SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
(X) Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended September 30, 2001, or
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from to ------- --------
Commission file number: 0-13886
Oshkosh Truck Corporation
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(Exact name of registrant as specified in its charter)
Wisconsin 39-0520270
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P. O. Box 2566, Oshkosh, WI 54903-2566
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(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (920) 235-9151
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered to Section 12(g) of the Act:
Common Stock
Preferred Share Purchase Rights
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Aggregate market value of the voting and nonvoting common equity held by
non-affiliates of the registrant as of November 30, 2001:
Class A Common Stock, $.01 par value - No Established Market Value
Common Stock, $.01 par value - $695,911,534
Number of shares outstanding of each of the registrant's classes of
common stock as of November 30, 2001:
Class A Common Stock, $.01 par value - 417,738 shares
Common Stock, $.01 par value - 16,297,694 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the 2002 Annual Meeting of
Shareholders (to be filed with the Commission under Regulation 14A within 120
days after the end of the registrant's fiscal year and, upon such filing, to be
incorporated by reference into Part III).
OSHKOSH TRUCK CORPORATION
Index to Annual Report on Form 10-K
Fiscal year ended September 30, 2001
Page
PART I.
ITEM 1. BUSINESS .........................................................3
ITEM 2. PROPERTIES ......................................................14
ITEM 3. LEGAL PROCEEDINGS................................................14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS............................................15
EXECUTIVE OFFICERS OF THE REGISTRANT ............................15
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED STOCKHOLDER MATTERS ..........................16
ITEM 6. SELECTED FINANCIAL DATA..........................................18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.............19
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK.........................................27
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA......................27
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE.....................60
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
OF THE REGISTRANT ..........................................60
ITEM 11. EXECUTIVE COMPENSATION ..........................................60
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT ......................................60
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS................................................60
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K ...................................60
INDEX TO EXHIBITS................................................65
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As used herein, the "Company" refers to Oshkosh Truck Corporation,
including Pierce Manufacturing Inc. ("Pierce"), McNeilus Companies, Inc.
("McNeilus") and its wholly-owned subsidiaries, Viking Truck and Equipment, Inc.
("Viking"), Kewaunee Fabrications, LLC ("Kewaunee"), Medtec Ambulance
Corporation ("Medtec") and Geesink Group BV, Norba AB and Geesink Norba Ltd and
their wholly-owned subsidiaries (together the "Geesink Norba Group"). "Oshkosh"
refers to Oshkosh Truck Corporation, not including Pierce, McNeilus, Viking,
Kewaunee, Medtec or the Geesink Norba Group or any other subsidiaries.
The "Oshkosh," "McNeilus," "Pierce," "Medtec," "Geesink" and "Norba"
trademarks and related logos are registered trademarks of the Company. All other
product and service names referenced in this document are the trademarks or
registered trademarks of their respective owners.
All information in this Annual Report on Form 10-K has been adjusted to
reflect the three-for-two split of the Company's Common Stock effected on August
19, 1999 in the form of a 50% stock dividend.
For ease of understanding, the Company refers to types of specialty trucks
for particular applications as "markets." When the Company refers to "market"
positions, these comments are based on information available to the Company
concerning units sold by those companies currently manufacturing the same types
of specialty trucks and truck bodies and are therefore only estimates. Unless
otherwise noted, these market positions are based on sales in the United States.
There can be no assurance that the Company will maintain such market positions
in the future.
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains "forward-looking statements" that
the Company believes to be within the meaning of the Private Securities
Litigation Reform Act of 1995. All statements other than statements of
historical fact included in this report, including, without limitation,
statements regarding the Company's future financial position, business strategy,
targets, projected sales, costs, earnings, capital spending and debt levels, and
plans and objectives of management for future operations, including those under
the caption "Fiscal 2002 Outlook," are forward-looking statements. When used in
this Annual Report on Form 10-K, words such as the Company "may," "will,"
"expects," "intends," "estimates," "anticipates," "believes," "should" or
"plans" or the negative thereof or variations thereon or similar terminology are
generally intended to identify forward-looking statements. These forward-looking
statements are not guarantees of future performance and are subject to risks,
uncertainties, assumptions and other factors, some of which are beyond the
Company's control, that could cause actual results to differ materially from
those expressed or implied by such forward-looking statements. These factors
include the cyclical nature of the Company's commercial and fire and emergency
markets, risks related to reductions in government expenditures, the uncertainty
of government contracts, the challenges of identifying, completing and
integrating acquisitions, disruptions in the supply of parts or components from
sole source suppliers and subcontractors, competition, and risks associated with
international operations and sales, including foreign currency fluctuations.
Additional information concerning factors that could cause actual results to
differ materially from those in the forward-looking statements is contained from
time to time in the Company's SEC filings, including, but not limited to, the
Company's Current Report on Form 8-K filed with the SEC on November 1, 2001. All
subsequent written and oral forward-looking statements attributable to the
Company, or persons acting on its behalf, are expressly qualified in their
entirety by these cautionary statements.
All forward-looking statements, including those under the caption "Fiscal
2002 Outlook," speak only as of December 7, 2001. The Company has adopted a
policy that if the Company makes a determination that it expects earnings for
future periods for which projections are contained in this Annual Report on Form
10-K to be lower than those projections, then the Company will publicly announce
that fact. The Company's policy also provides that the Company does not intend
to make such a public announcement if the Company makes a determination that it
expects earnings for future periods to be at or above the projections contained
in this Annual Report on Form 10-K. Except as set forth above, the Company
assumes no obligation, and disclaims any obligation, to update information
contained in this Annual Report on Form 10-K. Investors should be aware that the
Company may not update such information until the Company's next quarterly
conference call, if at all.
PART I
Item 1. BUSINESS
The Company
The Company is a leading designer, manufacturer and marketer of a broad
range of specialty commercial, fire and emergency and military trucks under the
"Oshkosh" and "Pierce" trademarks; truck bodies under the "McNeilus," "MTM,"
"Geesink" and "Norba" trademarks; and mobile and stationary compactors under the
"Geesink Kiggen" trademark. Oshkosh began business in 1917 and was
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among the early pioneers of four-wheel drive technology. In 1981, Oshkosh was
awarded the first Heavy Expanded Mobility Tactical Truck ("HEMTT") contract for
the U.S. Department of Defense ("DoD"), and quickly developed into the DoD's
leading supplier of severe-duty heavy tactical trucks. In 1996, the Company
began a strategic initiative to shed under-performing assets and to diversify
its business by making selective acquisitions in attractive specialty segments
of the commercial truck and truck body markets to complement its defense truck
business. The result of this initiative was an increase in sales from $413
million in fiscal 1996 to $1,445 million in fiscal 2001, with earnings from
continuing operations increasing from a loss of $.02 per share for fiscal 1996
to earnings of $2.98 per share for fiscal 2001.
As part of the Company's strategy, the Company has completed the following
acquisitions:
o Pierce, a leading manufacturer and marketer of fire trucks and other
fire apparatus, in September 1996;
o Nova Quintech, a manufacturer of aerial devices for fire trucks, in
December 1997;
o McNeilus, a leading manufacturer and marketer of commercial
specialty truck bodies, including rear-discharge concrete mixers and
portable concrete batch plants for the concrete ready-mix industry
and refuse truck bodies for the waste services industry, in February
1998;
o Kewaunee, a fabricator of heavy-steel components such as cranes and
aerial devices, in November 1999;
o Viking, Oshkosh's only remaining front-discharge concrete mixer
dealer, in April 2000;
o Medtec , a leading manufacturer of ambulances and rescue vehicles,
in October 2000; and
o Geesink Norba Group, a leading European manufacturer of refuse
collection truck bodies, mobile and stationary compactors and
transfer stations, in July 2001.
The Company believes it has developed a reputation for excellent product
quality, performance and reliability in each of the specialty segments in which
it participates. The Company has strong brand recognition in its segments and
has demonstrated design and engineering capabilities through the introduction of
several highly engineered proprietary components that increase the Company's
products' operating performance. The Company has developed comprehensive product
and service portfolios for many of its markets in an effort to become a
single-source supplier for its customers, including customer lease financing for
commercial products through the Company's interest in Oshkosh/McNeilus Financial
Services Partnership ("OMFSP"). The Company's commercial truck lines include
refuse truck bodies and rear- and front-discharge concrete mixers. The Company's
custom and commercial fire apparatus and emergency vehicles include pumpers,
aerial and ladder trucks, tankers, light, medium and heavy-duty rescue vehicles,
wildland rough terrain response vehicles, aircraft rescue and firefighting
("ARFF") vehicles, ambulances, and snow removal vehicles. As the leading
manufacturer of severe-duty heavy tactical trucks for the DoD, the Company
manufactures vehicles that perform a variety of demanding tasks such as hauling
tanks, missile systems, ammunition, fuel and cargo for combat units. In December
1998, the DoD awarded Oshkosh the Medium Tactical Vehicle Replacement ("MTVR")
contract for the U.S. Marine Corps., from which the Company expects to generate
total sales of $1.2 billion from fiscal 2000 through fiscal 2005, assuming the
DoD exercises all the options under the contract as currently anticipated. The
Company expects fiscal 2002 sales under this contract to approximate $300
million. The MTVR contract represents the Company's first production contract
for medium tactical trucks for the U.S. military.
Competitive Strengths
The following competitive strengths support the Company's business
strategy:
Strong Market Positions. The Company has developed strong market positions
and brand recognition in its core businesses, which the Company attributes to
its reputation for quality products, advanced engineering, innovation, vehicle
performance, reliability and customer service.
Extensive Distribution Capabilities. With the addition of the commercial
and municipal distribution capabilities of Pierce, McNeilus, Medtec and the
Geesink Norba Group, the Company has established an extensive domestic and
international distribution system for specialty trucks and truck bodies. In
addition to its network of dealers and distributors, the Company employs over
190 in-house sales and service representatives.
Flexible and Efficient Manufacturing. The Company believes it has
competitive advantages over larger truck manufacturers in its specialty truck
markets due to its manufacturing flexibility and custom fabrication
capabilities. Over the past nine years, the Company
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has significantly increased manufacturing efficiencies. In addition, the Company
believes it has competitive advantages over smaller truck and truck body
manufacturers due to the Company's relatively higher volumes that permit the use
of moving assembly lines and provide purchasing power opportunities across
product lines.
Diversified Product Offering and Customer Base. The Company's broad
product offerings and target markets serve to diversify its revenues, mitigate
the impact of economic cycles and provide multiple platforms for both internal
growth and acquisitions. For each of the Company's target markets, the Company
has developed or acquired a broad product line to become a single-source
provider to the Company's customers.
Strong Management Team. The present management team has successfully
executed a strategic repositioning of the Company's business while significantly
improving its financial and operating performance. With each prior acquisition,
the Company assimilated the management and culture of the acquired company,
introduced new strategies to significantly increase sales and used the Company's
expertise in purchasing and manufacturing to reduce costs.
Quality Products and Customer Service. Oshkosh, Pierce, McNeilus, Medtec
and the Geesink Norba Group have each developed strong brand recognition based
on their commitments to meet the stringent product quality and reliability
requirements of their customers and the specialty truck markets they serve. The
Company's commitment to product quality is exemplified by the ISO 9001
certification of Oshkosh, Pierce and the Geesink Norba Group. The Company also
achieves high quality customer service through its extensive service and parts
support program, which is available to domestic customers 365 days a year in all
product lines throughout the Company's distribution systems.
Proprietary Components. The Company's advanced design and engineering
capabilities have contributed to the development of proprietary, severe-duty
components that enhance truck performance, reduce manufacturing costs and
strengthen customer relationships. These proprietary components include front
drive and steer axles, transfer cases, cabs, the ALL-STEER electronic all-wheel
steering system, TAK-4 independent suspension, the Sky-Arm articulating aerial
ladder, the Hercules and Husky compressed air foam system, the Command Zone
multiplexing technology, the McNeilus Auto Reach Arm, an automated side-loading
refuse body, and the Pro Pulse, hybrid drive technology. The Company believes
these proprietary components provide the Company a competitive advantage by
increasing its vehicles' durability, operating efficiency and effectiveness. The
integration of many of these components across various product lines also
reduces the Company's costs to manufacture its products compared to
manufacturers who simply assemble purchased components.
Business Strategy
The Company is focused on increasing its net sales, profitability and cash
flow by capitalizing on its competitive strengths and pursuing a comprehensive,
integrated business strategy. Key elements of the Company's business strategy
include:
Focusing on Specialized Truck and Truck Body Markets. The Company plans to
continue its focus on those specialized truck and truck body markets where it
has strong market positions and where the Company can leverage synergies in
purchasing, manufacturing, technology and distribution to increase sales and
profitability. The Company believes the higher sales volumes associated with
strong market positions will allow the Company to continue to enhance
productivity in manufacturing operations, fund innovative product development
and invest in further expansion. In addition to the Company's strategies to
increase market share and profitability, each of the Company's specialized truck
and truck body markets is exhibiting opportunities for further market growth.
Pursuing Strategic Acquisitions. The Company's present management team has
successfully negotiated and integrated seven acquisitions since September 1996
that have significantly increased the Company's sales and earnings. The Company
intends to selectively pursue additional strategic acquisitions, both
domestically and internationally, to enhance its product offerings and expand
its international presence in specialized truck and truck body markets. The
Company will focus its acquisition strategy on providing a full range of
products to customers in specialty truck and truck body markets that are
growing, and where the Company can enhance its strong market positions and
achieve significant acquisition synergies.
Expanding Distribution and International Sales. The Company actively
investigates new distribution and service capabilities for municipal customers
of the domestic refuse truck body market and in targeted geographic areas in the
domestic fire apparatus market. The Company is actively recruiting new
representatives and dealers in targeted international commercial and fire and
emergency markets to expand the international sales of McNeilus refuse truck
bodies and rear-discharge concrete mixers and Pierce fire apparatus. The Company
is also expanding the capabilities of the Geesink Norba Group distribution
centers in Europe. The Company began marketing its new medium tactical military
truck to approved foreign armies. Because there have been limited sales of
medium tactical trucks to foreign armies over the last ten years under the U.S.
Foreign Military Sales ("FMS") Program and because the
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Company's truck has significant off-road capability at an attractive price, the
Company believes that the international market for this truck may be
significant.
Introducing New Products. The Company has increased its emphasis on new
product development in recent years, as it seeks to expand sales by leading its
core markets in the introduction of new or improved products and new
technologies, either through internal development or strategic acquisitions. In
fiscal 2001, the Company invested $14.3 million in development activities that
resulted in 8 major new products or product enhancements.
In the fire and emergency segment, Pierce first introduced its new Tak-4
Independent Suspension to the fire service in fiscal 2001. This system improves
braking, ride quality and lifespan of fire apparatus. Also in fiscal 2001,
Pierce developed an improved version of its Husky foam system. Pierce also
developed the Tactical Fire Fighting Truck ("TFFT") in fiscal 2001 on the eight
wheel drive chassis of the HEMTT M977. The TFFT is designed to suppress and
extinguish aircraft, petroleum, wildland and structural fires. Oshkosh developed
the Striker ARFF vehicle in fiscal 2001, a new truck that offers better
maneuverability, visibility and stability, making responses faster and safer for
the vehicle users.
In the commercial segment, McNeilus developed and introduced a new
"Atlantic Series" front-loading refuse packer, which is designed to meet the
specific requirements of East Coast U.S. waste removal. This vehicle is
engineered to carry heavy loads on narrow streets. In fiscal 2001, McNeilus
introduced the T-21 portable concrete paving plant, which is engineered to be
easily moved from one site to the next and set up in as little as 12 hours.
In the defense segment, Oshkosh developed the ProPulse hybrid electric
drive system and integrated it into a heavy tactical defense truck. Oshkosh also
developed a new tow truck model of its MTVR vehicle, with Command Zone
technology.
Reducing Costs While Maintaining Quality. The Company actively benchmarks
its competitors' costs and best industry practices, and continuously seeks to
implement process improvements to increase profitability and cash flow. With
each of its major acquisitions, the Company has established cost reduction
targets. At Pierce, the Company exceeded its two-year cost reduction target of
$6.5 million as a result of consolidating facilities, reengineering the
manufacturing process and leveraging increased purchasing power. Similarly, the
Company utilized its greater purchasing power and manufacturing capabilities in
connection with its 1998 acquisition of McNeilus. The Company established a $5
to $7 million two-year cost reduction target and to date has realized over $11
million of cost reductions. The Company has established an annual cost reduction
target of $2.0 - $3.5 million over the next three years for the Geesink Norba
Group acquisition. For historic product lines, the Company also establishes
annual labor productivity improvement targets, and for many product lines, the
Company establishes materials cost reduction targets. In September 2000, the
Company completed an $8.3 million expansion of its Dodge Center, Minnesota
manufacturing facility. The primary purpose of the expansion was to construct
two moving assembly lines with robotic welders to significantly reduce the
manufacturing costs of refuse bodies. The expansion also doubled the paint and
refuse body manufacturing capacity of this facility. In May 2001, the Company
completed the $8.0 million, 110,000 square foot expansion of its model-flexible
main assembly plant in Oshkosh, Wisconsin. This expansion significantly
increases assembly capacity, refines the manufacturing process and expands
testing capabilities. The expansion includes facilities for simulated road tests
and on-line ABS brake testing and provided for improvements in cab production
and TAK-4 independent suspension production.
Products
The Company is focused on the following core segments of the specialty
truck and truck body markets:
Commercial Segment. Through the Geesink Norba Group and McNeilus, the
Company is a leading European and U.S. manufacturer of refuse truck bodies for
the waste services industry. Through Oshkosh and McNeilus, the Company is a
leading manufacturer of rear- and front-discharge concrete mixers and portable
concrete batch plants for the concrete ready-mix industry. McNeilus manufactures
a wide range of rear, front, automated side and top loading refuse truck
bodies, which are mounted on commercial chassis. McNeilus sells its refuse
vehicles primarily to commercial waste management companies, and it is building
a presence with municipal customers such as the cities of Los Angeles,
California; Philadelphia, Pennsylvania; Greensboro, North Carolina; Cleveland,
Cincinnati and Columbus, Ohio and in international markets such as the United
Kingdom. The Geesink Norba Group sells its refuse vehicles throughout Europe to
municipal and commercial customers. The Company believes its refuse vehicles
have a reputation for efficient, cost-effective, dependable, low maintenance
operation that supports the Company's continued expansion into municipal and
international markets. The Company sells rear- and front-discharge concrete
mixers and portable concrete batch plants to concrete ready-mix companies
throughout the United States and internationally. The Company believes it is the
only domestic concrete mixer manufacturer that markets both rear- and
front-discharge concrete mixers and portable concrete batch plants. Mixers and
batch plants are marketed on the basis of their quality, dependability,
efficiency, low maintenance and cost-effectiveness.
The Company offers four- to seven-year tax advantaged lease financing to
mixer and portable concrete batch plant customers and to commercial waste hauler
customers in the United States through OMFSP, an affiliated partnership.
Offerings include competitive lease financing rates and the ease of one-stop
shopping for customers' equipment and financing.
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Fire and Emergency Segment. Through Pierce, the Company is a leading
domestic manufacturer of fire apparatus assembled on a custom chassis, which is
designed and manufactured by Pierce to meet the special needs of firefighters.
Pierce also manufactures fire apparatus assembled on a commercially available
chassis, which is produced for multiple end-customer applications. Pierce
primarily serves domestic government customers, but also sells fire apparatus to
airports, universities and large industrial companies, and in international
markets. Pierce's history of innovation and research and development in
consultation with firefighters has resulted in a broad product line that
features a wide range of innovative, high-quality custom and commercial
firefighting equipment with advanced fire suppression capabilities. Pierce's
engineering expertise also allows it to design its vehicles to meet stringent
government regulations for safety and effectiveness.
Through Medtec, the Company is one of the leading U.S. manufacturers of
custom ambulances for private and public transporters and fire departments.
Medtec is among the top U.S. manufacturers of ambulances. Medtec markets a broad
line of ambulances for private patient transporters, fire departments and public
transporters. Medtec manufactures a broad line of ambulances, however it
specializes in Type I and Type III ambulances. Type I and Type III ambulances
are popular among public patient transporters and fire departments. Type I
ambulances feature a conventional style, light- or medium-duty chassis with a
modular patient transport body mounted separately behind the truck cab. Type III
ambulances are built on light-duty van chassis with a walk-through opening into
the patient transport body which is mounted behind the vehicle cab.
The Company is among the leaders in sales of aircraft rescue and
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 such as Montreal and Toronto, Canada, are served by the Company's
aircraft rescue and firefighting vehicles. The Company believes that the
reliability of its aircraft rescue and firefighting vehicles contributes to the
Company's strong market position.
The Company is a leader in airport snow removal in the United States. The
Company's specially designed airport snow removal vehicles can cast up to 5,000
tons of snow per hour and are used by some of the largest airports in the United
States, including Denver International Airport, LaGuardia International Airport,
Minneapolis-St. Paul International Airport and O'Hare International Airport. The
Company believes that the reliability of its high performance snow removal
vehicles and the speed with which they clear airport runways contributes to its
strong market position.
Through an independent third party finance company, the Company offers
two- to ten-year municipal lease financing programs to its fire and emergency
customers in the United States. Programs include competitive lease financing
rates, creative and flexible finance arrangements and the ease of one-stop
shopping for Pierce's customers' equipment and financing.
Defense Truck Segment. The Company has sold products to the DoD for over
70 years. The Company's proprietary military all-wheel drive product line of
heavy-payload tactical trucks includes the HEMTT, the Heavy Equipment
Transporter ("HET"), the Palletized Load System ("PLS"), Common Bridge
Transporter ("CBT") and the Logistic Vehicle System ("LVS"). The Company also
exports severe-duty heavy tactical trucks to approved foreign customers.
The Company has developed a strong relationship with the DoD over the
years that has resulted in the Company operating under "family contracts" with
the DoD for the HEMTT, HET, PLS and LVS and for DoD vehicle parts. "Family
contracts" is the term given to contracts that group similar models together to
simplify the acquisition process. Under the vehicle family contracts, the DoD
orders a specified range of volume of either HEMTT, HET, PLS or LVS trucks at
fixed prices, which allows the Company to predict and plan its long-term
production and delivery schedules for vehicles. The Company completed
negotiations in fiscal 2001 that extended these family contracts for a five-year
period under a program referred to as the Family of Heavy Tactical Vehicles
("FHTV"). The FHTV is a five-year requirements contract running from fiscal 2001
to fiscal 2006 and includes the following heavy-payload products: HEMTT,
HEMTT-ESP, HET, PLS, CBT, LVS and the associated logistics and configuration
management support.
With the award of the MTVR contract, the Company has become a major
manufacturer of medium-payload tactical trucks for the U.S. Marine Corps. The
goal of the U.S. Marine Corps is to upgrade the current configuration to carry a
much greater payload with substantially increased cross-country mobility. MTVRs
are equipped with the Company's patented independent suspension and transfer
cases, and central tire inflation to enhance off-road performance. This program
is currently expected to include the production of 5,666 trucks with options for
up to 2,489 additional trucks. The total value of this contract could reach $1.2
billion, including the options, or $850 million, exclusive of options, over
fiscal years 2000 through 2005. Testing of the initial ten trucks began in
December 1999. In fiscal 2000, production occurred at the rate of approximately
one truck per day, and in April 2001, the Company received approval to commence
full-rate production, increasing to approximately seven trucks per day in August
2001.
The U.S. Army commenced a competition to add a second supplier to build
Family of Medium Tactical Vehicles ("FMTV"). The Company received a $1.9 million
contract in November 1998 to compete with one other truck manufacturer to
qualify as a second source to produce three trucks for testing by the DoD under
Phase I of its second source supplier qualification plan. The three Oshkosh
FMTVs produced under this contract have successfully completed Phase I testing.
The fiscal year 2000 Defense Authorization Act cancelled the above mentioned
second source program; however, it directed the Army to go forward with a
competition for 100% of the next procurement. Initially, the FMTV competition
was scheduled to begin in October 2000 with the issuance of a request for
proposal ("RFP") to retrofit three trucks for testing, to be followed by a
period of testing, another RFP for firm production pricing and then conclude
with a contract award in March or April 2002. In late September 2000, the DoD
delayed
7
the competition to permit engine manufacturers more time to develop engines for
the FMTV that will be compliant with U.S. Environmental Protection Agency
regulations for diesel engines sold in 2004. The DoD's RFP issued in December
2000 requires retrofit of eight trucks for testing. The period for follow-on
testing and submission of production pricing was extended. In April 2001,
Oshkosh was awarded a $5.6 million contract to build eight prototype FMTV
trucks. One competitor, the current incumbent on the program, was awarded a
similar contract. Following a ten-month prototype truck build phase, the DoD
will test the trucks built by each competitor for a period of seven months.
Following the test period, each contractor will submit a production proposal in
about October 2002, with an anticipated production contract award to Oshkosh,
or its competitor, in March 2003; production would commence in fiscal 2004 or
2005. The first five-year contract under the FMTV Competitive Rebuy program
involves 14,000 trucks and trailers, and revenues in excess of $1.0 billion. The
entire program is expected to run through 2020 and entail revenues in excess of
$13.0 billion. The Company intends to continue to compete aggressively for a
contract award under the FMTV program.
The Company's objective is to continue to diversify into other areas of
the U.S. defense truck market by expanding applications, uses and body styles of
its current heavy and medium tactical truck lines. As the Company enters the
medium tactical truck area of the defense market segment, management believes
that the Company has multiple competitive advantages, including:
o Truck engineering and testing. DoD truck contract competitions require
significant defense truck engineering expertise to ensure that a company's
truck excels under demanding testing conditions. The Company has a team of
47 engineers and draftsmen to support current business and truck contract
competitions. These personnel have significant expertise designing new
trucks, using sophisticated computer aided tools, supporting grueling
testing programs at DoD test sites and submitting detailed, comprehensive,
successful contract proposals.
o Proprietary components. The Company's patented independent suspension and
transfer case enhance its trucks' off-road performance. In addition,
because these are two of the highest cost components in a truck, the
Company has a competitive cost-advantage from in-house manufacturing of
these two truck components.
o Past performance. The Company has been building trucks for the DoD for
over 70 years. The Company believes that its past success in delivering
reliable, high quality trucks on time, within budget and meeting
specifications is a competitive advantage in future defense truck
procurement programs. The Company understands the special contract
procedures in use by the DoD and has developed substantial expertise in
contract management and accounting.
o Flexible manufacturing. The Company's ability to produce a variety of
truck models on the same moving assembly line permits it to avoid
facilitation costs on most new contracts and maintain competitive
manufacturing efficiencies.
o Logistics. The Company has gained significant experience in the
development of operators' manuals and training and in the delivery of
parts and services worldwide in accordance with the DoD's expectations,
which differ materially from commercial practices. In fiscal 2000 and
2001, the Company expanded it logistics capabilities to permit the DoD to
order parts, receive invoices and remit payments electronically.
