<PAGE>   1


                                    FORM 10-K

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
         (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 No. 0-7770

                            MCCLAIN INDUSTRIES, INC.
             (Exact name of Registrant as specified in its charter)

STATE OF MICHIGAN                                                     38-1867649
State of Incorporation                                  I.R.S. Employer I.D. No.
                               6200 ELMRIDGE ROAD
                        STERLING HEIGHTS, MICHIGAN 48310
                                 (810) 264-3611
          (Address of principal executive offices and telephone number)

           Securities Registered Pursuant to Section 12(b) of the Act:
                                      NONE

           Securities Registered Pursuant to Section 12(g) of the Act:
                           COMMON STOCK, NO PAR VALUE


         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, as amended, 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.

                                      [ ]

         As of December 7, 1999, the aggregate market value of the Registrant's
voting stock held by nonaffiliates of the Registrant was $26,430,853 determined
in accordance with the highest price at which the stock was sold on such date as
reported by the Nasdaq National Market.

         As of December 7, 1999, there were 4,647,183 shares of the Registrant's
common stock issued and outstanding.

                       The Exhibit Index Begins on Page 48



<PAGE>   2

                                     PART I

ITEM 1.  BUSINESS

GENERAL

         McClain Industries, Inc., a Michigan corporation ("McClain"), together
with its subsidiaries (the "Company"), is one of the nation's leading
manufacturers of a diversified line of dump truck bodies and solid waste
handling equipment. Dump truck bodies are assemblies attached to truck frames
and used to carry and dump solid materials such as dirt or gravel. Solid waste
handling equipment is used for the temporary storage, transportation and
compaction of residential, commercial and industrial waste and recycling
materials. The Company also sells truck chassis at the retail level. In
addition, the Company operates a steel tube mill to manufacture some of its
steel tubing needs. The Company also provides coiled steel cutting and
warehousing services for its own manufacturing operations and, on a limited
basis, for sale to third-party customers.

BACKGROUND

         McClain-Michigan was incorporated in 1968 and became a publicly-traded
company in 1973. On January 1, 1999, the Company restructured its subsidiaries.
Currently they are: McClain E-Z Pack, Inc. ("E-Z Pack"); McClain Galion, Inc.
("Galion", formerly Galion Dump Bodies, Inc.); McClain Southland Company
("Southland", formerly, McClain Group Sales of Florida, Inc.); Shelby Steel
Processing Co. ("Shelby Steel"); McClain Tube Company (d/b/a Quality Tubing)
("Tube"); McClain Group Leasing, Inc. ("Leasing"); and McClain International
FSC, Inc. ("FSC"). All of these  companies are Michigan corporations, except
Southland, which is a Florida Corporation, and for FSC, which is a Virgin
Islands corporation. Southland is a Distributorship, Leasing is a Lease
Financing Company, and FSC is an International Sales Corporation.

         The Company's executive offices are located at 6200 Elmridge Road,
Sterling Heights, Michigan 48310 and its telephone number is (810) 264-3611.

PRODUCTS

         The Company manufactures and markets dump truck bodies and four solid
waste handling equipment product lines: (1) containers; (2) compactors and
baling equipment; (3) garbage and recycling truck bodies; and (4) transfer
trailers. The Company also markets truck chassis. Sales of dump truck bodies
accounted for approximately 14%, sales of solid waste handling equipment
accounted for approximately 67%, and truck chassis accounted for approximately
19% of the Company's consolidated net sales for the fiscal year ended September
30, 1999.


<PAGE>   3


Dump Truck Bodies and Hoists

         Galion manufactures steel dump truck bodies varying in capacity from
two to twenty-five cubic yards at its Winesburg, Ohio facility. E-Z Pack, under
license from Galion, also manufactures dump truck bodies at its Macon, Georgia
and Oklahoma City, Oklahoma facilities. Dump truck bodies are assemblies which
are attached to a truck's frame or chassis, to allow the truck to carry and
dump solid materials such as dirt, gravel or waste materials. Hoists are the
hydraulic lift mechanisms used to tilt the dump body. Trucks with a dump body
and hoist are commonly seen in use as "dump trucks". The products manufactured
by Galion Dump Bodies are sold under the registered trademark "Galion". The
trademark registration, if not renewed, will expire in the year 2001.

Containers

         Detachable Roll-Off Containers and Roll-Off Hoists. E-Z Pack
manufactures several types of detachable roll-off containers and roll-off hoists
at the Company's facilities in Sterling Heights, Michigan, Macon, Georgia,
Demopolis, Alabama, and Oklahoma City, Oklahoma. Detachable roll-off containers
vary in capacity from ten to forty-five cubic yards and are transported with
their contents to recycling centers, incinerators or landfill sites. Roll-off
hoists consist of frames mounted on truck chassis which are hydraulically
operated to load, transport and dump roll-off containers. Roll-off hoists are
advertised and sold under the trade name "MAGNA-HOIST."

         Intermodal, Water-Tight and Sludge Containers. The Company manufactures
various types of intermodal, water-tight and sludge containers at the Company's
facilities in Sterling Heights, Michigan, Macon, Georgia, Demopolis, Alabama,
and Oklahoma City, Oklahoma. Intermodal containers vary in capacity from
nineteen cubic yards to thirty-five cubic yards and are designed for highway,
railroad and marine movement of waste products. Water-tight containers vary in
capacity from ten to forty cubic yards and are designed for highway movement
of wet waste. Sludge containers vary in capacity from ten to thirty-five cubic
yards and are designed for highway movement of slurry type waste products.

Compactors and Baling Equipment

         The Company manufactures compactors at its Sterling Heights, Michigan
facility. Compactors consist of a compaction unit and separate power source.
Compaction units force deposited refuse through an opening at one end of the
unit into a roll-off body coupled to the compaction unit. When the roll-off body
is filled, the compactor is detached and the roll-off body is removed for
dumping. The Company also manufactures unitized compaction systems consisting of
a compactor and roll-off container manufactured as a single unit. Compactors are
sold under the trade name "MAGNUM" and unitized compactor systems are sold
under the trade name "OCTAMAG". E-Z Pack manufactures, at the Winesburg, Ohio
facility, 24 models of balers which compact plastic and paper products,
primarily cardboard. Balers are either vertical downstroke or closed door
horizontal balers.

Garbage and Recycling Truck Bodies

         E-Z Pack manufactures at its Galion, Ohio facility traditional garbage
truck bodies comprised of front, rear and side loading truck bodies and a
recycling truck body used in solid waste handling and disposal. The front
loading truck bodies vary in


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capacity from thirty-two cubic yards to forty-three cubic yards, the rear
loading truck bodies vary in capacity from eighteen cubic yards to thirty-one
cubic yards, and the side loading truck bodies vary in capacity from twenty-nine
cubic yards to thirty-nine cubic yards. The recycling truck bodies vary in
capacity from thirty cubic yards to forty cubic yards. The products manufactured
by E-Z Pack are sold under the registered trademark "E-Z Pack". Within this
line, E-Z Pack sells its rear loading truck bodies under the trademarks
"Goliath", "Goliath II", and "Apollo", and its front loading truck bodies under
the trademark "Hercules". The side loading truck bodies and the recycling truck
bodies are principally identified by the E-Z Pack name only. These trademarks
will expire in the year 2001, unless renewed. The Company has several patents
covering its recycling truck.

Transfer Trailers

         E-Z Pack manufactures at its Galion, Ohio facility, various types of
steel and aluminum transfer trailers, including open-top walking floor trailers,
closed-top walking floor trailers, ejection trailers and open-top tipper
trailers, varying in capacity from thirty cubic yards to 124 cubic yards.
Transfer trailers are used to transport compacted solid waste from transfer
stations to landfills or incinerators.

Truck Chassis

         Truck chassis are purchased and combined with either a roll-off hoist,
garbage truck body or dump body for sale as a road ready package. This program
gives the Company the opportunity to provide a more complete product to its
customers and gives it the ability to react quickly to unexpected customer
needs. Since the trucks are purchased rather than manufactured by the Company,
margins on sales of these package units lower than those generated from the
products manufactured by the Company are expected.

Leasing

         Leasing provides the Company's customers with financing options through
finance type leases including TRAC (Terminal Rental Adjustment Clause) leases.

CUSTOMERS AND DISTRIBUTION

         For the fiscal year ended September 30, 1999, the Company's
consolidated net sales were divided approximately 40% to distributors, 53% to
solid waste handling companies, and 7% to other entities.

         During the fiscal years ended September 30, 1999, 1998 and 1997,
approximately 23.1%, 28.8% and 13.5%, respectively, of the Company's total sales
were made to Waste Management, Inc. The Company has no contracts with any of its
customers and, accordingly, sells its products pursuant to purchase orders
placed from time to time in the ordinary course of business. The Company
delivers its products to its customers through the use of its own trucks or
common carriers.

         The Company obtains its municipal as well as certain private contracts
through the process of competitive bidding. There can be no assurance that
municipalities or others will continue to solicit bids, or if they do, that the
Company will continue to be successful in having its bids accepted.
Additionally, inherent in the competitive bidding process is the risk that if a
bid is submitted and a contract is subsequently awarded,

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actual performance costs may exceed the projected costs upon which the submitted
bid or contract price was based.

         Historically, foreign sales have not accounted for a significant
portion of the Company's revenues, The Company anticipates that future foreign
sales will remain steady or increase slightly.

SALES AND MARKETING

         Historically, the Company's products have been marketed by the
Company's executive officers and sales personnel who have worked closely with
customers to solicit orders and to render technical assistance and advice. The
Company's executive officers will continue to devote a significant amount of
time to developing and maintaining continuing relations with the Company's
customers.

         The Company also engages independent distributors and dealers in
various regions throughout the United States and certain foreign countries, for
marketing its products to customers. The Company's dealers are generally
responsible in their respective geographic markets for identifying customers and
soliciting customer orders. As of December 13, 1999, there were approximately
280 authorized Company dealers located in numerous states and 20 authorized
Company dealers, licensees and commissioned district managers in 10 foreign
countries, each of which is independently owned. The Company is dependent on
such dealers for a significant portion of its revenues. These dealers typically
specialize in specific products and areas and, accordingly, have specific
knowledge of and contacts in particular markets. The Company believes that its
dealers have enhanced and will continue to enhance the scope of the Company's
marketing and sales efforts and have, to a certain extent, also enabled the
Company to avoid certain significant costs associated with creating a more
extensive direct sales network.

         The Company advertises its products under trade names and under its
name in trade journals and brochures. Other marketing efforts include articles
in trade publications, attendance at trade shows and presentations by the
Company's personnel at industry trade conferences.

         The Company, through Leasing, also provides both sales-type financing
and operating leases. At September 30, 1999, Leasing held net lease receivables
of approximately $18.8 million.

RAW MATERIALS

         The Company is dependent on third-party suppliers and manufacturers for
the raw materials and a significant portion of the parts it uses in the
manufacture of its products. The major raw materials used by the Company are
steel in sheet, plate, structural and tubular form and aluminum in sheet and
extruded form. The Company purchases its steel, principally in coils, and its
sheet and extruded aluminum from domestic mills, warehouses and importers.
Coiled steel is received by the Company at various manufacturing facilities
where it is then cut, bent, sheared and formed for assembly by welding. Electric
and hydraulic components incorporated into the power units of compactors, balers
and hoists used with dump bodies manufactured by the Company are brand name
items purchased from various sources and assembled by the Company or to their
specifications by outside sources. The assembled products are then painted to
customers' specifications.

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<PAGE>   6

         While the Company attempts to maintain alternative sources for the
Company's raw materials and believes that multiple sources are currently
available for all of the raw materials that it uses, the Company's business is
generally subject to periodic shortages of raw materials which could have an
adverse effect on the Company. The Company currently purchases all of its
hydraulic cylinders from only a few major suppliers. The failure by any of such
suppliers to continue to supply the Company with cylinders on commercially
reasonable terms, or at all, could also have a material adverse effect on the
Company.

         The Company generally has no supply agreements with any of its
suppliers and, accordingly, generally purchases raw materials pursuant to
purchase orders placed from time to time in the ordinary course of business.
Failure or delay by suppliers in supplying necessary raw materials to the
Company could adversely affect the Company's ability to obtain and deliver its
products on a timely and competitive basis. In addition, the Company has
experienced price fluctuations for the raw materials that it purchases,
particularly with respect to steel and aluminum. Any significant price
fluctuations in the future could also have an adverse effect on the Company.

         The Company uses a forecasting and purchasing system to monitor the
quantity and cost of necessary raw materials. Such cost controls allow the
Company to minimize its operating costs by purchasing from the lowest priced
suppliers the appropriate amount of raw materials in light of the Company's
needs. The Company often orders raw materials in amounts in excess of its
anticipated short-term needs in order to take advantage of price discounts
available on large volume purchases of raw materials.

         To reduce its cost of raw materials, the Company has been processing
coiled steel and manufacturing some of its own tubing, rather than purchasing
tubing and processed sheet steel from third parties. The Company believes that
it is the only manufacturer of dump truck bodies and solid waste handling
equipment to process coiled steel and to operate a steel tube mill.

Steel Processing

         Shelby Steel, a wholly-owned subsidiary of the Company, receives coiled
steel and either warehouses or cuts and processes the steel at its River Rouge,
Michigan facility to prescribed specifications. In addition to processing coiled
steel for use by the Company, Shelby Steel also offers steel processing and
warehousing services to third parties. Shelby Steel's ability to warehouse
customers' steel attracts customers such as steel brokers who do not maintain
facilities of their own to warehouse steel. Its steel processing and warehousing
sales are generally limited to customers in the Detroit metropolitan area. Sales
to third parties represented 92.6%, 92.8%, and 91.8% of Shelby Steel's business
and 1.5%, 1.6%, and 1.9% of the Company's consolidated net sales for the fiscal
years ended September 30, 1999, 1998 and 1997, respectively.

Tube Manufacturing

         Tube, a wholly-owned subsidiary of the Company, began operating its
tube manufacturing line in the Company's Kalamazoo facility in mid-1994. The
facility receives coiled steel, slits the coil to proper width and forms it into
square and rectangular tubing. The tubing produced by this facility provides the
Company with approximately 95% of its steel tubing requirements.



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<PAGE>   7

COMPETITION

         The Company faces intense competition in the solid waste handling
equipment and dump truck bodies industries. Certain of the Company's competitors
offer as wide a range of products, have greater market share and financial,
marketing, manufacturing and other resources than the Company. At present, the
Company's order backlogs are approximately four to six weeks. In addition, the
Company believes that several of its competitors have added or are in the
process of adding additional manufacturing capacity, which could reduce order
backlogs and price levels, and consequently adversely affect the Company.
Moreover, the absence of highly sophisticated technology results in a number of
small regional companies entering the container product business periodically
and competing with the Company.

