OSHKOSH, Wis. — Oshkosh Corp. has reported fiscal 2009 first quarter net sales of $1.39 billion and a net loss of $20.6 million, or 28 cents per share. These results compare with earnings per share of 50 cents on net sales of $1.50 billion and net income of $37.3 million for the first quarter of fiscal 2008.
“We are obviously disappointed in the overall performance we are reporting today. It has been widely reported that global manufacturing orders and activity fell sharply in November and December 2008. Certain of our businesses shared this experience, which led to our weak performance in our first quarter. Fortunately, our defense, fire apparatus and domestic refuse collection vehicle businesses continued to report solid results,” said Robert Bohn, Oshkosh chairman and chief executive officer.
“While we generated strong operating cash flow in the quarter, order activity slowed more sharply than we had expected in access equipment and other businesses. As a result, we do not expect that earnings for the remainder of the fiscal year will be sufficient for us to avoid violating a financial covenant in our credit agreement. We have commenced discussions with our lead banks to seek an amendment to our credit agreement in the second quarter of fiscal 2009. We believe that we will be successful in finalizing an amendment that will provide us with financial covenant relief. We anticipate that the amendment will entail upfront fees and higher interest costs than under our current credit agreement,” added Bohn.
“In response to the weaker economic outlook, we have taken further measures to reduce our costs. These actions include a reduction in workforce of 7 percent, which is in addition to the workforce reduction concluded in the summer of 2008.
"Additionally, we have further reduced production, announced closures of a number of underutilized facilities and slashed spending in general. We understand these decisions will have wide-ranging effects on our employees, their families and the communities in which we operate, but we believe they are necessary in the current environment,” stated Bohn.
Consolidated sales in the first quarter of fiscal 2009 decreased 7.6 percent compared to last year’s first quarter. The lower sales were the result of a decrease in sales in the company’s access equipment segment as a result of the slowdown in the worldwide construction markets, offset in part by strong demand for defense vehicles and armor kits.
First quarter operating income decreased 84.5 percent to $17.1 million, or 1.2 percent of sales. An operating loss in the access equipment segment more than offset higher operating income in the defense segment and lower corporate expenses. Operating income in the first quarter of fiscal 2009 also included $14.3 million of provisions for bad debts and $8.3 million of charges related to cost reduction initiatives.
Operating income in the first quarter increased 15.4 percent to $73.7 million, or 13.6 percent of sales, compared to the prior year quarter operating income of $63.9 million, or 16.0 percent of sales. The decrease in operating income as a percent of sales compared to the prior year quarter reflects a larger percentage of sales under lower margin contracts during the first quarter of fiscal 2009, a reduction in the prior year quarter of a warranty reserve upon the expiration of a systemic warranty as well as costs to support several new defense programs. These items were offset in part by better absorption of fixed costs and improved performance on in-theater service work.
The company generated $280.2 million of cash from operating activities during the first quarter of fiscal 2009. Despite the successful generation of cash during the quarter, continued deteriorating business conditions in certain of its segments caused the company to believe it would likely be in violation of one or more of the financial covenants under its credit agreement at the end of the second quarter of fiscal 2009 without an amendment. As a result, the company is proceeding with a plan to seek an amendment of its credit agreement. Based on discussions with its lead banks, the company expects that an amendment will be concluded in late February or March 2009. The company expects to incur upfront fees and higher interest costs as a result of the amendment.
Over the last nine to 12 months, global demand for many of the company’s products has become increasingly volatile as the recession spread rapidly around the world. Highly volatile commodity prices and foreign currency exchange rates have further complicated the company’s ability to estimate operating income in certain of its businesses. Accordingly, the company is withdrawing its previous earnings estimates and said it will not be issuing new earnings estimates.
