Oshkosh Corporation F2Q10 (Qtr End 3/31/10) Earnings Call Transcript

Oshkosh Corporation F2Q10 (Qtr End 3/31/10) Earnings Call Transcript
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Oshkosh Corporation (OSK)

F2Q10 Earnings Call

April 29, 2010 9:00 am ET

Executives

Pat Davidson – Vice President of Investor Relations

Robert Bohn – Chairman, Chief Executive Officer

Charles Szews – President, Chief Operating Officer

David Sagehorn – Executive Vice President, Chief Financial Officer

Analysts

Jerry Rivich – Goldman Sachs

Walter Liptak – Barrington Research

Alexander Blanton – Ingalls & Snyder

[Robert Kakacks – Suntrust Robinson Humphrey]

Charles Brady – BMO Capital Markets

Ann Duignan – JP Morgan

Paul Bodner – Longbow Research

Chris Rousser – Robert W. Baird

Ben Elias – Sterne, Agee & Leach

[Davila Lucas – Morningstar]

David Raso – ISI Group

Steve Barger – Keybanc Capital Markets

Chase for Jamie Cook – Credit Suisse

Presentation

Operator

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Previous Statements by OSK
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Welcome to the Oshkosh Corporation’s fiscal year 2010 second quarter financial results conference call. (Operator Instructions) It is now my pleasure to introduce your host, Mr. Pat Davidson, Vice President of Investor Relations for Oshkosh Corporation.

Pat Davidson

Good morning everybody and thanks for joining us. Earlier today, we published our second quarter results for fiscal 2010. 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.

Please refer now to Slide 2 of that slide 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 filing 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.

During our second fiscal quarter of 2009, we recorded non-cash charges for the impairment of good will and other long-lived assets. Additionally, we sold our European Refuse Collection vehicle and fire apparatus businesses in July and October of 2009 respectively. All sales, income and backlog figures that we discuss today exclude non-cash impairment charges and refer to continuing operations only unless otherwise stated.

Presenting today for Oshkosh Corporation will be Bob Bohn, our Chairman and Chief Executive Officer, Charlie Szews, our President and Chief Operating Officer, and Dave Sagehorn, our Executive Vice President and Chief Financial Officer.

Let’s begin by turning to Slide 3, and I’ll turn it over to you Bob.

Robert Bohn

Thank you Pat. Good morning and thank you all for joining us today. Three months ago, we shared with you that our fiscal year was off to a very strong start, driven by our well-executed ramp up of production and sales under the M-Wrap All Terrain vehicle, M-ATV contract.

I’m here today to let you know that we have continued where we left off and are proud to announce another stellar quarter. For the quarter, our sales increased 131% to $2.68 billion leading to record quarterly operating income of $494 million and record quarterly earnings per share of $3.22.

Once again, this outstanding performance was driven mainly by strength in our Defense segment supported by improved results in our Access Equipment segment, which was aided by the M-ATV production as well as improved performance in its base business. Sales in most of our non-Defense businesses in the quarter were flat or down as we continued to experience weaknesses in many of our end markets.

I would like to thank our employees, suppliers and government customers for their great support in ramping up and sustaining the quality and high rate production to quickly get the M-ATV’s to our war fighters in Afghanistan to save lives. Like any rapid short duration program, we had to overcome operational challenges, but the team has pulled together to deliver to schedule for our war fighters and we’re pleased to hear that the vehicles are performing extremely well in the theatre.

We generated strong cash flow again this quarter, allowing us to reduce our debt by an additional $239 million. We also completed a $500 million senior notes offering in the quarter that Dave will talk about later.

Please turn to Slide 4 for a discussion of current conditions. We were awarded an order for an additional 1,460 M-ATV’s in February, taking the total quantity ordered of these life saving vehicles to 8,079. At that time, we also received instructions to modify our delivery schedule. Starting next month, we will reduce our monthly M-ATV production quantities. This now means that we’ll be building and shipping M-ATV in lower quantities for the remainder of fiscal 2010 and extending production and sales into the first quarter of fiscal 2011.

There is potential for additional M-ATV orders principally through four military sales FMS as well as potential sales of new variance of the M-ATV. Charlie will talk in more detail about these opportunities in a few moments.

On February 12, the U.S. Army confirmed its award of the family of tactical vehicles, the FMTV contract to Oshkosh. This was a great win for both Oshkosh Corporation and the U.S. Army. We’re busy producing test vehicles and are continuing to prepare for full rate production that will allow us to deliver FMTV’s beginning in fiscal 2011 and continuing through fiscal 2014 and hopefully beyond. We are absolutely honored to have the opportunity to manufacture these important vehicles.

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