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Q1 2011 Earnings Call
January 28, 2011 9:00 am ET
Charles Szews - Chief Executive Officer, President, Chief Operating Officer and Director
David Sagehorn - Chief Financial Officer and Executive Vice President
Patrick Davidson - Vice President of Investor Relations
Ann Duignan - JP Morgan Chase & Co
Jerry Revich - Goldman Sachs Group Inc.
Walter Liptak - Barrington Research Associates, Inc.
Peter Skibitski - SunTrust Robinson Humphrey Capital Markets
Paul Bodnar - Longbow Research LLC
Charles Brady - BMO Capital Markets U.S.
Ben Elias - Sterne Agee & Leach Inc.
Robert McCarthy - Robert W. Baird & Co. Incorporated
David Raso - ISI Group Inc.
Josephine Millward - The Benchmark Company, LLC
Andrew Obin - BofA Merrill Lynch
Jamie Cook - Crédit Suisse AG
Previous Statements by OSK
» Oshkosh CEO Discusses F4Q10 Results - Earnings Call Transcript
» Oshkosh F3Q10 (06/30/2010) Earnings Call Transcript
» Oshkosh Corporation F2Q10 (Qtr End 3/31/10) Earnings Call Transcript
Thanks, Claudia. Good morning, and thanks for joining us today. Earlier today, we published our first quarter results for fiscal 2011. A copy of the release is available on our website at www.oshkoshcorporation.com. Today's call is being webcast and is accompanied by a slide presentation, which is also available on our website. The audio replay and slide presentation will be available on our website for approximately 12 months, and please refer now to Slide 2 of that presentation.
Our remarks that follow, including answers to your questions, include statements that we believe to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks that could cause actual results to be materially different. These risks include, among others, matters that we have described in our Form 8-K filed with the SEC this morning and other filings we make with the SEC. We disclaim any obligation to update these forward-looking statements, which may not be updated until our next quarterly earnings conference call, if at all.
Presenting today for Oshkosh Corporation will be Charlie Szews, President and Chief Executive Officer; and Dave Sagehorn, Executive Vice President and Chief Financial Officer.
Let's begin by turning to Slide 3, and I'll turn it over to you, Charlie.
Thank you, Pat. Good morning, and thank you, all, for joining us today. We're continuing the approach we began with our previous quarterly conference call to reduce some of the repetitiveness that creeps into the call. Instead of methodically running through each of our segments, we will discuss overall company results and outlook, with particular focus on actions we are taking to drive the business during this transition year. This should shorten our prepared remarks and leave more time for questions. With that, let's get started.
For the quarter, our sales decreased 30% to $1.7 billion, leading to lower operating income of $169 million and earnings per share or EPS of $1.09. This quarter, we began our transition from high-volume production of M-ATVs to the gradual launch production of the U.S. Army's Family of Medium Tactical Vehicles and what we expect to be near breakeven margins for fiscal 2011. These margins are significantly lower than the margins we achieved on the M-ATV program. This transition will challenge our quarterly earning comparisons in fiscal 2011, but we do expect to be solidly profitable each quarter this year.
Beyond fiscal 2011, we have good visibility in our Defense segment with several programs of record and ample opportunities to drive our Defense business forward by reducing our FMTV costs and pursuing domestic and global programs. We believe JLG is beginning to turn the corner and that it should provide a lift for our company. We also have initiatives to reduce the cost structures in several of our businesses that are now not recovering as quickly as JLG. And our continued focus of debt reduction provides us with options and flexibility to pursue growth initiatives. We'll be working throughout fiscal 2011 to position Oshkosh Corporation to be able to return to growth in fiscal 2012. I'll talk more about this in the upcoming slides.
Let's dive a little deeper into the operating highlights for the quarter and turn with me to Slide 4. During the quarter, we completed delivery of the final 322 M-ATVs from the original orders for 8,079 units compared to about 2,300 units delivered during the prior year first quarter. We continue to deliver a high volume of M-ATVs spare kits in the quarter, which drove up our Defense margins despite the drop in M-ATV vehicle volume. There's a great team effort across our entire company to deliver these vehicles at unprecedented speed to our troops in Afghanistan. But then it is easy to rally our people around such an important mission. We continue to hear from the field that the M-ATV has proven its worth in theater for both for its ability to protect our men and women and also for its ability to traverse the most difficult terrain. This leads us to believe that it will be part of the continuing force structure and that Oshkosh will generate M-ATV-related revenues for years to come, whether it be for new vehicles, spares or upgrades.
The Defense team continues to extend the M-ATV family of vehicles with the award of a contract modification for 250 ambulances, and a follow-on award of 46 Special Forces Vehicles. We're working on additional variants that meet other mission requirements, and we're continuing to design platform upgrades like the order for 800 M-ATV bolt-on protection kits. The team also conducted M-ATV trials in another Middle Eastern country just this month. International sales opportunities take more time to develop, but we do believe we have a game-changing vehicle that is drawing considerable foreign interest, most likely for 2012 production or later.
Our attractive pricing on the FMTV program caught the attention of the U.S. Department of Defense, which led to additional orders totaling $1.2 billion in the first fiscal quarter for FMTVs. To date, we've received orders for approximately 18,000 FMTV trucks and trailers. Many of these units will be delivered in fiscal 2012 and 2013 providing us with excellent visibility for this program. As you may recall, the request for proposal called for up to 23,000 trucks and trailers. We now believe the U.S. Army will ultimately order many more FMTVs than the original 23,000 in the RFP.