<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 27, 1999
REGISTRATION NO. 333-87149
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
OSHKOSH TRUCK CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
WISCONSIN
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
39-0520270
(I.R.S. EMPLOYER
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)
------------------------
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.
FOLEY & LARDNER
777 EAST WISCONSIN AVENUE
MILWAUKEE, WISCONSIN 53202
(414) 271-2400
JOHN R. SAGAN, ESQ.
MAYER, BROWN & PLATT
190 SOUTH LASALLE STREET
CHICAGO, ILLINOIS 60603
(312) 782-0600
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
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. [ ]
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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<PAGE> 2
The information in this prospectus is 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 OCTOBER 27, 1999
3,000,000 Shares
[OSHKOSH LOGO]
OSHKOSH TRUCK CORPORATION
Common Stock
------------------
We are selling 3,000,000 shares of our common stock. 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 450,000 additional
shares to cover over-allotments of shares.
Our common stock is traded on the Nasdaq National Market under the symbol
"OTRKB". On October 26, 1999, the last reported sale price of our common stock
was $30.50 per share.
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" ON PAGE 8.
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND OSHKOSH TRUCK
PUBLIC COMMISSIONS CORPORATION
-------- ------------- -------------
<S> <C> <C> <C>
Per Share............................ $ $ $
Total................................ $ $ $
</TABLE>
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
ROBERT W. BAIRD & CO.
INCORPORATED
The date of this prospectus is , 1999
<PAGE> 3
[INSIDE FRONT COVER]
<TABLE>
<S> <C>
[Picture of Oshkosh S-Series Front- [Picture of McNeilus Rear Loader]
Discharge Concrete Mixer]
[Oshkosh Truck Corporation Logo]
[Pierce Manufacturing Inc. Logo] [McNeilus Companies, Inc. Logo]
Quality. Service. Results.
[Picture of Pierce Quantum [Picture of Oshkosh Palletized
Pumper with Aerial ladder] Load System]
</TABLE>
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FORWARD-LOOKING STATEMENTS.............. 1
PROSPECTUS SUMMARY...................... 3
RISK FACTORS............................ 9
USE OF PROCEEDS......................... 12
PRICE RANGE OF COMMON STOCK AND
DIVIDENDS............................. 13
CAPITALIZATION.......................... 14
SELECTED CONSOLIDATED FINANCIAL DATA.... 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CONSOLIDATED FINANCIAL CONDITION AND
RESULTS OF OPERATIONS................. 17
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
BUSINESS................................ 28
MANAGEMENT AND BOARD OF DIRECTORS....... 46
DESCRIPTION OF CAPITAL STOCK............ 48
UNDERWRITING............................ 52
NOTICE TO CANADIAN RESIDENTS............ 54
WHERE YOU CAN FIND MORE INFORMATION..... 55
LEGAL MATTERS........................... 56
EXPERTS................................. 56
INDEX TO FINANCIAL STATEMENTS........... F-1
</TABLE>
-------------------------
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 factors, 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.
1
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[This page intentionally left blank]
2
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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.
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<PAGE> 7
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.
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.
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<PAGE> 8
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 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 front-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 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.
RECENT DEVELOPMENTS
The following information for the fiscal year ended September 30, 1999 has
been derived from our preliminary unaudited results of operations, which results
are included in the Form 8-K we filed with the SEC on October 25, 1999 which is
incorporated by reference in this prospectus. Our net income increased 106.6% to
$31.1 million, or $2.39 per share, on net sales of $1,165 million for the fiscal
year ended September 30, 1999 compared to net income of $15.1 million, or $1.18
per share, on net sales of $903 million for the fiscal year ended September 30,
1998. Our operating income increased 56.4% to $76.2 million, or 6.5% of sales,
for the fiscal year ended September 30, 1999 compared to $48.7 million, or 5.4%
of sales, in the prior year. Our backlog increased $109.1 million, or 29%
compared to the prior year, to $486.5 million at September 30, 1999.
In September 1999, we made scheduled and early term debt repayments of $3.2
million and $15.8 million, respectively. In October 1999, our Board of Directors
declared a quarterly dividend of $0.07500 per share of class A common stock and
$0.08625 per share of our common stock, which dividend was an increase of 3.5%
compared to prior quarters and will be payable to shareholders of record as of
November 8, 1999.
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THE OFFERING
Common stock offered............ 3,000,000 shares
Common stock to be outstanding
after the offering............ 15,404,170 shares
Total common stock and class A
common stock to be outstanding
after the offering............ 15,830,155 shares
Use of proceeds................. We intend to use the net proceeds of the
offering to repay indebtedness.
Nasdaq National Market symbol... OTRKB
These share numbers are based on shares outstanding on September 30, 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
1,076,555 shares of our common stock were outstanding as of September 30, 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.
<TABLE>
<CAPTION>
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)..................... $ 5,191 $ 42,637 $ 66,550 $ 46,427 $ 69,317
EBITDA margin %(4)............ 1.3% 6.2% 7.4% 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
</TABLE>
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- -------------------------
(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.
(4) EBITDA means operating income (loss) plus depreciation and amortization. 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 $25 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.
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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.
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
10
<PAGE> 14
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.
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 a material 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.
11
<PAGE> 15
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.
TWO OF OUR DIRECTORS 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 September 30, 1999, on a pro forma basis
that includes the issuance of our common stock in the offering, two of our
directors, J. Peter Mosling, Jr. and Stephen P. Mosling, beneficially own
approximately 7.9% 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.
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 $86.5 million, based on an
assumed offering price of $30.50 per share, after deducting the underwriting
discounts and commissions and the estimated offering expenses payable by us.
We intend to use a portion of the net proceeds to repay a total of $30.0
million of outstanding indebtedness under Term Loans B and C of our senior
credit facility, with $15.0 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 $34.5 million each at September 30, 1999. 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 $84.0 million at September 30, 1999. The
weighted-average interest rates on borrowings outstanding at September 30, 1999
were 6.84% on Term Loan A, 7.64% on Term Loan B and 7.89% on Term Loan C.
12
<PAGE> 16
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.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
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.......................... 38.50 22.75
</TABLE>
On October 26, 1999, the last reported sale price for our common stock on
the Nasdaq National Market was $30.50. 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. For fiscal 2000, the
terms of our senior credit facility generally limit the aggregate amount of all
dividends we may pay on our common equity during that period to an amount equal
to $5 million plus 5% of our consolidated net income.
13
<PAGE> 17
CAPITALIZATION
The following table sets forth our consolidated capitalization as of
September 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
$30.50 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>
SEPTEMBER 30, 1999
----------------------
AS
ACTUAL ADJUSTED
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents.................................. $ 5,137 $ 5,137
======== ========
Long-term debt, including current maturities............... $260,548 $174,048
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; 425,985 shares issued(1).................. 4 4
Common stock, $.01 par value; 18,000,000 shares
authorized; 13,611,044 shares issued; 16,611,044
shares issued as adjusted(2).......................... 136 166
Paid-in capital.......................................... 15,997 102,467
Retained earnings(3)..................................... 157,810 157,255
Common stock in treasury, at cost, 1,206,874 shares...... (11,067) (11,067)
-------- --------
Total shareholders' equity............................ 162,880 248,825
-------- --------
Total capitalization................................ $423,428 $422,873
======== ========
</TABLE>
- -------------------------
(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 1,288,630 shares of our common stock reserved for issuance pursuant
to our employee benefit plans, under which options to purchase 1,076,555
shares of our common stock were outstanding as of September 30, 1999, at a
weighted-average exercise price of $15.47 per share.
(3) Reflects write-off of deferred financing costs of $555, net of income tax
benefit of $340 due to early repayment of debt from proceeds of the
offering.
14
<PAGE> 18
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 $ 5,191 $ 42,637 $ 66,550 $ 46,427 $ 69,317
EBITDA margin %(4)................................ 5.6% 6.3% 1.3% 6.2% 7.4% 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
</TABLE>
15
<PAGE> 19
- -------------------------
(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. 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.
16
<PAGE> 20
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 front-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.
17
<PAGE> 21
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.
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.
18
<PAGE> 22
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 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
19
<PAGE> 23
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
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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 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 1997. 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
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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.
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
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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 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
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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.
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.
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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:
- development of an inventory of Year 2000 risks;
- assignment of priorities to identified risks;
- assessment of Year 2000 compliance and impact of noncompliance;
- tests to determine whether any upgrade or replacement is required;
- upgrade or replacement of items that are determined not to be Year 2000
compliant if the impact of noncompliance is material; and
- 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 August 1999 upgrades are Year 2000 ready was completed in
October 1999.
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
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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.
However, we cannot give any 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
$8.5 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 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
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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 completed
contingency planning for material risks in October 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:
- Pierce, a leading manufacturer and marketer of fire trucks and other fire
apparatus in the United States, in September 1996;
- Nova Quintech, a manufacturer of aerial devices for fire trucks, in
December 1997; and
- 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 the acquisitions of Pierce and McNeilus, 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 front-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
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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.
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
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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.
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
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attractive price, we believe that the international market for this truck will
be significant. International sales 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 front-discharge concrete mixer in
fiscal 1999 to combine a new cab engineered and produced by Oshkosh and a new
mixer package produced in part 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
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
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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
October 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 21(st) 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 front-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 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 sole 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
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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
front-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 front-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 front-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
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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 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:
- 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.
