Williams Controls' CEO Discusses Q1 2012 Results - Earnings Call Transcript

Williams Controls Inc. (WMCO)

Q1 2012 Earnings Call

May 1, 2012 04:15 pm ET

Executives

Dennis Bunday - EVP & CFO

Pat Cavanagh - President & CEO

Analysts

Presentation

Operator

My name is Shinal and I will be your conference operator today. At this time I would like to welcome everyone to the Williams Controls second quarter fiscal 2012 investor 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 will now turn the conference over to Dennis Bunday, Chief Financial Officer.

Dennis Bunday

Thank you. Good afternoon everyone and welcome to our second quarter fiscal 2012 conference call. Before we begin, you should note that the following discussions and responses to questions reflect management's views as of today, May 1, 2012, 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 2011 annual report on Form 10-K, our fiscal 2012 reports on Form 10-Q, and our fiscal 2012 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 afternoon everyone and welcome to our conference call. This morning we released our financial results for our fiscal second quarter that ended March 31, 2012 and I am glad to see as many of you joined us from New York as are on the call because I was kind of concerned about what was going on out there. Sales for the quarter were $16.8 million, up 13.8% or $2 million from the $14.8 million reported in the comparable period last year.

For the six month period sales increased $4 million or 14.1% to $32.3 million from comparable six month period last year. NAFTA truck sales was the primary driver of increased sales in the quarter and the six month period. Our NAFTA truck sales were up 46% in the quarter and 51% for the six month period compared to the same periods last fiscal year.

Last week I was at the Heavy Duty Business Forum meeting at Phoenix with many of your key supplier executives in the trucking industry. My opinion is that the outlook for sales this year is still a bit uncertain and many people now believe that the industry will build around 270,000 class A trucks and a 150,000 medium duty trucks this year, down from earlier projections but up from last year.

I think this view was reinforced when a couple of OEMs adjusted their production build schedules last quarter. Global off-highway sales were up 23% for the quarter at $4.2 million and up 29% year to date at $8.4 million compared to last year as a result of new products and programs coming to fruitions with key global off-highway manufacturers.

We are particularly excited about our success in this market at the TOEMs over the last couple of years. As we have discussed in the past we are in the midst of launching an aggressive sales and media campaign this month for our new CAN-bus Joystick product line.

This product was introduced at INTERMAT, a major off-highway equipment show in Paris two weeks ago and we have a number of print and digital advertisements appearing this month in major trade journals. We have provided units to a number of the North America and Asian OEMs at this point for testing and evaluation.

In our design, we have incorporated the voice of the customer which has resulted in an economical and very robust design. In fact a couple of weeks ago when we demonstrated our joystick to a technical executive at one of our major off-highway OEM customers for the first time, he commented that it was very similar to our pedals and described them in one word bulletproof. We feel that our long-standing relationship in context and quality certifications with all of the major off-highway OEMs combined with our global platform that will enable us to be successful with this new product, we intend to be manufacturing our joysticks for the Asian market and in our plant in China in fiscal 2013.

With the significant investment by the many of the global off-highway OEMs in the China market, it will simply be one of the largest markets for joysticks in the world and we will leverage our footprint in customer relationships in that market with this new product. You may remember in our last call we described the shortfall in sales in Korea and with one large European truck OEM.

At that time we believed this shortfall was largely contained in the first quarter and in fact sales in Korea and to this European OEM have returned to normalized levels in the second quarter. Sales in Korea were up sequentially a 167% to a more normalized basis and on the same basis through European truck OEMs, we were up 49% reflecting a return to normalized levels there also.

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