Marketing, Sales and Distribution
The Company believes it differentiates itself from many of its larger
competitors by tailoring its distribution to the needs of its specialized truck
markets and from its smaller competitors with its national and global sales and
service capabilities. Distribution personnel use demonstration trucks to show
customers how to use the Company's trucks and truck bodies properly. In
addition, the Company's flexible distribution is focused on meeting customers on
their terms, whether on a jobsite, in an evening public meeting or at a
municipality's offices, compared to the showroom sales approach of the typical
dealers of large truck manufacturers. The Company backs all products by same-day
parts shipment, and its service technicians are available in person or by
telephone to domestic customers 365 days a year. The Company believes its
dedication to keeping its products in-service in demanding conditions worldwide
has contributed to customer loyalty.
The Company provides its salespeople, representatives and distributors
with product and sales training on the operation and specifications of its
products. The Company's engineers, along with its product managers, develop
operating manuals and provide field support at truck delivery for some markets.
Dealers and representatives, where used, enter into agreements with the
Company that allows for termination by either party generally upon 90 days'
notice. Dealers and representatives are not permitted to market and sell
competitive products.
Commercial Segment. The Company operates 16 distribution centers with over
130 in-house sales and service representatives in the U.S. to sell and service
refuse truck bodies, rear- and front-discharge concrete mixers and concrete
batch plants. These centers are in addition to sales and service activities at
the Company's manufacturing facilities. Fourteen of the Company's distribution
centers provide sales, service and parts distribution to customers in their
geographic regions. Four of the distribution centers also have paint facilities
and provide significant additional paint and mounting services during peak
demand periods. Two of the centers also manufacture concrete mixer replacement
barrels. The Company believes this network represents one of the largest
concrete mixer and refuse truck body distribution networks in the United States.
8
In Europe, the Company operates fourteen distribution centers with over 70
in-house sales and service representatives in nine countries to sell and service
its refuse truck bodies and stationary compactors. Two of the centers have paint
facilities, and most of the centers provide mounting services. The Company also
operates 49 roving service vans throughout Europe. The Company believes this
network represents one of the largest refuse truck body distribution networks in
Europe. The Geesink Norba Group also has sales and service agents in Europe and
the Middle East.
The Company believes its direct distribution to customers is a competitive
advantage in commercial markets, particularly in the U.S. waste services
industry where principal competitors distribute through dealers and to a lesser
extent in the ready-mix concrete industry, where several competitors in part use
dealers. In addition to the avoidance of dealer commissions, the Company
believes direct distribution permits a more focused sales force in U.S. refuse
body markets whereas dealers frequently offer a very broad and mixed product
line, and accordingly, the time dealers tend to devote to refuse body sales
activities is limited.
With respect to commercial distribution efforts, the Company has begun to
apply Oshkosh's and Pierce's sales and marketing expertise in municipal markets
to increase sales of McNeilus refuse truck bodies to municipal customers. Prior
to the Company's acquisition of McNeilus, virtually all McNeilus refuse truck
body sales were to commercial customers. While the Company believes commercial
customers represent a majority of the refuse truck body market, many
municipalities purchase their own refuse trucks. The Company believes it is
positioned to create an effective municipal distribution system in the refuse
truck body market by leveraging its existing commercial distribution
capabilities and by opening service centers in major metropolitan markets.
Following its acquisition and new focus in municipal markets, McNeilus has been
awarded new business for the cities of Philadelphia, Pennsylvania; Los Angeles,
California; Greensboro, North Carolina; and Waco, Texas and has targeted other
major metropolitan areas.
The Company also has begun to offer McNeilus refuse truck bodies,
rear-discharge concrete mixers and concrete batch plants to Oshkosh's
international representatives and dealers for sales and service worldwide.
McNeilus' international sales have historically been limited because it had
focused on the domestic market. However, the Company believes that refuse body
exports are a significant percentage of some competitors' sales and represent a
meaningful opportunity for McNeilus. The Company is training its international
Oshkosh and Pierce representatives and dealers to sell and service the McNeilus
product line and has commenced sales of McNeilus products through these
representatives and dealers. The Company has also been actively recruiting new
refuse and rear-discharge concrete mixer representatives and dealers worldwide.
Fire and Emergency Segment. The Company believes the geographical breadth,
size and quality of its fire apparatus sales and service organization are
competitive advantages in a market characterized by a few large manufacturers
and numerous small, regional competitors. Pierce's fire apparatus are sold
through 33 sales and service organizations with more than 250 sales
representatives nationwide, which combine broad geographical reach with
frequency of contact with fire departments and municipal government officials.
These sales and service organizations are supported by 76 product and marketing
support professionals and contract administrators at Pierce. The Company
believes frequency of contact and local presence are important to cultivate
major, and typically infrequent, purchases involving the city or town council
and fire department, purchasing, finance, and mayoral offices, among others,
that may participate in a fire truck bid and selection. After the sale, Pierce's
nationwide local parts and service capability is available to help
municipalities maintain peak readiness for this vital municipal service.
Prior to its acquisition by Oshkosh, Pierce primarily focused its sales
efforts in rural and small suburban domestic markets. Due to the Company's
expertise and long-standing relationships in numerous large urban markets, the
Company has extended Pierce's sales focus into several key metropolitan areas.
As a result of this focus and since its acquisition, Pierce has been awarded new
business in the cities of Los Angeles, California; Richmond, Virginia; Tampa and
Miami, Florida; Detroit, Michigan; Chicago, Illinois and Honolulu, Hawaii among
other major cities, and continues to target other urban markets.
Prior to its acquisition by Oshkosh, Pierce had targeted premium-priced
markets where it could use its innovative technology, quality and advanced
customization capabilities. In 1999, Pierce also began targeting price sensitive
domestic and international markets through the introduction of its Contender
series of lower-priced commercial and custom pumpers. These limited-option
vehicles are being produced in the Company's Bradenton, Florida facility for
lower cost delivery to international customers.
Pierce has substantially strengthened its competitive position overseas.
Pierce's worldwide distribution network was expanded from one to 26
international representatives and dealers. This network has delivered several
new orders from government agencies and private companies in Curacao, Puerto
Rico, Mexico, Argentina and Saudi Arabia, among other countries.
The Company has invested in the development of sales tools for its
representatives that it believes create a competitive advantage in the sale of
fire apparatus. For example, Pierce's Pride 2000 PC-based sales tool can be used
by its sales representatives to develop the detail specifications, price the
base truck and options and draw the configured truck on the customer's premises.
The quote, if accepted, is directly interfaced into Pierce's sales order
systems.
9
The Company's aircraft rescue and firefighting vehicles are marketed
through a combination of three direct sales representatives domestically and 47
representatives and distributors in international markets. In addition, the
Company has 29 full-time sales and service representative and distributor
locations with over 100 sales people focused on the sale of snow removal
vehicles, principally to airports, but also to municipalities, counties and
other governmental entities.
The acquisition of Medtec has added seven distributor organizations with
approximately 42 sales people focused on the ambulance market.
Defense Segment. Substantially all domestic defense products are sold
directly to principal branches of the DoD. The Company maintains a liaison
office in Washington, D.C. to represent its interests with the Pentagon,
Congress and the offices of the Executive Branch. The Company also sells and
services defense products to foreign governments directly through four
international sales offices, through dealers, consultants and representatives,
and through the FMS program. The DoD has begun to rely on industry for support
and sustainability of its vehicles. This has opened up new opportunities for
maintenance, service and contract support to the U.S. Army and U.S. Marine
Corps.
The Company maintains a marketing staff of four individuals that regularly
meets with all branches of the Armed Services, Reserves and National Guard and
with representatives of key military bases to determine their vehicle
requirements and identify specialty truck variants and apparatus required to
fulfill their missions.
In addition to marketing its current truck offerings and competing for new
contracts in the medium-payload segment, the Company actively works with the
Armed Services to develop new applications for its vehicles and expand its
services.
Manufacturing
The Company manufactures trucks and truck bodies at eighteen manufacturing
facilities. Employee involvement is encouraged to improve production processes
and product quality. To reduce production costs, the Company maintains a
continuing emphasis on the development of proprietary components,
self-sufficiency in fabrication, just-in-time inventory management, improvement
in production flows, interchangeability and simplification of components among
product lines, creation of jigs and fixtures to ensure repeatability of quality
processes, utilization of robotics, and performance measurement to assure
progress toward cost reduction targets.
The Company intends to continue to upgrade its manufacturing capabilities
by adopting best practices across its manufacturing facilities, relocating
manufacturing activities to the most efficient facility, investing in further
fixturing and robotics, re-engineering manufacturing processes and adopting lean
manufacturing management practices across all facilities.
The Company is focusing on achieving targeted synergies with each
acquisition. Within the first year following the Pierce acquisition, the Company
consolidated three Pierce manufacturing facilities down to two while increasing
Pierce's capacity by improving product flow. In addition, among other things,
the Company reduced the number of operating shifts at the Pierce paint plant
from three to one to substantially reduce utility costs, implemented indexing of
production lines, and eliminated storage rooms to relocate inventory to point of
use thereby eliminating duplicate material handling. Likewise, at McNeilus, the
Company has installed seven additional robots and re-arranged weld and mount
activities.
In September 2000, the Company completed construction of a 100,000 square
foot, $8.3 million expansion at its Dodge Center, Minnesota facility, which
expanded paint capacity and doubled refuse body manufacturing capacity. The
primary purpose of the expansion was to construct two moving assembly lines with
robotic welders to significantly reduce the manufacturing costs of refuse
bodies. With the acquisition of Kewaunee in fiscal 2000, the Company acquired
heavy metal fabrication capabilities.
In fiscal 2001, Oshkosh completed an $8.0 million plan to expand its
existing production facilities in Oshkosh, Wisconsin. The project expanded the
Company's machining, fabrication and assembly facilities, with a total addition
of approximately 110,000 square feet of space to accommodate higher levels of
production under the MTVR contract.
In 1994, Oshkosh commenced a program to educate and train all employees at
its Oshkosh facilities in quality principles and to seek ISO 9001 certification
to improve the Company's competitiveness in its global markets. ISO 9001 is a
set of internationally accepted quality requirements established by the
International Organization for Standardization, which indicates that a company
has established and follows a rigorous set of requirements aimed at achieving
customer satisfaction by preventing nonconformity in design, development,
production, installation and servicing of products. Employees at all levels of
the Company are encouraged to understand customer and supplier requirements,
measure performance, develop systems and procedures to prevent nonconformance
10
with requirements and produce continuous improvement in all work processes.
Oshkosh achieved ISO 9001 certification in 1995 and Pierce achieved ISO 9001
certification in 1998. The Geesink Norba Group systems are also ISO 9001
certified.
Engineering, Research and Development
The Company's extensive engineering, research and development capabilities
have been key drivers of the Company's marketplace success. The Company
maintains three facilities for new product development and testing with a staff
of 68 engineers and technicians who are responsible for improving existing
products and development and testing of new trucks, truck bodies and components.
The Company prepares annual new product development and improvement plans for
each of its markets and measures progress against those plans each month.
Virtually all of the Company's sales of fire apparatus require some custom
engineering to meet the customer's specifications and changing industry
standards. Engineering is also a critical factor in defense truck markets due to
the severe operating conditions under which the Company's trucks are utilized,
new customer requirements and stringent government documentation requirements.
In the commercial segment, product innovation is highly important to meet
customers' changing requirements. Accordingly, the Company maintains a permanent
staff of over 300 engineers and engineering technicians, and it regularly
outsources significant engineering activities in connection with major DoD bids
and proposals.
For fiscal years 2001, 2000 and 1999, the Company incurred engineering,
research and development expenditures of $14.3 million, $14.1 million and $10.9
million, respectively, portions of which were recoverable from customers,
principally the U.S. government.
Competition
The Company operates in highly competitive markets. The Company competes
in the fire apparatus and defense truck markets principally on the basis of
lowest qualified bid. To submit a qualified bid, the bidder must demonstrate
that the fire apparatus or defense truck meets stringent specifications and, for
most defense truck contracts, passes extensive testing. In addition, decreases
in the DoD budget have resulted in a reduction in the number and size of
contracts, which has intensified the competition for remaining available
contracts. The Company and its competitors continually undertake substantial
marketing, technical and legislative actions in order to maintain existing
levels of defense business. In the refuse truck body and concrete mixer markets,
the Company also faces intense competition on the basis of price, innovation,
quality, service and product performance. As the Company seeks to expand its
sales of refuse truck bodies to municipal customers, management believes the
principal basis of competition for such business will be lowest qualified bid.
In all of the Company's market segments, competitors include smaller,
specialized manufacturers as well as large, mass producers. The Company believes
that, in its specialized truck markets, it has been able to effectively compete
against large, mass producers due to product quality, flexible manufacturing and
specialized distribution systems. The Company believes that its competitive cost
structure, engineering expertise, product quality and global distribution
systems have enabled it to compete effectively with other specialized
manufacturers.
Principal competitors of McNeilus for refuse truck body sales include The
Heil Company (a subsidiary of Dover Corporation), Wittke (a subsidiary of
Northside Industries, Inc.) and McClain E-Z Pack, Inc. The principal competitor
for the Geesink Norba Group is Faun Umwelttechnik GmbH & Co. Principal
competitors of McNeilus and Oshkosh for concrete mixer sales include Advance
Mixer, Inc. (a subsidiary of the Prince Group), Continental Manufacturing Co.,
Kimble Mixer Co. and London Machinery, Inc. Oshkosh's principal competitor for
airport snow removal sales is Kovatch Mobile Equipment Corp. Pierce's principal
competitors for fire apparatus sales include Emergency One, Inc. (a subsidiary
of Federal Signal Corporation), Kovatch Mobile Equipment Corp., and numerous
small, regional manufacturers. Medtec's principal competitors for ambulance and
rescue sales include Wheeled Coach Industries, a subsidiary of Collins
Industries, Inc., McCoy Miller and Halcore. Oshkosh's principal competitor for
aircraft rescue and firefighting sales is Emergency One, Inc. Oshkosh's
principal competitors for DoD contracts include the MAN Group, Volvo and Stewart
& Stevenson Services, Inc. The Company also faces competition from its
competitors for acquisition opportunities.
Several of the Company's competitors have greater financial, marketing,
manufacturing and distribution resources than the Company. There can be no
assurance that the Company's products will continue to compete successfully with
the products of competitors or that the Company will be able to retain its
customer base or to improve or maintain its profit margins on sales to its
customers, all of which could materially adversely affect the Company's
financial condition, profitability and cash flows.
11
Customers and Backlog
Sales to the U. S. Department of Defense comprised approximately 27% of
the Company's net sales in fiscal 2001. No other single customer accounted for
more than 10% of the Company's net sales for this period. A substantial majority
of the Company's net sales are derived from customer orders prior to commencing
production.
The Company's backlog at September 30, 2001 was $799.5 million compared to
$607.5 million at September 30, 2000, with approximately $46.9 million of the
$192.0 million increase related to Medtec and the Geesink Norba Group, which
were acquired during fiscal 2001. Backlog related to the defense segment
increased by $122.2 million to $413.7 million in 2001 compared to 2000, with the
backlog increasing by approximately $154.7 million due to the multi-year MTVR
contract. Fire and emergency backlogs increased by $34.5 million ($24.9 million
excluding Medtec) to $251.3 million at September 30, 2001 compared to the prior
year. Commercial backlogs increased by $35.3 million (declined by $2.0 million
excluding the impact of the Geesink Norba Group acquisition) to $134.4 million
at September 30, 2001 compared to the prior year. Approximately 1% of the
September 30, 2001 backlog is not expected to be filled in fiscal 2002.
Reported backlog excludes purchase options and announced orders for which
definitive contracts have not been executed. Additionally, backlog excludes
unfunded portions of the U. S. Department of Defense long-term family and MTVR
contracts. Backlog information and comparisons thereof as of different dates may
not be accurate indicators of future sales or the ratio of the Company's future
sales to the U. S. Department of Defense versus its sales to other customers.
Government Contracts
Approximately 27% of the Company's net sales for fiscal 2001 were made to
the U.S. government under long-term contracts and programs, the majority of
which were in the defense truck market. Accordingly, a significant portion of
the Company's sales are subject to risks specific to doing business with the
U.S. government, including uncertainty of economic conditions, changes in
government policies and requirements that may reflect rapidly changing military
and political developments, the availability of funds and the ability to meet
specified performance thresholds.
The Company's sales into defense truck markets are substantially dependent
upon periodic awards of new contracts and the purchase of base vehicle
quantities and the exercise of options under existing contracts. The Company's
existing contracts with the DoD may be terminated at any time for the
convenience of the government. Upon such termination, the Company would
generally be entitled to reimbursement of its incurred costs and, in general, to
payment of a reasonable profit for work actually performed. Contractually under
the Company's MTVR contract, the Company is entitled to $5 million in program
year three if the contract is terminated for the convenience of the government.
Under firm fixed-price contracts with the government, the price paid to
the Company is generally not subject to adjustment to reflect the Company's
actual costs, except costs incurred as a result of contract changes ordered by
the government. The Company generally attempts to negotiate with the government
the amount of increased compensation to which the Company is entitled for
government-ordered changes that result in higher costs. If the Company is unable
to negotiate a satisfactory agreement to provide such increased compensation,
then the Company may file an appeal with the Armed Services Board of Contract
Appeals or the U.S. Claims Court. The Company has no such appeals pending. The
Company seeks to mitigate risks with respect to fixed price contracts by
executing firm fixed price contracts with qualified suppliers for the duration
of the Company's contracts.
The Company, as a U.S. government contractor, is subject to financial
audits and other reviews by the U.S. government of performance of, and the
accounting and general practices relating to, U.S. government contracts, and
like most large government contractors, the Company is audited and reviewed on a
continual basis. Costs and prices under such contracts may be subject to
adjustment based upon the results of such audits and reviews. Additionally, such
audits and reviews can and have led to civil, criminal or administrative
proceedings. Such proceedings could involve claims by the government for fines,
penalties, compensatory and treble damages, restitution and/or forfeitures.
Under government regulations, a company or one or more of its subsidiaries can
also be suspended or debarred from government contracts, or lose its export
privileges based on the results of such proceedings. The Company believes, based
on all available information, that the outcome of all such audits, reviews and
proceedings will not have a material adverse effect on its consolidated
financial condition or results of operations.
Suppliers
The Company is highly dependent on its suppliers and subcontractors to
meet commitments to its customers, and many major components are procured or
subcontracted on a sole-source basis with a number of domestic and foreign
companies. Through its reliance on this supply network for the purchase of
certain components, the Company is able to avoid many of the preproduction and
fixed costs associated with the manufacture of those components. The Company
maintains an extensive qualification, on-site inspection and assistance and
performance measurement system to control risks associated with such reliance on
suppliers. The
12
Company occasionally experiences problems with supplier and subcontractor
performance and must identify alternate sources of supply and/or address related
warranty claims from customers.
While the Company purchases many costly components such as engines,
transmissions and axles, it manufactures certain proprietary components that are
material to each of the Company's segments. These components include front drive
and steer axles, transfer cases, cabs, the ALL-STEER electronic all-wheel
steering system, TAK-4 independent suspension, the Sky-Arm articulating aerial
ladder, the McNeilus Auto Reach Arm, the Hercules compressed air foam system,
the Command Zone proprietary multiplexing system, body structures and many
smaller parts which add uniqueness and value to the Company's products. Internal
production of these components provides a significant competitive advantage and
also serves to reduce the manufacturing costs of the Company's products.
Intellectual Property
Patents and licenses are important in the operation of the Company's
business, as one of management's key objectives is developing proprietary
components to provide the Company's customers with advanced technological
solutions at attractive prices. The Company holds 113 active domestic and 96
foreign patents. The Company believes patents for all-wheel steer and
independent suspension systems, which have remaining lives of 8 to 13 years,
provide the Company with a competitive advantage in the fire and emergency
segment. In the defense segment, the independent suspension system was added to
the U.S. Marine Corps' MTVR program, which the Company believes provided a
performance and cost advantage in the successful competition for the Phase II
production contract. To a lesser extent, other proprietary components provide
the Company a competitive advantage in the Company's other segments.
The Company holds trademarks for "Oshkosh," "Pierce," "McNeilus," "MTM,"
"Geesink," "Norba" and "Geesink Kiggen," among others. These trademarks are
considered to be important to the future success of the Company's business.
Employees
As of November 30, 2001, the Company had approximately 5,800 employees.
Approximately 1,065 production employees at the Company's Oshkosh facilities are
represented by the United Auto Workers union and approximately 200 employees at
the Company's Kewaunee facilities are represented by the Boilermakers, Iron
Shipbuilders, Blacksmiths, and Forgers Union ("Boilermakers"). The Company's
five-year agreement with the United Auto Workers union extends through September
2006 and the Company's agreement with the Boilermakers union extends to May
2002. Approximately 1,000 employees at the Geesink Norba Group are represented
by separate works councils. The Company believes its relationship with employees
is satisfactory.
Industry Segments
Financial information concerning the Company's industry segments is
included in Note 14 to the Consolidated Financial Statements contained in Item 8
of this Form 10-K.
Foreign and Domestic Operations and Export Sales
Financial information concerning the Company's foreign and domestic
operations and export sales is included in Note 14 to the Consolidated Financial
Statements contained in Item 8 of this Form 10-K.
13
Item 2. PROPERTIES
Management believes the Company's equipment and buildings are modern, well
maintained and adequate for its present and anticipated needs. As of November
30, 2001, the Company operated in eighteen manufacturing facilities and owned
another facility that was not in use. The location, size and focus of the
Company's facilities is provided in the table below:
Approximate
Square Footage Principal
Location (# of facilities) Owned Leased Products Manufactured
--------------------------- ------------ ------------- ---------------------------------------
Oshkosh, Wisconsin(3).... 774,000 17,000 Defense Trucks; Front-Discharge Mixers;
Snow Removal Vehicles; ARFF Vehicles
Appleton, Wisconsin(2)... 604,000 16,000 Fire Apparatus
Dodge Center, Minnesota(1) 711,000 2,000 Rear-Discharge Mixers; Refuse Truck
Bodies; Portable Batch Plants
Bradenton, Florida(1).... 287,000 Fire Apparatus; Defense Trucks and Truck
Bodies
Emmeloord, Netherlands (1) 272,000 Refuse Truck Bodies
Kewaunee, Wisconsin(1)... 216,000 Aerial Devices and Heavy Steel
Fabrication
Riceville, Iowa(1)....... 108,000 Components for Rear-Discharge Mixers and
Goshen, Indiana(1)....... 87,000 Ambulances
Maarheeze, Netherlands (1) 89,000 Mobile and Stationary Compactors,
Refuse Transfer Stations and Containers
Blomstermala, Sweden (1) 102,000 Refuse Truck Bodies
White Pigeon, Michigan(1) 58,000 Ambulances
Kensett, Iowa(1)......... 65,000 Not Currently in Use
McIntire, Iowa(1)........ 28,000 Components for Rear-Discharge Mixers and
Refuse Truck Bodies
Weyauwega, Wisconsin(1).. 28,000 Refurbished Fire Apparatus
Ontario, California(1)... 31,000 Refurbished Fire Apparatus
Villa Rica, Georgia(1)... 20,000 Replacement Drums for Rear-Discharge
Mixers
The Company's manufacturing facilities generally operate five days per
week on one shift, except for one-week shutdowns in July and December.
Management believes the Company's manufacturing capacity could be significantly
increased with limited capital spending by working an additional shift at each
facility.
In addition to sales and service activities at the Company's manufacturing
facilities, the Company maintains sixteen sales and service centers in the
United States. The Company owns such facilities in Grand Rapids, Michigan;
Colton, California; Commerce City, Colorado; Villa Rica, Georgia; Lithia
Springs, Georgia; Hutchins, Texas; Morgantown, Pennsylvania; and Gahanna, Ohio.
The Company leases such facilities in Milpitas, California; Tacoma, Washington;
Salt Lake City, Utah; Aurora, Illinois; Fairfield, Ohio; East Granby,
Connecticut; Houston, Texas; and Phoenix, Arizona. These facilities range in
size from approximately 2,000 square feet to approximately 46,000 square feet
and are used primarily for sales and service of concrete mixers and refuse
bodies.
In addition to sales and service activities at the Geesink Norba Group's
manufacturing facilities, the Geesink Norba Group maintains eleven sales and
service centers in Europe. The Geesink Norba Group owns such facilities in
Cardiff and St. Albans UK; Copenhagen, Denmark; and leases facilities in
Manchester, UK; Mions France; Brussels, Belgium; Hunxe Germany; Pabianice,
Poland; Milan, Italy and Madrid and Barcelona, Spain. These facilities range in
size from approximately 2,000 sq. ft. to 77,000 sq. ft.
The Company's U.S. facilities are pledged as collateral under the terms of
the Company's senior credit facility.
Item 3. LEGAL PROCEEDINGS
The Company is subject to federal, state and local environmental laws and
regulations that impose limitations on the discharge of pollutants into the
environment and establish standards for the treatment, storage and disposal of
toxic and hazardous wastes. As part of its routine business operations, the
Company disposes of and recycles or reclaims certain industrial waste materials,
chemicals and solvents at third party disposal and recycling facilities which
are licensed by appropriate governmental agencies. In some instances, these
facilities have been and may be designated by the United States Environmental
Protection Agency ("EPA") or a state environmental agency for remediation. Under
Comprehensive Environmental Response, Compensation, and Liability Act (the
"Superfund" law) and similar state laws, each potentially responsible party
("PRP") that contributed hazardous substances may be jointly and severally
liable for the costs associated with cleaning up the site. Typically, PRPs
negotiate a resolution with the EPA and/or the state environmental agencies.
PRPs also negotiate with each other regarding allocation of the cleanup cost.