- 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.
- 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.
- 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.
- 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.
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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.
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 front-discharge concrete mixers and
concrete batch plants. We also use one independent distributor for
front-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:
- 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
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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.
- 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 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.
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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.
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
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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 18% 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
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<PAGE> 44
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.
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
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<PAGE> 45
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 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
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<PAGE> 46
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 in 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.
LEGAL PROCEEDINGS
We were engaged in litigation against Super Steel Products Corporation, our
former supplier of mixer systems for front-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
43
<PAGE> 47
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
upgradient property line.
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<PAGE> 48
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> 49
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
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, 62 Director
Jr. ..........................
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.
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<PAGE> 50
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.
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> 51
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 September 30, 1999, we had
12,404,170 shares of common stock issued and outstanding, 425,985 shares of
class A common stock issued and outstanding and no shares of preferred stock
issued and outstanding. We will have 15,404,170 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
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<PAGE> 52
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 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 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
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<PAGE> 53
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.
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
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<PAGE> 54
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> 55
UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement dated , 1999, we have agreed to sell to the
underwriters named below, for whom Credit Suisse First Boston Corporation,
Goldman, Sachs & Co., Tucker Anthony Cleary Gull and Robert W. Baird & Co.
Incorporated are acting as representatives, the following respective numbers of
shares of our common stock:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ---------
<S> <C>
Credit Suisse First Boston Corporation......................
Goldman, Sachs & Co. .......................................
Tucker Anthony Cleary Gull..................................
Robert W. Baird & Co. Incorporated..........................
---------
Total.................................................. 3,000,000
=========
</TABLE>
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 have granted to the underwriters a 30-day option to purchase on a
pro-rata basis up to 450,000 additional shares from us 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 broker/dealers may be changed by the
representatives.
The following table summarizes the compensation and estimated expenses we
will pay.
<TABLE>
<CAPTION>
PER SHARE TOTAL
-------------------------------- --------------------------------
WITHOUT WITH WITHOUT WITH
OVER-ALLOTMENT OVER-ALLOTMENT OVER-ALLOTMENT OVER-ALLOTMENT
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Underwriting discounts
and commissions paid by
us..................... $ $ $ $
Expenses payable by us... $ $ $ $
</TABLE>
We, our directors and our executive officers 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 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
52
<PAGE> 56
these options. In addition, some of our directors may make a gift or donation of
shares of our common stock, provided that the donor agrees to take these shares
subject to the terms of these restrictions.
We have agreed to indemnify the underwriters against liabilities under the
Securities Act 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 stabilizing transaction or 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.
53
<PAGE> 57
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of our common stock in Canada is being made only on a
private placement basis exempt from the requirement that we 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 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 principal and not as 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 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.
54
<PAGE> 58
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:
- 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;
- 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;
- Our Proxy Statement for our 1999 Annual Meeting of Shareholders dated
December 23, 1998;
- Our Current Reports on Form 8-K dated February 26, 1998 and October 25,
1999;
- 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;
- 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
- 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.
55
<PAGE> 59
LEGAL MATTERS
The validity of the shares of our common stock offered hereby will be
passed upon for us 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.
56
<PAGE> 60
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
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 Statements.................. F-7
</TABLE>
F-1
<PAGE> 61
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> 62
OSHKOSH TRUCK CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS 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> 63
OSHKOSH TRUCK CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<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> 64
OSHKOSH TRUCK CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
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> 65
OSHKOSH TRUCK CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
SEPTEMBER 30, JUNE 30,
-------------------------------- --------------------
1996 1997 1998 1998 1999
--------- -------- --------- --------- --------
(UNAUDITED)
(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> 66
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
F-7
<PAGE> 67
OSHKOSH TRUCK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
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.
F-8
<PAGE> 68
OSHKOSH TRUCK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 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
F-9
<PAGE> 69
OSHKOSH TRUCK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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. 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
F-10
<PAGE> 70
OSHKOSH TRUCK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
shares distributed to effect the stock split has been transferred from
paid-in-capital to common stock.
2. BALANCE SHEET INFORMATION
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------ JUNE 30,
RECEIVABLES 1997 1998 1999
----------- ------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
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
======= ======= ========
</TABLE>
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.
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------- JUNE 30,
INVENTORIES 1997 1998 1999
----------- ------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
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
======= ======== ========
</TABLE>
F-11
<PAGE> 71
OSHKOSH TRUCK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Title to all inventories related to government contracts, which provide for
progress payments, vests with the government to the extent of unliquidated
progress payments.
<TABLE>
<CAPTION>
GOODWILL AND OTHER INTANGIBLE ASSETS SEPTEMBER 30,
- ---------------------------------------------------- -------------------- JUNE 30,
USEFUL LIVES 1997 1998 1999
------------ -------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
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
======== ======== ========
</TABLE>
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 periods February 26, 1998 (the
date OMFSP was
F-12
<PAGE> 72
OSHKOSH TRUCK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
formed) to June 30, 1998 and September 30, 1998 and the nine month period ended
June 30, 1999, is as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998 JUNE 30, 1999
------------------ -------------
(UNAUDITED)
<S> <C> <C>
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
======== ========
</TABLE>
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM NINE MONTHS
FEBRUARY 26, 1998 TO FEBRUARY 26, 1998 TO ENDED
SEPTEMBER 30, 1998 JUNE 30, 1998 JUNE 30, 1999
-------------------- -------------------- -------------
<S> <C> <C> <C>
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
</TABLE>
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.
F-13
<PAGE> 73
OSHKOSH TRUCK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Pro forma unaudited consolidated operating results of the Company, assuming
McNeilus had been acquired as of October 1, 1996 and 1997, are summarized below:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
SEPTEMBER 30,
---------------------- NINE MONTHS ENDED
1997 1998 JUNE 30, 1998
-------- ---------- -----------------
<S> <C> <C> <C>
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
</TABLE>
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 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
F-14
<PAGE> 74
OSHKOSH TRUCK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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-15
<PAGE> 75
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-16
<PAGE> 76
OSHKOSH TRUCK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. INCOME TAXES
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,
-------------------------------
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
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
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,
--------------------------------
1996 1997 1998
------ ----- -----
<S> <C> <C> <C>
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%
===== ==== ====
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------
1997 1998
-------- --------
<S> <C> <C>
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)
======== ========
</TABLE>
The Company has not recorded a valuation allowance with respect to any
deferred tax assets.
F-17
<PAGE> 77
OSHKOSH TRUCK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
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:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,
--------------------------------
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
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
======= ======= =======
</TABLE>
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>
F-18
<PAGE> 78
OSHKOSH TRUCK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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:
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
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
</TABLE>
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.
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:
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------
1997 1998
------- -------
<S> <C> <C>
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
======= =======
</TABLE>
F-19
<PAGE> 79
OSHKOSH TRUCK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Net periodic postretirement benefit cost for fiscal 1996, 1997 and 1998,
including discontinued operations for 1996 which are not significant, includes
the following components:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
SEPTEMBER 30,
----------------------
1996 1997 1998
---- ---- ------
<S> <C> <C> <C>
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
==== ==== ======
</TABLE>
Net change in postretirement benefit obligations includes the following:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
SEPTEMBER 30,
------------------
1997 1998
------- -------
<S> <C> <C>
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
======= =======
</TABLE>
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 survivor of
them, the two
F-20
<PAGE> 80
OSHKOSH TRUCK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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
F-21
<PAGE> 81
OSHKOSH TRUCK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
to purchase shares expire not later than ten years and one month after the grant
of the option.
The following table summarizes the transactions of the Plan for the
three-year period ended September 30, 1998.
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED-AVERAGE
OPTIONS EXERCISE PRICE
--------- ----------------
<S> <C> <C>
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
</TABLE>
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,
F-22
<PAGE> 82
OSHKOSH TRUCK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
$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.
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
F-23
<PAGE> 83
OSHKOSH TRUCK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 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.
