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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, 1999, or
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ____________________ to
_______________
Commission file number: 0-13886
Oshkosh Truck Corporation
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(Exact name of registrant as specified in its charter)
Wisconsin 39-0520270
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(State or other jurisdiction of (I.R.S. Employer Identification)
incorporation or organization)
P. O. Box 2566, Oshkosh, WI 54903-2566
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(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (920) 235-9151
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
Preferred Share Purchase Rights
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _X_ No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Aggregate market value of the voting and nonvoting common equity held by
non-affiliates of the registrant as of November 30, 1999:
Class A Common Stock, $.01 par value - No Established Market Value
Common Stock, $.01 par value - $420,020,000
Number of shares outstanding of each of the registrant's classes of common
stock as of November 30, 1999:
Class A Common Stock, $.01 par value - 425,982 shares
Common Stock, $.01 par value - 16,201,173 shares
DOCUMENTS INCORPORATED BY REFERENCE
Parts I, II and IV incorporate, by reference, portions of the Annual Report
to Shareholders for the year ended September 30, 1999.
Part III incorporates, by reference, portions of the Proxy Statement dated
December 29, 1999.
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OSHKOSH TRUCK CORPORATION
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Index to Annual Report on Form 10-K
Fiscal year ended September 30, 1999
Page
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PART I.
ITEM 1. BUSINESS ..........................................................3
ITEM 2. PROPERTIES .......................................................13
ITEM 3. LEGAL PROCEEDINGS.................................................13
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS................................................14
EXECUTIVE OFFICERS OF THE REGISTRANT .............................14
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED STOCKHOLDER MATTERS ................................15
ITEM 6. SELECTED FINANCIAL DATA...........................................15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.....................................................15
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK...............................................15
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.......................15
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE..........................16
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
OF THE REGISTRANT ..............................................16
ITEM 11. EXECUTIVE COMPENSATION ...........................................16
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT ..........................................16
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS....................................................16
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K ........................................16
INDEX TO EXHIBITS.................................................21
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As used herein, the "Company" refers to Oshkosh Truck Corporation,
including Pierce Manufacturing Inc. ("Pierce"), McNeilus Companies, Inc.
("McNeilus") and its other wholly-owned subsidiaries, and "Oshkosh" refers to
Oshkosh Truck Corporation, not including Pierce or McNeilus or their
wholly-owned subsidiaries.
The "Oshkosh," "McNeilus" and "Pierce" trademarks and related logos are
registered trademarks of the Company. All other product and service names
referenced in this document are the trademarks or registered trademarks of their
respective owners.
All information in this document 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.
Forward-Looking Statements
This Annual Report on Form 10-K contains "forward looking statements" which
are believed 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, budgets, targets,
projected costs, and plans and objectives of management for future operations
are forward-looking statements. In addition, forward-looking statements
generally can be identified by the use of forward-looking terminology such as
"may," "will," "expect," "intend," "estimates," "anticipate," "believe,"
"should," "plans," or "continue," or the negative thereof or variations thereon
or similar terminology. Although the Company believes the expectations reflected
in such forward-looking statements are reasonable, it can give no assurance that
such expectations will prove to have been correct. Important factors that could
cause actual results to differ materially from the Company's expectations
include, without limitation, the following: (1) the cyclical nature of the
concrete placement industry; (2) the risks related to reductions or changes in
U.S. government expenditures; (3) the potential for actual costs to exceed
projected costs with fixed-price U.S. government contracts; (4) the risks
related to suspension, termination or audit of U.S. government contracts; (5)
the challenges of identifying, completing and integrating future acquisitions;
(6) competition; (7) disruptions in the supply of parts or components from sole
source suppliers and subcontractors; (8) product liability and warranty claims;
(9) labor relations and market conditions; and (10) unanticipated events
relating to Year 2000 issues. 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 prospectus dated November
18, 1999 included in the Registration Statement on Form S-3 No. 333-87149. 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.
PART I
Item 1. BUSINESS
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The Company
The Company is a leading designer, manufacturer and marketer of a broad
range of specialty commercial, fire and emergency apparatus and military trucks
under the "Oshkosh," "Pierce," "McNeilus" and "MTM" trademarks. The Company
began business in 1917 and was among the early pioneers of four-wheel drive
technology. In 1981, the Company was awarded the first Heavy Expanded Mobility
Tactical Truck contract for the U.S. Department of Defense ("DoD"), and quickly
developed into the DoD's leading supplier of severe-duty heavy tactical trucks.
In 1996, the Company began a strategic initiative to shed under performing
assets and to diversify 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 $1,165 million in fiscal
1999, with earnings from continuing operations increasing from a loss of $.02
per share for fiscal 1996 to earnings of $2.39 per share for fiscal 1999.
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 the United States, 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; and
o Kewaunee Engineering Corporation, a fabricator of heavy-steel components
such as cranes and aerial devices, in November 1999.
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The Company believes it has developed a reputation for excellent product
quality, performance and reliability in each of the 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
portfolios for each of its markets in an effort to become a single-source
supplier for its customers. 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, heavy-duty rescue vehicles, wildland rough terrain
response vehicles, aircraft rescue and firefighting ("ARFF") 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. Fiscal 2000 sales under this contract are expected to be
about $26 million, increasing to peak sales of about $300 million in fiscal
2002. This contract represents the Company's first production contract for
medium tactical trucks for the U.S. military. McNeilus has an equity interest in
Oshkosh/McNeilus Financial Services Partnership ("OMFSP"), which provides lease
financing to the Company's customers.
Competitive Strengths
The following competitive strengths support the Company's business
strategy:
Strong Market Positions. The Company has developed leading market positions
and brand recognition in each of its core businesses, which the Company
attributes to its reputation for quality products, advanced engineering,
innovation, vehicle performance, reliability and customer service.
Extensive Distribution Capabilities. With the addition of the commercial
and municipal distribution capabilities of Pierce and McNeilus, the Company has
established an extensive domestic and international distribution system for
specialty trucks and truck bodies. In addition to its network of dealers and
distributors, the Company employs over 100 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 seven years, the Company has significantly increased
manufacturing efficiencies. In addition, the Company believes it has competitive
advantages over smaller truck and truck body manufacturers, which comprise the
majority of the competition in its markets, due to the Company's relatively
higher volumes that permit the use of moving assembly lines and provide
purchasing power opportunities across product lines.
