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Oshkosh Truck Corp. (NYSE:OSK)

F1Q09 (Qtr End 12/31/08) Earnings Call

January 29, 2009 09:00 AM ET

Executives

Patrick Davidson - Vice President, Investor Relations

Robert G. Bohn - Chairman and Chief Executive Officer

Charles L. Szews - President and Chief Operating Officer

David M. Sagehorn - Executive Vice President, Chief Financial Officer

Analysts

Jamie Cook - Credit Suisse

Walter Liptak - Barrington Research

David Raso - ISI Group

Alexander Blanton - Ingalls & Snyder LLC

Charles Brady - BMO Capital Markets

Robert McCarthy - Robert W. Baird & Co., Inc.

John Sykes - Nomura Holdings

Steve Barger - Keybanc Capital Markets

Jerry Revich - Goldman Sachs

Operator

Greetings and welcome to the Oshkosh Corporation Fiscal Year 2009 First Quarter Financial Results.

At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions). As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Mr. Pat Davidson, Vice President of Investor Relations for Oshkosh Corporation. Thank you, Mr. Davidson, you may begin.

Patrick Davidson

Thanks, good morning everybody and thanks for joining us today.

Earlier today, we published our first quarter results for fiscal 2009. A copy of the release is available on our website at www.oshkoshcorporation.com. Today's call is being webcast and is accompanied by a slide presentation also available on our website. The audio replay and slide presentation will be available on the website for approximately 12 months.

Please refer now to slide 2 of that presentation. Our remarks to follow including answers to your questions include statements that we believe to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks that could cause actual results to be materially different.

Those risks include, among others: matters that we have described in our Form 8-K filed with SEC this morning and other filings we make with the SEC. We disclaim any obligation to update these forward-looking statements, which may not be updated until our next quarterly earnings conference call if it all. Occasionally, today we will refer to previous estimates. We made our updated such estimates during our fourth fiscal quarter earnings conference call on November 3rd, 2008.

Presenting today for Oshkosh Corporation will be Bob Bohn, our Chairman and Chief Executive Officer; Charlie Szews, President and Chief Operating Officer; and Dave Sagehorn, Executive Vice President and Chief Financial Officer.

Let's begin by turning to slide 3, and I'll turn it over to you, Bob.

Robert G. Bohn

Thank you, Pat. Good morning and thank you all for joining us today.

On our last call, I mentioned that we were living in unprecedented times that equity and credit markets were volatile and needed to stabilize for us to realize our earnings estimates, and that the daily volatility and negative news were leading to rapidly changing demand in some of our markets.

I remind of these points, because they are all still true. In fact there has been an uptick in negative news and data points around the world since November 3rd. Manufacturing orders globally were down sharply in our first fiscal quarter. Unemployment is rising quickly, consumer spending is falling, housing and non-residential spending are down, and the credit markets continue to experience major surprises.

With these conditions as the backdrop, we are reporting fiscal 2009 first quarter sales of 1.39 billion, a decline of 7.6% from last year's first quarter. The decline in sales was directly related to the economic conditions we have been facing. Customers especially in our businesses with exposure to construction have become more conscious.

Our lower sales lead to substantially lower operating income and a net loss of $20.6 million. We have noted in our November 3rd conference call that we expected a loss for the first quarter. We had another strong quarter of cash flow as we paid down $81.5 million of debt and ended the quarter with $260 million of cash in short-term investments.

We are maintaining our focus on tightly managing working capital in this period of uncertainty. We experience the modest increase in inventory over the past three months largely to support growth in our defense segment. But we saw a decrease of 61 million on the year-over-year basis. We will continue to work hard to reduce our inventories while maintaining high customer service levels.

As expected, we were in compliance with the financial covenants in our credit agreement at December 31st. However due to weaker than expected orders in certain number of businesses in the first fiscal quarter and concerns about our near-term outlook, we now project that we will need to amend our credit agreement to avoid violating the financial covenant, and I will talk more about that in a few minutes.

Please turn to slide 4, and I'll describe you the current state of our various businesses. With such a broad spectrum of businesses, at any given time, we will likely be experiencing some strong markets and some weak markets. This is one of the benefits of our diversification strategy. Businesses with stronger market conditions help us offset some of the negative earnings that businesses experiencing weaker conditions.

It won't come as a surprise to those of you, who have followed us over the years that we expect our defense, fire apparatus, airport products and domestic refuse vehicle businesses to grow in fiscal 2009 in spite of the global recession.

In defense, we have strong funding and backlog for our products in significant new business opportunities some of which Charlie will describe. For our fire apparatus and airport product businesses, market share gains have filled out our backlog for fiscal 2009.

In domestic refuse, we had a strong backlog entering the fiscal year in solid first quarter orders that should lead to a strong fiscal year performance. Countering the strong performances and outlooks in these businesses, our businesses that support the construction industry are experienced particularly weak demand. Nearly all of our other businesses realized weaker than expected orders in the first fiscal quarter.

During the quarters, orders virtually stopped in some markets and order cancellations nearly equaled new orders for access equipment in Europe. This newer drought in demand is unprecedented, and has really caused us to reassess near term expectation for access equipment and of course our commercial segments.

Lack of credit, currency volatility, and general economic uncertainty with the primary causes of the order short falls. And the volume weakness combined with currency and commodity cost volatility are putting further pressure on our margins.

So what are we doing to address these challenges? Please turn with me to slide 5, and I will describe our actions. We have taken decisive actions to improve our cost structure, address our balance sheet and as a result, improve our competitive position over the long-term.