F-24
<PAGE> 84
OSHKOSH TRUCK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 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
F-25
<PAGE> 85
OSHKOSH TRUCK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,
--------------------------------
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
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
======== ======== ========
</TABLE>
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-26
<PAGE> 86
OSHKOSH TRUCK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. UNAUDITED QUARTERLY RESULTS
<TABLE>
<CAPTION>
FISCAL 1997 FISCAL 1998
----------------------------------------------------- -------------------------
1ST 2ND 3RD 4TH 1ST 2ND
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net sales............. $150,320 $170,465 $176,596 $185,853 $151,801 $217,836
Gross income.......... 17,590 21,115 19,686 22,606 19,998 27,534
Income from continuing
operations.......... 1,624 2,474 2,792 3,116 3,140 3,161
Extraordinary item.... -- -- -- -- -- (735)
Net income............ 1,624 2,474 2,792 3,116 3,140 2,426
Earnings per share:
Continuing
operations........ $.13 $.19 $.22 $.25 $.25 $ .25
Extraordinary
item.............. -- -- -- -- -- (.06)
Net income.......... .13 .19 .22 .25 .25 .19
Earnings per share
assuming dilution:
Continuing
operations...... .13 .19 .22 .25 .25 .25
Extraordinary
item............ -- -- -- -- -- (.06)
Net income........ .13 .19 .22 .25 .25 .19
Dividends per share:
Class A Common
Stock............. $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
<CAPTION>
FISCAL 1998
-------------------------
3RD 4TH
QUARTER QUARTER
------- -------
<S> <C> <C>
Net sales............. $290,104 $243,051
Gross income.......... 39,579 38,925
Income from continuing
operations.......... 5,000 4,952
Extraordinary item.... (450) --
Net income............ 4,550 4,952
Earnings per share:
Continuing
operations........ $ .39 $.39
Extraordinary
item.............. (.03) --
Net income.......... .36 .39
Earnings per share
assuming dilution:
Continuing
operations...... .38 .39
Extraordinary
item............ (.03) --
Net income........ .35 .39
Dividends per share:
Class A Common
Stock............. $0.07250 $0.07250
Common Stock........ 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
F-27
<PAGE> 87
OSHKOSH TRUCK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 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
F-28
<PAGE> 88
OSHKOSH TRUCK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
CONDENSED CONSOLIDATING STATEMENT OF INCOME
YEAR ENDED SEPTEMBER 30, 1998
<TABLE>
<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-29
<PAGE> 89
OSHKOSH TRUCK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
SEPTEMBER 30, 1998
<TABLE>
<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-30
<PAGE> 90
OSHKOSH TRUCK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED SEPTEMBER 30, 1998
<TABLE>
<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-31
<PAGE> 91
OSHKOSH TRUCK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF INCOME
NINE MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
<TABLE>
<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-32
<PAGE> 92
OSHKOSH TRUCK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF INCOME
NINE MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<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-33
<PAGE> 93
OSHKOSH TRUCK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
JUNE 30, 1999
(UNAUDITED)
<TABLE>
<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-34
<PAGE> 94
OSHKOSH TRUCK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
NINE MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
<TABLE>
<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-35
<PAGE> 95
OSHKOSH TRUCK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
NINE MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<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-36
<PAGE> 96
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-37
<PAGE> 97
[INSIDE BACK COVER]
<PAGE> 98
[OSHKOSH LOGO]
<PAGE> 99
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
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
========
</TABLE>
All of the above fees, costs and expenses will be paid by Oshkosh Truck
Corporation (the "Company"). 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> 100
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 -- 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> 101
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 Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Oshkosh, State of Wisconsin, on this 27th day of
October, 1999.
OSHKOSH TRUCK CORPORATION
By: /s/ CHARLES L. SZEWS
-----------------------------------
Charles L. Szews
Executive Vice President and Chief
Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
Robert G. Bohn* President, Chief October 27, 1999
Executive Officer and
Director (Principal
Executive Officer)
/s/ CHARLES L. SZEWS Executive Vice President October 27, 1999
- ------------------------------------------ and Chief Financial
Charles L. Szews Officer (Principal
Financial Officer)
Thomas J. Polnaszek* Vice President and October 27, 1999
Controller (Principal
Accounting Officer)
J. William Andersen* Director October 27, 1999
Daniel T. Carroll* Chairman October 27, 1999
General Frederick M. Franks, Jr.* Director October 27, 1999
Michael W. Grebe* Director October 27, 1999
Kathleen J. Hempel* Director October 27, 1999
J. Peter Mosling, Jr.* Director October 27, 1999
Stephen P. Mosling* Director October 27, 1999
Richard G. Sim* Director October 27, 1999
</TABLE>
*By: /s/ CHARLES L. SZEWS
------------------------------------------
Charles L. Szews
Attorney-in-Fact
II-3
<PAGE> 102
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------- -------------------
<C> <S>
(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 3/4% Senior Subordinated Note due 2008
(incorporated by reference to Exhibit 4.3 to the Company's
Registration Statement on Form S-4 (Reg. No. 333-47931)).
(4.5) 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).*
</TABLE>
- -------------------------
* Previously filed.
II-4
<PAGE> 1
3,000,000 SHARES
OSHKOSH TRUCK CORPORATION
COMMON STOCK
UNDERWRITING AGREEMENT
_____________, 1999
CREDIT SUISSE FIRST BOSTON CORPORATION
GOLDMAN, SACHS & CO.
TUCKER ANTHONY CLEARY GULL
ROBERT W. BAIRD & CO. INCORPORATED,
As Representatives of the Several Underwriters,
c/o Credit Suisse First Boston Corporation,
Eleven Madison Avenue,
New York, N.Y. 10010-3629
Ladies and Gentlemen:
1. Introductory. Oshkosh Truck Corporation, a Wisconsin corporation
("COMPANY"), proposes to issue and sell 3,000,000 shares of its Common Stock,
par value $0.01 per share ("SECURITIES") (such 3,000,000 shares of Securities
being hereinafter referred to as the "FIRM SECURITIES"). The Company also
proposes to issue and sell to the Underwriters, at the option of the
Underwriters, an aggregate of not more than 450,000 additional shares of its
Securities (such 450,000 shares of Securities being hereinafter referred to as
the "OPTIONAL SECURITIES"). The Firm Securities and the Optional Securities are
herein collectively called the "OFFERED SECURITIES". The Company hereby agrees
with the several Underwriters named in Schedule A hereto ("UNDERWRITERS") as
follows:
2. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, the several Underwriters that:
(i) A registration statement (No. 333-87149) relating to the
Offered Securities, including a form of prospectus, has been filed with
the Securities and Exchange Commission ("COMMISSION") and either (A)
has been declared effective under the Securities Act of 1933 ("ACT")
and is not proposed to be amended or (B) is proposed to be amended by
amendment or post-effective amendment. If such registration statement
(the "INITIAL REGISTRATION STATEMENT") has been declared effective,
either (A) an additional registration statement (the "ADDITIONAL
REGISTRATION STATEMENT") relating to the Offered Securities may have
been filed with the Commission pursuant to Rule 462(b) ("RULE 462(B)")
under the Act and, if so filed, has become effective upon filing
pursuant to such Rule and the Offered Securities all have been duly
registered under the Act
<PAGE> 2
pursuant to the initial registration statement and, if applicable, the
additional registration statement or (B) such an additional
registration statement is proposed to be filed with the Commission
pursuant to Rule 462(b) and will become effective upon filing pursuant
to such Rule and upon such filing the Offered Securities will all have
been duly registered under the Act pursuant to the initial registration
statement and such additional registration statement. If the Company
does not propose to amend the initial registration statement or if an
additional registration statement has been filed and the Company does
not propose to amend it, and if any post-effective amendment to either
such registration statement has been filed with the Commission prior to
the execution and delivery of this Agreement, the most recent amendment
(if any) to each such registration statement has been declared
effective by the Commission or has become effective upon filing
pursuant to Rule 462(c) ("RULE 462(C)") under the Act or, in the case
of the additional registration statement, Rule 462(b). For purposes of
this Agreement, "EFFECTIVE TIME" with respect to the initial
registration statement or, if filed prior to the execution and delivery
of this Agreement, the additional registration statement means (A) if
the Company has advised the Representatives that it does not propose to
amend such registration statement, the date and time as of which such
registration statement, or the most recent post-effective amendment
thereto (if any) filed prior to the execution and delivery of this
Agreement, was declared effective by the Commission or has become
effective upon filing pursuant to Rule 462(c), or (B) if the Company
has advised the Representatives that it proposes to file an amendment
or post-effective amendment to such registration statement, the date
and time as of which such registration statement, as amended by such
amendment or post-effective amendment, as the case may be, is declared
effective by the Commission. If an additional registration statement
has not been filed prior to the execution and delivery of this
Agreement but the Company has advised the Representatives that it
proposes to file one, "EFFECTIVE TIME" with respect to such additional
registration statement means the date and time as of which such
registration statement is filed and becomes effective pursuant to Rule
462(b). "EFFECTIVE DATE" with respect to the initial registration
statement or the additional registration statement (if any) means the
date of the Effective Time thereof. The initial registration statement,
as amended at its Effective Time, including all material incorporated
by reference therein, including all information contained in the
additional registration statement (if any) and deemed to be a part of
the initial registration statement as of the Effective Time of the
additional registration statement pursuant to the General Instructions
of the Form on which it is filed and including all information (if any)
deemed to be a part of the initial registration statement as of its
Effective Time pursuant to Rule 430A(b) ("RULE 430A(B)") under the Act,
is hereinafter referred to as the "INITIAL REGISTRATION STATEMENT". The
additional registration statement, as amended at its Effective Time,
including the contents of the initial registration statement
incorporated by reference therein and including all information (if
any) deemed to be a part of the additional registration statement as of
its Effective Time pursuant to Rule 430A(b), is hereinafter referred to
as the "ADDITIONAL REGISTRATION STATEMENT". The Initial Registration
Statement and the Additional Registration Statement are hereinafter
referred to collectively as the "REGISTRATION STATEMENTS" and
individually as a "REGISTRATION STATEMENT". The form of prospectus
relating to the Offered Securities, as first filed with the Commission
pursuant to and in accordance with Rule 424(b) ("RULE 424(B)") under
the Act or (if no such filing is required) as included in a
Registration Statement, including all material incorporated by
reference in such prospectus, is hereinafter referred to as the
"PROSPECTUS". No
<PAGE> 3
document has been or will be prepared or distributed in reliance on
Rule 434 under the Act.