Diversified Product Offering and Customer Base. The Company's broad product
offerings and target markets serve to diversify its revenues, mitigate the
impact of economic cycles and provide multiple platforms for both internal
growth and acquisitions. For each of the Company's target markets, it has
developed or acquired a broad product line in order to become a single-source
provider to the Company's customers.
Strong Management Team. The present management team has successfully
executed a strategic repositioning of the Company's business while significantly
improving its financial and operating performance. With each of the recent
acquisitions, the Company assimilated the management and culture of the acquired
company, introduced new strategies to significantly increase sales and used the
Company's expertise in purchasing and manufacturing to reduce costs.
Quality Products and Customer Service. Oshkosh, Pierce and McNeilus have
each developed strong brand recognition based on their commitments to meet the
stringent product quality and reliability requirements of their customers and
the specialty truck markets they serve. The Company's commitment to product
quality is exemplified by the ISO 9001 certification of Oshkosh and Pierce. The
Company also achieves high quality customer service through its extensive
service and parts support program, which is available to domestic customers 365
days a year in all product lines throughout the Company's distribution systems.
Proprietary Components. The Company's advanced design and engineering
capabilities have contributed to the development of proprietary, severe-duty
components that enhance truck performance, reduce manufacturing costs and
strengthen customer relationships. These proprietary components include front
drive and steer axles, transfer cases, cabs, the ALL-STEER electronic all-wheel
steering system, independent suspension, the Sky-Arm articulating aerial ladder,
the Hercules compressed air foam systems, the Command Zone multiplexing
technology and the McNeilus Auto Reach Arm, an automated side-loading refuse
body. The Company believes these proprietary components provide the Company a
competitive advantage by increasing its vehicles' durability, operating
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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 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 market leadership
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 three acquisitions since September 1996
(and completed a fourth acquisition (Kewaunee) in November 1999) 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 markets. The Company will focus its acquisition
strategy on 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. In fiscal 2000, the Company
plans to add new distribution capabilities for the municipal segment of the
refuse truck body market and in targeted geographic areas in the domestic fire
apparatus market. For example, in fiscal 1999, the Company added two refuse
service facilities and one fire apparatus service facility and began providing
refuse service at three existing mixer distribution facilities to attract
additional municipal sales. The Company plans to open additional service
facilities in fiscal 2000. The Company is developing strategies to increase
international sales. The Company is actively recruiting new representatives and
dealers in targeted international commercial markets to expand the international
sales of McNeilus' refuse truck bodies and rear-discharge concrete mixers. In
the summer of 1999, the Company began offering the new Contender line of custom
and commercial fire trucks to Pierce's extensive international dealer network.
This line of fire trucks is more appropriately priced for international sales
than Pierce's historically premium-priced product line. In fiscal 2000, the
Company plans to begin marketing its new medium tactical military truck to
approved foreign armies when the DoD concludes testing of the initial production
units. Because there have been limited sales of medium tactical trucks to
foreign armies over the last ten years under the U.S. Foreign Military Sales
Program and because the Company's truck has significant off-road capability at
an attractive price, the Company believes that the international market for this
truck will be significant.
Introducing New Products. The Company has increased its emphasis on new
product development in recent years, and seeks to expand sales by leading its
core markets in the introduction of new or improved products, either through
internal development or strategic acquisitions. For example, in fiscal 1998, the
Company purchased the aerial fire apparatus product line of Nova Quintech. This
acquisition broadened Pierce's aerial product line and provided Pierce with
three new products in fiscal 1998. In addition, Pierce introduced seven other
new products in fiscal 1998 and 1997, including the Dash 2000 and Lance 2000
chassis with Pierce's proprietary Command Zone multiplexing technology and a new
Hercules compressed air foam system. In January 1999, Pierce introduced its
Contender series of limited option fire apparatus produced at the Company's
Bradenton, Florida facility and mounted on a commercially available or custom
chassis, to compete in price segments Pierce did not previously serve. In the
commercial market, the Company introduced a substantially upgraded
front-discharge concrete mixer in fiscal 1999 to combine a new cab engineered
and produced by Oshkosh and a new mixer package produced in part by McNeilus.
For refuse customers, McNeilus introduced a new lightweight front-end loader in
August 1999 targeted for the large West Coast market where McNeilus did not have
a suitable product offering. In the defense market, Oshkosh recently received
its first medium tactical truck contract with the award of the MTVR contract,
and it continues to expand its heavy tactical truck offerings.
Reducing Costs While Maintaining Quality. The Company actively benchmarks
its competitors' costs and best industry practices, and continuously seeks to
implement process improvements to increase profitability and cash flow. With
each of its acquisitions, the Company has established cost reduction targets. At
Pierce, the Company exceeded its two-year cost reduction target of $6.5 million
as a result of consolidating facilities, reengineering the manufacturing process
and leveraging increased purchasing power. The Company is planning for
additional cost savings at Pierce in fiscal 2000. Similarly, the Company is
taking advantage of its greater purchasing power and manufacturing capabilities
in connection with its February 1998 acquisition of McNeilus, for which the
Company established a $5 to $7 million two-year cost reduction target. In the
first sixteen months following the McNeilus acquisition, the Company realized
approximately $7 million of cost reductions, and believes that it ultimately
could save another $3 million. In July 1999, the Company announced plans for
McNeilus to invest more than $8.3 million to expand its Dodge Center, Minnesota
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manufacturing facility. The primary purpose of the expansion is to construct two
moving assembly lines with robotic welders to significantly reduce the
manufacturing costs of refuse bodies. The expansion will also double the paint
and refuse body manufacturing capacity of this facility. 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.
Products
The Company is focused on the following core specialty truck and truck body
markets:
Commercial Segment. The Company is a leading domestic manufacturer of
refuse truck bodies for the waste services industry and of rear- and
front-discharge concrete mixers and portable concrete batch plants for the
concrete ready-mix industry. McNeilus manufactures a wide range of automated
rear, front, side and top loading refuse truck bodies, which are mounted on
commercial chassis. With more than half of all mixers in the field bearing the
McNeilus nameplate, McNeilus is the U.S. market share leader in rear-discharge
concrete mixers. McNeilus sells its refuse vehicles primarily to commercial
waste management companies, but it is building a presence with municipal
customers such as the cities of Los Angeles and Philadelphia and in
international markets such as England. 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 one
of the only domestic concrete mixer manufacturers that markets both rear- and
front-discharge concrete mixers and portable concrete batch plants. Mixers and
batch plants are marketed on the basis of their quality, dependability,
efficiency, low maintenance and cost-effectiveness.
