Williams Controls, Inc. (WMCO)
F3Q10 (Qtr End 06/30/10) Earnings Call Transcript
August 4, 2010 4:00 pm ET
Dennis Bunday – EVP & CFO
Pat Cavanagh – President & CEO
John Nobile – Taglich Brothers
Chris Sansone – Robotti & Company
Previous Statements by WMCO
» Williams Controls Inc. Q2 2010 Earnings Call Transcript
» Williams Controls, Inc. F1Q10 (Qtr End 12/31/09) Earnings Call Transcript
» Williams Controls, Inc. F3Q09 (Qtr End 06/30/09) Earnings Call Transcript
Good afternoon, and welcome to the Williams Controls host third quarter 2010 results conference call. My name is Jessica and I will be facilitating the audio portion of today’s Interactive Broadcast. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator instructions)
At this time, I would like to turn the event over to Dennis Bunday, Chief Financial Officer.
Good afternoon, everyone, and welcome to our third quarter fiscal 2010 conference call. Before we begin, you should note that the following discussions and responses to questions reflect management's views as of today, August 4, 2010, and may include forward-looking statements.
Actual results may differ materially from those projected in the forward-looking statements. Information concerning risk factors and other factors that could cause actual results to differ materially is included in our filings with the SEC, including our 2009 annual report on Form 10-K, our 2010 quarterly reports on Form 10-Q, and our fiscal 2010 current reports on Form 8-K.
Specific factors that may cause such a difference include, but are not limited to, availability of adequate working capital, domestic and international competitive pressures, increased governmental regulation, increased costs of materials and labor, and general economic conditions in the United States and abroad.
I will now turn the call over to our CEO, Pat Cavanagh, for his comments on the quarter.
Thank you, Dennis. Good afternoon, everyone, and welcome to our fiscal third quarter conference call. This morning we released our financial results for the third quarter of fiscal 2010, looks like we have a large following on the interview [ph] today.
Sales increased for the fourth conservative quarter from our low point in the third quarter of fiscal 2009 as our markets worldwide have continued to recover and we’ve launched a number of new programs and are introducing several new products.
The quarterly sales of $13.8 million were up 63% over last year's third quarter sales of $8.4 million, and up 9% from this year's second quarter. For the first nine months of the fiscal year, sales are up almost $10 million or 35% over last year to $38.1 million.
While we don’t break out revenues in individual markets, I wanted to share with you some relevant sales comparisons and market projections.
For both our quarter-over-quarter and year-to-date comparisons, a significant portion of the sales improvements came from new products and new program introductions, including off-road and military applications, stand-alone sensors, electronic hand controls and continued increases in the penetration of electronic controls in India and China. For the first nine months, approximately $3.3 million or one-third of the sales improvements came from these new products and programs.
During the worse of the downturn last year, while some of our competitors were making cuts in engineering and marketing capability we decided, with the support of the Board and a sound balance sheet, to invest in new product programs, global customer acquisition, and manufacturing capability while running the business at cash flow breakeven. We are seeing the results of some of these decisions in the third quarter.
In addition to new products, all of our markets were stronger both in the quarter and year-to-date. Europe truck sales more than doubled in the quarter and was up 70% year-to-date due to a combination of an improvement in market conditions and a reduction in truck inventories.
Korean truck and bus sales were up 46% in the quarter and 93% year-to-date. Our worldwide off-road sales, excluding new programs, were up 15% year-to-date. NAFTA truck sales were up 51% in the quarter and 17% year-to-date. Several positive things are occurring at the same time in the NAFTA truck market. More goods are being transported and used truck prices are firming, while overcapacity is evaporating.
The current age of class 8 trucks in North America is at a record age of almost 7 years and many of the fleets will soon have fully depreciated trucks negating their depreciation tax credits.
Industry forecasters are now calling for calendar-year 2010 class 8 production in the 150,000 unit range growing to 220,000 units in calendar-year 2011 and 275,000 units in calendar-year 2012. Many industry executives are worried about the effects on the supply chain as volumes start to ramp up this vertically.
As I've mentioned before, NAFTA truck market is almost 20% of our business this year. We currently see sales in our third quarter in the $4.3 million to $4.7 million a month range, but it’s really too early to tell if this is sustainable into 2011 due to the uncertainty in the economy.
Our sales in China were up 43% over the third quarter of fiscal-year 2009 and up 60% year-to-date over the comparable period last year. We are seeing an increase in sales of our controls for the Chinese off-road equipment manufacturers and a steady increase in the number of truck OEMs utilizing electronic engines which use our pedals. We remain very well positioned in that strategic market as the Chinese OEMs transition to electronic engines and we use our low-cost advantage to gain additional global market share.