(ii) If the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement: (A)
on the Effective Date of the Initial Registration Statement, the
Initial Registration Statement conformed in all material respects to
the requirements of the Act and the rules and regulations of the
Commission ("RULES AND REGULATIONS") and did not include any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading, (B) on the Effective Date of the Additional
Registration Statement (if any), each Registration Statement conformed,
or will conform, in all material respects to the requirements of the
Act and the Rules and Regulations and did not include, or will not
include, any untrue statement of a material fact and did not omit, or
will not omit, to state any material fact required to be stated therein
or necessary to make the statements therein not misleading and (C) on
the date of this Agreement, the Initial Registration Statement and, if
the Effective Time of the Additional Registration Statement is prior to
the execution and delivery of this Agreement, the Additional
Registration Statement each conforms, and at the time of filing of the
Prospectus pursuant to Rule 424(b) or (if no such filing is required)
at the Effective Date of the Additional Registration Statement in which
the Prospectus is included, each Registration Statement and the
Prospectus will conform, in all material respects to the requirements
of the Act and the Rules and Regulations, and neither of such documents
includes, or will include, any untrue statement of a material fact or
omits, or will omit, to state any material fact required to be stated
therein or necessary to make the statements therein not misleading. If
the Effective Time of the Initial Registration Statement is subsequent
to the execution and delivery of this Agreement: on the Effective Date
of the Initial Registration Statement, the Initial Registration
Statement and the Prospectus will conform in all material respects to
the requirements of the Act and the Rules and Regulations, neither of
such documents will include any untrue statement of a material fact or
will omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and no
Additional Registration Statement has been or will be filed. The two
preceding sentences do not apply to statements in or omissions from a
Registration Statement or the Prospectus based upon written information
furnished to the Company by any Underwriter through the Representatives
specifically for use therein, it being understood and agreed that the
only such information is that described as such in Section 7(b) hereof.
(iii) The Company has been duly incorporated and is a validly
existing corporation under the laws of the State of Wisconsin, with
power and authority (corporate and other) to own its properties and
conduct its business as described in the Prospectus; and the Company is
duly qualified to do business as a foreign corporation in good standing
in all other jurisdictions in which its ownership or lease of property
or the conduct of its business requires such qualification, except
where the failure to be so qualified would not individually or in the
aggregate have a material adverse effect on the condition (financial or
other), business, properties or results of operations of the Company
and its subsidiaries taken as a whole ("MATERIAL ADVERSE EFFECT").
(iv) Each subsidiary of the Company has been duly
incorporated or organized and is a validly existing corporation,
partnership or other entity under the laws of the
<PAGE> 4
jurisdiction of its incorporation or organization, with power and
authority (corporate, partnership or other) to own its properties and
conduct its business as described in the Prospectus; and each
subsidiary of the Company is duly qualified to do business as a foreign
corporation, partnership or other entity in good standing in all other
jurisdictions in which its ownership or lease of property or the
conduct of its business requires such qualification, except where the
failure to be so qualified would not individually or in the aggregate
have a Material Adverse Effect; all of the issued and outstanding
capital stock or partnership or other equity interests of each
subsidiary of the Company has been duly authorized and validly issued
and (except with respect to general partnership interests) is fully
paid and nonassessable (except for certain statutory liabilities that
may be imposed by Section 180.0622(b) of the Wisconsin Business
Corporation Law (the "WBCL") for unpaid employee wages); and the
capital stock or partnership or other equity interests of each
subsidiary owned by the Company, directly or through subsidiaries, is
owned free from liens, encumbrances and defects, except that the
capital stock of each subsidiary directly owned by the Company has been
pledged as security for the payment and performance of all obligations
and liabilities of the Company under the Credit Agreement, dated as of
February 26, 1998, among the Company, Bank of America National Trust
and Savings Association, as agent, and the financial institutions party
thereto (the "Credit Agreement").
(v) The Offered Securities and all other outstanding shares
of capital stock of the Company have been duly authorized; all
outstanding shares of capital stock of the Company are, and, when the
Offered Securities being issued and sold by the Company have been
delivered and paid for in accordance with this Agreement on each
Closing Date (as defined below), such Offered Securities will be,
validly issued, fully paid and nonassessable (except for certain
statutory liabilities that may be imposed by Section 180.0622(b) of the
WBCL for unpaid employee wages) and conform in all material respects to
the description thereof contained in the Prospectus; and the
shareholders of the Company have no preemptive rights with respect to
the Securities.
(vi) Except as disclosed in the Prospectus, there are no
contracts, agreements or understandings between the Company and any
person that would give rise to a valid claim against the Company or any
Underwriter for a brokerage commission, finder's fee or other like
payment in connection with this offering.
(vii) There are no contracts, agreements or understandings
between the Company and any person granting such person the right to
require the Company to file a registration statement under the Act with
respect to any securities of the Company owned or to be owned by such
person or to require the Company to include such securities in the
securities registered pursuant to a Registration Statement or in any
securities being registered pursuant to any other registration
statement filed by the Company under the Act.
(viii) The Offered Securities being issued and sold by the
Company have been approved for listing on The Nasdaq Stock Market's
National Market subject to notice of issuance.
(ix) No consent, approval, authorization or order of, or
filing with, any governmental agency or body or any court is required
to be obtained or made by the
<PAGE> 5
Company for the consummation of the transactions contemplated by this
Agreement in connection with the sale of the Offered Securities, except
such as have been obtained and made under the Act and such as may be
required under state securities laws.
(x) The execution, delivery and performance of this
Agreement, and the consummation of the transactions herein contemplated
will not result in a breach or violation of any of the terms and
provisions of, or constitute a default under, any statute, any rule,
regulation or order of any governmental agency or body or any court,
domestic or foreign, having jurisdiction over the Company or any
subsidiary of the Company or any of their properties, or any agreement
or instrument to which the Company or any such subsidiary is a party or
by which the Company or any such subsidiary is bound or to which any of
the properties of the Company or any such subsidiary is subject, or the
charter or by-laws of the Company or any such subsidiary.
(xi) This Agreement has been duly authorized, executed and
delivered by the Company.
(xii) Except as disclosed in the Prospectus, the Company and
its subsidiaries have good and marketable title to all real properties
and all other properties and assets owned by them, in each case free
from liens, encumbrances and defects that would individually or in the
aggregate have a Material Adverse Effect, except that all copyrights,
trademarks and patents owned by the Company and its subsidiaries have
been pledged as security for the payment and performance of all
obligations and liabilities of the Company under the Credit Agreement
and certain real properties owned by the Company and its subsidiaries
are subject to mortgages pursuant to the Credit Agreement; and except
as disclosed in the Prospectus, the Company and its subsidiaries hold
any leased real or personal property under valid and enforceable leases
with no exceptions that would individually or in the aggregate have a
Material Adverse Effect.
(xiii) The Company and its subsidiaries possess adequate
certificates, authorities or permits issued by appropriate governmental
agencies or bodies necessary to conduct the business now operated by
them and have not received any notice of proceedings relating to the
revocation or modification of any such certificate, authority or permit
that, if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a Material
Adverse Effect.
(xiv) No labor dispute with the employees of the Company or
any subsidiary exists or, to the knowledge of the Company, is imminent
that might have a Material Adverse Effect.
(xv) The Company and its subsidiaries own, possess or can
acquire on reasonable terms, adequate trademarks, trade names and other
rights to inventions, know-how, patents, copyrights, confidential
information and other intellectual property (collectively,
"INTELLECTUAL PROPERTY RIGHTS") necessary to conduct the business now
operated by them, or presently employed by them, and have not received
any notice of infringement of or conflict with asserted rights of
others with respect to any intellectual property rights that, if
determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a Material Adverse Effect.
<PAGE> 6
(xvi) Except as disclosed in the Prospectus, neither the
Company nor any of its subsidiaries is in violation of any statute, any
rule, regulation, decision or order of any governmental agency or body
or any court, domestic or foreign, relating to the use, disposal or
release of hazardous or toxic substances or relating to the protection
or restoration of the environment or human exposure to hazardous or
toxic substances (collectively, "ENVIRONMENTAL LAWS"), owns or operates
any real property contaminated with any substance that is subject to
any environmental laws, is liable for any off-site disposal or
contamination pursuant to any environmental laws, or is subject to any
claim relating to any environmental laws, which violation,
contamination, liability or claim would individually or in the
aggregate have a Material Adverse Effect; and the Company is not aware
of any pending investigation which might lead to such a claim.
(xvii) Except as disclosed in the Prospectus, there are no
pending actions, suits or proceedings against or affecting the Company,
any of its subsidiaries or any of their respective properties that, if
determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a Material Adverse Effect, or
would materially and adversely affect the ability of the Company to
perform its obligations under this Agreement, or which are otherwise
required to be described in the Prospectus but are not so described;
and no such actions, suits or proceedings are threatened or, to the
Company's knowledge, contemplated.