The Company offers four- to seven-year tax advantaged lease financing to
mixer and portable concrete batch plant customers and to commercial waste hauler
customers in the United States through OMFSP, an affiliated partnership.
Offerings include competitive lease financing rates and the ease of one-stop
shopping for customers' equipment and financing.
Fire and Emergency Segment. Through Pierce, the Company is the 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 governmental markets, but also sells fire apparatus to
airports, universities and large industrial companies, and in international
markets. Pierce's history of innovation and research and development in
consultation with firefighters has resulted in a broad product line that
features a wide range of innovative, high-quality custom and commercial
firefighting equipment with advanced fire suppression capabilities. Pierce's
engineering expertise also allows it to design its vehicles to meet stringent
government regulations for safety and effectiveness.
The Company is among the leaders in the sale of aircraft rescue and
firefighting vehicles to domestic and international airports. These highly
specialized vehicles are required to be in-service at most airports worldwide to
support commercial airlines in the event of an emergency. Many of the largest
airports in the world, including LaGuardia International Airport, O'Hare
International Airport and Los Angeles International Airport in the United States
and airports in the People's Republic of China and Montreal and Toronto, Canada,
are served by 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 remains the leader in airport snow removal in the United
States. The Company's specially designed airport snow removal vehicles can cast
up to 4,000 tons of snow per hour and are used by some of the largest airports
in the United States, including Denver International Airport, LaGuardia
International Airport, Minneapolis-St. Paul International Airport and O'Hare
International Airport. 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 leading market position. In fiscal 1999, the Company
introduced a downsized all-wheel drive snow removal vehicle for municipal
markets to take advantage of the Company's strong brand name and meet the needs
of heavy snow regions of the United States.
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 includes
the Heavy Expanded Mobility Tactical Truck ("HEMTT"), the Heavy Equipment
Transporter ("HET"), the Palletized Load System ("PLS") and the Logistic Vehicle
System ("LVS"). The Company also exports severe-duty heavy tactical trucks to
approved foreign customers.
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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 HET and PLS trucks or HEMTT and LVS trucks
at fixed prices, which allows the Company to predict and plan its long-term
production and delivery schedules for vehicles. Current family contracts expire
in fiscal years 2000 and 2001.
With the award of the MTVR contract, the Company will become a major
manufacturer of medium tactical trucks for the U.S. Marine Corps. The Goal of
the U.S. Marine Corps is to upgrade the current configuration to carry a much
greater payload with substantially increased cross-country mobility. These
trucks are equipped with the Company's patented independent suspension and
transfer cases, and central tire inflation to enhance off-road performance. This
program is currently expected to include the production of 5,666 trucks with
options for up to 2,502 additional trucks. The total value of this contract
could reach $1.2 billion, including the options, or $850 million, exclusive of
options, over the fiscal years 2000 through 2005. Testing of the initial ten
trucks begins in December 1999. In early 2000, production is scheduled to be one
truck per day, ultimately increasing to eight trucks per day in August 2001.
The U.S. Army has commenced a competition to add a second supplier to build
Family of Medium Tactical Vehicles ("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.
A new law embodied in 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, which is expected
to involve production for the winner in 2003.
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 and by competing for the next
generation of light tactical trucks, which is expected to be opened for
competition early in the next decade. As the Company enters the medium tactical
truck and seeks to enter the light tactical truck areas of the defense market,
management believes that the Company has multiple competitive advantages,
including:
o Proprietary components. The Company's patented independent suspension and
transfer cases 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 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.
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
48 engineers and draftsmen to support current business and truck contract
competitions. These personnel have significant expertise designing new
trucks, using sophisticated computer aided tools, supporting grueling
testing programs at DoD test sites and submitting detailed, comprehensive,
successful contract proposals.
Marketing, Sales and Distribution
The Company believes it differentiates itself from many of its larger
competitors by tailoring its distribution to the needs of its specialized truck
markets and from its smaller competitors with its national and global sales and
service capabilities. Distribution personnel use demonstration trucks to show
customers how to use the Company's trucks and truck bodies properly. In
addition, the Company's flexible distribution is focused on meeting customers on
their terms, whether on a jobsite, an evening public meeting or a municipality's
offices, compared to the showroom sales approach of the typical dealers of large
truck manufacturers. The Company backs all products by same-day parts shipment,
and its service technicians are available in person or by telephone to domestic
customers 365 days a year. The Company believes its dedication to keeping its
trucks in-service in demanding conditions worldwide has contributed to customer
loyalty.
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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 15 distribution centers with 95
in-house sales and service representatives in the U.S. to sell and service the
refuse truck bodies, rear- and front-discharge concrete mixers and concrete
batch plants. The Company also uses one independent distributor for
front-discharge concrete mixers. Eleven 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 refuse truck body
and concrete mixer distribution networks in the United States. In fiscal 2000,
the Company plans on adding one additional distribution center and to begin
manufacturing concrete mixer replacement barrels at a third center.
The Company believes its direct distribution to customers is a competitive
advantage in commercial markets, particularly in the waste services industry
where principal competitors distribute through dealers and to a lesser extent in
the ready-mix concrete industry, where several competitors in part use dealers.
In addition to the avoidance of dealer commissions, the Company believes direct
distribution permits a more focused sales force in refuse body markets whereas
dealers frequently offer a very broad product line, and accordingly, the time
dealers tend to devote to refuse body sales activities is limited.
With respect to commercial market distribution efforts, the Company has
begun to apply Oshkosh's and Pierce's sales and marketing expertise in municipal
markets to increase sales of McNeilus refuse truck bodies to municipal
customers. Prior to the Company's acquisition of McNeilus, virtually all
McNeilus refuse truck body sales were to commercial customers. While the Company
believes commercial customers represent a majority of the refuse truck body
market, many municipalities purchase their own refuse trucks. The Company
believes it is positioned to create an effective municipal distribution system
in the refuse truck body market by leveraging its existing commercial
distribution capabilities and by opening service centers in major metropolitan
markets. The Company opened two centers in fiscal 1999. Following its
acquisition and new focus in municipal markets, McNeilus has been awarded new
business for the cities of Philadelphia, PA and Los Angeles, CA 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 McNeilus
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 in the first nineteen months following the
acquisition. 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 37 sales and service organizations with more than 240 sales
representatives nationwide, which combine broad geographical reach with
frequency of contact with fire departments and municipal government officials.