         Although the Company believes that its products are superior to those
of most of its competitors because of the quality and amount of steel used in
its products, consumers generally find the products relatively interchangeable.
Consequently, price, product availability and delivery, design and manufacturing
quality and service are the principal means of competition. The Company believes
that it can continue to compete and further strengthen its competitive position
through proper pricing, marketing and cost-effective distribution of the
Company's products.

         The steel processing industry is also highly competitive, with quality,
price and delivery the principal means of competition. The Company believes that
it will generally continue to maintain its competitive position in the
marketplace with respect to steel processing. Shelby Steel's ability to
warehouse customers' steel attracts customers such as steel brokers who do not
maintain facilities of their own to warehouse steel.

BACKLOG AND INVENTORY

         The Company generally produces solid waste handling equipment and dump
truck bodies pursuant to customer purchase orders. The Company includes in its
backlog only firm product orders, which are subject to termination at will and
rescheduling, without penalty. The Company's backlog was approximately $18.5
million and $17 million at September 30, 1999 and 1998, respectively.
Substantially all of the Company's backlog is delivered within four to six weeks
of the Company's receipt of purchase orders. Due to numerous factors, including
termination of orders, rescheduling, possible change orders and delays, which
affect production and delivery of the Company's products, there can be no
assurance as to if or when cash receipts will be recognized from the Company's
backlog. In addition, year to year comparisons of backlog are not necessarily
indicative of future operating results. Although most of the Company's sales are
based on orders for goods to be manufactured, the Company nevertheless carries
certain amounts of finished goods inventory in order to meet customer delivery
dates. In addition, from time to time, the Company manufactures units in excess
of ordered units to "round out" production runs or to maintain base stock
levels. At September 30, 1999, 1998 and 1997, the Company had inventory of
$63.3 million, $38.9 million and $31.0 million, respectively.

EMPLOYEES

         The Company had approximately 881 employees as of December 13, 1999.
Seventy-Five of the Company's hourly employees are represented by the McClain
Hourly Employees' Union pursuant to a collective bargaining agreement which
expires September 16, 2002. 225 hourly employees of E-Z Pack are represented
by the International Association of Machinists and Aerospace Workers Union
pursuant to a


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collective bargaining agreement which expires June 12, 2000. 57 hourly
employees of E-Z Pack are represented by the International Association of
Machinists and Aerospace Workers Union pursuant to a collective bargaining
agreement which expires November 1, 2002. On February 23, 1995 the National
Labor Relations Board (the "NLRB") conducted an election in response to a
petition filed by the Shopmen's Local Union No. 616 of the International
Association of Bridge, Structural and Ornamental Iron Workers (AFL-CIO) (the
"Union") to represent the hourly employees at E-Z Pack's facility in Macon,
Georgia. The ballots of 11 employees were challenged as ineligible. The
Union filed charges against the Company asserting that it committed various
unfair labor practices which affected the election results and that the
challenged ballots should be counted. On October 17, 1996, the NLRB issued a
Decision, Order and Direction upholding the unfair labor practice charges, and
on November 5, 1996, the NLRB determined that the results of the election were
in favor of the Union. The Company is bargaining with the Union and discussing
the appropriate remedy and possible settlement of all claims with the NLRB.
The Company believes that relations with the hourly employees at its Georgia
facility are generally satisfactory. There have been no work stoppages due to
labor difficulties.

ENVIRONMENTAL

         The Company's operations are subject to extensive federal, state and
local regulation under environmental laws and regulations concerning, among
other things, emissions into the air, discharges into the waters and the
generation, handling, storage, transportation, treatment and disposal of waste
and other materials. Inherent in manufacturing operations and in owning real
estate is the risk of environmental liabilities as a result of both current and
past operations, which cannot be predicted with certainty. The Company has
incurred and will continue to incur costs, on an ongoing basis, associated with
environmental regulatory compliance in its business.

         State and local agencies have become increasingly active in the
environmental area. The increased regulation by multiple agencies can be
expected to increase the Company's future environmental costs. In particular,
properties under federal and state scrutiny frequently result in significant
clean-up costs and litigation expenses related to a party's clean-up obligation.
However, the Company believes that the ever-increasing waste stream and the
continuing initiatives of government authorities relating to environmental and
waste disposal problems, including restrictions on landfill locations and
operations and extensive regulation relating to the disposal of waste, create
significant opportunities for companies in the solid waste handling equipment
industry.


ITEM 2.  PROPERTIES

         In the aggregate, the Company owns or leases approximately 940,200
square feet of real property located in Michigan, Ohio, Georgia, Oklahoma and
Alabama. The Company owns three facilities in Michigan, four facilities in Ohio,
one facility in Georgia, one facility in Oklahoma and one facility in Alabama.
The properties that the Company owns or leases consist of the following:

<TABLE>
<CAPTION>
                                                                                        OWNED                 SQUARE
         LOCATION                                                                     OR LEASED               FOOTAGE
         --------                                                                     ---------               -------
<S>                                                                                  <C>                    <C>
Sterling Heights, Michigan                                                            Owned                    37,000
Sterling Heights, Michigan                                                            Leased                   18,000
</TABLE>


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<TABLE>
<CAPTION>
                                                                                        OWNED                 SQUARE
         LOCATION                                                                     OR LEASED               FOOTAGE
         --------                                                                     ---------               ------
<S>                                                                                  <C>                     <C>
Kalamazoo, Michigan                                                                   Owned                    55,000
River Rouge, Michigan                                                                 Owned                    50,000
Galion, Ohio                                                                          Owned                   365,000
Winesburg, Ohio                                                                       Owned                    67,500
Winesburg, Ohio                                                                       Owned                    16,000
Winesburg, Ohio                                                                       Owned                    15,200
Macon, Georgia                                                                        Owned                   114,500
Oklahoma City, Oklahoma                                                               Owned                   100,000
Demopolis, Alabama                                                                    Owned                   102,000
</TABLE>

         The Company's main office and manufacturing facilities are located in a
37,000 square foot facility situated on 8 2/3 acres in Sterling Heights,
Michigan owned by the Company. This facility is used to manufacture roll-off
containers, roll-off hoists and compactors. The Company also owns a 55,000
square foot facility located in Kalamazoo, Michigan which is home to the
Company's tube mill. Shelby Steel owns a 50,000 square foot steel processing
facility on six acres of land in River Rouge, Michigan, where all of its
operations are conducted. The Company leases, under a verbal month-to-month
lease, an 18,000 square foot manufacturing facility also located in Sterling
Heights, Michigan from siblings of Messrs. Kenneth and Robert McClain. This
facility is used by the Company as a fabrication facility. The monthly rental
for this facility is $3,500, with the lessor responsible for the payment of real
estate taxes, assessments, insurance premiums and replacement in case of damage
by fire, and the Company responsible for maintenance of the building. The
Company believes that the terms and conditions of this lease are comparable to
the terms and conditions which would be available from an unrelated party with
respect to similar facilities, although other similarly situated unrelated
parties would, in all likelihood, require a long-term written lease.

         E-Z Pack owns three buildings comprising approximately 365,000 square
feet situated on approximately 38 acres of land in Galion, Ohio. This facility
manufactures front, side and rear loading garbage truck bodies and recycling
trucks as well as transfer trailers.

         Galion owns three manufacturing facilities (67,500, 15,200 and 16,000
square feet) situated on 20 acres of land in Winesburg, Ohio where it
manufactures dump bodies, hoists and balers.

         E-Z Pack's Georgia facility is an approximately 114,500 square foot
manufacturing facility on 13.2 acres in Macon, Georgia. This facility
manufactures dump bodies and roll-off hoists to sell principally in the
Southeast.

         E-Z Pack's Oklahoma facility consists of three buildings in Oklahoma
City, aggregating 100,000 square feet. This facility is used to fabricate and
process steel for its own use and to manufacture roll-off containers.

         E-Z Pack owns an approximately 102,000 square foot manufacturing
facility in Demopolis, Alabama on approximately 84 acres of land. This facility
is used to fabricate and process steel for its own use and to manufacture
roll-off containers.

         The Company's Sterling Heights, Michigan facility and Galion, Ohio
facility are currently operating at approximately 80% of capacity. The Oklahoma
facility is currently operating at 65% of capacity. The Georgia facility is
currently operating at 50% of

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<PAGE>   10



capacity. The Alabama facility is currently operating at 60% capacity. The
Winesburg, Ohio facility is currently operating at 90% of capacity. The
Kalamazoo, Michigan facility is currently operating at 60% of capacity. The
determination of the productive capacity on each facility actually used by the
Company is a function of the mix of products being produced at such facility and
the pricing of such products. The production capacity figures set forth in this
paragraph reflect the mix of products presently produced by each facility and
the present pricing of such products. The Company enjoys expandable capacity at
most of these facilities depending on double-shifting and other performance
enhancing activities.

         The facilities owned and leased by the Company are well maintained and
in good operating condition. Its plants and equipment are subject to various
liens and encumbrances which collateralize certain obligations. See Notes 6 and
7 of Notes to Consolidated Financial Statements.


ITEM 3.  LEGAL PROCEEDINGS

         The Company is from time to time subject to various claims from
existing or former employees alleging gender, age or racial discrimination and
anti-union activity, none of which are expected to have a material adverse
affect on the Company. See ITEM 1. BUSINESS. Employees. In addition, as a
manufacturer of industrial products, the Company is, from time to time,
subjected to various product liability claims. Such claims typically involve
personal injury or wrongful death associated with the use or misuse of the
Company's products. While such claims have not been material to the Company in
any year and the Company believes that it maintains adequate product liability
insurance, there can be no assurance that such insurance will continue to be
available on terms acceptable to the Company. Any product liability claim not
fully covered by insurance, as well as any adverse publicity from a product
liability claim, could have a material adverse effect on the Company. The
Company is currently defending a number of legal proceedings involving product
liability claims relating to McClain, Galion and E-Z Pack brand products. A
subsidiary of the Company purchased the business now conducted by Galion and
E-Z Pack from the Peabody Galion Division of Peabody International Corporation
("Peabody"). Pursuant to an indemnification provided Peabody in connection
with the acquisition, the Company is currently defending several legal
proceedings involving product liability claims arising out of products
manufactured by Peabody prior to the date of the acquisition. These claims are
also covered by insurance. In addition, the acquisition agreement called for
the seller to share in the payment of certain costs related to the defense of
these cases. On December 29, 1998 the Company reached a settlement agreement
with the seller, the terms of which called for the Company to release the
seller from its obligations related to product liability claims under the
Galion acquisition agreement in exchange for a cash payment of $1,050,000.
Although the Company has settled all of the cases which were pending at the
date of the acquisition and the Company believes that it can continue to
successfully resolve pending and future product liability claims, there can
be no assurance that the Company will be able to do so. The Company is not
presently a party to any material legal proceedings except as described above
in this item and in Item 1. Business, Employees.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         No matters were submitted to a vote of the Company's security holders
during the fourth quarter of the fiscal year covered by this report.


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<PAGE>   11


                                     PART II

ITEM 5.  MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         The Company's Common Stock is traded and quoted on the Nasdaq National
Market ("Nasdaq/NMS") under the trading symbol "MCCL." The following table sets
forth, for the periods indicated, the high and low sales prices for the Common
Stock as reported by Nasdaq/NMS. These per share quotations represent
inter-dealer prices on the Nasdaq/NMS, and do not include retail mark-ups or
commissions.

<TABLE>
<CAPTION>

                                                                                    SALES PRICE
                                                                                        OF
                                                                                   COMMON STOCK
                                                                                   -------------
                                                                              HIGH              LOW
                                                                              ----              ---
              <S>                                                            <C>              <C>
               FISCAL YEAR ENDED SEPTEMBER 30, 1998
                        First Quarter                                         4.75             4.20
                        Second Quarter                                        6.19             3.375
                        Third Quarter                                         5.75             4.375
                        Fourth Quarter                                        5.00             3.00

               FISCAL YEAR ENDED SEPTEMBER 30, 1999
                        First Quarter                                         5.875            3.125
                        Second Quarter                                        6.00             5.250
                        Third Quarter                                         5.938            4.25
                        Fourth Quarter                                        7.125            4.375
</TABLE>


         On December 7, 1999, the last reported sales price for the Common Stock
as reported by Nasdaq/NMS was $5.6875. As of such date there were approximately
209 holders of record of the Common Stock. The Company believes there are a
substantial number of beneficial owners of the Company's Common Stock whose
shares are held in street name. The Company has never paid any cash dividends.
The payment of dividends by the Company is within the discretion of the Board of
Directors and will depend on the Company's earnings, its capital requirements
and financial condition, as well as other relevant factors. The Board of
Directors does not intend to declare any dividends in the foreseeable future,
but instead intends to retain earnings for use in the Company's operations.


ITEM 6.  SELECTED FINANCIAL DATA

         Selected financial data for each of the Company's last five fiscal
years ended September 30 are as follows:



                                       10

<PAGE>   12

<TABLE>
<CAPTION>
=======================================================================================================================
                                   1999              1998               1997               1996               1995
                                   ----              ----               ----               ----               ----
<S>                             <C>                <C>                <C>                 <C>             <C>
Gross Sales                      $142,079,475       $118,487,052        $95,255,641        $84,680,797     $82,263,202
Sales, Net of Customer
Discounts                        $140,604,885       $116,554,031        $95,255,641        $84,221,810     $81,569,427

Net Income (Loss)                  $4,181,938         $3,383,892       $(1,703,780)         $2,384,957      $2,462,755



Net Earnings (Loss) Per
Common and Common
Equivalent Share,1, 2                    $.90               $.72             $(.36)               $.50            $.53

Working Capital                   $58,689,965        $41,919,687        $33,520,003        $32,371,639     $33,868,556

Total Assets                     $129,923,989       $100,246,967        $87,185,567        $79,425,255     $73,899,197

Long-Term Debt                    $62,648,684        $42,530,105        $38,513,490        $34,217,149     $31,170,287

Stockholders' Investment          $30,890,965        $26,835,306        $23,837,091        $25,457,255     $22,841,274

Weighted Average Number of
Common Equivalent Shares
Outstanding 1, 2                    4,673,027          4,711,741          4,729,281          4,752,050       4,657,476
Current Ratio                          2.79:1             2.57:1             2.63:1             3.18:1          3.37:1
Long Term Debt to Equity
                                       2.03:1             1.59:1             1.62:1             1.34:1          1.36:1
=======================================================================================================================
</TABLE>

1        Weighted average number of shares outstanding includes, as appropriate,
         adjustments for the effect of common stock equivalents.

2        Adjusted to reflect a 4-for-3 stock split effective February 28, 1995.


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

OVERVIEW

         The following discussion should be read in conjunction with the
consolidated financial statements, including the notes to them, appearing
elsewhere in this report.


