Oshkosh Truck Reports Third Quarter EPS
OSHKOSH, Wis.--Aug. 1, 2006--| Raises Full-Year Fiscal 2006 EPS Estimate Range to $2.70 - $2.75 and Announces Fiscal 2007 EPS Estimate Range of $3.05 - $3.15 |
Oshkosh Truck Corporation , a leading manufacturer of specialty trucks and truck bodies, today reported that, for the quarter ended June 30, 2006, earnings per share increased 38.5 percent to $0.72 on sales of $887.9 million and net income of $53.4 million. This compares with earnings per share of $0.52 on sales of $818.9 million and net income of $38.7 million for the prior year's third quarter. These results exceeded Oshkosh's most recent earnings per share estimate range for the third quarter of fiscal 2006 of $0.53 - $0.57 per share. Based upon the results of the third quarter, Oshkosh increased its earnings per share estimate range for the full year ending September 30, 2006 to $2.70 - $2.75 per share.
Sales increased 8.4 percent in the third quarter of fiscal 2006 as compared to the prior year's third quarter. Operating income increased 31.2 percent to $82.6 million, or 9.3 percent of sales, compared to $63.0 million, or 7.7 percent of sales, in the prior year's third quarter. All segments contributed to the sales and earnings growth during the third quarter with the commercial segment driving approximately two-thirds of the increase in consolidated operating income. Third quarter operating income rose 252.0 percent in the commercial segment compared to the prior year's third quarter.
Commenting on the results, Robert G. Bohn, chairman, president and chief executive officer, said, "Oshkosh's commercial segment was the driving force in delivering exceptional earnings per share growth this quarter. The team's efforts over the last year to raise prices, increase production capacity and drive lean production processes across the segment led the way to a 500 basis point increase in segment margins in the third quarter compared to prior year levels."
Bohn continued, "Oshkosh's defense segment contributed another solid quarter, and the fire and emergency segment experienced strong results led by a superior performance in our Pierce Manufacturing fire apparatus business and improved airport product sales. Exceptional results year-to-date, along with solid visibility into the next quarter, provided the basis for us to raise our earnings per share estimate range to $2.70 - $2.75 for fiscal 2006.
"We're very pleased to have announced during the last 90 days that we have entered into agreements to purchase two additional companies, AK Specialty Vehicles and Iowa Mold Tooling. Both companies will continue our diversification within specialty body markets and move Oshkosh Truck into several new product lines, including broadcasting, mobile medical, specialized cranes and service vehicles. We believe each company also provides near-term growth prospects and an opportunity for sharing technologies throughout the corporation. We expect these acquisitions to contribute annual sales of approximately $245 million and $0.10 per share to fiscal 2007 earnings," stated Bohn.
Bohn concluded, "We have initiated our earnings per share estimate range for fiscal 2007 at $3.05 - $3.15. This estimate range reflects our confidence in our ability to deliver earnings improvement despite softening market demand for vocational trucks in 2007 as a result of the diesel engine emissions standards changes effective January 1, 2007. It also fully considers the contributions of our latest acquisitions, along with prospects for organic growth. As we move into fiscal 2007, we are actively pursuing more acquisitions, new business development opportunities and operational initiatives to improve on these estimates."
Factors affecting third quarter results for the Company's business segments included:
Fire and emergency--Fire and emergency segment sales increased 14.7 percent to $255.3 million for the quarter compared to the third quarter of last year. Operating income was up 28.7 percent to $29.8 million, or 11.7 percent of sales, compared to prior year quarter operating income of $23.1 million, or 10.4 percent of sales. The increase in sales for the fire and emergency segment included $13.6 million in sales that were delayed from the previous quarter due to two separate supplier component issues. Operating income margins for the fire and emergency segment improved due to an improved product mix, including increased airport product sales, and benefits from cost reduction initiatives, especially at Pierce.
Defense--Defense segment sales increased 3.7 percent to $291.4 million for the quarter compared to the prior year's third quarter. An increase in sales of remanufactured trucks for the U.S. Department of Defense and of new trucks for international customers offset lower parts and service and Medium Tactical Vehicle Replacement ("MTVR") truck sales. The MTVR base contract was concluded during the third quarter of fiscal 2005.
Operating income in the third quarter was up 6.7 percent to $49.0 million, or 16.8 percent of sales, compared to prior year operating income of $46.0 million, or 16.4 percent of sales. The increase in operating income for the third quarter was primarily due to the increase in sales and was partially offset by higher bid and proposal spending. Operating income margins in the third quarter of fiscal 2005 benefited from a $2.1 million ($0.02 per share) adjustment to MTVR base contract margins, which was recorded under the percentage of completion method of accounting.