As to one such Superfund site, Pierce is one of 393 PRPs participating in
the costs of addressing the site and has been assigned an allocation share of
approximately 0.04%. Currently, a report of the remedial investigation/
feasibility study is being completed, and as
14
such, an estimate for the total cost of the remediation of this site has not
been made to date. However, based on estimates and the assigned allocations, the
Company believes its liability at the site will not be material and its share is
adequately covered through reserves established by the Company at September 30,
2001. Actual liability could vary based on results of the study, the resources
of other PRPs and the Company's final share of liability.
The Company is addressing a regional trichloroethylene ("TCE") groundwater
plume on the south side of Oshkosh, Wisconsin. The Company believes there may be
multiple sources in the area. TCE was detected at the Company's North Plant
facility with testing showing the highest concentrations in a monitoring well
located on the upgradient property line. Because the investigation process is
still ongoing, it is not possible for the Company to estimate its long-term
total liability associated with this issue at this time. Also, as part of the
regional TCE groundwater investigation, the Company conducted a groundwater
investigation of a former landfill located on Company property. The landfill,
acquired by the Company in 1972, is approximately 2.0 acres in size and is
believed to have been used for the disposal of household waste. Based on the
investigation, the Company does not believe the landfill is one of the sources
of the TCE contamination. Based upon current knowledge, the Company believes its
liability associated with the TCE issue will not be material and is adequately
covered through reserves established by the Company at September 30, 2001.
However, this may change as investigations proceed by the Company, other
unrelated property owners and government entities.
The Company is subject to other environmental matters and legal
proceedings and claims, including patent, antitrust, product liability and state
dealership regulation compliance proceedings. Although the final results of all
such matters and claims cannot be predicted with certainty, management believes
that the ultimate resolution of all such matters and claims, after taking into
account the liabilities accrued with respect to such matters and claims, will
not have a material adverse effect on the Company's financial condition or
results of operations. Actual results could vary, among other things, due to the
uncertainties involved in litigation.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended September 30, 2001.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information as of November 30, 2001
concerning the Company's executive officers. All of the Company's officers serve
terms of one year and until their successors are elected and qualified.
Name Age Title
Robert G. Bohn.......... 48 President, Chief Executive Officer and Chairman of the Board
Timothy M. Dempsey...... 61 Executive Vice President, General Counsel and Secretary
Ted L. Henson........... 50 Vice President, International Sales
Paul C. Hollowell....... 60 Executive Vice President and Chief Executive Officer, Defense
Business
Daniel J. Lanzdorf...... 53 Executive Vice President and President, McNeilus Companies, Inc.
Mark A. Meaders......... 43 Executive Vice President and General Manager of European Operations
John W. Randjelovic..... 57 Executive Vice President and President, Pierce Manufacturing Inc.
William J. Stoddart..... 56 Executive Vice President and President, Defense Business
Donald H. Verhoff....... 55 Vice President, Corporate Engineering
Charles L. Szews........ 45 Executive Vice President and Chief Financial Officer
Michael J. Wuest........ 42 Vice President and Chief Procurement Officer, General Manager
Airport Products
Matthew J. Zolnowski.... 48 Executive Vice President, Corporate Administration
Robert G. Bohn. Mr. Bohn joined the Company in 1992 as Vice
President-Operations. He was appointed President and Chief Operating Officer in
1994. He was appointed President and Chief Executive Officer in October 1997 and
Chairman of the Board in January 2000. Prior to joining the Company, Mr. Bohn
was Director-European Operations for Johnson Controls, Inc., Milwaukee,
Wisconsin, which manufactures, among other things, automotive products. He
worked for Johnson Controls from 1984 until 1992. He was elected a Director of
the Company in June 1995. He is a director of Graco, Inc.
Timothy M. Dempsey. Mr. Dempsey joined the Company in October 1995 as Vice
President, General Counsel and Secretary. Mr. Dempsey has been and continues to
be a partner in the law firm of Dempsey, Magnusen, Williamson and Lampe in
Oshkosh, Wisconsin. Mr. Dempsey was appointed Executive Vice President in
February 1999.
Ted L. Henson. Mr. Henson joined the Company in January 1990 and has
served in various assignments, including Director of Airport/Municipal Products,
Vice President Sales and President of Summit Performance Systems, Inc. Mr.
Henson assumed his present position in May 1998.
15
Paul C. Hollowell. Mr. Hollowell joined the Company in April 1989 as Vice
President-Defense Product and was appointed Executive Vice President in February
1994. In February 1999, Mr. Hollowell was appointed Executive Vice President and
President, Defense Business. Mr. Hollowell assumed his present position in
October 2001.
Daniel J. Lanzdorf. Mr. Lanzdorf joined the Company in 1973 as a design
engineer and has served in various assignments including Chief Engineer--
Defense, Director of Defense Engineering, Director of the Defense Business Unit,
and Vice President of Manufacturing Operations & General Manager Commercial
Business prior to becoming President of McNeilus Companies, Inc. in April 1998.
Mr. Lanzdorf was appointed to his present position in February 1999.
Mark A. Meaders. Mr. Meaders joined Pierce Manufacturing Inc. in September
1996 as Purchasing Manager. In January 1998, he was appointed Vice President
Corporate Purchasing, Materials and Logistics of the Company and in July 1999
was appointed Vice President Operations and Corporate Purchasing, Materials and
Logistics. Mr. Meaders was appointed to his current position in October 2001.
John W. Randjelovic. Mr. Randjelovic joined the Company in October 1992 as
Vice President and General Manager in charge of the Bradenton, Florida Division.
In September 1996, he was appointed Vice President of Manufacturing, Purchasing,
and Materials for Pierce. In October 1997, Mr. Randjelovic was appointed Vice
President and General Manager, Pierce Manufacturing Inc. and was appointed to
his current position in February 1999.
Charles L. Szews. Mr. Szews joined the Company in March 1996 as Vice
President and Chief Financial Officer and assumed his present position in
October 1997. Mr. Szews was previously employed by Fort Howard Corporation, a
manufacturer of tissue products, from June 1988 until March 1996 in various
positions, including Vice President and Controller from September 1994 until
March 1996.
William J. Stoddart. Mr. Stoddart joined the Company's Defense unit in
September 1995 as General Manager Medium Vehicles. In January 1999, he was
appointed Vice President, Defense Programs and assumed his present position in
October 2001.
Donald H. Verhoff. Mr. Verhoff joined the Company in May 1973 and has
served in various assignments, including Director Test and Development/New
Product Development and Vice President Technology and Director Corporate
Engineering. Mr. Verhoff assumed his present position in September 1998.
Michael J. Wuest. Mr. Wuest joined the Company in November 1981 as an
analyst and has served in various assignments, including Senior Buyer, Director
Purchasing, Vice President Manufacturing Operations, Vice President and General
Manager of Operations of Pierce Manufacturing Inc. Mr. Wuest was appointed to
his present position in October 2001.
Matthew J. Zolnowski. Mr. Zolnowski joined the Company as Vice
President-Human Resources in January 1992, was appointed Vice President,
Administration in February 1994 and assumed his present position in February
1999.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.
The information included in Notes 7 and 11 to the Consolidated Financial
Statements contained herein under Item 8 and the information relating to
dividends per share contained herein under Item 6 is hereby incorporated by
reference in answer to this item.
In July 1995, the Company's Board of Directors authorized the repurchase
of up to 1,500,000 shares of Common Stock. As of November 30, 2001, the Company
has repurchased 692,302 shares under this program at a cost of $6.6 million.
Dividends and Common Stock Price*
It is the Company's intention to declare and pay dividends on a regular
basis. However, the payment of future dividends is at the discretion of the
Company's Board of Directors and will depend upon, among other things, future
earnings, capital requirements, the Company's general financial condition,
general business conditions and other factors. When the Company pays dividends,
it pays a dividend on each share of Common Stock equal to 115% of the amount
paid on each share of Class A Common Stock. The agreements governing the
Company's subordinated debt and bank debt restrict its ability to pay dividends
on Common Stock and Class A Common Stock. For fiscal 2002, the terms of the
Company's senior credit facility generally limit the aggregate amount of all
dividends the Company may pay on its common equity during that period to an
amount equal to $6 million plus 7.5% of consolidated net income.
16
The Company's Common Stock is quoted on the Nasdaq National Market. As of
September 30, 2001, there were 847 holders of record of the Company's Common
Stock and 92 holders of record of the Company's Class A Common Stock. The
following table sets forth prices reflecting actual sales as reported on the
Nasdaq National Market.
Fiscal 2001 Fiscal 2000
Quarter Ended High Low High Low
------------- ---- --- ---- ---
September........................... $ 45.00 $ 34.63 $ 40.00 $ 30.81
June................................ 44.75 34.75 38.50 28.75
March............................... 49.38 31.88 34.88 21.63
December............................ 44.00 33.25 34.75 24.88
*There is no established public trading market for Class A Common Stock.
17
Item 6. SELECTED FINANCIAL DATA.
Fiscal years ended September 30,
(In thousands, except per share amounts)
2001(6) 2000(7) 1999 1998(8) 1997
---- ---- ---- ---- ----
Net sales(1).................................... $1,445,293 $1,329,516 $1,170,304 $905,888 $683,877
Operating income................................ 98,296 98,051 76,213 48,720 28,785
Income from continuing operations(2)............ 50,864 48,508 31,191 16,253 10,006
Per share assuming dilution................ 2.98 2.96 2.39 1.27 0.78
Income from discontinued operations(3).......... -- 2,015 -- -- --
Per share assuming dilution(3)............. -- 0.12 -- -- --
Net income(4)................................... 50,864 49,703 31,131 15,068 10,006
Per share assuming dilution (4)............ 2.98 3.03 2.39 1.18 0.78
Dividends per share:
Class A Common Stock....................... .300 .300 .292 .290 .290
Common Stock............................... .345 .345 .336 .333 .333
Total assets.................................... 1,089,268 796,380 753,290 685,039 420,394
Expenditures for property, plant and equipment.. 18,493 22,647 17,999 13,444 6,574
Depreciation.................................... 15,510 12,200 10,743 9,515 9,382
Amortization of goodwill, other intangible
assets and deferred financing costs............ 12,987 12,018 12,414 9,183 4,688
Net working capital............................. 123,949 76,500 46,709 42,030 51,483
Long-term debt (including current maturities)(5) 359,280 162,782 260,548 280,804 135,000
Shareholders' equity(5)......................... 347,026 301,057 162,880 131,296 120,900
Book value per share(5)......................... 20.76 18.06 12.70 10.39 9.70
Backlog......................................... 799,000 608,000 487,000 377,000 361,000
(1)In fiscal 2001, the Company adopted provisions of EITF No. 00-10, "Accounting for Shipping and Handling Fees and Costs."
Adoption of provisions of EITF No. 00-10 resulted in a reclassification of shipping fee revenue to sales, from cost of sales where
it had been classified as a reduction of shipping costs. Adoption did not have any impact on reported earnings. Sales for all
previous periods have been retroactively restated to conform with the current year presentation.
(2)Fiscal 2001 includes a $1,727 one-time foreign currency transaction gain in connection with euros acquired prior to the
purchase of the Geesink Norba Group and includes a $1,400 reduction in income tax expense related to settlement of certain income
tax audits.
(3)In fiscal 2000, the Company recorded a $2,015 after-tax gain resulting from a technology transfer agreement and collection of
previously written-off receivables related to the Company's former bus chassis joint venture in Mexico.
(4)Includes after-tax extraordinary charges of $820 ($0.05 per share) in 2000, $60 ($0.00 per share) in 1999 and $1,185 ($0.09 per
share) in 1998 related to early retirement of debt.
(5)On November 24, 1999, the Company prepaid $93,500 of term debt under its senior credit facility from proceeds of the sale of
3,795,000 shares of Common Stock. On July 23, 2001 the Company amended and restated its senior credit facility and borrowed
$140,000 under a new Term Loan B note in connection with the acquisition of Geesink Norba Group. See Note 4 to Notes to
Consolidated Financial Statements.
(6)On October 30, 2000, the Company acquired for $14,466 in cash all of the issued and outstanding capital stock of Medtec . On
March 6, 2001, the Company purchased certain assets from TEMCO for cash of $8,139 and credits to the seller valued at $7,558, for
total consideration of $15,697. On July 25, 2001, the Company acquired for $137,636 in cash all of the issued and outstanding
capital stock of the Geesink Norba Group. Amounts include acquisition costs and are net of cash acquired. See Note 3 to Notes to
Consolidated Financial Statements.
(7)On November 1, 1999 the Company acquired assets, assumed certain liabilities and entered into related non-compete agreements
for Kewaunee for $5,467 in cash. On April 28, 2000, the Company acquired for cash, all of the issued and outstanding capital stock
of Viking for $1,680. See Note 3 to Notes to Consolidated Financial Statements.
(8)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.
18
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
MANAGEMENT'S DISCUSSION AND ANALYSIS
Oshkosh Truck Corporation and Subsidiaries
General
The Company is a leading designer, manufacturer and marketer of a wide
range of specialty trucks and truck bodies, including concrete mixers, refuse
bodies, fire and emergency vehicles and defense trucks. Under the "McNeilus" and
"Oshkosh" brand names, the Company manufactures rear- and front-discharge
concrete mixers. Under the "McNeilus," "Geesink" and "Norba" brand names, the
Company manufactures a wide range of automated rear, front, side and top loading
refuse truck bodies and mobile and stationary refuse compactors and transfer
systems. Under the "Pierce" brand name, the Company is among the leading
domestic manufacturers of fire apparatus assembled on both custom and commercial
chassis. The Company manufactures aircraft rescue and firefighting and airport
snow removal vehicles under the "Oshkosh" brand name and ambulances and
heavy-duty rescue vehicles under the "Medtec" brand name. The Company also
manufactures defense trucks under the "Oshkosh" brand name and is the leading
manufacturer of severe-duty heavy tactical trucks for the Department of Defense.
Major products manufactured and marketed by each of the Company's business
segments are as follows:
Commercial--concrete mixer systems, refuse truck bodies, mobile and stationary
compactors and waste transfer units, portable concrete batch plants and truck
components sold to ready-mix companies and commercial and municipal waste
haulers in the U. S., Europe and other international markets.
Fire and emergency--commercial and custom fire trucks, aircraft rescue and
firefighting trucks, snow removal trucks, ambulances and other emergency
vehicles primarily sold to fire departments, airports and other governmental
units in the U. S. and abroad.
Defense--heavy- and medium-payload tactical trucks and supply parts sold to the
U. S. military and to other militaries around the world.
ACQUISITION HISTORY
Since 1996, the Company has selectively pursued strategic acquisitions to
enhance its product offerings and diversify its business. The Company has
focused its acquisition strategy on providing a full range of products to
customers in specialty truck and truck body markets that are growing and where
it can develop strong market positions and achieve acquisition synergies.
Identified below is information with respect to these acquisitions, all of which
have been accounted for using the purchase method of accounting and have been
included in the Company's results of operations from the date of acquisition.
On September 18, 1996, the Company acquired for cash all of the issued and
outstanding capital stock of Pierce, a leading manufacturer and marketer of fire
trucks and other emergency apparatus for $156.9 million, including acquisition
costs and net of cash acquired. The acquisition was financed from borrowings
under a subsequently retired bank credit facility.
On December 19, 1997, Pierce acquired certain inventory, machinery and
equipment, and intangible assets of Nova Quintech, a division of Nova Bus
Corporation, for $3.6 million. Nova Quintech was engaged in the manufacture and
sale of aerial devices for fire trucks.
On February 26, 1998, the Company acquired for cash all of the issued and
outstanding capital stock of McNeilus and entered into related non-compete and
ancillary agreements for $217.6 million, including acquisition costs and net of
cash acquired. McNeilus is a leading manufacturer and marketer of rear-discharge
concrete mixers and portable concrete batch plants for the concrete placement
industry and refuse truck bodies for the waste services industry in the United
States. The acquisition was financed from borrowings under the Company's senior
credit facility and the issuance of senior subordinated notes.
On November 1, 1999, the Company acquired the manufacturing assets of
Kewaunee for $5.5 million in cash plus the assumption of certain liabilities
aggregating $2.2 million. Kewaunee manufactures all of the Company's
requirements for aerial devices in its fire and emergency segment.
On April 28, 2000, the Company acquired all of the issued and outstanding
capital stock of Viking for $1.7 million, including acquisition costs and net of
cash acquired.
19
On October 30, 2000, the Company acquired all of the issued and outstanding
capital stock of Medtec and an affiliate and certain related assets for $14.5
million in cash, including acquisition costs and net of cash acquired. Medtec is
a U.S. manufacturer of custom ambulances and rescue vehicles. The acquisition
was financed from available cash and borrowings under the Company's senior
credit facility.
On March 6, 2001 the Company acquired certain machinery and equipment,
parts inventory and certain intangible assets from TEMCO, a division of
Dallas-based Trinity Industries, Inc. ("TEMCO"). TEMCO, a manufacturer of
concrete mixers, batch plants and concrete mixer parts had discontinued its
business. Consideration for the purchase was valued at $15.7 million and
included cash of $8.1 million and credits to the seller valued at $7.6 million
for future purchases of certain concrete placement products from the Company
over the next six years. The acquisition was financed from borrowings under the
Company's senior credit facility.
On July 25, 2001, the Company acquired all of the outstanding capital stock
of Geesink Norba Group for $137.6 million, including acquisition costs, and net
of cash acquired. Geesink Norba Group is a leading European manufacturer of
refuse collection truck bodies, mobile and stationary compactors and transfer
stations. The acquisition was financed from proceeds of a new Term B Loan under
the Company's senior credit facility.
RESULTS OF OPERATIONS
ANALYSIS OF CONSOLIDATED NET SALES--THREE YEARS ENDED SEPTEMBER 30, 2001
The following table presents net sales by business segment (in thousands):
Fiscal Year Ended September 30,
2001 2000 1999
---- ---- ----
Net sales to unaffiliated customers:
Commercial................................ $ 559,871 $ 663,819 $ 613,028
Fire and emergency........................ 463,919 390,659 336,241
Defense................................... 423,132 275,841 222,535
Corporate and other....................... (1,629) (803) (1,500)
------------ ------------ ------------
Consolidated.......................... $ 1,445,293 $ 1,329,516 $ 1,170,304
============ ============ ============
The following table presents net sales by geographic region based on
product shipment destination (in thousands):
Fiscal Year Ended September 30,
2001 2000 1999
---- ---- ----
Net sales:
United States............................. $ 1,314,930 $ 1,227,038 $ 1,118,564
Other North America....................... 7,343 7,429 7,822
Europe and Middle East.................... 93,263 68,317 21,713
Other..................................... 29,757 26,732 22,205
------------ ------------ ------------
Consolidated.......................... $ 1,445,293 $ 1,329,516 $ 1,170,304
============ ============ ============
FISCAL 2001 COMPARED TO FISCAL 2000
Consolidated net sales increased 8.7% to $1,445.3 million in fiscal 2001
compared to fiscal 2000. Excluding the impact of the acquisitions of Medtec and
the Geesink Norba Group, consolidated net sales increased 5.6% in fiscal 2001
compared to fiscal 2000.
Commercial segment net sales decreased 15.7% in fiscal 2001 compared to
fiscal 2000. Concrete placement sales were down 26.6% while refuse sales were up
15.6%, or 4.7% excluding the impact of the Geesink Norba Group acquisition.
Fiscal 2000 results were impacted by unusually strong end-markets for concrete
placement sales. In fiscal 2001, economic uncertainties caused the Company's
concrete placement customers to scale back or delay their equipment purchases.
Domestic refuse product sales increased in the period compared to fiscal 2000
levels as the Company began shipping units under a three year agreement with a
large national waste hauler.
Fire and emergency segment sales increased 18.8% in fiscal 2001 compared to
fiscal 2000. Traditional fire truck sales accounted for about one-half of the
current year increase, with sales up across all categories, including custom and
commercial pumpers, aerials, heavy duty rescues and parts sales and service.
Inclusion of Medtec sales following its October 2000 acquisition
20
contributed another one-third of the current year increase, with the balance of
the current year increase generally attributable to organic growth in Oshkosh
snow removal and ARFF vehicles.
Defense segment net sales increased 53.4% in fiscal 2001 compared to fiscal
2000. Over 75% of the current year sales increase was due to increased sales of
the Medium Tactical Vehicle Replacement ("MTVR") truck. Early in fiscal 2000,
Oshkosh began start-up of low-rate initial production of the MTVR truck and in
April of fiscal 2001 Oshkosh received approval to commence full-rate production
of the MTVR truck. Full-rate production was achieved in August 2001 and is
expected to continue at this level throughout fiscal 2002 and 2003. Vehicle
sales to international customers and domestic parts sales also increased while
domestic, heavy-payload vehicle sales declined.
FISCAL 2000 COMPARED TO FISCAL 1999
Consolidated net sales increased 13.6% to $1,329.5 million in fiscal 2000
compared to fiscal 1999 with approximately one-third of the overall sales growth
being generated by each of the Company's three segments - commercial, fire and
emergency and defense.
Commercial segment net sales increased 8.3% in fiscal 2000 compared to
fiscal 1999. Sales increases were balanced across the entire segment, which
includes front- and rear-discharge concrete mixers, batch plants, concrete
placement parts and service, refuse packers and refuse parts and service.
Fire and emergency segment sales increased 16.2% in fiscal 2000 compared to
fiscal 1999. Traditional fire truck sales accounted for three-fourths of the
fiscal 2000 increase, with sales up across all categories, including custom and
commercial pumpers, aerials, heavy-duty rescues and parts sales and service. The
Company experienced particular success in the launch of its new Contender Series
of commercial fire trucks. A $17.8 million reduction in international fire truck
sales in fiscal 2000 compared to fiscal 1999 was partially offset by a $7.2
million increase in international sales of ARFF vehicles. Fiscal 1999 sales
included final shipments under a large, multi-unit fire truck order which was
shipped to the Middle East in fiscal 1998 and 1999.
Defense segment net sales increased 24.0% in fiscal 2000 compared to fiscal
1999. Approximately one-half of the fiscal 2000 sales increase was due to
start-up of low rate initial production of the MTVR truck, which began early in
fiscal 2000. International shipments increased $53.7 million as a result of
several large orders to Middle East customers. Increased international vehicle
sales and domestic parts sales offset reductions in domestic, heavy-payload
vehicle sales.
ANALYSIS OF CONSOLIDATED OPERATING INCOME--THREE YEARS ENDED SEPTEMBER 30, 2001
The following table presents operating income by business segment (in
thousands):
Fiscal Year Ended September 30,
2001 2000 1999
---- ---- ----
Operating income (loss):
Commercial................................ $ 29,891 $ 54,654 $ 48,995
Fire and emergency........................ 45,841 32,922 26,758
Defense................................... 39,545 30,119 22,878
Corporate and other....................... (16,981) (19,644) (22,418)
------------ ------------ ------------
Consolidated.......................... $ 98,296 $ 98,051 $ 76,213
============ ============ ============
FISCAL 2001 COMPARED TO FISCAL 2000
Consolidated operating income increased 0.2% in fiscal 2001 compared to
fiscal 2000. Consolidated operating income divided by consolidated sales
("operating income margin") decreased from 7.4% in fiscal 2000 to 6.8% in fiscal
2001.
Commercial segment operating income decreased 45.3% in fiscal 2001 compared
to fiscal 2000. Operating income margins decreased to 5.3% of segment sales in
fiscal 2001 compared to 8.2% in fiscal 2000. Significant reductions in concrete
placement sales volumes and the related impact on fixed overhead absorption
contributed to the decline in operating income margin.
Fire and emergency segment operating income increased 39.2% in fiscal 2001
compared to fiscal 2000. Excluding the impact of the Medtec acquisition,
operating income increased 32.3%. Operating income margin increased to 9.9% of
segment sales compared to 8.4% in fiscal 2000. Prior year results were affected
by inefficiencies following an enterprise-wide resource planning system
installation. Improved gross margins of the Company's ARFF and snow removal
vehicles resulting from cost reduction efforts and
21
manufacturing efficiencies and a favorable product mix contributed most of the
remaining improvement in the segment operating income margin.
Defense segment operating income increased 31.3% in fiscal 2001 compared to
fiscal 2000. Operating income margins decreased to 9.3% of segment sales in
fiscal 2001 compared to 10.9% in fiscal 2000. Increased sales volume of the
lower-margin MTVR vehicles was partially offset by increased international sales
of higher-margin, heavy-payload vehicles. The Company expects overall segment
operating income margins to continue to decline as the Company sustains
full-rate production of its lower-margin MTVR vehicles for all of fiscal 2002,
and invests in bid and proposal activities for large potential contracts in the
U.S. and U.K.
Corporate and other expenses decreased $2.6 million to $17.0 million, or
1.2% of consolidated net sales, from $19.6 million, or 1.5% of consolidated net
sales, in fiscal 2000. Lower expenses resulted from cost reduction initiatives
and lower variable compensation expense.
FISCAL 2000 COMPARED TO FISCAL 1999
Consolidated operating income increased 28.7% in fiscal 2000 compared to
fiscal 1999. Consolidated operating income margin increased from 6.5% in fiscal
1999 to 7.4% in fiscal 2000.
Commercial segment operating income increased 11.6% in fiscal 2000 compared
to fiscal 1999. Operating income margins increased to 8.2% of segment sales in
fiscal 2000 compared to 8.0% in fiscal 1999. Higher front-discharge concrete
mixer margins resulting from material cost reduction efforts and lower
manufacturing overhead costs as a result of increased defense business volume
were partially offset by production inefficiencies associated with the $8.3
million expansion at the McNeilus Dodge Center facility that was completed in
September 2000. In fiscal 2000, the commercial segment experienced
workforce-related health claims in excess of historical rates of occurrence.
Expense related to these claims was offset by reductions of expense due to
settlement in fiscal 2000 of unrelated litigation.
Fire and emergency segment operating income increased 23.0% in fiscal 2000
compared to fiscal 1999. Operating income margins increased to 8.4% of segment
sales in fiscal 2000 compared to 8.0% in fiscal 1999. The acquisition of
Kewaunee contributed 0.2 percentage points to the segment operating income
margin. Improved gross margins of the Company's ARFF and snow removal vehicles
resulting from cost reduction efforts and manufacturing efficiencies contributed
most of the remaining improvement in the segment operating income margin.
