales to other customers.
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Government Contracts
Approximately 28% of our net sales for fiscal 1998 and 18% of our net
sales for the nine months ended June 30, 1999 were made to the U.S. government
under long-term contracts and programs, substantially all of which were in the
defense truck market. Assuming all options to purchase vehicles are exercised
under the MTTR contract, MTTR sales would increase from $26 million in fiscal
2000 to a peak of approximately $300 million in fiscal 2002 and 2003 and would
aggregate up to $1.2 billion over the fiscal years 2000-2005. Accordingly, a
significant portion of our sales are subject to risks specific to doing business
with the U.S. government, including changes in government policies and
requirements that may reflect rapidly changing military and political
developments and the availability of funds.
Our sales into defense truck markets are substantially dependent upon
periodic awards of new contracts, the purchase of base vehicle quantities and
the exercise of options under existing contracts. Our existing contracts with
the Department of Defense may be terminated at any time for the convenience of
the government. Upon such a termination, we would generally be entitled to
reimbursement of our incurred costs and, in general, to payment of a reasonable
profit for work actually performed.
Under firm fixed-price contracts with the government, the price paid to
us is generally not subject to adjustment to reflect our actual costs, except
costs incurred as a result of contract changes ordered by the government. We
generally attempt to negotiate with the government the amount of increased
compensation to which we are entitled for government-ordered changes that result
in higher costs. If we are unable to negotiate a satisfactory agreement to
provide increased compensation, then we may file an appeal with the Armed
Services Board of Contract Appeals or the U.S. Claims Court. We have none of
these appeals pending. We seek to mitigate our risks with respect to our fixed
price contracts by executing firm fixed price contracts with qualified suppliers
for the duration of our contracts.
Suppliers
We are highly dependent on our suppliers and subcontractors in order to
meet our commitments to our customers, and many major components and assembled
units, such as engines, transmissions, flatracks and trailers, are procured or
subcontracted on a sole-source basis with a number of domestic and foreign
companies. Through our reliance on this supply network for such purchases, we
are able to avoid many of the preproduction and fixed costs associated with the
manufacture of those components and assembled units. We maintain an extensive
qualification, on-site inspection and assistance and performance measurement
system to control risks associated with our reliance on suppliers. We
occasionally experience problems with supplier and subcontractor performance and
must identify alternate sources of supply and/or address related warranty and
delivery claims from customers.
While we purchase many costly components such as engines, transmissions
and axles, we manufacture some proprietary components that are deemed material
to our business. 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 systems, the Command Zone proprietary
multiplexing system, body structures and many smaller parts which add uniqueness
and value to our products. Some of these proprietary components are marketed to
other manufacturers. Our internal production of these components provides a
significant competitive advantage and also serves to reduce the manufacturing
costs of our products.
Intellectual Property
Patents and licenses are important in the operation of our business, as
one of our key objectives is developing proprietary components in order to
provide our customers with advanced technological solutions at attractive
prices. We hold in excess of 80 active domestic and 50 foreign patents. We
believe patents for all-wheel steer and independent suspension systems, which
have remaining lives of 9 to 14 years, provide us with
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a competitive advantage in the fire and emergency markets. The independent
suspension system was also added to the U.S. Marine Corps portion of the MTTR
program, which, in our opinion, provided a performance and cost advantage in our
successful competition for the Phase II production contract. While other
proprietary components provide us a competitive advantage, we believe that none
of our other patents individually are significant to the business.
We hold trademarks for "Oshkosh," "McNeilus" and "Pierce." We consider
these trademarks to be important to the future success of our business.
Employees
As of June 30, 1999, we had approximately 3,900 employees, of which
approximately 1,400 were employees of Oshkosh, 1,100 were employees of McNeilus
and 1,400 were employees of Pierce. Production workers totaling approximately
800 employees at our Oshkosh facilities are represented by the United Auto
Workers union. Our five-year contract with the United Auto Workers union extends
through September 30, 2001. We believe our relationship with employees is good.
Properties
We believe our equipment and buildings are modern, well-maintained and
provide adequate capacity for our present and anticipated needs. As of June 30,
1999, we operated in eleven manufacturing facilities and owned another facility
that was not in use. The location, size and focus of our facilities is provided
in the table below.
<TABLE>
<CAPTION>
Approximate
Square Footage
------------------------ Principal
Location (# of facilities) Owned Leased Products Manufactured
----------------------------- ------- ------ -----------------------------------------------
<S> <C> <C> <C>
Oshkosh, Wisconsin(3)........ 688,000 Defense Trucks; Front-Discharge Mixers; Snow
Removal Vehicles; Aircraft Rescue and
Firefighting Vehicles
Appleton, Wisconsin(2)....... 589,000 19,000 Fire Apparatus
Dodge Center, Minnesota(1)... 612,000 Rear-Discharge Mixers; Refuse Truck Bodies;
Portable Concrete Batch Plants
Bradenton, Florida(1)........ 287,000 Fire Apparatus; Defense Trucks and Truck Bodies
Riceville, Iowa(1)........... 108,000 Components for Rear-Discharge Mixers and
Refuse Truck Bodies
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)....... 23,000 Refurbished Fire Apparatus
</TABLE>
Our manufacturing facilities generally operate five days per week on one
or two shifts, except for one-week shutdowns in July and December. We believe
our 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 our manufacturing
facilities, we maintain fifteen sales and service centers throughout the United
States. We own such facilities in Colton, California; Commerce City, Colorado;
Villa Rica, Georgia; Lithia Springs, Georgia; Hutchins, Texas; Morgantown,
Pennsylvania; Gahanna, Ohio; Dodge Center, Minnesota; Bradenton, Florida; and
Oshkosh, Wisconsin. We lease such facilities in Milpitas, California; Tacoma,
Washington; Salt Lake City, Utah; Aurora, Illinois; and East Granby,
Connecticut. These facilities range in size from approximately 3,000 square feet
to approximately 46,000 square feet and are used primarily for sales and service
of concrete mixers and refuse bodies.
Our facilities are pledged as collateral under the terms of our senior
credit facility.
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<PAGE>
Legal Proceedings
We were engaged in litigation against Super Steel Products Corporation,
our former supplier of mixer systems for forward-discharge concrete mixer trucks
under a long-term supply contract. Super Steel sued us in state court claiming
we breached the contract. We counterclaimed for repudiation of contract. On July
26, 1996, a jury returned a verdict for Super Steel awarding damages totaling
$4.5 million. On October 10, 1996, the state court judge overturned the verdict
against us, granted judgment for us on our counterclaim, and ordered a new trial
for damages on our counterclaim. Both parties 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 us awarding damages totaling
approximately $4.5 million plus interest to Super Steel. On April 6, 1999, our
petition for review of this decision by the Wisconsin Supreme Court was denied.
On April 12, 1999, we petitioned the state court judge to act on our previous
motion for a retrial. The petition was denied on June 18, 1999 and the state
court directed that judgment be entered. In lieu of further appeals, we paid
$5.75 million on July 27, 1999 in final settlement of the matter. We had
recorded a liability for the full amount of the final settlement at June 30,
1999.
In addition, patent infringement cases are brought against us from time
to time, and some cases are presently pending. Although we believe that our
products do not infringe upon a valid claim of any patent and that we have
meritorious defenses to each presently pending lawsuit, we cannot predict the
outcomes of any of these lawsuits.
Environmental Matters
We are 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 our routine business operations, we
dispose of and recycle or reclaim industrial waste materials, chemicals and
solvents at third party disposal and recycling facilities that are licensed by
appropriate governmental agencies. In some instances, these facilities have been
and may be designated by the United States Environmental Protection Agency 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 that contributed hazardous
substances may be jointly and severally liable for the costs associated with
cleaning up the site. Typically, potentially responsible parties negotiate a
resolution with the Environmental Protection Agency and/or the state
environmental agencies. Potentially responsible parties also negotiate with each
other regarding allocation of the cleanup cost.
As to one such Superfund site, Pierce is one of 414 potentially
responsible parties participating in the costs of addressing the site and has
been assigned an allocation share of approximately 0.04%. Currently a 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, we believe our
liability at the site will not be material and our share is adequately covered
through reserves established by us at June 30, 1999. Our actual liability could
vary based on results of the study, the resources of other potentially
responsible parties and our final share of liability.
As to another Superfund site, Pierce and Oshkosh are two of approximately
1,450 customers of one of the potentially responsible parties that has received
notification as a potentially responsible party. No further evidence concerning
the site, its environmental issues or any other information has been furnished
to us. We believe that it will be a de minimis level potentially responsible
party, if any liability is established, so that any liability will not be
material. Our actual liability could vary based upon subsequently available
information.
We are addressing a regional trichloroethylene groundwater plume on the
south side of Oshkosh, Wisconsin. We believe there may be multiple sources in
the area. Trichloroethylene was detected at our North Plant facility with recent
testing showing the highest concentrations in a monitoring well located on the
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<PAGE>
upgradient property line. Because the investigation process is still ongoing, it
is not possible for us to estimate our long-term total liability associated with
this issue at this time. Also, as part of the regional trichloroethylene
groundwater investigation, we conducted a groundwater investigation of a former
landfill located on our property. The landfill, acquired by us 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, we do not believe the
landfill is one of the sources of the trichloroethylene contamination. Based
upon current knowledge, we believe our liability associated with the
trichloroethylene issue will not be material and is adequately covered through
reserves established by us at June 30, 1999. However, this may change as
investigations proceed by us, other unrelated property owners, and government
entities.
We are subject to other environmental matters and legal proceedings and
claims, including patent, antitrust and state dealership regulation compliance
proceedings. Although the final results of all such claims cannot be predicted
with certainty, we believe that the ultimate resolution of all claims, after
taking into account the liabilities accrued with respect to such claims, will
not have a material adverse effect on our financial condition, profitability or
cash flows. Actual results could vary, among other things, due to the
uncertainties involved in litigation.
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<PAGE>
MANAGEMENT AND BOARD OF DIRECTORS
The following table sets forth information as of August 31, 1999
concerning our executive officers and Directors. All of our officers serve terms
of one year and until their successors are elected and qualified. Each of our
Directors are elected each year to serve for a term of one year and until his or
her successor is elected and qualified.
<TABLE>
<CAPTION>
Name Age Title
------------------------------------------ --- -----------------------------------------------------------------
<S> <C> <C>
Robert G. Bohn............................ 46 President, Chief Executive Officer and Director
Timothy M. Dempsey........................ 59 Executive Vice President, General Counsel and Secretary
Paul C. Hollowell......................... 58 Executive Vice President and President, Defense Business
Charles L. Szews.......................... 42 Executive Vice President and Chief Financial Officer
Matthew J. Zolnowski...................... 46 Executive Vice President, Corporate Administration, Strategic
Planning and Marketing
Dan J. Lanzdorf........................... 51 Executive Vice President and President, McNeilus Companies, Inc.
John W. Randjelovic....................... 54 Executive Vice President and President, Pierce Manufacturing Inc.
J. William Andersen....................... 61 Director
Daniel T. Carroll......................... 73 Director and Chairman of the Board of Directors
Gen. Frederick M. Franks, Jr.............. 62 Director
Michael W. Grebe.......................... 58 Director
Kathleen J. Hempel........................ 48 Director
J. Peter Mosling, Jr...................... 55 Director
Stephen P. Mosling........................ 52 Director
Richard G. Sim............................ 55 Director
</TABLE>
Robert G. Bohn. Mr. Bohn joined us 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. Prior to joining us, 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 in
June 1995. Mr. Bohn is also a director of Graco Inc.
Timothy M. Dempsey. Mr. Dempsey joined us 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.
Paul C. Hollowell. Mr. Hollowell joined us in April 1989 as Vice
President-Defense Products and assumed his present position in February 1994.
Charles L. Szews. Mr. Szews joined us 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 us as Vice President-Human
Resources in January 1992 and assumed his present position in September 1998.
Dan J. Lanzdorf. Mr. Lanzdorf joined us 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 prior to assuming his current position in September
1998.
John W. Randjelovic. Mr. Randjelovic joined us 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 and assumed his present position in October 1997.
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<PAGE>
J. William Andersen. Mr. Andersen has served as a Director since 1976 and
had been the Executive Director of Development, University of Wisconsin-Oshkosh
from 1980 through his retirement in 1994.
Daniel T. Carroll. Mr. Carroll has served as Director since 1991. In
October 1997, he was elected Chairman of our Board of Directors. He is Chairman
of The Carroll Group, a management consulting firm located in Avon, Colorado.
Mr. Carroll is also a director of Wolverine World Wide, Incorporated; Comshare,
Inc.; Aon Corp.; A.M. Castle & Company; American Woodmark Corporation; and
Woodhead Industries, Inc.
Gen. Frederick M. Franks, Jr. Gen. Franks has served as a Director since
1997. He was the Commander of the U.S. Army Training and Doctrine Command from
1991 to 1994 and commanded the U.S. Army VII Corps during Operation Desert
Storm. He retired from the Army in 1994.
Michael W. Grebe. Mr. Grebe has served as a Director since 1990. He has
been a partner in the law firm of Foley & Lardner in Milwaukee since 1977. We
retained Mr. Grebe's firm for legal services in fiscal 1999 and will similarly
do so in fiscal 2000.
Kathleen J. Hempel. Ms. Hempel has served as a Director since 1997. She
was Vice Chairman and Chief Financial Officer of Fort Howard Corporation, Green
Bay, Wisconsin, a manufacturer of tissue products, from 1992 until its merger
into Fort James Corporation in 1997. She is a director of A. O. Smith
Corporation and Whirlpool Corporation.
J. Peter Mosling, Jr. Mr. Mosling has served as a Director since 1976,
having joined us in 1969. He has served in various senior executive capacities
since joining us through his retirement in 1994.
Stephen P. Mosling. Mr. Mosling has served as a Director since 1976,
having joined us in 1971. He had served in various senior executive capacities
since joining us through his retirement in 1994.
Richard G. Sim. Mr. Sim has served as a Director since 1997. He is
Chairman, President and Chief Executive Officer of Applied Power, Inc., Butler,
Wisconsin, which manufactures hydraulic and electrical tools and supplies,
engineered components and electrical enclosure systems. He is a member of its
Board of Directors. He also is a director of Ipsco, Inc.
Stephen P. Mosling and J. Peter Mosling, Jr. are brothers. Other than as
noted, none of our Directors or executive officers has any family relationship
with any other Director or executive officer.
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<PAGE>
SELLING SHAREHOLDERS
The only selling shareholders in the offering are J. Peter Mosling, Jr.,
Stephen P. Mosling and the Melissa K Mosling 1980 Trust. Messrs. Mosling are
each members of our Board of Directors and previously served in various senior
executive capacities until their retirement in 1994. Stephen P. Mosling is a
trustee of the Melissa K Mosling 1980 Trust. The following table sets forth
information about the beneficial ownership of our class A common stock and
common stock as of August 31, 1999 by each selling shareholder.