(xviii) The historical consolidated financial statements
included or incorporated by reference in each Registration Statement
and the Prospectus present fairly in all material respects the
financial position of the Company and its consolidated subsidiaries as
of the dates shown and their results of operations and cash flows for
the periods shown, and, except as noted therein, such financial
statements have been prepared in conformity with the generally accepted
accounting principles in the United States applied on a consistent
basis; the schedule included or incorporated by reference in each
Registration Statement presents fairly the information required to be
stated therein; and, in the opinion of the Company, the assumptions
used in preparing the pro forma financial statements included or
incorporated by reference in each Registration Statement and the
Prospectus provide a reasonable basis for presenting the significant
effects directly attributable to the transactions or events described
therein, the related pro forma adjustments give appropriate effect to
those assumptions, and the pro forma columns therein reflect the proper
application of those adjustments to the corresponding historical
financial statement amounts.
(xix) Except as disclosed in the Prospectus, since the date
of the latest audited financial statements included or incorporated by
reference in the Prospectus there has been no material adverse change,
nor any development or event involving a prospective material adverse
change, in the condition (financial or other), business, properties or
results of operations of the Company and its subsidiaries taken as a
whole, and, except as disclosed in or contemplated by the Prospectus,
there has been no dividend or distribution of any kind declared, paid
or made by the Company on any class of its capital stock.
(xx) The Company is not and, after giving effect to the
offering and sale of the Offered Securities and the application of the
proceeds thereof as described in the
<PAGE> 7
Prospectus, will not be an "investment company" as defined in the
Investment Company Act of 1940.
3. Purchase, Sale and Delivery of Offered Securities. On the basis of
the representations, warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, the Company agrees to sell to each
Underwriter, and each Underwriter agrees, severally and not jointly, to purchase
from the Company, at a purchase price of $__________ per share, that number of
Firm Securities set forth opposite the name of such Underwriter in Schedule A
hereto.
The Company will deliver the Firm Securities to the Representatives for
the accounts of the Underwriters, at the office of
_____________________________, against payment of the purchase price in Federal
(same day) funds by official bank check or checks or wire transfer to an account
at a bank acceptable to Credit Suisse First Boston Corporation ("CSFBC") drawn
to the order of the Company at the office of ______________________________ at
__________ A.M., New York time, on _______________ _____, 1999, or at such other
time not later than seven full business days thereafter as CSFBC and the Company
determine, such time being herein referred to as the "FIRST CLOSING DATE". The
certificates for the Firm Securities so to be delivered will be in definitive
form, in such denominations and registered in such names as CSFBC requests and
will be made available for checking and packaging at the above office of
_____________________________ at least 24 hours prior to the First Closing Date.
In addition, upon written notice from CSFBC given to the Company from
time to time not more than 30 days subsequent to the date of the Prospectus, the
Underwriters may purchase all or less than all of the Optional Securities at the
purchase price per Security to be paid for the Firm Securities. The Company
agrees to sell to the Underwriters the number of Optional Securities specified
in such notice. Such Optional Securities shall be purchased from the Company for
the account of each Underwriter in the same proportion as the number of shares
of Firm Securities set forth opposite such Underwriter's name bears to the total
number of shares of Firm Securities (subject to adjustment by CSFBC to eliminate
fractions) and may be purchased by the Underwriters only for the purpose of
covering over-allotments made in connection with the sale of the Firm
Securities. No Optional Securities shall be sold or delivered unless the Firm
Securities previously have been, or simultaneously are, sold and delivered. The
right to purchase the Optional Securities or any portion thereof may be
exercised from time to time and to the extent not previously exercised may be
surrendered and terminated at any time upon notice by CSFBC to the Company.
Each time for the delivery of and payment for the Optional Securities,
being herein referred to as an "OPTIONAL CLOSING DATE", which may be the First
Closing Date (the First Closing Date and each Optional Closing Date, if any,
being sometimes referred to as a "CLOSING DATE"), shall be determined by CSFBC
but shall be not later than five full business days after written notice of
election to purchase Optional Securities is given. The Company will deliver the
Optional Securities being purchased on each Optional Closing Date to the
Representatives for the accounts of the several Underwriters, at the office of
_____________________________, against payment of the purchase price therefor in
Federal (same day) funds by official bank check or checks or wire transfer to an
account at a bank acceptable to CSFBC drawn to the order of the Company at the
above office of ______________________________. The certificates for the
Optional Securities being purchased on each Optional Closing Date will be in
definitive form, in such denominations and registered in such names as CSFBC
requests upon reasonable
<PAGE> 8
notice prior to such Optional Closing Date and will be made available for
checking and packaging at the above office of ______________________________ at
a reasonable time in advance of such Optional Closing Date.
4. Offering by Underwriters. It is understood that the several
Underwriters propose to offer the Offered Securities for sale to the public as
set forth in the Prospectus.
5. Certain Agreements of the Company. The Company agrees with the
several Underwriters that:
(a) If the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement, the
Company will file the Prospectus with the Commission pursuant to and in
accordance with subparagraph (1) (or, if applicable and if consented to
by CSFBC, subparagraph (4)) of Rule 424(b) not later than the earlier
of (A) the second business day following the execution and delivery of
this Agreement or (B) the fifteenth business day after the Effective
Date of the Initial Registration Statement.
The Company will advise CSFBC promptly of any such filing pursuant to
Rule 424(b). If the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement and
an additional registration statement is necessary to register a portion
of the Offered Securities under the Act but the Effective Time thereof
has not occurred as of such execution and delivery, the Company will
file the additional registration statement or, if filed, will file a
post-effective amendment thereto with the Commission pursuant to and in
accordance with Rule 462(b) on or prior to 10:00 P.M., New York time,
on the date of this Agreement or, if earlier, on or prior to the time
the Prospectus is printed and distributed to any Underwriter, or will
make such filing at such later date as shall have been consented to by
CSFBC.
(b) The Company will advise CSFBC promptly of any proposal to
amend or supplement the initial or any additional registration
statement as filed or the related prospectus or the Initial
Registration Statement, the Additional Registration Statement (if any)
or the Prospectus and will not effect such amendment or supplementation
without CSFBC's consent; and the Company will also advise CSFBC
promptly of the effectiveness of each Registration Statement (if its
Effective Time is subsequent to the execution and delivery of this
Agreement) and of any amendment or supplementation of a Registration
Statement or the Prospectus and of the institution by the Commission of
any stop order proceedings in respect of a Registration Statement and
will use its best efforts to prevent the issuance of any such stop
order and to obtain as soon as possible its lifting, if issued.
(c) If, at any time when a prospectus relating to the Offered
Securities is required to be delivered under the Act in connection with
sales by any Underwriter or dealer, any event occurs as a result of
which the Prospectus as then amended or supplemented would include an
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is
necessary at any time to amend the Prospectus to comply with the Act,
the Company will promptly notify CSFBC of such event and will promptly
prepare and file with the Commission, at its own expense, an amendment
or supplement
<PAGE> 9
which will correct such statement or omission or an amendment which
will effect such compliance. Neither CSFBC's consent to, nor the
Underwriters' delivery of, any such amendment or supplement shall
constitute a waiver of any of the conditions set forth in Section 6.
(d) As soon as practicable, but not later than the
Availability Date (as defined below), the Company will make generally
available to its securityholders an earnings statement (which need not
be audited) covering a period of at least 12 months beginning after the
Effective Date of the Initial Registration Statement (or, if later, the
Effective Date of the Additional Registration Statement) which will
satisfy the provisions of Section 11(a) of the Act. For the purpose of
the preceding sentence, "AVAILABILITY DATE" means the 45th day after
the end of the fourth fiscal quarter following the fiscal quarter that
includes such Effective Date, except that, if such fourth fiscal
quarter is the last quarter of the Company's fiscal year, "AVAILABILITY
DATE" means the 90th day after the end of such fourth fiscal quarter.
(e) The Company will furnish to the Representatives copies of
each Registration Statement (four of which will be signed and will
include all exhibits), each related preliminary prospectus, and, so
long as a prospectus relating to the Offered Securities is required to
be delivered under the Act in connection with sales by any Underwriter
or dealer, the Prospectus and all amendments and supplements to such
documents, in each case in such quantities as CSFBC requests. The
Prospectus shall be so furnished on or prior to 3:00 P.M., New York
time, on the business day following the later of the execution and
delivery of this Agreement or the Effective Time of the Initial
Registration Statement. All other documents shall be so furnished as
soon as available. The Company will pay the expenses of printing and
distributing to the Underwriters all such documents.
(f) The Company will arrange for the qualification of the
Offered Securities for sale under the laws of such jurisdictions as
CSFBC designates and will continue such qualifications in effect so
long as required for the distribution.
(g) During the period of three years hereafter, the Company
will furnish to the Representatives and, upon request, to each of the
other Underwriters, as soon as practicable after the mailing thereof, a
copy of its annual report to shareholders for such year; and the
Company will furnish to the Representatives (i) as soon as practicable
after the filing thereof, a copy of each report and any definitive
proxy statement of the Company filed with the Commission under the
Securities Exchange Act of 1934 or mailed to shareholders, and (ii)
from time to time, such other information concerning the Company as
CSFBC may reasonably request.
(h) For a period of 120 days after the date of the initial
public offering of the Offered Securities, the Company will not offer,
sell, contract to sell, pledge or otherwise dispose of, directly or
indirectly, or file with the Commission a registration statement under
the Act relating to, any additional shares of its Securities or
securities convertible into or exchangeable or exercisable for any
shares of its Securities, or publicly disclose the intention to make
any such offer, sale, pledge, disposition or filing, without the prior
written consent of CSFBC, except grants of employee or director stock
options pursuant to the terms of a plan in effect on the date hereof or
issuances of Securities pursuant to
<PAGE> 10
the exercise of such options. Prior to the First Closing Date, the
Company will obtain substantially similar written agreements from each
of its directors and executive officers; provided, however, that each
of J. Peter Mosling, Jr. and Stephen P. Mosling may make a gift or
donation of shares of Common Stock, provided that the donor agrees in
writing to take such shares subject to the terms of these restrictions.