These sales and service organizations are supported by 65 product and marketing
support professionals and contract administrators at Pierce. 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.
Pierce primarily focused its sales efforts in rural and small suburban
domestic markets prior to its acquisition by Oshkosh. 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; 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 January 1999, Pierce also began targeting price
sensitive domestic and international markets through the introduction of its
Contender series of lower-priced commercial and custom pumpers. These
8
limited-option vehicles are being produced in the Company's Bradenton, Florida
facility for lower cost delivery to international customers.
Pierce substantially strengthened its competitive position overseas in
fiscal 1998 and 1999. Pierce's worldwide distribution network was expanded from
one to 25 international representatives and dealers. This network has delivered
several new orders in fiscal 1998 and 1999 from government agencies and private
companies in Egypt, the Philippines, Latin America and South Africa, among other
countries.
The Company has invested in the development of sales tools for its
representatives that it believes create a competitive advantage in the sale of
fire apparatus. For example, Pierce's Pride 2000 PC-based sales tool can be used
by its sales representatives to develop the detail specifications, price the
base truck and options and draw the configured truck on the customer's premises.
The quote, if accepted, is directly interfaced into Pierce's sales order
systems.
The Company's aircraft rescue and firefighting vehicles are marketed
through a combination of three direct sales representatives domestically and 53
representatives and dealers in international markets. In addition, the Company
maintains 23 full-time sales and service representative and dealer organizations
which have over 100 sales people focused on the sale of snow removal vehicles,
principally to airports, but also to municipalities, counties and other
governmental entities.
Defense Segment. Substantially all domestic defense products are sold
directly to principal branches of the DoD. The Company maintains a liaison
office in Washington, D.C. to represent its interests with the Pentagon,
Congress and the offices of the Executive Branch. The Company also sells and
services defense products to foreign governments directly through four
international sales offices, through dealers, consultants and representatives,
and through the United States Foreign Military Sales ("FMS") program. The DoD
has begun to rely on industry for support and sustainability of its vehicles
which has opened up new opportunities for maintenance, service and contract
support to the U.S. Army and U.S. Marine Corps.
The Company maintains a marketing staff of four individuals that regularly
meets with all branches of the Armed Services, Reserves and National Guard and
with representatives of key military bases to determine their vehicle
requirements and identify specialty truck variants and apparatus required to
fulfill their missions.
In addition to marketing its current truck offerings and competing for new
contracts in the medium- and light-payload segments, 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 twelve manufacturing
facilities. Employee involvement is encouraged to improve production processes
and product quality. In order to reduce production costs, the Company maintains
a continuing emphasis on the development of proprietary components,
self-sufficiency in fabrication, just-in-time inventory management, improvement
in production flows, interchangeability and simplification of components among
product lines, creation of jigs and fixtures to ensure repeatability of quality
processes, utilization of robotics, and performance measurement to assure
progress toward cost reduction targets. The Company also employs a team of
industrial engineers that travel to all plants to study and streamline
workflows.
The Company intends to continue to upgrade its manufacturing capabilities
by adopting best practices across its manufacturing facilities, relocating
manufacturing activities to the most efficient facility, investing in further
fixturing and robotics, re-engineering manufacturing processes and adopting lean
manufacturing management practices across all facilities.
The Company is drawing upon its recent experience with the Pierce
acquisition in integrating the McNeilus manufacturing facilities. Within the
first year following the Pierce acquisition, the Company consolidated three
Pierce manufacturing facilities down to two while increasing Pierce's capacity
by improving product flow. In addition, among other things, the Company reduced
the number of operating shifts at the Pierce paint plant from three to one to
substantially reduce utility costs, implemented indexing of production lines and
relocated chassis frame build-up to Oshkosh to improve production efficiencies,
and eliminated storage rooms to relocate inventory to point of use thereby
eliminating duplicate material handling. Likewise, at McNeilus, the Company has
installed seven additional robots and re-arranged weld and mount activities. In
the summer of 1999, the Company began construction of a 100,000 square foot,
$8.3 million expansion at its Dodge Center, Minnesota facility, which expands
paint capacity and doubles refuse body manufacturing capacity. The primary
purpose of the expansion is to construct two moving assembly lines with robotic
welders to significantly reduce the manufacturing costs of refuse bodies.
In 1994, 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
9
established and follows a rigorous set of requirements aimed at achieving
customer satisfaction by preventing nonconformity in design, development,
production, installation and servicing of products. Employees at all levels of
the Company are encouraged to understand customer and supplier requirements,
measure performance, develop systems and procedures to prevent nonconformance
with requirements and produce continuous improvement in all work processes.
Oshkosh achieved ISO 9001 certification in 1995 and Pierce achieved ISO 9001
certification in 1998. The Company is evaluating whether to pursue ISO 9001
certification for McNeilus. Although management does not consider such
certification essential for McNeilus' domestic markets, the Company may conclude
it is valuable in marketing to certain international customers.
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 51 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 markets, 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 1999, 1998 and 1997, the Company incurred engineering,
research and development expenditures of $10.9 million, $9.7 million and $7.8
million, respectively, portions of which were recoverable from customers,
principally the U.S. government.
Competition
The Company operates in highly competitive industries. 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 markets, 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 in the refuse truck body market include
The Heil Company (a subsidiary of Dover Corporation), Leach Company and McClain
E-Z Pack, Inc. Principal competitors of McNeilus and Oshkosh in concrete mixer
markets include Advance Mixer, Inc., London Machinery, Inc. and T.L. Smith
Machine Co., Inc. Oshkosh's principal competitor in the airport snow removal
market is Stewart & Stevenson Services, Inc. Pierce's principal competitors in
the fire apparatus market include Emergency One, Inc. (a subsidiary of Federal
Signal Corporation), Kovatch Mobile Equipment Corp., and numerous small,
regional manufacturers. Oshkosh's principal competitor for aircraft rescue and
firefighting sales is Emergency One, Inc. Oshkosh's principal competitors for
DoD contracts include AM General Corporation and Stewart & Stevenson Services,
Inc. The Company also faces competition from its competitors for acquisition
opportunities.
Several of the Company's competitors have greater financial, marketing,
manufacturing and distribution resources than the Company. There can be no
assurance that the Company's products will continue to compete successfully with
the products of competitors or that the Company will be able to retain its
customer base or to improve or maintain its profit margins on sales to its
customers, all of which could materially adversely affect the Company's
financial condition, profitability and cash flows.