                                       11

<PAGE>   13

         The following table presents, as a percentage of net sales, certain
selected financial data for the Company for the years indicated:

<TABLE>
<CAPTION>

                                  -----------------------------------------------------------------------------
                                                                   YEAR ENDED
                                                                 SEPTEMBER 30,
                                  ---------------- --------------- ---------------- ------------ --------------
                                       1999             1998            1997           1996          1995
                                       ----             ----            ----           ----          ----
  <S>                                <C>              <C>             <C>            <C>           <C>
   Net Sales                          100.00%          100.0%          100.00%        100.00%       100.00%
   Cost of Sales                       82.40           82.18            83.68          79.65         78.35
                                      ------           -----           ------          -----        ------
   Gross Profit                        17.60           17.82            16.32          20.35         21.65
   Selling, General &
   Administrative Expenses             11.55           11.47            14.33          13.60         14.52
   Restructuring and Impairment
   Charge                               0.00            0.00             1.84           0.00          0.00
                                      ------           -----           ------          -----        ------
   Operating Profit                     6.05            6.35              .15           6.75          7.13
   Other Expense                        1.54            2.22             2.24           2.48          2.59
                                      ------           -----           ------          -----        ------
   Income (Loss) Before Income
   Taxes                                4.51            4.13            (2.09)          4.27          4.54
   Income Taxes (Benefit)               1.53            1.23             (.30)          1.45          1.55
                                      ------           -----           ------          -----        ------
   Net Income (Loss)                    2.98%           2.90%           (1.79)%         2.82%         2.99%
                                      ======           =====           ======          =====        ======
</TABLE>


         The Company manufactures dump truck bodies and a variety of solid waste
handling products including: (i) detachable roll-off waste containers ("roll-off
containers") and hydraulically operated roll-off hoist tilt truck frames used to
load, transport and dump roll-off containers ("roll-off hoists"); (ii)
intermodal waste containers designed for interchangeable use on trucks, trains
and ships ("intermodals"); (iii) water-tight and sludge detachable roll-off
waste containers designed to handle wet waste and slurry type waste,
respectively; (iv) compactors, unitized compactor/roll-off container systems
("unitized compaction systems"), and balers; (v) an assortment of front, rear
and side loading garbage truck bodies; (vi) recycling truck bodies; and (vii)
transfer trailers used to transport compacted solid waste from transfer stations
to landfills or incinerators.

RESULTS OF OPERATIONS

Comparison of year ended September 30, 1999 to year ended September 30, 1998

         Net sales increased 20.7% to $140.6 million for the fiscal year ended
September 30, 1999 (Fiscal 1999) from $116.5 million for the fiscal year ended
September 30, 1998 (Fiscal 1998). The increase was due primarily to strong sales
by the Company's E-Z Pack and Truck Chassis divisions. Sales for E-Z Pack
increased 49.6% or $11.8 million, while Truck Chassis sales increased 56.9%
or $9.6 million. Sales of the Company's other product lines increased slightly
or were flat for Fiscal 1999 compared to Fiscal 1998 The sales of the McClain
Truck division accounted for 18.8% of the Company's sales for Fiscal 1999
compared to 14.5% of the Company's sales for Fiscal 1998. Although truck chassis
sales increased significantly, the number of trucks the Company had available
for sale at September 30, 1999 increased significantly over the September 30,
1998 level. This increase was due primarily to the Company's decision to
aggressively pursue the Truck Chassis market for its tandem dump body product
line. The market for these Truck Chassis was extremely soft in 1999, which
combined with the Company's attempt to pursue this market caused approximately
60% of the increase in the Truck Chassis inventory. The Company paid
approximately $1.0 million dollars in interest on debt incurred to finance
this inventory increase.

         The Company's overall gross profit as a percentage of sales decreased
to 17.60% for Fiscal 1999 from 17.82% for Fiscal 1998, while the gross profit
margin on

                                       12

<PAGE>   14

products manufactured by the Company increased to 21.4% for Fiscal 1999
compared to 21.2% for Fiscal 1999. This increase results from reduced steel
prices and increased production, providing overhead reductions, at certain of
the Company's production facilities. The gross profit margin for the Truck
Chassis division decreased to 5.8% for Fiscal 1999 from 6.8% for Fiscal 1998,
due primarily to the softness in the truck chassis market in Fiscal 1999.

         Selling, General & Administrative Expenses increased to 11.55 % of net
sales for Fiscal 1999 from 11.47% of net sales for the Fiscal 1998 as a result
of increased marketing activity by the Company and expansion of its sales force.

         Inventory has increased to $63.3 million at September 30, 1999 from
$38.9 million at September 30, 1998. Approximately $27.2 million of the
inventory consists of trucks and related equipment the Company has dedicated to
its truck ready program. This increase is the result of the Company's decision
in the fourth quarter of fiscal 1998 to more aggressively pursue an expanding
market it believes exists for package units consisting of a truck chassis and a
piece of equipment manufactured by the Company (Roll-off Hoists, Refuse Truck
Bodies and Dump Bodies). See above discussion regarding dump truck chassis.

         The Company's leasing subsidiary generated pretax income of $.48
Million for Fiscal 1999 compared to a pretax loss of $.02 Million for Fiscal
1998. The Company had $18.8 Million in net finance lease receivables at
September 30, 1999 compared to $10.8 Million at September 30, 1998.

Comparison of year ended September 30, 1998 to year ended September 30, 1997

         Net sales for the fiscal year ended September 30, 1998 increased 22.4%
to $116.6 million compared to $95.2 million for the fiscal year ended September
30, 1997. The increase was the result of strong sales of the Company's E-Z Pack
and commodity products and the expansion of the Company's truck chassis program.
E-Z Pack and commodity sales increased by approximately $4.0 million and $8.0
million, respectively, while sales of truck chassis increased approximately
$10.0 million over the prior year. Although the sales for Fiscal 1998 increased
substantially, the Company's E-Z Pack and Galion facilities sales were slower
than expected due to logistical problems resulting from a shortage of truck
chassis throughout the year.

         The Company's overall gross profit as a percentage of sales increased
to 17.82% for Fiscal 1998 from 16.32% for fiscal 1997 while the gross profit on
products manufactured by the Company increased to 21.2% for Fiscal 1998 from
17.26% for Fiscal 1997. The price increase implemented during December 1997,
increased production at the Company's Georgia facility, the transfer of the EPCO
product line to the Winesburg facility and the closing of the Buffalo facility
were the primary factors in the increased gross profit on the products
manufactured by the Company.

         The Company's inventory levels increased to $38.9 million at the end of
fiscal 1998 from $31.0 million at the end of fiscal 1997. This increase was
primarily due to the expansion of the Company's truck chassis program and
increased finished goods inventories at the E-Z Pack and Galion facilities due
to the shortage of truck chassis previously discussed.


                                       13

<PAGE>   15

         Selling, general and administrative expenses decreased to 11.47% of net
sales during fiscal 1998 compared to 14.33% for fiscal 1997. This decrease was
due primarily to the increased sales and the Company's continuing efforts to
automate and centralize certain administrative functions.

LIQUIDITY AND CAPITAL RESOURCES

         The Company had working capital of $58.7 million at September 30,
1999 compared to $41.9 million at September 30, 1998. The ratio of current
assets to current liabilities was 2.79 at September 30 1999 and 2.57:1 at
September 30, 1998. The Company's cash and cash equivalents totaled $1.9 million
at September 30, 1999. Cash flows used by operations were $13.6 million for the
year ended September 30, 1999 primarily due to the increased inventory dedicated
to the Company's truck program as discussed previously.

         The Company's required level of working capital increased during fiscal
1999 from fiscal 1998 due to increases in the Company's Truck Chassis program
and continued success in expanding its leasing subsidiary. Long-term debt
continued to increase as a result of the increased inventory levels, the
continued expansion of leasing activity and the Company's ongoing commitment to
increasing production efficiency by properly maintaining and upgrading its
production facilities and machinery and equipment.

         The Company has a Revolving Credit Facility with Standard Federal Bank,
a federal savings bank ("Standard"), which provides maximum availability of
$33.3 million for working capital needs and a $1.5 million credit line to fund
machinery and equipment acquisitions. On July 9, 1999 the Company signed an
amendment to this agreement that temporarily increased the availability of the
line to $35.0 million. The new agreement calls for a monthly reduction to the
availability of $833,333, beginning August 1, 1999, and continuing through
July 1, 2000, when the total availability will be $25,000,000. At September 30,
1999 the Company had borrowed approximately $26.9 million under the working
capital line. Borrowings under the working capital line are limited to 80% of
eligible accounts receivable and 50% of qualified inventory while the equipment
line is limited to 80% of pledged equipment purchases.

         The Company also has a Revolving Credit Facility with Standard used to
finance certain of its lease receivables. The agreement calls for a maximum
availability of $15.0 million with borrowing limited to 80% of eligible lease
receivables. At September 30, 1999 approximately $12.1 million had been drawn on
this facility.

         All borrowings with Standard are secured by substantially all of the
assets of the Company. In addition, the loans contain various covenants
including those requiring the Company to maintain certain current ratios, levels
of tangible net worth and debt ratios and restricting the among of capital
expenditures the Company may make each year. The Company is in compliance with
the various covenants as of September 30, 1999. The revolving credit agreements
bear interest at the LIBOR rate plus 175 basis points and expire in May 2001, at
which time the Company expects to obtain renewals on the same or similar terms.

         The Company has agreements with three financial institutions to provide
financing for its TRAC (Terminal Rental Adjustment Clause) Leasing Agreements.
The agreements call for maximum availability of $8 million in lease commitments.
Under these facilities, the Company may finance 100% of eligible lease
receivables over the

                                       14


<PAGE>   16


term of the related lease at a fixed interest rate determined at the time of the
lease closing. The notes are secured by the related lease receivable. At
September 30, 1999, approximately $7.3 million had been drawn on the facilities.

         The Company has currently set its budget for capital expenditures in
fiscal 1999 at approximately $3.0 million as compared to $4.5 million in fiscal
1998. Despite the increase in inventory and leasing activity, management
believes that the Company's cash flow, together with the credit available to it
under existing debt facilities, will provide it with adequate cash for its
working capital needs for the next 12 months.

YEAR 2000 COMPLIANCE

         The Company purchases the various computer hardware and software used
in the administration of its financial, manufacturing and engineering processes
from third party suppliers. A centralized computer and software is used for
approximately 90% of the financial and manufacturing applications of the Company
and certification has been received from both the hardware and software
suppliers that these products are Year 2000 compliant. The engineering software
is run on either a LAN (local area network) or individual personal computers
depending on the size of the manufacturing facility. All the necessary hardware
and software for the engineering is Year 2000 compliant. Additionally, the
Company has various stand alone personal computers and laptop computers that run
word processing, database and spreadsheet software. The Company is currently in
the process of upgrading all the software run on these stand alone computers
with versions that are Year 2000 compliant and estimates completion of this
project prior to December 31, 1999.

         To date, the Company has expended approximately $80,000 to make its
engineering hardware and software and certain of its stand alone computers and
software Year 2000 compliant and estimates that it will expend approximately
$10,000 on its remaining computers and software. These amounts represent
approximately 75% and 10% of the Company's information technology budget for the
fiscal years ended September 30, 1999 and 2000, respectively, and will be paid
from the cash flow from operations.

         The Company believes that the steps it has taken regarding the Year
2000 issue will allow operations to run normally on January 1, 2000 and
thereafter. The possibility exists however, that certain stand alone computers
or software may not be upgraded timely or unforeseen circumstances may arise
that interrupt certain areas of the Company's operations. In case of any such
occurrence the Company believes that it can correct the problem within a few
days and no serious interruption in its business or operations will occur.

         The Company has made no formal assessment concerning the Year 2000
compliance status of its suppliers or customers. If any of the Company's
significant suppliers or customers does not successfully and timely become Year
2000 compliant, the Company's business or operations could be adversely
affected. The Company has not yet generated and does not intend to generate any
disaster contingency plans related to the Year 2000 compliance issue.


                                       15

<PAGE>   17



ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         Financial statements and supplementary data are filed herewith under
Item 14.


ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

         There have been no changes in the Company's independent public
accountants during the past two fiscal years and the Company does not disagree
with such accountants on any matter of accounting principles, practices or
financial statement disclosure.


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

         The directors and executive officers of the Company are as follows:

<TABLE>
<CAPTION>
                                                                                                        APPROXIMATE
                                                                                                               DATE
                                                                                                            SERVICE
              NAME                     AGE                              OFFICE                                BEGAN
              ----                     ---                              ------                                -----
<S>                                   <C>           <C>                                                     <C>
Kenneth D. McClain(1)                   58           Chairman of the Board, Chief
                                                     Executive Officer and President                           3/68

Robert W. McClain(1)                    63           Senior Vice President, Assistant
                                                     Secretary and Director                                    3/68

Raymond Elliott                         65           Director                                                  8/90

Walter J. Kirchberger                   64           Director                                                 11/95

Carl Jaworski                           56           Secretary                                                10/72

Mark S. Mikelait                        39           Treasurer                                                 5/97
</TABLE>

 (1) Kenneth D. McClain and Robert W. McClain are brothers.

         KENNETH D. MCCLAIN is Chairman of the Board and President of the
Company. He has been a director and officer of the Company since its inception
in March 1968. He also serves as Vice President and a director of Shelby Steel.
Mr. McClain is also a director and the Chairman of the Board of E-Z Pack and
Galion.

         ROBERT W. MCCLAIN is Senior Vice President and Assistant Secretary of
the Company. He has been a director and officer of the Company since its
inception in March 1968. He also serves as President of Shelby Steel.

         RAYMOND ELLIOTT has been a director of the Company since August 1990.
He is President of Hartland Insurance Group, Inc. From January 1, 1997 to
October 2, 1998, he was a Vice President of First of America Insurance (now
National City) Group since

                                       16

<PAGE>   18

October 1996. Prior to that he was President and a director of Elliott & Sons
Insurance Agency, Inc. and Michigan Benefit Plans Insurance Agency, Inc. since
1967. Mr. Elliott also serves as a director of the Boys and Girls Club of Troy,
a charitable organization located in Troy, Michigan.

         WALTER J. KIRCHBERGER was elected to the Board of Directors in November
1995. Mr. Kirchberger is First Vice President - Research of PaineWebber
Incorporated, and has served in such capacity for more than 25 years. He also
serves as a director of Simpson Industries, Inc.

         CARL JAWORSKI has served as Secretary since October 1972. Mr. Jaworski
was also a director and the Treasurer of the Company from October 1972 until
April 1992. Mr. Jaworski also serves as Secretary and a director of Shelby
Steel. Mr. Jaworski is the Secretary of E-Z Pack and Galion.

         MARK S. MIKELAIT has served as Treasurer of the Company since May 1997
and joined the Company in September 1994. Prior to that time Mr. Mikelait, a
CPA, was employed as a senior manager by Rehmann Robson, the Company's
independent auditors, beginning in November 1985.

         The Company is required to identify each person who was an officer,
director or beneficial owner of more than 10% of the Company's registered equity
securities during the Company's most recent fiscal year and who failed to file
on a timely basis reports required by Section 16(a) of the Securities Exchange
Act of 1934. Based solely upon its review of copies of such reports received by
it during or with respect to the fiscal year ended September 30, 1999, the
Company believes that all officers, directors and beneficial owners of more than
10% of the Company's registered equity securities timely filed all required
reports.


