Dodge Center sales a bright spot for Oshkosh

Strong sales of the concrete mixers made by Oshkosh Corp.'s McNeilus Truck subsidiary in Dodge Center were one of the few bright spots in a tough fourth quarter for the manufacturer.

Oshkosh Corp., said Thursday it's bracing for a steep decline in military vehicle sales in 2014 as the U.S. winds down wars in Iraq and Afghanistan.

The maker of military trucks, firetrucks, concrete mixers and aerial lift equipment said its defense segment sales fell nearly 50 percent in the fourth fiscal quarter of 2013 compared with the same period a year ago.

A boost in non-defense business wasn't enough to offset the decline in military vehicle revenue in the quarter that ended Sept. 30, as the company reported net income of $35.7 million, or 40 cents per share, down 57% from $83.7 million, or 91 cents per share, in the fourth quarter of 2012.

The manufacturer said it had $1.73 billion in sales in the recent quarter, down nearly 16 percent from a year ago.


The company's defense division sales fell 46 percent, to $513.8 million, primarily due to an expected drop in revenue from military vehicles and lower sales of aftermarket parts and service.

But commercial vehicle revenue increased 15 percent to $209.4 million, driven by improved sales of concrete mixers. sales of concrete mixers were up 42 percent to $92.8 million; and sales of refuse collection trucks were up 3.4 percent to $87.2 million. Both are made by the McNeilus subsidiary in Dodge Center.

"Continued strong demand for (aerial lifts) in North America and improved demand for concrete mixers in the U.S. partially offset a significant sales decline in our defense segment in the fourth quarter," President and CEO Charles Szews said in a statement.

Oshkosh said it expects a reduction in Defense Department spending will have a significant effect on net sales in 2014. The company is forecasting net sales of $6.6 billion to $6.9 billion, down from $7.7 billion in fiscal 2013.

Coming out of the wars in Iraq and Afghanistan, and with automatic budget cuts known as sequestration, billions of dollars in defense spending reductions are expected in 2014.

"We expect higher sales and higher operating income in each of our non-defense segments, but we don't expect these improvements to be quite enough to overcome the previously indicated decline in defense," Szews said in a conference call with analysts.

The company, which supplies medium and heavy tactical vehicles to the military, typically gets about 45% of its revenue from the U.S. government.

Overall, the Pentagon's spending fell by $37 billion in fiscal 2013 and is likely to fall further by about $52 billion in 2014, according to the news agency Reuters.


Other federal spending cuts also could hurt companies like Oshkosh that supply equipment for government-funded projects including road and building construction.

"While we have seen some evidence that municipal spending is improving, we have not seen that same improvement from our federal government customers. We believe the federal business has bottomed, but we don't expect an upturn to start until 2015," Szews said.

To offset some of the losses, Oshkosh is aggressively pursuing military vehicle sales to foreign governments including the United Arab Emirates.

"We don't have anything to announce today, and in this kind of environment I couldn't tell you the magnitude of it or when we might have some business under contract ... but we are optimistic," Szews said.

"There is a significant amount of opportunity right now," he added.

Meanwhile, the company remains focused on its non-defense businesses, including the division that makes aerial lifts used in the construction industry. Company officials also have doubled down on controlling costs.

Oshkosh's forecast for 2014 earnings of $3.10 to $3.40 per share and net sales of $6.6 billion to $6.9 billion is conservative, said analyst Charles Brady with BMO Capital Markets.

For the week, Oshkosh Corp. stock was down 12 percent to $47.11.Over the past 52 weeks, the shares have traded in a range between $26.76 and $53.70.

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