Oshkosh Truck Reports First Quarter EPS Up 33.7 Percent
Sales increased 30.8 percent in the first quarter of fiscal 2005. Sales grew in all segments as the Company's end markets continued to improve, and due to $47.6 million of sales contributed by recent acquisitions. Operating income increased 44.7 percent to $67.6 million, or 10.5 percent of sales. Operating income increased principally due to strong performance in the Company's defense and fire and emergency segments, while the Company's European refuse business exhibited continued weak performance.
Robert G. Bohn, chairman, president and chief executive officer, said, "This is the best first quarter in Company history, driven by exceptional execution of logistics services for the U.S. Department of Defense and strong performance in the fire and emergency business."
Bohn continued, "The first quarter has established solid momentum for Oshkosh's fiscal 2005 financial performance. Both our defense and fire and emergency businesses had exceptionally strong starts to the fiscal year. The defense business continues to grow at record levels, fueled by new armor contracts, active recapitalization of the fleet in Iraq, and a doubling of our parts and service revenues -all as a result of the ongoing conflicts.
"We believe the municipal and homeland security markets are improving and provide a solid foundation for continued growth in our fire and emergency business. JerrDan and BAI, acquisitions completed last year, contributed to our financial performance, with JerrDan delivering double-digit growth in its incoming order rate for towing and recovery equipment.
"In our commercial business, we had improved revenue generation and earnings in our U.S. operations, but European operations continued to report losses in the first quarter. Although we believe that McNeilus has turned the corner, we are implementing 'lean' initiatives and price increases at both our U.S. and European operations to reduce our cost structure and deliver margin enhancement."
Commenting on the outlook for the fiscal year, Bohn said, "We increased our fiscal 2005 earnings per share estimate just last quarter. Now, our confidence has been further bolstered by recent developments, particularly the strong incoming order rate in our defense and fire and emergency businesses, leading us to again increase fiscal 2005 estimates above previous guidance."
Factors affecting first quarter results for the Company's business segments included:
Fire and emergency--Fire and emergency segment sales increased 58.0 percent to $194.2 million for the quarter. Operating income was up 58.9 percent to $18.4 million, or 9.5 percent of sales. The JerrDan and BAI acquisitions contributed revenues of $43.6 million and operating income of $3.0 million. Sales and operating income from other businesses in this segment grew 22.5 percent and 32.7 percent, respectively, for the quarter. The higher sales level for these businesses reflected strong order flow for fire apparatus and airport products during fiscal 2004, largely due to continued recovery in municipal spending nationwide and federal homeland security funding, which fueled purchases by federal agencies, states and municipalities. Operating income margins for these businesses improved due to an improved sales mix.
Defense--Defense segment sales increased 13.2 percent to $215.5 million for the quarter. Parts and services sales more than doubled, compensating for lower truck sales. Prior year first quarter results included shipments of Heavy Equipment Transporters ("HETs") to the U.K. The U.K. HET contract was concluded during the second quarter of fiscal 2004.
Operating income in the first quarter was up 39.1 percent to $51.7 million, or 24.0 percent of sales. Earnings for the current quarter increased primarily due to the more than doubling of relatively higher-margin parts and service sales and the negotiation of contracts in the first quarter under which the Company recovered $3.7 million of pre-contract costs expensed in fiscal 2004 related to maintenance and armoring work performed in Iraq. First quarter earnings also reflected an $8.5 million cumulative life-to-date adjustment to operating income due to an increase in margins on the Company's Medium Tactical Vehicle Replacement ("MTVR") contract from 7.6 percent to 8.5 percent. The Company had reported a cumulative life-to-date adjustment to MTVR margins during the first quarter of fiscal 2004 of $6.5 million to raise its MTVR base contract margins to a 6.3 percent rate at that time.
Commercial--Commercial segment sales increased 32.0 percent to $241.6 million for the quarter. Higher unit volumes of concrete placement and domestic refuse products were the primary drivers, while pricing held relatively flat compared to the prior year. Operating income decreased 21.7 percent to $5.6 million, or 2.3 percent of sales, as a result of a $2.6 million operating loss at the Company's European refuse products business. The loss was attributable to lower unit volume, lower pricing in many end markets and increased material, labor and warranty costs associated with the launch of a new, Geesink-branded rear loader.