ITEM 11. EXECUTIVE COMPENSATION

COMPENSATION OF EXECUTIVE OFFICERS

         The following tables set forth all cash compensation paid to the Chief
Executive Officer of the Company and the other executive officers whose total
annual salary and bonus from the Company exceeded $100,000 during the fiscal
year ended September 30, 1999.


                                       17
<PAGE>   19




                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
                 Annual Compensation                      Long Term Compensation
------------------------------------------------------------------------------------

         Name and             Fiscal       Salary                Options/
    Principal Position         Year      Amount($)               SARs(#)
    ------------------         ----      ---------               -------
<S>                           <C>        <C>                    <C>
Kenneth D. McClain,
President/ CEO                 1999       $275,000               25,000
                               1998       $263,031                 ---
                               1997        226,885                 ---
Robert W. McClain, Senior
Vice President
                               1999       $143,751               25,000
                               1998        125,004                 ---
                               1997        183,335
Carl Jaworski
Secretary
                               1999       $108,750                5,000
                               1998       $104,631                5,000
                               1997        107,207
Mark S. Mikelait
Treasurer
                               1999       $126,250                5,000
                               1998        101,250               10,000
                               1997          ---                   ---
====================================================================================
</TABLE>



                    AGGREGATED OPTION/SAR EXERCISES AND
                  FISCAL YEAR-END OPTION/SAR VALUES TABLE
<TABLE>
<CAPTION>
-------------------------------------------------------- ------------------------------------- -------------------------------------
                            Shares                          No. of Unexercised                          Value of Unexercised
                           Acquired                          Options/SARs at                        In-The-Money Options/SARs at
                             on                             Fiscal Year-End (1)                         Fiscal Year-End(2)
                           Exercise         Value        ------------------------------------- -------------------------------------
                           in 1998         Realized                                Not                                    Not
                                                           Exercisable       Exercisable(1)        Exercisable        Exercisable
---------------------- --------------- ----------------- ---------------- -------------------- ------------------ ------------------
<S>                        <C>              <C>             <C>                 <C>                  <C>                <C>
Kenneth D. McClain           -0-              -0-            13,333              25,000               $ -0-              $ -0-

Robert W. McClain            -0-              -0-             6,666              20,000               $ -0-              $ -0-

---------------------- --------------- ----------------- ---------------- -------------------- ------------------ ------------------
</TABLE>


(1) Stock options granted November 16, 1995 and pursuant to the Company's 1989
    and 1999 Incentive Stock Plan (the "Incentive Plan"). Options must be
    exercised by November 15, 2000 and May 7, 2004. Exercise price is $7.31 and
    $5.50 per share.

(2) Value based on the average of the September 30, 1999 closing bid high and
    low price which was $4.375 per share.

COMPENSATION OF DIRECTORS

         Directors who are employees of the Company do not receive compensation
for serving on the Board or on the Board's committees. Directors who are not
employees of the Company are entitled to a quarterly retainer fee of $3,750, a
$1,000 fee for each regular or special meeting of the Board and a $1,000 fee for
each committee meeting attended on a day other than a regular or special Board
meeting date (collectively, the "Fees"). A Director may elect to receive payment
of the Fees in shares of Common Stock pursuant to the Company's 1989 Retainer
Stock Plan for Non-Employee Directors (the "Retainer Plan"). To participate in
the Retainer Plan, an eligible director must elect prior to December 31 of each
year the percentage, if any, of Fees he desires to receive in the form of shares
of Common Stock. The Common Stock is issued

                                       18

<PAGE>   20


quarterly during the following calendar year. The number of shares of Common
Stock to be issued to an eligible director is determined by dividing the dollar
amount of the percentage of fees such director elects to receive in Common Stock
by the "fair market value" of Common Stock on the day prior to the date of
issuance of the Common Stock to such director. The term "fair market value"
means the average of the highest and lowest selling price for the Common Stock
as quoted on Nasdaq/NMS for the day prior to the date of issuance or for the
first date prior to the date of issuance for which shares of Common Stock are
quoted, if not quoted on the day prior to the date of issuance. Any fractional
share of Common Stock derived from such calculation is paid in cash.

         The aggregate fair market value of the shares of Common Stock issued to
any eligible director in a given year cannot exceed 100% of such eligible
director's fees. Fees may not be increased more often than annually.

         For the fiscal year ended September 30, 1999, 6,114 shares of Common
Stock were issued under the Retainer Plan.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth, as of December 7,1999, certain
information regarding the beneficial ownership of Common Stock, of: (i) each
person known to the Company to be the beneficial owner of more than five (5%)
percent of the Common Stock; (ii) each director of the Company; (iii) each
executive officer listed in the Summary Compensation Table; and (iv) all
executive officers and directors of the Company as a group, based upon
information available to the Company.

<TABLE>
<CAPTION>
                                                      AMOUNT AND
                                                      NATURE OF              PERCENT OF
     NAME AND ADDRESS                                 BENEFICIAL            OUTSTANDING
     OF BENEFICIAL OWNER                             OWNERSHIP(1)            SHARES(2)
     -------------------                             ------------            ---------
<S>                                                  <C>                      <C>
Kenneth D. McClain                                   1,433,279(3)                30.84%
6200 Elmridge Road
Sterling Heights, MI  48310
Robert W. McClain                                    1,025,844(4)                22.08%
6200 Elmridge Road
Sterling Heights, MI  48310
June McClain                                           337,178                    7.26%
6200 Elmridge Road
Sterling Heights, MI 48310
Lisa McClain Pfeil                                     310,474(5)                 6.68%
6200 Elmridge Road
Sterling Heights, MI 48310
Raymond Elliott                                         22,322                    0.48%
290 Town Center
P.O. Box 890
Troy, Michigan  48084
Walter Kirchberger                                       6,137                    0.18%
2301 West Big Beaver Rd., Suite 800
Troy, Michigan 48084
Carl Jaworski                                          117,825                    2.54%
6200 Elmridge Road
Sterling Heights, MI 48310
Mark S Mikelait                                         17,332                    0.55%
500 Sherman Street
Galion, OH 44833
All current executive officers and                   2,624,739(6)                56.48%
directors as a group (6 persons)
</TABLE>



                                       19

<PAGE>   21

(1)      For purposes of this table, a person is deemed to have "beneficial
         ownership" of any shares that such person has a right to acquire within
         60 days.

(2)      Based on 4,647,183 shares of Common Stock issued and outstanding as of
         December 7, 1999. In addition, for purposes of computing the percentage
         of outstanding shares held by each person or group of persons named
         above, any security that such person or persons has or have the right
         to acquire within 60 days is also deemed to be outstanding, but is not
         deemed to be outstanding for the purpose of computing the percentage
         ownership of any other person.

(3)      Includes 2,430 shares of Common Stock owned by Kenneth D. McClain's
         wife. Mr. McClain disclaims beneficial ownership of these shares.

(4)      Includes 337,178 shares of Common Stock owned by Robert W. McClain's
         wife. Mr. McClain disclaims beneficial ownership of these shares.

(5)      Of the shares beneficially owned by Mrs. Pfeil, 305,098 are held of
         record by an irrevocable trust for her benefit. Mrs. Pfeil is the
         daughter of Kenneth D. McClain.

(6)      Includes 32,331 shares which executive officers and directors have the
         right to acquire pursuant to stock options exercisable within 60 days.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The Company leases one of its facilities from siblings of Messrs.
Kenneth and Robert McClain. See "Properties." The Company believes that the
terms and conditions of this lease are comparable to those available from an
unrelated party with respect to similar facilities.

         The Company had sales of approximately $231,000 in Fiscal 1999 to
McClain Leasing Corporation, an entity controlled by certain officers and
directors of the Company.

         The Hartland Insurance Group, an entity owned by Raymond Elliott, a
director of the Company, provided insurance to the Company during Fiscal 1999.
Sales from this entity to the Company aggregated approximately $1.0 million
during Fiscal 1999, for which this entity received fees and commissions in the
approximate amount of $117,500.


                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) The following documents are filed herewith as part of this Form 10-K:

         (1) A list of the financial statements required to be filed as a part
of this Form 10-K is shown in the "Index to the Consolidated Financial
Statements and Schedules" filed herewith.

         (2) A list of financial statement schedules required to be filed as a
part of this Form 10-K is shown in the "Index to the Consolidated Financial
Statements and Schedules" filed herewith.

         (3) A list of the exhibits required by Item 601 of Regulation S-K to be
filed as a part of this Form 10-K is shown on the "Index to Exhibits" filed
herewith.

                                       20


<PAGE>   22


                                   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.

Dated: December 13, 1999           McCLAIN INDUSTRIES, INC.


                                   By:/s/ Kenneth D. McClain
                                      ------------------------------------------
                                          Kenneth D. McClain, President
                                          (Principal Executive Officer)


                                   And By:/s/ Mark S. Mikelait
                                          --------------------------------------
                                              Mark S. Mikelait, Treasurer
                                              (Principal Financial Officer and
                                              Principal Accounting 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 and on the dates indicated.


Dated:  December 13, 1999        /s/ Kenneth D. McClain
                                 -----------------------------------------------
                                 Kenneth D. McClain, Director


Dated:  December 13, 1999        /s/ Robert W. McClain
                                 -----------------------------------------------
                                 Robert W. McClain, Director


Dated:  December 13, 1999        /s/ Raymond Elliott
                                 -----------------------------------------------
                                 Raymond Elliott, Director


Dated:  December 13, 1999        /s/ Walter J. Kirchberger
                                 -----------------------------------------------
                                 Walter J. Kirchberger, Director



                                       21
<PAGE>   23



                       SECURITIES AND EXCHANGE COMMISSION
--------------------------------------------------------------------------------

                                Washington, D. C.



                                    Form 10-K

                                For Corporations



                                  ANNUAL REPORT



              FOR THE YEARS ENDED SEPTEMBER 30, 1999, 1998 and 1997





                    MCCLAIN INDUSTRIES, INC. AND SUBSIDIARIES





                        CONSOLIDATED FINANCIAL STATEMENTS

                                       AND

                          INDEPENDENT AUDITORS' REPORT



                                      -22-
<PAGE>   24


                    MCCLAIN INDUSTRIES, INC. AND SUBSIDIARIES

                 INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  AND SCHEDULES

--------------------------------------------------------------------------------


                       CONSOLIDATED FINANCIAL STATEMENTS


Independent Auditors' Report

Consolidated Balance Sheets - September 30, 1999 and 1998

Consolidated Statements of Operations for the years ended September 30, 1999,
1998 and 1997

Consolidated Statements of Stockholders' Investment 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





                                    SCHEDULES


The information required to be submitted in Schedule II - Valuation and
Qualifying Accounts is included in the consolidated financial statements and
notes thereto.

The following schedules are omitted as not required or not applicable:
         I, III, IV and V.





                                      -23-

<PAGE>   25




                          INDEPENDENT AUDITORS' REPORT





To the Board of Directors and Stockholders
McClain Industries, Inc. and Subsidiaries
Sterling Heights, Michigan



We have audited the accompanying consolidated balance sheets of McClain
Industries, Inc. and Subsidiaries as of September 30, 1999 and 1998, and the
related consolidated statements of operations, stockholders' investment, and
cash flows for each of the three years in the period ended September 30, 1999.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of McClain Industries,
Inc. and Subsidiaries as of September 30, 1999 and 1998, and the results of
their operations and their cash flows for each of the three years in the period
ended September 30, 1999 in conformity with generally accepted accounting
principles.




                                             REHMANN ROBSON, P.C.



Farmington Hills, Michigan
December 13, 1999



                                      -24-

<PAGE>   26
             MCCLAIN INDUSTRIES, INC. AND SUBSIDIARIES

                   CONSOLIDATED BALANCE SHEETS

--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                               ASSETS                                              SEPTEMBER 30,
                                                                       -------------------------------
                                                                            1 9 9 9         1 9 9 8
                                                                       ---------------   -------------
<S>                                                                    <C>               <C>
Current assets
     Cash and cash equivalents                                          $    1,908,397   $   1,924,006
     Accounts receivable, net of allowance for doubtful accounts
        of $570,000 in 1999 ($800,000 in 1998)                              20,140,166      24,235,761
     Inventories                                                            63,281,785      38,873,477
     Net investment in sales-type leases, current portion                    5,900,000       3,100,000
     Prepaid expenses                                                          237,129         543,095
                                                                        --------------   -------------

TOTAL CURRENT ASSETS                                                        91,467,477      68,676,339
                                                                        --------------   -------------

PROPERTY, PLANT AND EQUIPMENT, NET                                          23,236,170      23,266,545
                                                                        --------------   -------------

OTHER ASSETS
     Net investment in sales-type leases, net of
        current portion                                                     12,871,973       6,013,959
     Goodwill, net of amortization                                           1,044,734       1,440,745
     Other                                                                     605,401         454,941
     Equipment under construction                                              698,234         394,438
                                                                        --------------   -------------

TOTAL OTHER ASSETS                                                          15,220,342       8,304,083
                                                                        --------------   -------------






TOTAL ASSETS                                                            $  129,923,989   $ 100,246,967
                                                                        ==============   =============
</TABLE>





The accompanying notes are an integral part of these consolidated financial
statements.