10
Customers and Backlog
Sales to the DoD comprised approximately 19% of the Company's net sales for
fiscal 1999. 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, 1999 was $486.5 million compared to
$377.5 million at September 30, 1998. Commercial backlogs increased by $39.0
million to $122.3 million at September 30, 1999 compared to the prior year. Fire
and emergency backlogs increased by $16.6 million to $200.3 million at September
30, 1999 compared to the prior year. Backlog related to DoD contracts decreased
by $53.4 million to $163.9 million at September 30, 1999 compared to September
30, 1998 with approximately $46.6 million due to the multi-year MTVR contract
awarded in December 1998. Approximately 6% of the September 30, 1999 backlog is
not expected to be filled in fiscal 2000.
Reported backlog excludes purchase options and announced orders for which
definitive contracts have not been executed. Additionally, backlog excludes
unfunded portions of DoD 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 DoD
versus its sales to other customers.
Government Contracts
Approximately 19% of the Company's net sales for fiscal 1999 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 and the availability of funds.
The Company's sales into defense truck markets are substantially dependent
upon periodic awards of new contracts and the purchase of base vehicle
quantities and the exercise of options under existing contracts. The Company's
existing contracts with the DoD may be terminated at any time for the
convenience of the government. Upon such termination, the Company would
generally be entitled to reimbursement of its incurred costs and, in general, to
payment of a reasonable profit for work actually performed. Contractually under
the Company's MTVR contract, the Company is entitled to $11 million in program
year two and $5 million in program year three if the contract is terminated for
the convenience of the government.
Under firm fixed-price contracts with the government, the price paid to the
Company is generally not subject to adjustment to reflect the Company's actual
costs, except costs incurred as a result of contract changes ordered by the
government. The Company generally attempts to negotiate with the government the
amount of increased compensation to which the Company is entitled for
government-ordered changes that result in higher costs. If the Company is unable
to negotiate a satisfactory agreement to provide such increased compensation,
then the Company may file an appeal with the Armed Services Board of Contract
Appeals or the U.S. Claims Court. The Company has no such appeals pending. The
Company seeks to mitigate risks with respect to fixed price contracts by
executing firm fixed price contracts with qualified suppliers for the duration
of the Company's contracts.
The Company, as a U.S. government contractor, is subject to financial
audits and other reviews by the U.S. government of performance of, and the
accounting and general practices relating to, U.S. government contracts, and
like most large government contractors, the Company is audited and reviewed on a
continual basis. Costs and prices under such contracts may be subject to
adjustment based upon the results of such audits and reviews. Additionally, such
audits and reviews can and have led to civil, criminal or administrative
proceedings. Such proceedings could involve claims by the government for fines,
penalties, compensatory and treble damages, restitution and/or forfeitures.
Under government regulations, a company or one or more of its subsidiaries can
also be suspended or debarred from government contracts, or lose its export
privileges based on the results of such proceedings. The Company believes, based
on all available information, that the outcome of all such audits, reviews and
proceedings will not have a material adverse effect on its consolidated
financial condition or results of operations.
Suppliers
The Company is highly dependent on its suppliers and subcontractors in
order to meet commitments to its customers, and many major components are
procured or subcontracted on a sole-source basis with a number of domestic and
foreign companies. Through its reliance on this supply network for the purchase
of certain components, the Company is able to avoid many of the preproduction
and fixed costs associated with the manufacture of those components. The Company
maintains an extensive qualification, on-site inspection and assistance and
performance measurement system to control risks associated with such reliance on
suppliers. The
11
Company occasionally experiences problems with supplier and subcontractor
performance and must identify alternate sources of supply and/or address related
warranty claims from customers.
While the Company purchases many costly components such as engines,
transmissions and axles, it manufactures certain proprietary components that are
deemed material to each of the Company's segments. These components include
front drive and steer axles, transfer cases, cabs, the ALL-STEER electronic
all-wheel steering system, independent suspension, the Sky-Arm articulating
aerial ladder, the McNeilus Auto Reach Arm, the Hercules compressed air foam
systems, 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 in excess of 80 active
domestic and 50 foreign patents. The Company believes patents for all-wheel
steer and independent suspension systems, which have remaining lives of 9 to 14
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. See
Legal Proceedings.
The Company holds trademarks for "Oshkosh," "Pierce" and "McNeilus." These
trademarks are considered to be important to the future success of the Company's
business.
Employees
As of November 30, 1999, the Company had approximately 4,100 employees, of
which approximately 1,300, 1,400, 1,100, 100 and 200 employees are located at
its principal facilities in Oshkosh, Wisconsin, Appleton, Wisconsin, Dodge
Center, Minnesota, Bradenton, Florida and Kewaunee, Wisconsin, respectively.
Production workers totaling approximately 800 employees at the Company's Oshkosh
facilities are represented by the United Auto Workers union. The Company's
five-year contract with the United Auto Workers union extends through September
30, 2001. The Company believes its relationship with employees is satisfactory.
Industry Segments
Financial information concerning the Company's industry segments is
included in Note 13 to the Consolidated Financial Statements contained in the
Company's Annual Report to Shareholders for the fiscal year ended September 30,
1999 and such information is incorporated herein by reference.
Foreign and Domestic Operations and Export Sales
Financial information concerning the Company's foreign and domestic
operations and export sales is included in Note 13 to the Consolidated Financial
Statements contained in the Company's Annual Report to Shareholders for the
fiscal year ended September 30, 1999 and such information is incorporated herein
by reference.
12
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, 1999, the Company operated in twelve 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)....... 688,000 Defense Trucks; Front-Discharge Mixers; Snow
Removal Vehicles; ARFF Vehicles
Appleton, Wisconsin(2)...... 589,000 19,000 Fire Apparatus
Dodge Center, Minnesota(1).. 612,000 Rear-Discharge Mixers; Refuse Truck Bodies
Portable Batch Plants
Bradenton, Florida(1)....... 287,000 Fire Apparatus; Defense Trucks and Truck
Bodies
Kewaunee, Wisconsin(1)...... 175,000 Aerial Devices and Heavy Steel Fabrication
Riceville, Iowa(1).......... 108,000 Components for Rear-Discharge Mixers and
Refuse Truck Bodies
Kensett, Iowa(1)............ 65,000 Not currently in use
McIntire, Iowa(1)........... 28,000 Components for Rear-Discharge Mixers and
Refuse Truck Bodies
Weyauwega, Wisconsin(1)..... 28,000 Refurbished Fire Apparatus
Ontario, California(1)...... 23,000 Refurbished Fire Apparatus
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 fifteen sales and service centers in the
United States. The Company owns such facilities in Colton, California; Commerce
City, Colorado; Villa Rica, Georgia; Lithia Springs, Georgia; Hutchins, Texas;
Morgantown, Pennsylvania; Gahanna, Ohio; Dodge Center, Minnesota; Bradenton,
Florida; and Oshkosh, Wisconsin. The Company leases such facilities in Milpitas,
California; Tacoma, Washington; Salt Lake City, Utah; Aurora, Illinois; and East
Granby, Connecticut. These facilities range in size from approximately 3,000
square feet to approximately 46,000 square feet and are used primarily for sales
and service of concrete mixers and refuse bodies.