<TABLE>
<CAPTION>
Shares of Class A Shares of Shares of Shares of
Common Stock Common Stock Beneficially Common Stock Common Stock
Beneficially Owned Owned Being Beneficially Owned
Before and After Offering Before Offering Offered After Closing
------------------------- ------------------------- ------------ ----------------------
Selling Shareholder Number Percent Number Percent Number Number Percent
- ------------------------------- ------ ------- ------ ------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
J. Peter Mosling, Jr.(1)(2) 179,719 42.2 289,418 2.3 75,000 214,418 1.4
Stephen P. Mosling(1)(2) 181,388 42.6 600,501(3) 4.8 75,000 425,501(4) 3.4
Melissa K Mosling 1980 Trust -- -- 237,928 1.9 100,000 137,928 0.9
--------------------
(1) Each share of our class A common stock is convertible into one share of
our common stock at any time at the holder's option. As a result, a
holder of our class A common stock is deemed to beneficially own an equal
number of shares of our common stock. However, in order to avoid
overstatement of the beneficial ownership of our common stock, the shares
of our common stock listed in the table do not include shares of our
common stock that may be issued upon conversion of our class A common
stock. J. Peter Mosling, Jr. and Stephen P. Mosling are parties to an
agreement relating to our class A common stock. Under the agreement,
Messrs. Mosling each have agreed with us that, in the event of both of
their deaths or earlier incapacities, their shares of our class A common
stock then will be exchanged for a like number of shares of our common
stock. If that occurred, then each outstanding share of our class A
common stock would automatically convert into one share of our common
stock.
(2) Amounts shown include 6,500 shares of common stock for J. Peter Mosling,
Jr. and 6,500 shares of common stock for Stephen P. Mosling, represented
by stock options exercisable within 60 days of August 31, 1999.
(3) Amount shown includes 237,928 shares of common stock beneficially owned
by Stephen P. Mosling as trustee of the Melissa K Mosling 1980 Trust
before the offering.
(4) Amount shown includes 137,928 shares of common stock to be beneficially
owned by Stephen P. Mosling as trustee of the Melissa K Mosling 1980
Trust after the offering.
</TABLE>
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
Our Restated Articles of Incorporation provide that we have authority to
issue 18,000,000 shares of common stock, 1,000,000 shares of class A common
stock, and 2,000,000 shares of preferred stock. As of August 31, 1999, we had
12,403,831 shares of common stock issued and outstanding, 426,099 shares of
class A common stock issued and outstanding and no shares of preferred stock
issued and outstanding. We will have 15,403,831 shares of common stock
outstanding after the offering. All of the outstanding shares are fully paid and
nonassessable, and the shares of common stock being sold by us will, upon
completion of the offering, be fully paid and nonassessable, except in each case
for statutory liability under Section 180.0622(2)(b) of the Wisconsin Business
Corporation Law for unpaid employee wages.
The following summary of some provisions of our common stock and
preferred stock is not complete. You should refer to our Restated Articles of
Incorporation, which are incorporated by reference as an exhibit to the
registration statement of which this prospectus is a part, and applicable law
for more information.
Common Stock
Dividends. We must pay dividends on both our class A common stock and our
common stock at any time that we pay dividends on either. Whenever we pay any
dividends, other than dividends of our stock, on our stock, each share of common
stock is entitled to receive 115% of the dividend paid on each share of our
class A common stock, rounded up or down to the nearest $0.0025.
Voting Rights. Holders of our common stock have the right to elect or
remove as a class 25% of our entire Board of Directors, rounded to the nearest
whole number of Directors, but not less than one. Holders of our common stock
are not entitled to vote on any other corporate matters, except as may be
required by law in connection with some significant actions such as mergers and
amendments to our Restated Articles of Incorporation, and are entitled to one
vote per share on all matters upon which they are entitled to vote. Holders of
our 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 other matters presented
to the shareholders for vote.
Liquidation Rights. Upon our liquidation, dissolution or winding up, and
after distribution of any amounts due to holders of our preferred stock, holders
of our common stock are entitled to receive $5.00 per share before any payment
or distribution to holders of class A common stock. Thereafter, holders of class
A common stock are entitled to receive $5.00 per share before any further
payment or distribution to holders of our common stock. The $5.00 amounts will
be adjusted for stock splits, stock dividends or similar events involving shares
of our stock. Thereafter, holders of our class A common stock and common stock
share on a pro-rata basis in all payments or distributions upon our liquidation,
dissolution or winding up.
Conversion. Each share of our class A common stock is convertible into
one share of our common stock at any time at the holder's option. We have a
stock restriction agreement with Stephen P. Mosling and J. Peter Mosling, Jr.,
who own the majority of our class A common stock, that provides that, upon the
death or the incapacity of both of them, they or their legal representatives and
trustees will act to eliminate our class A common stock, so that we will have
only one class of issued and outstanding common equity. Also, if Messrs. Mosling
together own less than 150,000 shares of class A common stock for any reason,
all then outstanding shares of our class A common stock will be converted into
shares of our common stock. From and after that time, the existing differences
between the rights of our class A common stock relative to those of our common
stock, with respect to dividends, rights upon our liquidation and voting rights
will be eliminated, and all shares of our common stock will generally have the
same rights with respect to voting, dividends and upon liquidation.
Other Terms. We generally do not have authority to issue new shares of
our class A common stock without approval of our shareholders. None of our
shareholders have preemptive or other rights to subscribe
43
<PAGE>
for additional shares. No class of common stock is subject to redemption.
Section 180.1150 of the Wisconsin Business Corporation Law is inapplicable to us
until Messrs. Mosling together own less than 150,000 shares of our class A
common stock. Section 180.1150 provides that the voting power of shares of
Wisconsin corporations such as us held by any person or persons acting as a
group in excess of 20% of the voting power in the election of directors is
limited to 10% of the full voting power of those shares. This restriction does
not apply to shares acquired directly from us or in specified transactions or
shares for which full voting power has been restored pursuant to a vote of
shareholders. Messrs. Mosling have full voting power with respect to their
shares of our class A common stock.
Transfer Agent. The transfer agent for the our common stock is Firstar
Bank, N. A., Milwaukee, Wisconsin.
Preferred Stock
Our Restated Articles of Incorporation authorize our Board of Directors
to issue our preferred stock in series and to fix the variations in the powers,
preferences, rights, qualifications, limitations or restrictions of any series
with respect to the rate and nature of dividends, the price and terms and
conditions on which shares may be redeemed, the amount payable in the event of
our voluntary or involuntary liquidation, any sinking fund provisions for
redemption or repurchase of shares, the terms and conditions for conversion into
any other class or series of our stock and voting rights.
In connection with the issuance of the rights described below, our Board
of Directors has authorized a series of our preferred stock designated as series
A junior participating preferred stock. Shares of our series A junior
participating preferred stock purchasable upon the exercise of the rights will
not be redeemable. Each share of our series A junior participating preferred
stock will be entitled to a minimum preferential quarterly dividend payment of
$1.00 per share but will be entitled to an aggregate dividend of 150 times the
dividend we declare per share of our common stock. In the event of our
liquidation, the holders of the shares of our series A junior participating
preferred stock will be entitled to a minimum aggregate payment of $100 per
share but will be entitled to an aggregate payment of 150 times the payment we
make per share of our common stock. Each share of our series A junior
participating preferred stock will have 150 votes, voting together with our
common stock. Finally, in the event of any merger, consolidation or other
transaction in which shares of our common stock are exchanged, each share of our
series A junior participating preferred stock will be entitled to receive 150
times the amount received per share of our common stock. These rights are
protected by customary antidilution provisions. There are no shares of our
series A junior participating preferred stock currently outstanding.
The issuance of any series of our preferred stock, including the series A
junior participating preferred stock, may have an adverse effect on the rights
of holders of our common stock, and could decrease the amount of earnings and
assets available for distribution to holders of our common stock. In addition,
any issuance of our preferred stock could have the effect of delaying, deferring
or preventing a change in control.
Preferred Share Purchase Rights
We have entered into a Rights Agreement dated as of February 1, 1999,
with Firstar Bank, N. A., pursuant to which each outstanding share of our common
stock, including the shares being sold by us in the offering, has attached
two-thirds of a right to purchase shares of our series A junior participating
preferred stock and each outstanding share of our class A common stock has
attached 40/69 of a right. Each share of our common stock subsequently issued by
us prior to the expiration of the Rights Agreement will likewise have attached
two-thirds of a right and each share of our class A common stock subsequently
issued will have attached 40/69 of a right. Under circumstances described below,
the rights will entitle the holder thereof to purchase additional shares of our
common stock. In this prospectus, unless the context otherwise requires, all
references to our common stock include the accompanying rights.
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<PAGE>
Currently, the rights are not exercisable and trade with our common stock
and class A common stock. If the rights become exercisable, each right, unless
held by a person or group which beneficially owns more than 15% of our
outstanding common stock and class A common stock in the aggregate, will
initially entitle the holder to purchase one one-hundredth of a share of our
series A junior participating preferred stock at a purchase price of $145,
subject to adjustment. The rights will only become exercisable if a person or
group has acquired, or announced an intention to acquire, 15% or more of our
outstanding common stock and class A common stock in the aggregate. Under some
circumstances, including the existence of a 15% acquiring party, each holder of
a right, other than the acquiring party, will be entitled to purchase at the
right's then-current exercise price, shares of our common stock having a market
value of two times the exercise price. If another corporation acquires us after
a party acquires 15% or more of our common stock, each holder of a right will be
entitled to receive the acquiring corporation's common shares having a market
value of two times the exercise price. The rights may be redeemed at a price of
$.01 until a party acquires 15% or more of our common stock, and after that time
may be exchanged for one share of our common stock per right until a party
acquires 50% or more of our common stock. The rights initially will expire on
February 1, 2009. Under the Rights Agreement, our Board of Directors may reduce
the thresholds applicable to the rights from 15% to not less than 10%. The
rights do not have voting or dividend rights and, until they become exercisable,
have no dilutive effect on our earnings.
Statutory Provisions
Sections 180.1140 to 180.1144 of the Wisconsin Business Corporation Law
contain some limitations and special voting provisions applicable to specified
business combinations involving Wisconsin corporations such as us and a
significant shareholder, unless the board of directors of the corporation
approves the business combination or the shareholder's acquisition of shares
before these shares are acquired. Similarly, Sections 180.1130 to 180.1133 of
the Wisconsin Business Corporation Law contain special voting provisions
applicable to some business combinations, unless specified minimum price and
procedural requirements are met. Following commencement of a takeover offer,
Section 180.1134 of the Wisconsin Business Corporation Law imposes special
voting requirements on share repurchases effected at a premium to the market and
on asset sales by the corporation, unless, as it relates to the potential sale
of assets, the corporation has at least three independent directors and a
majority of the independent directors vote not to have the provision apply to
the corporation.
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<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in an
underwriting agreement dated , 1999, we and the selling shareholders
have agreed to sell to the underwriters named below, for whom Credit Suisse
First Boston Corporation, Goldman, Sachs & Co. and Tucker Anthony Cleary Gull
are acting as representatives, the following respective numbers of shares of our
common stock:
Number
Underwriter of Shares
----------- ---------
Credit Suisse First Boston Corporation..............
Goldman, Sachs & Co.................................
Tucker Anthony Cleary Gull..........................
Total................................ 3,250,000
=========
The underwriting agreement provides that the underwriters are obligated
to purchase all the shares of our common stock in the offering if any are
purchased, other than those shares covered by the over-allotment option
described below. The underwriting agreement also provides that if an underwriter
defaults, the purchase commitments of non-defaulting underwriters may be
increased or the offering of our common stock may be terminated.
We and the selling shareholders have granted to the underwriters a 30-day
option to purchase on a pro-rata basis up to 450,000 additional shares from us,
and an aggregate of 37,500 additional outstanding shares from the selling
shareholders, at the initial public offering price less the underwriting
discounts and commissions. The option may be exercised only to cover any
over-allotments of our common stock.
The underwriters propose to offer the shares of our common stock
initially at the public offering price on the cover page of this prospectus and
to selling group members at that price less a concession of $ per share. The
underwriters and selling group members may allow a discount of $ per share on
sales to other broker/dealers. After the initial public offering, the public
offering price and concession and discount to dealers may be changed by the
representatives.
The following table summarizes the compensation and estimated expenses we
and the selling shareholders will pay.
<TABLE>
<CAPTION>
Total
----------------------------------
Without With
Per Share Over-allotment Over-allotment
--------- -------------- --------------
<S> <C> <C> <C>
Underwriting discounts and commissions
paid by us........................................... $ $ $
Expenses payable by us.................................... $ $ $
Underwriting discounts and commissions
paid by the selling shareholders...................... $ $ $
Expenses payable by the selling shareholders.............. $ $ $
</TABLE>
We, our directors and executive officers and the selling shareholders
have agreed that we will not offer, sell, contract to sell, announce our
intention to sell, pledge or otherwise dispose of, directly or indirectly, or
file with the Securities and Exchange Commission a registration statement under
the Securities Act of 1933 relating to, any additional shares of our common
stock or securities convertible into or exchangeable or exercisable for any of
our common stock without the prior written consent of Credit Suisse First Boston
Corporation for a
46
<PAGE>
period of 120 days after the date of this prospectus, except that these
restrictions will not apply to our ability to grant employee or director stock
options under the terms of plans in effect on the date of this prospectus or to
the issuances of our common stock upon any exercise of these options.
We and the selling shareholders have agreed to indemnify the underwriters
against liabilities under the Securities Act of 1933, or contribute to payments
which the underwriters may be required to make in that respect.
Credit Suisse First Boston Corporation has provided advisory and
investment banking services to us in the past, for which we have paid customary
compensation.
The representatives may engage in over-allotment, stabilizing
transactions, syndicate covering transactions, penalty bids and "passive" market
making in accordance with Regulation M under the Securities Exchange Act of
1934.
Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position.
Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.
Syndicate covering transactions involve purchases of our common stock in
the open market after the distribution has been completed in order to cover
syndicate short positions.
Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the common stock originally sold by that syndicate
member is purchased in a syndicate covering transaction to cover syndicate short
positions.
In "passive" market making, market makers in our common stock who are
underwriters or prospective underwriters may, subject to certain limitations,
make bids for or purchases of our common stock until the time, if any, at which
a stabilizing bid is made.
These stabilizing transactions, syndicate covering transactions and
penalty bids may cause the price of our common stock to be higher than it would
otherwise be in the absence of these transactions. These transactions may be
effected on the Nasdaq National Market or otherwise and, if commenced, may be
discontinued at any time.