                                      -25-



<PAGE>   27

--------------------------------------------------------------------------------

                          LIABILITIES AND
                      STOCKHOLDERS' INVESTMENT

<TABLE>
<CAPTION>

                                                                                       SEPTEMBER 30,
                                                                        -------------------------------------------
                                                                              1 9 9 9                1 9 9 8
                                                                        --------------------   --------------------
<S>                                                                      <C>                   <C>
CURRENT LIABILITIES
     Accounts payable                                                   $        21,775,139    $        18,405,224
     Current portion of long-term debt                                            4,450,000              3,300,000
     Accrued expenses                                                             4,682,156              4,537,434
     Federal and state income taxes                                               1,870,217                513,994
                                                                        -------------------   --------------------

TOTAL CURRENT LIABILITIES                                                        32,777,512             26,756,652

Long-term debt, net of current portion                                           62,648,684             42,530,105

Product liability                                                                 1,406,828              1,909,904

Deferred income taxes                                                             2,200,000              2,215,000
                                                                        -------------------    -------------------

TOTAL LIABILITIES                                                                99,033,024             73,411,661
                                                                        -------------------    -------------------

COMMITMENTS AND CONTINGENCIES (NOTE 17)

STOCKHOLDERS' INVESTMENT
     Common stock, no par value; authorized 10,000,000 shares,
       issued and outstanding, 4,660,878 shares
       (4,686,727 shares in 1998)                                                 4,871,530              4,997,809
     Retained earnings                                                           26,019,435             21,837,497
                                                                        -------------------    -------------------

TOTAL STOCKHOLDERS' INVESTMENT                                                   30,890,965             26,835,306
                                                                        -------------------    -------------------

TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT                          $       129,923,989    $       100,246,967
                                                                        ===================    ===================
</TABLE>












                                      -26-






<PAGE>   28
                    MCCLAIN INDUSTRIES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                 YEAR ENDED SEPTEMBER 30,
                                             -----------------------------------------------------------------
                                                  1 9 9 9                1 9 9 8                1 9 9 7
                                             -------------------    -------------------    -------------------

<S>                                          <C>                     <C>                   <C>
Net sales                                    $       140,604,885     $      116,554,031    $        95,255,641

Cost of sales                                        115,863,228             95,786,681             79,711,774
                                             -------------------    -------------------    -------------------

GROSS PROFIT                                          24,741,657             20,767,350             15,543,867

Selling, general and administrative
     expenses                                         16,234,546             13,363,850             13,647,757
Restructuring and impairment charges                           -                      -              1,755,000
                                             -------------------    -------------------    -------------------

INCOME FROM OPERATIONS                                 8,507,111              7,403,500                141,110
                                             -------------------    -------------------    -------------------

OTHER INCOME (EXPENSE)
     Interest expense                                 (3,982,325)            (3,381,132)            (3,448,867)
     Interest income                                   1,575,188              1,285,016              1,215,877
     Other, net                                          236,964               (493,492)               101,100
                                             -------------------    -------------------    -------------------

OTHER EXPENSE - NET                                   (2,170,173)            (2,589,608)            (2,131,890)
                                             -------------------    -------------------    -------------------

INCOME (LOSS) BEFORE INCOME TAXES                      6,336,938              4,813,892             (1,990,780)

Income taxes (benefit)                                 2,155,000              1,430,000               (287,000)
                                             -------------------    -------------------    -------------------

NET INCOME (LOSS)                            $         4,181,938    $         3,383,892    $        (1,703,780)
                                             ===================    ===================    ===================

Net income (loss) per share:
     Basic                                   $              0.90    $              0.72     $            (0.36)
                                             ===================    ===================    ===================
     Assuming dilution                       $              0.90    $              0.72     $            (0.36)
                                             ===================    ===================    ===================
</TABLE>






The accompanying notes are an integral part of these consolidated financial
statements.

                                      -27-



<PAGE>   29
                    MCCLAIN INDUSTRIES, INC. AND SUBSIDIARIES

               CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT

--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                COMMON STOCK
                                    ------------------------------------       RETAINED
                                        SHARES             AMOUNT              EARNINGS               TOTALS
                                    ----------------  ------------------  --------------------  -------------------
<S>                                 <C>               <C>                 <C>                   <C>
Balance at October 1,
1996                                $ 4,693,916           $  5,299,870           $ 20,157,385           $ 25,457,255

Shares issued                            56,971                157,695                   --                  157,695

Shares repurchased                      (24,467)              (136,968)                  --                 (136,968)

Common stock issued in
     connection with EPCO
     acquisition                         11,202                 62,889                   --                   62,889

Net loss                                   --                     --               (1,703,780)            (1,703,780)
                                   ------------           ------------           ------------           ------------

Balance at September 30,
1997                                  4,737,622              5,383,486             18,453,605             23,837,091

Shares issued                            45,284                 90,323                   --                   90,323

Shares repurchased                      (96,179)              (476,000)                  --                 (476,000)

Net income                                 --                     --                3,383,892              3,383,892
                                   ------------           ------------           ------------           ------------

Balance at September 30,
1998                                  4,686,727              4,997,809             21,837,497             26,835,306

Shares issued                             4,505                 25,123                   --                   25,123

Shares repurchased                      (30,354)              (151,402)                  --                 (151,402)

Net income                                 --                     --                4,181,938              4,181,938
                                   ------------           ------------           ------------           ------------

Balance at September 30,
1999                                $ 4,660,878           $  4,871,530           $ 26,019,435           $ 30,890,965
                                   ============           ============           ============           ============

</TABLE>





The accompanying notes are an integral part of these consolidated financial
statements.

                                      -28-



<PAGE>   30


                    MCCLAIN INDUSTRIES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                    YEAR ENDED SEPTEMBER 30,
                                                                   -----------------------------------------------------------
                                                                        1 9 9 9             1 9 9 8             1 9 9 7
                                                                   ------------------   -----------------  -------------------
<S>                                                                <C>                  <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net income (loss)                                              $       4,181,938    $      3,383,892   $       (1,703,780)
    Adjustments to reconcile net income (loss) to
      net cash (used in) provided by operating activities
      Depreciation and amortization                                        3,280,109           3,395,115            4,893,701
      Deferred income taxes (benefit)                                        (15,000)            115,000                    -
      Provision for doubtful accounts                                        146,500             481,407              432,511
      (Gain) loss on disposal of plant and equipment                          (8,330)             (1,530)               4,032
      Common stock issued to directors for services                           25,123              31,127               28,494
      Common stock issued in connection
        with EPCO acquisition                                                      -                   -               62,889
      Net changes in operating assets and liabilities
        which provided (used) cash:
        Accounts receivable                                                3,949,095          (8,127,905)           1,481,176
        Inventories                                                      (24,408,308)         (7,861,711)          (5,434,766)
        Net investment in sales-type leases                               (9,658,012)           (865,186)          (2,632,423)
        Prepaid expenses and other assets                                   (233,581)            403,712           (1,086,661)
        Accounts payable                                                   3,369,915           4,272,578            3,585,004
        Accrued expenses                                                   1,500,945           1,400,960            1,455,314
                                                                  ------------------    ----------------   ------------------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES                      (17,869,606)         (3,372,541)           1,085,491
                                                                  ------------------    ----------------   ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchases of plant and equipment                                      (2,768,433)           (965,246)          (4,080,499)
    Payments on liabilities assumed upon the
      Galion acquisition                                                    (503,077)           (241,967)            (623,984)
    Proceeds from sale of plant and equipment                                  8,330               1,528                    -
                                                                  ------------------    ----------------   ------------------
NET CASH USED IN INVESTING ACTIVITIES                                     (3,263,180)         (1,205,685)          (4,704,483)
                                                                  ------------------    ----------------   ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from long-term debt                                          19,768,579           7,269,129           10,078,495
    Repayments of long-term debt                                          (2,900,000)         (2,752,514)          (5,114,354)
    Proceeds from funding of capital lease obligations                     4,534,732                   -                    -
    Repayments of capital lease obligations                                 (134,732)                  -                    -
    Sale of common stock under stock option plan                                   -              59,196              129,201
    Repurchase of common stock                                              (151,402)           (476,000)            (136,968)
                                                                  ------------------    ----------------   ------------------

NET CASH PROVIDED BY FINANCING ACTIVITIES                                 21,117,177           4,099,811            4,956,374
                                                                  ------------------    ----------------   ------------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                         (15,609)           (478,415)           1,337,382
Cash and cash equivalents, beginning of year                               1,924,006           2,402,421            1,065,039
                                                                  ------------------    ----------------   ------------------
CASH AND CASH EQUIVALENTS, END OF YEAR                            $        1,908,397    $      1,924,006   $        2,402,421
                                                                  ==================    ================   ==================
</TABLE>




The accompanying notes are an integral part of these consolidated financial
statements.





                                      -29-


<PAGE>   31

                    MCCLAIN INDUSTRIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

--------------------------------------------------------------------------------



1.       BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Nature of Business

         McClain Industries, Inc. and its wholly-owned subsidiaries (the
         "Company") manufacture and sell a diversified line of dump truck bodies
         (assemblies attached to truck frames which are used to carry and dump
         solid materials such as dirt, gravel or waste materials) and solid
         waste handling equipment (including containers, compactors and baling
         equipment, garbage and recycling truck bodies, and transfer trailers)
         used for the temporary storage, transportation and compaction of
         residential, commercial and industrial waste and recycling materials.
         The Company sells its dump truck bodies primarily to truck equipment
         dealers and its solid waste handling equipment primarily to
         distributors, solid waste handling companies, government agencies,
         shopping centers and other large retail outlets principally within the
         United States. The Company also sells truck chassis at the retail
         level. In addition, the Company provides coiled steel cutting and
         warehousing services for its own manufacturing operations in order to
         reduce its processed steel expense (one of its major cost components)
         and, on a limited basis, for sale to third-party customers.

         Principles of Consolidation

         The consolidated financial statements include the accounts of McClain
         Industries, Inc., and its wholly-owned subsidiaries (McClain E-Z Pack,
         Inc., McClain, Galion, Inc., Shelby Steel Processing Co., McClain Group
         Leasing, Inc., McClain Tube Company, and McClain International FSC,
         Inc., an international sales corporation). On January 1, 1999, Galion
         Holding Company, McClain of Georgia, Inc., McClain of Ohio, Inc.,
         McClain of Oklahoma, Inc., McClain of Alabama, Inc., McClain EPCO,
         Inc., and McClain Group Sales, Inc. were merged into McClain E-Z Pack,
         Inc. McClain E-Z Pack, Inc. and McClain Galion, Inc. were formerly
         operating subsidiaries of Galion Holding Company. All significant
         intercompany accounts and transactions have been eliminated.

         Concentration Risks

         The Company grants trade credit to its customers in the normal course
         of business. No collateral is required. Concentrations of credit risk
         with respect to trade receivables generally are limited due to the
         relatively large number of customers comprising the Company's customer
         base and its geographic dispersion, with the exception of the customer
         discussed below. The Company maintains reserves for potential credit
         losses and such losses have historically been insignificant and
         generally within management's expectations.

         Sales to a major customer aggregated approximately $32,500,000,
         $33,642,000 and $12,896,000 in 1999, 1998 and 1997, respectively. The
         Company had receivables of approximately $3,066,000 and $8,000,000 from
         this customer at September 30, 1999 and 1998, respectively. The loss of
         this customer could adversely affect the Company's short-term operating
         results.

                                      -30-

<PAGE>   32

                    MCCLAIN INDUSTRIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

--------------------------------------------------------------------------------


         Use of Estimates

         The preparation of consolidated 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 consolidated financial statements and the reported
         amounts of income and expenses during the reporting periods. Actual
         results could differ from those estimates. Significant estimates
         include but are not limited to product liability, goodwill amortization
         and the allowance for doubtful receivables.

         Income Taxes

         Deferred income tax assets and liabilities are computed annually for
         differences between the financial statement and tax bases of assets and
         liabilities that will result in taxable or deductible amounts in the
         future, based on enacted tax laws and rates applicable to the periods
         in which the differences are expected to affect taxable income.
         Valuation allowances are established when necessary to reduce deferred
         tax assets to the amount expected to be realized. Income tax expense is
         the tax payable or refundable for the year plus or minus the change
         during the year in deferred tax assets and liabilities. Deferred income
         taxes arise from temporary basis differences principally related to
         inventory, product liability, and plant and equipment.

         Cash and Cash Equivalents

         The Company considers all highly liquid investments with an original
         maturity of three months or less when purchased to be cash equivalents.

         Sales-Type Leases

         The Company, through McClain Group Leasing, Inc., offers lease
         financing to certain purchasers of the Company's products. These
         leases, along with TRAC leases entered into subsequent to September 30,
         1998, meet the criteria for classification as capitalized leases and
         are accounted for as sales-type leases, whereby sales and gross profit
         are recognized at the inception of the lease. Accordingly, an
         investment is reflected on the accompanying balance sheets in an amount
         equal to the gross minimum lease payments receivable less unearned
         finance income. Unearned finance income is amortized in such a manner
         as to produce a constant periodic rate of return on the net investment
         in the lease.


                                      -31-
<PAGE>   33


                    MCCLAIN INDUSTRIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

--------------------------------------------------------------------------------

         Goodwill

         Goodwill representing the purchase price in excess of the fair values
         of net assets acquired is amortized on a straight line basis. The
         amortization period is estimated based upon management's judgements and
         generally ranges from 5 to 40 years. Accumulated amortization as of
         September 30, 1999 and 1998 was $1,205,990 and $821,998, respectively.

         A significant portion of goodwill attributable to certain business
         combinations has arisen in recent years. While management believes that
         these costs will be recovered from the profitable operating of these
         businesses in the future, a change in the estimates of the applicable
         recovery periods or the development of unfavorable business conditions
         pertinent to these operations could adversely affect the Company's
         operating results.

         Earnings (Loss) Per Share

         Earnings (loss) per share is computed using the weighted average number
         of common shares outstanding during the year. The diluted amount
         reflects the potential dilution of all common stock equivalents. At
         September 30, 1999, 1998 and 1997 options to purchase 244,998, 199,476,
         and 125,464 common shares, respectively, were excluded from the
         computation of earnings per share because the options' exercise prices
         were greater than the average market price of the common shares. A
         reconciliation of the denominators used in the basic and diluted share
         calculation follows for the years ended September 30:

<TABLE>
<CAPTION>
                                                                 1 9 9 9         1 9 9 8          1 9 9 7
                                                              -------------   -------------    -------------
<S>                                                           <C>             <C>              <C>
         Denominator:
            Weighted average shares outstanding, basic            4,673,027       4,711,741        4,729,281
            Incremental shares from assumed
              conversion of options                                     109               -           41,577
                                                              -------------   -------------    -------------
         Weighted average shares outstanding, diluted             4,673,583       4,711,741        4,770,858
                                                              =============   =============    =============
</TABLE>


         Fair Values of Financial Instruments

         The carrying amount of cash equivalents, accounts receivable and
         accounts payable approximate their fair values due to the short-term
         maturity of these financial instruments. The carrying amounts of
         long-term debt approximate their fair values because the interest rates
         are representative of, or change with, market rates.

         Common Stock Issued to Directors for Services

         Common stock is issued from time to time in lieu of cash for services
         provided to the Company by Directors of the Company and is recorded as
         compensation expense generally at the fair value on the date of
         issuance.


                                      -32-
<PAGE>   34
                    MCCLAIN INDUSTRIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

--------------------------------------------------------------------------------

         Revenue Recognition

         Sales are recorded by the Company when the products are delivered to
         independent distributors or other customers.