(i) The Company agrees with the several Underwriters that the
Company will pay all expenses incident to the performance of the
obligations of the Company under this Agreement, for any filing fees
and other expenses (including fees and disbursements of counsel) in
connection with qualification of the Offered Securities for sale under
the laws of such jurisdictions as CSFBC designates and the printing of
memoranda relating thereto, for the filing fee incident to, and the
reasonable fees and disbursements of counsel to the Underwriters in
connection with, the review by the National Association of Securities
Dealers, Inc. of the Offered Securities, for any travel expenses of the
Company's officers and employees and any other expenses of the Company
in connection with attending or hosting meetings with prospective
purchasers of the Offered Securities and for expenses incurred in
distributing preliminary prospectuses and the Prospectus (including any
amendments and supplements thereto) to the Underwriters.
6. Conditions of the Obligations of the Underwriters. The obligations
of the several Underwriters to purchase and pay for the Firm Securities on the
First Closing Date and the Optional Securities to be purchased on each Optional
Closing Date will be subject to the accuracy of the representations and
warranties on the part of the Company herein, to the accuracy of the statements
of Company officers made pursuant to the provisions hereof, to the performance
by the Company of its obligations hereunder and to the following additional
conditions precedent:
(a) The Representatives shall have received a letter, dated
the date of delivery thereof (which, if the Effective Time of the
Initial Registration Statement is prior to the execution and delivery
of this Agreement, shall be on or prior to the date of this Agreement
or, if the Effective Time of the Initial Registration Statement is
subsequent to the execution and delivery of this Agreement, shall be
prior to the filing of the amendment or post-effective amendment to the
registration statement to be filed shortly prior to such Effective
Time), of Ernst & Young LLP confirming that they are independent public
accountants within the meaning of the Act and the applicable published
Rules and Regulations thereunder and stating to the effect that:
(i) in their opinion the financial statements and
schedule examined by them and included in the Registration
Statements comply as to form in all material respects with the
applicable accounting requirements of the Act and the related
published Rules and Regulations;
(ii) they have performed the procedures specified by
the American Institute of Certified Public Accountants for a
review of interim financial information as described in
Statement of Auditing Standards No. 71, Interim Financial
Information, on the unaudited financial statements included in
the Registration Statements;
<PAGE> 11
(iii) on the basis of the review referred to in
clause (ii) above, a reading of the latest available interim
financial statements of the Company, inquiries of officials of
the Company who have responsibility for financial and
accounting matters and other specified procedures, nothing
came to their attention that caused them to believe that:
(A) the unaudited financial statements
included in the Registration Statements do not comply
as to form in all material respects with the
applicable accounting requirements of the Act and the
related published Rules and Regulations or any
material modifications should be made to such
unaudited financial statements for them to be in
conformity with generally accepted accounting
principles or that the amounts set forth in such
unaudited financial statements were not determined on
a basis substantially consistent with that of the
corresponding amounts in the audited statements of
income;
(B) at the date of the latest available
balance sheet read by such accountants, or at a
subsequent specified date not more than three
business days prior to the date of such letter, there
was any change in the capital stock or any increase
in long-term debt of the Company and its consolidated
subsidiaries or, at the date of the latest available
balance sheet read by such accountants, there was any
decrease in net current assets or stockholders'
equity, as compared with amounts shown on the latest
balance sheet included in the Prospectus;
(C) for the period from the closing date of
the latest income statement included in the
Prospectus to the closing date of the latest
available income statement read by such accountants
there were any decreases, as compared with the
corresponding period of the previous year, in net
sales or in the total or per share amounts of income
before extraordinary items or net income; or
(D) the pro forma financial statements
included in the Registration Statement and the
Prospectus do not comply as to form in all material
respects with the applicable accounting requirements
of the Act and the Rules and Regulations or the pro
forma columns therein do not reflect the proper
application of the pro forma adjustments to the
corresponding historical financial statement amounts;
except in all cases set forth in clauses (B) and (C) above for
changes, increases or decreases which the Prospectus discloses
have occurred or may occur or which are described in such
letter; and
(iv) they have compared specified dollar amounts (or
percentages derived from such dollar amounts) and other
financial information contained in the Registration Statements
(in each case to the extent that such dollar amounts,
percentages and other financial information are derived from
the general accounting records of the Company and its
subsidiaries subject to the internal controls of the Company's
accounting system or are derived directly from such
<PAGE> 12
records by analysis or computation) with the results obtained
from inquiries, a reading of such general accounting records
and other procedures specified in such letter and have found
such dollar amounts, percentages and other financial
information to be in agreement with such results, except as
otherwise specified in such letter.
For purposes of this subsection, (i) if the Effective Time of the
Initial Registration Statement is subsequent to the execution and
delivery of this Agreement, "REGISTRATION STATEMENTS" shall mean the
initial registration statement as proposed to be amended by the
amendment or post-effective amendment to be filed shortly prior to its
Effective Time, (ii) if the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement but
the Effective Time of the Additional Registration is subsequent to such
execution and delivery, "REGISTRATION STATEMENTS" shall mean the
Initial Registration Statement and the additional registration
statement as proposed to be filed or as proposed to be amended by the
post-effective amendment to be filed shortly prior to its Effective
Time, and (iii) "PROSPECTUS" shall mean the prospectus included in the
Registration Statements. All financial statements and schedules
included in material incorporated by reference into the Prospectus
shall be deemed included in the Registration Statements for purposes of
this subsection.
(b) The Representatives shall have received a letter, dated
the date of delivery thereof (which, if the Effective Time of the
Initial Registration Statement is prior to the execution and delivery
of this Agreement, shall be on or prior to the date of this Agreement
or, if the Effective Time of the Initial Registration Statement is
subsequent to the execution and delivery of this Agreement, shall be
prior to the filing of the amendment or post-effective amendment to the
registration statement to be filed shortly prior to such Effective
Time), of Larson, Allen, Weishair and Co., LLP confirming that they are
independent public accountants within the meaning of the Act and the
applicable published Rules and Regulations thereunder and stating to
the effect that:
(i) in their opinion the financial statements and
schedule of McNeilus Companies, Inc. ("MCNEILUS") examined by
them and included in the Registration Statements comply as to
form in all material respects with the applicable accounting
requirements of the Act and the related published Rules and
Regulations; and
(ii) they have compared specified dollar amounts (or
percentages derived from such dollar amounts) and other
financial information contained in the Registration Statements
(in each case to the extent that such dollar amounts,
percentages and other financial information relate to periods
ending on or before February 26, 1998, and are derived from
the general accounting records of McNeilus and its
subsidiaries subject to the internal controls of McNeilus's
accounting system or are derived directly from such records by
analysis or computation) with the results obtained from
inquiries, a reading of such general accounting records and
other procedures specified in such letter and have found such
dollar amounts, percentages and other financial information to
be in agreement with such results, except as otherwise
specified in such letter.
<PAGE> 13
For purposes of this subsection, (i) if the Effective Time of the
Initial Registration Statement is subsequent to the execution and
delivery of this Agreement, "REGISTRATION STATEMENTS" shall mean the
initial registration statement as proposed to be amended by the
amendment or post-effective amendment to be filed shortly prior to its
Effective Time, (ii) if the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement but
the Effective Time of the Additional Registration is subsequent to such
execution and delivery, "REGISTRATION STATEMENTS" shall mean the
Initial Registration Statement and the additional registration
statement as proposed to be filed or as proposed to be amended by the
post-effective amendment to be filed shortly prior to its Effective
Time, and (iii) "PROSPECTUS" shall mean the prospectus included in the
Registration Statements. All financial statements and schedules
included in material incorporated by reference into the Prospectus
shall be deemed included in the Registration Statements for purposes of
this subsection.
(c) If the Effective Time of the Initial Registration
Statement is not prior to the execution and delivery of this Agreement,
such Effective Time shall have occurred not later than 10:00 P.M., New
York time, on the date of this Agreement or such later date as shall
have been consented to by CSFBC. If the Effective Time of the
Additional Registration Statement (if any) is not prior to the
execution and delivery of this Agreement, such Effective Time shall
have occurred not later than 10:00 P.M., New York time, on the date of
this Agreement or, if earlier, the time the Prospectus is printed and
distributed to any Underwriter, or shall have occurred at such later
date as shall have been consented to by CSFBC. If the Effective Time of
the Initial Registration Statement is prior to the execution and
delivery of this Agreement, the Prospectus shall have been filed with
the Commission in accordance with the Rules and Regulations and Section
5(a) of this Agreement. Prior to such Closing Date, no stop order
suspending the effectiveness of a Registration Statement shall have
been issued and no proceedings for that purpose shall have been
instituted or, to the knowledge of the Company or the Representatives,
shall be contemplated by the Commission.