47
<PAGE>
NOTICE TO CANADIAN RESIDENTS
Resale Restrictions
The distribution of the our common stock in Canada is being made only on
a private placement basis exempt from the requirement that we and the selling
shareholders prepare and file a prospectus with the securities regulatory
authorities in each province where trades of our common stock are effected.
Accordingly, any resale of our common stock in Canada must be made in accordance
with applicable securities laws which will vary depending on the relevant
jurisdiction, and which may require resales to be made in accordance with
available statutory exemptions or pursuant to a discretionary exemption granted
by the applicable Canadian securities regulatory authority. Purchasers are
advised to seek legal advice prior to any resale of our common stock.
Representations of Purchasers
Each purchaser of our common stock in Canada who receives a purchase
confirmation will be deemed to represent to us, the selling shareholders and the
dealer from whom that purchase confirmation is received that (1) the purchaser
is entitled under applicable provincial securities laws to purchase that common
stock without the benefit of a prospectus qualified under those securities laws,
(2) where required by law, the purchaser is purchasing as a principal and not as
an agent and (3) the purchaser has reviewed the text above under "Resale
Restrictions".
Rights of Action (Ontario Purchasers)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities laws. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. Federal securities laws.
Enforcement of Legal Rights
All of the issuer's directors and officers as well as the experts named
herein and the selling shareholders may be located outside of Canada and, as a
result, it may not be possible for Canadian purchasers to effect service of
process within Canada upon the issuer or those persons. All or a substantial
portion of the assets of the issuer and those persons may be located outside of
Canada and, as a result, it may not be possible to satisfy a judgment against
the issuer or those persons in Canada or to enforce a judgment obtained in
Canadian courts against the issuer or those persons outside of Canada.
Notice to British Columbia Residents
A purchaser of common stock to whom the Securities Act (British Columbia)
applies is advised that the purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by that purchaser pursuant to the offering. That report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be obtained from us. Only one such report
must be filed in respect of common stock acquired on the same date and under the
same prospectus exemption.
Taxation and Eligibility for Investment
Canadian purchasers of our common stock should consult their own legal
and tax advisors with respect to the tax consequences of an investment in our
common stock in their particular circumstances and with respect to the
eligibility of our common stock for investment by the purchaser under relevant
Canadian legislation.
48
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
any reports, statements or other information on file at the Commission's public
reference rooms in Washington D.C., New York, New York, and Chicago, Illinois.
Please call the Commission at 1-800-SEC-0330 for further information on the
public reference rooms. Our Commission filings are also available to the public
on the Commission's Internet site at "http://www.sec.gov".
We have filed a registration statement on Form S-3 under the Securities
Act of 1933 with respect to our common stock. This prospectus, which forms a
part of the registration statement, does not contain all of the information
included in the registration statement. Some information is omitted and you
should refer to the registration statement and its exhibits.
The Commission allows us to "incorporate by reference" the information we
file with them, which means we can disclose important information to you by
referring to those documents. The information incorporated by reference is an
important part of this prospectus. The most recent information that we file with
the Commission automatically updates and supersedes any older information. We
incorporate by reference the following documents we have filed or may file with
the Commission pursuant to Sections 13, 14 and 15(d) of the Securities Exchange
Act until we terminate the offering:
o Our Annual Report on Form 10-K for the fiscal year ended September
30, 1998, as amended by our Form 10-K/A filed February 12, 1999;
o Our Quarterly Reports on Form 10-Q for the quarters ended December
31, 1998 (as amended by our Form 10-Q/A filed February 16, 1999),
March 31, 1999 and June 30, 1999;
o Our Proxy Statement for our 1999 Annual Meeting of Shareholders
dated December 23, 1998;
o Our Current Report on Form 8-K dated February 26, 1998;
o The description of our common stock contained in our Registration
Statement on Form 8-A dated September 25, 1985, and any amendment
or report updating that description;
o The description of the preferred share purchase rights contained
in our Registration Statement on Form 8-A dated February 1, 1999,
and any amendment or report updating that description; and
o All documents filed by us pursuant to Section 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934 until we terminate
the offering.
You may request a copy of any of these documents at no cost, by writing
or telephoning us at the following: Timothy M. Dempsey, Oshkosh Truck
Corporation, P.O. Box 2566, Oshkosh, Wisconsin 54903-2566, telephone number
(920) 235-9151.
49
<PAGE>
LEGAL MATTERS
The validity of the shares of our common stock offered hereby will be
passed upon for us and the selling shareholders by Foley & Lardner, Milwaukee,
Wisconsin. Michael W. Grebe, a partner in the firm of Foley & Lardner, is a
Director. Some legal matters in connection with the offering will be passed upon
for the underwriters by Mayer, Brown & Platt, Chicago, Illinois.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements at September 30, 1997 and 1998, and for each of the three
years in the period ended September 30, 1998, as set forth in their report
appearing in this prospectus and registration statement. Ernst & Young LLP
audited the financial statement schedule incorporated by reference from our
Annual Report on Form 10-K for the year ended September 30, 1998. We have
included our financial statements in the prospectus and elsewhere in the
registration statement and incorporated our financial statement schedule in
reliance on Ernst & Young LLP's report, given on their authority as experts in
accounting and auditing.
Larson, Allen, Weishair and Co., LLP, independent auditors, have audited
the financial statements of McNeilus as set forth in their report incorporated
by reference in this prospectus and registration statement from our Current
Report on Form 8-K dated February 26, 1998. We have incorporated by reference
the financial statements of McNeilus in the prospectus and registration
statement in reliance on Larson, Allen, Weishair and Co.'s report, given on
their authority as experts in accounting and auditing.
50
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
----
Report of Ernst & Young LLP, Independent Auditors...................... F-2
Consolidated Statements of Income (Loss) for each of the
three fiscal years in the period ended September 30,
1998, and for the nine month periods ended June 30,
1998 and 1999 (unaudited)......................................... F-3
Consolidated Balance Sheets as of September 30, 1997 and
1998, and as of June 30, 1999 (unaudited)......................... F-4
Consolidated Statements of Shareholders' Equity for each of
the three fiscal years in the period ended September
30, 1998, and for the nine month period ended June 30,
1999 (unaudited).................................................. F-5
Consolidated Statements of Cash flows for each of the three
fiscal years in the period ended September 30, 1998,
and for the nine month periods ended June 30, 1998 and
1999 (unaudited).................................................. F-6
Notes to Consolidated Financial Statement.............................. F-7
F-1
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors
Oshkosh Truck Corporation
We have audited the accompanying consolidated balance sheets of Oshkosh Truck
Corporation (the Company) as of September 30, 1997 and 1998, and the related
consolidated statements of income (loss), shareholders' equity and cash flows
for each of the three years in the period ended September 30, 1998. 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 generally accepted auditing
standards. 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, 1997 and 1998, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended September 30,
1998, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Milwaukee, Wisconsin
October 30, 1998, except for
Notes 1, 8, 11 and 15, as to which
the dates are July 23, 1999,
February 1, 1999, July 27, 1999
and February 1, 1999, respectively
F-2
<PAGE>
<TABLE>
OSHKOSH TRUCK CORPORATION
Consolidated Statements of Income (Loss)
<CAPTION>
Nine Months Ended
Fiscal Year Ended September 30, June 30,
------------------------------- -----------------
1996 1997 1998 1998 1999
---- ---- ---- ---- ----
(Unaudited)
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Continuing operations:
Net sales............................................. $ 413,455 $ 683,234 $ 902,792 $ 659,741 $ 851,048
Cost of sales......................................... 384,680 602,237 776,756 572,630 726,128
--------- --------- --------- --------- ---------
Gross income.................................... 28,775 80,997 126,036 87,111 124,920
Operating expenses:
Selling, general and administrative................... 32,205 47,742 69,001 47,665 63,322
Amortization of goodwill and other intangibles........ 171 4,470 8,315 5,559 8,400
--------- --------- --------- --------- ---------
Total operating expenses........................ 32,376 52,212 77,316 53,224 71,722
--------- --------- --------- --------- ---------
Operating income (loss)................................... (3,601) 28,785 48,720 33,887 53,198
Other income (expense):
Interest expense...................................... (929) (12,722) (21,490) (14,273) (19,839)
Interest income....................................... 1,040 717 1,326 544 614
Miscellaneous, net.................................... 1,508 (278) 92 (344) 564
--------- --------- --------- --------- ---------
1,619 (12,283) (20,072) (14,073) (18,661)
--------- --------- --------- --------- ---------
Income (loss) from continuing operations before income
taxes, equity in earnings of unconsolidated
partnership and extraordinary item.................... (1,982) 16,502 28,648 19,814 34,537
Provision (credit) for income taxes....................... (1,741) 6,496 12,655 8,378 14,700
--------- --------- --------- --------- ---------
(241) 10,006 15,993 11,436 19,837
Equity in earnings (loss) of unconsolidated partnership,
net of income taxes (credits) of $167, ($85) and $747. -- -- 260 (135) 1,169
--------- --------- --------- --------- ---------
Income (loss) from continuing operations.................. (241) 10,006 16,253 11,301 21,006
Discontinued operations--loss on disposal of operations,
net of income tax benefit of $1,827................... (2,859) -- -- -- --
Extraordinary charge for early retirement of debt, net
of income tax benefit of $757 and $757................ -- -- (1,185) (1,185) --
--------- --------- --------- --------- ---------
Net income (loss) ........................................ $ (3,100) $ 10,006 $ 15,068 $ 10,116 $ 21,006
========= ========= ========= ========= =========
Earnings (loss) per share:
Continuing operations................................. $ (0.02) $ 0.78 $ 1.29 $ 0.89 $ 1.65
Discontinued operations............................... (0.21) -- -- -- --
Extraordinary item.................................... -- -- (0.09) (0.09) --
--------- --------- --------- --------- ---------
Net income (loss) .................................... $ (0.23) $ 0.78 $ 1.20 $ 0.80 $ 1.65
========= ========= ========= ========= =========
Earnings (loss) per share assuming dilution:
Continuing operations................................. $ (0.02) $ 0.78 $ 1.27 $ 0.88 $ 1.62
Discontinued operations............................... (0.21) -- -- -- --
Extraordinary item.................................... -- -- (0.09) (0.09) --
--------- --------- --------- --------- ---------
Net income (loss) .................................... $ (0.23) $ 0.78 $ 1.18 $ 0.79 $ 1.62
========= ========= ========= ========= =========
</TABLE>
See accompanying notes.
F-3
<PAGE>
<TABLE>
OSHKOSH TRUCK CORPORATION
Consolidated Balance Sheets
<CAPTION>
September 30, September 30, June 30,
1997 1998 1999
---------- ---------- --------
(Unaudited)
(In thousands, except share and per share amounts)
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents....................... $ 23,219 $ 3,622 $ 5,441
Receivables, net................................ 81,235 80,982 107,220
Inventories..................................... 76,497 149,191 218,319
Prepaid expenses................................ 3,405 3,768 3,836
Deferred income taxes........................... 9,479 12,281 20,659
-------- -------- --------
Total current assets......................... 193,835 249,844 355,475
Deferred charges.................................... 1,067 342 1,835
Investment in unconsolidated partnership............ -- 13,496 16,643
Other long-term assets.............................. 6,660 13,856 15,015
Property, plant and equipment:
Land............................................ 7,172 7,574 7,889
Buildings....................................... 42,220 64,566 65,159
Machinery and equipment......................... 78,270 84,643 89,499
-------- -------- --------
127,662 156,783 162,547
Less accumulated depreciation................... (72,174) (75,947) (81,923)
-------- -------- --------
Net property, plant and equipment............ 55,488 80,836 80,624
Goodwill and other intangible assets, net........... 163,344 326,665 324,471
-------- -------- --------
Total assets........................................ $420,394 $685,039 $794,063
======== ======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable................................ $ 48,220 $ 65,171 $ 80,814
Floor plan notes payable........................ -- 11,645 35,971
Customer advances............................... 30,124 44,915 64,084
Payroll-related obligations..................... 15,157 24,124 24,688
Accrued warranty................................ 12,320 15,887 16,091
Other current liabilities....................... 22,901 43,498 61,493
Current maturities of long-term debt............ 15,000 3,467 28,163
-------- -------- --------
Total current liabilities.................. 143,722 208,707 311,304
Long-term debt...................................... 120,000 277,337 266,693
Postretirement benefit obligations.................. 10,147 10,935 11,560
Deferred income taxes............................... 22,452 47,832 43,677
Other long-term liabilities......................... 3,173 8,932 9,686
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 -
610,317 in 1997; 445,332 in 1998; and
426,575 at June 30, 1999...................... 6 4 4
Common Stock, $.01 par value; authorized -
18,000,000 shares; issued - 13,426,930 in
1997; 13,591,916 in 1998; and 13,610,673
at June 30, 1999.............................. 134 136 136
Paid-in capital................................. 13,544 14,665 15,576
Retained earnings............................... 120,085 130,959 148,791
-------- -------- --------
133,769 145,764 164,507
Common Stock in treasury, at cost: 1,576,209
in 1997; 1,406,496 in 1998; and 1,259,000 at
June 30, 1999................................. (12,869) (12,664) (11,560)
Minimum pension liability adjustment............ -- (1,804) (1,804)
-------- -------- --------
Total shareholders' equity.................. 120,900 131,296 151,143
-------- -------- --------
Total liabilities and shareholders' equity.......... $420,394 $685,039 $794,063
======== ======== ========
</TABLE>
See accompanying notes.