2.       ALLOWANCE FOR DOUBTFUL ACCOUNTS RECEIVABLE

         The following is a summary of changes in the allowance for doubtful
         accounts during each of the three years in the period ended September
         30:

<TABLE>
<CAPTION>
                                                       1 9 9 9             1 9 9 8            1 9 9 7
                                                   --------------     --------------      --------------
         <S>                                       <C>                <C>                 <C>
         Balance, beginning of year                $      800,000     $      500,000      $      600,000
         Add provision charged
            against income                                146,500            481,400             432,500
         Less uncollectible accounts
            written off, net of recoveries               (376,500)          (181,400)           (532,500)
                                                   --------------     --------------      --------------
         Balance, end of year                      $      570,000     $      800,000      $      500,000
                                                   ==============     ==============      ==============
</TABLE>


3.       INVENTORIES

         Inventories are stated at the lower of cost or market. The LIFO
         (last-in, first-out) method is utilized for certain inventories, while
         the FIFO (first-in, first-out) method is utilized for the remaining
         inventories. The major components of inventories were as follows at
         September 30:

<TABLE>
<CAPTION>

                                                       1 9 9 9              1 9 9 8
                                               ------------------   ------------------
         <S>                                    <C>                 <C>
         Materials                              $      19,416,535   $       16,530,726
         Work-in process                                5,555,977            5,707,374
         Finished goods                                11,120,913           11,065,851
                                               ------------------   ------------------
                                                       36,093,425           33,303,951
         Chassis                                       27,188,360            5,569,526
                                               ------------------   ------------------
                                                $      63,281,785   $       38,873,477
                                               ==================   ==================
</TABLE>

         The chassis inventory above consists of the cost of the vehicle as
         purchased from the manufacturer and, as applicable, includes the
         Company's cost of manufacturing, assembling and mounting its truck
         bodies and waste handling equipment products. The purchased cost of the
         chassis on a stand-alone basis was $24,733,961 and $4,839,853 at
         September 30, 1999 and 1998, respectively.





                                      -33-
<PAGE>   35
                    MCCLAIN INDUSTRIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

4.       LEASING OPERATIONS

         Sale-Leaseback Sublease Transactions

         The Company, through McClain Group Leasing, Inc., has TRAC (Terminal
         Rental Adjustment Clause) leasing programs in place with three
         financial institutions in order to assist customers in obtaining
         financing for certain products delivered by guaranteeing a portion of
         the residual values of such products. Distribution of the Company's
         products in this manner has been accomplished by (i) selling the
         products to the independent financial institution leasing company, (ii)
         leasing the products back and providing a specified minimum guaranteed
         residual value to the leasing company, and (iii) subleasing the product
         to the user customer. TRAC leasing activity subsequent to September
         30, 1998 is accounted for as sales-type leases.

         Sales-Type Leases

         The Company provides financing contracts for the sales of various
         manufactured products to certain of its customers. Such financing is
         principally structured in the form of finance leases having a five-
         year term, which are accounted for as sales-type leases with the
         related gross profit on sale of the products recognized as income
         currently. The net investment in these sales-type leases is comprised
         of the following amounts at September 30:

<TABLE>
<CAPTION>
                                                                     1 9 9 9             1 9 9 8
                                                                 ---------------   ----------------
               <S>                                              <C>               <C>
               Gross minimum lease payments
                 collectible in monthly installments             $    23,060,916   $     11,706,584
               Less advance lease payments and
                 deposits received                                       428,563            289,157
                                                                 ---------------   ----------------
               Subtotal                                               22,632,353         11,417,427
               Less unearned finance income                            3,860,380          2,303,468
                                                                 ---------------   ----------------
               Total net investment in sales-type leases              18,771,973          9,113,959
               Current portion                                         5,900,000          3,100,000
                                                                 ---------------   ----------------
               Noncurrent portion                                $    12,871,973   $      6,013,959
                                                                 ===============   ================
</TABLE>



            Gross minimum lease payments are collectible in the following
            scheduled annual amounts for the years succeeding September 30,
            1999:

<TABLE>
<CAPTION>

               Year ending
               September 30                                                Amount
            -------------------                                      ----------------
           <S>                                                       <C>
                    2000                                             $      7,130,000
                    2001                                                    5,690,000
                    2002                                                    4,610,000
                    2003                                                    3,345,000
                    2004                                                    1,857,353
                                                                     ----------------
            Gross minimum amount collectible                         $     22,632,353
                                                                     ================
</TABLE>



                                      -34-
<PAGE>   36

                    MCCLAIN INDUSTRIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

         The TRAC leasing programs in place with financial institutions allow
         for maximum availability of $8,000,000 in lease commitments which
         provide for financing of 100% of eligible lease receivables over the
         term of the related lease. These notes are secured by a pledge of the
         remittances in the related sublease. At September 30, 1999,
         approximately $7,300,000 had been drawn on these lease programs,
         $4,400,000 of which is accounted for as capital lease obligations and
         $2,900,000 of which is accounted for as minimum lease payments under
         operating leases.

         Rental income from these subleasing activities was $1,221,000,
         $1,382,000, and $1,420,000 in the years 1999, 1998 and 1997,
         respectively, while the related rental expense for the leaseback of the
         products was $1,035,000, $1,317,000, and $1,212,000 during the years
         ended September 30, 1999, 1998 and 1997, respectively. Proceeds of the
         subleasing activities have been, and are expected to continue to be, in
         excess of the related rental expense. Minimum scheduled rental payments
         and rental receipts under these operating lease arrangements in future
         years are summarized as follows:

<TABLE>
<CAPTION>

               Year ending                                                 Rental                Rental
               September 30                                               Payments              Receipts
               ------------                                         -----------------      ----------------
               <S>                                                  <C>                   <C>
                    2000                                            $         930,000      $      1,130,000
                    2001                                                      930,000             1,130,000
                    2002                                                      930,000             1,130,000
                    2003                                                      913,000             1,125,000
                                                                    -----------------      ----------------
               Gross minimum rental payments                        $       3,703,000      $      4,515,000
                                                                    =================      ================
</TABLE>

         Total residual values guaranteed by the Company under these leasing
         arrangements approximates $1,390,000 as of September 30, 1999.


5.       PROPERTY, PLANT AND EQUIPMENT

         Property, plant, and equipment are recorded at cost. Depreciation for
         financial reporting purposes is provided primarily using the
         straight-line method over the estimated useful lives of the assets.
         Accelerated depreciation methods are used for income tax purposes.
         Estimated useful lives range from 20 to 40 years for buildings and
         improvements, and 3 to 30 years for machinery, equipment, furniture and
         fixtures, and vehicles. Expenditures for maintenance and repairs are
         charged to expense as incurred, and significant betterments are
         capitalized.





                                      -35-
<PAGE>   37
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


          Property, plant and equipment consisted of the following amounts as of
          September 30:

<TABLE>
<CAPTION>

                                                                   1 9 9 9             1 9 9 8
                                                              ---------------    ----------------
          <S>                                                <C>                <C>
          Land                                                $     2,282,977    $      2,282,977
          Buildings and improvements                               14,926,790          13,517,487
          Machinery and equipment                                  22,903,789          22,276,726
          Furniture, fixtures and vehicles                          4,169,061           4,023,385
                                                              ---------------    ----------------
                                                                   44,282,617          42,100,575
          Less accumulated depreciation                            21,046,447          18,834,030
                                                              ---------------    ----------------
          Property, plant and equipment, net                  $    23,236,170    $     23,266,545
                                                              ===============    ================
</TABLE>




         6.     LINES OF CREDIT

                The Company and certain of its subsidiaries are party to the
                following line of credit agreements with financial institutions
                as of September 30:

<TABLE>
<CAPTION>
                                                                                      1 9 9 9            1 9 9 8
                                                                                -----------------   ----------------
                <S>                                                             <C>                 <C>
                Revolving  line of credit providing for maximum  availability
                of up to  $33,333,334  and  $20,000,000 at September 30, 1999
                and 1998,  respectively.  On July 9, 1999, the Company signed
                a new agreement  temporarily  increasing the  availability of
                the line to  $35,000,000.  The agreement  calls for a monthly
                reduction to the  availability of $833,000,  beginning August
                1, 1999, and continuing  through July 1, 2000, when the total
                availability  will be $25,000,000.  Borrowings are limited to
                80% of the eligible accounts  receivable and 50% of qualified
                inventory  and are subject to interest at the LIBOR rate plus
                175 basis points (7.09% at September 30, 1999).                  $    26,858,901    $    17,955,713

                The  agreement  is  collateralized  by  substantially  all  the
                assets of the Company and contains various covenants  requiring
                the Company to maintain certain financial ratios. The agreement
                also prohibits the  Company from incurring additional indebted-
                ness other than subordinated  indebtedness and limits plant and
                equipment  acquisitions  to  $3.0 million per fiscal year. This
                agreement expires in May 2001, at which time the Company expects
                to obtain a renewal upon the same or similar terms.
</TABLE>


                                      -36-

<PAGE>   38
                    MCCLAIN INDUSTRIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                           1 9 9 9            1 9 9 8
                                                                      -----------------   ----------------

       <S>                                                              <C>                <C>
       Line  of  credit   providing  for  maximum   availability  of
       $15,000,000 in 1999 and  $10,000,000 in 1998.  Borrowings are
       limited to 80% of eligible lease  receivables and are subject
       to  interest  at the LIBOR  rate plus 175 basis  points.  The
       agreement is  collateralized by certain equipment leases held
       by the Company's leasing  subsidiary.  This agreement expires
       in May 2001,  at which time the  Company  expects to obtain a
       renewal upon the same or similar terms.                               12,125,000           7,605,295
                                                                      -----------------   ----------------


       Total lines of credit borrowings (Note 7)                       $     38,983,901    $     25,561,008
                                                                       ================    ================

</TABLE>

7.     LONG-TERM DEBT

       Long-term debt consisted of the following obligations as of September 30:

<TABLE>
<CAPTION>

                                                                            1 9 9 9            1 9 9 8
                                                                      -----------------   ----------------

       <S>                                                              <C>                <C>
       Promissory note to a bank,  collateralized  by certain assets
       as  disclosed  in Note 6.  The  note is  payable  in  monthly
       installments  of  $220,000  plus  interest  at the LIBOR rate
       plus  205   basis   points   (effective   rate  of  7.39%  at
       September 30,  1999),  maturing in September  2006. This note
       was refinanced in July 1999.                                     $    18,500,000    $    14,200,000

       Promissory  notes  to  banks,  collateralized  by  commercial
       mortgages  on  certain   real  estate,   payable  in  monthly
       installments  of $28,300 plus interest  ranging from the bank
       prime  rate to prime  plus 1/4%  (effective  rates of 8.5% to
       8.75% at  September 30,  1999),  maturing  at  various  dates
       through January 2000.                                                  1,039,783          1,369,097

       Industrial Revenue Bonds,  collateralized by a bank letter of
       credit.  The bonds are  payable  in  annual  installments  of
       $525,000   through  April  2007.  The  bonds  bear  interest,
       payable  monthly,  at either a fixed term, or a variable rate
       (effective   rate  of  3.84%  at   September   30,  1999)  as
       determined by the bond holder.                                         4,175,000          4,700,000
                                                                      -----------------   ----------------
</TABLE>






                                      -37-

<PAGE>   39
                    MCCLAIN INDUSTRIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                                       1 9 9 9            1 9 9 8
                                                                ----------------     --------------

<S>                                                             <C>                 <C>
        Subtotal, notes and bonds                                     23,714,783         20,269,097


        Capital lease obligations (Note 4)                             4,400,000                  -

        Lines of credit borrowings (Note 6)                           38,983,901         25,561,008
                                                                ----------------     --------------
                                                                      67,098,684         45,830,105
        Total long-term debt

        Less current portion                                           4,450,000          3,300,000
                                                                ----------------     --------------

        Long-term debt, net of current portion                  $     62,648,684     $   42,530,105
                                                                ================     ==============
</TABLE>




        Scheduled aggregate principal maturities of long-term debt for years
        succeeding September 30, 1999 are presented below:
<TABLE>
<CAPTION>

               Year ending
               September 30                                             Amount
            -----------------                                     ---------------
              <S>                                                 <C>
                  2000                                            $     4,450,000
                  2001                                                 43,200,000
                  2002                                                  4,300,000
                  2003                                                  4,300,000
                  2004                                                  3,700,000
               Thereafter                                               7,148,684
                                                                  ---------------
                                                                  $    67,098,684
                                                                  ===============
</TABLE>


        The debt agreements contain certain restrictive covenants which require
        the Company to, among other things, meet certain net worth and working
        capital requirements along with maintaining various financial ratios. As
        of September 30, 1999, the Company was not in compliance with one of the
        financial covenants contained in the loan agreements with its principal
        lending institution. In December, 1999, the Company's principal lender
        waived its rights to accelerate repayment of the debt arising from such
        covenant violation and agreed to amend that covenant which is considered
        by management to be more compatible with the Company's current
        operations. Accordingly, the obligations are classified on the
        accompanying consolidated balance sheet at September 30, 1999 according
        to their original repayment terms.


8.      ACCRUED EXPENSES

        Accrued expenses included on the accompanying consolidated balance
        sheets consist of the following amounts at September 30:

<TABLE>
<CAPTION>
                                                                   1 9 9 9             1 9 9 8
                                                              ---------------    ----------------
          <S>                                                 <C>                 <C>
          Sales discounts                                     $     1,018,312     $     1,162,959
          Compensation                                                788,200             640,869
          Vacation and holiday pay                                    434,303             481,174
          Taxes                                                       607,510             488,598
          Insurance                                                   777,283             891,592
          Other                                                     1,056,548             872,242
                                                              ---------------    ----------------
          Total                                               $     4,682,156    $      4,537,434
                                                              ===============    ================
</TABLE>




                                      -38-

<PAGE>   40

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

9.       INCOME TAXES

         The provision (benefit) for income taxes for each of the three years in
         the period ended September 30, consists of the following components:

<TABLE>
<CAPTION>

                                                                1 9 9 9            1 9 9 8             1 9 9 7
                                                           ---------------     ---------------    ---------------
               <S>                                         <C>                 <C>                 <C>
               Current federal provision (benefit)         $     2,170,000     $     1,315,000     $     (287,000)
               Deferred provision (credit)                         (15,000)            115,000                  -
                                                           ---------------     ---------------     --------------
               Total income taxes (benefit)                $     2,155,000     $     1,430,000     $     (287,000)
                                                           ===============     ===============     ==============
</TABLE>

         The effective income tax rate on consolidated pre-tax income differs
         from the federal statutory rate for the following reasons:

<TABLE>
<CAPTION>

                                                        1 9 9 9                 1 9 9 8                 1 9 9 7
                                                 ----------------------   --------------------  -----------------------
                                                       Amount       %         Amount        %          Amount        %
                                                  --------------- ------ ---------------  -----  ---------------  ------
               <S>                                 <C>             <C>    <C>              <C>    <C>              <C>
               Provision (benefit) computed
                  at statutory rate                $   2,155,000     34    $  1,637,000     34     $    (677,000)    (34)
               Nondeductible expenses                     22,000      1          21,000      1           389,000      19
               Cancellation of debt
                 related to EPCO restructuring                 -      -        (207,000)    (4)                -       -
               Other                                     (22,000)    (1)        (21,000)    (1)            1,000       -
                                                   -------------     --    ------------    ---     -------------     ---
                                                   $   2,155,000     34    $  1,430,000     30     $    (287,000)    (15)
                                                   =============     ==    ============    ===     =============     ===
</TABLE>

         The balance of the net deferred income tax liability consists of
         temporary basis differences related to the following assets and
         liabilities as of September 30:

<TABLE>
<CAPTION>
                                                                        1 9 9 9             1 9 9 8
                                                                   ----------------   -----------------
               <S>                                                 <C>                <C>
               Taxable differences:
                  Property and equipment                           $     2,905,000    $      2,850,000
                  Inventory                                              1,100,000           1,140,000
                                                                   ---------------    ----------------
               Gross deferred tax liabilities                            4,005,000           3,990,000
                                                                   ---------------    ----------------
               Deductible differences:
                  Product liability                                        478,000             646,000
                  Accounts receivable                                      193,000             170,000
                  Accrued expenses                                         889,000             798,000
                  Goodwill                                                 245,000             161,000
                                                                   ---------------    ----------------
               Gross deferred tax assets                                 1,805,000           1,775,000
                                                                   ---------------    ----------------
               Net deferred income tax liability                   $     2,200,000    $      2,215,000
                                                                   ===============    ================
</TABLE>



         The components which comprise gross deferred taxes are predominantly
         noncurrent; as such, the entire related net liability is classified as
         noncurrent.