Defense segment operating income margins increased 31.7% in fiscal 2000
compared to fiscal 1999. Operating income margins increased to 10.9% of segment
sales in fiscal 2000 compared to 10.3% in fiscal 1999. Favorable product mix of
higher-margin U.S. heavy-payload trucks and higher international sales, the
favorable impact of increased sales volume on fixed manufacturing overhead costs
and lower operating expenses offset the impact of $26.2 million in MTVR sales at
lower gross margins.
Corporate and other expenses decreased $2.8 million to $19.6 million, or
1.5% of consolidated net sales, from $22.4 million, or 1.9% of consolidated net
sales, in fiscal 1999. Excluding the $3.5 million charge in fiscal 1999 in
connection with the settlement of litigation, corporate and other expenses were
up $0.7 million, or 3.8%.
ANALYSIS OF NON-OPERATING INCOME STATEMENT ITEMS--THREE YEARS ENDED
SEPTEMBER 30, 2001
FISCAL 2001 COMPARED TO FISCAL 2000
Interest expense increased 6.3% in fiscal 2001 compared to fiscal 2000.
Interest on borrowings to fund the Medtec and Geesink Norba Group acquisitions
and the purchase of certain assets of TEMCO and increased borrowings to fund
higher working capital requirements associated with full-rate production of the
MTVR partially offset a $1.9 million benefit resulting from the more favorable
short-term interest rate environment.
Miscellaneous non-operating income increased $1.1 million to $1.8 million
in fiscal 2001 compared to fiscal 2000. The Company recorded a $1.7 million
one-time foreign currency exchange gain in connection with funds borrowed to
acquire Geesink Norba Group in July 2001. Favorable movement of the U.S. dollar
compared to the euro in the two days between the time the Company purchased
euros for the Geesink Norba Group acquisition and the time the acquisition was
closed caused the one-time gain.
The provision for income taxes in fiscal 2001 was 37.3% of pre-tax income,
compared to 39.9% of pre-tax income in fiscal 2000. The effective tax rate was
impacted by a nonrecurring reduction in tax expense of $1.4 million related to
the settlement of certain income tax audits during fiscal 2001 and nondeductible
goodwill amortization of $5.8 million in fiscal 2001 and $5.4 million in
22
fiscal 2000, primarily related to the acquisitions of McNeilus, Pierce and
Medtec. Excluding the effects of nondeductible goodwill amortization and the
impact of the tax audit settlement, the Company's effective tax rate decreased
from 37.4% in fiscal 2000 to 36.5% in fiscal 2001 due to the tax benefit related
to increased foreign sales.
Equity in earnings of an unconsolidated lease financing partnership of $1.4
million in fiscal 2001 was up from $1.2 million in fiscal 2000. The Company
recorded a lower share of increased partnership earnings as the Company's share
of pre-tax earnings of the partnership declined from 59% in fiscal 2000 to 57%
in fiscal 2001. The Company's equity in the partnership continued to decline
from approximately 70% at formation in fiscal 1998 to 52% at September 30, 2001.
Ultimately, the Company and its other partner will each share 50/50 in the
earnings of the partnership as the original "contributed" lease portfolio runs
off and is replaced with leases originated subsequent to the formation of the
partnership, in which each partner has a 50% interest.
FISCAL 2000 COMPARED TO FISCAL 1999
Interest expense decreased 21.6% in fiscal 2000 compared to fiscal 1999.
Interest expense declined approximately $6.0 million as the Company paid down
$93.5 million of term debt following a November 1999 secondary equity offering.
Interest on borrowings to fund the Kewaunee and Viking acquisitions, higher
working capital requirements associated with overall sales growth and higher
interest rates contributed to increased interest expense, exclusive of the
impact of the equity offering.
The provision for income taxes in fiscal 2000 was 39.9% of pre-tax income,
compared to 41.8% of pre-tax income in fiscal 1999. The effective tax rate was
impacted by nondeductible goodwill amortization of $5.4 million in fiscal 2000
and $5.5 million in fiscal 1999 related to the acquisitions of McNeilus and
Pierce. Excluding the effects of nondeductible goodwill amortization, the
Company's effective tax rate decreased from 38.0% in fiscal 1999 to 37.4% in
fiscal 2000 as a result of certain research and development tax credits claimed
in fiscal 2000.
Equity in earnings of an unconsolidated lease financing partnership of $1.2
million in fiscal 2000 was down from $1.5 million in fiscal 1999. The Company's
share of pre-tax earnings of the partnership declined from 65% in fiscal 1999 to
59% in fiscal 2000 as the Company's equity in the partnership continued to
decline from approximately 70% at formation in fiscal 1998.
Gain on disposal of discontinued operations of $3.2 million, less income
taxes of $1.2 million, or $2.0 million in fiscal 2000 relates to a technology
transfer agreement and collection of previously written-off receivables from a
foreign affiliate. The Company exited this business in fiscal 1995.
The $0.8 million after-tax extraordinary charge in fiscal 2000 relates to
the write-off of deferred financing costs for that portion of debt prepaid
during the year.
FINANCIAL CONDITION
FISCAL YEAR ENDED SEPTEMBER 30, 2001
During fiscal 2001, cash and cash equivalents decreased by $2.3 million to
$11.3 million at September 30, 2001. Borrowings under the Company's revolving
credit facility of $65.2 million were used to fund cash used in operating
activities of $8.4 million, capital expenditures of $18.5 million, scheduled
debt repayments of $8.9 million, the acquisition of Medtec for $14.5 million,
including acquisition costs and net of cash acquired, the cash portion of the
acquisition of certain assets from TEMCO aggregating $8.1 million and to pay
dividends of $5.7 million. The Company used proceeds from its $140.0 million new
Term Loan B borrowing under the Company's senior credit facility to fund the
Geesink Norba Group acquisition of $137.6 million, which includes acquisition
costs and is net of cash acquired. Cash totaling $8.4 million was used in
operations in fiscal 2001. In fiscal 2000, operating activities generated cash
totaling $49.7 million. The decrease in cash provided from operating activities
in fiscal 2001 compared to fiscal 2000 principally arose from approximately
$50.9 million of receivables and inventory invested in the ramp-up of the MTVR
contract and about $21.0 million of higher domestic refuse receivables due from
increased business with large waste haulers. Timing of estimated income tax
payments in fiscal 2001compared to fiscal 2000 reduced cash used in operations
in fiscal 2001 by approximately $15.6 million.
The Company's debt-to-capital ratio at September 30, 2001 was 50.9%
compared to 35.1% at September 30, 2000. Debt-to-capital may vary from time to
time to the extent that the Company uses debt to fund acquisitions.
FISCAL YEAR ENDED SEPTEMBER 30, 2000
During fiscal 2000, cash and cash equivalents increased by $8.4 million to
$13.6 million at September 30, 2000. Cash provided from operating activities of
$49.7 million was used to fund capital expenditures of $22.6 million, to repay
$12.2 million of
23
indebtedness under the Company's revolving credit facility, including $7.2
million of advances used to fund the acquisitions of Viking and Kewaunee and to
pay dividends of $5.4 million.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and cash equivalents of $11.3 million and
approximately $89.3 million of unused availability under the terms of its senior
credit facility (See Note 4 to Notes to Consolidated Financial Statements) as of
September 30, 2001. The Company's primary cash requirements include working
capital, interest and principal payments on indebtedness, capital expenditures,
dividends and, potentially, future acquisitions. The primary sources of cash are
expected to be cash flow from operations and borrowings under the Company's
senior credit facility. Based upon current and anticipated future operations,
management believes that capital resources will be adequate to meet future
working capital, debt service and other capital requirements for fiscal 2002.
The Company's cash flow from operations in fiscal 2001 was impacted by the
ramp-up in production of the multi-year MTVR contract and by longer payment
terms extended to certain commercial customers. The Company's cash flow from
operations has fluctuated, and will likely continue to fluctuate, significantly
from quarter to quarter due to changes in working capital requirements arising
principally from seasonal fluctuations in commercial segment sales.
The Company's senior credit facility and senior subordinated notes contain
various restrictions and covenants that could potentially limit the Company's
ability to respond to market conditions, to provide for unanticipated capital
investments, to raise additional debt or equity capital, to pay dividends or to
take advantage of business opportunities, including future acquisitions.
The Company's senior credit facility accrues interest at variable rates.
The Company presently has no plans to enter into interest rate swap arrangements
to limit exposure to future increases in interest rates.
The Company expects capital expenditures will not exceed $25.0 million in
fiscal 2002.
FISCAL 2002 OUTLOOK
The Company expects consolidated sales growth of approximately 11.4% in
fiscal 2002 from fiscal 2001 sales to $1,610.0 million. The Company expects that
the Geesink Norba Group acquisition will contribute about $101.0 million of the
sales increase in fiscal 2002. The Company expects that consolidated operating
income margins will decline in fiscal 2002 to 6.6% compared to fiscal 2001
levels of 6.8%. The Company expects consolidated operating income to be
approximately $107.0 million for fiscal 2002. Excluding elimination of
amortization of goodwill and other intangible assets upon the Company's planned
adoption of Statements of Financial Accounting Standards ("SFAS") Nos. 141 and
142, effective October 1, 2001, the Company expects consolidated operating
income to be approximately $100.0 million for fiscal 2002, up 1.7% from fiscal
2001 amounts. The Company expects earnings per share from continuing operations
assuming dilution of $2.98 per share in fiscal 2002. Excluding the impact of
adoption of SFAS Nos. 141 and 142, the Company expects earnings per share to
decrease to $2.60 in fiscal 2002. The Company anticipates the decrease will
largely be due to expected continued economic softness in the United States and
higher spending on the FMTV and United Kingdom bids for future defense business,
which the Company anticipates will be offset in part by the expected
contribution from the Geesink Norba Group acquisition of approximately $0.10 to
$0.15 per share in fiscal 2002.
The Company estimates that commercial segment sales will increase 6.3% in
fiscal 2002 to $595.0 million. The Company expects the Geesink Norba Group to
contribute an additional $101.0 million in fiscal 2002 over fiscal 2001 due to
inclusion for a full twelve months in fiscal 2002 compared to only two months in
fiscal 2001. The Company expects continued softness in the concrete placement
market, estimating a 21% reduction in concrete placement sales in fiscal 2002
compared to fiscal 2001 sales levels. The Company expects U.S. refuse sales
volume to be up 5% in fiscal 2002 over fiscal 2001 levels. The Company
anticipates stronger sales from the three largest domestic waste haulers and
some estimated market share gains will offset an expected weakening in capital
spending by most U.S. commercial waste haulers and municipal customers. The
Company expects commercial operating income to improve approximately 20% in
fiscal 2002 to $36.0 million, or about 6.1% of commercial sales. Due to adoption
of SFAS Nos. 141 and 142, the Company expects the elimination of amortization of
goodwill and other intangible assets to increase commercial segment operating
income by another $4.0 million from this estimate to $40.0 million, or about
6.7% of segment sales. The Company projects concrete placement operating income
to decline about 31% in fiscal 2002 as a result of the projected 21% decline in
sales. The Company expects the Geesink Norba Group to contribute low
double-digit operating income margins in fiscal 2002 and expects U.S. refuse
margins to grow one-half percentage point due to continued cost reduction
activities.
The Company expects fire and emergency segment sales to increase 2.5% in
fiscal 2002 to $475.5 million. The Company expects the growth rate in this
segment will be down sharply from fiscal 2001 because the Company believes that
municipal spending will begin to soften in this weak domestic economy. The
Company anticipates that projected market share gains and a full twelve months
of operations at Medtec should offset some of the economic weakness. The Company
estimates that fire and emergency
24
operating income will grow about 7% to approximately $49.0 million in fiscal
2002, or approximately 10.3% of sales. The Company expects that cost reduction
initiatives will drive the estimated one-half percentage point improvement in
operating income margins in fiscal 2002. Upon adoption of SFAS Nos. 141 and 142,
the Company expects the elimination of amortization of goodwill and other
intangible assets to increase fire and emergency segment operating income by
another $3.0 million from this estimate to $52.0 million, or about 10.9% of
segment sales.
The Company estimates that defense segment sales will increase to
approximately $540.0 million in fiscal 2002 due to a planned $156.0 million
increase in MTVR sales as that contract continues at the full-rate of production
level for the entire fiscal year, whereas fiscal 2001 production ramped up
throughout the year. The Company expects that its higher-margin, heavy-payload
international truck sales will decline in fiscal 2002, resulting in a net
increase in segment sales in fiscal 2002 over estimated fiscal 2001 levels of
approximately $117.0 million. The Company expects that defense segment operating
income will decline approximately 17% in fiscal 2002 to about $33.0 million, or
6.1% of sales. The Company anticipates that lower operating income margins on
increased sales volumes will be due to increased spending on product development
and bid and proposal activities associated with the FMTV opportunity and certain
defense truck opportunities in the United Kingdom. Further, the sales mix shift
from higher-margin, heavy-payload international sales to lower-margin MTVR sales
will also contribute to the decline in operating income in fiscal 2002 compared
to fiscal 2001
The Company expects corporate expenses to increase from $17.0 million in
fiscal 2001 to $18.0 million in fiscal 2002. The Company expects interest
expense to increase $6.5 million to $28.8 million in fiscal 2002, largely as a
result of interest on the $140.0 million borrowing to purchase the Geesink Norba
Group, which should be offset by expected debt reduction resulting from
operating cash flow.
The Company expects debt to decline to $285.0 million at September 2002
from September 2001 levels. The Company estimates capital spending at no more
than $25.0 million in fiscal 2002, which includes estimated capital requirements
associated with recent acquisitions.
The expectations with respect to projected sales, costs, earnings and debt
levels in this "Fiscal 2002 Outlook" are forward-looking statements and are
based in part on certain assumptions made by the Company, some of which are
referred to in, or as part of, the forward-looking statements. These assumptions
include, without limitation, the Company's estimates for concrete placement
activity, housing starts and the U.S. economy generally; the Company's
expectations as to when it will receive sales orders and payments; the Company's
ability to achieve cost reductions; the anticipated level of sales and margins
associated with the Family of Heavy Tactical Vehicles contract, international
defense truck sales and full-rate production under the MTVR program; the
Company's estimates for capital expenditures of municipalities for fire and
emergency and refuse products and of large commercial waste haulers; the
expected level of sales and operating income of the Geesink Norba Group; the
Company's ability to sustain market share gains by its fire and emergency and
refuse products businesses; the Company's planned spending on product
development and bid and proposal activities with respect to defense program
competitions; the Company's estimates for debt levels and associated interest
costs; and that the Company does not complete any acquisitions. The Company
cannot provide any assurance that the assumptions referred to in the
forward-looking statements or otherwise are accurate or will prove to have been
correct. Any assumptions that are inaccurate or do not prove to be correct could
have a material adverse effect on the Company's ability to achieve the
forward-looking statements.
NEW ACCOUNTING STANDARDS
In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 141, "Business Combinations," and No. 142, "Goodwill and Other Intangible
Assets," effective for fiscal years beginning after December 15, 2001 (with
early adoption allowed). Under the new rules, goodwill and intangible assets
deemed to have indefinite lives will no longer be amortized but will be subject
to annual impairment tests in accordance with the Statements. Other intangible
assets will continue to be amortized over their useful lives.
The Company expects that it will apply the new rules on accounting for
goodwill and other intangible assets beginning in the first quarter of fiscal
2002. Subject to final analysis, the Company expects application of the
nonamortization provisions of SFAS Nos. 141 and 142 to result in a positive
effect on net income of approximately $6.5 million ($0.38 per share) in fiscal
2002. The Company expects to perform the first of the required impairment tests
of goodwill and indefinite-lived intangible assets during the first quarter of
fiscal 2002. The Company has not yet determined what the effect of these tests
will be on the earnings and financial position of the Company, however it does
not expect the impact to be material.
In August 2001, the FASB issued SFAS No. 144, "Accounting for Impairment or
Disposal of Long-Lived Assets," which supersedes SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of." SFAS No. 144 also supercedes the accounting and reporting provisions of APB
Opinion No. 30, "Reporting the Results of Operations-Reporting the Effects of
Disposal of a Segment of a Business and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions." SFAS No. 144 is intended to establish one
accounting model for long-lived assets to be disposed of by sale and to
25
address significant implementation issues of SFAS No. 121. The Company adopted
SFAS No. 144 on October 1, 2001. The Company does not expect SFAS No. 144 will
have a material effect on the consolidated financial statements.
CUSTOMERS AND BACKLOG
Sales to the U. S. Department of Defense comprised approximately 27% of the
Company's net sales in fiscal 2001. No other single customer accounted for more
than 10% of the Company's net sales for this period. A substantial majority of
the Company's net sales are derived from customer orders prior to commencing
production.
The Company's backlog at September 30, 2001 was $799.5 million compared to
$607.5 million at September 30, 2000, with approximately $46.9 million of the
$192.0 million increase related to Medtec and the Geesink Norba Group, which
were acquired during fiscal 2001. Backlog related to the defense segment
increased by $122.3 million to $413.8 million in 2001 compared to 2000, with the
backlog increasing by approximately $154.7 million due to the multi-year MTVR
contract. Fire and emergency backlogs increased by $34.4 million ($24.8 million
excluding Medtec) to $251.3 million at September 30, 2001 compared to the prior
year. Commercial backlogs increased by $35.3 million (declined by $2.0 million
excluding the impact of the Geesink Norba Group acquisition) to $134.4 million
at September 30, 2001 compared to the prior year. A decrease in concrete
placement products backlog of 37% was nearly offset by a 67% increase in the
domestic refuse products backlog. Approximately 1% of the September 30, 2001
backlog is not expected to be filled in fiscal 2002.
Reported backlog excludes purchase options and announced orders for which
definitive contracts have not been executed. Additionally, backlog excludes
unfunded portions of the U. S. Department of Defense long-term family and MTVR
contracts. Backlog information and comparisons of backlogs as of different dates
may not be accurate indicators of future sales or the ratio of the Company's
future sales to the U. S. Department of Defense versus its sales to other
customers.
EURO CONVERSION
On January 1, 1999, certain members of the European Union established fixed
conversion rates between their existing national currencies and a single new
currency, the euro. For a three-year transition period, transactions can be
conducted in both the euro and national currencies. After June 30, 2002, the
euro will be sole legal tender of the participating countries. The adoption of
the euro will affect a multitude of financial systems and business applications.
The Company has operations in most, and has product sales in all, of the
countries participating in the euro conversion. The Company's European
businesses affected by the euro conversion have established plans to address the
information system issues and the potential business implications of converting
to a common currency. As part of this process, the Company has evaluated its
information technology systems and has converted to recent releases of system
software that accommodate the euro conversion. The Company believes it will be
able to modify its business activities to accommodate the conversion and
transition to the euro. The Company is unable to determine the financial impact
of the conversion on its operations, if any, given that the impact will depend
on the competitive situations that exist in the various regional markets in
which the Company participates and potential actions that may or may not be
taken by the Company's competitors and suppliers. The Company does not expect
the conversion to have a material impact on its results of operations or
financial condition.
FINANCIAL MARKET RISK
The Company is exposed to market risk from changes in foreign exchange and
interest rates. To reduce the risk from changes in foreign exchange rates, the
Company selectively uses financial instruments. The Company does not hold or
issue financial instruments for trading purposes.
Interest Rate Risk
The Company's interest expense is sensitive to changes in the interest
rates in the U.S. and off-shore markets. In this regard, changes in U.S. and
off-shore interest rates affect interest payable on the Company's long-term
borrowing under its senior credit facility. The Company has not historically
utilized derivative securities to fix variable rate interest obligations or to
make fixed-rate interest obligations variable. If short-term interest rates
averaged two percent more in fiscal 2002 than in fiscal 2001, then the Company's
interest expense would increase, and pre-tax income would decrease by
approximately $2.7 million. Similarly, if interest rates increased by two
percent, the fair value of the Company's $100 million fixed-rate, long-term
notes at September 30, 2001 would decrease by approximately $8.9 million. These
amounts are determined by considering the impact of the hypothetical interest
rates on the Company's borrowing cost, but do not consider the effects of the
reduced level of overall economic activity that could exist in such an
environment. Further, in the event of a change of such magnitude, management
would likely take actions to mitigate the Company's exposure to the change.
However, due to the uncertainty of the specific actions that would be taken and
their possible effects, the foregoing sensitivity analysis assumes no changes in
the Company's financial structure other than as noted.
26
Foreign Currency Risk
The Company's operations consist of manufacturing in the U. S., the
Netherlands, the United Kingdom and Sweden and sales and limited truck body
mounting activities throughout the U. S. and in various European jurisdictions.
Export sales were less than 7% of overall net sales in fiscal 2001. The majority
of export sales in fiscal 2001 were denominated in U.S. dollars. Sales outside
of the U.S. will increase in fiscal 2002 due to the recent acquisition of the
Geesink Norba Group. For the Company's U.S. operations, the Company generally
purchases materials and components denominated in U.S. dollars and seeks payment
in U. S. dollars for large multi-unit sales contracts, which span several months
or years.
The Company's earnings are affected by fluctuations in the value of the
U.S. dollar against foreign currencies primarily as a result of euro-denominated
purchases of component parts from a European supplier (approximately 12.0
million euros in annual requirements, or approximately $10.9 million based on
the exchange rate as of September 30, 2001) and, to a lesser extent, hedging
customer orders denominated in currencies other than the U.S. dollar. The
Company may use forward foreign exchange contracts to partially hedge against
the earnings effects of such fluctuations in exchange rates on non-U.S. dollar
denominated sales. At September 30, 2001, the Company had outstanding forward
foreign exchange contracts to sell 0.9 million Canadian dollars for settlement
in October 2001 to hedge an outstanding firm sales commitment. A hypothetical
10% weakening of the U.S. dollar relative to all other currencies would not have
had a material impact on the Company's fiscal 2001 earnings or cash flows.
However, to a certain extent, foreign currency exchange rate movements may also
affect the Company's competitive position, as exchange rate changes may affect
business practices and/or pricing strategies of non-U.S. based competitors.
Fluctuations in currency exchange rates may also impact the Company's
shareholders' equity. Amounts invested in the Company's non-U.S. subsidiaries
are translated into U.S. dollars at the exchange rates in effect at year-end.
The resulting translation adjustments are recorded in shareholders' equity as
cumulative translation adjustments. The cumulative translation adjustments
component of shareholders' equity increased $4.3 million since the July 2001
acquisition of the Geesink Norba Group. Using the year-end exchange rates, the
total amount invested in non-U.S. subsidiaries at September 30, 2001 was
approximately $145 million.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information under the caption "Management's Discussion and Analysis -
Financial Market Risk" contained in Item 7 of this Form 10-K is hereby
incorporated by reference in answer to this item.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
27
REPORT OF ARTHUR ANDERSEN LLP, INDEPENDENT AUDITORS
To the Shareholders and Board of Directors of
Oshkosh Truck Corporation
We have audited the accompanying consolidated balance sheets of Oshkosh Truck
Corporation (the "Company") as of September 30, 2001 and 2000 and the related
consolidated statements of income, shareholders' equity and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform our
audits to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits 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 as of
September 30, 2001 and 2000 and the consolidated results of its operations and
its cash flows for the years then ended in conformity with accounting principles
generally accepted in the United States.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule listed in Part IV, Item 14(a)(2) is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly state in all material
respects the financial data required to be set forth therein in relation to the
basic financial statements taken as a whole.
/S/ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
October 29, 2001
28
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Shareholders and Board of Directors of
Oshkosh Truck Corporation
We have audited the accompanying consolidated statements of income,
shareholders' equity and cash flows of Oshkosh Truck Corporation (the "Company")
for the years ended September 30, 1999. Our audit also included the financial
statement schedule listed in the Index of Item 14(a) for the year ended
September 30, 1999. These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated results of operations and cash flows of
the Company for the year ended September 30, 1999, in conformity with accounting
principles generally accepted in the United States. Also, in our opinion, the
related financial statement schedule, for the year ended September 30, 1999,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
Milwaukee, Wisconsin /S/ERNST & YOUNG LLP
October 23, 1999
29
OSHKOSH TRUCK CORPORATION
Consolidated Statements of Income
Fiscal Year Ended September 30,
------------------------------
2001 2000 1999
---- ---- ----
(In thousands, except per share amounts)
Net sales................................................. $1,445,293 $1,329,516 $1,170,304
Cost of sales............................................ 1,230,800 1,126,582 996,923
---------- ---------- ----------
Gross income......................................... 214,493 202,934 173,381
Operating expenses:
Selling, general and administrative.................. 104,022 93,724 85,996
Amortization of goodwill and other intangibles....... 12,175 11,159 11,172
---------- ---------- ----------
Total operating expenses....................... 116,197 104,883 97,168
---------- ---------- ----------
Operating income.......................................... 98,296 98,051 76,213
Other income (expense):
Interest expense...................................... (22,286) (20,956) (26,744)
Interest income....................................... 1,050 893 760
Miscellaneous, net.................................... 1,753 661 730
---------- ---------- ----------
(19,483) (19,402) (25,254)
---------- ---------- ----------
Income before items noted below........................... 78,813 78,649 50,959
Provision for income taxes................................ 29,361 31,346 21,313
---------- ---------- ----------
49,452 47,303 29,646
Equity in earnings of unconsolidated partnership, net of
income taxes of $829, $738 and $948.................... 1,412 1,205 1,545
---------- ---------- ----------
Income from continuing operations......................... 50,864 48,508 31,191
Gain on disposal of discontinued operations, net of
income taxes of $1,235................................ -- 2,015 --
Extraordinary charge for early retirement of debt, net of
income tax benefit of $503 and $37 ....................... -- (820) (60)
---------- ---------- ----------
Net income................................................ $ 50,864 $ 49,703 $ 31,131
========== ========== ==========
Earnings (loss) per share:
Continuing operations................................. $ 3.05 $ 3.01 $ 2.45
Discontinued operations............................... -- 0.13 --
Extraordinary charge.................................. -- (0.05) --
---------- ---------- ----------
Net income............................................ $ 3.05 $ 3.09 $ 2.45
========== ========== ==========
Earnings (loss) per share assuming dilution:
Continuing operations................................. $ 2.98 $ 2.96 $ 2.39
Discontinued operations............................... -- 0.12 --
Extraordinary charge.................................. -- (0.05) --
---------- ---------- ----------
Net income............................................ $ 2.98 $ 3.03 $ 2.39
========== ========== ==========
See accompanying notes.