F-4
<PAGE>
<TABLE>
OSHKOSH TRUCK CORPORATION
Consolidated Statements of Shareholders' Equity
Accumulated
Cost of Other
Common Comprehensive
Common Paid-In Retained Stock in Income
Stock Capital Earnings Treasury (Loss) Total
------ ------- --------- -------- ------------- --------
(In thousands, except share and per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1995 as previously
reported....................................... $ 93 $16,533 $121,697 $ (3,403) $(1,507) $133,413
Three-for-two stock split effective August 19,
1999........................................... 47 (47) -- -- -- --
---- ------- -------- -------- ------- --------
Balance at September 30, 1995.................... 140 16,486 121,697 (3,403) (1,507) 133,413
Comprehensive income:
Net loss....................................... -- -- (3,100) -- -- (3,100)
Minimum pension liability adjustment........... -- -- -- -- 1,507 1,507
--------
Comprehensive loss............................. -- -- -- -- -- (1,593)
Cash dividends:
Class A Common Stock ($0.290 per share)..... -- -- (177) -- -- (177)
Common Stock ($0.333 per share).............. -- -- (4,174) -- -- (4,174)
Purchase of Common Stock for treasury............ -- -- -- (5,618) -- (5,618)
Exercise of stock options........................ -- 43 -- 225 -- 268
Termination of incentive compensation awards..... -- (517) -- -- -- (517)
---- ------- -------- -------- ------- --------
Balance at September 30, 1996.................... 140 16,012 114,246 (8,796) -- 121,602
Comprehensive income:
Net income..................................... -- -- 10,006 -- -- 10,006
--------
Comprehensive income........................... -- -- -- -- -- 10,006
Cash dividends:
Class A Common Stock ($0.290 per share)..... -- -- (177) -- -- (177)
Common Stock ($0.333 per share).............. -- -- (3,990) -- -- (3,990)
Purchase of Common Stock for treasury............ -- -- -- (4,246) -- (4,246)
Purchase of 1,875,000 stock warrants............. -- (2,504) -- -- -- (2,504)
Exercise of stock options........................ -- 36 -- 173 -- 209
---- ------- -------- -------- ------- --------
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........... -- -- -- -- (1,804) (1,804)
--------
Comprehensive income........................... -- -- -- -- -- 13,264
Cash dividends:
Class A Common Stock ($0.290 per share)...... -- -- (153) -- -- (153)
Common Stock ($0.333 per share).............. -- -- (4,041) -- -- (4,041)
Exercise of stock options........................ -- 255 -- (217) -- 38
Tax effect of 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 (unaudited)......................... -- -- 21,006 -- -- 21,006
--------
Comprehensive income (unaudited)............... -- -- -- -- -- 21,006
Cash dividends:
Class A Common Stock ($0.2175 per share)
(unaudited).................................. -- -- (93) -- -- (93)
Common Stock ($0.2500 per share) (unaudited) -- -- (3,081) -- -- (3,081)
Exercise of stock options (unaudited)............ -- (45) -- 1,104 -- 1,059
Tax effect of stock options exercised
(unaudited).................................... -- 956 -- -- -- 956
---- ------- -------- -------- ------- --------
Balance at June 30, 1999 (unaudited)............. $140 $15,576 $148,791 $(11,560) $(1,804) $151,143
==== ======= ======== ======== ======= ========
</TABLE>
See accompanying notes.
F-5
<PAGE>
<TABLE>
OSHKOSH TRUCK CORPORATION
Consolidated Statements of Cash Flows
<CAPTION>
Nine Months Ended
Fiscal Year Ended September 30, June 30,
------------------------------- -----------------
1996 1997 1998 1998 1999
---- ---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C> <C>
Operating activities:
Income (loss) from continuing operations.................. $ (241) $ 10,006 $ 16,253 $ 11,301 $ 21,006
Provision for impairment of assets........................ -- -- 5,800 -- --
Depreciation and amortization............................. 8,798 14,070 18,698 12,995 17,018
Write-off (gain from sale) of investments................. 4,125 200 (3,375) -- --
Deferred income taxes..................................... (1,381) (3,980) 26 2,590 (8,906)
Equity in earnings of unconsolidated partnership.......... -- -- (427) 220 (1,916)
(Gain) loss on disposal of property, plant and
equipment........................................... 77 (43) 122 49 (31)
Changes in operating assets and liabilities:
Receivables, net...................................... (10,648) (4,611) 20,900 25,026 (26,238)
Inventories........................................... (25,071) 29,792 9,958 24,236 (69,128)
Prepaid expenses...................................... 469 214 (260) 381 (68)
Deferred charges...................................... 333 1,578 725 677 (1,493)
Accounts payable...................................... 13,314 (958) 956 (2,862) 15,643
Floor plan notes payable.............................. -- -- (11,377) (13,949) 24,326
Customer advances..................................... 930 2,331 10,718 16,393 19,169
Payroll-related obligations........................... 213 2,314 3,480 7,074 464
Accrued warranty...................................... 2,094 3,378 (1,883) 883 (796)
Other current liabilities............................. (9,914) 10,893 6,750 (9,624) 10,651
Other long-term liabilities........................... 665 598 2,877 3,592 1,368
-------- -------- --------- --------- --------
Net cash provided from (used for) operating
activities.................................... (16,237) 65,782 79,941 78,982 1,069
Investing activities:
Acquisitions of businesses, net of cash acquired.......... (160,838) -- (221,144) (217,954) --
Additions to property, plant and equipment................ (5,355) (6,263) (8,555) (6,270) (6,900)
Proceeds from sale of investments......................... -- -- 3,375 -- --
Proceeds from sale of property, plant and
equipment........................................... 2,086 395 1,524 320 58
Increase in other long-term assets........................ (2,124) (1,532) (3,817) (2,232) (4,356)
-------- -------- --------- --------- --------
Net cash used for investing activities................ (166,231) (7,400) (228,617) (226,136) (11,198)
Net cash provided from (used for) discontinued
operations.......................................... 4,743 (1,658) (1,093) (872) --
Financing activities:
Net borrowings (repayments) under revolving credit
facility............................................ 7,882 (7,882) 6,000 -- 14,300
Proceeds from issuance of long-term debt.................. 150,000 -- 325,000 325,000 --
Repayment of long-term debt............................... -- (15,000) (188,049) (163,931) (248)
Debt issuance costs....................................... -- -- (8,641) (8,507) --
Purchase of Common Stock, Common Stock
warrants and proceeds from exercise of stock
options, net........................................ (5,350) (6,541) 38 31 1,059
Dividends paid............................................ (4,396) (4,209) (4,176) (3,129) (3,163)
-------- -------- --------- --------- --------
Net cash provided from (used for) financing
activities........................................ 148,136 (33,632) 130,172 149,464 11,948
-------- -------- --------- --------- --------
Increase (decrease) in cash and cash equivalents.......... (29,589) 23,092 (19,597) 1,438 1,819
Cash and cash equivalents at beginning of period.......... 29,716 127 23,219 23,219 3,622
-------- -------- --------- --------- --------
Cash and cash equivalents at end of period................ $ 127 $ 23,219 $ 3,622 $ 24,657 $ 5,441
======== ======== ========= ========= ========
Supplemental disclosures:
Cash paid for interest................................ $ 538 $ 12,974 $ 17,240 $ 7,633 $ 16,887
Cash paid for income taxes............................ 3,116 2,998 11,097 7,162 20,342
</TABLE>
See accompanying notes.
F-6
<PAGE>
OSHKOSH TRUCK CORPORATION
Notes to Consolidated Financial Statements
September 30, 1998 and June 30, 1999 (Unaudited)
(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
heavy duty specialized trucks and truck bodies predominately for the U.S.
market. The Company sells its products into three principal markets -- fire and
emergency, defense, and other commercial truck markets. The Company's fire and
emergency business is principally conducted through its wholly-owned subsidiary,
Pierce Manufacturing Inc. ("Pierce"). The Company's commercial truck business is
principally conducted through its wholly-owned subsidiary, McNeilus Companies,
Inc. ("McNeilus"). 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 68% at September 30, 1998 and 63% at June
30, 1999, under the equity method.
Principles of Consolidation and Presentation -- The consolidated financial
statements include the accounts of Oshkosh Truck Corporation and all its
wholly-owned subsidiaries and are prepared in conformity with U.S. generally
accepted accounting principles. 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 overnight investments
in money-market accounts and commercial paper, totaled $23,022, $785 and $714 at
September 30, 1997 and 1998 and June 30, 1999 respectively. The cost of these
securities, which are considered "available for sale" for financial reporting
purposes, approximates fair value at September 30, 1997 and 1998 and June 30,
1999.
Inventories -- The Company values its inventories at the lower of cost,
computed principally on the last-in, first-out (LIFO) method, or market.
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 and from 4
to 25 years for machinery and equipment.
Deferred Charges -- Deferred charges include certain engineering and
technical support costs incurred in connection with multi-year government
contracts. 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.
Other Long-Term Assets -- Other long-term assets include capitalized
software and related costs which are amortized on a straight-line method over a
three- to ten-year period, deferred financing costs which are amortized using
the interest method over the term of the debt, prepaid funding of pension costs
and certain investments.
F-7
<PAGE>
OSHKOSH TRUCK CORPORATION
Notes to Consolidated Financial Statements - (Continued)
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 13.
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 based on
short-term borrowing rates.
Revenue Recognition -- Sales under fixed-price defense contracts are
recorded as units are accepted by the government. Change orders are not invoiced
until agreed upon by the government. Recognition of profit on change orders and
on contracts that do not involve fixed prices is based upon estimates, which may
be revised during the terms of the contracts. Sales to fire and emergency and
commercial customers are recorded when the goods or services are billable at
time of shipment or delivery of the trucks.
Research and Development -- Research and development costs are charged to
expense as incurred and amounted to approximately $6,304, $7,847 and $9,681 for
continuing operations during fiscal 1996, 1997 and 1998, respectively.
Warranty -- Provisions for estimated warranty and other related costs are
recorded at the time of sale and are periodically adjusted to reflect actual
experience. Amounts expensed in fiscal 1996, 1997, and 1998 were $7,741, $9,658
and $9,403, 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.
Fair Values -- The carrying amounts of receivables, accounts payable and
long-term debt approximated fair value as of September 30, 1997 and 1998 and
June 30, 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, investments, 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 credit risk associated with these receivables.
Environmental Remediation Costs -- Statement of Position ("SOP") 96-1,
"Environmental Remediation Liabilities," became effective for the Company in
fiscal 1997. In accordance with SOP 96-1, the Company
F-8
<PAGE>
OSHKOSH TRUCK CORPORATION
Notes to Consolidated Financial Statements - (Continued)
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.
Earnings (Loss) Per Share -- Statement of Financial Accounting Standards
("SFAS") No. 128, "Earnings per Share," became effective for the Company in
fiscal 1998. SFAS No. 128 replaced the calculation of primary and fully diluted
earnings per share with basic and diluted earnings per share. Unlike primary
earnings per share, basic earnings per share excludes any dilutive effects of
options, warrants and convertible securities. Earnings per share amounts for all
periods have been presented and, where appropriate, restated to conform to SFAS
No. 128 requirements.
The following table sets forth the computation of basic and diluted
weighted average shares used in the per share calculations:
<TABLE>
<CAPTION>
Nine Months Ended
Fiscal Year Ended September 30, June 30,
-------------------------------------- -----------------------
1996 1997 1998 1998 1999
---- ---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C> <C>
Denominator for basic earnings per
share.................................. 13,242,336 12,753,249 12,597,598 12,586,650 12,699,587
Effect of dilutive options, warrants and
incentive compensation awards.......... -- 65,874 161,901 145,458 300,174
---------- ---------- ---------- ---------- ----------
Denominator for dilutive earnings per
share.................................. 13,242,336 12,819,123 12,759,499 12,732,108 12,999,761
========== ========== ========== ========== ==========
</TABLE>
New Accounting Standards -- 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. Provisions of these
standards are required to be adopted in years beginning after June 15, 2000.
Because of the Company's minimal use of derivatives, management does not
anticipate that the adoption of the new Statement will have a significant effect
on the results of operations or on the financial position of the Company.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information." SFAS No.
131 establishes the standards for the manner in which public enterprises are
required to report financial and descriptive information about their operating
segments. The statement defines operating segments as components of an
enterprise for which separate financial information is available and evaluated
regularly as a means for assessing segment performance and allocating resources
to segments. A measure of profit or loss, total assets and other related
information are required to be disclosed for each operating segment. In
addition, this statement requires the annual disclosure of information
concerning revenues derived from the enterprise's products or services,
countries in which it earns revenue or holds assets, and major customers. The
statement is effective for fiscal years beginning after December 15, 1997. The
Company will adopt SFAS No. 131 during the three month period ending September
30, 1999. The adoption of SFAS No. 131 will not affect the Company's results of
operations, financial position or cash flows, but will affect the disclosure of
segment information.
In June 1997, the Financial Accounting Standards Board issued SFAS No.
130, "Reporting Comprehensive Income." SFAS No. 130 establishes the standards
for reporting and displaying comprehensive income and its components (revenues,
expenses, gains, and losses) as part of a full set of financial statements. This
statement requires that all elements of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements. The statement is effective for fiscal years beginning
after December 15, 1997. The Company adopted SFAS No. 130 during the three month
period ended December 31, 1998. The adoption of SFAS No. 130 had no impact on
the Company's net earnings.
F-9
<PAGE>
OSHKOSH TRUCK CORPORATION
Notes to Consolidated Financial Statements - (Continued)
Comprehensive income has been included in the Company's Consolidated Statement
of Shareholders' Equity and prior period amounts have been reclassified to
conform to SFAS No. 130 requirements.
Reclassifications -- Engineering and research and development expense has
been reclassified to conform with the current period presentation.
Basis of Presentation of Unaudited Financial Statements -- The accompanying
unaudited consolidated financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information.
In the opinion of management, all adjustments (consisting only of normal
recurring accruals) considered necessary for a fair presentation have been
included.
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 to
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 number of shares, per share amounts, stock
option data and market prices of the Company's stock have been restated to
reflect the stock split. In addition, an amount equal to the par value of the
shares distributed to effect the stock split has been transferred from
paid-in-capital to common stock.
2. Balance Sheet Information
September 30, June 30,
-------------------
Receivables 1997 1998 1999
--------------------------- ---- ---- ----------
(Unaudited)
U.S. Government:
Amounts billed.................... $ 34,399 $ 22,197 $ 26,755
Amounts unbilled.................. 1,782 -- 587
-------- -------- --------
36,181 22,197 27,342
Commercial customers................ 45,603 58,776 79,952
Other............................... 1,421 2,077 2,087
-------- -------- --------
83,205 83,050 109,381
Less allowance for doubtful
accounts.......................... (1,970) (2,068) (2,161)
-------- -------- --------
$ 81,235 $ 80,982 $107,220
======== ======== ========
The unbilled amounts represent estimated claims for government-ordered
changes which will be invoiced upon completion of negotiations and price
adjustment provisions which will be invoiced when they are agreed upon by the
government.
September 30, June 30,
-------------------
Inventories 1997 1998 1999
--------------------------- ---- ---- ----------
(Unaudited)
Finished products................... $ 6,430 $ 27,916 $ 58,493
Partially finished products......... 36,661 52,700 80,075
Raw materials....................... 44,455 77,675 92,701
-------- -------- --------
Inventories at FIFO cost............ 87,546 158,291 231,269
Less: Progress payments on U.S.
government contracts........ (2,988) -- (1,694)
Excess of FIFO cost over
LIFO cost................... (8,061) (9,100) (11,256)
-------- -------- --------
$76,497 $149,191 $218,319
======== ======== ========
Title to all inventories related to government contracts, which provide for
progress payments, vests with the government to the extent of unliquidated
progress payments.