                                      -39-
<PAGE>   41

                    MCCLAIN INDUSTRIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

--------------------------------------------------------------------------------


10.      EMPLOYEE PENSION AND PROFIT SHARING PLANS

         The Company and certain subsidiaries have qualified pension and profit
         sharing plans covering substantially all union employees. Contributions
         to the plans were calculated at an hourly rate as defined in the
         various union contracts. The Company also maintains a defined
         contribution pension plan qualified pursuant to Section 401(k) of the
         Internal Revenue Code for certain union employees and all eligible
         non-union employees. The Company makes matching contributions of
         specified percentages of participants' compensation. The cost of all of
         these plans was $673,480 in 1999, $494,133 in 1998, and $407,739 in
         1997.

         The Company has an employee stock bonus plan for full time, salaried
         and non-union employees. Company contributions are discretionary each
         year and are generally limited to 15% of participants' compensation. No
         contributions were made for the years ended September 30, 1999, 1998
         and 1997.


11.      RELATED PARTY TRANSACTIONS

         Leases

         The Company leases an operating facility from siblings of the
         President of McClain Industries, Inc. on a month-to-month basis with
         annual rentals totaling $42,000 in each of the years ended September
         30, 1999, 1998 and 1997.

         INSURANCE COSTS

         Raymond Elliott, a director of the Company, is also the owner of
         Hartland Insurance Group. That entity provided insurance at a cost of
         approximately $1,005,000, $1,100,000, and $1,093,000 to the Company
         during the years ended September 30, 1999, 1998 and 1997, respectively.
         That entity received fees and commissions in connection with these
         transactions of approximately $117,500, $116,000, and $117,000,
         respectively.

         Product Sales

         The Company had product sales of approximately $231,000, $590,000, and
         $560,000, during the years ended September 30, 1999, 1998 and 1997,
         respectively, to a business controlled by the President of McClain
         Industries, Inc.


12.      STOCK BASED COMPENSATION PLANS

         The Company maintains the 1999 and 1989 Retainer Stock Plans for
         Non-employee Directors and the McClain 1999 and 1989 Incentive Stock
         Plans.




                                      -40-
<PAGE>   42
                   MCCLAIN INDUSTRIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
         Retainer Stock Plans

         The Retainer Stock Plans as adopted call for reserving 233,333 shares
         of the Company's no par common stock and allows non-employee directors
         the option to receive payment of all or a portion of their directors
         fees in the form of shares of common stock at the fair market value of
         such shares on the date of issuance. For the years ended September 30,
         1999, 1998 and 1997 the Company issued 4,505, 7,593, and 5,466 shares,
         respectively, of its common stock to such directors in exchange for
         services rendered.

         Incentive Stock Plan

         The Incentive Stock Plans as adopted call for reserving 2,333,333
         shares of the Company's no par common stock for the granting of stock
         awards to officers and key management personnel. The awards consist of
         incentive stock option (ISO) or non-qualified options, stock
         appreciation rights (SARs) and restricted share rights, and may be
         granted at the following prices at the date of grant: incentive stock
         options must be equal to or greater than the fair market value of
         common stock; stock appreciation rights and restricted share rights may
         be issued at a price which may not be less than 50% of the price of the
         common stock. Shares which have been issued under these plans vest in
         annual installments from the date of grant, over a three year period,
         and expire within 5 years from the date of grant.

         The following table presents a summary of stock option activity for
         each of the years in the three year period ended September 30:

<TABLE>
<CAPTION>
                                                     1 9 9 9                1 9 9 8                  1 9 9 7
                                             ---------------------   ---------------------  ----------------------
                                                          Exercise               Exercise                Exercise
                                               Shares     Price *     Shares     Price *      Shares     Price *
                                             -----------  --------   ----------  ---------  -----------  ---------
         <S>                                   <C>        <C>        <C>         <C>          <C>        <C>
          Outstanding, beginning of year         199,476  $   6.30      191,391  $    5.71      227,896  $    5.01
          Granted                                130,000      5.42       74,000       5.08       15,000       5.75
          Exercised                                 -            -      (30,825)      3.25      (51,505)      2.51
          Forfeited/expired                      (59,811)     7.06      (35,090)      3.25          -          -
                                                 -------  --------      -------  ---------      -------  ---------
          Outstanding, end of year               269,665      5.71      199,476  $    6.30      191,391  $    5.71
                                                 -------  --------      -------  ---------      -------  ---------
          Exercisable, end of year                85,332  $   6.50      145,131  $    6.73      164,491  $    5.55
                                                 =======  ========      =======  =========      =======  =========
</TABLE>


         OPTIONS AT SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
                                                          Options Outstanding                 Options Exercisable
                                                  ------------------------------------       ----------------------
                                                               Remaining
                                                              Contractual   Exercise                      Exercise
          Range of Exercise Prices                   Shares      Life *      Price *           Shares      Price *
          ----------------------------------       ---------    --------    ---------       ----------   ---------
         <S>                                       <C>       <C>            <C>             <C>          <C>
            $5.00 to $6.00                           219,000    .5 years     $   5.33           34,667   $    5.27
            $7.00 to $8.00                            50,665   3.9 years         7.33           50,665        7.33
                                                     -------   ---------    ---------           ------   ---------
         Total                                       269,665   1.1 years    $    5.71           85,332   $    6.50
                                                     =======   =========    =========           ======   =========
</TABLE>

         *Weighted average





                                      -41-
<PAGE>   43


                    MCCLAIN INDUSTRIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

--------------------------------------------------------------------------------

         The Company continues to apply the provisions of Accounting Principles
         Board Opinion No. 25, "Accounting for Stock Issued to Employees" and
         related interpretations in accounting for its employee stock options
         issued pursuant to the 1999 and 1989 Incentive Stock Plan. Under APB
         25, because the exercise price of employee stock options equals the
         market price of the underlying common stock on the date of grant, no
         compensation expense is recorded in the accompanying consolidated
         statements of operations. Had stock option compensation expense been
         determined pursuant to the methodology provided in Statement of
         Financial Accounting Standards No. 123, "Accounting for Stock-Based
         Compensation", using the Black-Schales option pricing model with the
         following weighted average assumptions for grants in 1999, 1998 and
         1997: expected volatility of 71%, 66% and 65%, risk free interest rate
         of 5.5% and expected lives of 5 years. The proforma effect on results
         of operations would have been a decrease in net income by $223,000 and
         $121,000 for the years ended September 30, 1999 and 1998, respectively,
         and an increase in the net loss of $27,000 for fiscal 1997.


13.      COMMON STOCK REPURCHASES

         The Board of Directors has authorized the Company to repurchase from
         time to time on the open market up to 300,000 shares of the Company's
         common stock. During the year ended September 30, 1999, the Company
         repurchased 30,354 shares at prices ranging from $3.375 to $5.75.
         During the year ended September 30, 1998, the Company repurchased
         96,179 shares at prices ranging from $3.25 to $5.25. During the year
         ended September 30, 1997, the Company repurchased 24,467 shares at
         prices ranging from $5.32 to $5.75 per share.


14.      SUPPLEMENTAL CASH FLOWS INFORMATION

         During the years ended September 30, 1999, 1998 and 1997, common stock
         valued at $25,123, $31,127, and $28,494, respectively, was issued to
         non-employee directors in exchange for services rendered.

         During the year ended September 30, 1997, common stock valued at
         $62,889 was issued in accordance with the EPCO purchase agreement.

         Cash paid for interest amounted to $3,855,735 for 1999, $3,356,571 for
         1998, and $3,223,867 for 1997. Cash paid for federal income taxes
         amounted to $350,000 for 1999, $-0- for 1998, and $350,000 for 1997.



                                     -42-
<PAGE>   44
                    MCCLAIN INDUSTRIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

--------------------------------------------------------------------------------

15.      RESTRUCTURING AND IMPAIRMENT CHARGES

         In September 1997, the Company decided to restructure its baler
         equipment manufacturing operations based upon an evaluation of sales
         levels to date, anticipated levels of business in 1998 and beyond, and
         unsatisfactory operating results. The plan involved the shift of all
         baler production from the Company's facility in Buffalo, New York to
         its Winesburg, Ohio plant, the abandonment of the leased premises in
         Buffalo, and the transfer of moveable property and equipment to other
         locations. The related restructuring and impairment charge of
         $1,755,000 in 1997 consists principally of a writeoff of goodwill of
         $1,145,000, the writedown of leasehold improvements and other assets of
         $310,000, and costs associated with the abandoned leased facilities of
         $300,000. After an income tax benefit of $207,000, which excluded the
         writeoff of goodwill not considered to be deductible, these actions
         reduced reported operating results by $1,548,000 or $0.33 per share in
         1997.


16.      SEGMENT INFORMATION

         During fiscal 1999, the Company adopted Statement of Financial
         Accounting Standards (SFAS) No. 131 "Disclosures About Segments of an
         Enterprise and Related Information". This statement requires financial
         information to be reported on the basis that management uses for
         evaluating segment performance and making operating decisions.

         The Company operates in three principal operating segments 1)
         Manufactured Equipment, 2) Truck Chassis Sales, and 3) Leasing
         Operations. The accounting policies of the reportable segments are the
         same as those described in Note 1. Management evaluates the performance
         of its operating segments separately to individually monitor the
         different factors affecting performance. The Company measures the
         performance of its operating segments based on net revenue and
         operating income. Income taxes are managed on a Company-wide basis.
         Segment performance is also evaluated based on profit or loss before
         income taxes.


                                      -43-

<PAGE>   45

                    MCCLAIN INDUSTRIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

--------------------------------------------------------------------------------

Information regarding the Company's operating segments follows:

<TABLE>
<CAPTION>

                                          Manufacturing           Truck            Leasing
                                            Operations            Group           Operations           Totals
                                        -----------------    ---------------    -------------    -----------------
          <S>                            <C>                    <C>              <C>                <C>
          1999
          ----
             Net sales                       $105,024,800        $35,580,085      $         -        $ 140,604,885
             Lease revenues                             -                  -        3,597,594            3,597,594
             Operating income                   7,661,619            368,844          476,648            8,507,111
             Interest expense, net              2,283,630            988,496          710,199            3,982,325
             Income (loss) before
                income taxes                    6,247,914           (387,624)         476,648            6,336,938
             Identifiable assets               80,563,757         26,162,434       23,197,798          129,923,989
             Capital expenditures               2,768,433                  -                -            2,768,433
             Depreciation and
                amortization                    3,280,109                  -                -            3,280,109

          1998
          ----
             Net sales                       $ 95,143,347        $21,410,684      $         -        $ 116,554,031
             Lease revenues                             -                  -        2,588,787            2,588,787
             Operating income (loss)            6,677,317            743,721          (17,538)           7,403,500
             Interest expense, net              2,809,504                  -          571,628            3,381,132
             Income (loss) before
                income taxes                    4,087,709            743,721          (17,538)           4,813,892
             Identifiable assets               83,883,371          5,569,526       10,794,070          100,246,967
             Capital expenditures                 965,246                  -                -              965,246
             Depreciation and
                amortization                    3,395,115                  -                -            3,395,115

          1997
          ----
             Net sales                       $ 92,429,721        $ 2,825,920      $         -        $  95,255,641
             Lease revenues                             -                  -        2,604,060            2,604,060
             Operating income                    (141,182)            78,752          203,540              141,110
             Interest expense, net              2,877,614                  -          571,253            3,448,867
             Income (loss) before
                income taxes                   (2,141,594)           (52,654)         203,540           (1,990,708)
             Identifiable assets               75,610,014          2,311,737        9,263,816           87,185,567
             Capital expenditures               4,080,499                  -                -            4,080,499
             Depreciation
                amortization                    4,893,701                  -                -            4,893,701
</TABLE>

Total net sales to foreign countries were not significant in 1999, 1998 and
1997. There were no capital assets located in foreign countries at September 30,
1999, 1998 or 1997. The net sales for the Truck Group include sales of products
manufactured by the Company of $9,129,104, $4,551,877 and $600,786 for the years
ended September 30, 1999, 1998 and 1997, respectively.

                                      -44-










<PAGE>   46



                    MCCLAIN INDUSTRIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

--------------------------------------------------------------------------------


17.      COMMITMENTS AND CONTINGENCIES

         Product Liability

         As a manufacturer of industrial products, the Company is occasionally
         subjected to various product liability claims. Such claims typically
         involve personal injury or wrongful death associated with the use or
         misuse of the Company's products. The Company is currently defending
         certain legal proceedings involving allegations of product liability
         relating to products manufactured and sold by the Company.
         Historically, such claims have not resulted in material losses to the
         Company in any one year, and the Company maintains product liability
         insurance in amounts believed by management to be adequate.

         McClain E-Z Pack, Inc., as successor to Galion Holding Company (GHC),
         pursuant to an indemnification it provided to the seller in connection
         with GHC's July 1992 acquisition of the Galion operations, is currently
         defending a number of legal proceedings involving product liability
         claims arising out of products manufactured and sold prior to the
         acquisition. These claims are covered by insurance and many of these
         cases have been settled. In addition, the acquisition agreement called
         for the seller to share in the payment of certain costs related to the
         defense of these cases. On December 29, 1998, the Company reached a
         settlement agreement with the seller, the terms of which called for the
         Company to release the seller from its obligations related to product
         liability claims under the Galion acquisition agreement in exchange for
         a cash payment to the Company of $1,050,000.

         A liability to provide for these product claims was established at the
         acquisition date. Since many of the cases have been settled and
         insurance coverage exists, management believes that the ongoing costs
         to defend these claims will not exceed the amount accrued on the
         accompanying consolidated balance sheet at September 30, 1999.
         Nevertheless, it is not possible to predict the ultimate outcome of any
         product liability claim, and any such claim not fully covered by
         insurance, as well as adverse publicity from a product claim, could
         have a material adverse effect on the Company.

