Oshkosh Corporation, the parent company of access-equipment and telehandler manufacturer JLG, has reported net income of $84.2 million, or $1.13 per diluted share, for the third quarter of its fiscal year 2016, compared to $89.9 million, or $1.13 per diluted share, in the third quarter of fiscal 2015.
Comparisons in this news are to the corresponding period of the prior year, unless otherwise noted.
Consolidated net sales in the third quarter of fiscal 2016 were $1.75 billion, an increase of 8.4%. Higher sales in the defense, fire & emergency, and access equipment segments were partially offset by a slight decline in sales in the commercial segment.
Consolidated operating income in the third quarter of fiscal 2016 was $146.8 million, or 8.4% of sales, compared to $136.6 million, or 8.5% of sales, in the prior year third quarter. The increase in operating income was the result of higher defense, fire & emergency and commercial segment operating income, offset in part by lower access equipment segment operating income and higher corporate expenses.
“Our solid fiscal third quarter results were led by strong performance in our defense and fire & emergency segments, each of which recorded year-over-year increases in sales, operating income and operating income margin,” said Wilson Jones, president and chief executive officer of Oshkosh Corporation. “Our People First culture, the further enhancement and execution of our MOVE strategy and our innovative products contribute to Oshkosh being a different integrated global industrial, enabling us to deliver solid performance in a variety of economic conditions."
Jones added, “The fiscal third quarter was highlighted by progress on many fronts, most notably in our defense segment as we prepare to ramp up production and deliver our revolutionary new Joint Light Tactical Vehicle (JLTV). Our activities in fiscal 2016 are preparing us to successfully deliver low rate initial production JLTVs to our U.S. government customer starting late this fiscal year. We also made progress this quarter on a large order we received in our second fiscal quarter for an international defense customer that is purchasing more than 1,000 of our Mine Resistant Ambush Protected – All Terrain Vehicles (M-ATV). Most of these vehicles will ship in fiscal 2017, but we do expect to sell approximately 175 units under this contract in our fourth quarter of this fiscal year."
Jones added, “Our access equipment segment continues to manage production levels while delivering high quality aerial products in a market that we expect to be down compared with fiscal 2015. The team made great progress this quarter lowering inventory as we work to optimize our working capital."
Jones concluded, “As a result of improved defense and fire & emergency segment expectations, we are raising our earnings per share expectations for fiscal 2016 to a range of $2.60 to $2.80.”
Factors affecting third quarter results for the Company’s business segments included:
Access Equipment – Access equipment segment net sales increased 2.1 percent to $952.5 million in the third quarter of fiscal 2016. The increase in sales was primarily due to higher telehandler unit sales in North America, offset in part by a challenging pricing environment.
Access equipment segment operating income decreased 10.4 percent to $122.1 million, or 12.8 percent of sales, in the third quarter of fiscal 2016 compared to $136.4 million, or 14.6 percent of sales, in the third quarter of fiscal 2015. The decrease in operating income was primarily the result of a challenging pricing environment and higher incentive compensation expense, offset in part by lower spending on engine emissions standards changes and the impact of higher sales volume. In the third quarter of fiscal 2015, the access equipment segment recorded a reduction in accrued incentive compensation expense as a result of lowering its fiscal 2015 projected results.
Defense – Defense segment net sales for the third quarter of fiscal 2016 increased 36.1 percent to $264.3 million. The increase in sales was primarily due to increased sales of Family of Heavy Tactical Vehicles (FHTV). The Company experienced a break in production under the FHTV program in the third quarter of fiscal 2015.
The defense segment recorded operating income of $19.1 million, or 7.2 percent of sales, in the third quarter of fiscal 2016 compared to an operating loss of $7.1 million, or 3.7 percent of sales, in the third quarter of fiscal 2015. The increase in operating results was largely due to favorable product mix, contractual price increases and the impact of higher sales volume.
Fire & Emergency – Fire & emergency segment net sales for the third quarter of fiscal 2016 increased 24.4 percent to $248.5 million. Sales in the third quarter of fiscal 2016 benefited from higher domestic fire apparatus deliveries as a result of increased production rates to meet higher demand. Improved operational efficiencies have allowed the fire & emergency segment to increase its production rates.