Since our last call, we've taken further actions to aggressively reduce our cost structure across the company to reflect lower sales and earnings expectations in some of our businesses. We believe these recent actions will reduce fiscal 2009 overhead and operating expenses by approximately 50 million. This amount is an addition to the 100 million of annual savings from cost reduction activities implemented late last summer. As part of these actions, we also made a further 7% reduction to our combined hourly and salary workforce bringing our total staffing reductions to approximately 17% since December of 2008.

Most of the layouts were in the access equipment and commercial segments, where the slowdown in residential and non-residential construction has had the most impact. We are also suspending production at several plans for one or two weeks each month during our second fiscal quarter and implementing one week furloughs for our salaried employees in our access equipment segment.

Since the equity and credit markets did not stabilize in November nor December, costumers even became more and more cautious. This cautiousness led to the significantly lower order rates that we experienced in several of our businesses. The lower than expected order rates in the first fiscal quarter along with continued uncertainty as to when stability and liquidity will return to the credit markets has caused us to reduce our sales outlook and begin discussions with our lead banks regarding an amendment to our credit agreement to provide financial covenant relief.

We expect to execute an amendment in late February or March, this amendment will likely result an upfront fees and higher interest cost in fiscal 2009 and for the duration of the credit agreement. We further expect that the lower sales outlook and higher interest cost will lead to lower debt reduction in fiscal 2009 than we previously anticipated. We will make an announcement after the amendment is concluded, and Dave Sagehorn will talk a little more about the amendment in a few moments.

Furthermore with the limited visibility we have at this time in our access equipment in the commercial segments, we would determine that it is appropriate to withdraw our previous estimates and suspend issuance of earnings in other estimates going forward.

With that, I will turn it over to our President, Charlie Szews to discuss details in each of our business segments and review some of our operating highlights and challenges. Charlie?

Charles L. Szews

Well, thanks Bob.

Please turn with me to slide 6. During our last call, we described how demand for access equipment had fallen in North America as well as Western and Eastern Europe. But that demand in other markets was holding up. As the global economy continue to soften over the last quarter, cost for steel, fuel, and other minerals fell sharply, this caused demand for access equipments to deteriorate in the Middle East, Australia, and Latin America, which are dependent on commodity exports. China, India and most of the rest of Asia are now also adversely impacted by the spread of the recession around the world as you all know.

So access equipment demand is not generally weak across the globe, but the sharpest downturn currently in Europe. We believe that utilization rates and rental rates are down globally, but only marginally, which is a good sign that rental customers are better managing their ways through this downturn.

Limited credit availability in general on certainly both the economy have caused many customers to keep their fingers on the order pause button. We are looking forward to Congress passing the U.S. stimulus package to follow the actions of other countries. The benefits from any stimulus plan however may not aid this business until at least the second half of calendar year 2009.

During the first fiscal quarter, we stay on the sidelines and watch multiple competitors offer a large discounts and extended payment terms to customers in Europe and around the world to bolster their financial year results, and reduce their inventory levels. I believe we were quicker to reduce production to manage demand.

Most of the U.S. national rental company annual agreements for 2009 have been negotiated by JLG, which comprises our access equipment segment. Based on these negotiations, we believe that most of the price discounting by the competition is behind us, but it is difficult to know how desperate the financial situation could be for some competitors.

With the lower level of business we are expecting, we have significantly reduced our workforce both office and factory and our production schedules.

Since we first began layoffs at JLG in July 2008, we have reduced staffing by about one third, plus the significant number of employees are affected by one to two week per month production shut down. We don't like doing this, but the weak environment is forcing us to take action.

We are continuing investments in new products to move this business forward. Our evolutionary new product, the LiftPod is a compact and easy to use mobile lift assist that retails for just under $2,000 and has been named the grand winner of the 2008 Rental Equipment Register innovative product award. Details of the award are in the December issue the magazine, and we are very proud of this achievement.

Finally in November 2008, JLG President Craig Paylor and I were in Tianjin, China for the ground breaking of a new production facility for access equipment. We are very appreciative of the support we see for this project from the Tianjin Municipal Government and from the Civil Aviation Administration of China. We expect the facility to start production in 2010 to support our access equipment sales throughout Asia.

Please move with me to slide 7, and let's take a look at defense. The defense segment has been bright spot for us. Posted another strong quarter, budgets by new vehicle and significant armor kit sales. We were especially pleased to sign a multiyear contract for heavy-payload tactical vehicles.

In just the last three months we received delivery orders for $1.6 billion for medium and heavy tactical vehicles. We support the optimism we have communicated to you over the last year or so, about the near-term prospects for defense business with the U.S. Army and Marines.

As Bob mentioned, our defense team is working on a number of business opportunities, some of which could still benefit fiscal 2009. We are currently working with the armed services to explore the modification of the mine resistant ambush protected or MRAP fleet to incorporate Oshkosh's patented TAK-4 independent suspension, improve the mobility and durability of the fleet for the off-road missions of Afghanistan.

The largest opportunity is also the most competitive program. The MRAP all terrain vehicle or M-ATV. The U.S. armed services have MRAP vehicles in theater today that can protect America's sons and daughters, but the vehicles don't have the mobility or durability for use in the off-road mountainous terrains of Afghanistan. This led to the armed services issuing a joint urgent operational needs statement for new vehicles for use in Afghanistan.

