Williams Controls Inc. ( WMCO)

Q4 2011 Earnings Call

December 8, 2011 10:30 AM ET

Executives

Dennis Bunday – Chief Financial Officer

Pat Cavanagh – Chief Executive Officer

Analysts

John Nobile – Taglich Brothers

Matthew Berry – Lane Five Capital

Presentation

Operator

Good afternoon, ladies and gentlemen. My name is Martina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Williams Controls Fourth Quarter and Fiscal Year End 2011 Conference Call. 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)

I would now like to turn the call over to Dennis Bunday, Chief Financial Officer of Williams Controls. You may begin your conference.

Dennis Bunday

Good morning, everyone. Welcome to our fourth quarter and year end fiscal 2011 conference call.

Before we begin, you should note that the following discussions and responses to questions reflect management's views as of today, December 8, 2011, 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 2010 annual report on Form 10-K, our fiscal 2011 quarterly reports on Form 10-Q, and our fiscal 2011 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 regulations, 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.

Pat Cavanagh

Thank you, Dennis. Good morning, everyone. And welcome to our fiscal fourth investor conference call. This morning we released our financial results for our 2011 fourth quarter and year end.

We are holding our call today from the New York Stock Exchange where we had the opportunity to ring the opening bell yesterday. We move from the NASDAQ to the NYSE Amex because we believe that for our stock the NYSE Amex platform may reduce spreads and increase trading volume making it easier for investors to own our stock.

Sales for the year ended September 30, 2011 increased $9.6 million or 18.4% to $61.9 million from $52.3 million for the comparable period last year. Net income for the year ended September 30, 2011 was $3.3 million or $0.45 per diluted share, compared to net income of $1.4 million or $0.19 per diluted share for the year ended September 30, 2010.

There were number of one-time costs in both fiscal ’10 and fiscal ’11, and Dennis will cover those later in his call, later in this call. Over the last five years we have made a conservative effort to broaden our product offering and expand our international footprint.

Overall, in fiscal ’11 55% of our products were sold in United States, 9% in Canada and Mexico, 22% in Europe and 14% in Asia. Also in fiscal ’11 over $3 million in sales came from new products introduced in the last year.

We expect to see similar results going forward based on over $18 million of new business that we won in the last two fiscal years. Many of these new products wins were for off-highway customers where sales were at a record level this year $14 million or 24% of our total sales.

In fiscal ’11, we were specially pleased with our new bulldozer pedal systems and power armrest adjusters, where those products contributed over a $1 million in new sales at the key off-highway OEM.

We also launched another rocker pedal system for major agricultural OEM, which will contribute the meaningful sales in fiscal ’13. We recently introduced our new state-of-the-art joystick systems and have them in the field under customer evaluation. So far we have received very good feedback from our existing customers and potential customers.

We expect to start selling these products in fiscal ’12, because of the sophistication and software contained in these products, the selling price is substantially higher than our existing throttle pedals. In fiscal ’11 20% of our business was tied directly to production of medium and heavy trucks in North America. So I thought to make a couple of comments about the outlook in this market.

In calendar 2012 the industry is projected to build 295,000 Class 8 trucks, up from approximately 250,000 in calendar year 2011. I think there is some risk in this number, the kiosk in Europe continues, but the backlog of Class 8 trucks are strong, fleet profits are up, used truck prices are firm, exports are strong and the current fleet is old. Class 8 trucks are normally owned by fleets that transport goods for leaving.

While the Class 8 market gets a lot of attention, the North American Class 5 through 7 medium duty vehicle market is also very important player. In 2010, medium demand was made up of three components, medium trucks of about 68% of the market, school and buses at about 22% and recreational vehicles at 10%.

The medium duty market in North America this year is showing a 40% year-over-year increase compared to 2010 at 165,000 vehicles. The next year’s production is expected to increase to 176,000 vehicles.

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