F-10
<PAGE>
OSHKOSH TRUCK CORPORATION
Notes to Consolidated Financial Statements - (Continued)
September 30, June 30,
-------------------
Goodwill and Other Intangible Assets 1997 1998 1999
------------------------------------ ---- ---- ----------
(Unaudited)
Useful Lives
------------
Goodwill 40 Years..... $103,887 $212,746 $218,614
Distribution network 40 Years..... 53,000 63,800 63,800
Non-compete agreements 15 Years..... -- 38,000 38,000
Other 5-40 Years... 11,098 24,860 25,198
-------- -------- --------
167,985 339,406 345,612
Less accumulated amortization.......... (4,641) (12,741) (21,141)
-------- -------- --------
$163,344 $326,665 $324,471
======== ======== ========
The Company engaged third party business valuation appraisers to determine
the fair value of the distribution network in connection with its acquisition of
Pierce (see Note 3). 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. To establish the useful lives of the distribution network, a historical
turnover analysis was performed.
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. The
partners finance purchases of trucks to be leased to user-customers by investing
equity in an amount equal to approximately 11.0% to 14.0% of the cost of the
trucks. Banks and other financial institutions lend to OMFSP the remaining
percentage, with recourse solely to OMFSP, secured by a pledge of the
user-lessees. Each partner funds one-half of the equity needed to finance the
new truck 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, 1998 (its
fiscal year end) and June 30, 1999 and for the period February 26, 1998 (the
date OMFSP was formed) to June 30, 1998 and September 30, 1998 and the nine
month period ended June 30, 1999, is as follows:
September 30, 1998 June 30, 1999
------------------ -------------
(Unaudited)
Cash and cash equivalents............... $ 4,584 $ 5,731
Investment in sales type leases, net.... 123,973 137,901
Other................................... 204 407
---------- ----------
$ 128,761 $ 144,039
========== ==========
Notes payable........................... $ 105,473 $ 111,527
Other liabilities....................... 2,908 6,274
Partners' equity........................ 20,380 26,238
---------- ----------
$ 128,761 $ 144,039
========== ==========
Period From
Period From February 26, 1998 Nine Months
February 26, 1998 to Ended
to September 30, 1998 June 30, 1998 June 30, 1999
--------------------- ----------------- -------------
Interest income........ $6,605 $ 3,741 $ 8,636
Net interest income.... 1,622 950 2,654
Revenues in excess of
(less than)expenses... 644 (102) 2,942
F-11
<PAGE>
OSHKOSH TRUCK CORPORATION
Notes to Consolidated Financial Statements - (Continued)
Excess of revenues over expenses for the periods February 26, 1998 to June
30, 1998 and September 30, 1998 includes a $1,466 nonrecurring, non-cash charge
to write off start-up expenses incurred in fiscal 1998 to establish OMFSP (see
Note 12).
3. Acquisitions
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 (see Note 4).
The 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 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.
Pro forma unaudited consolidated operating results of the Company, assuming
McNeilus had been acquired as of October 1, 1996 and 1997, are summarized below:
Fiscal Year Ended September 30, Nine Months Ended
-------------------------------
1997 1998 June 30, 1998
-------- ---------- -------------
Net sales............................. $998,031 $1,040,986 $797,935
Income before extraordinary
item........ 14,954 18,590 13,752
Net income............................ 14,954 17,405 12,567
Earnings per share:
Before extraordinary item........ 1.17 1.47 1.09
Net income....................... 1.17 1.38 1.00
Earnings per share assuming dilution:
Before extraordinary item........ 1.17 1.46 1.08
Net income....................... 1.17 1.36 0.99
These pro forma results have been prepared for informational purposes only
and include certain adjustments to depreciation expense related to acquired
plant and equipment, amortization expense arising from goodwill and other
intangible assets, interest expense on acquisition debt, elimination of certain
non-recurring expenses directly attributable to the transaction (including
elimination of the write-off of the Company's share of start-up expenses), and
the estimated related income tax effects of all such adjustments. Anticipated
efficiencies from the consolidation of certain manufacturing activities between
the Company and McNeilus and anticipated lower material costs related to the
consolidation of purchasing between the Company and McNeilus have been excluded
from the amounts included in the pro forma operating results. These pro forma
results do not purport to be indicative of the results of operations which would
have resulted had the combination been in effect as of October 1, 1996 and 1997
or of the future results of operations of the consolidated entities.
On December 19, 1997, the Company 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
F-12
<PAGE>
OSHKOSH TRUCK CORPORATION
Notes to Consolidated Financial Statements - (Continued)
being manufactured at Pierce. The acquisition was accounted for using the
purchase method of accounting, and accordingly, the operating results of Nova
Quintech are included in the Company's statement of income since the date of the
acquisition. Had the acquisition occurred as of October 1, 1996 or 1997, there
would have been no material pro forma effect on net sales, net income, or
earnings per share in fiscal 1997 or 1998.
On September 18, 1996, the Company acquired for cash all of the issued and
outstanding stock of Pierce, a leading manufacturer and marketer of fire trucks
and other fire apparatus in the U.S. The acquisition price of $156,926,
including acquisition costs and net of cash acquired, was financed from
borrowings under a subsequently retired bank credit facility. The acquisition
was accounted for using the purchase method of accounting, and accordingly, the
operating results of Pierce are included in the Company's consolidated
statements of income since the date of acquisition. The purchase price,
including acquisition costs, was allocated based on the estimated fair values of
the assets acquired and liabilities assumed at the date of the acquisition and
was subsequently adjusted during fiscal 1997. Approximately $62,000 of the
purchase price was allocated to the distribution network and other intangible
assets. The excess of the purchase price over the estimated fair value of net
assets acquired amounted to $103,887, which has been accounted for as goodwill.
On November 9, 1995, the Company, through its wholly-owned subsidiary,
Summit Performance Systems, Inc. ("Summit"), acquired the land, buildings,
machinery and equipment, and technology of Friesz Manufacturing Company
("Friesz") using available cash for $3,912. Friesz was engaged in the
manufacture and sale of concrete mixer systems and related aftermarket
replacements parts. Approximately $2,150 of the purchase price was allocated to
intangible assets, principally designs and related technology (see Note 13). The
acquisition was accounted for using the purchase method of accounting, and
accordingly, the operating results of Friesz are included in the Company's
consolidated statements of income (loss) since the date of acquisition.
4. Long-Term Debt
On February 26, 1998, the Company entered into the Senior Credit Facility
and issued $100,000 of 8 3/4% Senior Subordinated Notes due March 1, 2008 to
finance the acquisition of McNeilus (see Note 3) and to refinance a previous
credit facility. The Senior Credit Facility consists of a six year $100,000
revolving credit facility ("Revolving Credit Facility") and three term loan
facilities ("Term Loan A," "Term Loan B," and "Term Loan C," collectively, the
"Term Loan Facility"). Term Loan A was for $100,000 and matures on March 31,
2004. Term Loans B and C each were for $62,500 and mature on March 31, 2005 and
March 31, 2006, respectively.
Term Loan A required principal payments of $5,000 in fiscal 1998, and
required principal payments of $11,000 in fiscal 1999, $13,500 in fiscal 2000,
$15,000 in fiscal 2001, $19,500 in fiscal 2002 and $24,000 in fiscal 2003, with
the remaining outstanding principal amount of $12,000 due in fiscal 2004. Term
Loans B and C each require principal payments of $200 per quarter through March
31, 2004 (for Term Loan B) and through March 31, 2005 (for Term Loan C). Any
remaining outstanding principal balances on Term Loans B and C are due in
quarterly installments through March 31, 2005 and March 31, 2006, respectively.
From February 26, 1998 through September 30, 1998, the Company has paid from
available cash $53,000 on the Term Loan Facility. All prepayments are first
applied to the next twelve months mandatory principal payments and then on a pro
rata basis to the principal payments due over the remainder of the loans. The
outstanding balances as of September 30, 1998 and June 30, 1999 on Term Loan A,
Term Loan B and Term Loan C are $87,000, $42,500, and $42,500, respectively,
after prepayments.
At September 30, 1998, borrowings of $6,000 and outstanding letters of
credit of $12,146 reduced available capacity under the Company's Revolving
Credit Facility to $81,854. At June 30, 1999, borrowings of $20,300 and $9,298
of outstanding letters of credit reduced available capacity under the Revolving
Credit Facility to $70,402.
F-13
<PAGE>
OSHKOSH TRUCK CORPORATION
Notes to Consolidated Financial Statements - (Continued)
Interest rates on borrowings under the Revolving Credit and Term Loan
Facilities are variable and are equal to the "Base Rate" (which is equal to the
higher of a bank's reference rate and the federal funds rate plus 0.5%) or the
"IBOR Rate" (which is a bank's inter-bank offered rate for U.S. dollars in
off-shore markets) plus a margin of 0.50%, 0.50%, 1.00% and 1.25% for Base Rate
loans and a margin of 1.75%, 1.75%, 2.25% and 2.50% for IBOR Rate loans under
the Revolving Credit Facility, Term Loan A, Term Loan B, and Term Loan C,
respectively, as of September 30, 1998. The margins are subject to adjustment,
up or down, based on whether certain financial criteria are met. The weighted
average interest rates on borrowings outstanding at September 30, 1998 were
7.417% on the Revolving Credit Facility and 7.435%, 7.923% and 8.173% for Term
Loans A, B and C, respectively.
The Company is charged a 0.30% annual fee with respect to any unused
balance under its Revolving Credit Facility, and a 1.75% annual fee with respect
to any letters of credit issued under the Revolving Credit Facility. These fees
are subject to adjustment if certain financial criteria are met.
Substantially all the tangible and intangible assets of the Company and its
subsidiaries (including the stock of certain subsidiaries) are pledged as
collateral under the Senior Credit Facility. Among other restrictions, the
Senior Credit Facility: (1) limits payments of dividends, purchases of the
Company's stock, and capital expenditures; (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; (4) requires mandatory
prepayments to the extent of "excess cash flows"; and (5) limits investments,
dispositions of assets and guarantees of indebtedness. The Company believes that
such limitations should not impair its future operating activities.
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 are due March 1, 2008 and can be redeemed by the Company for
a premium after March 1, 2003. However, the Company may redeem up to $35,000 of
the Senior Subordinated Notes at any time prior to March 1, 2001, at a
redemption price of 108.75% of the principal amount redeemed, with net cash
proceeds of any public offerings of Common Stock, provided that such redemption
occurs within 45 days of the date of the closing of such public offering. In
addition to the Company, certain of the Company's subsidiaries, fully,
unconditionally, jointly and severally guarantee the Company's obligations under
the Senior Subordinated Notes.
McNeilus has unsecured notes payable to several of its former shareholders
aggregating $2,804 at September 30, 1998. 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.
The aggregate annual maturities of long-term debt for the five years
succeeding September 30, 1998, are as follows: 1999 -- $3,472; 2000 -- $14,621;
2001 -- $16,099; 2002 -- $20,602; and 2003 -- $25,088.
F-14
<PAGE>
OSHKOSH TRUCK CORPORATION
Notes to Consolidated Financial Statements - (Continued)
5. Income Taxes
Fiscal Year Ended September 30,
-------------------------------
1996 1997 1998
-------- -------- --------
Income Tax Provision (Credit)
Current:
Federal............................. $ 2,988 $ 8,236 $ 10,555
State............................... 368 1,866 2,162
-------- -------- --------
Total current.................... 3,356 10,102 12,717
Deferred:
Federal............................. (4,630) (3,271) (53)
State............................... (467) (335) (9)
-------- -------- --------
Total deferred................... (5,097) (3,606) (62)
-------- -------- --------
$ (1,741) $ 6,496 $ 12,655
======== ======== ========
Fiscal Year Ended September 30,
-------------------------------
1996 1997 1998
-------- -------- --------
Effective Rate Reconciliation
U.S. federal tax rate................... (34.0)% 35.0% 35.0%
State income taxes, net................. (5.0) 6.0 4.9
Reduction of prior years' excess tax
provisions.............................. (50.5) (5.5) --
Foreign sales corporation............... (5.2) (1.5) (1.5)
Goodwill amortization................... -- 5.4 5.1
Other, net.............................. 6.9 -- 0.7
----- ---- ----
(87.8)% 39.4% 44.2%
===== ==== ====
September 30,
----------------------
1997 1998
--------- ---------
Deferred Tax Assets and Liabilities
Deferred tax assets:
Other current liabilities..................... $ 5,277 $ 6,284
Accrued warranty.............................. 4,439 8,625
Postretirement benefit obligations............ 3,916 4,219
Payroll-related obligations................... 1,846 3,177
Investments................................... 1,887 406
Other......................................... 729 949
--------- --------
Total deferred tax assets................. 18,094 23,660
Deferred tax liabilities:
Intangible assets............................. 23,402 31,498
Investment in unconsolidated partnership...... -- 16,496
Property, plant and equipment................. 4,175 7,288
Inventories................................... 2,341 3,038
Deferred charges.............................. 1,091 850
Other......................................... 58 41
--------- ---------
Total deferred tax liabilities............ 31,067 59,211
--------- ---------
Net deferred tax liability................ $ (12,973) $ (35,551)
========= =========
The Company has not recorded a valuation allowance with respect to any
deferred tax assets.
6. Employee Benefit Plans
The Company has defined benefit pension plans covering substantially all
employees, except McNeilus employees. The plans provide benefits based on
compensation, years of service and date of birth. The Company's policy is to
fund the plans in amounts which comply with contribution limits imposed by law.
F-15
<PAGE>
OSHKOSH TRUCK CORPORATION
Notes to Consolidated Financial Statements - (Continued)
Components of net periodic pension cost for these plans for fiscal 1996,
1997 and 1998, including costs of discontinued operations for 1996 which are not
significant, but excluding Pierce pension costs for 1996 due to the proximity of
its acquisition to the Company's fiscal year end, are as follows:
Fiscal Year Ended September 30,
-------------------------------
1996 1997 1998
------- ------- -------
Service cost- benefits earned during year $ 1,149 $ 1,387 $ 1,744
Interest cost on projected benefit
obligations........................... 1,979 2,439 2,751
Actual return on plan assets............ (3,347) (8,789) 1,647
Net amortization and deferral........... 1,232 6,123 (4,575)
Net periodic pension cost............... $ 1,013 $ 1,160 $ 1,567
======= ======= =======
The following table summarizes the funded status of the pension plans and
the amounts recognized in the Company's consolidated balance sheets at September
30, 1997 and 1998:
<TABLE>
<CAPTION>
1997 1998
-------------------- -------------------------------------------
Assets Exceed Assets Exceed Accumulated Benefits
Accumulated Benefits Accumulated Benefits Exceed Assets
-------------------- -------------------- -------------
<S> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested.................................................... $ 29,334 $ 17,355 $ 16,953
Nonvested................................................. 694 318 1,515
---------- --------- -----------
Accumulated benefit obligations.............................. 30,028 17,673 18,468
Adjustment for projected benefit obligations................. 4,759 5,719 --
---------- --------- -----------
Projected benefit obligations................................ 34,787 23,392 18,468
Plan assets at fair value.................................... 39,556 21,907 15,862
---------- --------- -----------
Plan assets in excess of (less than) projected benefit
obligations.............................................. 4,769 (1,485) (2,606)
Unrecognized net transition asset............................ (594) (173) (354)
Unrecognized net (gain) loss................................. (1,538) 2,729 3,311
Unrecognized prior service cost.............................. 1,229 36 1,878
Adjustment required to recognize minimum pension liability... -- -- (4,835)
---------- --------- -----------
Prepaid pension asset (accrued liability).................... $ 3,866 $ 1,107 $ (2,606)
========== ========= ===========
</TABLE>
Generally accepted accounting principles require the recognition of a
minimum pension liability for each defined benefit plan for which the
accumulated benefit obligation exceeds plan assets ($2,606 at September 30,
1998) and recognition of an intangible asset to the extent of unrecognized past
service cost ($1,878 at September 30, 1998). These amounts are included in other
long-term liabilities and intangible assets, respectively, at September 30,
1998. An adjustment of $1,804 has been recorded as a reduction of shareholders'
equity in fiscal 1998 to recognize the minimum liability of $4,835, net of both
the intangible asset recorded of $1,878 and the related income tax benefit of
$1,153.