30
OSHKOSH TRUCK CORPORATION
Consolidated Balance Sheets
September 30,
-------------
2001 2000
---- ----
(In thousands, except share
Assets and per share amounts)
Current assets:
Cash and cash equivalents............................................ $ 11,312 $ 13,569
Receivables, net..................................................... 211,405 106,517
Inventories.......................................................... 258,038 201,210
Prepaid expenses..................................................... 6,673 5,424
Deferred income taxes................................................ 15,722 14,708
---------- --------
Total current assets.............................................. 503,150 341,428
Investment in unconsolidated partnership................................. 18,637 15,179
Other long-term assets................................................... 10,276 10,283
Property, plant and equipment:
Land and land improvements........................................... 13,355 8,359
Equipment on operating lease to others............................... 11,476 11,915
Buildings............................................................ 86,224 69,494
Machinery and equipment.............................................. 130,780 111,591
Construction in progress............................................. 2,331 5,148
---------- --------
244,166 206,507
Less accumulated depreciation........................................ (102,238) (87,748)
---------- --------
Net property, plant and equipment................................. 141,928 118,759
Goodwill and other intangible assets, net................................ 415,277 310,731
---------- --------
Total assets............................................................. $1,089,268 $796,380
========== ========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable..................................................... $ 107,864 $ 84,215
Floor plan notes payable............................................. 19,271 23,925
Customer advances.................................................... 58,070 58,493
Payroll-related obligations.......................................... 27,084 23,465
Accrued warranty..................................................... 18,338 15,519
Other current liabilities............................................ 71,543 50,767
Revolving credit facility and current maturities of long-term debt... 77,031 8,544
---------- --------
Total current liabilities....................................... 379,201 264,928
Long-term debt........................................................... 282,249 154,238
Deferred income taxes.................................................... 40,334 46,414
Other long-term liabilities.............................................. 40,458 29,743
Commitments and contingencies............................................
Shareholders' equity:
Preferred Stock, $.01 par value; authorized - 2,000,000 shares;
none issued and outstanding...................................... -- --
Class A Common Stock, $.01 par value; authorized - 1,000,000 shares;
issued - 418,199 in 2001 and 422,207 in 2000..................... 4 4
Common Stock, $.01 par value; authorized 60,000,000 shares;
issued - 17,413,830 in 2001 and 17,409,822 in 2000............... 174 174
Paid-in capital...................................................... 110,330 109,740
Retained earnings.................................................... 246,915 201,791
Common Stock in treasury, at cost: 1,116,597 shares in 2001 and
1,163,872 shares in 2000......................................... (10,195) (10,652)
Accumulated other comprehensive loss................................. (202) --
---------- --------
Total shareholders' equity....................................... 347,026 301,057
---------- --------
Total liabilities and shareholders' equity............................... $1,089,268 $796,380
========== ========
See accompanying notes.
31
OSHKOSH TRUCK CORPORATION
Consolidated Statements of Shareholders' Equity
Common Accumulated
Common Paid-In Retained Stock in Other
Stock Capital Earnings Treasury Comprehensive Total
-------- --------- ---------- at Cost Loss ----------
--------- -------------
(In thousands, except per share amounts)
Balance at September 30, 1998.................. $140 $ 14,665 $130,959 $ (12,664) $ (1,804) $131,296
Comprehensive income:
Net income................................. -- -- 31,131 -- -- 31,131
Minimum pension liability adjustment
(net of income taxes of $1,153)........ -- -- -- -- 1,804 1,804
--------
Comprehensive income............... 32,935
--------
Cash dividends:
Class A Common Stock
($.29250 per share).................... -- -- (125) -- -- (125)
Common Stock ($.33625 per share)........... -- -- (4,155) -- -- (4,155)
Exercise of stock options...................... -- (156) -- 1,597 -- 1,441
Tax benefit related to stock options exercised. -- 1,496 -- -- -- 1,496
Other.......................................... -- (8) -- -- -- (8)
---- -------- -------- --------- -------- --------
Balance at September 30, 1999.................. 140 15,997 157,810 (11,067) -- 162,880
Net income and comprehensive income............ -- -- 49,703 -- -- 49,703
Cash dividends:
Class A Common Stock
($.30000 per share).................... -- -- (127) -- -- (127)
Common Stock ($.34500 per share). -- -- (5,595) -- -- (5,595)
Exercise of stock options...................... -- (55) -- 415 -- 360
Net proceeds of Common Stock offering.......... 38 93,364 -- -- -- 93,402
Tax benefit related to stock options exercised. -- 434 -- -- -- 434
---- -------- -------- --------- -------- --------
Balance at September 30, 2000.................. 178 109,740 201,791 (10,652) -- 301,057
Comprehensive income:
Net income................................. -- -- 50,864 -- -- 50,864
Gain on derivative instruments (net of
income taxes of $7).................... -- -- -- -- 13 13
Minimum pension liability adjustment
(net of income tax benefit of $2,637).. -- -- -- -- (4,490) (4,490)
Cumulative translation adjustment -- -- -- 4,275 4,275
--------
Comprehensive income................... -- -- -- -- -- 50,662
--------
Cash dividends:
Class A Common Stock
($.30000 per share).................... -- -- (126) -- -- (126)
Common Stock ($.34500 per share)........... -- -- (5,614) -- -- (5,614)
Exercise of stock options...................... -- 23 -- 457 -- 480
Tax benefit related to stock options exercised. -- 567 -- -- -- 567
---- -------- -------- --------- -------- --------
Balance at September 30, 2001.................. $178 $110,330 $246,915 $ (10,195) $ (202) $347,026
==== ======== ======== ========= ======== ========
See accompanying notes.
32
OSHKOSH TRUCK CORPORATION
Consolidated Statements of Cash Flows
Fiscal Year Ended September 30,
2001 2000 1999
--------- --------- ---------
(In thousands)
Operating activities:
Income from continuing operations................................ $ 50,864 $ 48,508 $ 31,191
Depreciation and amortization.................................... 28,497 24,218 23,157
Deferred income taxes............................................ (2,697) 2,277 (3,370)
Equity in earnings of unconsolidated partnership................. (2,241) (1,943) (2,493)
Loss (gain) on disposal of property, plant and
equipment.................................................. (52) (12) 59
Changes in operating assets and liabilities:
Receivables, net............................................. (71,489) (9,702) (12,204)
Inventories.................................................. (14,835) 7,330 (51,272)
Prepaid expenses............................................. 311 (436) (1,195)
Other long-term assets....................................... 174 256 --
Accounts payable............................................. (1,156) (7,802) 19,556
Floor plan notes payable..................................... (7,938) (2,691) 14,971
Customer advances............................................ (892) (12,059) 23,449
Payroll-related obligations.................................. (1,924) 1,639 1,582
Accrued warranty............................................. 641 1,600 (2,289)
Other current liabilities.................................... 14,956 (638) (3,144)
Other long-term liabilities.................................. (589) (862) 1,050
--------- --------- ---------
Net cash provided from (used for) operating activities... (8,370) 49,683 39,048
Investing activities:
Acquisitions of businesses, net of cash acquired................. (160,241) (7,147) --
Additions to property, plant and equipment....................... (18,493) (22,647) (17,999)
Proceeds from sale of property, plant and equipment 238 52 158
Decrease (increase) in other long-term assets.................... (4,867) (2,417) 3,357
--------- --------- ---------
Net cash used for investing activities....................... (183,363) (32,159) (14,484)
Net cash provided from discontinued operations................... -- 2,015 --
Financing activities:
Net borrowings (repayments) under revolving credit facility...... 65,200 (5,000) (1,000)
Proceeds from issuance of long-term debt......................... 140,000 30,913 --
Repayment of long-term debt...................................... (8,908) (124,595) (19,256)
Debt issuance costs.............................................. (1,183) (795) --
Proceeds from Common Stock offering.............................. -- 93,736 --
Costs of Common Stock offering................................... -- (334) --
Purchase of Common Stock and proceeds from
exercise of stock options, net............................... 480 360 1,433
Dividends paid................................................... (5,735) (5,392) (4,226)
--------- --------- ---------
Net cash provided from (used for) financing
activities............................................... 189,854 (11,107) (23,049)
Effect of exchange rate changes on cash.......................... (378) -- --
--------- --------- ---------
Increase (decrease) in cash and cash equivalents................. (2,257) 8,432 1,515
Cash and cash equivalents at beginning of year................... 13,569 5,137 3,622
--------- --------- ---------
Cash and cash equivalents at end of year......................... $ 11,312 $ 13,569 $ 5,137
========= ========= =========
Supplemental disclosures:
Cash paid for interest (net of amount capitalized)........... $ 20,068 $ 22,148 $ 26,142
Cash paid for income taxes................................... 17,959 22,438 26,859
See accompanying notes.
33
OSHKOSH TRUCK CORPORATION
Notes to Consolidated Financial Statements
September 30, 2001
(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") is a leading manufacturer of a wide variety of medium- and
heavy-duty specialized trucks and truck bodies predominately for the U.S. and
European markets. "Oshkosh" refers to Oshkosh Truck Corporation, not including
its subsidiaries. The Company sells its products into three principal truck
markets -- commercial, fire and emergency and defense. The Company's commercial
business is principally conducted through its wholly-owned subsidiaries,
McNeilus Companies, Inc. ("McNeilus"), Viking Truck and Equipment, Inc.
("Viking"), Geesink Group BV, Norba AB and Geesink Norba Ltd and their
wholly-owned subsidiaries (together the "Geesink Norba Group") and the
commercial division of Oshkosh. The Company's fire and emergency business is
principally conducted through its wholly-owned subsidiary, Pierce Manufacturing
Inc. ("Pierce"), the airport products division of Oshkosh and the Company's
wholly-owned subsidiaries, Kewaunee Fabrications, LLC ("Kewaunee") and Medtec
Ambulance Corporation ("Medtec"). The defense business is conducted through the
operations of Oshkosh. McNeilus is one of two general partners in
Oshkosh/McNeilus Financial Services Partnership ("OMFSP"), which provides lease
financing to the Company's customers. Each of the two general partners have
identical participating and protective rights and responsibilities and,
accordingly, the Company accounts for its equity interest in OMFSP of 52% at
September 30, 2001 and 53% at September 30, 2000, under the equity method.
Principles of Consolidation and Presentation -- The consolidated financial
statements include the accounts of Oshkosh and all of its wholly-owned
subsidiaries and are prepared in conformity with U.S. generally accepted
accounting principles. The Company records its interest in OMFSP under the
equity method. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. All
significant intercompany accounts and transactions have been eliminated.
Cash and Cash Equivalents -- The Company considers all highly liquid
investments with a maturity of three months or less when purchased to be cash
equivalents. Cash equivalents, consisting principally of time deposits and money
market instruments, totaled $3,770 and $13,000 at September 30, 2001 and 2000,
respectively. The cost of these securities, which are considered "available for
sale" for financial reporting purposes, approximates fair value at September 30,
2001 and 2000.
Receivables -- Receivables consist of amounts billed and currently due from
customers and unbilled costs and accrued profits related to revenues on
long-term contracts that have been recognized for accounting purposes but not
yet billed to customers.
Inventories -- Approximately 74.3% and 85.5% of the Company's inventories
at September 30, 2001 and 2000, respectively, were valued at the lower of cost,
computed on the last-in, first-out ("LIFO") method, or market. The remaining
inventories are valued at the lower of cost, computed on the first-in, first-out
("FIFO") method, or market. If the FIFO inventory valuation method had been used
exclusively, inventories would have increased by $12,619 and $10,988 at
September 30, 2001 and 2000, respectively.
Property, Plant and Equipment -- Property, plant and equipment are recorded
at cost. Depreciation is provided over the estimated useful lives of the
respective assets using accelerated and straight-line methods. The estimated
useful lives range from 10 to 50 years for buildings and improvements, from 4 to
25 years for machinery and equipment and from 3 to 10 years for capitalized
software and related costs. Depreciation expense was $15,510, $12,200 and
$10,743 in fiscal 2001, 2000 and 1999, respectively. The Company capitalizes
interest on borrowings during the active construction period of major capital
projects. Capitalized interest is added to the cost of the underlying assets and
is amortized over the useful lives of the assets. The Company capitalized
interest of $173 and $270 in fiscal 2001 and 2000, respectively. There was no
capitalized interest in fiscal 1999. Equipment on operating lease to others
represents the cost of vehicles sold to customers for which the Company has
guaranteed the residual value. These transactions are accounted for as operating
leases with the related assets capitalized and depreciated over their estimated
economic life of 10 years. Cost less accumulated depreciation for equipment on
operating lease at September 30, 2001 and 2000 was $9,703 and $11,309,
respectively.
Other Long-Term Assets -- Other long-term assets include deferred financing
costs, which are amortized using the interest method over the term of the debt,
prepaid funding of pension costs and certain investments.
34
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.
In August 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 144, "Accounting for Impairment
or Disposal of Long-Lived Assets," which supersedes SFAS No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of." SFAS No. 144 also supercedes the accounting and reporting provisions of
Accounting Principles Board ("APB") Opinion No. 30, "Reporting the Results of
Operations-Reporting the Effects of Disposal of a Segment of a Business and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions." SFAS
No. 144 is intended to establish one accounting model for long-lived assets to
be disposed of by sale and to address significant implementation issues of SFAS
No. 121. The Company expects to adopt SFAS No. 144 effective October 1, 2001.
The Company does not expect SFAS No. 144 will have a material effect on the
consolidated financial statements.
Floor Plan Notes Payable -- Floor plan notes payable represent liabilities
related to the purchase of commercial truck chassis upon which the Company
mounts its manufactured refuse bodies and rear-discharge concrete mixers and
certain fire apparatus. Floor plan notes payable are non-interest bearing for
terms ranging from 90 to 180 days and must be repaid upon the sale of the
vehicle to a customer. The Company's practice is to repay all floor plan notes
for which the non-interest bearing period has expired without sale of the
vehicle to a customer.
Customer Advances -- Customer advances principally represent amounts
received in advance of the completion of fire and emergency and commercial
vehicles. Most of these advances bear interest at variable rates approximating
the prime rate. Advances also include any Performance-Based Payments received
from the U.S. Department of Defense ("DoD") in excess of the value of related
inventory. Advances from the DoD are non-interest bearing. See discussion on
Performance-Based Payments that follows.
Performance-Based Payments -- The Company's five-year contract with the
U.S. DoD to deliver heavy-payload vehicles (Future Heavy Tactical Vehicle or
"FHTV") includes requirements for "Performance-Based Payments". The
Performance-Based Payments provision in the contract requires the DoD to pay the
Company based on the completion of certain pre-determined events in connection
with the production of vehicles under the FHTV contract. Performance Based
Payments received are shown as a contra-inventory amount, to the extent of FHTV
inventory on hand. Amounts received in excess of FHTV inventory are included as
customer advance liabilities.
Guaranteed Residual Value Obligations and Deferred Income -- Prior to
acquisition, the Company's wholly-owned subsidiary, Viking, entered into "sales"
transactions with customers that provided for residual value guarantees. In
accordance with SFAS No. 13 "Accounting For Leases," these transactions have
been recorded as operating leases. Net proceeds received in connection with the
initial transactions have been recorded as residual value liabilities to the
extent of Viking's guarantee. Proceeds received in excess of the guarantee
amount have been recorded as deferred income and are being accreted to income on
a straight-line basis over the period to the first exercise date of the
guarantee. Amounts outstanding at September 30, 2001 and 2000 and included in
other liabilities were:
September 30, 2001
------------------
Current Long-Term Total
------- --------- -----
Deferred revenue............... $1,276 $1,719 $ 2,995
Residual value guarantees...... 981 6,033 7,014
------ ------ -------
$2,257 $7,752 $10,009
====== ====== =======
September 30, 2000
------------------
Current Long-Term Total
------- --------- -----
Deferred revenue............... $1,503 $2,570 $ 4,073
Residual value guarantees...... 1,495 6,114 7,609
------ ------ -------
$2,998 $8,684 $11,682
====== ====== =======
Residual value guarantees are first exercisable by the customer as follows:
2002 - $981; 2003 - $1,635; 2004 - $4,090; 2005 - $308.
Revenue Recognition and Long-Term Contracts -- In December 1999, the
Securities and Exchange Commission issued Staff Accounting Bulletin ("SAB") No.
101, which deals with revenue recognition issues, excluding revenue accounted
for using the percentage-of-completion method. SAB No. 101 (as modified by SAB
No. 101 A and 101 B) was adopted by the Company in the fourth quarter of fiscal
2001. The adoption of SAB No. 101 did not have a significant effect on the
results of operations or on the financial position of the Company.
35
In conformity with SAB No. 101, revenue is generally recognized and earned
when all of the following circumstances are satisfied: persuasive evidence of an
arrangement exists, the price is fixed or determinable, collectibility is
reasonably assured, and delivery has occurred or services have been rendered.
Sales under fixed-price defense contracts generally are recorded using the
percentage-of-completion method of accounting. Sales and anticipated profits
under the Medium Tactical Vehicle Replacement ("MTVR") long-term, fixed-price
production contract are recorded on a percentage-of-completion basis, generally
using units accepted as the measurement basis for effort accomplished. Estimated
contract profits are taken into earnings in proportion to recorded sales based
on estimated average cost determined using total contract units under order
(including exercised options of 426) of 6,092, of which 1,173 units have been
completed as of September 30, 2001. Sales under certain long-term, fixed-price
defense contracts which, among other things, provide for delivery of minimal
quantities or require a significant amount of development effort in relation to
total contract value, are recorded using the percentage-of-completion method
upon achievement of performance milestones, or using the cost-to-cost method of
accounting where sales and profits are recorded based on the ratio of costs
incurred to estimated total costs at completion. Amounts representing contract
change orders, claims or other items are included in sales only when they can be
reliably estimated and realization is probable. When adjustments in contract
value or estimated costs are determined, any changes from prior estimates are
reflected in earnings in the current period. Anticipated losses on contracts or
programs in progress are charged to earnings when identified.
Research and Development and Similar Costs -- Except for certain
arrangements described below, research and development costs are generally
expensed as incurred and included as part of cost of sales. Research and
development costs charged to expense amounted to approximately $14,321, $14,137
and $10,868, during fiscal 2001, 2000 and 1999, respectively. Customer-sponsored
research and development costs incurred pursuant to contracts are accounted for
as contract costs.
Warranty -- Provisions for estimated warranty and other related costs are
recorded in cost of sales at the time of sale and are periodically adjusted to
reflect actual experience. Amounts expensed in fiscal 2001, 2000 and 1999 were
$12,278, $9,648 and $7,573, respectively.
Advertising -- Advertising costs are included in selling, general and
administrative expense and are expensed as incurred. These expenses totaled
$2,616, $2,132 and $1,804 in fiscal 2001, 2000 and 1999, respectively.
Foreign Currency Translation -- The financial statements of foreign
subsidiaries have been translated into U.S. dollars in accordance with SFAS No.
52, Foreign Currency Translation. All balance sheet accounts have been
translated using the exchange rates in effect at the balance sheet date. Income
statement amounts have been translated using the average exchange rate for the
year. Resulting translation adjustments are included in "accumulated other
comprehensive income (loss)." The Company recorded a $1,727 foreign currency
transaction gain in miscellaneous other income in fiscal 2001 related to the
purchase of euros prior to the acquisition of Geesink in July 2001. All other
foreign currency transaction gains and losses were insignificant for all years
presented.
Income Taxes -- Deferred income taxes are provided to recognize temporary
differences between the financial reporting basis and the income tax basis of
the Company's assets and liabilities using currently enacted tax rates and laws.
Income taxes are provided currently on financial statement earnings of non-U.S.
subsidiaries expected to be repatriated. The Company intends to determine
annually the amount of undistributed non-U.S. earnings to invest indefinitely in
its non-U.S. operations.
Financial Instruments -- The carrying amounts of cash equivalents,
receivables, accounts payable and variable rate debt approximated fair value as
of September 30, 2001 and 2000. The fair value of the Company's $100,000 8 3/4%
senior subordinated notes was approximately $98,000 and $95,000 at September 30,
2001 and 2000, respectively.
Concentration of Credit Risk -- Financial instruments which potentially
subject the Company to significant concentrations of credit risk consist
principally of cash equivalents, trade accounts receivable and OMFSP leases
receivable.
The Company maintains cash and cash equivalents, and certain other
financial instruments, with various major financial institutions. The Company
performs periodic evaluations of the relative credit standing of these financial
institutions and limits the amount of credit exposure with any institution.
Concentration of credit risk with respect to trade accounts and leases
receivable is limited due to the large number of customers and their dispersion
across many geographic areas. However, a significant amount of trade receivables
are with the U.S. government, with companies in the ready-mix concrete industry
and with several large waste haulers in the United States. The Company does not
currently foresee a significant credit risk associated with these receivables.
36
Derivative Financial Instruments -- As of October 1, 2000, the Company
adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," which was amended by SFAS No. 137 and SFAS No. 138 (collectively
referred to as SFAS No. 133). As a result of adoption of SFAS No. 133, the
Company recognizes all derivative financial instruments, such as foreign
exchange contracts, in the consolidated financial statements at fair value
regardless of the purpose or intent for holding the instrument. Changes in the
fair value of derivative financial instruments are either recognized
periodically in income or in shareholders' equity as a component of
comprehensive income depending on whether the derivative financial instrument
qualifies for hedge accounting, and if so, whether it qualifies as a fair value
hedge or cash flow hedge. Generally, changes in fair values of derivatives
accounted for as fair value hedges are recorded in income along with the
portions of the changes in the fair values of the hedged items that relate to
the hedged risks. Changes in fair values of derivatives accounted for as cash
flow hedges, to the extent they are effective as hedges, are recorded in other
comprehensive income net of deferred taxes. Changes in fair value of derivatives
not qualifying as hedges are reported in income.
Upon adoption of SFAS No. 133 on October 1, 2000, the Company recorded a
$119 charge to cost of sales as required under the standard.
Stock-Based Compensation -- The Company measures compensation cost for
stock-based compensation plans using the intrinsic value method of accounting as
prescribed in APB Opinion No. 25, "Accounting for Stock Issued to Employees,"
and related interpretations. The Company has adopted those provisions of SFAS
No. 123, "Accounting for Stock-Based Compensation," which require disclosure of
the pro forma effect on net earnings and earnings per share as if compensation
cost had been recognized based upon the estimated fair value at the date of
grant for options awarded.
Environmental Remediation Costs -- The Company accrues for losses
associated with environmental remediation obligations when such losses are
probable and reasonably estimable. Costs of future expenditures for
environmental remediation obligations are not discounted to their present value.
Recoveries of environmental remediation costs from other parties are recorded as
assets when their receipt is deemed probable. The accruals are adjusted as
further information develops or circumstances change.
Business Combinations and Goodwill and Other Intangible Assets -
Historically, the cost of goodwill and other intangible assets has been
amortized to expense on a straight line basis over the estimated periods
benefited, which ranged from 5 to 40 years.
In June 2001, the FASB issued SFAS No. 141, "Business Combinations," and
No. 142, "Goodwill and Other Intangible Assets" effective for fiscal years
beginning after December 15, 2001 (with early adoption allowed). Application of
SFAS No. 141 is required for purchase business combinations completed after June
30, 2001. Under the new rules, goodwill and intangible assets deemed to have
indefinite lives will no longer be amortized but will be subject to annual
impairment tests in accordance with the Statements. Other intangible assets will
continue to be amortized over their useful lives.
The Company adopted the new rules on accounting for goodwill and other
intangible assets in the first quarter of fiscal 2002. Subject to final
analysis, the Company expects application of the non-amortization provisions of
the Statements to result in a positive effect on operating income of
approximately $7,000 and net income of approximately $6,500 ($0.38 per share) in
fiscal 2002. The Company will perform the first of the required impairment tests
of goodwill and indefinite lived intangible assets during the first quarter of
fiscal 2002. The Company has not yet determined what the effect of these tests
will be on the earnings and financial position of the Company, however it does
not expect the impact to be material.
Earnings Per Share -- The following table sets forth the computation of
basic and diluted weighted average shares used in the per share calculations:
Fiscal Year Ended September 30,
2001 2000 1999
----------- ----------- -----------
Denominator for basic earnings per
share.............................. 16,681,000 16,073,684 12,727,141
Effect of dilutive options and
incentive compensation awards...... 407,063 330,389 324,713
----------- ----------- -----------
Denominator for dilutive earnings per
share................................ 17,088,063 16,404,073 13,051,854
=========== =========== ===========
Reclassifications -- Certain reclassifications have been made to the fiscal
2000 and 1999 financial statements to conform to the fiscal 2001 presentation.
In the fourth quarter of fiscal 2001, the Company adopted provisions of the
Emerging Issues Task Force ("EITF") of the FASB Abstract No. 00-10, "Accounting
for Shipping and Handling Fees and Costs." Adoption of the provisions of EITF
00-10 resulted in a
37
reclassification of shipping fee revenue to sales, from cost of sales where it
had been classified as a reduction of shipping costs. Amounts reclassified only
impacted the commercial segment and totaled $5,490 and $5,350 for fiscal 2000
and 1999, respectively.
Common Stock Split - On July 23, 1999, the Board of Directors of the
Company authorized a three-for-two split of the Company's Common Stock in the
form of a 50% stock dividend. The stock split was effected on August 19, 1999
for shareholders of record at the close of business on August 5, 1999. All
references in the Consolidated Financial Statements and the Notes to
Consolidated Financial Statements to numbers of shares, per share amounts, stock
option data and market prices of the Company's stock have been restated to
reflect the stock split.
2. Balance Sheet Information
September 30,
Receivables 2001 2000
----------------------------------------- --------- ---------
U.S. government:
Amounts billed....................... $ 78,626 $ 35,932
Costs and profits not billed......... 1,512 5,038
--------- ---------
80,138 40,970
Commercial customers..................... 126,033 65,754
Other.................................... 9,062 2,240
--------- ---------
215,233 108,964
Less allowance for doubtful accounts..... (3,828) (2,447)
--------- ---------
$ 211,405 $ 106,517
========= =========
In accordance with industry practice, recoverable costs and profits not billed
include amounts relating to programs and contracts with multi-year terms, a
portion of which is not expected to be realized in one year. Costs and profits
not billed generally will become billable upon the Company achieving certain
milestones.