Corporate and other--Operating expenses and inter-segment profit elimination decreased $1.1 million to $8.1 million, largely due to favorable settlements of product liability matters aggregating $4.2 million which offset higher compensation expense. Net interest expense for the quarter doubled to $1.8 million, compared to the prior year quarter. Higher interest costs were largely due to acquisition-related debt incurred in July and November 2004 in connection with the Company's recent acquisitions.
Total debt increased during the quarter to $104.4 million at December 31, 2004 from $75.9 million at September 30, 2004 as a result of debt incurred in connection with the Company's acquisition of the Concrete Equipment Company, Inc. in November 2004 and increased working capital requirements associated with seasonal requirements.
Dividend Announcement
Oshkosh Truck Corporation's Board of Directors declared a quarterly dividend of $0.075 per share for Class A Common Stock and $0.0875 per share for Common Stock. These dividends, unchanged from the immediately preceding quarter, will be payable February 14, 2005, to shareholders of record as of February 7, 2005.
The Company will comment on first quarter earnings and expectations for the remainder of fiscal 2005 during a live conference call at 11:00 a.m. Eastern Standard Time this morning. Viewer-controlled slides for the call will be available on the Company's website beginning at 9:30 a.m. Eastern Standard Time this morning. The call will be available simultaneously via a webcast over the Internet as a service to investors. It will be listen-only format for on-line listeners. To access the webcast, investors should go to www.oshkoshtruckcorporation.com at least 15 minutes prior to the event and follow instructions for listening to the broadcast. An audio replay of such conference call and related question and answer session will be available for twelve months at this website.
Oshkosh Truck Corporation is a leading designer, manufacturer and marketer of a broad range of specialty commercial, fire and emergency and military trucks and truck bodies under the Oshkosh®, McNeilus®, Pierce®, JerrDan®, Medtec®, CON-E-CO®, Geesink, Norba and BAI brand names. Oshkosh's products are valued worldwide by fire and emergency units, defense forces, municipal and airport support services, and concrete placement and refuse businesses where high quality, superior performance, rugged reliability and long-term value are paramount.
OSHKOSH TRUCK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
December 31,
-------------------
2004 2003
--------- ---------
(In thousands,
except
per share amounts)
Net sales $644,917 $493,194
Cost of sales 529,326 404,772
--------- ---------
Gross income 115,591 88,422
Operating expenses:
Selling, general and administrative 46,265 40,031
Amortization of purchased intangibles 1,694 1,663
--------- ---------
Total operating expenses 47,959 41,694
--------- ---------
Operating income 67,632 46,728
Other income (expense):
Interest expense (2,251) (1,148)
Interest income 466 250
Miscellaneous, net (713) (40)
--------- ---------
(2,498) (938)
--------- ---------
Income before provision for income taxes,
equity in earnings of unconsolidated
affiliates and minority interest 65,134 45,790
Provision for income taxes 25,132 16,712
--------- ---------
Income before equity in earnings of
unconsolidated affiliates and
minority interest 40,002 29,078
Equity in earnings of unconsolidated
affiliates, net of income taxes 473 620
Minority interest 99 -
--------- ---------
Net income $ 40,574 $ 29,698
========= =========
Earnings per share:
Class A Common Stock $ 0.99 $ 0.74
Common Stock $ 1.14 $ 0.86
Earnings per share assuming dilution $ 1.11 $ 0.83
Weighted average shares outstanding:
Basic earnings per share:
Class A Common Stock 806 815
Common Stock 34,809 33,984
Effect of dilutive options and incentive
compensation awards 824 980
--------- ---------
Diluted earnings per share 36,439 35,779
========= =========
Cash dividends:
Class A Common Stock $0.07500 $0.05000
Common Stock $0.08750 $0.05750
OSHKOSH TRUCK CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
December September
31, 30,