Oshkosh's modified... has combined a modified version of its medium tactical vehicle replacement chassis, which was designed for a 70% off-road mission profile in the roughest of terrains with Plasan North America armored crew compartment. Plasan is armored 5000 MRAP vehicles to-date and provides a proven armor solution.

Our M-ATV offering delivers the essential capability not available in the current MRAP fleet that is our vehicle provides exceptional offer mobility to take the fight where no other vehicles dare to go. Now, we were not selected to be a large volume MRAP supplier and some have discounted our opportunity in this competition.

However, this program has truly responded to the urgent need for a proven non-developmental, survivable, and mobile vehicle for the off-road Afghan terrain, then the services need a vehicle like the Oshkosh M-ATV to justify the use of tax payer dollars in a recession, and most importantly, to deliver the capability needed for America's sons and daughters that are sacrificing for us in Afghanistan and in Iraq.

We also expect to hear decision in this quarter from the U.S. Government on the protest that our partner, Northrop Grumman filed the regarding a JLTV technology development awards last fall.

Please turn to slide 8 to discuss our Fire & Emergency segment. Even with soft municipal spending affecting fire truck sales, our Pierce fire apparatus business continues to outperform the competition in a difficult market. In fact, Pierce market share grew by approximately five percentage points in the most recently published rolling 12 month data. We continue to benefit from recent stronger new product launches of our Velocity and Impel chassis as well as from the success of the Pierce Ultimate Configuration or PUC.

Additionally, we believe there has been some pre-buy back activity ahead of the new fire... National Fire Protection Association or NFPA, voluntary standards that became effective on January 1, 2009, which is countering lower fire truck demand due to reduced municipal spending. While, we have a full backlog at Pierce for fiscal 2009, it is possible that order rates will slow as the year progresses in response to tightening municipal spending.

We expect to launch additional new products over the next 90 days to attempt to sustain our positive order momentum. We will address those in our next call.

Airport products business once again have brisk quarter activity in the first fiscal quarter for aircraft rescue and firefighting of vehicles, particularly in international markets to support global airport expansion and replacement needs.

Strong winter storms during the last couple of years has helped drive orders for our domestic snow removal vehicles as well. Our towing and recovery business continues to be negatively impacted by the rescission and reduced credit availability. In our mobile medical business, which continues to fill the effects of lower reimbursement rates for medical procedures performed in mobile units, also continues to experience weak demand.

We have spoken to you in the past about our success in China. In particular with our ARFF units snow plows, we are proud at the field reports we have received back from airports in China that are utilizing our H-Series non-removal equipment. We anticipate continued success in this market.

Now before I leave this slide, I would like to point out our recently announced exclusive agreement with Detroit Diesel, and the DD 13 2010 EPA compliant engines. Detroit Diesel is the engine of choice for many fire departments and we believe this makes our Pierce offerings even more attractive to new customers. We are truly excited about potential for this engine in the fire service.

Please turn to slide 9 for discussion of our commercial segment. Much like the situation affecting our access equipment business, our concrete business is facing an industry that is simply not spending on new equipment. Since we do not expect recovery in this business until the broader U.S. economy and construction markets improved, we are continuing to work on lowering the cost structure in this business with an objective of driving profitability during difficult times.

Domestic Refuse Collection Vehicle or RCV demand has been solid as sales in this business were up in the first fiscal quarter and the strength of orders from costumers working to reduce their the ages of their fleets. We continue to be cautious however recognizing the continued economic weakness could put pressure in our waste hauling customers to slow their equipment purchase rate.

We are very encouraged by customer response for our compressed natural gas or CNG vehicles. CNG-powered vehicles continue to be requested by U.S. municipalities looking to reduce vehicle emissions. We are positioned very well to capitalize in these opportunities.

We are making progress, but at slower pace than we expected in eliminating the inefficiencies caused by prior year restructuring activities at the Geesink Norba Group. We are in the process of further reducing staffing at this business, which we believe will improve Geesink's efficiency rate.

There are indications that demand in European refuse collection vehicle market is weakening, as we've heard from someway taught us (ph), we have decided to delay or reduce their purchases of RCVs in fiscal 2009 as a result of weakening economic condition.

Well, that's a brief overview of our operations. Dave, please take it from here.

David M. Sagehorn

Thanks Charlie, good morning everyone.

Please turn to slide 10. Consolidated net sales of $1.39 billion for the first fiscal quarter is down 7.6% compared to the first fiscal quarter of last year as increased sales in defense, fire apparatus, and our domestic RCV businesses were not enough to offset lower sales and our access equipment and concrete placement products businesses.

And 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 fiscal quarter also included provisions for bad debts of 14.3 million and severance and other restructuring charges totaling $8.3 million related to the staffing reductions and facility closures during the quarter. We recorded a net loss per share for the quarter of $0.28.

Corporate operating expenses in inter-segment profit elimination declined $6.2 million in the first quarter of fiscal 2009 compared to the first quarter of fiscal 2008 due to lower incentive compensation and cost reduction initiatives. Interest expense decreased by $11.4 million in the first fiscal quarter compared to the prior year quarter due to lower debt outstanding and lower interest rates.

We had a tax benefit of 7.7% of the pretax loss in the first fiscal quarter compared to a provision of 34% of pretax income in the prior year quarter. The current year rate reflects the impact of valuation allowances on tax benefits resulting from first fiscal quarter operating losses at Geesink, discrete items primarily related to a state income tax audit and the recapture of a portion of the European tax incentive.