The plans' assets consist of investments in commingled equity and fixed
income funds and individually managed equity portfolios. Actuarial assumptions
are as follows:
September 30,
--------------------
1996 1997 1998
---- ---- ----
Discount rate..................................... 7.75% 7.25% 7.25%
Rate of increase in compensation.................. 4.50 4.50 4.50
Expected long-term rate of return on plan assets.. 9.25 9.25 9.25
The Company provides health benefits to certain of its retirees and their
eligible spouses. Approximately 35% of the Company's employees become eligible
for these benefits if they reach normal retirement age while working for the
Company.
F-16
<PAGE>
OSHKOSH TRUCK CORPORATION
Notes to Consolidated Financial Statements - (Continued)
The following table summarizes the status of the postretirement benefit
plan and the amounts recognized in the Company's consolidated balance sheets for
the periods indicated:
September 30,
------------------
1997 1998
------- -------
Postretirement benefit obligations:
Retirees...................................... $ 2,828 $ 3,055
Fully eligible active participants............ 522 563
Other active participants..................... 5,647 6,453
------- -------
8,997 10,071
Unrecognized net gain............................. 1,150 864
------- -------
Postretirement benefit obligations................ $10,147 $10,935
======= =======
Net periodic postretirement benefit cost for fiscal 1996, 1997 and 1998,
including discontinued operations for 1996 which are not significant, includes
the following components:
Fiscal Year Ended
September 30,
------------------
1996 1997 1998
---- ---- ----
Service cost......................................... $353 $366 $ 397
Interest cost on the accumulated postretirement
benefit obligation................................. 580 613 676
Amortization of unrecognized net gain................ -- (32) (13)
---- ---- ------
Net periodic postretirement benefit cost............. $933 $947 $1,060
==== ==== ======
Net change in postretirement benefit obligations includes the following:
Fiscal Year Ended
September 30,
----------------------
1997 1998
------- --------
Balance at beginning of year................... $ 9,517 $ 10,147
Benefits paid.................................. (317) (272)
Net periodic postretirement benefit cost....... 947 1,060
------- ---------
Balance at end of year......................... $10,147 $ 10,935
======= ========
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation was 9.8% in fiscal 1998, declining to 6.5% in
fiscal 2006. The weighted average discount rate used in determining the
postretirement benefit obligation was 7.75% and 7.25% in fiscal 1997 and 1998,
respectively. If the health care cost trend rate was increased by 1%, the
postretirement benefit obligation at September 30, 1998 would increase by $896
and net periodic postretirement benefit cost for fiscal 1998 would increase by
$120.
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. Amounts expensed for Company matching
contributions were $401, $825 and $1,345 in fiscal 1996, 1997 and 1998,
respectively.
7. Shareholders' Equity
On May 2, 1997, the Company and Freightliner Corporation ("Freightliner")
formally terminated a strategic alliance formed on June 2, 1995. The Company
repurchased from Freightliner 525,000 shares of its Common Stock and 1,875,000
warrants for the purchase of additional shares of Common Stock for a total of
$6,750.
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
F-17
<PAGE>
OSHKOSH TRUCK CORPORATION
Notes to Consolidated Financial Statements - (Continued)
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. As of September 30, 1998, 445,332 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, 1997 and 1998, 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.
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.
8. Stock Option Plan
The Company has reserved 1,488,252 shares of Common Stock at September 30,
1998 to provide for the exercise of outstanding stock options and the issuance
of Common Stock under incentive compensation awards. Under the 1990 Incentive
Stock Plan for the Key Employees (the "Plan"), officers, other key employees and
directors may be granted options to purchase up to an aggregate of 1,875,000
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 (as amended on February 1, 1999)
expires on September 21, 2008. 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.
F-18
<PAGE>
OSHKOSH TRUCK CORPORATION
Notes to Consolidated Financial Statements - (Continued)
The following table summarizes the transactions of the Plan for the
three-year period ended September 30, 1998.
Number of Weighted-Average
Options Exercise Price
--------- ----------------
Unexercised options outstanding
September 30, 1995.............................. 715,602 $ 7.31
Options granted............................... 21,750 9.79
Options exercised............................ (36,772) 6.48
Options forfeited............................ (9,377) 8.39
---------
Unexercised options outstanding
September 30, 1996............................. 691,203 7.41
Options granted.............................. 7,500 8.00
Options exercised............................ (30,496) 6.89
Options forfeited............................ (11,355) 8.65
---------
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
========= =======
Price range $5.25-- $7.50 (weighted-average
contractual life of 5.3 years)................ 281,926 $ 6.55
Price range $8.00-- $11.17 (weighted-average
contractual life of 7.8 years)................ 322,125 10.29
Price range $12.75-- $15.75 (weighted-average
contractual life of 9.8 years)................ 463,500 14.38
Exercisable options at September 30, 1998........ 434,804 7.58
Shares available for grant at September 30, 1998. 420,700
SFAS No. 123, "Accounting for Stock-Based Compensation," became effective
for the Company in fiscal 1997. As allowed by SFAS No. 123, the Company has
elected to continue to follow Accounting Principles Board Opinion ("APB") No.
25, "Accounting for Stock Issued to Employees," in accounting for the Plan.
Under APB No. 25, the Company does not recognize compensation expense on the
issuance of its stock options because the option terms are fixed and the
exercise price equals the market price of the underlying stock on the grant
date.
As required by SFAS No. 123, the Company has determined the pro forma
information as if the Company had accounted for stock options granted since
September 30, 1995 under the fair value method of SFAS No. 123. The
Black-Scholes option pricing model was used with the following weighted-average
assumptions: risk-free interest rates of 5.39% and 6.38% in 1996, 6.27% in 1997
and 5.87%, 5.44% and 4.62% in 1998; dividend yield of 3.60% and 3.28% in 1996,
4.17% in 1997 and 2.99%, 2.61% and 2.12% in 1998; expected common stock market
price volatility factor of .305 in 1996 and 1997 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 1996, 1997 and 1998 was $2.72, $2.05 and $4.07
per share, respectively. The pro forma effect of these options on net earnings
and earnings per share was not material. These pro forma calculations only
include the effects of 1996, 1997 and 1998 grants. As such, the impacts are not
necessarily indicative of the effects on reported net income of future years.
9. Operating Leases and Related-Party Transactions
Total rental expense for plant and equipment charged to continuing
operations under noncancelable operating leases was $797, $886 and $1,114 in
fiscal 1996, 1997 and 1998, respectively. Minimum rental payments due under
operating leases for subsequent fiscal years are: 1999 -- $842; 2000 -- $382;
2001 -- $281; 2002 -- $206; and 2003 -- $137.
Included in rental expense are charges of $128, $128 and $128 in fiscal
1996, 1997 and 1998, respectively, 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 Company's
new product development operations are conducted in the building. The purchase
price was based on the average of two independent appraisals.
F-19
<PAGE>
OSHKOSH TRUCK CORPORATION
Notes to Consolidated Financial Statements - (Continued)
10. Discontinued Operations
On June 2, 1995, Freightliner acquired certain assets of the Company's
motor home, bus and van chassis business. The consideration included cash of
$23,815 and the assumption by Freightliner of certain liabilities. The assets
sold to Freightliner consisted of inventories, property, plant and equipment and
an option to buy the Company's joint venture ownership interest in a Mexican
chassis manufacturer, which option has subsequently expired. The liabilities
assumed by Freightliner included certain warranty obligations related to
previously produced chassis in excess of certain specified amounts for which the
Company retained liability and industrial revenue bonds that were secured by the
underlying real estate. The disposition of the chassis business has been
accounted for as a discontinued operation.
In fiscal 1996, the Company incurred charges totaling $2,623 arising from
the write-off of receivables and other obligations related to the Company's
former joint venture in Mexico. In addition, in fiscal 1996, the Company
recognized additional warranty and other related costs totaling $2,063 with
respect to the Company's former U.S. chassis business.
11. 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. The Company had recorded a liability for
the full amount of the final settlement as of June 30, 1999.
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 skeletal container chassis. 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 414 PRPs participating in
the costs of addressing the site and has been assigned an allocation share of
approximately 0.04%. Currently a remedial investigation/ feasibility study is
being completed, and as such, an estimate for the total cost of the remediation
of this site has
F-20
<PAGE>
OSHKOSH TRUCK CORPORATION
Notes to Consolidated Financial Statements - (Continued)
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, 1998. 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 recent 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, 1998.
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, 1998 and June 30, 1999. The Company is also contingently liable
under bid, performance and specialty bonds totaling approximately $86,885 and
$107,815 and open standby letters of credit issued by the Company's bank in
favor of third parties totaling $12,146 and $9,298 at September 30, 1998 and
June 30, 1999, respectively.
Provisions for estimated warranty and other related costs are recorded at
the time of sale and are periodically adjusted to reflect actual experience. As
of September 30, 1997 and 1998, the Company has accrued $12,320 and $15,887 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 1996, 1997 and 1998, the
Company recorded warranty and other related costs for matters beyond the
Company's historical experience totaling $5,602, $3,770 and $3,200,
respectively, with respect to continuing operations and $2,063 with respect to
discontinued operations in fiscal 1996 (see Note 10). The additional charges in
fiscal 1996, 1997 and 1998 with regard to continuing operations principally
related to a dispute involving the Company's former trailer manufacturing
operations with OV, which was settled in fiscal 1998, and secondarily to repair
certain matters related to refuse and front-discharge chassis. The additional
warranty charges with respect to discontinued operations in fiscal 1996 resulted
from the underestimation of the warranty liabilities retained by the Company
upon the sale of the Company's former chassis business. 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.
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 in fiscal 1995 and 1996. As a result
F-21
<PAGE>
OSHKOSH TRUCK CORPORATION
Notes to Consolidated Financial Statements - (Continued)
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 fiscal 1996. 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. In fiscal 1996, the Company also wrote
off an investment of $900 in a joint venture, which leases equipment to
Steeltech and accrued $1,084 for the potential satisfaction of a guarantee of
50% of the outstanding indebtedness of the joint venture. 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, the Company is attempting
to dispose of its investment in the joint venture and simultaneously satisfy in
cash the remainder of its guarantee. The Company believes that it is adequately
reserved at September 30, 1998, for any matters relating to the disposition of
such investment and guarantee.
The Company derives a significant portion of its revenue from the U.S.
Department of Defense, as follows:
Fiscal Year Ended September 30,
-----------------------------------
1996 1997 1998
--------- --------- ----------
Defense:
U.S. Department of Defense... $ 249,413 $ 272,042 $ 248,577
Export....................... 2,059 16,584 452
--------- --------- ---------
251,472 288,626 249,029
Commercial:
Domestic..................... 141,540 373,946 619,170
Export....................... 20,443 20,662 34,593
--------- --------- ---------
161,983 394,608 653,763
--------- --------- ---------
Net sales....................... $ 413,455 $ 683,234 $ 902,792
========= ========= =========
U.S. Department of Defense sales include $58,855, $17,723 and $10,437, in
fiscal 1996, 1997 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.
Various actions or claims have been asserted or may be asserted in the
future by the government against the Company. A potential action by the
government against the Company in connection with a grand jury investigation was
commenced in 1989. In 1996, the government discontinued this investigation
without any action against the Company or its employees. A subsequent, related
civil investigation was dismissed in fiscal 1998.
F-22
<PAGE>
OSHKOSH TRUCK CORPORATION
Notes to Consolidated Financial Statements - (Continued)
12. Unaudited Quarterly Results
<TABLE>
<CAPTION>
Fiscal 1997 Fiscal 1998
--------------------------------------------------- -----------------------------------------------
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales............... $150,320 $170,465 $176,596 $185,853 $151,801 $217,836 $290,104 $243,051
Gross income............ 17,590 21,115 19,686 22,606 19,998 27,534 39,579 38,925
Income from continuing
operations............. 1,624 2,474 2,792 3,116 3,140 3,161 5,000 4,952
Extraordinary item...... -- -- -- -- -- (735) (450) --
Net income.............. 1,624 2,474 2,792 3,116 3,140 2,426 4,550 4,952
Earnings per share:
Continuing operations. $ .13 $ .19 $ .22 $ .25 $ .25 $ .25 $ .39 $ .39
Extraordinary item.... -- -- -- -- -- (.06) (.03) --
Net income............ .13 .19 .22 .25 .25 .19 .36 .39
Earnings per share assuming
dilution:
Continuing operations. .13 .19 .22 .25 .25 .25 .38 .39
Extraordinary item.... -- -- -- -- -- (.06) (.03) --
Net income............ .13 .19 .22 .25 .25 .19 .35 .39
Dividends per share:
Class A Common Stock.. $0.07250 $0.07250 $0.07250 $0.07250 $0.07250 $0.07250 $0.07250 $0.07250
Common Stock.......... 0.08333 0.08333 0.08333 0.08333 0.08333 0.08333 0.08333 0.08333
</TABLE>
For the fourth quarter of fiscal 1998, continuing operations includes, on a
pre-tax basis, a $3,865 non-cash charge related to an impairment loss for the
Company's Florida manufacturing facilities, a $1,935 non-cash charge related to
an impairment loss on the Company's Summit brand mixer system technology
intangible asset, and a $3,375 cash gain from the sale of an interest in a
Mexican bus manufacturer (see Note 13).
In April 1998, the AICPA issued SOP No. 98-5, "Reporting on the Costs of
Start-up Activities." Prior to fiscal 1998, the Company had not capitalized any
costs covered by SOP 98-5. In February 1998, OMFSP, which the Company accounts
for using the equity method, incurred and capitalized approximately $1,466 of
costs ($895 net of income taxes) related to the organization of the partnership.
In the fourth quarter of fiscal 1998, OMFSP elected to adopt early the
provisions of SOP 98-5 which require that adoption be as of the beginning of the
year. As a result, the Company has restated the previously reported results for
the second quarter of fiscal 1998 to write off its share of the costs previously
capitalized by the partnership. The charge has been included in the consolidated
statements of income under the caption "Equity in earnings of unconsolidated
partnership, net of income taxes."
