Oshkosh Corporation (NYSE: OSK) reported fiscal 2011 fourth-quarter income from continuing operations of $37.5 million, or $0.41 per share, compared to income from continuing operations of $116.6 million, or $1.28 per share, in the fourth quarter of fiscal 2010.
Fiscal 2011 fourth quarter results were adversely impacted by after-tax charges for the impairment of certain defense facilities of $2.0 million, or $0.02 per share and intangible assets in the fire & emergency segment of $3.9 million, or $0.05 per share. Adjusting for these items and similar items in the prior year, income from continuing operations would have been $43.4 million, or $0.48 per share, compared to income from continuing operations of $122.3 million, or $1.34 per share, in the fourth quarter of the prior year.
Consolidated net sales in the fourth quarter of fiscal 2011 were $2.12 billion, a slight increase compared to the prior year fourth quarter. Higher Family of Medium Tactical Vehicles (FMTV) sales and increased demand for aerial work platforms and telehandlers in the access equipment segment were almost entirely offset by expected lower MRAP-All Terrain Vehicle (M-ATV) sales, a decrease in TAK-4 independent suspension system kit sales to other MRAP original equipment manufacturers (OEMs) and lower fire & emergency volume.
Consolidated operating income in the fourth quarter of fiscal 2011 was $73.8 million, or 3.5 percent of sales, compared to $233.6 million, or 11.1 percent of sales, in the prior year fourth quarter. Excluding impairment charges in both periods, adjusted consolidated operating income in the fourth quarter of fiscal 2011 was $81.7 million, or 3.9 percent of sales, compared to $242.7 million, or 11.5 percent of sales, in the prior year fourth quarter. The decrease in consolidated operating income was primarily attributable to the defense segment where an adverse product mix, lower sales volume and costs associated with the ramp-up of FMTV production all had an adverse effect on operating income comparisons. Higher material costs in the access equipment segment also had an adverse effect on consolidated operating income.
“We are pleased with the continued improvement in our global access equipment markets during the fourth quarter, with orders rising 91 percent compared to the fourth quarter of the prior year," said Charles L. Szews, Oshkosh Corporation president and chief executive officer. "Despite the continued uncertain economic environment, rental equipment utilization and rental rates strengthened during the fourth quarter in North America, and emerging markets continue to exhibit positive growth trends. We continue to expect strong growth in this segment in fiscal 2012.
“During the fourth quarter, we made significant progress on the FMTV program, as sales increased nearly 70 percent and our operating performance improved significantly on both an absolute and on a per unit basis compared with our third quarter. The FMTV program remains on the path to profitability by the second quarter of fiscal 2012. Additionally, since the end of the quarter, we have signed a five-year labor contract with our UAW-represented production employees in our defense segment and announced the hiring of John Urias as our new president of this segment.
“As we look forward to fiscal 2012, we see the opportunity to set the foundation for another period of growth for Oshkosh. We continue to execute on our MOVE strategy with initiatives aimed at improving our cost structure, accelerating new product development and growing sales in emerging markets to drive earnings growth in fiscal 2013 and beyond. By focusing our efforts in these areas, we will be in an improved position to take full advantage of the eventual recovery in our markets,” stated Szews.
Factors affecting fourth quarter results for the company’s business segments included:
Defense – Defense segment sales decreased 11.9 percent to $1.17 billion for the fourth quarter of fiscal 2011 compared with the prior year fourth quarter. The decrease was primarily due to lower production under the M-ATV contract, lower M-ATV related parts & service sales and a decrease in TAK-4 independent suspension system kit sales to other MRAP OEMs. These decreases were offset in part by the continued ramp-up of production under the FMTV contract. Combined M-ATV related vehicle and parts & service sales totaled $292.2 million in the fourth quarter of fiscal 2011, a decrease of $378.6 million compared to the fourth quarter of the prior year.
In the fourth quarter of fiscal 2011, defense segment operating income decreased 68.3 percent to $71.0 million, or 6.1 percent of sales, compared to prior year fourth quarter operating income of $224.1 million, or 16.8 percent of sales. The decrease in operating income was largely due to an adverse product mix, lower sales volume and costs associated with the ramp-up of production on the FMTV contract. While costs on the FMTV contract exceeded revenues by $9.9 million during the fourth quarter of fiscal 2011, this was approximately $12.0 million better than the third fiscal quarter on a nearly 70 percent increase in FMTV sales.
Access Equipment – Access equipment segment sales to external customers increased 60.7 percent to $619.6 million for the fourth quarter of fiscal 2011 compared to the prior year fourth quarter primarily as a result of demand for replacement equipment in North America and parts of Europe. In addition to sales to external customers, access equipment segment sales in the fourth quarters of fiscal 2011 and 2010 included sales to the defense segment of $53.9 million and $151.1 million, respectively. Including sales to the defense segment, access equipment segment sales increased 25.5 percent for the fourth quarter of fiscal 2011 compared with the prior year quarter.
In the fourth quarter of fiscal 2011, access equipment segment operating income increased 376.7 percent to $34.8 million, or 5.2 percent of sales, compared to prior year fourth quarter operating income of $7.3 million, or 1.4 percent of sales. The increase in operating income reflected higher volume with external customers and lower facility rationalization costs, offset in part by an increase in raw material costs and the decrease in intersegment sales of M-ATVs at mid single-digit margins. Operating income in the fourth quarter of fiscal 2010 included $6.7 million of facility rationalization costs related to the integration of manufacturing for JerrDan, the Company’s towing and recovery business, into JLG facilities.
Fire & Emergency – Fire & emergency segment sales for the fourth quarter of fiscal 2011 decreased 19.3 percent to $205.6 million compared with the prior year quarter. The decrease in sales primarily reflected lower shipments of fire apparatus. Weak municipal spending in the U.S. was the primary driver of the decrease in fire apparatus sales, with the U.S. market down by approximately 40 percent from historic averages.
The fire & emergency segment reported an operating loss of $8.6 million, or 4.2 percent of sales, for the fourth quarter of fiscal 2011 compared to operating income of $220 million, or 8.6 percent of sales, in the prior year quarter. Excluding impairment charges in both periods, the fire & emergency segment adjusted operating loss in the fourth quarter of fiscal 2011 was $3.8 million, or 1.8 percent of sales, compared to adjusted operating income of $25.7 million, or 10.1 percent of sales, in the prior year quarter. Operating results during the fourth quarter were negatively impacted by lower sales volume at the company’s fire apparatus business, costs related to the move of mobile medical and ambulance production to the company’s facilities in Florida, and an adverse product mix.
Commercial – Commercial segment sales decreased 16.9 percent to $135.2 million in the fourth quarter of fiscal 2011 compared to the prior year quarter. The decrease in sales was almost entirely attributable to lower demand for refuse collection vehicles.
Commercial segment operating income in the fourth quarter of fiscal 2011 decreased 67.4 percent to $2.6 million, or 1.9 percent of sales, compared to prior year fourth quarter operating income of $7.9 million, or 4.9 percent of sales. Excluding impairment charges in the prior year quarter, adjusted operating income in the fourth quarter of fiscal 2010 was $10.2 million, or 6.3 percent of sales. The decrease in operating income primarily resulted from lower refuse collection vehicle demand and a lower LIFO benefit. The fourth quarter of fiscal 2011 included a $0.5 million LIFO inventory benefit compared to a benefit of $4.5 million in the prior year fourth quarter.