These were partially offset by the benefit of the retroactive reinstatement of the U.S. research and development tax credit. With the strong cash generation that Bob talked about earlier, we were able to pay down $81.5 million of debt during the quarter, and had $260.8 million of cash in short-term investments on hand at December 31st.

Now let's take a look at each of the segments in detail. Please turn to slide 11. Access equipment sales were $368.4 million in the first fiscal quarter, down 39.7% compared to the same period last year as weak demand in the U.S. and Western Europe spread to other regions around the globe.

Sales of both aerial work platforms and telehandlers were down in the quarter. Equipment sales in North America were down about 45% from the prior year quarter on significantly lower aerial work platform sales. Equipment sales in Europe were down 51% as costumers pull back even more than we previously expected and competitors moved aggressively to reduce inventory levels heading into their fiscal year end.

The segment recorded an operating loss of 47 million, compared to operating income of $61.1 million in the prior year quarter. Operating margin was negatively impacted by lower volumes and the related under absorption of fixed costs, product mix shift to a higher percentage of lower margin telehandlers and un-recovered material costs increases, which negatively impacted margins by nearly 800 basis points.

While steel and other commodity costs have decreased over the last few months, the equipment that JLG sold in the first fiscal quarter was largely comprised of higher cost inventory. We do not expect to see a significant impact on JLG's margin from lower commodity costs until later in the fiscal year. We recorded provisions for bad debts during the quarter of $13.6 million for the segment taking into consideration the deteriorating worldwide business climate.

Additionally, foreign currency exchange rates adversely impacted margins in the quarter by more than 100 basis points compared to the first quarter of fiscal 2008. Backlog for access equipment was $139.5 million at December 31, 2008, a decrease of 84.9% compared to December 31, 2007.

The decrease in backlog resulted from significantly softer demand driven by weakness in economies in construction markets across the globe as well as the wait and see approach taken by customers, who understand the long lead times for access equipment are thing of the past at least for now.

Please turn to slide 12. Defense segment sales were $543.8 million, up 36.5% compared to last year's first fiscal quarter due to continued strong demand for new trucks and significantly higher aftermarket parts and service revenues led by armor kit sales.

Operating income increased 15.4% to $73.7 million compared to $63.9 million in the prior year quarter. Operating income margin in the quarter declined to 13.6% compared to 16% in the first quarter of fiscal 2008. The decrease in operating income margin was largely a result of a higher percentage of sales this quarter from truck shipments under the lower margin family of heavy-tactical vehicles of FHTV contract, as well as costs to support several programs that our defense group is perusing.

In addition the margin in the first quarter of fiscal 2008 benefited from the expiration of a systemic warranty approval. Backlog in this segment was $2.35 billion at December 31, 2008, up 62% compared to December 31, 2007. The increase in backlog was largely the result of several large contracts awards for our FHTV products.

Please turn the slide 13. Turning to fire and emergency, sales decreased by 0.6% to $271.1 million compared to the prior year's first fiscal quarter due mostly to weaker towing and recovery equipment sales that offsets strong Pierce deliveries.

Operating income in the segment decreased to 18.1 million or 6.7% of sales compared to the prior year quarter due to significantly weaker results at our towing and recovery equipment business, higher material costs on units sold in the quarter at Pierce that were priced before the significant run up in commodity costs and a weaker product mix across the segment.

We do not expect to see a similar negative material cost impacting the segment in the upcoming quarters. Compared to prior year, fire and emergency backlog was up 21.8% to 698.3 million on December 31, 2008 due largely to higher fire apparatus backlog as Pierce delivered another quarter of outstanding order capture.

Please turn to slide 14. Commercial sales increased 0.8% to 232.2 million compared to last year's first fiscal quarter. The increase was due to higher sales of RCVs in North America as customers continue to update their fleets. This increase was largely offset by ongoing weak sales of concrete mixers driven by nearly non-existed demand as a result of continued week residential and declining non-residential construction markets.

We reported an operating loss of 6.8 million in this segment in the first fiscal quarter due to continued losses at Geesink. Geesink efficiency is still not where we need them to be, but we believe progress is being made. Geesink also recorded a 3.4 million charge for severance costs as part of the restructuring to improve profitability of this business.

Backlog for the commercial segment at December 31, 2008 was $163.2 million, down 34.5% compared to December 31, 2007. Higher domestic refuse collection vehicle backlog was offset by substantially lower backlog for concrete mixers and batch plants.

Please turn to slide 15. It's important to reiterate that at quarter end December 31, 2008, we remain compliant with all the covenants in our credit agreement. We did this with significant free cash flow generation, which translated into debt reduction of 81.5 million and an increase of cash and investments of 172.6 million to end the quarter just over 260 million of cash and investments.

We previously said that we would amend our credit agreement if we thought the likelihood of violating the covenant was too high. Based on weaker than expected order rates during the first fiscal quarter and our current view that significant economic weakness will continue through at least fiscal 2009. We now believe that it is likely that we will violate a financial covenant at the end of the second quarter of fiscal 2009 without an amendment to our credit agreement.

As a result, we plan to seek an amendment that we expect will provide us with financial covenant relief. We've had discussions with our lead banks and are in the process of preparing the launch of formal amendment request to the broader lender group.

As we said in November, we believe that the amendment will involve upfront fees along with higher interest expense. We are not going to go into anymore detail regarding the proposed amendment other than to say that we plan to provide an update after the amendment is completed, which we expect to occur in late February or March 2009.