September 30,
Inventories 2001 2000
--------------------------------------------- --------- ---------
Finished products............................ $ 64,049 $ 53,068
Partially finished products.................. 104,955 75,667
Raw materials................................ 122,484 95,776
--------- ---------
Inventories at FIFO cost..................... 291,488 224,511
Less: Progress/performance-based payments on
U.S. government contracts........... (20,831) (12,313)
Excess of FIFO cost over LIFO cost..... (12,619) (10,988)
--------- ---------
$ 258,038 $ 201,210
========= =========
Title to all inventories related to government contracts, which provide for
progress payments, vests with the government to the extent of unliquidated
progress/performance-based payments.
Inventory includes the following costs related to the Company's MTVR contract:
September 30,
2001 2000
--------- ---------
Tooling.................................. $ 3,340 $ 3,571
Deferred production and retrofit costs... 262 479
Logistics support development costs...... 3,727 3,888
Engineering.............................. 6,446 5,942
Test, training and other................. 954 817
--------- ---------
$ 14,729 $ 14,697
========= =========
September 30,
Goodwill and Other Intangible Assets 2001 2000
----------------------------------------- --------- ---------
Useful Lives
--------------
Goodwill 15 - 40 Years..... $ 315,875 $ 220,433
Distribution network 40 Years.......... 63,800 63,800
Non-compete agreements 5 - 15 Years...... 40,106 38,250
Other 5 - 40 Years...... 42,744 23,320
--------- ---------
462,525 345,803
Less accumulated amortization............... (47,248) (35,072)
--------- ---------
$ 415,277 $ 310,731
========= =========
38
On February 26, 1998, concurrent with the Company's acquisition of
McNeilus, the Company and BA Leasing & Capital Corporation ("BALCAP") formed
OMFSP, a general partnership, for the purpose of offering lease financing to
customers of the Company. Each partner contributed existing lease assets (and in
the case of the Company, related notes payable to third party lenders which were
secured by such leases) to capitalize the partnership. Leases and related notes
payable contributed by the Company were originally acquired in connection with
the McNeilus acquisition.
OMFSP manages the contributed assets and liabilities and engages in new
vendor lease business providing financing to customers of the Company. OMFSP
purchases trucks, truck bodies and concrete batch plants for lease to
user-customers. Banks and other financial institutions lend to OMFSP a portion
of the purchase price, with recourse solely to OMFSP, secured by a pledge of
lease payments due from the user-lessees. Each partner funds one-half of the
equity portion of the cost of the new truck and batch plant purchases, and each
partner is allocated its proportionate share of OMFSP cash flow and taxable
income. Indebtedness of OMFSP is secured by the underlying leases and assets of,
and is with recourse to, OMFSP. However, such indebtedness is non-recourse to
the Company.
Summarized financial information of OMFSP as of September 30, 2001 and 2000
and for the fiscal years ended September 30, 2001, 2000 and 1999, is as follows:
September 30,
2001 2000
---- ----
Cash and cash equivalents.................... $ 2,973 $ 1,867
Investment in sales type leases, net......... 204,772 172,255
Other assets................................. 869 491
-------- -------
$208,614 $174,613
======== ========
Notes payable................................ $166,635 $141,565
Other liabilities............................ 6,211 4,368
Partners' equity............................. 35,768 28,680
-------- -------
$208,614 $174,613
======== ========
Fiscal Year Ended September 30,
2001 2000 1999
---- ---- ----
Interest income.............................. $15,429 $13,132 $11,624
Net interest income.......................... 4,048 3,160 3,499
Excess of revenues over expenses............. 3,961 3,295 3,854
3. Acquisitions
On July 25, 2001, the Company acquired from Powell Duffryn Limited all of
the outstanding capital stock of the Geesink Norba Group to expand the Company's
presence in Europe to include manufacturing and direct distribution
capabilities. The cash purchase price for the acquisition of 156,422 euros,
including acquisition costs of 3,954 euros and net of cash acquired, or $137,636
was financed under a new Term B Loan under the Company's senior credit facility.
The Geesink Norba Group is a leading European manufacturer of refuse collection
truck bodies, mobile and stationary compactors and transfer stations under the
Geesink and Norba brands. The Geesink Norba Group is included in the Company's
commercial segment.
The operating results of the Geesink Norba Group have been included in the
Company's consolidated statements of income from the date of acquisition. The
purchase price, including acquisition costs, was allocated based on the
estimated fair values of the assets acquired and liabilities assumed at the date
of acquisition with any excess purchase price allocated to goodwill. The
allocation of the purchase price is tentative pending completion of appraisals
on assets acquired and finalization of certain restructuring plans. The
allocation may change following the completion of these items. Under SFAS Nos.
141 and 142, no goodwill amortization has been recorded for the Geesink Norba
Group acquisition in fiscal 2001.
39
Following is a summary of the estimated fair values of the assets acquired
and liabilities assumed as of the date of acquisition, on a preliminary basis:
Current assets, excluding cash of $2,044... $ 62,404
Property, plant and equipment.............. 16,189
Intangible assets.......................... 7,761
Goodwill................................... 86,213
-------
Total assets acquired.................... 172,567
Current liabilities........................ 34,409
Other long-term liabilities................ 323
Debt....................................... 199
---
Total liabilities assumed.............. 34,931
------
Net assets acquired........................ $ 137,636
=======
The preliminary valuation of intangible assets consist of $3,889 in assets
subject to amortization and $3,872 assigned to trademarks not subject to
amortization. The intangible assets subject to amortization consist of $3,783 in
internally-developed technology with a 15 year life and $106 of non-compete
agreements with a two year life. All the goodwill was assigned to the Company's
commercial segment and is expected to be deductible for income tax purposes.
On March 6, 2001, the Company purchased certain machinery and equipment,
parts inventory and certain intangible assets from TEMCO, a division of
Dallas-based Trinity Industries, Inc ("TEMCO"). TEMCO, a manufacturer of
concrete mixers, batch plants and concrete mixer parts had discontinued its
business. Consideration for the purchase was valued at $15,697 and included cash
of $8,139 and credits to the seller valued at $7,558 for future purchases of
certain concrete placement products from the Company over the next six years.
On October 30, 2000, the Company acquired all of the issued and outstanding
capital stock of Medtec for approximately $14,466, including acquisition costs
and net of cash acquired. Medtec is a U.S. manufacturer of custom ambulances and
rescue vehicles with manufacturing facilities in Indiana and Michigan. The
acquisition was financed from available cash and borrowings under the Company's
revolving credit facility.
On April 28, 2000, the Company acquired all of the capital stock of Viking
for $1,680 in cash (net of cash acquired). Viking is a dealer of new and used
equipment primarily in the Company's commercial products segment. On November 1,
1999, the Company acquired the manufacturing assets of Kewaunee and entered into
related non-competition agreements for $5,467 in cash plus the assumption of
certain liabilities aggregating $2,211. Kewaunee is a fabricator of heavy-steel
components for cranes, aerial devices and other equipment. The acquisitions were
financed from borrowings under the Company's senior credit facility.
The Geesink Norba Group, Medtec, Viking and Kewaunee acquisitions were
accounted for using the purchase method of accounting and, accordingly, their
respective operating results were included in the Company's consolidated
statements of income beginning July 25, 2001, October 30, 2000, April 28, 2000
and November 1, 1999, respectively. The excess of the purchase price, including
acquisition costs, of the Geesink Norba Group, Medtec, Viking and Kewaunee
acquisitions over the estimated fair value of the assets acquired and
liabilities assumed amounted to $86,213, $6,498, $2,135 and $115, respectively,
which has been recorded as goodwill. The purchase price allocation for the
Geesink Norba Group acquisition is preliminary and further refinements, which
are not expected to be material, are likely to be made.
Pro forma unaudited condensed consolidated operating results of the
Company, assuming the Geesink Norba Group, Medtec, Viking and Kewaunee had been
acquired as of October 1, 1999, are summarized below:
Fiscal 2001 Fiscal 2000
----------- -----------
Net sales............................ $ 1,546,996 $ 1,459,419
Income before extraordinary charge... 51,613 45,996
Net income........................... 51,613 47,191
Earnings per share:
Before extraordinary charge........ $ 3.09 $ 2.86
Net income......................... 3.09 2.94
Earnings per share assuming dilution:
Before extraordinary charge...... $ 3.02 $ 2.81
Net income....................... 3.02 2.88
40
4. Revolving Credit Facility, Long-Term Debt and Extraordinary Charge for Early
Retirement of Debt
To finance the Geesink Norba Group acquisition, the Company entered into a
Second Amended and Restated Credit Agreement, dated July 23, 2001, which added a
$140,000 Term Loan B ($139,650 outstanding at September 30, 2001) to its senior
credit facility. The Term Loan B provides for quarterly principal payments of
$350, with the balance due in January 2007.
On September 28, 2000, the Company amended its senior credit facility. The
amended senior credit facility is comprised of a $60,000 Term Loan A, with
balances outstanding of $52,000 and $60,000 at September 30, 2001 and 2000,
respectively, and a $170,000 revolving credit facility ($65,200 and $0
outstanding at September 30, 2001 and 2000, respectively), both of which mature
in January 2006. Term Loan A requires principal payments of $10,000 in fiscal
2002, $12,000 in fiscal 2003, $14,000 in both fiscal 2004 and fiscal 2005, with
the balance of $2,000 payable in fiscal 2006. Principal payments are due in
quarterly installments.
The Company recorded an after-tax extraordinary charge of $581 in November
1999 and $239 in September 2000 to record the write-off of deferred financing
costs related to the prepayment of $93,500 of debt from proceeds of a common
stock offering (see Note 7) and the prepayment of $30,413 of debt in connection
with the amendment and restatement of its senior credit facility, respectively.
Fiscal 1999 operating results include an after-tax extraordinary charge of $60
related to the write-off of deferred financing costs due to early repayment of
debt.
At September 30, 2001, outstanding borrowings of $65,200 and outstanding
letters of credit of $15,526 which reduced available capacity under the
Company's revolving credit facility to $89,274.
Interest rates on borrowings under the Company's senior credit facility are
variable and are equal to the "Base Rate" (which is equal to the higher of a
bank's reference rate and the federal funds rate plus 0.5%) or the "IBOR Rate"
(which is a bank's inter-bank offered rate for U.S. dollars in off-shore
markets) plus a margin of 0.625%, 0.625% and 1.25% for IBOR Rate loans under the
Company's revolving credit facility, Term Loan A and Term Loan B, respectively,
as of September 30, 2001. 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, 2001 were 6.287% on
the revolving credit facility and 4.545% and 5.160% for Term Loans A and B,
respectively.
The Company is charged a 0.40% annual fee with respect to any unused
balance under its revolving credit facility, and a 1.875% annual fee with
respect to any letters of credit issued under the revolving credit facility.
These fees are subject to adjustment if certain financial criteria are met.
Substantially all the domestic tangible and intangible assets of the
Company and its subsidiaries (including the stock of certain subsidiaries) are
pledged as collateral under the Second Amended and Restated Senior Credit
Facility. Among other restrictions, the Second Amended and Restated Senior
Credit Facility: (1) limits payments of dividends and purchases of the Company's
stock, (2) requires that certain financial ratios be maintained at prescribed
levels; (3) restricts the ability of the Company to make additional borrowings,
or to consolidate, merge or otherwise fundamentally change the ownership of the
Company; and (4) limits investments, dispositions of assets and guarantees of
indebtedness. The Company believes that such limitations should not impair its
future operating activities.
The Company has $100,000 of 8 3/4% Senior Subordinated Notes due March 1,
2008 ("Senior Subordinated Notes"). The indenture governing the terms of the
Senior Subordinated Notes contains customary affirmative and negative covenants.
The Company is in compliance with these covenants. The Senior Subordinated Notes
can be redeemed by the Company for a premium after March 1, 2003. In addition to
the Company, certain of the Company's subsidiaries fully, unconditionally,
jointly and severally guarantee the Company's obligations under the Senior
Subordinated Notes (see Note 15).
McNeilus has unsecured notes payable to several of its former shareholders
aggregating $2,052 at September 30, 2001 and $2,289 at September 30, 2000.
Interest rates on these notes range from 5.7% to 8.0% with annual principal and
interest payments ranging from $21 to $155 with maturities through October 2033.
Debt at September 30, 2001 and 2000 of $186 and $493, respectively, was assumed
as part of the Viking acquisition. This debt matures in fiscal 2002. The
interest rates on these notes range from 7.60% to 9.25%. Geesink Norba Group has
debt of $192 at September 30, 2001 which was assumed as part of the acquisition.
This debt matures in March 2008 with interest rates ranging from 6.75% to
10.50%.
The aggregate annual maturities of long-term debt for the five years
succeeding September 30, 2001, are as follows: 2002 -- $11,831; 2003 -- $13,695;
2004 -- $15,620; 2005 -- $15,466 and 2006 -- $3,468.
41
5. Income Taxes
Pretax income from continuing operations for the fiscal years ended
September 30 was taxed in the following jurisdictions:
Fiscal Year Ended September 30,
2001 2000 1999
--------- --------- ---------
Domestic............................ $ 77,558 $ 78,649 $ 50,959
Foreign............................. 1,255 -- --
--------- --------- ---------
$ 78,813 $ 78,649 $ 50,959
========= ========= =========
Significant components of the provision (credit) for income taxes are as
follows:
Fiscal Year Ended September 30,
2001 2000 1999
--------- --------- ---------
Allocated to Income from Continuing Operations
Before Equity in Earnings of Unconsolidated
Partnership
Current:
Federal.............................. $ 28,857 $ 26,021 $ 22,654
Foreign.............................. 439 -- --
State................................ 2,762 3,048 2,029
--------- --------- ---------
Total current..................... 32,058 29,069 24,683
Deferred:
Federal.............................. (2,402) 1,935 (2,882)
Foreign.............................. 201 -- --
State................................ (496) 342 (488)
--------- --------- ---------
Total deferred.................... (2,697) 2,277 (3,370)
--------- --------- ---------
$ 29,361 $ 31,346 $ 21,313
========= ========= =========
Allocated to Other Comprehensive Income
Deferred:
Federal and state.................... $ (2,630) $ -- $ 1,153
========= ========= =========
The reconciliation of income tax computed at the U.S. federal statutory tax
rates to income tax expense is:
Fiscal Year Ended September 30,
2001 2000 1999
-------- -------- -------
Effective Rate Reconciliation 35.0% 35.0% 35.0%
U.S. federal tax rate...............
Goodwill amortization............... 2.6 2.5 3.8
State income taxes, net............. 2.1 2.8 2.9
Settlement of tax audits............ (1.8) -- --
Foreign sales corporation........... (0.8) (0.6) (0.5)
Other, net.......................... 0.2 0.2 0.6
-------- -------- --------
37.3% 39.9% 41.8%
======== ======== ========
42
Deferred income tax assets and liabilities are comprised of the following:
September 30,
2001 2000
--------- ---------
Deferred Tax Assets and Liabilities
Deferred tax assets:
Other current liabilities.................. $ 9,355 $ 8,679
Other long-term liabilities................ 9,436 7,885
Accrued warranty........................... 6,235 5,540
Payroll-related obligations................ 3,524 4,035
Other...................................... 598 --
--------- ---------
Total deferred tax assets.............. 29,148 26,139
Deferred tax liabilities:
Intangible assets.......................... 28,273 29,079
Investment in unconsolidated partnership... 10,024 10,819
Property, plant and equipment.............. 9,602 8,849
Inventories................................ 4,509 5,367
Other long-term assets..................... 1,078 2,419
Other...................................... 274 1,312
--------- ---------
Total deferred tax liabilities......... 53,760 57,845
--------- ---------
Net deferred tax liability............. $ (24,612) $ (31,706)
========= =========
The net deferred tax liability is classified in the consolidated balance
sheet as follows:
September 30,
2001 2000
--------- ---------
Current net deferred tax asset................. $ 15,722 $ 14,708
Non-current net deferred tax liability......... (40,334) (46,414)
------- -------
$ (24,612) $ (31,706)
========= =========
Undistributed earnings of the Company's foreign subsidiaries amounted to
approximately $800 at September 30, 2001. Because the Company plans on
distributing those earnings in the form of dividends, or otherwise, the Company
has provided for U.S. income taxes, net of any foreign tax credits, on these
foreign earnings.
6. Employee Benefit Plans
The Company and certain of its subsidiaries sponsor multiple defined
benefit pension plans and postretirement benefit plans covering certain Oshkosh
and Pierce employees and certain Oshkosh and Kewaunee retirees and their
spouses, respectively. The pension plans provide benefits based on compensation,
years of service and date of birth. The postretirement benefit plans provides
health benefits based on years of service and date of birth. The Company's
policy is to fund the pension plans in amounts that comply with contribution
limits imposed by law. Requirements of the Company's postretirement benefit
plans are funded as benefit payments are made.
43
Details regarding the Company's defined benefit pension plans and
postretirement benefit plans and amounts recorded in the consolidated financial
statements are as follows:
Pension Benefits Postretirement Benefits
2001 2000 2001 2000
---------- ---------- ---------- ----------
Change in benefit obligation
Benefit obligation at October 1.............................. $ 45,392 $ 41,816 $ 9,883 $ 8,744
Service cost................................................. 1,861 1,741 421 349
Interest cost................................................ 3,654 3,203 678 694
Actuarial (gains) losses..................................... 2,278 170 (15) 306
Acquisition of Kewaunee...................................... -- -- -- 262
Benefits paid by the Company................................. -- -- (426) (472)
Benefits paid from plan assets............................... (1,549) (1,538) -- --
---------- ---------- ---------- ----------
Benefit obligation at September 30........................... $ 51,636 $ 45,392 $ 10,541 $ 9,883
========== ========== ========== ==========
Change in plan assets
Fair value of plan assets at October 1....................... $ 51,874 $ 45,953 $ -- $ --
Actual return on plan assets................................. (9,841) 4,966 -- --
Company contributions........................................ 2,049 2,493 426 472
Benefits paid from plan assets............................... (1,549) (1,538) -- --
Benefits paid by the Company................................. -- -- (426) (472)
---------- ---------- ---------- ----------
Fair value of plan assets at September 30.................... $ 42,533 $ 51,874 $ -- $ --
========== ========== ========== ==========
Reconciliation of funded status
Funded status of plan - over (under) funded.................. $ (9,103) $ 6,482 $ (10,541) $ (9,883)
Unrecognized net actuarial (gains) losses.................... 13,653 (3,072) (2,517) (2,654)
Unrecognized transition asset................................ (324) (392) -- --
Unamortized prior service cost............................... 1,520 1,652 -- --
---------- ---------- ---------- ----------
Prepaid (accrued) benefit cost............................... $ 5,746 $ 4,670 $ (13,058) $ (12,537)
========== ========== ========== ==========
Recognized in consolidated balance sheet at September 30
Prepaid benefit cost recorded in other long-term assets...... $ 1,024 $ 4,670 $ -- $ --
Intangible assets............................................ 1,495 -- -- --
Accrued benefit cost recorded in other long-term liabilities. (3,900) -- (13,058) (12,537)
Accumulated other comprehensive loss ........................ 7,127 -- -- --
---------- ---------- ---------- ----------
Prepaid (accrued) benefit cost............................... $ 5,746 $ 4,670 $ (13,058) $ (12,537)
========== ========== ========== ==========
Weighted-average assumptions as of September 30
Discount rate................................................ 7.50% 7.75% 7.50% 7.75%
Expected return on plan assets............................... 9.25 9.25 n/a n/a
Rate of compensation increase................................ 4.50 4.50 n/a n/a
Pension Benefits Postretirement Benefits
Fiscal Year Ended September 30, Fiscal Year Ended September 30,
2001 2000 1999 2001 2000 1999
---------- ---------- ---------- ---------- ---------- ----------
Components of net periodic benefit cost
Service cost............................ $ 1,861 $ 1,741 $ 1,828 $ 421 $ 349 $ 461
Interest cost........................... 3,654 3,203 2,853 678 694 708
Expected return on plan assets.......... (4,605) (4,023) (3,450) -- -- --
Amortization of prior service cost...... 131 131 131 -- -- --
Amortization of transition asset........ (67) (67) (67) -- -- --
Amortization of net actuarial (gains)
losses................................ -- -- 155 (152) (111) --
--------- --------- --------- ---------- --------- ---------
Net periodic benefit cost............... $ 974 $ 985 $ 1,450 $ 947 $ 932 $ 1,169
========= ========= ========= ========= ========== =========
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation for the Company was 10.0% in fiscal 2001,
declining to 5.5% in fiscal 2010. If the health care cost trend rate was
increased by 1%, the accumulated postretirement benefit obligation at September
30, 2001 would increase by $721 and net periodic postretirement benefit cost for
fiscal 2001 would increase by $113. A corresponding decrease of 1% would
decrease the accumulated postretirement benefit obligation at September 30, 2001
by $653 and net periodic postretirement benefit cost for fiscal 2001 would
decrease by $101.
As part of the Company's acquisition of the Geesink Norba Group, the
Company agreed to establish a retirement plan for employees of a subsidiary in
the United Kingdom. Previously, this subsidiary participated in the seller's
defined benefit retirement plan. The Company expects that it will have a
replacement plan in place sometime in mid fiscal 2002. Until then, the Geesink
Norba Group will continue to make contributions to the seller's retirement plan.
Contributions made in fiscal 2001 were $26.
44
The Company maintains supplemental executive retirement plans ("SERPs") for
certain executive officers of the Company and its subsidiaries that are
unfunded. Expense related to the plans of $531, $409 and $660 was recorded in
fiscal 2001, 2000 and 1999, respectively. Amounts accrued as of September 30,
2001 and 2000 related to the plans were $2,650 and $2,145, respectively.
The Company has defined contribution 401(k) plans covering substantially
all employees. The plans allow employees to defer 2% to 19% of their income on a
pre-tax basis. Each employee who elects to participate is eligible to receive
Company matching contributions which are based on employee contributions to the
plans, subject to certain limitations. Amounts expensed for Company matching
contributions were $2,243 , $2,120 and $1,684 in fiscal 2001, 2000 and 1999,
respectively.
7. Shareholders' Equity
On February 1, 1999, the Board of Directors of the Company adopted a
shareholder rights plan and declared a rights dividend of two-thirds of one
Preferred Share Purchase Right ("Right") for each share of Common Stock and
40/69 of one Right for each share of Class A Common Stock outstanding on
February 8, 1999, and provided that two-thirds of one Right and 40/69 of one
Right would be issued with each share of Common Stock and Class A Common Stock,
respectively, thereafter issued. The Rights are exercisable only if a person or
group acquires 15% or more of the Common Stock and Class A Common Stock or
announces a tender offer for 15% or more of the Common Stock and Class A Common
Stock. Each Right entitles the holder thereof to purchase from the Company one
one-hundredth share of the Company's Series A Junior Participating Preferred
Stock at an initial exercise price of $145 per one one-hundredth of a share
(subject to adjustment), or, upon the occurrence of certain events, Common Stock
or common stock of an acquiring company having a market value equivalent to two
times the exercise price. Subject to certain conditions, the Rights are
redeemable by the Board of Directors for $.01 per Right and are exchangeable for
shares of Common Stock. The Board of Directors is also authorized to reduce the
15% thresholds referred to above to not less than 10%. The Rights have no voting
power and initially expire on February 1, 2009.
The Company has a stock restriction agreement with two shareholders owning
the majority of the Company's Class A Common Stock. The agreement is intended to
allow for an orderly transition of Class A Common Stock into Common Stock. The
agreement provides that at the time of death or incapacity of the survivor of
them, the two shareholders will exchange all of their Class A Common Stock for
Common Stock. At that time, or at such earlier time as there are no more than
150,000 shares of Class A Common Stock issued and outstanding, the Company's
Articles of Incorporation provide for a mandatory conversion of all Class A
Common Stock into Common Stock.
Each share of Class A Common Stock is convertible into Common Stock on a
one-for-one basis. During fiscal 2001 and 2000, 4,008 and 3,778 shares of Class
A Common Stock were converted into Common Stock. As of September 30, 2001,
418,199 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, 2001 and 2000, the Company
had purchased 692,302 shares of its Common Stock at an aggregate cost of $6,551.
Dividends are required to be paid on both the Class A Common Stock and
Common Stock at any time that dividends are paid on either. Each share of Common
Stock is entitled to receive 115% of any dividend paid on each share of Class A
Common Stock, rounded up or down to the nearest $0.0025 per share. Agreements
governing the Company's senior credit facility and senior subordinated notes
restrict the Company's ability to pay dividends. Under these agreements, the
Company generally may pay dividends in an amount not to exceed $6,000 plus 7.5%
of net income.
Holders of the Common Stock have the right to elect or remove as a class
25% of the entire Board of Directors of the Company rounded to the nearest whole
number of directors, but not less than one. Holders of Common Stock are not
entitled to vote on any other Company matters, except as may be required by law
in connection with certain significant actions such as certain mergers and
amendments to the Company's Articles of Incorporation, and are entitled to one
vote per share on all matters upon which they are entitled to vote. Holders of
Class A Common Stock are entitled to elect the remaining directors (subject to
any rights granted to any series of Preferred Stock) and are entitled to one
vote per share for the election of directors and on all matters presented to the
shareholders for vote.
The Common Stock shareholders are entitled to receive a liquidation
preference of $5.00 per share before any payment or distribution to holders of
the Class A Common Stock. Thereafter, holders of the Class A Common Stock are
entitled to receive $5.00 per share before any further payment or distribution
to holders of the Common Stock. Thereafter, holders of the Class A Common Stock
and Common Stock share on a pro rata basis in all payments or distributions upon
liquidation, dissolution or winding up of the Company.
45
On November 24, 1999, the Company completed the offer and sale of 3,795,000
shares of its Common Stock at $26.00 per share. Proceeds from the offering, net
of underwriting discounts and commissions, totaled $93,736 with $93,500 used to
repay indebtedness under the Company's senior credit facility (see Note 4).
8. Stock Options and Common Stock Reserved
The Company has reserved 2,098,353 shares of Common Stock at September 30,
2001 to provide for the exercise of outstanding stock options and the issuance
of Common Stock under incentive compensation awards and 418,199 shares of Common
Stock at September 30, 2001 to provide for conversion of Class A Common Stock to
Common Stock, for a total of 2,516,552 shares of Common Stock reserved. Under
the 1990 Incentive Stock Plan for Key Employees, as amended (the "Plan"),
officers, other key employees and directors may be granted options to purchase
shares of the Company's Common Stock at not less than the fair market value of
such shares on the date of grant. Participants may also be awarded grants of
restricted stock under the Plan. The Plan expires on September 19, 2010. Options
become exercisable ratably on the first, second, and third anniversary of the
date of grant. Options to purchase shares expire not later than ten years and
one month after the grant of the option.