Commercial--Commercial segment sales increased 8.8 percent to $350.6 million in the third quarter compared to the prior year quarter. Operating income increased 252.0 percent to $25.4 million, or 7.2 percent of sales, compared to $7.2 million, or 2.2 percent of sales, in the prior year quarter. The increase in sales for the segment was largely due to strong demand at the Company's North American businesses in advance of diesel engine emissions standards changes effective January 1, 2007 and higher unit sales at the Company's European refuse business, offset in part by a lower mix of package sales involving both a truck chassis and truck body. The significant increase in operating income margins in the third quarter of fiscal 2006 resulted from both higher price realization and cost reduction in North America and continued profitable operations at the Company's European refuse business compared to an operating loss of $5.1 million in Europe in the third quarter of fiscal 2005. The prior year's third quarter results included a $4.3 million ($0.04 per share) charge for workforce reductions at the Company's European refuse business. The improvement in Europe resulted from increased sales volume, cost reduction activities and restructuring activities that began in fiscal 2005.
Corporate and other--Operating expenses and inter-segment profit elimination increased $8.2 million to $21.5 million. The increase in the third quarter was largely due to a $5.9 million increase in acquisition investigation and related costs, an additional $1.1 million related to the expensing of stock options due to the adoption of Statement of Financial Accounting Standards No. 123(R), "Share Based Payment," and $0.8 million related to the Company's new office in China. Interest income net of interest expense for the quarter was $0.3 million as compared to $1.4 million of net expense for the prior year quarter. Lower interest costs were largely due to the repayment of acquisition-related debt and higher interest income resulting from the investment of higher average cash balances during the quarter.
Cash and cash equivalents, net of debt, increased during the quarter to $193.1 million at June 30, 2006 from $74.6 million at March 31, 2006.
Nine-Month Results
The Company reported that earnings per share increased 31.3 percent to $2.10 per share for the first nine months of fiscal 2006 on sales of $2.52 billion and net income of $156.3 million compared to $1.60 per share for the first nine months of fiscal 2005 on sales of $2.14 billion and net income of $117.5 million. Results for the first nine months of fiscal 2005 included MTVR base contract life-to-date margin adjustments totaling $24.7 million.
Operating income increased 29.0 percent to $249.3 million, or 9.9 percent of sales, in the first nine months of fiscal 2006 compared to $193.2 million, or 9.0 percent of sales, in the first nine months of fiscal 2005.
Dividend Announcement
Oshkosh Truck Corporation's Board of Directors declared a quarterly dividend of $0.10 per share of Common Stock. The dividend, unchanged from the immediately preceding quarter, will be payable August 23, 2006 to shareholders of record as of August 15, 2006.
The Company will comment on third quarter earnings and expectations for the remainder of fiscal 2006 and for fiscal 2007 during a live conference call at 9:00 a.m. Eastern Daylight Time this morning. Viewer-controlled slides for the call will be available on the Company's website beginning at 8:30 a.m. Eastern Daylight 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. 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 Nine Months Ended
June 30, June 30,
----------------------- -----------------------
2006 2005 2006 2005
----------- ----------- ----------- -----------
(In thousands, except per share amounts)
Net sales $ 887,919 $ 818,912 $2,523,035 $2,136,184
Cost of sales 732,629 695,068 2,069,457 1,776,856
----------- ----------- ----------- -----------
Gross income 155,290 123,844 453,578 359,328
Operating expenses:
Selling, general and
administrative 70,841 58,827 198,617 160,332
Amortization of
purchased
intangibles 1,832 2,046 5,617 5,768
----------- ----------- ----------- -----------
Total operating
expenses 72,673 60,873 204,234 166,100
----------- ----------- ----------- -----------
Operating income 82,617 62,971 249,344 193,228
Other income
(expense):
Interest expense (1,293) (1,880) (4,212) (6,370)
Interest income 1,625 481 4,457 1,499
Miscellaneous, net (301) (224) (709) (837)
----------- ----------- ----------- -----------
31 (1,623) (464) (5,708)
----------- ----------- ----------- -----------
Income before
provision for income
taxes, equity in
earnings of
unconsolidated
affiliates and
minority interest 82,648 61,348 248,880 187,520
Provision for income
taxes 30,058 23,493 94,061 72,195
----------- ----------- ----------- -----------
Income before equity
in earnings of
unconsolidated
affiliates and
minority interest 52,590 37,855 154,819 115,325
Equity in earnings of
unconsolidated
affiliates, net of
income taxes 880 977 1,878 2,317
Minority interest, net
of income taxes (56) (143) (378) (189)
----------- ----------- ----------- -----------
Net income $ 53,414 $ 38,689 $ 156,319 $ 117,453