Our comments from last quarters call related to micro managing production schedules and maintaining tight control over discretionary spending are still valid. We have aggressive working capital reduction goals and are limiting our capital expenditures as we continue to drive cash flow generation.

As Bob mentioned earlier, we are suspending our practice of providing quantitative earnings estimate this time. We won't go into specific or quantitative forecasts, but we believe it is worthwhile for you to understand at least directionally our outlook for each of our segments. We discussed weakness in the access equipment market in our last quarterly conference call. Our expectations for this business are incrementally worse than they were when we last spoke on November 3rd.

Our Defense segment continues to receive notification of contract awards and is performing above as we expected on November 3rd.

Our Fire & Emergency segment is led by strong expectations for higher sales of Pierce fire trucks and airport vehicles. We expect segment sales would be limited by additional economic weakness that has impacted our towing and recovery business. We also expect weakness in our mobile medical business to continue and anticipate weak demand for our broadcast vehicles as network advertising revenues decline.

As the outlook for construction activity has continued to decline, sort of estimates for our concrete mixture and batch plant businesses. While orders were solid for our domestic refuse collection vehicle business in the first quarter, we are more cautious that continued economic weakness can begin to affect this business. We also believe that the weaker euro zone will negatively impact our European RCV sales, and we are now expecting lower results in this business for fiscal 2009 than we were expecting on November 3rd.

Bob previously mentioned the additional cost reduction activities that we are undertaking and they are absolutely the right actions to be taken. But we do not believe they will be enough to offset the lowered outlook that we have for some of our businesses.

I will turn it back over to you for slide 16.

Robert G. Bohn

Thanks a lot, Dave.

As we close out our formal comments, I want to stress to you that we have some very compelling strengths that will help us succeed as we work through this recession. Oshkosh brands are second to none, and we are committed to keeping them their. Unfortunately, we are going to be experiencing this near term pain as we move forward towards a lower cost structure. But this pain has been felt by everybody, and we will work through these issues as we sharpen our competitive focus.

We described you our intentions to amend our credit agreement that will bring additional cost, but we expect that we will obtain the relief needed to whether the duration of the recessionary storm and emerge as a stronger company in the recovery.

And let's finish with some good news; we have solid backlog in some of our larger businesses. These are businesses that we believe will grow in 2009 and provide strong cash flow as we work to pay down debt and improve our balance sheet. We also have a number of business opportunities particularly those in the defense segment that could aid our performance over the balance of fiscal 2009.

Contrary to what our shared price has been doing in the horrific markets over the last year or so, Oshkosh has a long proud history of creating shareholder value. We have not lost sight of that achievement, and we are committed to succeeding in the marketplace each day. It is this focus on creating shareholder value that drives us as we take the necessary actions to align our operations for the current recession while maintaining key initiatives to build for the future.

With that, I'll turn it back over to Pat and our moderator Rob for questions.

Patrick Davidson

Thanks, Bob.

I'd like to remind everyone to limit their questions to one plus a follow-up and please avoid questions with multiple subparts as this makes it very difficult to ensure that everyone participates. After the follow-up, we ask that each participant to get back in queue to ask additional questions. And operator, Rob, I will turn it over to you to begin the Q&A.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions). Thank you. Our first question is coming from the line of Jamie Cook of Credit Suisse. Please go ahead with your question.

Jamie Cook - Credit Suisse

Hi. Good morning. My first question, I know you guys have... you're not giving guidance anymore. But last quarter, you did suggest that you thought you would be able to hit on about $500 million in debt for the year, and you guys made some impressive headway in the first quarter. I am just wondering if you can give us anymore color on what the potential range could be in debt reduction. And then, my follow-up question, if you could just comment on JLG specifically, receivable levels in Europe, I know there has been issues there on previous cycles, and the progress you made on inventory reduction within JLG?

David Sagehorn

Jamie, it's Dave. On the debt, we are not going to be providing ranges for that. I guess what I would say is, we do continue to expect to be able to pay down debts through the reminder of the fiscal year.

I am sorry, can you give me the second?

Jamie Cook - Credit Suisse

The second question is just related to specifically within JLG, if you could comment on receivable levels within JLG or even inventory, I just remember from previous cycles when I cover JLG, the receivables really got out of hand, in particular in Europe. So I was just wondering what you are seeing today.

David Sagehorn

Jamie, certainly our receivables came down sharply in the current quarter that helped us drive some of the cash that you saw in the current quarter. Are there issues in Europe, potentially we did take provisions for bad debts for the $13.6 million, this quarter in the excess equipment segment that address some in Europe and some another parts of the world, so there are issues. Are they manageable at this time? We think so. But this could be potentially a deep cycle and difficult cycle, so there could be further development. It's very difficult to predict that. But we are certainly monitoring it on a daily basis.

In terms of inventory, we did have a slight increase in inventory in the current quarter and is really due to our sales being a little lower in the first quarter at JLG. We are actually fairly excitably lower in the first quarter than we had projected. The order outlook in Europe was pretty anemic.

Jamie Cook - Credit Suisse

Okay, thanks. I will get back in queue.

Operator

Thank you. Our next question is coming from the line of Walter Liptak of Barrington Research. Please go ahead with your question.

Walter Liptak - Barrington Research

Good morning. I'd like to get a little bit more color on the workforce reduction and some of the charges. And while there is probably multiple questions here, are there charges that are expected again in the coming quarter? And then, just looking at the charge you took this quarter, how much of cash... how much is non-cash?