13. Impairment Losses and Gain on Sale of Affiliate
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 the previously acquired concrete mixer
technology of Friesz (see Note 3). 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 Friesz mixer technology and determined that
such cash flows were less than the carrying value of the assets. Accordingly,
pre-tax
F-23
<PAGE>
OSHKOSH TRUCK CORPORATION
Notes to Consolidated Financial Statements - (Continued)
impairment losses of $3,865 and $1,935, respectively, were recognized in fiscal
1998 and are included in selling, general and administrative expense. The fair
value of the Florida facility was based on a third party appraisal. The fair
value of the mixer intangible asset was based on the absence of future cash
flows.
During fiscal 1996, the Company wrote off (as a charge to selling, general
and administrative expense) its $3,025 equity investment in a Mexican bus
manufacturer due to prolonged weakness in the Mexican economy and continuing
high losses and high leverage reported by the Mexican affiliate. Also, in fiscal
1996, the Company wrote off a $200 equity investment in Steeltech and a $900
investment in a joint venture which leases equipment to Steeltech (see Note 11).
In September 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 has been
recorded as a reduction of selling, general and administrative expense in fiscal
1998.
14. Subsidiary Guarantors
The following tables present condensed consolidating financial information
for fiscal 1998 and as of June 30, 1999 and for the nine months then ended 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.,
Oshkosh/McNeilus Financial Services, Inc., and Nation's Casualty Insurance,
Inc., which are the only non-guarantor subsidiaries of the Company
("Non-Guarantor Subsidiaries"); and (c) on a combined basis, the Non-Guarantor
Subsidiaries. Condensed consolidating financial information has not been
presented for any period prior to February 26, 1998 because no Non-Guarantor
Subsidiaries existed prior to the issuance of the Senior Subordinated Notes as
of that date. 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 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.
F-24
<PAGE>
OSHKOSH TRUCK CORPORATION
Notes to Consolidated Financial Statements - (Continued)
<TABLE>
Condensed Consolidating Statement of Income
Year Ended September 30, 1998
<CAPTION>
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ ------------
(In thousands)
<S> <C> <C> <C> <C> <C>
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) from operations before
income taxes, equity in earnings of
subsidiaries and unconsolidated
partnership and extraordinary item..... (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 (loss) from continuing operations... 16,253 22,516 498 (23,014) 16,253
Extraordinary charge for early retirement
of debt, net of income tax benefit..... (1,185) -- -- -- (1,185)
---------- ---------- ---------- ---------- -----------
Net income................................. $ 15,068 $ 22,516 $ 498 $ (23,014) $ 15,068
========== ========== ========== ========== ===========
</TABLE>
F-25
<PAGE>
OSHKOSH TRUCK CORPORATION
Notes to Consolidated Financial Statements - (Continued)
<TABLE>
Condensed Consolidating Balance Sheet
September 30, 1998
<CAPTION>
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ ------------
(In thousands)
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............. $ 1,065 $ 979 $ 1,578 $ -- $ 3,622
Receivables, net....................... 41,009 39,863 110 -- 80,982
Inventories............................ 47,191 102,000 -- -- 149,191
Prepaid expenses and other............. 9,059 5,099 1,891 -- 16,049
---------- ---------- ---------- ---------- -----------
Total current assets................ 98,324 147,941 3,579 -- 249,844
Investment in and advances to:
Subsidiaries........................... 363,189 (4,585) -- (358,604) --
Unconsolidated partnership............. -- -- 13,496 -- 13,496
Other long-term assets..................... 9,276 4,960 (38) -- 14,198
Net property, plant and equipment.......... 23,789 57,047 -- -- 80,836
Goodwill and other intangible assets, net.. 1,108 325,557 -- -- 326,665
---------- ---------- ---------- ---------- -----------
Total assets............................... $ 495,686 $ 530,920 $ 17,037 $ (358,604) $ 685,039
========== ========== ========== ========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable....................... $ 30,843 $ 34,294 $ 34 $ -- $ 65,171
Floor plan notes payable............... -- 11,645 -- -- 11,645
Customer advances...................... 1,689 43,226 -- -- 44,915
Payroll-related obligations............ 8,749 15,348 27 -- 24,124
Accrued warranty....................... 5,689 10,198 -- -- 15,887
Other current liabilities.............. 23,710 15,037 4,751 -- 43,498
Current maturities of long-term debt... 3,216 251 -- -- 3,467
---------- ---------- ---------- ---------- -----------
Total current liabilities.......... 73,896 129,999 4,812 -- 208,707
Long-term debt............................. 274,784 2,553 -- -- 277,337
Deferred income taxes...................... (2,394) 33,416 16,810 -- 47,832
Other long-term liabilities ............... 18,104 1,763 -- -- 19,867
Investment by and advances from (to)
parent................................. -- 363,189 (4,585) (358,604) --
Shareholders' equity....................... 131,296 -- -- -- 131,296
---------- ---------- ---------- ---------- -----------
Total liabilities and shareholders' equity. $ 495,686 $ 530,920 $ 17,037 $ (358,604) $ 685,039
========== ========== ========== ========== ===========
</TABLE>
F-26
<PAGE>
OSHKOSH TRUCK CORPORATION
Notes to Consolidated Financial Statements - (Continued)
<TABLE>
Condensed Consolidating Statement of Cash Flows
Year Ended September 30, 1998
<CAPTION>
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ ------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Operating activities:
Income (loss) from continuing operations.. $ 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 4,532 (2,488) -- 42,844
---------- ---------- ---------- ---------- -----------
Net cash provided from (used for)
operating activities.................. 66,760 41,341 (5,146) (23,014) 79,941
Investing activities:
Acquisitions of businesses, net of
cash acquired......................... (217,581) (3,563) -- -- (221,144)
Investments in and advances to
subsidiaries.......................... (2,045) (28,180) 7,211 23,014 --
Additions to property, plant and
equipment............................. (2,584) (5,971) -- -- (8,555)
Other..................................... 4,177 (2,608) (487) -- 1,082
---------- ---------- ---------- ---------- -----------
Net cash provided from (used for)
investing activities.................. (218,033) (40,322) 6,724 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
period.................................... 23,210 9 -- -- 23,219
---------- ---------- ---------- ---------- -----------
Cash and cash equivalents at end of period.... $ 1,065 $ 979 $ 1,578 $ -- $ 3,622
========== ========== ========== ========== ===========
</TABLE>
F-27
<PAGE>
OSHKOSH TRUCK CORPORATION
Notes to Consolidated Financial Statements - (Continued)
<TABLE>
Condensed Consolidating Statement of Income
Nine Months Ended June 30, 1998
(Unaudited)
<CAPTION>
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ ------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Net sales................................. $ 305,537 $ 354,204 $ -- $ -- $ 659,741
Cost of sales............................. 274,524 298,106 -- -- 572,630
---------- ---------- ---------- ---------- -----------
Gross income.............................. 31,013 56,098 -- -- 87,111
Operating expenses:
Selling, general and administrative..... 27,266 20,147 252 -- 47,665
Amortization of goodwill and other
intangibles....................... -- 5,559 -- -- 5,559
---------- ---------- ---------- ---------- -----------
Total operating expenses.................. 27,266 25,706 252 -- 53,224
---------- ---------- ---------- ---------- -----------
Operating income (loss)................... 3,747 30,392 (252) -- 33,887
Other income (expense):
Interest expense........................ (9,117) (5,156) -- -- (14,273)
Interest income......................... 274 270 -- -- 544
Miscellaneous, net...................... (292) (416) 364 -- (344)
---------- ---------- ---------- ---------- -----------
(9,135) (5,302) 364 -- (14,073)
---------- ---------- ---------- ---------- -----------
Income (loss) from operations before
income taxes, and equity in
earnings of subsidiaries and
unconsolidated partnership and
extraordinary item...................... (5,388) 25,090 112 -- 19,814
Provision (credit) for income taxes....... (2,243) 10,584 37 -- 8,378
---------- ---------- ---------- ---------- -----------
(3,145) 14,506 75 -- 11,436
Equity in earnings of subsidiaries
and unconsolidated partnership,
net of income taxes..................... 14,446 -- (135) (14,446) (135)
---------- ---------- ---------- ---------- -----------
Income from operations.................... 11,301 14,506 (60) (14,446) 11,301
Extraordinary charge for early
retirement of debt, net of income tax
benefit................................. (1,185) -- -- -- (1,185)
---------- ---------- ---------- ---------- -----------
Net income................................ $ 10,116 $ 14,506 $ (60) $ (14,446) $ 10,116
========== ========== ========== ========== ===========
</TABLE>
F-28
<PAGE>
OSHKOSH TRUCK CORPORATION
Notes to Consolidated Financial Statements - (Continued)
<TABLE>
Condensed Consolidating Statement of Income
Nine Months Ended June 30, 1999
(Unaudited)
<CAPTION>
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ ------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Net sales................................. $ 295,341 $ 559,294 $ -- $ (3,587) $ 851,048
Cost of sales............................. 259,360 470,355 -- (3,587) 726,128
---------- ---------- ---------- ---------- -----------
Gross income.............................. 35,981 88,939 -- -- 124,920
Operating expenses:
Selling, general and administrative..... 30,155 32,919 248 -- 63,322
Amortization of goodwill and other
intangibles....................... -- 8,400 -- -- 8,400
---------- ---------- ---------- ---------- -----------
Total operating expenses.................. 30,155 41,319 248 -- 71,722
---------- ---------- ---------- ---------- -----------
Operating income (loss)................... 5,826 47,620 (248) -- 53,198
Other income (expense):
Interest expense........................ (18,493) (6,071) -- 4,725 (19,839)
Interest income......................... 245 5,047 47 (4,725) 614
Miscellaneous, net...................... 130 130 304 -- 564
---------- ---------- ---------- ---------- -----------
(18,118) (894) 351 -- (18,661)
---------- ---------- ---------- ---------- -----------
Income (loss) from operations before
income taxes, and equity in
earnings of subsidiaries and
unconsolidated partnership.............. (12,292) 46,726 103 -- 34,537
Provision (credit) for income taxes....... (4,671) 19,332 39 -- 14,700
---------- ---------- ---------- ---------- -----------
(7,621) 27,394 64 -- 19,837
Equity in earnings of subsidiaries
and unconsolidated partnership,
net of income taxes..................... 28,627 -- 1,169 (28,627) 1,169
---------- ---------- ---------- ---------- -----------
Net income................................ $ 21,006 $ 27,394 $ 1,233 $ (28,627) $ 21,006
========== ========== ========== ========== ===========
</TABLE>
F-29
<PAGE>
OSHKOSH TRUCK CORPORATION
Notes to Consolidated Financial Statements - (Continued)
<TABLE>
Condensed Consolidating Balance Sheet
June 30, 1999
(Unaudited)
<CAPTION>
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ ------------
(In thousands)
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............... $ 4,110 $ 904 $ 427 $ -- $ 5,441
Receivables, net........................ 52,216 54,938 66 -- 107,220
Inventories............................. 60,048 158,271 -- -- 218,319
Prepaid expenses and other.............. 3,174 662 -- -- 3,836
Deferred income taxes 9,164 7,007 4,488 -- 20,659
---------- ---------- ---------- ---------- -----------
Total current assets................. 128,712 221,782 4,981 -- 355,475
Investment in and advances to:
Subsidiaries............................ 382,141 (2,943) -- (379,198) --
Unconsolidated partnership.............. -- -- 16,643 -- 16,643
Other long-term assets.................... 9,977 6,825 48 -- 16,850
Net property, plant and equipment......... 23,252 57,372 -- -- 80,624
Goodwill and other intangible assets, net. 1,108 323,363 -- -- 324,471
---------- ---------- ---------- ---------- -----------
Total assets.............................. $ 545,190 $ 606,399 $ 21,672 $ (379,198) $ 794,063
========== ========== ========== ========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable........................ $ 35,643 $ 45,139 $ 32 $ -- $ 80,814
Floor plan notes payable................ -- 35,971 -- -- 35,971
Customer advances....................... 1,155 62,929 -- -- 64,084
Payroll-related obligations............. 10,459 14,205 24 -- 24,688
Accrued warranty........................ 6,366 9,725 -- -- 16,091
Other current liabilities............... 32,424 18,148 10,921 -- 61,493
Current maturities of long-term debt
and revolving credit facility........ 27,912 251 -- -- 28,163
---------- ---------- ---------- ---------- -----------
Total current liabilities............ 113,959 186,368 10,977 -- 311,304
Long-term debt............................ 264,388 2,305 -- -- 266,693
Deferred income taxes..................... (4,017) 34,056 13,638 -- 43,677
Other long-term liabilities............... 19,717 1,529 -- -- 21,246
Investments by and advances from
(to) parent............................. -- 382,141 (2,943) (379,198) --
Shareholders' equity...................... 151,143 -- -- -- 151,143
---------- ---------- ---------- ---------- -----------
Total liabilities and shareholders' equity $ 545,190 $ 606,399 $ 21,672 $ (379,198) $ 794,063
========== ========== ========== ========== ===========
</TABLE>
F-30
<PAGE>
OSHKOSH TRUCK CORPORATION
Notes to Consolidated Financial Statements - (Continued)
<TABLE>
Condensed Consolidating Statement of Cash Flows
Nine Months Ended June 30, 1998
(Unaudited)
<CAPTION>
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ ------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Operating activities:
Income (loss) from operations........... $ 11,301 $ 14,506 $ (60) $ (14,446) $ 11,301
Non-cash adjustments.................... 7,042 8,552 260 -- 15,854
Changes in operating assets and
liabilities........................... 32,445 21,010 (1,628) -- 51,827
---------- ---------- ---------- ---------- -----------
Net cash provided from (used for)
operating activities.................... 50,788 44,068 (1,428) (14,446) 78,982
Investing activities:
Acquisition of businesses, net of cash
acquired.............................. (225,524) (3,535) 11,105 -- (217,954)
Investments in and advances to
subsidiaries.......................... 20,715 (32,702) (2,459) 14,446 --
Additions to property, plant and
equipment............................ (1,488) (4,782) -- -- (6,270)
Other................................... 386 (2,274) (24) -- (1,912)
---------- ---------- ---------- ---------- -----------
Net cash provided from (used for)
investing activities.................... (205,911) (43,293) 8,622 14,446 (226,136)
Net cash used for discontinued
operations.............................. (872) -- -- -- (872)
Financing activities:
Proceeds from issuance of
long-term debt........................ 325,000 -- -- -- 325,000
Repayments of long-term debt............ (164,000) 69 -- -- (163,931)
Debt issuance costs..................... (8,507) -- -- -- (8,507)
Dividends paid.......................... (3,129) -- -- -- (3,129)
Other................................... 31 -- -- -- 31
---------- ---------- ---------- ---------- -----------
Net cash provided from financing
activities.............................. 149,395 69 -- -- 149,464
---------- ---------- ---------- ---------- -----------
Increase (decrease) in cash and cash
equivalents............................. (6,600) 844 7,194 -- 1,438
Cash and cash equivalents at
beginning of period..................... 23,210 9 -- -- 23,219
---------- ---------- ---------- ---------- -----------
Cash and cash equivalents at end of
period.................................. $ 16,610 $ 853 $ 7,194 $ -- $ 24,657
========== ========== ========== ========== ===========
</TABLE>
F-31
<PAGE>
OSHKOSH TRUCK CORPORATION
Notes to Consolidated Financial Statements - (Continued)
<TABLE>
Condensed Consolidating Statement of Cash Flows
Nine Months Ended June 30, 1999
(Unaudited)
<CAPTION>
Subsidiary Non-Guarantor
Company Guarantors Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ ------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Operating activities:
Income from operations.................. $ 21,006 $ 27,394 $ 1,233 $ (28,627) $ 21,006
Non-cash adjustments.................... (806) 11,614 (4,643) -- 6,165
Changes in operating assets and
liabilities........................... (7,508) (17,003) (1,591) -- (26,102)
---------- ---------- ---------- ---------- -----------
Net cash provided from (used for)
operating activities.................... 12,692 22,005 (5,001) (28,627) 1,069
Investing activities:
Investments in and advances to
subsidiaries.......................... (18,952) (14,842) 5,167 28,627 --
Additions to property, plant and
equipment............................. (2,589) (4,311) -- -- (6,900)
Other................................... (302) (2,679) (1,317) -- (4,298)
---------- ---------- ---------- ---------- -----------
Net cash provided from (used for)
investing activities.................... (21,843) (21,832) 3,850 28,627 (11,198)
Financing activities:
Net payments under revolving
credit facility....................... 14,300 -- -- -- 14,300
Repayments of long-term debt............ -- (248) -- -- (248)
Dividends paid.......................... (3,163) -- -- -- (3,163)
Other................................... 1,059 -- -- -- 1,059
---------- ---------- ---------- ---------- -----------
Net cash provided from (used for)
financing activities.................. 12,196 (248) -- -- 11,948
---------- ---------- ---------- ---------- -----------
Increase (decrease) in cash and cash
equivalents............................. 3,045 (75) (1,151) -- 1,819
Cash and cash equivalents at
beginning of period..................... 1,065 979 1,578 -- 3,622
---------- ---------- ---------- ---------- -----------
Cash and cash equivalents at end of
period.................................. $ 4,110 $ 904 $ 427 $ -- $ 5,441
========== ========== ========== ========== ===========
</TABLE>
F-32
<PAGE>
OSHKOSH TRUCK CORPORATION
Notes to Consolidated Financial Statements - (Continued)
15. Subsequent Event
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.