Fire & emergency segment operating income increased 105.0 percent to $19.7 million, or 7.9 percent of sales, in the third quarter of fiscal 2016 compared to $9.6 million, or 4.8 percent of sales, in the third quarter of fiscal 2015. The increase in operating income was primarily a result of the impact of higher sales volume and improved pricing.
Commercial – Commercial segment net sales decreased 2.1 percent to $287.9 million in the third quarter of fiscal 2016. The decrease in sales was primarily attributable to lower refuse collection vehicles sales. Sales in the third quarter of fiscal 2015 included a large international refuse collection vehicle sale that did not repeat in the third quarter of fiscal 2016.
Commercial segment operating income increased 6.2 percent to $23.8 million, or 8.3 percent of sales, in the third quarter of fiscal 2016 compared to $22.4 million, or 7.6 percent of sales, in the third quarter of fiscal 2015. The increase in operating income was primarily a result of improved product mix.
Corporate – Corporate operating costs increased $13.2 million in the third quarter of fiscal 2016 to $37.9 million due primarily to higher incentive compensation expense. Results for the third quarter of fiscal 2015 reflected a credit for incentive compensation to reverse amounts accrued earlier in fiscal 2015 as a result of a reduction in fiscal 2015 projected results.
Interest Expense Net of Interest Income – Interest expense net of interest income increased $2.7 million to $15.3 million in the third quarter of fiscal 2016 as a result of borrowings to support increased working capital levels.
Provision for Income Taxes – The Company recorded income tax expense of $48.4 million in the third quarter of fiscal 2016, or 36.6 percent of pre-tax income, compared to $34.8 million, or 28.1 percent of pre-tax income, in the third quarter of fiscal 2015. The Company recorded a year-to-date adjustment in the third quarter of fiscal 2016 to increase tax expense as a result of a higher estimated mix of domestic income versus lower-tax rate foreign income. The Company recorded a $7.5 million, $0.09 per share, benefit from the reduction of income tax reserves in the third quarter of fiscal 2015 related to settlement of tax audits and expiration of statutes of limitations.
Share Repurchases – Share repurchases completed during the previous twelve months benefited earnings per share in the third quarter of fiscal 2016 by $0.07 compared to the prior year third quarter. The Company did not repurchase any shares in the third quarter of fiscal 2016.
Nine-month Results
The Company reported net sales for the first nine months of fiscal 2016 of $4.52 billion and net income of $154.9 million, or $2.08 per share. This compares with net sales of $4.52 billion and net income of $179.2 million, or $2.25 per share, in the first nine months of the prior year. Consolidated net sales in the first nine months of fiscal 2016 were essentially flat as increased defense and fire & emergency segment sales were offset by significantly lower access equipment segment sales. Results for the first nine months of fiscal 2015 included after-tax costs of $9.3 million, or $0.12 per share, incurred in connection with the refinancing of the Company’s senior notes due 2020 and $2.1 million, or $0.03 per share, after-tax other postretirement benefit curtailment gain. Excluding these items, adjusted1 net income for the first nine months of fiscal 2015 was $186.4 million, or $2.34 per share. Improved operating income results in each of the Company’s non-access equipment segments in fiscal 2016 were not sufficient to offset the impact of lower sales in the Company’s access equipment segment and higher corporate expenses, including increased start-up costs of a shared manufacturing facility and higher incentive compensation expense. Earnings per share in the first nine months of fiscal 2016 benefited $0.13 compared to the prior year period as a result of lower average diluted shares outstanding. Earnings per share for the first nine months of fiscal 2016 were negatively impacted by $0.03 as a result of the strengthening U.S. dollar.
Fiscal 2016 Expectations
The Company increased its fiscal 2016 earnings per share estimate range to $2.60 to $2.80 on projected net sales of $6.0 billion to $6.1 billion and operating income of $340 million to $360 million. The increased estimate range largely reflects higher defense and fire & emergency segment sales and operating income, partially offset by lower access equipment segment operating income, higher corporate costs related to increased incentive compensation expense and a higher effective income tax rate. The Company now expects to recognize sales of approximately 175 M-ATVs in the fourth quarter of fiscal 2016 in the defense segment. The Company expects fiscal 2016 net cash flow provided by operating activities of approximately $500 million less additions to property, plant and equipment of approximately $100 million to result in free cash flow of approximately $400 million.
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