Unidentified Analyst

Walter, during the quarter, most of that will ultimately end up being cash for the facility shutdown. That's probably maybe 2 million or so that was non-cash related to that. But, the rest will be cash. In terms of upcoming quarters, we've taken significant action last summer, we took significant action again this quarter as we announced this morning. We would like to believe that we've made most of the... or taken most of the actions that we are going to need to. However, we will continue to monitor the situation and if the economy continues to weaken further, additional cuts may be necessary.

Walter Liptak - Barrington Research

Okay. And when I think about the backlog and aerial work platforms, the decline is almost hard to believe. If there is not some stability in ordering, I would think that that's where you would have to take more cost out.

Unidentified Analyst

Well, certainly there is segment there, business that suffering with low orders as you noted. We are managing on day-to-day basis our staffing levels. We've already we reduced the workforce there by about a third plus we have a number of people that are on one or two week shutdowns per month plus we have asked our salary workforce to furlough with no pay for one week in the coming quarter, that's our second fiscal quarter.

So, we're already taking steep actions to address our inventory levels in the level of business overall. And we hope that that's the end we do have light of sight to some orders coming forward from the national rental companies and other parties around the world. So, well, this is going to be a day-to-day management for some period of time.

Walter Liptak - Barrington Research

Okay. I understand. Thank you.

Operator

Thank you. Our next question is coming from the line of David Raso with ISI Group. Please go ahead with your question.

David Raso - ISI Group

Hi. Good morning. My question is about the comment, we will be successful in finalizing an amendment and the idea that that maybe late February or March. I know you don't want to go into detail. But, the confidence in that statement, have you been fairly actively engaged with your bank discussions already aware. You maybe the one that provide the economics around the upfront fees and so forth. But you do have some sense of the financial impact potentially and you do have confidence in and amendment could be reached within the next, say, six to eight weeks.

David Sagehorn

David, we've been in conversations with our lead banks, Bank of America and JPMorgan, and shared with them our outlook and views. And they are very confident that we will be able to conclude the amendment.

David Raso - ISI Group

And regarding the dividend in that same vein, obviously everything is on the table when you have the covenant being tripped. But any commentary around the sustainability of the dividend?

Robert Bohn

David, this is Bob. The dividend is something that we look at, the Board of Directors looks at each quarter; and of course, we review it every year. It's something we'll continue to talk about as we go forward in these delicate times.

David Raso - ISI Group

And the goodwill impairment risk with... obviously the JLG carrying value, I assume that's also up for discussion.

Robert Bohn

David, we completed our annual impairment review in the fourth fiscal quarter. Within that we did model in a recession. Our view as we have gone through our first fiscal quarter here has gotten worse in terms of the severity of the recession. But our long-term view on our businesses as a whole definitely has not gotten worse. As a result, we did not see any indicators of impairment as we went through our first fiscal quarter. As time goes on here if our views change in terms of the outlooks for the businesses or the economy or if our stock price would continue to languish for some time, those could in the future at some point become indicators of impairment.

David Raso - ISI Group

Okay. I will get back in queue. Thank you.

Operator

Thank you. Our next question is from the line of Alex Blanton of Ingalls & Snyder. Please go and ask your question.

Alexander Blanton - Ingalls & Snyder LLC

Good morning.

Robert Bohn

Good morning, Alex.

Alexander Blanton - Ingalls & Snyder LLC

During the campaign, the long election campaign, Vice President, Biden was quoted a number of times as being outraged at the fact that the defense department had delayed on the ordering of body armor and armored vehicles like MRAP. And I think he actually held some hearings on that. I am wanting to know why in world they were letting people die in Iraq for one armor. So now that he is in a position perhaps to do more about it than he did. Do you think that that could have an influence on the defense department's budgets or the urgency with which they procure some of these advanced vehicles that you have been talking about including the boys? Is there a chance that could be revived for use in Afghanistan?

Robert Bohn

Charlie, why don't you answer that? You were just interested with our customers that take arm just recently, and I had been on the hill. But go ahead Charlie.

Charles Szews

Alex it's very early in the Obama administration, and so it's very difficult for us to set direction actions that he could take. And I'd rather... we would rather have him and the administration speak for himself in terms of what their actions are. We can tell you that we are engaged with the armed services that and potentially putting our independent suspension under MRAP vehicles. They have tested some of our... some vehicles with the our TAK-4 independent suspension.

Hello?

Alexander Blanton - Ingalls & Snyder LLC

Excuse me.

Charles Szews

It performed very well, so we are excited about that potential opportunity. In addition as you know there has been a solicitation for the MRAP all terrain vehicles for Afghanistan, where the armed services are looking for a vehicle that is not only survivable, which they have in the current MRAP fleet, but also highly mobile, because this is a tough terrain, a lot of roads in remote areas going through in over boulders drawn roads and there is nothing better for that than our TAK-4 independent suspension. So we do have an offering that we are presenting to the armed services of our own M-ATV. And over the next six months, we'll get to see how successful that could be for us.

Alexander Blanton - Ingalls & Snyder LLC

Yeah. Was that covered... did you announce that suspension program?

Robert Bohn

I wouldn't say we announced anything, but we certainly commented it on this conference call.

Alexander Blanton - Ingalls & Snyder LLC

Yes, okay. Second question is on the covenants and the debt repayment. I think in the last conference call, you indicated that you could reduce debt by substantially more than what you have done, 82 million. I think it's implied a couple of 100 million. Because you were going to get advance funds from defense department for certain contracts and so you have very, very good cash generation in the first quarter be able to pay down debt. But apparently that did not happen. Could you comment on that? And give us... I know you haven't given us guidance for the year, but debt lease, everybody kind of up in here as to whether or not you can either make money this year. So, could you at least give us some indication of that whether you could be possible?