2004 2004
----------- -----------
(Unaudited)
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 37,628 $ 30,081
Receivables, net 279,047 253,914
Inventories 438,979 368,067
Prepaid expenses 19,906 17,612
Deferred income taxes 38,153 41,033
----------- -----------
Total current assets 813,713 710,707
Investment in unconsolidated affiliates 20,811 21,187
Other long-term assets 28,115 26,375
Property, plant and equipment 329,599 316,538
Less accumulated depreciation (153,507) (147,962)
----------- -----------
Net property, plant and equipment 176,092 168,576
Purchased intangible assets, net 134,668 140,506
Goodwill 411,957 385,063
----------- -----------
Total assets $1,585,356 $1,452,414
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 179,017 $ 200,290
Customer advances 237,791 209,656
Floor plan notes payable 38,679 25,841
Payroll-related obligations 32,322 43,978
Income taxes 8,848 17,575
Accrued warranty 39,087 35,760
Other current liabilities 85,740 73,842
Revolving credit facility and
current maturities of long-term debt 101,037 72,739
----------- -----------
Total current liabilities 722,521 679,681
Long-term debt 3,392 3,209
Deferred income taxes 62,262 66,543
Other long-term liabilities 73,320 64,259
Minority interest 2,824 2,629
Commitments and contingencies
Shareholders' equity 721,037 636,093
----------- -----------
Total liabilities and shareholders' equity $1,585,356 $1,452,414
=========== ===========
OSHKOSH TRUCK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
December 31,
-------------------
2004 2003
--------- ---------
(In thousands)
Operating activities:
Net income $ 40,574 $ 29,698
Non-cash and other adjustments 10,756 6,986
Changes in operating assets and liabilities (62,533) (48,745)
--------- ---------
Net cash used for operating activities (11,203) (12,061)
Investing activities:
Acquisition of business, net of cash acquired (19,111) -
Additions to property, plant and equipment (3,507) (4,716)
Proceeds from sale of assets 3 46
Decrease (increase) in other long-term assets 2,123 (434)
--------- ---------
Net cash used for investing activities (20,492) (5,104)
Financing activities:
Net borrowings under revolving credit facility 25,511 20,100
Proceeds from exercise of stock options 16,326 1,772
Proceeds from issuance of long-term debt - 965
Repayment of long-term debt (384) (240)
Dividends paid (3,088) (2,001)
--------- ---------
Net cash provided from financing activities 38,365 20,596
Effect of exchange rate changes on cash 877 912
--------- ---------
Increase in cash and cash equivalents 7,547 4,343
Cash and cash equivalents at beginning of period 30,081 19,245
--------- ---------
Cash and cash equivalents at end of period $ 37,628 $ 23,588
========= =========
Supplementary disclosure:
Depreciation and amortization $7,834 $6,585
OSHKOSH TRUCK CORPORATION
SEGMENT INFORMATION
(Unaudited)
Three Months Ended
December 31,
-------------------------
2004 2003
----------- -----------
(In thousands)
Net sales to unaffiliated customers:
Fire and emergency $ 194,156 $ 122,861
Defense 215,474 190,387
Commercial 241,581 182,996
Intersegment eliminations (6,294) (3,050)
----------- -----------
Consolidated $ 644,917 $ 493,194
=========== ===========
Operating income (expense):
Fire and emergency $ 18,445 $ 11,606
Defense 51,701 (1) 37,164 (2)
Commercial 5,625 7,187
Corporate and other (8,139) (9,229)
----------- -----------
Consolidated $ 67,632 $ 46,728
=========== ===========
Period-end backlog:
Fire and emergency $ 532,352 $ 347,577
Defense 1,052,905 874,761
Commercial 279,743 215,385
----------- -----------
Consolidated $1,865,000 $1,437,723
=========== ===========
(1) Includes an $8,500 cumulative life-to-date adjustment to operating
income due to an increase in margins on the Company's MTVR
contract from 7.6 percent to 8.5 percent as a result of the final
negotiation of disputed pricing on two components of the MTVR
truck, improved overhead absorption due largely to increased
overall defense segment production volume and other items.
(2) Includes a $6,500 cumulative life-to-date adjustment to operating
income due to an increase in margins on the Company's MTVR
contract from 5.5 percent to 6.3 percent.