The Company's facilities are pledged as collateral under the terms of the
Company's Senior Credit Facility.
Item 3. LEGAL PROCEEDINGS
-----------------
The Company was engaged in litigation against Super Steel Products
Corporation ("SSPC"), the Company's former supplier of mixer systems for
forward-discharge concrete mixer trucks under a long-term supply contract. SSPC
sued the Company in state court claiming the Company breached the contract. On
July 26, 1996, a jury returned a verdict for SSPC awarding damages totaling $4.5
million. On October 10, 1996, the state court judge overturned the verdict
against the Company, granted judgment for the Company on its counterclaim, and
ordered a new trial for damages on the Company's counterclaim. Both SSPC and the
Company appealed the state court judge's decision. On December 8, 1998, the
Wisconsin Court of Appeals ordered a state court judge to reinstate the jury
verdict against the Company awarding damages totaling approximately $4.5 million
plus interest to SSPC. On April 6, 1999, the Company's petition for review of
this decision by the Wisconsin Supreme Court was denied. On April 12, 1999, the
Company petitioned the state court judge to act on the Company's previous motion
for a retrial. The petition was denied on June 18, 1999 and the state court
directed that judgment be entered. In lieu of further appeals, the Company paid
$5.75 million on July 27, 1999 in final settlement of the matter.
McNeilus is a defendant in litigation, which was commenced in 1993 prior to
the acquisition of McNeilus by the Company, in the U.S. District Court for the
Northern District of Alabama. The litigation, which was brought by The Heil Co.
("Heil"), a McNeilus competitor, seeks damages and claims that McNeilus
infringed certain aspects of its patent for refuse packer design. The patent
referenced in the matter was allowed by Heil to lapse in 1995. The Company has
denied infringement and asserted that the patent is invalid, both on the basis
of prior art and on a defective application. A trial is scheduled in early
calendar 2000. The Company is vigorously contesting the claims and has
established a reserve for litigation and defense costs.
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
13
solvents at third party disposal and recycling facilities that are licensed by
appropriate governmental agencies. In some instances, these facilities have been
and may be designated by the United States Environmental Protection Agency
("EPA") or a state environmental agency for remediation. Under Comprehensive
Environmental Response, Compensation, and Liability Act (the "Superfund" law)
and similar state laws, each potentially responsible party ("PRP") that
contributed hazardous substances may be jointly and severally liable for the
costs associated with cleaning up the site. Typically, PRPs negotiate a
resolution with the EPA and/or the state environmental agencies. PRPs also
negotiate with each other regarding allocation of the cleanup cost.
As to one such Superfund site, Pierce is one of 431 PRPs participating in
the costs of addressing the site and has been assigned an allocation share of
approximately 0.04%. Currently, a report of the remedial
investigation/feasibility study is being completed, and as such, an estimate for
the total cost of the remediation of this site has not been made to date.
However, based on estimates and the assigned allocations, the Company believes
its liability at the site will not be material and its share is adequately
covered through reserves established by the Company at September 30, 1999.
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, 1999.
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 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, 1999.
EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------
The following table sets forth certain information as of November 30, 1999
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........ 46 President and Chief Executive Officer
Timothy M. Dempsey.... 59 Executive Vice President, General Counsel and
Secretary
Paul C. Hollowell..... 58 Executive Vice President and President, Defense
Business
Daniel J. Lanzdorf.... 51 Executive Vice President and President, McNeilus
Companies, Inc.
John W. Randjelovic... 55 Executive Vice President and President, Pierce
Manufacturing Inc.
Charles L. Szews...... 43 Executive Vice President and Chief Financial
Officer
Matthew J. Zolnowski.. 46 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.
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.
14
Paul C. Hollowell. Mr. Hollowell joined the Company in April 1989 as Vice
President-Defense Products and assumed his present position in February 1994.
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 prior to assuming his current position in
September 1998.
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 and assumed his present position in October 1997.
Charles L. Szews. Mr. Szews joined the Company in March 1996 as Vice
President and Chief Financial Officer and assumed his present position in
October 1997. Mr. Szews was previously employed by Fort Howard Corporation, a
manufacturer of tissue products, from June 1988 until March 1996 in various
positions, including Vice President and Controller from September 1994 until
March 1996.
Matthew J. Zolnowski. Mr. Zolnowski joined the Company as Vice
President-Human Resources in January 1992 and assumed his present position in
September 1998.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.
--------------------------------------------------------------------
The information under the captions "Financial Highlights" and
"Dividends and Common Stock Price" and Notes 7 and 11 to the Consolidated
Financial Statements contained in the Company's Annual Report to Shareholders
for the fiscal year ended September 30, 1999, 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 December 23, 1999,
the Company has repurchased 692,302 shares under this program at a cost of $6.6
million.
Item 6. SELECTED FINANCIAL DATA.
-----------------------
The information under the caption "Financial Highlights" contained in
the Company's Annual Report to Shareholders for the fiscal year ended September
30, 1999, is hereby incorporated by reference in answer to this item.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL
------------------------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS.
-----------------------------------
The information under the caption "Management's Discussion and
Analysis" contained in the Company's Annual Report to Shareholders for the
fiscal year ended September 30, 1999, is hereby incorporated by reference in
answer to this item.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
The information under the caption "Management's Discussion and
Analysis - Financial Market Risk" contained in the Company's Annual Report to
Shareholders for the fiscal year ended September 30, 1999, is hereby
incorporated by reference in answer to this item.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
-------------------------------------------
The financial statements set forth in the Company's Annual Report to
Shareholders for the fiscal year ended September 30, 1999, are hereby
incorporated by reference in answer to this item. Data regarding quarterly
results of operations included in Note 11 to the Consolidated Financial
Statements contained in the Company's Annual Report to Shareholders for the
fiscal year ended September 30, 1999, is hereby incorporated by reference.