=========== =========== =========== ===========
Earnings per share:
Basic $ 0.73 $ 0.53 $ 2.14 $ 1.63
Diluted $ 0.72 $ 0.52 $ 2.10 $ 1.60
Basic weighted average
shares outstanding 73,181 72,019 73,134 70,747
Effect of dilutive
securities:
Class A Common Stock - 566 - 1,263
Stock options and
incentive
compensation awards 1,310 1,298 1,229 1,460
----------- ----------- ----------- -----------
Diluted weighted
average shares
outstanding 74,491 73,883 74,363 73,470
=========== =========== =========== ===========
OSHKOSH TRUCK CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, September 30,
2006 2005
------------- -------------
(Unaudited)
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 221,703 $ 127,507
Receivables, net 287,718 280,247
Inventories, net 543,569 489,997
Deferred income taxes 41,291 36,618
Other current assets 20,433 20,015
------------- -------------
Total current assets 1,114,714 954,384
Investments in unconsolidated affiliates 18,569 20,280
Property, plant and equipment 390,588 355,341
Less accumulated depreciation (177,217) (162,315)
------------- -------------
Property, plant and equipment, net 213,371 193,026
Goodwill, net 405,523 399,875
Purchased intangible assets, net 123,439 128,525
Other long-term assets 26,499 22,213
------------- -------------
Total assets $ 1,902,115 $ 1,718,303
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 223,703 $ 226,768
Revolving credit facility and current
maturities of long-term debt 26,501 21,521
Customer advances 300,671 303,090
Floor plan notes payable 30,773 21,332
Payroll-related obligations 52,475 47,460
Income taxes payable 18,438 11,571
Accrued warranty 48,380 39,546
Deferred revenue 23,102 25,457
Other current liabilities 76,419 78,794
------------- -------------
Total current liabilities 800,462 775,539
Long-term debt 2,083 2,589
Deferred income taxes 51,030 55,443
Other long-term liabilities 63,592 62,917
Commitments and contingencies
Minority interest 3,671 3,145
Shareholders' equity 981,277 818,670
------------- -------------
Total liabilities and shareholders' equity $ 1,902,115 $ 1,718,303
============= =============
OSHKOSH TRUCK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
June 30,
---------------------------
2006 2005
------------- -------------
(In thousands)
Operating activities:
Net income $ 156,319 $ 117,453
Non-cash and other adjustments 24,005 26,446
Changes in operating assets and
liabilities (34,674) (42,206)
------------- -------------
Net cash provided by operating
activities 145,650 101,693
Investing activities:
Acquisition of businesses, net of cash
acquired - (31,302)
Additions to property, plant and
equipment (40,482) (21,716)
Proceeds from sale of assets 365 194
(Increase) decrease in other long-term
assets (996) 4,986
------------- -------------
Net cash used by investing activities (41,113) (47,838)
Financing activities:
Net borrowings (repayments) under
revolving credit facilities 3,750 (52,263)
Repayment of long-term debt (471) (603)
Proceeds from exercise of stock options 2,565 24,149
Excess tax benefits from stock-based
compensation 2,700 -
Dividends paid (19,682) (11,073)
------------- -------------
Net cash used by financing activities (11,138) (39,790)
Effect of exchange rate changes on cash 797 (1,084)
------------- -------------
Increase in cash and cash equivalents 94,196 12,981
Cash and cash equivalents at beginning of
period 127,507 30,081
------------- -------------
Cash and cash equivalents at end of period $ 221,703 $ 43,062
============= =============
Supplementary disclosure:
Depreciation and amortization $ 26,664 $ 23,490
OSHKOSH TRUCK CORPORATION
SEGMENT INFORMATION
(Unaudited)
Three Months Ended Nine Months Ended
June 30, June 30,
----------------------- -----------------------
2006 2005 2006 2005
----------- ----------- ----------- -----------
(In thousands)
Net sales to
unaffiliated
customers:
Fire and emergency $ 255,314 $ 222,670 $ 693,050 $ 630,051
Defense 291,366 280,985 988,664 706,095
Commercial 350,561 322,346 871,231 819,186
Intersegment
eliminations (9,322) (7,089) (29,910) (19,148)
----------- ----------- ----------- -----------
Consolidated $ 887,919 $ 818,912 $2,523,035 $2,136,184
=========== =========== =========== ===========
Operating income
(expense):
Fire and emergency $ 29,760 $ 23,132 $ 68,562 $ 60,580
Defense(1) 49,013 45,955 187,430 147,037
Commercial 25,388 7,212 49,024 19,295
Corporate and other (21,544) (13,328) (55,672) (33,684)
----------- ----------- ----------- -----------
Consolidated $ 82,617 $ 62,971 $ 249,344 $ 193,228
=========== =========== =========== ===========
Period-end backlog:
Fire and emergency $ 554,750 $ 520,982
Defense 1,054,696 1,163,137
Commercial 418,032 246,010
----------- -----------
Consolidated $2,027,478 $1,930,129
=========== ===========
(1) Includes the following cumulative life-to-date adjustments to
operating income due to an increase in margins on the Company's
MTVR base contract.
Three Months Ended Nine Months Ended
June 30, June 30,
----------------------- -----------------------
2006 2005 2006 2005
----------- ----------- ----------- -----------
(In thousands, except percentages)
Increase in operating
income $ - $ 2,100 $ - $ 24,700
Increase in margin
percentage - 0.2% - 2.5%
Margin percentage at
period-end - 10.1%