(d) Subsequent to the execution and delivery of this
Agreement, there shall not have occurred (i) any change, or any
development or event involving a prospective change, in the condition
(financial or other), business, properties or results of operations of
the Company or its subsidiaries which, in the judgment of a majority in
interest of the Underwriters including the Representatives, has a
Material Adverse Effect and makes it impractical or inadvisable to
proceed with completion of the public offering or the sale of and
payment for the Offered Securities; (ii) any downgrading in the rating
of any debt securities of the Company by any "nationally recognized
statistical rating organization" (as defined for purposes of Rule
436(g) under the Act), or any public announcement that any such
organization has under surveillance or review its rating of any debt
securities of the Company (other than an announcement with positive
implications of a possible upgrading, and no implication of a possible
downgrading, of such rating); (iii) any suspension or limitation of
trading in securities generally on the New York Stock Exchange or The
Nasdaq Stock Market's National Market, or any setting of minimum prices
for trading on such exchange or market, or any suspension of trading of
any securities of the Company on any exchange or in the
over-the-counter market; (iv) any banking moratorium declared by U.S.
Federal or New York authorities; or (v) any outbreak or escalation of
major hostilities in which the United States is involved, any
declaration of war by Congress or any other substantial national or
international calamity
<PAGE> 14
or emergency if, in the judgment of a majority in interest of the
Underwriters including the Representatives, the effect of any such
outbreak, escalation, declaration, calamity or emergency makes it
impractical or inadvisable to proceed with completion of the public
offering or the sale of and payment for the Offered Securities.
(e) The Representatives shall have received an opinion, dated
such Closing Date, of Foley & Lardner, counsel for the Company, to the
effect that:
(i) The Company has been duly incorporated and is a
validly existing corporation under the laws of the State of
Wisconsin, with corporate power and authority to own its
properties and conduct its business as described in the
Prospectus; and the Company is duly qualified to do business
as a foreign corporation in good standing in all other
jurisdictions in which its ownership or lease of property or
the conduct of its business requires such qualification,
except where the failure to be so qualified would not
individually or in the aggregate have a Material Adverse
Effect;
(ii) Each "significant subsidiary" of the Company
(as such term is defined in Rule 1.02 of Regulation S-X
promulgated under the Act) has been duly incorporated or
organized and is a validly existing corporation, partnership
or other entity under the laws of the jurisdiction of its
incorporation or organization, with power and authority to own
its properties and conduct its business as described in the
Prospectus; and each such significant subsidiary of the
Company is duly qualified to do business as a foreign
corporation, partnership or other entity in good standing in
all other jurisdictions in which its ownership or lease of
property or the conduct of its business requires such
qualification, except where the failure to be so qualified
would not individually or in the aggregate have a Material
Adverse Effect; and the capital stock or partnership or other
equity interests of each such significant subsidiary owned by
the Company, directly or through subsidiaries, is owned free
from liens, encumbrances and defects, except that the capital
stock of each subsidiary directly owned by the Company has
been pledged as security for the payment and performance of
all obligations and liabilities of the Company under the
Credit Agreement;
(iii) The Offered Securities delivered on such
Closing Date and all other outstanding shares of capital stock
of the Company have been duly authorized; all outstanding
shares of capital stock of the Company are, and the Offered
Securities being sold by the Company pursuant to this
Agreement will be, when paid for in accordance with this
Agreement, validly issued, fully paid and nonassessable
(except for certain statutory liabilities that may be imposed
by Section 180.0622(b) of the WBCL for unpaid employee wages);
and all outstanding shares of capital stock of the Company
conform, and the Offered Securities being sold by the Company
pursuant to this Agreement, when issued, will conform in all
material respects to the description thereof contained in the
Prospectus; and the shareholders of the Company have no
preemptive rights with respect to the Securities;
<PAGE> 15
(iv) There are no contracts, agreements or
understandings known to such counsel between the Company and
any person granting such person the right to require the
Company to file a registration statement under the Act with
respect to any securities of the Company owned or to be owned
by such person or to require the Company to include such
securities in the securities registered pursuant to the
Registration Statement or in any securities being registered
pursuant to any other registration statement filed by the
Company under the Act;
(v) The Company is not and, after giving effect to
the offering and sale of the Offered Securities and the
application of the proceeds thereof as described in the
Prospectus, will not be an "investment company" as defined in
the Investment Company Act of 1940;
(vi) No consent, approval, authorization or order
of, or filing with, any governmental agency or body or, to the
best of our knowledge, after due investigation, any court is
required to be obtained or made by the Company for the
consummation of the transactions contemplated by this
Agreement in connection with the sale of the Offered
Securities, except such as have been obtained and made under
the Act and such as may be required under state securities
laws;
(vii) The execution, delivery and performance of
this Agreement and the consummation of the transactions herein
contemplated will not result in a breach or violation of any
of the terms and provisions of, or constitute a default under,
(A) any statute, rule or regulation of, or, to the best of our
knowledge, after due investigation, any order of, any
governmental agency or body or any court having jurisdiction
over the Company or any subsidiary of the Company or any of
their properties, except in any such case where such breach,
violation or default would not individually or in the
aggregate have a Material Adverse Effect or (B) to the best of
our knowledge, after due investigation, any agreement or
instrument to which the Company or any such subsidiary is a
party or by which the Company or any such subsidiary is bound
or to which any of the properties of the Company or any such
subsidiary is subject, except in any such case where such
breach, violation or default would not individually or in the
aggregate have a Material Adverse Effect or (C) the charter or
by-laws of the Company or any such subsidiary;
(viii) The Initial Registration Statement was
declared effective under the Act as of the date and time
specified in such opinion, the Additional Registration
Statement (if any) was filed and became effective under the
Act as of the date and time (if determinable) specified in
such opinion, the Prospectus either was filed with the
Commission pursuant to the subparagraph of Rule 424(b)
specified in such opinion on the date specified therein or was
included in the Initial Registration Statement or the
Additional Registration Statement (as the case may be), and,
to the knowledge of such counsel after reasonable inquiry, no
stop order suspending the effectiveness of a Registration
Statement or any part thereof has been issued and no
proceedings for that purpose have been instituted or are
pending or contemplated under the Act, and each Registration
Statement and the Prospectus, and each amendment or supplement
thereto, as of their
<PAGE> 16
respective effective or issue dates, complied as to form in
all material respects with the requirements of the Act and the
Rules and Regulations; no facts have come to the attention of
such counsel which lead it to believe that any part of a
Registration Statement or any amendment thereto, as of its
effective date or as of such Closing Date, contained any
untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to
make the statements therein not misleading or that the
Prospectus or any amendment or supplement thereto, as of its
issue date or as of such Closing Date, contained any untrue
statement of a material fact or omitted to state any material
fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading; the descriptions in the Registration Statements
and Prospectus of statutes, legal and governmental proceedings
and contracts and other documents are accurate and complete in
all material respects; and such counsel do not know of any
legal or governmental proceedings required to be described in
a Registration Statement or the Prospectus which are not
described as required or of any contracts or documents of a
character required to be described in a Registration Statement
or the Prospectus or to be filed as exhibits to a Registration
Statement which are not described and filed as required; it
being understood that such counsel need express no opinion as
to the financial statements or other financial data contained
in the Registration Statements or the Prospectus; and
(ix) This Agreement has been duly authorized,
executed and delivered by the Company.
(f) The Representatives shall have received from Mayer, Brown
& Platt, counsel for the Underwriters, such opinion or opinions, dated
such Closing Date, with respect to the incorporation of the Company,
the validity of the Offered Securities delivered on such Closing Date,
the Registration Statements, the Prospectus and other related matters
as the Representatives may require, and the Company shall have
furnished to such counsel such documents as they request for the
purpose of enabling them to pass upon such matters. In rendering such
opinion, Mayer, Brown & Platt may rely as to the incorporation of the
Company and all other matters governed by Wisconsin law upon the
opinion of Foley & Lardner referred to above.
(g) The Representatives shall have received a certificate,
dated such Closing Date, of the President or any Executive Vice
President and a principal financial or accounting officer of the
Company in which such officers, to the best of their knowledge after
reasonable investigation, shall state that: the representations and
warranties of the Company in this Agreement are true and correct; the
Company has complied with all agreements and satisfied all conditions
on its part to be performed or satisfied hereunder at or prior to such
Closing Date; no stop order suspending the effectiveness of any
Registration Statement has been issued and no proceedings for that
purpose have been instituted or are contemplated by the Commission; the
Additional Registration Statement (if any) satisfying the requirements
of subparagraphs (1) and (3) of Rule 462(b) was filed pursuant to Rule
462(b), including payment of the applicable filing fee in accordance
with Rule 111(a) or (b) under the Act, prior to the time the Prospectus
was printed and distributed to any Underwriter; and, subsequent to the
date of the most recent financial statements in the Prospectus, there
has been no material adverse change, nor any
<PAGE> 17
development or event involving a prospective material adverse change,
in the condition (financial or other), business, properties or results
of operations of the Company and its subsidiaries taken as a whole
except as set forth in or contemplated by the Prospectus or as
described in such certificate.
(h) The Representatives shall have received a letter, dated
such Closing Date, of Ernst & Young LLP which meets the requirements of
subsection (a) of this Section, and a letter, dated such Closing Date,
of Larson, Allen, Weishair and Co., LLP which meets the requirements of
subsection (b) of this Section, except that the specified date referred
to in such subsections will be a date not more than three days prior to
such Closing Date for the purposes of this subsection.