Robert Bohn

Alex, we did actually generate a significant amount of cash in the first fiscal quarter. In addition to the 81 million of debt that we paid down. We ended the quarter with approximately 170 million more cash and cash investments than we entered the quarter.

Alexander Blanton - Ingalls & Snyder LLC

Okay. So you just didn't pay the debt down?

Robert Bohn

The debt was not paid down. We wanted to maintain some flexibility as we headed into the amendment process here.

Alexander Blanton - Ingalls & Snyder LLC

And profits for the year

Robert Bohn

We... as we said in the prepared remarks, Alex, we're not going to provide estimates for the year.

Alexander Blanton - Ingalls & Snyder LLC

Okay. Thank you.

Operator

Thank you. Our next question is from the line of Charlie Brady of BMO Capital Markets. Please go ahead with your question.

Charles Brady - BMO Capital Markets

Thanks. Good morning. With regard to the Geesink Norba, can you give us what the revenues were for that business in the quarter?

Robert Bohn

We historically have not provided that level of detail, Charlie. But it's 15% probably or in that range historically of segment revenues.

Charles Brady - BMO Capital Markets

Can you just give little more granularity on that business in sort of your strategic direction for that business? I know you're talked about, it's coming along the way you wanted, but it continues to lose money, and obviously that economic situations where we are now is not going to help that business to recover any time soon. Have you given any additional thought to maybe thinking that should not be part of the Oshkosh family?

Robert Bohn

Charlie, with respect to this business, it has been a bit of a struggle for us. We have a new Managing Director, Chris Tecca, who's actually done a fabulous job for us. We... he has literally hired a complete new management team for that business, because it takes some period of time to bring new people into the fold. They are just starting to gain traction.

In the last quarter, we have made some decisions about some facilities, and we are further reducing some staffing as we mentioned on the call. So, I think a lot of positive developments are happening, it's unfortunate that the European refuse collection vehicle demand overall is also weakened like our excess equipment demand in Europe. And so, some of the things they are doing aren't really visible in terms of what we might... may do with this business longer-term. Obviously, everything is perhaps some table, but at the present time, it's our intention to hold the business.

Charles Brady - BMO Capital Markets

Can you give us the backlog levels for refuse and for the concrete mixer businesses?

Robert Bohn

The backlog, Charlie for concrete mixers is... it's very low. We've had as you know some of our calls here, lowered rates, low activity as construction markets have continued to be extremely weak. The backlog in our refuse collection business have actually quite strong. And we've got a good outlook there as we head into the upcoming quarters.

Charles Brady - BMO Capital Markets

Thanks. I'll get back in queue.

Operator

Thank you. The next question is coming from the line of Robert McCarthy of Robert W. Baird. Please go ahead with your question.

Robert McCarthy - Robert W. Baird & Co., Inc.

Good morning, gentlemen.

Robert Bohn

Good morning.

Unidentified Analyst

Good morning.

Robert McCarthy - Robert W. Baird & Co., Inc.

You provided some outlook comments directional for each of your segments. And when you were talking about the Fire & Emergency segment, you made positive comments about fire business with offsetting negative comments about the commercial businesses if you will. So, are we too infer from that that your outlook would have been ... if you had a formal outlook towards business it would be largely unchanged or has it move directionally one way or the other?

Robert Bohn

I think it's similar to where our outlook was when we had an outlook estimates.

Robert McCarthy - Robert W. Baird & Co., Inc.

Okay. And, I want to ask you about a couple of... about a couple of the... excuse me, comments have been made about products within the business in your competitive positioning. One, you made a specific comment about being well positioned in the CNG refuse market. Is that supposed to mean that you have some kind of specific competitive advantage, something that no one else is offering? And similarly when you were talking about your new exclusive agreement with Detroit Diesel, could you comment on how much of the rest of the industry has historically put Detroit Engines in their trucks.

Robert Bohn

Okay. Couple of questions there, Rob. In terms of our CNG, we're the only refuse collection of vehicle in our body manufacture that we of know that will buy a chasses that's set up for... that's capable to be converted to compressed natural gas, add modifications to the body in the chasses, and then market the vehicle as a compressed natural gas powered vehicle.

Robert McCarthy - Robert W. Baird & Co., Inc.

And you have been taking orders, right?

Robert Bohn

And we have sold at least 100 or more... maybe a couple of hundred already of these vehicles, and we have orders for many more. So we have certain other compare advantages, we have the capability of operating these in our plans. We have the capability, we have installed equipments that can fill the vehicles with compressed natural gas on sight. These are unique facilities to be able to that, so we do things that we have a lead, I can't tell you it's a long lead. I'm sure other people are looking at it as a sort of technology as well. In terms of Detroit Diesel, I would say that that was... it was certainly the leading engine in the marketplace, and so it's important.

Robert McCarthy - Robert W. Baird & Co., Inc.

Is it traditionally not been a significant percentage of your own production?

Robert Bohn

No, it's always been a significant piece of our production as well.

Robert McCarthy - Robert W. Baird & Co., Inc.

Okay, thank you.

Operator

Thank you. The next question is coming from the line of John Sykes of Nomura Holdings. Please proceed with your question.

