Q3 2011 Earnings Call
July 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.
Charles Brady - BMO Capital Markets U.S.
Josephine Millward - The Benchmark Company, LLC
Robert McCarthy - Robert W. Baird & Co. Incorporated
David Raso - ISI Group Inc.
Andrew Obin - BofA Merrill Lynch
Jamie Cook - Crédit Suisse AG
Peter Skibitski - SunTrust Robinson Humphrey, Inc.
Previous Statements by OSK
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Thanks, Latonya. Good morning, everybody, and thanks for joining us. Earlier today, we published our second quarter results for fiscal 2011. A copy of the release is available on our website at 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. Please begin by turning to Slide 3. And I'll turn it over to you, Charlie.
Thank you, Pat. This morning we have 3 objectives. First, we will review our third quarter results; second, we will introduce qualitative guidance on fourth quarter and next fiscal year; and third, will introduce and explain our new multiyear growth strategy, which is a combination of a comprehensive 6-month study. This will allow us to explain to you, our shareholders, as well as our employees and customers, how we expect to drive through the uncertainties of the pending U.S. defense spending decline and slow economic recovery to deliver strong returns for shareholders, growth prospects for employees, all while delighting our customers.
So let's get started on those objectives. For the quarter, our sales decreased 17% to $2 billion, leading to operating income of $126 million and EPS of $0.75. As was the case during the first 2 quarters of fiscal 2011, lower sales of M-ATVs compared to last year drove the EPS decline. Our Access Equipment segment delivered improved performance, largely due to U.S. rental customers continuing to invest in new equipment to reduce their average fleet age. In fact, JLG's sales to external customers grew 44% compared to the prior-year quarter, resulting in the segment's strongest single quarter for Access Equipment sales in several years.
Last quarter, we told you that we plan to triple our daily FMTV production rate by the end of calendar 2011. While we're the on track to deliver that schedule by doubling daily production from month end March to month end June to over 20 trucks and about 10 trailers per day. Our team has put forward a phenomenal effort to make this progress. Finally, our defense leadership team has visited our army customer, and it was clear that we are meeting their expectations for this production launch and are delivering an improved, high-quality vehicle to our soldiers.
Now it's another good quarter for Defense orders, as we received several multiple M-ATV orders. Specifically, the U.S. has ordered 577 additional units with the Oshkosh underbody improvement kit, which provide additional protection against IED threats. We also received an order for more than 5,100 underbody improvement kits that, along with previous orders, will cover nearly every M-ATV in the U.S. fleet.
And finally, we received our first long-awaited M-ATV order from an international customer. These units began to ship this month, that is July, to the UAE. There are opportunities for additional international M-ATV orders, some significant. Similar to this first order, we believe it will take time for any further orders to materialize. We're also expecting an announcement by the U.S. Army. Perhaps as early advantage today, we will be receiving an order for approximately $900 million for the delivery of nearly 7,000 FMTV trucks and trailers. Production of these units will largely occur in our fiscal 2013.
Please turn to Slide 4. JLG's Access Equipment business continue to experience strong demand for its aerial work platform and telehandler products. Most likely described to you on our last call, we are experiencing strong replacement demand in the North American market. This demand has been steady and well described by many of our larger rental customers as they work to reduce fleet age. We have also experienced some improvement in replacement demand in parts of Europe, although the European recovery is still lags improvement in North America.