The Company will furnish the Representatives with such conformed copies of such
opinions, certificates, letters and documents as the Representatives reasonably
request. CSFBC may in its sole discretion waive on behalf of the Underwriters
compliance with any conditions to the obligations of the Underwriters hereunder,
whether in respect of an Optional Closing Date or otherwise.
7. Indemnification and Contribution. (a) The Company will indemnify and
hold harmless each Underwriter, its partners, directors and officers and each
person, if any, who controls such Underwriter within the meaning of Section 15
of the Act, against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Registration Statement,
the Prospectus, or any amendment or supplement thereto, or any related
preliminary prospectus, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
each Underwriter for any legal or other expenses reasonably incurred by such
Underwriter in connection with investigating or defending any such loss, claim,
damage, liability or action as such expenses are incurred; provided, however,
that the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement in or omission or alleged omission from
any of such documents in reliance upon and in conformity with written
information furnished to the Company by any Underwriter through the
Representatives specifically for use therein, it being understood and agreed
that the only such information furnished by any Underwriter consists of the
information described as such in subsection (b) below.
(b) Each Underwriter will severally and not jointly indemnify and hold
harmless the Company, its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the Act against any
losses, claims, damages or liabilities to which the Company may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any Registration Statement, the Prospectus, or any amendment or supplement
thereto, or any related preliminary prospectus, or arise out of or are based
upon the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in
<PAGE> 18
conformity with written information furnished to the Company by such Underwriter
through the Representatives specifically for use therein, and will reimburse any
legal or other expenses reasonably incurred by the Company in connection with
investigating or defending any such loss, claim, damage, liability or action as
such expenses are incurred, it being understood and agreed that the only such
information furnished by any Underwriter consists of the following information
in the Prospectus furnished on behalf of each Underwriter: the concession and
reallowance figures appearing in the fourth paragraph under the caption
"Underwriting", the information contained in the ninth paragraph under the
caption "Underwriting" and the information contained under the caption "Notice
to Canadian Residents."
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party under
subsection (a) or (b) above, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise than
under subsection (a) or (b) above. In case any such action is brought against
any indemnified party and it notifies an indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party (who shall not, except with the consent of the indemnified
party, be counsel to the indemnifying party), and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party under this Section for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened action in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party unless such settlement (i) includes an unconditional release
of such indemnified party from all liability on any claims that are the subject
matter of such action and (ii) does not include a statement as to, or an
admission of, fault, culpability or a failure to act by or on behalf of an
indemnified party.
(d) If the indemnification provided for in this Section is unavailable
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities referred to in subsection (a) or (b) above (i) in such proportion as
is appropriate to reflect the relative benefits received by the Company on the
one hand and the Underwriters on the other from the offering of the Securities
or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company on the one hand and the Underwriters on the other in connection with
the statements or omissions which resulted in such losses, claims, damages or
liabilities as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and the Underwriters on the
other shall be deemed to be in the same proportion as the total net proceeds
from the offering (before deducting expenses) received by the Company bear to
the total underwriting discounts and commissions received by the Underwriters.
The relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent
<PAGE> 19
such untrue statement or omission. The amount paid by an indemnified party as a
result of the losses, claims, damages or liabilities referred to in the first
sentence of this subsection (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any action or claim which is the subject of this
subsection (d). Notwithstanding the provisions of this subsection (d), no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Securities underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations in
this subsection (d) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(f) The obligations of the Company under this Section shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls any
Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section shall be in addition to any liability which the
respective Underwriters may otherwise have and shall extend, upon the same terms
and conditions, to each director of the Company, to each officer of the Company
who has signed a Registration Statement and to each person, if any, who controls
the Company within the meaning of the Act.
8. Default of Underwriters. If any Underwriter or Underwriters default
in their obligations to purchase Offered Securities hereunder on either the
First or any Optional Closing Date and the aggregate number of shares of Offered
Securities that such defaulting Underwriter or Underwriters agreed but failed to
purchase does not exceed 10% of the total number of shares of Offered Securities
that the Underwriters are obligated to purchase on such Closing Date, CSFBC may
make arrangements satisfactory to the Company for the purchase of such Offered
Securities by other persons, including any of the Underwriters, but if no such
arrangements are made by such Closing Date, the non-defaulting Underwriters
shall be obligated severally, in proportion to their respective commitments
hereunder, to purchase the Offered Securities that such defaulting Underwriters
agreed but failed to purchase on such Closing Date. If any Underwriter or
Underwriters so default and the aggregate number of shares of Offered Securities
with respect to which such default or defaults occur exceeds 10% of the total
number of shares of Offered Securities that the Underwriters are obligated to
purchase on such Closing Date and arrangements satisfactory to CSFBC and the
Company for the purchase of such Offered Securities by other persons are not
made within 36 hours after such default, this Agreement will terminate without
liability on the part of any non-defaulting Underwriter or the Company, except
as provided in Section 9 (provided that if such default occurs with respect to
Optional Securities after the First Closing Date, this Agreement will not
terminate as to the Firm Securities or any Optional Securities purchased prior
to such termination). As used in this Agreement, the term "Underwriter" includes
any person substituted for an Underwriter under this Section. Nothing herein
will relieve a defaulting Underwriter from liability for its default.
9. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of the
Company or its officers and of the several Underwriters set forth in or made
pursuant to this Agreement will remain in full force and effect, regardless of
any investigation, or statement as to the results thereof, made by
<PAGE> 20
or on behalf of any Underwriter, the Company or any of their respective
representatives, officers or directors or any controlling person, and will
survive delivery of and payment for the Offered Securities. If this Agreement is
terminated pursuant to Section 8 or if for any reason the purchase of the
Offered Securities by the Underwriters is not consummated, the Company shall
remain responsible for the expenses to be paid or reimbursed by it pursuant to
Section 5 and the respective obligations of the Company and the Underwriters
pursuant to Section 7 shall remain in effect, and if any Offered Securities have
been purchased hereunder the representations and warranties in Section 2 and all
obligations under Section 5 shall also remain in effect. If the purchase of the
Offered Securities by the Underwriters is not consummated for any reason other
than solely because of the termination of this Agreement pursuant to Section 8
or the occurrence of any event specified in clause (iii), (iv) or (v) of Section
6(d), then the Company will reimburse the Underwriters for all out-of-pocket
expenses (including fees and disbursements of counsel) reasonably incurred by
them in connection with the offering of the Offered Securities.
10. Notices. All communications hereunder will be in writing and, if
sent to the Underwriters, will be mailed, delivered or telegraphed and confirmed
to the Representatives c/o Credit Suisse First Boston Corporation, Eleven
Madison Avenue, New York, N.Y. 10010-3629, Attention: Investment Banking
Department--Transactions Advisory Group, or, if sent to the Company, will be
mailed, delivered or telegraphed and confirmed to it at 2307 Oregon Street,
Oshkosh, Wisconsin 54903-2566, Attention: ____________________; provided,
however, that any notice to an Underwriter pursuant to Section 7 will be mailed,
delivered or telegraphed and confirmed to such Underwriter.
11. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective personal representatives
and successors and the officers and directors and controlling persons referred
to in Section 7, and no other person will have any right or obligation
hereunder.
12. Representation. The Representatives will act for the several
Underwriters in connection with the transactions contemplated by this Agreement,
and any action under this Agreement taken by the Representatives jointly or by
CSFBC will be binding upon all the Underwriters.
13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
14. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.
The Company hereby submits to the non-exclusive jurisdiction of the
Federal and state courts in the Borough of Manhattan in The City of New York in
any suit or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby.
<PAGE> 21
If the foregoing is in accordance with the Representatives'
understanding of our agreement, kindly sign and return to the Company one of the
counterparts hereof, whereupon it will become a binding agreement among the
Company and the several Underwriters in accordance with its terms.
Very truly yours,
Oshkosh Truck Corporation
By
[Insert title]
The foregoing Underwriting Agreement is hereby
confirmed and accepted as of the date first above
written.
CREDIT SUISSE FIRST BOSTON CORPORATION
GOLDMAN, SACHS & CO.
TUCKER ANTHONY CLEARY GULL
ROBERT W. BAIRD & CO. INCORPORATED
Acting on behalf of themselves and as the
Representatives of the several
Underwriters
By CREDIT SUISSE FIRST BOSTON CORPORATION
By
[Insert title]
<PAGE> 22
SCHEDULE A
NUMBER OF
FIRM SECURITIES
UNDERWRITER TO BE PURCHASED
----------- ---------------
Credit Suisse First Boston Corporation
Goldman, Sachs & Co.
Tucker Anthony Cleary Gull
Robert W. Baird & Co. Incorporated
<PAGE> 1
[ERNST & YOUNG LLP LETTERHEAD]
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our Firm under the caption "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
3,450,000 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.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Milwaukee, Wisconsin
October 26, 1999
<PAGE> 1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in this Amendment No. 1 to
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, and to the reference to our firm under the caption "Experts"
in the Prospectus. 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.
/s/ Larson, Allen, Weishair & Co., LLP
LARSON, ALLEN, WEISHAIR & CO., LLP
Minneapolis, Minnesota
October 26, 1999