15
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 under the captions "Governance of the Company - the
Board of Directors" and "Stock Ownership - Compliance with Section 16(a)
Beneficial Ownership Reporting" of the Company's definitive proxy statement for
the annual meeting of shareholders on January 31, 2000, as 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 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 January 31, 2000, as 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 under the caption "Stock Ownership - Stock Ownership
of Directors, Executive Officers and Other Large Shareholders" contained in the
Company's definitive proxy statement for the annual meeting of shareholders on
January 31, 2000, as filed with the Securities and Exchange Commission, is
hereby incorporated by reference in answer to this item.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
----------------------------------------------
None.
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, 1999, are
incorporated by reference in Item 8:
Report of Ernst & Young LLP, Independent Auditors
Consolidated Statements of Income for the years ended September 30,
1999, 1998 and 1997
Consolidated Balance Sheets at September 30, 1999 and 1998
Consolidated Statements of Shareholders' Equity for the years ended
September 30, 1999, 1998 and 1997.
Consolidated Statements of Cash Flows for the years ended September
30, 1999, 1998 and 1997
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.
16
3. Exhibits:
3.1 Restated Articles of Incorporation of Oshkosh Truck
Corporation (incorporated by reference to Exhibit 3.1 to the
Company's Annual Report on Form 10-K for the year ended
September 30, 1997 (File No. 0-13886)).
3.2 By-Laws of Oshkosh Truck Corporation, as amended
(incorporated by reference to Exhibit 3.2 to the Company's
Registration Statement on Form S-4 (Reg. No. 333-47931)).
4.1 Credit Agreement dated February 26, 1998, among Oshkosh
Truck Corporation, Bank of America National Trust and
Savings Association, as Agent and as Swing Line Lender, and
certain other financial institutions (incorporated by
reference to Exhibit 4.1 to the Company's Current Report on
Form 8-K dated February 26, 1998 (File No. 0-13886)).
4.2 Indenture dated February 26, 1998, among Oshkosh Truck
Corporation, the Subsidiary Guarantors and Firstar Trust
Company (incorporated by reference to Exhibit 4.2 to the
Company's Current Report on Form 8-K dated February 26, 1998
(File No. 0-13886)).
4.3 Form of 8 3/4% Senior Subordinated Note due 2008
(incorporated by reference to Exhibit 4.3 to the Company's
Registration Statement on Form S-4 (Reg. No. 333-47931)).
4.4 Form of Note Guarantee (incorporated by reference to Exhibit
4.4 to the Company's Registration Statement on Form S-4
(Reg. No. 333-47931)).
4.5 Rights Agreement, dated as of February 1, 1999, between
Oshkosh Truck Corporation and Firstar Bank, N.A.
(incorporated by reference to Exhibit 4.1 to the Company's
Registration Statement on Form 8-A, dated as of February 1,
1999 (File No. 013886)).
10.1 1990 Incentive Stock Plan for Key Employees, as amended
(incorporated by reference to Exhibit 10.1 to the Company's
Annual Report on Form 10-K for the year ended September 30,
1998 (File No. 0-13886)).*
10.2 1994 Long-Term Incentive Compensation Plan, dated March 29,
1994 (incorporated by reference to Exhibit 10.12 to the
Company's Annual Report on Form 10-K for the year ended
September 30, 1994) (File No. 0-13886)).*
10.3 Form of Key Employees Employment and Severance Agreement
with Messrs. R.G. Bohn, T.M. Dempsey, P.C. Hollowell, C.L.
Szews, and M.J. Zolnowski (incorporated by reference to
Exhibit 10.13 to the Company's Annual Report on Form 10-K
for the year ended September 30, 1994 (File No. 0-13886)).*
10.4 Form of Oshkosh Truck Corporation 1990 Incentive Stock Plan,
as amended, Nonqualified Stock Option Agreement
(incorporated by reference to Exhibit 4.2 to the Company's
Registration Statement on Form S-8 (Reg. No. 33-6287)).*
10.5 Form of Oshkosh Truck Corporation 1990 Incentive Stock Plan,
as amended, Nonqualified Director Stock Option Agreement
(incorporated by reference to Exhibit 4.3 to the Company's
Registration Statement on Form S-8 (Reg. No. 33-6287)).*
10.6 Form of 1994 Long-Term Incentive Compensation Plan Award
Agreement (incorporated by reference to Exhibit 10.16 to the
Company's Annual Report on Form 10-K for the year ended
September 30, 1995 (File No. 0-13886)).*
10.7 Stock Purchase Agreement, dated April 26, 1996, among
Oshkosh Truck Corporation, J. Peter Mosling, Jr. and Stephen
P. Mosling (incorporated by reference to Exhibit 10.17 to
the Company's Annual Report on Form 10-K for the year ended
September 30, 1996 (File No. 0-13886)).
10.8 Employment Agreement, dated as of October 15, 1998, between
Oshkosh Truck Corporation and Robert G. Bohn (incorporated
by reference to Exhibit 10.9 to the Company's Annual Report
on Form 10-K for the year ended September 30, 1998 (File No.
0-13886)).*
10.9 Employment Agreement, dated April 24, 1998, between McNeilus
Companies, Inc. and Daniel J. Lanzdorf.*
17
11. Computation of per share earnings (contained in Note 1 of
"Notes to Consolidated Financial Statements" of the
Company's Annual Report to Shareholders for the fiscal year
ended September 30, 1999).
13. 1999 Annual Report to Shareholders, to the extent
incorporated herein by reference.
21. Subsidiaries of Registrant.
23. Consent of Ernst & Young LLP
27. Financial Data Schedule
*Denotes a management contract or compensatory plan or arrangement.
(b) The Company was not required to file a report on Form 8-K during
the quarter ended September 30, 1999.
18
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 27, 1999 By /S/ Robert G. Bohn
---------------------------------------------------
Robert G. Bohn, President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities on the dates indicated.
