Oshkosh Earnings Call Nuggets: Telehandlers and Defense Margins

Oshkosh Corporation (NYSE:OSK) recently reported its first quarter earnings and discussed the following topics in its earnings conference call.

Telehandlers

Steve Volkmann – Jefferies & Company: I was hoping to dig in just a little bit on Access and maybe I’ll ask both my questions at once here. Can you just give us a sense of how things broke down between the telehandlers and the kind of core Access stuff versus your expectation? Looks like a lot of strength in telehandlers. What are you seeing in the orders? What are you seeing in the backlog? Is there any kind of shift in that mix happening that we should know about? And then the second follow-on is just on the margin. You obviously raised your margin target a bit here. Is that sort of price related? Is it efficiency related? It’s obviously not volume related? So I’m just curious what’s driving that?

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Wilson R. Jones – President and COO: This is Wilson. I’ll take a run at the order mix since you’re asking and then maybe Dave you can follow behind on the margin question. We are seeing a good order pattern, Steven, obviously telehandlers with housing, construction that continues to be a good mix of product for us. We were pleased with the performance in the quarter. If you look at the high number of telehandlers we had to perform the way we did we were pleased with that. But going forward our forecast and what we’re hearing from our customers is we will have more favorable (indiscernible) platform mix throughout the rest of the year.

David M. Sagehorn – EVP and CFO: Then on your question on the margins increased versus our prior estimates. I think you’re going to hear this consistently across the Company here the focus on MOVE strategy and the benefits that we think that can afford the Company over time. I think we’re seeing the benefit of that specifically here in the Access segment. So that would be one piece. I think Wilson touched a little bit on the mix. I think we’re thinking that we’re probably going to see a little better mix than we might have thought previously as we go through the remaining quarters and then also probably little bit of price realization as well that’s played into that.

Steve Volkmann – Jefferies & Company: So better mix, it means more AWPs?

Charles L. Szews – Chief Executive Officer: Yes.

Defense Margins

Jamie Cook – Credit Suisse: Just wanted to drill down a little bit on the Defense business. The margins there really surprised relative to what I was thinking and I was just wondering if you could quantify, you talked about favorable adjustments on some contracts and warranty. If you could quantify that and then I guess ex that I would assume that the margins are probably even better than you thought. So did something sort of structurally change versus when you laid out your margin targets in Defense back in September at your Analyst Day? If so, whether should we view this sort of as a more of a one-time thing? Then my second question just on the cement mixer size, can you just sort of give us a sense for where that – you mentioned the increase which is nice, but can you give us a sense of how big that business is and the profitability relative to prior peak, so we can see what the potential upside is?

David M. Sagehorn – EVP and CFO: Jamie, it’s Dave. I’ll take the question on Defense and then turn it over to Wilson to talk about the concrete mixers. In terms of the items in the quarter related to the definitization of contracts as well as warranty, that added about 80 basis points of margin to the segment in the quarter, so that is something that we were working through the quarter in terms of discussions with our government customer and the timing was such that we finalized those in the quarter.

Jamie Cook – Credit Suisse: But Dave even ex that your margins are pretty good.

David M. Sagehorn – EVP and CFO: Yeah and that’s a great point and I think some congratulations should go out to the Defense segment team those guys have focused a lot on driving operational performance and improvements in that segment and they actually exceeded our expectations for the quarter in terms of what they’ve been able to deliver there.

Charles L. Szews – Chief Executive Officer: Jamie, this is Charlie. The assembly hours in our Defense factories are much improved from the year ago and I think probably given your pregnancy you haven’t been in the plant in a while, but if you came for a tour now compared to a year, year and a half ago I think you’d see a dramatic improvement and I think part of that is what you’re seeing in our results.

Jamie Cook – Credit Suisse: No, but I guess, I mean is anything structurally changed since when you laid out your margin targets for the Analyst Day in September?

Charles L. Szews – Chief Executive Officer: Structurally I would say it’s more – it’s the performance.

Jamie Cook – Credit Suisse: But you’re not feeling more bullish relative to where we were? It did seem like underlying margin performance could be better relative to what you guys had laid out unless I’m being too positive?

Charles L. Szews – Chief Executive Officer: We did take our guidance up on our margins and I think that we are feeling more confident in the performance of this segment, absolutely.

Jamie Cook – Credit Suisse: Then sorry, but on this…

David M. Sagehorn – EVP and CFO: A lot of those lines Jamie, I mean our outlook for the future I mean we’re competing and Defense spending is coming down and our eyes are fully wide open on that.

Charles L. Szews – Chief Executive Officer: I didn’t know we’re speaking to 2013.

David M. Sagehorn – EVP and CFO: Yeah.

Jamie Cook – Credit Suisse: Then sorry, on the cement mixer side?

Wilson R. Jones – President and COO: Hi, Jamie, it’s Wilson. Coming up from a very small base we’re probably still in the 65% to 70% down from peak. I think it closely follows housing starts and so we’re seeing that come right up with the housing starts which has been some good news. I think some of the smaller ready mix customers are still struggling along, but what we’re seeing is some of the bigger ready-mix customers start to buy in volume.

A Closer Look: Oshkosh Earnings Cheat Sheet>>