         Environmental Matters

         The Company's operations are subject to extensive federal, state and
         local regulation under environmental laws and regulations concerning,
         among other things, emissions into the air, discharges into the waters
         and the generation, handling, storage, transportation, treatment and
         disposal of waste and other materials. Inherent in manufacturing
         operations and in owning real estate is the risk of environmental
         liabilities as a result of both current and past operations, which
         cannot be predicted with certainty. The Company has incurred and will
         continue to incur costs, on an ongoing basis, associated with
         environmental regulatory compliance in its business.


                                      -45-
<PAGE>   47
                    MCCLAIM INDUSTRIES, INC. AND SUSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
         Labor Union Matters

         Certain of the Company's hourly employees are represented by various
         labor unions pursuant to collective bargaining agreements which expire
         between June 2000 and November 2002.

         On February 23, 1995, the National Labor Relations Board (NLRB)
         conducted an election in response to a petition filed by a local union
         (Union) to represent the hourly employees at the Company's Macon,
         Georgia plant. The ballots of certain employees were challenged as
         ineligible. The Union filed charges asserting that the Company
         committed various unfair labor practices which affected the election
         results and that the challenged ballots should be counted. On October
         17, 1996 the NLRB upheld the unfair labor practice charges and on
         November 5, 1996 the NLRB determined that the results of the election
         were in favor of the Union. Management, based upon the opinion of
         counsel, does not believe a final decision upholding the Union
         certification or the unfair labor practice charges would have a
         material adverse effect on the Company.

         Sales Commitment

         In connection with the purchase of a manufacturing facility in 1996,
         the seller of the facility agreed to use reasonable commercial efforts
         to purchase annually from the Company, manufactured products in an
         amount that is not less than $25,000,000 in sales per year through
         December 31, 2001. In the event the $25,000,000 is reached, the Company
         has agreed to pay to the customer $1,200,000 during each year. In
         addition, a 5% sales discount will be paid on sales in excess of
         $25,000,000. If the customer purchases less than $25,000,000 annually,
         the $1,200,000 amount is to be reduced in accordance with the terms of
         the acquisition agreement. For the years ended September 30, 1999, 1998
         and 1997 approximately $1,308,000, $1,327,000 and $400,000 has been
         recorded as sales discounts in connection with post-acquisition sales
         of $32,500,000, $33,642,000 and $12,896,000, respectively, made to the
         customer pursuant to the agreement. On November 29, 1999, the Company
         signed an amendment to this agreement that extended the contract
         through December 31, 2003.

         Other Legal Matters

         The Company is also involved in routine litigation incidental to its
         business. Management believes that the resolution of these matters will
         not materially affect the consolidated financial statements.


                                      -46-
<PAGE>   48


                    MCCLAIN INDUSTRIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

--------------------------------------------------------------------------------

         Health Insurance

         The Company is self-insured for certain health benefits up to $100,000
         per occurrence per individual with an aggregate limitation of
         $1,600,000 annually. The Company is self-insured for State of Michigan
         workers' compensation up to $200,000 per occurrence with an aggregate
         limitation of $500,000 annually.


18.      FOURTH QUARTER ADJUSTMENTS

         During the quarter ended September 30, 1997, the Company recorded
         various adjustments of approximately $2,500,000 principally related to
         the valuation of inventories and lease accounting. The aggregate effect
         of such adjustments was to decrease net income for the fourth quarter
         of 1997 by approximately $1,650,000 ($0.35 per share).


                                    * * * * *


                                     - 47-
<PAGE>   49
                                INDEX TO EXHIBITS
<TABLE>
<CAPTION>

Exhibit No.         Description                                                                                 Location
-----------         -----------                                                                                 --------
<S>                <C>                                                                                           <C>
     3.1           Articles of Incorporation of McClain Industries, Inc.                                          (7)
     3.2           Bylaws of McClain Industries, Inc.                                                             (1)
    10.1           McClain Industries, Inc. 1989 Incentive Stock Plan                                             (2)
    10.2           McClain Industries, Inc. 1989 Retainer Stock Plan for Non-Employee Directors                   (2)
    10.3           Agreement of Purchase and Sale dated July 20, 1992 by and between Peabody  International       (4)
                   Corporation, as Seller, and Galion Holding Company, as Buyer
    10.4           Manufacture  and License  Agreement  dated as of November 2,  1992,  between Galion Dump       (6)
                   Bodies, as Licensor, and the Company, as Licensee
    10.5           Loan  documents  dated as of March 1, 1993,  between  the Company and Galion Dump Bodies       (6)
                   and E-Z Pack
    10.6           Guaranty Fee Agreement dated as of March 2, 1993, between Galion Holding and the Company       (6)
    10.7           Purchase  Agreement,  dated  as of  March  30,  1993,  between  the  Company  and  Group       (7)
                   Properties III
    10.8           Purchase Agreement, dated as of March 30, 1993, between the Company and Group Properties       (7)
    10.9           Purchase  Agreement,  dated  as of  March  30,  1993,  between  the  Company  and  Group       (7)
                   Properties of Georgia
    10.10          Commercial  Mortgage,  Assignment of Leases and Rents,  Security Agreement and Financing       (8)
                   Statement Dated February 6, 1995, between Standard Federal Bank and the Company
    10.11          Commercial  Mortgage,  Assignment of Leases and Rents,  Security Agreement and Financing       (8)
                   Statement Dated February 6, 1995, between Standard Federal Bank and the Company
    10.12          Second  Amendment to Open-End  Commercial  Mortgage and  Assignment of Lease and Rentals       (8)
                   (Secures Future Advances) dated February 6, 1995,  between Standard Federal Bank and E-Z
                   Pack
    10.13          Second  Amendment to Open-End  Commercial  Mortgage and  Assignment of Lease and Rentals       (8)
                   (Secures Future  Advances)  dated February 6, 1995,  between  Standard  Federal Bank and
                   Galion Dump Bodies
    10.14          Fifth  Amendment to Open-End  Commercial  Mortgage and  Assignment  of Lease and Rentals       (8)
                   (Secures Future  Advances)  between  Standard  Federal Bank and Galion Dump Bodies dated
                   June 22, 1995.
    10.15          Third  Amended  and  Restated  Promissory  Note  (Line of Credit)  dated June 22,  1995,       (8)
                   between Standard Federal Bank, Galion Holding,  E-Z Pack, Galion Dump Bodies and McClain
                   Group Sales of Florida
    10.16          Security  Agreement dated June 22, 1995, between Standard Federal Bank and McClain Group       (8)
                   Sales of Florida
    10.17          Fifth  Amendment to Open-End  Commercial  Mortgage and  Assignment  of Lease and Rentals       (8)
                   (Secures Future  Advances) dated June 22, 1995,  between  Standard  Federal Bank and E-Z
                   Pack
    10.18          Loan Agreement dated July 17, 1996, between Standard Federal Bank and Leasing                  (9)
</TABLE>




                                       48
<PAGE>   50



<TABLE>
<CAPTION>
Exhibit No.         Description                                                                                 Location
-----------         -----------                                                                                 --------
<S>                <C>                                                                                             <C>
    10.19           Promissory Note (Line of Credit) dated July 17, 1996,  between Standard Federal Bank and       (9)
                    Leasing
    10.20           Commercial  Mortgage,  Assignment of Leases and Rents,  Security Agreement and Financing       (9)
                    Statement dated August 29, 1996, between Standard Federal Bank and McClain-Alabama.
    10.21           Security   Agreement  dated  August  29,  1996,   between   Standard  Federal  Bank  and       (9)
                    McClain-Alabama
    10.22           Master Lease  Agreement  dated July 15, 1995  between  Fifth Third  Leasing  Company and       (9)
                    Leasing
    10.23           Master Lease Agreement dated May 17, 1996 between NBD Bank and Leasing                         (9)
    10.24           Term Note dated January 17, 1997 between  Trust  Company Bank of Middle  Georgia and the      (10)
                    Company
    10.25           Preliminary  Placement  Memorandum  dated  April 17, 1997 - The  Industrial  Development      (10)
                    Board  of the  City of  Demopolis  Industrial  Development  Revenue  Bonds  Series  1997
                    (McClain of Alabama, Inc. Project)
    10.26           Lease  Agreement  dated April 1, 1997 between the  Industrial  Development  Board of the      (10)
                    City of Demopolis and McClain of Alabama
    10.27           Trust Indenture  Agreement dated April 1, 1997 between the Industrial  Development Board      (10)
                    of the City of Demopolis and LaSalle National Bank
    10.28           Bond  Guaranty  Agreement  dated  April  1,  1997  between  LaSalle  National  Bank  and      (10)
                    McClain-Alabama
    10.29           Mortgage,  Assignment  of Leases and  Security  Agreement  dated  April 1, 1997 from the      (10)
                    Industrial  Development Board of the City of Demopolis and  McClain-Alabama  to Standard
                    Federal Bank
    10.30           Standard Federal Bank Irrevocable Letter of Credit dated April 23, 1997                       (10)
    10.31           Placement  Agency Agreement dated April 23, 1997 - The Industrial  Development  Board of      (10)
                    the City of  Demopolis  Industrial  Development  Revenue  Bond Series  1997  (McClain of
                    Alabama, Inc. Project)
    10.32           Remarketing  Agreement dated April 23, 1997 among LaSalle  National Bank, The Industrial      (10)
                    Development Board of the City of Demopolis and McClain of Alabama, Inc.
    10.33           Loan  Agreement  dated  April  16,  1998  between  Standard  Federal  Bank  and  McClain      (11)
                    Industries,  Inc., McClain of Alabama,  Inc., McClain of Georgia, Inc., McClain of Ohio,
                    Inc., McClain of Oklahoma,  Inc.,  McClain EPCO, Inc., Shelby Steel Processing  Company,
                    McClain Tube  Company,  Galion  Holding  Company,  McClain E-Z Pack,  Inc.,  Galion Dump
                    Bodies, Inc., McClain Group Sales, Inc., and McClain Group Sales of Florida, Inc.
    10.34           Promissory Note (Line of Credit) dated April 16, 1998 between  Standard Federal Bank and      (11)
                    McClain Industries,  Inc., McClain of Alabama,  Inc., McClain of Georgia,  Inc., McClain
                    of Ohio, Inc.,  McClain of Oklahoma,  Inc.,  McClain EPCO, Inc., Shelby Steel Processing
                    Company,  McClain Tube Company,  Galion Holding Company,  McClain E-Z Pack, Inc., Galion
                    Dump Bodies, Inc., McClain Group Sales, Inc., and McClain Group Sales of Florida, Inc.
</TABLE>



                                       49
<PAGE>   51
<TABLE>
<CAPTION>
Exhibit No.         Description                                                                                 Location
-----------         -----------                                                                                 --------
<S>                <C>                                                                                            <C>
    10.35           Promissory  Note (Term  Loan) dated April 16, 1998  between  Standard  Federal  Bank and      (11)
                    McClain Industries,  Inc., McClain of Alabama,  Inc., McClain of Georgia,  Inc., McClain
                    of Ohio, Inc.,  McClain of Oklahoma,  Inc.,  McClain EPCO, Inc., Shelby Steel Processing
                    Company,  McClain Tube Company,  Galion Holding Company,  McClain E-Z Pack, Inc., Galion
                    Dump Bodies, Inc., McClain Group Sales, Inc., and McClain Group Sales of Florida, Inc.
    10.36           Promissory  Note (Line of Credit  Converting  to Term Loan) dated April 16, 1998 between      (11)
                    Standard Federal Bank and McClain  Industries,  Inc., McClain of Alabama,  Inc., McClain
                    of Georgia, Inc., McClain of Ohio, Inc., McClain of Oklahoma,  Inc., McClain EPCO, Inc.,
                    Shelby Steel Processing Company,  McClain Tube Company, Galion Holding Company,  McClain
                    E-Z Pack, Inc., Galion Dump Bodies,  Inc.,  McClain Group Sales, Inc., and McClain Group
                    Sales of Florida, Inc.
    10.37           Second  Amendment  Agreement,  Loan  Agreement,  Promissory  Note (Line of Credit) dated      (11)
                    April 16, 1998 between Standard Federal Bank and McClain Group Leasing, Inc.
    10.38           McClain Industries, Inc. 1999 Incentive Stock Plan                                             52
    10.39           McClain Industries, Inc. 1999 Retainer Stock Plan for Non-Employee Directors                   67
    10.40           Amended and Restated Loan  Agreement  dated July 9, 1999 between  Standard  Federal Bank       73
                    and McClain Industries, Inc., McClain E-Z Pack, Inc.,
                    McClain Galion, Inc., Shelby Steel Processing Company,
                    McClain Tube Company, McClain International FSC, and McClain
                    Southland Co.
    10.41           Promissory  Note (Line of Credit) dated July 9, 1999 between  Standard  Federal Bank and       109
                    McClain  Industries,  Inc., McClain E-Z Pack, Inc.,  McClain Galion,  Inc., Shelby Steel
                    Processing  Company,  McClain  Tube  Company,  McClain  International  FSC,  and McClain
                    Southland Co.
    10.42           Promissory  Note  (Term  Loan)  dated July 9, 1999  between  Standard  Federal  Bank and       114
                    McClain  Industries,  Inc., McClain E-Z Pack, Inc.,  McClain Galion,  Inc., Shelby Steel
                    Processing  Company,  McClain  Tube  Company,  McClain  International  FSC,  and McClain
                    Southland Co.
    10.43           Promissory  Note (Line of Credit  Converting  to Term Loan)  dated July 9, 1999  between       120
                    Standard Federal Bank and McClain  Industries,  Inc.,  McClain E-Z Pack,  Inc.,  McClain
                    Galion,   Inc.,  Shelby  Steel  Processing  Company,   McClain  Tube  Company,   McClain
                    International FSC, and McClain Southland Co.
    10.44           Third Amendment Agreement,  Loan Agreement,  Promissory Note (Line of Credit) dated July       126
                    9, 1999 between Standard Federal Bank and McClain Group Leasing, Inc.
     22             List of Subsidiaries                                                                           (9)
     27             Financial Data Schedule                                                                        130
</TABLE>



<TABLE>
<S>               <C>
(1)               Incorporated by reference to the Company's Form 10-K f/y/e 9/30/89
(2)               Incorporated by reference to the Company's Registration Statement (33-29613)
(3)               Incorporated by reference to the Company's Form 10-K f/y/e 9/30/91
(4)               Incorporated by reference to the Company's Form 8-K dated 7/27/92
(5)               Incorporated by reference to the Company's Form 10-K f/y/e 9/30/92
</TABLE>



                                       50
<PAGE>   52



<TABLE>
<S>               <C>
(6)               Incorporated by reference to the Company's Form 10-K f/y/e 9/30/93
(7)               Incorporated by reference to the Company's Registration Statement on Form S-2
                  (33-84562)
(8)               Incorporated by reference to the Company's Form 10-K f/y/e 9/30/95
(9)               Incorporated by reference to the Company's Form 10-K f/y/e 9/30/96
(10)              Incorporated by reference to the Company's Form 10;K f/y/e 9/30/97
(11)              Incorporated by reference to the Company's Form 10;K f/y/e 9/30/98
</TABLE>



                                       51