December 27, 1999 /S/ R.G. Bohn
-----------------------------------------------------
R.G. Bohn, President and Chief Executive Officer
(Principal Executive Officer)
December 27, 1999 /S/ C.L. Szews
-----------------------------------------------------
C.L. Szews, Executive Vice President and Chief
Financial Officer
(Principal Financial Officer)
December 27, 1999 /S/ T.J. Polnaszek
-----------------------------------------------------
T.J. Polnaszek, Vice President and Controller
(Principal Accounting Officer)
December 27, 1999 /S/ J.W. Andersen
-----------------------------------------------------
J.W. Andersen, Director
December 27, 1999 /S/ D.T. Carroll
-----------------------------------------------------
D.T. Carroll, Chairman
December 27, 1999 /S/ General F.M. Franks, Jr.
-----------------------------------------------------
General F.M. Franks, Jr., Director
December 27, 1999 /S/ M.W. Grebe
-----------------------------------------------------
M.W. Grebe, Director
December 27, 1999 /S/ K.J. Hempel
-----------------------------------------------------
K.J. Hempel, Director
December 27, 1999 /S/ S.P. Mosling
-----------------------------------------------------
S.P. Mosling, Director
December 27, 1999 /S/ J.P. Mosling, Jr.
-----------------------------------------------------
J.P. Mosling, Jr., Director
December 27, 1999 /S/ R.G. Sim
-----------------------------------------------------
R.G. Sim, Director
19
SCHEDULE II
OSHKOSH TRUCK CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
Years Ended September 30, 1999, 1998 and 1997
(In Thousands)
Balance at Additions
Beginning of Purchase of Charged to Balance at
Classification Year McNeilus Expense Reductions* End of Year
-------------- ---- -------- ------- ---------- -----------
Receivables -
Allowance for doubtful accounts:
1997 $1,066 --- $881 $23 $1,970
====== === ==== ==== ======
1998 $1,970 $173 $124 $(199) $2,068
====== ==== ==== ====== ======
1999 $2,068 --- $201 $(65) $2,204
====== === ==== ===== ======
* Represents amounts written off to the reserve, net of recoveries.
20
INDEX TO EXHIBITS
- -----------------
3. Exhibits:
3.1 Restated Articles of Incorporation of Oshkosh Truck Corporation
(incorporated by reference to Exhibit 3.1 to the Company's Annual
Report on Form 10-K for the year ended September 30, 1997 (File
No. 0-13886)).
3.2 By-Laws of Oshkosh Truck Corporation, as amended (incorporated by
reference to Exhibit 3.2 to the Company's Registration Statement
on Form S-4 (Reg. No. 333-47931)).
4.1 Credit Agreement dated February 26, 1998, among Oshkosh Truck
Corporation, Bank of America National Trust and Savings
Association, as Agent and as Swing Line Lender, and certain other
financial institutions (incorporated by reference to Exhibit 4.1
to the Company's Current Report on Form 8-K dated February 26,
1998 (File No. 0-13886)).
4.2 Indenture dated February 26, 1998, among Oshkosh Truck
Corporation, the Subsidiary Guarantors and Firstar Trust Company
(incorporated by reference to Exhibit 4.2 to the Company's
Current Report on Form 8-K dated February 26, 1998 (File No.
0-13886)).
4.3 Form of 8 3/4% Senior Subordinated Note due 2008 (incorporated by
reference to Exhibit 4.3 to the Company's Registration Statement
on Form S-4 (Reg. No. 333-47931)).
4.4 Form of Note Guarantee (incorporated by reference to Exhibit 4.4
to the Company's Registration Statement on Form S-4 (Reg. No.
333-47931)).
4.5 Rights Agreement, dated as of February 1, 1999, between Oshkosh
Truck Corporation and Firstar Bank, N.A. (incorporated by
reference to Exhibit 4.1 to the Company's Registration Statement
on Form 8-A, dated as of February 1, 1999 (File No. 013886)).
10.1 1990 Incentive Stock Plan for Key Employees, as amended
(incorporated by reference to Exhibit 10.1 to the Company's
Annual Report on Form 10-K for the year ended September 30, 1998
(File No. 0-13886)).*
10.2 1994 Long-Term Incentive Compensation Plan, dated March 29, 1994
(incorporated by reference to Exhibit 10.12 to the Company's
Annual Report on Form 10-K for the year ended September 30, 1994)
(File No. 0-13886)).*
10.3 Form of Key Employees Employment and Severance Agreement with
Messrs. R.G. Bohn, T.M. Dempsey, P.C. Hollowell, C.L. Szews, and
M.J. Zolnowski (incorporated by reference to Exhibit 10.13 to the
Company's Annual Report on Form 10-K for the year ended September
30, 1994 (File No. 0-13886)).*
10.4 Form of Oshkosh Truck Corporation 1990 Incentive Stock Plan, as
amended, Nonqualified Stock Option Agreement (incorporated by
reference to Exhibit 4.2 to the Company's Registration Statement
on Form S-8 (Reg. No. 33-6287)).*
10.5 Form of Oshkosh Truck Corporation 1990 Incentive Stock Plan, as
amended, Nonqualified Director Stock Option Agreement
(incorporated by reference to Exhibit 4.3 to the Company's
Registration Statement on Form S-8 (Reg. No. 33-6287)).*
10.6 Form of 1994 Long-Term Incentive Compensation Plan Award
Agreement (incorporated by reference to Exhibit 10.16 to the
Company's Annual Report on Form 10-K for the year ended September
30, 1995 (File No. 0-13886)).*
10.7 Stock Purchase Agreement, dated April 26, 1996, among Oshkosh
Truck Corporation, J. Peter Mosling, Jr. and Stephen P. Mosling
(incorporated by reference to Exhibit 10.17 to the Company's
Annual Report on Form 10-K for the year ended September 30, 1996
(File No. 0-13886)).
10.8 Employment Agreement, dated as of October 15, 1998, between
Oshkosh Truck Corporation and Robert G. Bohn (incorporated by
reference to Exhibit 10.9 to the Company's Annual Report on Form
10-K for the year ended September 30, 1998 (File No. 0-13886)).*
21
10.9 Employment Agreement, dated April 24, 1998, between McNeilus
Companies, Inc. and Daniel J. Lanzdorf.*
11. Computation of per share earnings (contained in Note 1 of "Notes
to Consolidated Financial Statements" of the Company's Annual
Report to Shareholders for the fiscal year ended September 30,
1999).
13. 1999 Annual Report to Shareholders, to the extent incorporated
herein by reference.
21. Subsidiaries of Registrant.
23. Consent of Ernst & Young LLP
27. Financial Data Schedule
*Denotes a management contract or compensatory plan or arrangement.
22