F-33
<PAGE>
[INSIDE BACK COVER]
<PAGE>
[OUTSIDE BACK COVER]
[OSHKOSH TRUCK CORPORATION LOGO]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
Securities and Exchange Commission filing fee............. $ 29,515
NASD filing fee........................................... 11,117
Nasdaq National Market additional listing fee............. 17,500
Transfer agent expenses and fees.......................... 1,000
Printing and engraving.................................... 100,000
Accountants' fees and expenses............................ 80,000
Legal fees and expenses................................... 135,000
Miscellaneous............................................. 50,868
--------
Total........................................... $425,000
--------
All of the above fees, costs and expenses will be paid by Oshkosh Truck
Corporation (the "Company"), except that the selling shareholders will pay their
pro rata share of printing expenses. Other than the Securities and Exchange
Commission filing fee and NASD filing fee, all fees and expenses are estimated.
Item 15. Indemnification of Directors and Officers.
Pursuant to the Wisconsin Business Corporation Law and the Company's
By-Laws, directors and officers of the Company are entitled to mandatory
indemnification from the Company against certain liabilities and expenses (1) to
the extent such officers or directors are successful in the defense of a
proceeding and (2) in proceedings in which the director or officer is not
successful in defense thereof, unless (in the latter case only) it is determined
that the director or officer breached or failed to perform his or her duties to
the Company and such breach or failure constituted: (a) a willful failure to
deal fairly with the Company or its shareholders in connection with a matter in
which the director of officer had a material conflict of interest; (b) a
violation of the criminal law unless the director or officer had reasonable
cause to believe his or her conduct was lawful or had no reasonable cause to
believe his or her conduct was unlawful; (c) a transaction from which the
director or officer derived an improper personal profit; or (d) willful
misconduct. The Wisconsin Business Corporation law specifically states that it
is the public policy of Wisconsin to require or permit indemnification,
allowance of expenses and insurance in connection with a proceeding involving
securities regulation, as described therein, to the extent required or permitted
as described above. Additionally, under the Wisconsin Business Corporation Law,
directors of the Company are not subject to personal liability to the Company,
its shareholders or any person asserting rights on behalf thereof for certain
breaches or failures to perform any duty resulting solely from their status as
directors, except in circumstances paralleling those in subparagraphs (a)
through (d) outlined above.
Expenses for the defense of any action for which indemnification may be
available may be advanced by the Company under certain circumstances.
The indemnification provided by the Wisconsin Business Corporation Law and
the Company's By-Laws is not exclusive of any other rights to which a director
or officer may be entitled. The general effect of the foregoing provisions may
be to reduce the circumstances which an officer or director may be required to
bear the economic burden of the foregoing liabilities and expense.
II-1
<PAGE>
Item 16. Exhibits and Financial Statement Schedules.
(a)Exhibits. The exhibits listed in the accompanying Exhibit Index are
filed as part of this Registration Statement.
(b)Financial Statement Schedules. Schedule II C Valuation and Qualifying
Accounts is hereby incorporated by reference to the Company's Annual Report on
Form 10-K for the year ended September 30, 1998 (File No. 0-13886). All other
schedules are omitted because they are not applicable, or the required
information is shown in the consolidated financial statements or notes thereto.
Item 17. Undertakings.
(a) The undersigned Registrant hereby undertakes that:.
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon rule 430A and contained in a form of
prospectus filed by the registrant pursuant to rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore unenforceable. In the event that a claim for indemnification
against such liabilities (other than payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Oshkosh, State of Wisconsin, on this 15th of
September, 1999.
OSHKOSH TRUCK CORPORATION
By: /s/ Robert G. Bohn
-----------------------------------
Robert G. Bohn
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated. Each person whose signature appears below
constitutes and appoints Robert G. Bohn, Charles L. Szews and Timothy M.
Dempsey, and each of them individually, his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and any additional registration
statement to be filed pursuant to Rule 462(b) under the Securities Act of 1933,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in connection therewith, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Signature Title Date
--------- ----- ----
/s/ Robert G. Bohn President, Chief Executive September 15, 1999
- ----------------------------- Officer and Director
Robert G. Bohn (Principal Executive Officer)
/s/ Charles L. Szews Executive Vice President September 15, 1999
- ----------------------------- and Chief Financial Officer
Charles L. Szews (Principal Financial Officer)
/s/ Thomas J. Polnaszek Vice President and September 15, 1999
- ----------------------------- Controller
Thomas J. Polnaszek (Principal Accounting Officer)
/s/ J. William Andersen Director September 15, 1999
- -----------------------------
J. William Andersen
II-3
<PAGE>
Signature Title Date
--------- ----- ----
/s/ Daniel T. Carroll Chairman September 15, 1999
- -----------------------------
Daniel T. Carroll
/s/ Frederick M. Franks, Jr. Director September 15, 1999
- -----------------------------
General Frederick M. Franks, Jr.
/s/ Michael W. Grebe Director September 15, 1999
- -----------------------------
Michael W. Grebe
/s/ Kathleen J. Hempel Director September 15, 1999
- -----------------------------
Kathleen J. Hempel
/s/ J. Peter Mosling, Jr. Director September 15, 1999
- -----------------------------
J. Peter Mosling, Jr.
/s/ Stephen P. Mosling Director September 15, 1999
- -----------------------------
Stephen P. Mosling
/s/ Richard G. Sim Director September 15, 1999
- -----------------------------
Richard G. Sim
II-4
<PAGE>
EXHIBIT INDEX
Exhibit
Number Exhibit Description
- ------- --------------------
(1.1) Form of Underwriting Agreement. *
(4.1) Restated Articles of Incorporation of Oshkosh Truck Corporation
(incorporated by reference to Exhibit 3.1 to the Company's Annual
Report on Form 10-K for the year ended September 30, 1997 (File
No. 0-13886)).
(4.2) Credit Agreement dated February 26, 1998, among Oshkosh Truck
Corporation, Bank of America National Trust and Savings
Association, as Agent and as Swing Line Lender, and certain other
financial institutions (incorporated by reference to Exhibit 4.1
to the Company's Current Report on Form 8-K dated February 26,
1998 (File No. 0-13886)).
(4.3) 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)).
(4.4) Form of 8:% 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)).
(4.5) 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)).
(4.6) Rights Agreement, dated as of February 1, 1999, between Oshkosh
Truck Corporation and Firstar Bank, Milwaukee, N. A.
(incorporated by reference to Exhibit 4.1 to the Company's
Registration Statement on Form 8-A dated February 1, 1999 (File
No. 0-13886)).
(5.1) Opinion of Foley & Lardner.
(23.1) Consent of Ernst & Young LLP.
(23.2) Consent of Larson, Allen, Weishair & Co., LLP.
(23.3) Consent of Foley & Lardner (contained in Exhibit 5.1).
(24.1) Power of Attorney (contained on the signature page hereto).
- -------------
* To be filed by amendment.
II-5
EXHIBIT 5.1
FOLEY & LARDNER
ATTORNEYS AT LAW
CHICAGO FIRSTAR CENTER SACRAMENTO
DENVER 777 EAST WISCONSIN AVENUE SAN DIEGO
JACKSONVILLE MILWAUKEE, WISCONSIN 53202-5367 SAN FRANCISCO
LOS ANGELES TELEPHONE (414) 271-2400 TALLAHASSEE
MADISON FACSIMILE (414) 297-4900 TAMPA
MILWAUKEE WASHINGTON, D.C.
ORLANDO WEST PALM BEACH
CLIENT/MATTER NUMBER
061300/0201
September 15, 1999
Oshkosh Truck Corporation
2307 Oregon Street
P. O. Box 2566
Oshkosh, Wisconsin 54903
Ladies and Gentlemen:
We have acted as counsel for Oshkosh Truck Corporation, a Wisconsin
corporation (the "Company"), in conjunction with the preparation of a
Registration Statement on Form S-3 (the "Registration Statement"), including the
prospectus constituting a part thereof (the "Prospectus"), to be filed by the
Company with the Securities and Exchange Commission under the Securities Act of
1933, as amended (the "Securities Act"), relating to 3,250,000 shares of the
Company's common stock, $.01 par value (the "Common Stock"), and related
Preferred Share Purchase Rights (the "Rights"), together with up to 487,500
additional shares of Common Stock and related Rights being registered to cover
the over-allotment option granted by the Company and certain selling
shareholders of the Company (the "Selling Shareholders") to the underwriters.
The terms of the Rights are as set forth in that certain Rights Agreement, dated
as of February 1, 1999, as amended, by and between the Company and Firstar Bank
Milwaukee, N. A. (the "Rights Agreement").
In connection with our representation, we have examined: (i) the
Registration Statement, including the Prospectus; (ii) the Company's Restated
Articles of Incorporation and By-laws, as amended to date; (iii) the Rights
Agreement; (iv) resolutions of the Company's Board of Directors relating to the
authorization of the issuance of certain of the securities covered by the
Registration Statement; and (v) such other proceedings, documents and records as
we have deemed necessary to enable us to render this opinion.
Based upon the foregoing, we are of the opinion that:
1. The Company is a corporation validly existing under the laws of
the State of Wisconsin.
2. The shares of Common Stock covered by the Registration Statement
that are to be offered and sold by the Company, when the price thereof has been
determined by
<PAGE>
Foley & Lardner
Oshkosh Truck Corporation
September 15, 1999
Page 2
action of the Company's Board of Directors and when issued and paid for in the
manner contemplated in the Registration Statement and Prospectus, will be
validly issued, fully paid and nonassessable, except with respect to wage claims
of, or other debts owing to, employees of the Company for services performed,
but not exceeding six months' service in any one case, as provided in Section
180.0622(2)(b) of the Wisconsin Business Corporation Law.
3. The shares of Common Stock covered by the Registration Statement
that are to be offered and sold by the Selling Shareholders are, and when sold
in the manner contemplated in the Registration Statement and Prospectus will
continue to be, validly issued, fully paid and nonassessable, except with
respect to wage claims of, or other debts owing to, employees of the Company for
services performed, but not exceeding six months' service in any one case, as
provided in Section 180.0622(2)(b) of the Wisconsin Business Corporation Law.
4. The Rights when issued pursuant to the terms of the Rights
Agreement will be validly issued.
We consent to the use of this opinion as an exhibit to the
Registration Statement and the references to our firm therein. In giving our
consent, we do not admit that we are "experts" within the meaning of Section 11
of the Securities Act or within the category of persons whose consent is
required by Section 7 of the Securities Act.
Very truly yours,
/s/ Foley & Lardner
FOLEY & LARDNER
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our Firm under the captions "Experts", "Summary
Consolidated Financial Data" and "Selected Consolidated Financial Data" and to
the use of our report dated October 30, 1998 (except for Notes 1, 8, 11 and 15,
as to which the dates are July 23, 1999, February 1, 1999, July 27, 1999 and
February 1, 1999, respectively) in the Registration Statement (Form S-3) and
related Prospectus of Oshkosh Truck Corporation for the registration of
3,737,500 shares of its Common Stock.
We also consent to the incorporation by reference therein of our report dated
December 17, 1998 with respect to the financial statement schedule of Oshkosh
Truck corporation for the years ended September 30, 1998, 1997, and 1996
included in the Annual Report (Form 10-K) for 1998 filed with the Securities and
Exchange Commission.
ERNST & YOUNG LLP
Milwaukee, Wisconsin
September 13, 1999
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated April 23, 1997, except Notes 2 and 13,
as to which the date is December 8, 1997, on the consolidated financial
statements of McNeilus Companies, Inc. and Subsidiaries, which appears on page
F-1 of the current report on Form 8-K of Oshkosh Truck Corporation dated
February 26, 1998. It should be noted that we have not audited any financial
statements of McNeilus Companies, Inc. and Subsidiaries subsequent to February
28, 1997, or performed any audit procedures subsequent to the date of our
report.
LARSON, ALLEN, WEISHAIR & CO., LLP
Minneapolis, Minnesota
September 13, 1999