The following table summarizes the transactions under the Plan for the
three-year period ended September 30, 2001.
Number of Weighted-Average
Options Exercise Price
---------- ----------------
Unexercised options outstanding September 30, 1998.............................. 1,067,552 $ 11.08
Options granted............................................................ 210,500 29.89
Options exercised.......................................................... (199,622) 7.22
Options forfeited.......................................................... (1,875) 10.43
---------
Unexercised options outstanding September 30, 1999.............................. 1,076,555 15.47
Options granted............................................................ 265,500 32.75
Options exercised.......................................................... (43,002) 8.39
Options forfeited.......................................................... (3,500) 12.30
---------
Unexercised options outstanding September 30, 2000.............................. 1,295,553 19.26
Options granted............................................................ 260,000 39.62
Options exercised.......................................................... (47,275) 10.15
Options forfeited.......................................................... -- --
--------- -------
Unexercised options outstanding September 30, 2001.............................. 1,508,278 $ 23.05
========= =======
Price range $6.08-- $11.17 (weighted-average contractual life of 4.6 years)..... 319,778 $ 9.27
Price range $12.75-- $15.75 (weighted-average contractual life of 6.8 years).... 452,500 14.40
Price range $25.17-- $33.13 (weighted-average contractual life of 8.6 years).... 476,000 31.49
Price range $39.11-- $44.00 (weighted-average contractual life of 10.0 years)... 260,000 39.62
Exercisable options at September 30, 2001....................................... 1,001,113 16.56
Shares available for grant at September 30, 2001................................ 590,075
As allowed by SFAS No. 123, "Accounting for Stock-Based Compensation," the
Company has elected to continue to follow APB No. 25, "Accounting for Stock
Issued to Employees" and related interpretations in accounting for the Plan.
Accordingly, no compensation expense has been recognized for grants under the
stock option plan. Had compensation cost for the Plan been determined consistent
with SFAS No. 123, the Company's net income and earnings per share would have
been reduced to the following pro forma amounts:
Fiscal Year Ended September 30,
2001 2000 1999
---- ---- ----
Pro forma:
Net income............................... $48,971 $48,387 $30,313
Per share:
Net income........................... 2.94 3.01 2.38
Net income assuming dilution......... 2.87 2.95 2.32
During the initial phase-in period, as required by SFAS No. 123, the pro
forma amounts were determined based on stock option grants subsequent to
September 30, 1995. Therefore, the pro forma amounts may not be indicative of
the effects of compensation cost on net earnings and earnings per share in
future years. The fair value of each stock option grant was estimated on the
date of grant using the Black-Scholes option pricing model with the following
weighted-average assumptions: risk-free interest rates of 3.88% in 2001, 5.99%
in 2000 and 5.82% in 1999; dividend yields of 0.87% in 2001, 1.05% in 2000 and
1.13% in 1999; expected common stock market price volatility factor of .328 in
2001, .325 in 2000 and .335 in 1999; and a weighted-average expected life of the
options of six years. The weighted-average fair value of options granted in
2001, 2000 and 1999 was $14.06, $12.64 and $11.57 per share, respectively.
46
9. Operating Leases
Total rental expense for plant and equipment charged to operations under
noncancelable operating leases was $2,775, $1,723 and $937 in fiscal 2001, 2000
and 1999, respectively. Minimum rental payments due under operating leases for
subsequent fiscal years are: 2002 -- $3,434; 2003 -- $2,317; 2004 -- $1,629;
2005 -- $612; and 2006 -- $206.
10. Contingencies, Significant Estimates and Concentrations
As part of its routine business operations, the Company disposes of and
recycles or reclaims certain industrial waste materials, chemicals and solvents
at third party disposal and recycling facilities, which are licensed by
appropriate governmental agencies. In some instances, these facilities have been
and may be designated by the United States Environmental Protection Agency
("EPA") or a state environmental agency for remediation. Under the Comprehensive
Environmental Response, Compensation, and Liability Act (the "Superfund" law)
and similar state laws, each potentially responsible party ("PRP") that
contributed hazardous substances may be jointly and severally liable for the
costs associated with cleaning up these sites. Typically, PRPs negotiate a
resolution with the EPA and/or the state environmental agencies. PRPs also
negotiate with each other regarding allocation of the cleanup cost.
As to one such Superfund site, Pierce is one of 393 PRPs participating in
the costs of addressing the site and has been assigned an allocation share of
approximately 0.04%. Currently, a report of the remedial
investigation/feasibility study is being completed, and as such, an estimate for
the total cost of the remediation of this site has not been made to date.
However, based on estimates and the assigned allocations, the Company believes
its liability at the site will not be material and its share is adequately
covered through reserves established by the Company at September 30, 2001.
Actual liability could vary based on results of the study, the resources of
other PRPs, and the Company's final share of liability.
The Company is addressing a regional trichloroethylene ("TCE") groundwater
plume on the south side of Oshkosh, Wisconsin. The Company believes there may be
multiple sources in the area. TCE was detected at the Company's North Plant
facility with testing showing the highest concentrations in a monitoring well
located on the upgradient property line. Because the investigation process is
still ongoing, it is not possible for the Company to estimate its long-term
total liability associated with this issue at this time. Also, as part of the
regional TCE groundwater investigation, the Company conducted a groundwater
investigation of a former landfill located on Company property. The landfill,
acquired by the Company in 1972, is approximately 2.0 acres in size and is
believed to have been used for the disposal of household waste. Based on the
investigation, the Company does not believe the landfill is one of the sources
of the TCE contamination. Based upon current knowledge, the Company believes its
liability associated with the TCE issue will not be material and is adequately
covered through reserves established by the Company at September 30, 2001.
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, 2001. The Company is also contingently liable under bid,
performance and specialty bonds totaling approximately $122,280 and open standby
letters of credit issued by the Company's bank in favor of third parties
totaling $15,526 at September 30, 2001.
Provisions for estimated warranty and other related costs are recorded at
the time of sale and are periodically adjusted to reflect actual experience. At
September 30, 2001 and 2000, the Company has reserved $18,338 and $15,519,
respectively, for warranty claims. Certain warranty and other related claims
involve matters of dispute that ultimately are resolved by negotiation,
arbitration or litigation. Infrequently, a material warranty issue can arise
which is beyond the scope of the Company's historical experience. It is
reasonably possible that additional warranty and other related claims could
arise from disputes or other matters beyond the scope of the Company's
historical experience.
Product and general liability claims arise against the Company from time to
time in the ordinary course of business. The Company is generally self-insured
for future claims up to $250 to $750 per claim. Accordingly, a reserve is
maintained for the estimated costs of such claims. At September 30, 2001 and
2000, the reserve for product and general liability claims was $13,817 and
$12,276, respectively, based on available information. There is inherent
uncertainty as to the eventual resolution of unsettled claims. Management,
however, believes that any losses in excess of established reserves will not
have a material effect on the Company's financial condition or results of
operations.
47
The Company's defense segment derives a significant portion of its revenue
from the U.S. DoD, as follows:
Fiscal Year Ended September 30,
2001 2000 1999
----------- ----------- --------
U.S. DoD................. $ 390,172 $ 259,614 $ 218,017
Export................... 32,960 16,227 4,518
---------- ---------- ----------
Total Defense Sales... $ 423,132 $ 275,841 $ 222,535
========== ========== ==========
U.S. DoD sales include $42,179, $42,207 and $180 in fiscal 2001, 2000 and
1999, respectively, for products sold internationally under the Foreign Military
Sales ("FMS") Program.
Inherent in doing business with the U.S. DoD are certain risks, including
technological changes and changes in levels of defense spending. All U.S. DoD
contracts contain a provision that they may be terminated at any time at the
convenience of the government. In such an event, the Company is entitled to
recover allowable costs plus a reasonable profit earned to the date of
termination.
11. Unaudited Quarterly Results
Fiscal Year Ended September 30, 2001 Fiscal Year Ended September 30, 2000
-------------------------------------------------- --------------------------------------------------
4th Quarter 3rd Quarter 2nd Quarter 1st Quarter 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Net sales................ $ 413,608 $ 405,790 $ 343,367 $ 282,528 $ 359,181 $ 393,215 $ 332,177 $ 244,943
Gross income............. 64,403 56,319 50,504 43,267 54,394 58,802 49,761 39,977
Income from continuing
operations.............. 17,648 13,709 11,284 8,223 14,625 15,274 11,913 6,696
Discontinued operations.. -- -- -- -- -- -- 2,015 --
Extraordinary charge..... -- -- -- -- (239) -- -- (581)
Net income............... 17,648 13,709 11,284 8,223 14,386 15,274 13,928 6,115
Earnings per share:
Continuing operations... $ 1.06 $ 0.82 $ 0.68 $ 0.49 $ 0.87 $ 0.92 $ 0.72 $ 0.46
Discontinued operations. -- -- -- -- -- -- 0.12 --
Extraordinary charge.... -- -- -- -- (0.01) -- -- (0.04)
Net income.............. 1.06 0.82 0.68 0.49 0.86 0.92 0.84 0.42
Earnings per share assuming
dilution:
Continuing operations... 1.03 0.80 0.66 0.48 0.86 0.90 0.70 0.46
Discontinued operations. -- -- -- -- -- -- 0.12 --
Extraordinary charge.... -- -- -- -- (0.01) -- -- (0.04)
Net income.............. 1.03 0.80 0.66 0.48 0.85 0.90 0.82 0.42
Dividends per share:
Class A Common Stock.... $ 0.07500 $ 0.07500 $ 0.07500 $ 0.07500 $ 0.07500 $ 0.07500 $ 0.07500 $ 0.07500
Common Stock............ 0.08625 0.08625 0.08625 0.08625 0.08625 0.08625 0.08625 0.08625
In the fourth quarter of fiscal 2001, the Company adopted provisions of EITF No.
00-10, "Accounting for Shipping and Handling Fees and Costs" (see Note 1). All
prior periods presented have been retroactively restated to conform with the
current presentation. In the fourth quarter of fiscal 2001, the Company recorded
a $1,727 foreign currency transaction gain related to the movement in the
exchange rate for euros to the U.S. dollar during the period the Company held
euros prior to the acquisition of the Geesink Norba Group.
In the fourth quarter of fiscal 2000, the Company recorded a $385 non-cash
charge ($239 after-tax) for the write-off of deferred financing costs related to
debt which was prepaid on September 28, 2000 in connection with the refinancing
of the Company's senior credit facility. The after-tax amount has been recorded
as an extraordinary charge.
12. Discontinued Operations
In fiscal 2000, the Company entered into a technology transfer agreement
and collected certain previously written-off receivables from a foreign
affiliate, as part of the disposition of a business that the Company exited in
1995. Gross proceeds of $3,250, less income taxes of $1,235, or $2,015 has been
recorded as a gain on disposal of discontinued operations.
48
13. Financial Instruments
Derivative Financial Instruments--The Company uses derivatives for hedging
purposes. Following is a summary of the Company's risk management strategies and
the effect of these strategies on the Company's consolidated financial
statements.
Fair Value Hedging Strategy--The Company enters into forward exchange
contracts to hedge certain firm commitments denominated in foreign currencies,
primarily Canadian dollars. The purpose of the Company's foreign currency
hedging activities is to protect the Company from risk that the eventual
dollar-equivalent cash flows from the sale of products to international
customers will be adversely affected by changes in the exchange rates. During
fiscal 2001, net losses related to hedge ineffectiveness included in income was
immaterial.
At September 30, 2001, the Company had outstanding forward foreign exchange
contracts to sell 927 Canadian dollars over a period of two months.
Cash Flow Hedging Strategy--To protect against an increase in cost of
forecasted purchases of foreign-sourced component parts denominated in euros
over a 12-month period, the Company has instituted a foreign currency cash flow
hedging program. The Company hedges portions of its forecasted purchases
denominated in euros with forward contracts. When the U.S. dollar weakens
against the euro, increased foreign currency payments are offset by gains in the
value of the forward contracts. Conversely, when the U.S. dollar strengthens
against the euro, reduced foreign currency payments are offset by losses in the
value of the forward contracts.
The Company does not have any forward foreign exchange contracts
outstanding at September 30, 2001. During fiscal 2001, net losses related to
hedge ineffectiveness included in income was immaterial. At September 30, 2001,
the Company expects to reclassify $13 of net gains on derivative instruments
from accumulated other comprehensive income to earnings during the next twelve
months due to sales of product containing foreign-sourced component parts.
14. Business Segment Information
The Company is organized into three reportable segments based on the
internal organization used by management for making operating decisions and
measuring performance and based on the similarity of customers served and
economic results attained. Segments are as follows:
Commercial: This segment includes McNeilus, the Geesink Norba Group, Viking
and the commercial division of Oshkosh. McNeilus and Oshkosh manufacture, market
and distribute concrete mixer systems, portable concrete batch plants and truck
components. McNeilus and the Geesink Norba Group manufacture, market and
distribute refuse truck bodies and the Geesink Norba Group manufactures and
markets waste collection systems. Viking sells and distributes concrete mixer
systems. Sales are made to commercial and municipal customers in the U.S. and
abroad.
Fire and emergency: This segment includes Pierce, Medtec, the aircraft,
rescue and firefighting and snow removal divisions of Oshkosh and Kewaunee
Fabrications, LLC. These units manufacture and market commercial and custom fire
trucks and emergency vehicles primarily for fire departments, airports and other
governmental units in the U.S. and abroad.
Defense: This segment consists of a division of Oshkosh that manufactures
heavy- and medium-payload tactical trucks and supply parts for the U.S. military
and to other militaries around the world.
The Company evaluates performance and allocates resources based on profit
or loss from segment operations before interest income and expense, income taxes
and non-recurring items. Intersegment sales are not significant. The accounting
policies of the reportable segments are the same as those described in Note 1 of
the Notes to Consolidated Financial Statements.
49
Summarized financial information concerning the Company's reportable
segments is shown in the following table. The caption "Corporate and other"
includes corporate related items, results of insignificant operations,
intersegment eliminations and income and expense not allocated to reportable
segments.
Selected financial data by business segment is as follows:
Fiscal Year Ended September 30,
2001 2000 1999
---- ---- ----
Net sales to unaffiliated customers:
Commercial....................................... $ 559,871 $ 663,819 $ 613,028
Fire and emergency............................... 463,919 390,659 336,241
Defense.......................................... 423,132 275,841 222,535
Corporate and other.............................. (1,629) (803) (1,500)
------------ ------------ ------------
Consolidated................................. $ 1,445,293 $ 1,329,516 $ 1,170,304
============ ============ ============
Operating income (expense):
Commercial....................................... $ 29,891 $ 54,654 $ 48,995
Fire and emergency............................... 45,841 32,922 26,758
Defense.......................................... 39,545 30,119 22,878
Corporate and other.............................. (16,981) (19,644) (22,418)
------------ ------------ ------------
Consolidated operating income................ 98,296 98,051 76,213
Net interest expense............................. (21,236) (20,063) (25,984)
Miscellaneous other.............................. 1,753 661 730
------------ ------------ ------------
Income from continuing operations before
income taxes, equity in earnings of
unconsolidated partnership and extraordinary
charge....................................... $ 78,813 $ 78,649 $ 50,959
============ ============ ============
Fiscal Year Ended September 30,
2001 2000 1999
---- ---- ----
Depreciation and amortization:
Commercial....................................... $ 14,241 $ 11,547 $ 10,949
Fire and emergency............................... 9,973 8,979 8,156
Defense.......................................... 3,471 2,833 2,810
Corporate and other.............................. 812 859 1,242
------------ ------------ ------------
Consolidated................................. $ 28,497 $ 24,218 $ 23,157
============ ============ ============
Capital expenditures:
Commercial....................................... $ 5,555 $ 11,053 $ 9,317
Fire and emergency............................... 5,813 5,016 6,125
Defense.......................................... 7,125 6,578 2,557
------------ ------------ ------------
Consolidated................................. $ 18,493 $ 22,647 $ 17,999
============ ============ ============
September 30,
2001 2000 1999
---- ---- ----
Identifiable assets:
Commercial:......................................
U.S. (a)..................................... $ 413,149 $ 385,622 $ 381,199
Netherlands.................................. 114,859 -- --
Other European............................... 66,837 -- --
------------ ------------ ------------
Total Commercial.......................... 594,845 385,622 381,199
Fire and emergency--U.S........................... 315,565 288,904 276,692
Defense--U.S...................................... 168,400 108,528 85,796
Corporate and other--U.S.......................... 10,458 13,326 9,603
------------ ------------ ------------
Consolidated................................. $ 1,089,268 $ 796,380 $ 753,290
============ ============ ============
(a)Includes investment in unconsolidated partnership.
50
The following table presents net sales by geographic region based on
product shipment destination.
Fiscal Year Ended September 30,
2001 2000 1999
---- ---- ----
Net sales:
United States.................................... $ 1,314,930 $ 1,227,038 $ 1,118,564
Other North America.............................. 7,343 7,429 7,822
Europe and Middle East........................... 93,263 68,317 21,713
Other............................................ 29,757 26,732 22,205
------------ ------------ ------------
Consolidated................................. $ 1,445,293 $ 1,329,516 $ 1,170,304
============ ============ ============
15. Subsidiary Guarantors
The following tables present condensed consolidating financial information
for: (a) the Company; (b) on a combined basis, the guarantors of the Senior
Subordinated Notes, which include all of the wholly-owned subsidiaries of the
Company ("Subsidiary Guarantors") other than the Geesink Norba Group, McNeilus
Financial Services, Inc. and Oshkosh/McNeilus Financial Services, Inc., which
are the only non-guarantor subsidiaries of the Company ("Non-Guarantor
Subsidiaries"); and (c) on a combined basis, the Non-Guarantor Subsidiaries.
Separate financial statements of the Subsidiary Guarantors are not presented
because the guarantors are jointly, severally, and unconditionally liable under
the guarantees, and the Company believes separate financial statements and other
disclosures regarding the Subsidiary Guarantors are not material to investors.
The Company is comprised of Wisconsin and Florida manufacturing operations
and certain corporate management, information services and finance functions.
Borrowings and related interest expense under the Company's senior credit
facility and the Senior Subordinated Notes are charged to the Company. The
Company has allocated a portion of this interest expense to certain Subsidiary
Guarantors through formal lending arrangements. There are presently no
management fee arrangements between the Company and its Non-Guarantor
Subsidiaries.
51
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Statement of Income
Fiscal Year Ended September 30, 2001
(In thousands)
Company Subsidiary Non-Guarantor Eliminations Consolidated
------- Guarantors Subsidiaries ------------ ------------
---------- ------------
Net sales................................ $ 588,590 $ 864,170 $ 18,860 $ (26,327) $ 1,445,293
Cost of sales............................ 511,363 731,055 14,887 (26,505) 1,230,800
--------- ---------- ----------- ---------- -----------
Gross income............................. 77,227 133,115 3,973 178 214,493
Operating expenses:
Selling, general and administrative.. 43,949 57,460 2,613 -- 104,022
Amortization of goodwill and other
intangibles.................... 1 12,130 44 -- 12,175
--------- ---------- ----------- ---------- -----------
Total operating expenses................. 43,950 69,590 2,657 -- 116,197
--------- ---------- ----------- ---------- -----------
Operating income......................... 33,277 63,525 1,316 178 98,296
Other income (expense):
Interest expense..................... (24,310) (23,885) (1,656) 27,565 (22,286)
Interest income...................... 20,252 6,697 1,666 (27,565) 1,050
Miscellaneous, net................... 12,177 (10,422) (2) -- 1,753
--------- ---------- ----------- ---------- -----------
8,119 (27,610) 8 -- (19,483)
--------- ---------- ----------- ---------- -----------
Income before items noted below.......... 41,396 35,915 1,324 178 78,813
Provision for income taxes............... 13,445 15,385 465 66 29,361
--------- ---------- ----------- ---------- -----------
27,951 20,530 859 112 49,452
Equity in earnings of subsidiaries and
unconsolidated partnership, net of
income taxes......................... 22,913 1,467 1,412 (24,380) 1,412
--------- ---------- ----------- ---------- -----------
Net income............................... $ 50,864 $ 21,997 $ 2,271 $ (24,268) $ 50,864
========= ========== =========== ========== ===========
52
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Statement of Income
Fiscal Year Ended September 30, 2000
(In thousands)
Company Subsidiary Non-Guarantor Eliminations Consolidated
------- Guarantors Subsidiaries ------------ ------------
---------- ------------
Net sales................................ $ 479,349 $ 875,027 $ -- $ (24,860) $ 1,329,516
Cost of sales............................ 412,630 738,603 -- (24,651) 1,126,582
--------- ---------- ----------- ---------- -----------
Gross income............................. 66,719 136,424 -- (209) 202,934
Operating expenses:
Selling, general and administrative.. 41,108 52,260 356 -- 93,724
Amortization of goodwill and other
intangibles.................... -- 11,159 -- -- 11,159
--------- ---------- ----------- ---------- -----------
Total operating expenses................. 41,108 63,419 356 -- 104,883
--------- ---------- ----------- ---------- -----------
Operating income (loss).................. 25,611 73,005 (356) (209) 98,051
Other income (expense):
Interest expense..................... (18,863) (8,368) (25) 6,300 (20,956)
Interest income...................... 267 6,855 71 (6,300) 893
Miscellaneous, net................... 11,836 (11,763) 588 -- 661
--------- ---------- ----------- ---------- -----------
(6,760) (13,276) 634 -- (19,402)
--------- ---------- ----------- ---------- -----------
Income before items noted below.......... 18,851 59,729 278 (209) 78,649
Provision for income taxes............... 6,564 24,755 106 (79) 31,346
--------- ---------- ----------- ---------- -----------
12,287 34,974 172 (130) 47,303
Equity in earnings of subsidiaries and
unconsolidated partnership, net of
income taxes......................... 36,221 1,377 1,205 (37,598) 1,205
--------- ---------- ----------- ---------- -----------
Income from continuing operations........ 48,508 36,351 1,377 (37,728) 48,508
Gain on disposal of discontinued
operations........................... 2,015 -- -- -- 2,015
Extraordinary charge..................... (820) -- -- -- (820)
--------- ---------- ----------- ---------- -----------
Net income............................... $ 49,703 $ 36,351 $ 1,377 $ (37,728) $ 49,703
========= ========== =========== ==========- ===========
53
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Statement of Income
Fiscal Year Ended September 30, 1999
(In thousands)
Company Subsidiary Non-Guarantor Eliminations Consolidated
------- Guarantors Subsidiaries ------------ ------------
---------- ------------
Net sales................................ $ 411,089 $ 771,899 $ -- $ (12,684) $ 1,170,304
Cost of sales............................ 360,191 649,416 -- (12,684) 996,923
--------- ---------- ----------- ---------- -----------
Gross income............................. 50,898 122,483 -- -- 173,381
Operating expenses:
Selling, general and administrative.. 41,100 44,567 329 -- 85,996
Amortization of goodwill and other
intangibles.................... -- 11,172 -- -- 11,172
--------- ---------- ----------- ---------- -----------
Total operating expenses................. 41,100 55,739 329 -- 97,168
--------- ---------- ----------- ---------- -----------
Operating income (loss).................. 9,798 66,744 (329) -- 76,213
Other income (expense):
Interest expense..................... (24,817) (8,227) -- 6,300 (26,744)
Interest income...................... 282 6,725 53 (6,300) 760
Miscellaneous, net................... 95 205 430 -- 730
--------- ---------- ----------- ---------- -----------
(24,440) (1,297) 483 -- (25,254)
--------- ---------- ----------- ---------- -----------
Income (loss) before items noted below... (14,642) 65,447 154 -- 50,959
Provision (credit) for income taxes...... (5,706) 26,961 58 -- 21,313
--------- ---------- ----------- ---------- -----------
(8,936) 38,486 96 -- 29,646
Equity in earnings of subsidiaries and
unconsolidated partnership, net of
income taxes......................... 40,127 1,641 1,545 (41,768) 1,545
--------- ---------- ----------- ---------- -----------
Income before extraordinary charge....... 31,191 40,127 1,641 (41,768) 31,191
Extraordinary charge..................... (60) -- -- -- (60)
--------- ---------- ----------- ---------- -----------
Net income............................... $ 31,131 $ 40,127 $ 1,641 $ (41,768) $ 31,131
========= ========== =========== ========== ===========
54
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Balance Sheet
September 30, 2001
(In thousands)
Company Subsidiary Non-Guarantor Eliminations Consolidated
------- Guarantors Subsidiaries ------------ ------------
---------- ------------
Assets
Current assets:
Cash and cash equivalents.............. $ 4,726 $ 3,394 $ 3,192 $ -- $ 11,312
Receivables, net....................... 104,662 74,814 33,633 (1,704) 211,405
Inventories............................ 82,873 145,635 29,561 (31) 258,038
Prepaid expenses and other............. 11,525 9,644 1,226 -- 22,395
--------- ---------- ----------- ---------- -----------
Total current assets................ 203,786 233,487 67,612 (1,735) 503,150
Investment in and advances to:
Subsidiaries........................... 575,807 8,591 -- (584,398) --
Unconsolidated partnership............. -- -- 18,637 -- 18,637
Other long-term assets..................... 6,080 4,095 101 -- 10,276
Net property, plant and equipment.......... 36,286 88,783 16,859 -- 141,928
Goodwill and other intangible assets, net.. 884 317,269 97,124 -- 415,277
--------- ---------- ----------- ---------- -----------
Total assets............................... $ 822,843 $ 652,225 $ 200,333 $ (586,133) $ 1,089,268
========= ========== =========== ========== ===========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable....................... $ 41,703 $ 42,143 $ 25,722 $ (1,704) $ 107,864
Floor plan notes payable............... -- 19,271 -- -- 19,271
Customer advances...................... 3,568 54,502 -- -- 58,070
Payroll-related obligations............ 8,881 12,483 5,720 -- 27,084
Accrued warranty....................... 8,813 7,799 1,726 -- 18,338
Other current liabilities.............. 42,637 27,567 1,339 -- 71,543
Revolving credit facility and current
maturities of long-term debt....... 76,600 426 5 -- 77,031
--------- ---------- ----------- ---------- -----------
Total current liabilities....... 182,202 164,191 34,512 (1,704) 379,201
Long-term debt............................. 280,250 1,812 187 -- 282,249
Deferred income taxes...................... (5,764) 35,119 10,979 -- 40,334
Other long-term liabilities ............... 23,791 16,667 -- -- 40,458
Investment by and advances from (to)
Parent................................. -- 434,436 154,655 (599,137) --
Shareholders' equity....................... 342,364 -- -- 4,662 347,026
--------- ---------- ----------- ---------- ----------
Total liabilities and shareholders' equity. $ 822,843 $ 652,225 $ 200,333 $ (586,133) $ 1,089,268
========= ========== =========== ========== ===========
55
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Balance Sheet
September 30, 2000
(In thousands)
Company Subsidiary Non-Guarantor Eliminations Consolidated
------- Guarantors Subsidiaries ------------ ------------
---------- ------------
Assets
Current assets:
Cash and cash equivalents.............. $ 13,034 $ 499 $ 36 $ -- $ 13,569
Receivables, net....................... 60,868 47,473 272 (2,096) 106,517
Inventories............................ 59,552 141,867 -- (209) 201,210
Prepaid expenses and other............. 12,153 7,836 143 -- 20,132
--------- ---------- ----------- ---------- -----------
Total current assets................ 145,607 197,675 451 (2,305) 341,428
Investment in and advances to:
Subsidiaries........................... 382,723 4,308 -- (387,031) --
Unconsolidated partnership............. -- -- 15,179 -- 15,179
Other long-term assets..................... 8,019 1,980 284 -- 10,283
Net property, plant and equipment.......... 30,196 88,563 -- -- 118,759
Goodwill and other intangible assets, net.. -- 310,731 -- -- 310,731
--------- ---------- ----------- ---------- -----------
Total assets............................... $ 566,545 $ 603,257 $ 15,914 $ (389,336) $ 796,380
========= ========== =========== ========== ===========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable....................... $ 39,602 $ 46,704 $ 5 $ (2,096) $ 84,215
Floor plan notes payable............... -- 23,925 -- -- 23,925
Customer advances...................... 3,114 55,353 26 -- 58,493
Payroll-related obligations............ 10,642 12,792 31 -- 23,465
Accrued warranty....................... 6,867 8,652 -- -- 15,519
Other current liabilities.............. 25,908 24,695 164 -- 50,767
Revolving credit facility and current
maturities of long-term debt....... 8,000 237 307 -- 8,544
--------- ---------- ----------- ---------- -----------
Total current liabilities....... 94,133 172,358 533 (2,096) 264,928
Long-term debt............................. 152,000 2,052 186 -- 154,238
Deferred income taxes...................... (905) 36,432 10,887 -- 46,414
Other long-term liabilities ............... 20,260 9,483 -- -- 29,743
Investment by and advances from (to)
Parent................................. -- 382,932 4,308 (387,240) --
Shareholders' equity....................... 301,057 -- -- -- 301,057
--------- ---------- ----------- ---------- -----------
Total liabilities and shareholders' equity. $ 566,545 $ 603,257 $ 15,914 $ (389,336) $ 796,380
========= ========== =========== ========== ===========
56
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Statement of Cash Flows
Fiscal Year Ended September 30, 2001
(In thousands)
Company Subsidiary Non-Guarantor Eliminations Consolidated
------- Guarantors Subsidiaries ------------ ------------
---------- ------------
Operating activities:
Net income.............................. $ 50,864 $ 21,997 $ 2,271 $ (24,268) $ 50,864
Non-cash adjustments.................... 4,612 20,592 (2,057) -- 23,507
Changes in operating assets and
liabilities......................... (48,063) (34,810) 310 (178) (82,741)
--------- ---------- ----------- ---------- -----------
Net cash provided from (used for)
operating activities................ 7,413 8,139 524 (24,446) (8,370)
Investing activities:
Acquisition of businesses, net of cash
acquired............................ (3,954) (22,580) (133,707) -- (160,241)
Investments in and advances to
subsidiaries........................ (189,846) 26,885 138,515 24,446 --
Additions to property, plant and
equipment........................... (11,875) (6,113) (505) -- (18,493)
Other................................... (458) (2,948) (1,223) -- (4,629)
--------- ---------- ----------- ---------- -----------
Net cash provided from (used for)
investing activities................ (206,133) (4,756) 3,080 24,446 (183,363)
Financing activities:
Net borrowings under revolving credit
Facility............................ 65,200 -- -- -- 65,200
Proceeds from issuance of long-term
Debt................................ 140,000 -- -- -- 140,000
Repayment of long-term debt............. (8,350) (488) (70) -- (8,908)
Debt issuance costs..................... (1,183) -- -- -- (1,183)
Dividends paid.......................... (5,735) -- -- -- (5,735)
Other................................... 480 -- -- -- 480
--------- ---------- ----------- ---------- -----------
Net cash provided from (used for)
financing activities................ 190,412 (488) (70) -- 189,854
Effect of exchange rate changes on cash..... -- -- (378) -- (378)
--------- ---------- ----------- ---------- -----------
Increase (decrease) in cash and cash
equivalents............................. (8,308) 2,895 3,156 -- (2,257)
Cash and cash equivalents at beginning of
year.................................... 13,034 499 36 -- 13,569
--------- ---------- ----------- ---------- -----------
Cash and cash equivalents at end of year.... $ 4,726 $ 3,394 $ 3,192 $ -- $ 11,312
========= ========== =========== ========== ===========
57
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Statement of Cash Flows
Fiscal Year Ended September 30, 2000
(In thousands)
Company Subsidiary Non-Guarantor Eliminations Consolidated
------- Guarantors Subsidiaries ------------ ------------
---------- ------------
Operating activities:
Income from continuing operations....... $ 48,508 $ 36,351 $ 1,377 $ (37,728) $ 48,508
Non-cash adjustments.................... 5,967 18,999 (426) -- 24,540
Changes in operating assets and
liabilities......................... 100 (13,434) (10,240) 209 (23,365)
--------- ---------- ----------- ---------- -----------
Net cash provided from (used for)
operating activities................ 54,575 41,916 (9,289) (37,519) 49,683
Investing activities:
Acquisition of businesses, net of cash
acquired............................ (5,467) (1,752) 72 -- (7,147)
Investments in and advances to
subsidiaries........................ (19,681) (28,359) 10,521 37,519 --
Additions to property, plant and
equipment........................... (10,962) (11,685) -- -- (22,647)
Other................................... (719) (699) (947) -- (2,365)
--------- ---------- ----------- ---------- -----------
Net cash provided from (used for)
investing activities................ (36,829) (42,495) 9,646 37,519 (32,159)
Net cash provided from discontinued
operations.............................. 2,015 -- -- -- 2,015
Financing activities:
Net repayments under revolving credit
facility............................ (5,000) -- -- -- (5,000)
Proceeds from issuance of long-term
debt................................ 30,913 -- -- -- 30,913
Repayment of long-term debt............. (123,913) (259) (423) -- (124,595)
Debt issuance costs..................... (795) -- -- -- (795)
Proceeds from Common Stock Offering..... 93,736 -- -- -- 93,736
Costs of Common Stock Offering.......... (334) -- -- -- (334)
Dividends paid.......................... (5,392) -- -- -- (5,392)
Other................................... 360 -- -- -- 360
--------- ---------- ----------- ---------- -----------
Net cash used for financing activities.. (10,425) (259) (423) -- (11,107)
--------- ---------- ----------- ---------- -----------
Increase (decrease) in cash and cash
equivalents............................. 9,336 (838) (66) -- 8,432
Cash and cash equivalents at beginning of
year.................................... 3,698 1,337 102 -- 5,137
--------- ---------- ----------- ---------- -----------
Cash and cash equivalents at end of year.... $ 13,034 $ 499 $ 36 $ -- $ 13,569
========= ========== =========== ========== ===========
58
OSHKOSH TRUCK CORPORATION
Condensed Consolidating Statement of Cash Flows
Fiscal Year Ended September 30, 1999
(In thousands)
Company Subsidiary Non-Guarantor Eliminations Consolidated
------- Guarantors Subsidiaries ------------ ------------
---------- ------------
Operating activities:
Income before extraordinary charge...... $ 31,191 $ 40,127 $ 1,641 $ (41,768) $ 31,191
Non-cash adjustments.................... 4,005 18,491 (5,143) -- 17,353
Changes in operating assets and
liabilities......................... (11,739) 3,893 (1,650) -- (9,496)
--------- ---------- ----------- ---------- -----------
Net cash provided from (used for)
operating activities................ 23,457 62,511 (5,152) (41,768) 39,048
Investing activities:
Investments in and advances to
subsidiaries........................ 5,992 (47,872) 112 41,768 --
Additions to property, plant and
equipment........................... (4,261) (13,738) -- -- (17,999)
Other................................... 238 (287) 3,564 -- 3,515
--------- ---------- ----------- ---------- -----------
Net cash provided from (used for)
investing activities................ 1,969 (61,897) 3,676 41,768 (14,484)
Financing activities:
Net repayments under
revolving credit facility........... (1,000) -- -- -- (1,000)
Repayment of long-term debt............. (19,000) (256) -- -- (19,256)
Dividends paid.......................... (4,226) -- -- -- (4,226)
Other................................... 1,433 -- -- -- 1,433
--------- ---------- ----------- ---------- -----------
Net cash used for
financing activities............... (22,793) (256) -- -- (23,049)
--------- ---------- ----------- ---------- -----------
Increase (decrease) in cash and cash
equivalents............................ 2,633 358 (1,476) -- 1,515
Cash and cash equivalents at
beginning of year...................... 1,065 979 1,578 -- 3,622
--------- ---------- ----------- ---------- -----------
Cash and cash equivalents at end of year.... $ 3,698 $ 1,337 $ 102 $ -- $ 5,137
========= ========== =========== ========== ===========
59
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES.
None
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information to be included under the captions "Governance of the
Company - The Board of Directors" and "Stock Ownership - Compliance with Section
16(a) Beneficial Ownership Reporting" in the Company's definitive proxy
statement for the annual meeting of shareholders on February 8, 2002, to be
filed with the Securities and Exchange Commission, is hereby incorporated by
reference in answer to this item. Reference is also made to the information
under the heading "Executive Officers of the Registrant" included under Part I
of this report.
Item 11. EXECUTIVE COMPENSATION.
The information to be included under the captions "Governance of the
Company - Compensation of Directors," "Stock Price Performance Graph" and
"Executive Compensation" contained in the Company's definitive proxy statement
for the annual meeting of shareholders on February 8, 2002, to be filed with the
Securities and Exchange Commission, is hereby incorporated by reference in
answer to this item.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information to be included under the caption "Stock Ownership - Stock
Ownership of Directors, Executive Officers and Other Large Shareholders" in the
Company's definitive proxy statement for the annual meeting of shareholders on
February 8, 2002, to be filed with the Securities and Exchange Commission, is
hereby incorporated by reference in answer to this item.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information to be included under the captions "Governance of the
Company - The Board of Directors" and "Executive Compensation - Executive
Employment and Severance Agreements and Other Agreements" in the Company's
definitive proxy statement for the annual meeting of shareholders on February 8,
2002, to be filed with the Securities and Exchange Commission, is hereby
incorporated by reference in answer to this item.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements: The following consolidated financial
statements of the Company and the report of independent auditors included in the
Annual Report to Shareholders for the fiscal year ended September 30, 2001, are
contained in Item 8:
Report of Arthur Andersen LLP, Independent Auditors
Report of Ernst & Young LLP, Independent Auditors
Consolidated Statements of Income for the years ended
September 30, 2001, 2000 and 1999
Consolidated Balance Sheets at September 30, 2001 and 2000
Consolidated Statements of Shareholders' Equity for the years
ended September 30, 2001, 2000 and 1999
Consolidated Statements of Cash Flows for the years ended
September 30, 2001, 2000 and 1999
Notes to Consolidated Financial Statements
2. Financial Statement Schedules:
Schedule II - Valuation & Qualifying Accounts
All other schedules are omitted because they are not applicable, or the
required information is included in the consolidated financial statements
or notes thereto.
60
3. Exhibits:
3.1 Restated Articles of Incorporation of Oshkosh Truck Corporation
(incorporated by reference to Exhibit 3.2 to the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 2000 (File No.
0-13886)).
3.2 By-Laws of Oshkosh Truck Corporation, as amended.
4.1 Second Amended and Restated Credit Agreement, dated July 23, 2001,
among Oshkosh Truck Corporation, Bank of America, N.A., as Agent and
Swing Line Lender, Bank One, NA, as Syndication Agent, and the other
financial institutions party thereto (incorporated by reference to
Exhibit 4.1 to the Company's Current Report on Form 8-K, dated July
25, 2001 (File No. 01-3886)).
4.2 Indenture, dated February 26, 1998, among Oshkosh Truck Corporation,
the Subsidiary Guarantors and Firstar Trust Company (incorporated by
reference to Exhibit 4.2 to the Company's Current Report on Form 8-K
dated February 26, 1998 (File No. 0-13886)).
4.3 Form of 8 3/4% Senior Subordinated Note due 2008 (incorporated by
reference to Exhibit 4.3 to the Company's Registration Statement on
Form S-4 (Reg. No. 333-47931)).
4.4 Form of Note Guarantee (incorporated by reference to Exhibit 4.4 to
the Company's Registration Statement on Form S-4 (Reg. No.
333-47931)).
4.5 Rights Agreement, dated as of February 1, 1999, between Oshkosh Truck
Corporation and Firstar Bank, N.A. (incorporated by reference to
Exhibit 4.1 to the Company's Registration Statement on Form 8-A, dated
as of February 1, 1999 (File No. 013886)).
4.6 First Supplemental Indenture, dated September 21, 2000, among the
Guaranteeing Subsidiaries, Oshkosh Truck Corporation, the other
Subsidiary Guarantors and Firstar Bank, National Association, as
successor in interest to Firstar Trust Company, as trustee under the
Indenture.
4.7 Second Supplemental Indenture, dated October 30, 2000, among Medtec
Ambulance Corporation, Oshkosh Truck Corporation, the other Subsidiary
Guarantors and Firstar Bank, National Association, as successor in
interest to Firstar Trust Company, as trustee under the Indenture.
10.1 Oshkosh Truck Corporation 1990 Incentive Stock Plan, as amended.*
10.2 1994 Long-Term Incentive Compensation Plan, dated March 29, 1994
(incorporated by reference to Exhibit 10.12 to the Company's Annual
Report on Form 10-K for the year ended September 30, 1994) (File No.
0-13886)).*
10.3 Form of Oshkosh Truck Corporation 1990 Incentive Stock Plan, as
amended, Nonqualified Stock Option Agreement (incorporated by
reference to Exhibit 4.2 to the Company's Registration Statement on
Form S-8 (Reg. No. 33-6287)).*
10.4 Form of Oshkosh Truck Corporation 1990 Incentive Stock Plan, as
amended, Nonqualified Director Stock Option Agreement (incorporated by
reference to Exhibit 4.3 to the Company's Registration Statement on
Form S-8 (Reg. No. 33-6287)).*
10.5 Form of 1994 Long-Term Incentive Compensation Plan Award Agreement
(incorporated by reference to Exhibit 10.16 to the Company's Annual
Report on Form 10-K for the year ended September 30, 1995 (File No.
0-13886)).*
10.6 Stock Purchase Agreement, dated April 26, 1996, among Oshkosh Truck
Corporation, J. Peter Mosling, Jr. and Stephen P. Mosling
(incorporated by reference to Exhibit 10.17 to the Company's Annual
Report on Form 10-K for the year ended September 30, 1996 (File No.
0-13886)).
10.7 Employment Agreement, dated as of October 15, 1998, between Oshkosh
Truck Corporation and Robert G. Bohn (incorporated by reference to
Exhibit 10.9 to the Company's Annual Report on Form 10-K for the year
ended September 30, 1998 (File No. 0-13886)).*
61
10.8 Employment Agreement, dated April 24, 1998, between McNeilus
Companies, Inc. and Daniel J. Lanzdorf (incorporated by reference to
Exhibit 10.9 to the Company's Annual Report on Form 10-K for the year
ended September 30, 1999 (File No. 0-13886)).*
10.9 Oshkosh Truck Corporation Executive Retirement Plan (incorporated by
reference to Exhibit 10.1 to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 2000).*
10.10 Form of Key Executive Employment and Severance Agreement between
Oshkosh Truck Corporation and each of Robert G. Bohn, Timothy M.
Dempsey, Paul C. Hollowell, Daniel J. Lanzdorf, John W. Randjelovic,
Charles L. Szews and Matthew J. Zolnowski (incorporated by reference
to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 2000).*
10.11 Employment Agreement, dated September 16, 1996, between Pierce
Manufacturing Inc. and John W. Randjelovic (incorporated by reference
to Exhibit 10.12 to the Company's Annual Report on Form 10-K for the
year ended September 30, 2000 (File No. 0-13886)).*
10.12 Amendment effective July 1, 2000 to Employment Agreement, dated as of
October 15, 1998, between Oshkosh Truck Corporation and Robert G. Bohn
(incorporated by reference to Exhibit 10.13 to the Company's Annual
Report on Form 10-K for the year ended September 30, 2000 (File No.
0-13886)).*
10.13 Second Amendment effective December 31, 2000 to Employment Agreement,
dated as of October 15, 1998, between Oshkosh Truck Corporation and
Robert G. Bohn (incorporated by reference to Exhibit 10 to the
Company's Quarterly Report on Form 10-Q for the quarter ended December
31, 2000 (File No. 0-13886)).*
11. Computation of per share earnings (contained in Note 1 of "Notes to
Consolidated Financial Statements" of the Company's Annual Report on
Form 10-K for the fiscal year ended September 30, 2001).
21. Subsidiaries of Registrant.
23. Consent of Arthur Andersen LLP
23.1 Consent of Ernst & Young LLP
*Denotes a management contract or compensatory plan or arrangement.
(b) The Company filed a Current Report on Form 8-K, dated July 25, 2001,
relating to the Company's acquisition of the Geesink Norba Group and a
Current Report on Form 8-K, dated July 27, 2001, reporting a
conference call for analysts held in connection with the announcement
of the Company's earnings for the third quarter ended June 30, 2001.
62
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
OSHKOSH TRUCK CORPORATION
December 7, 2001 By /S/ Robert G. Bohn
--------------------------------------------------
Robert G. Bohn, President, Chief Executive Officer
and Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities on the dates indicated.
December 7, 2001 /S/ R. G. Bohn
-----------------------------------------------------
R. G. Bohn, President, Chief Executive Officer and
Chairman of the Board
(Principal Executive Officer)
December 7, 2001 /S/ C. L. Szews
-----------------------------------------------------
C. L. Szews, Executive Vice President and Chief
Financial Officer
(Principal Financial Officer)
December 7, 2001 /S/ T. J. Polnaszek
-----------------------------------------------------
T. J. Polnaszek, Vice President and Controller
(Principal Accounting Officer)
December 7, 2001 /S/ J. W. Andersen
-----------------------------------------------------
J. W. Andersen, Director
December 7, 2001 /S/ D. T. Carroll
-----------------------------------------------------
D. T. Carroll, Director
December 7, 2001
-----------------------------------------------------
R. M. Donnelly, Director
December 7, 2001
-----------------------------------------------------
D. V. Fites, Director
December 7, 2001 /S/ General (Ret.) F. M. Franks, Jr.
-----------------------------------------------------
General (Ret.) F. M. Franks, Jr., Director
December 7, 2001
-----------------------------------------------------
M. W. Grebe, Director
December 7, 2001 /S/ K. J. Hempel
-----------------------------------------------------
K. J. Hempel, Director
December 7, 2001 /S/ S. P. Mosling
-----------------------------------------------------
S. P. Mosling, Director
December 7, 2001 /S/ J. P. Mosling, Jr.
-----------------------------------------------------
J. P. Mosling, Jr., Director
December 7, 2001 /S/ R. G. Sim
-----------------------------------------------------
R. G. Sim, Director
63
SCHEDULE II
OSHKOSH TRUCK CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
Allowance for Doubtful Accounts
Years Ended September 30, 2001, 2000 and 1999
(In Thousands)
Balance at Acquisitions Additions
Beginning of of Charged to Balance at
Fiscal Year Year Businesses Expense Reductions* End of Year
----------- ---- ---------- ------- ---------- -----------
Receivables -
Allowance for doubtful accounts:
1999 $2,068 -- $201 $ (65) $2,204
====== ----- ==== ===== ======
2000 $2,204 $ 5 $255 $ (17) $2,447
====== ===== ==== ===== ======
2001 $2,447 $1,063 $423 $(105) $3,828
====== ===== ==== ===== ======
* Represents amounts written off to the reserve, net of recoveries.
64
INDEX TO EXHIBITS
3.1 Restated Articles of Incorporation of Oshkosh Truck Corporation
(incorporated by reference to Exhibit 3.2 to the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 2000 (File No.
0-13886)).
3.2 By-Laws of Oshkosh Truck Corporation, as amended.
4.1 Second Amended and Restated Credit Agreement, dated July 23, 2001,
among Oshkosh Truck Corporation, Bank of America, N.A., as Agent and
Swing Line Lender, Bank One, NA, as Syndication Agent, and the other
financial institutions party thereto (incorporated by reference to
Exhibit 4.1 to the Company's Current Report on Form 8-K, dated July
25, 2001 (File No. 01-3886)).
4.2 Indenture, dated February 26, 1998, among Oshkosh Truck Corporation,
the Subsidiary Guarantors and Firstar Trust Company (incorporated by
reference to Exhibit 4.2 to the Company's Current Report on Form 8-K
dated February 26, 1998 (File No. 0-13886)).
4.3 Form of 8 3/4% Senior Subordinated Note due 2008 (incorporated by
reference to Exhibit 4.3 to the Company's Registration Statement on
Form S-4 (Reg. No. 333-47931)).
4.4 Form of Note Guarantee (incorporated by reference to Exhibit 4.4 to
the Company's Registration Statement on Form S-4 (Reg. No.
333-47931)).
4.5 Rights Agreement, dated as of February 1, 1999, between Oshkosh Truck
Corporation and Firstar Bank, N.A. (incorporated by reference to
Exhibit 4.1 to the Company's Registration Statement on Form 8-A, dated
as of February 1, 1999 (File No. 013886)).
4.6 First Supplemental Indenture, dated September 21, 2000, among the
Guaranteeing Subsidiaries, Oshkosh Truck Corporation, the other
Subsidiary Guarantors and Firstar Bank, National Association, as
successor in interest to Firstar Trust Company, as trustee under the
Indenture.
4.7 Second Supplemental Indenture, dated October 30, 2000, among Medtec
Ambulance Corporation, Oshkosh Truck Corporation, the other Subsidiary
Guarantors and Firstar Bank, National Association, as successor in
interest to Firstar Trust Company, as trustee under the Indenture.
10.1 Oshkosh Truck Corporation 1990 Incentive Stock Plan, as amended.*
10.2 1994 Long-Term Incentive Compensation Plan, dated March 29, 1994
(incorporated by reference to Exhibit 10.12 to the Company's Annual
Report on Form 10-K for the year ended September 30, 1994) (File No.
0-13886)).*
10.3 Form of Oshkosh Truck Corporation 1990 Incentive Stock Plan, as
amended, Nonqualified Stock Option Agreement (incorporated by
reference to Exhibit 4.2 to the Company's Registration Statement on
Form S-8 (Reg. No. 33-6287)).*
10.4 Form of Oshkosh Truck Corporation 1990 Incentive Stock Plan, as
amended, Nonqualified Director Stock Option Agreement (incorporated by
reference to Exhibit 4.3 to the Company's Registration Statement on
Form S-8 (Reg. No. 33-6287)).*
10.5 Form of 1994 Long-Term Incentive Compensation Plan Award Agreement
(incorporated by reference to Exhibit 10.16 to the Company's Annual
Report on Form 10-K for the year ended September 30, 1995 (File No.
0-13886)).*
10.6 Stock Purchase Agreement, dated April 26, 1996, among Oshkosh Truck
Corporation, J. Peter Mosling, Jr. and Stephen P. Mosling
(incorporated by reference to Exhibit 10.17 to the Company's Annual
Report on Form 10-K for the year ended September 30, 1996 (File No.
0-13886)).
65
10.7 Employment Agreement, dated as of October 15, 1998, between Oshkosh
Truck Corporation and Robert G. Bohn (incorporated by reference to
Exhibit 10.9 to the Company's Annual Report on Form 10-K for the year
ended September 30, 1998 (File No. 0-13886)).*
10.8 Employment Agreement, dated April 24, 1998, between McNeilus
Companies, Inc. and Daniel J. Lanzdorf (incorporated by reference to
Exhibit 10.9 to the Company's Annual Report on Form 10-K for the year
ended September 30, 1999 (File No. 0-13886)).*
10.9 Oshkosh Truck Corporation Executive Retirement Plan (incorporated by
reference to Exhibit 10.1 to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 2000).*
10.10 Form of Key Executive Employment and Severance Agreement between
Oshkosh Truck Corporation and each of Robert G. Bohn, Timothy M.
Dempsey, Paul C. Hollowell, Daniel J. Lanzdorf, John W. Randjelovic,
Charles L. Szews and Matthew J. Zolnowski (incorporated by reference
to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 2000).*
10.11 Employment Agreement, dated September 16, 1996, between Pierce
Manufacturing Inc. and John W. Randjelovic (incorporated by reference
to Exhibit 10.12 to the Company's Annual Report on Form 10-K for the
year ended September 30, 2000 (File No. 0-13886)).*
10.12 Amendment effective July 1, 2000 to Employment Agreement, dated as of
October 15, 1998, between Oshkosh Truck Corporation and Robert G. Bohn
(incorporated by reference to Exhibit 10.13 to the Company's Annual
Report on Form 10-K for the year ended September 30, 2000 (File No.
0-13886)).*
10.13 Second Amendment effective December 31, 2000 to Employment Agreement,
dated as of October 15, 1998, between Oshkosh Truck Corporation and
Robert G. Bohn (incorporated by reference to Exhibit 10 to the
Company's Quarterly Report on Form 10-Q for the quarter ended December
31, 2000 (File No. 0-13886)).*
11. Computation of per share earnings (contained in Note 1 of "Notes to
Consolidated Financial Statements" of the Company's Annual Report on
Form 10-K for the fiscal year ended September 30, 2001).
21. Subsidiaries of Registrant.
23. Consent of Arthur Andersen LLP
23.1 Consent of Ernst & Young LLP
*Denotes a management contract or compensatory plan or arrangement.
66