John Sykes - Nomura Holdings

Yeah, hi, good morning.

Robert Bohn

Good morning.

John Sykes - Nomura Holdings

I am really looking at this from a more of a macro point of view, but have you lost market share in the segments that you are operating or would you characterize it as maintaining markets to offshore gain in there.

Robert Bohn

We are maintaining and gaining market share. What happens in these recessionary times and we saw a little bit in '99, a little bit in 2002, 2003. What we are really seeing it today is, they know we are going to be here at the end of this recession, and they know post recession, we continue today and will continue then to provide the service and support to make sure that the units in the equipment is running out during the field.

So during times like these, usually the main customers migrate to the industrial leaders, and we certainly are that. We continue to maintain a relationship with our large customers, medium privates, and the smaller people, the municipalities. And I personally get excited, I'm not an economist, post recession with what we have done with the cost structure in this company. Boy, I mean we've got a great company, great products, number one market share, and we have been stronger now coming out post recession than we were going in, and we were okay going in.

John Sykes - Nomura Holdings

I guess what I am trying to driving at here is, in this kind of an environment there is still winners and losers, right? Some of the weaker players out there that may not be as well situated as you. You would just think that you would pick up some of that business, which would help offset kind of what's happened in the results and granted access equipment, I think what you are seeing in there is that the orders have basically dried up there and...

Robert Bohn

John, this is Bob. You couldn't have described the picture better than what's happening to peers in fire and emergency.

John Sykes - Nomura Holdings

No. Just one other thing. In terms of the dividend, I guess that the only sort of struggling happened there is just given the results from the environment, does it make sense to continue with that at that level, just given kind of the environment we are in. I mean obviously that could always be, we are instated in the future. But, now just... I guess I just struggled little bit with that.

Robert Bohn

John, you bring up an interesting point. And it's a Board decision. And it's something that we talk about. And as Charlie mentioned earlier, there's a lot of things we are talking about today we didn't need to talk about one or two years ago. And we're going to get through this recession and be even stronger than when would end (ph). And this is something that the Board periodically talks about. And, I think that's the proper way to answer that question.

John Sykes - Nomura Holdings

Okay. I appreciate that.

Robert Bohn

Thank you.

John Sykes - Nomura Holdings

Have a good day. Thanks.

Robert Bohn

Pat, why don't we take one more question or a couple more? Go ahead.

Operator

Our next question is coming from the line of Steve Barger of Keybanc Capital Markets. Please go ahead with your question.

Steve Barger - Keybanc Capital Markets

Good morning.

Robert Bohn

Good morning, Steve

Steve Barger - Keybanc Capital Markets

I hear what you're saying about JLG order intake being anemic, and... but you have some line of sight on future orders. I guess the question is, is it your expectation that access equipment revenue declines for the next quarter or two will be in inline with the first quarter? Could it be worse? Or do you see some kind of recovery in revenue in the back half of '09 calendar?

Robert Bohn

We're really not giving you quantitative estimates here. Steve, it is a difficult environment to predict, where orders are going to head. But I do standby my comment that we've had our negotiations with the national rental companies except for one or two, which have fiscal years that are little bit delayed. So, we have a general alliance site in terms of what orders we expect. It's difficult to predict exactly which week or month they are going to come in. So... but I would say that we are hopeful that as the progresses that demand does come back and seasonally improves as the year goes by.

Steve Barger - Keybanc Capital Markets

Okay. So, just to follow-up on that, earlier, you said that some competitors over the last quarter or two had been pretty aggressive on price and incentives. And, obviously, in terms of your balance sheet, you're probably constrained in terms of some of the flexibility of providing financing options. Is there a point, where you would consider using more aggressive pricing or other actions to stimulate demand when customers do start to re-emerge, or is this just a waiting game for the time period until we get to a more normal environment?

Robert Bohn

We stay in the sidelines in the last quarter, because we felt that the industry need to re-bounce their inventories. But certainly, over the course of this fiscal year, you won't see us losing significant share or anything like that. We will maintain our share levels in this business. We do often times have opportunities to corner some of these deals that are going on. And we may or may not have done that last quarter.

But on an overall basis, you won't see us losing significant share in this kind of a market. I don't see us doing long extended payment term kinds of transactions. That is what got the industry in trouble last time around. And, any one that has a strong balance sheet and wants to do that sort of a transaction, they're really taking a significant risk, and it costs companies to fail last time around, because many factories to be sold. And, I don't think that's a really good strategy. So, I don't think you'll see us doing extended payment terms. I don't think you would have seen us do it. We had a few billion in cash in our balance sheet in our debt.

Steve Barger - Keybanc Capital Markets

Right. So, right. In terms of being able to maintain that shares, it's probably more on the pricing side and just being competitive with the market as demand returns.

Robert Bohn

We'll be competitive in pricing. We have a great product, great service. Some have wholesale reductions to their sales forces and there are service people around the world. And, we've maintained that better. And I think that that is going to board us well, because the customers know that they need that kind of aftermarket support and they can depend on that from JLG and Oshkosh.

Steve Barger - Keybanc Capital Markets

Got it. Thank you.

Patrick Davidson

Hey, Rob?

Operator

Yes, sir.

Patrick Davidson

Let's make... if we've got one more question that will be our last one here as we approached 10:00 AM.

Operator

Okay, sir. And our last question will be coming from the line of Jerry Revich of Goldman Sachs. Please go ahead with your question, sir.

Jerry Revich - Goldman Sachs

Hi, good morning.

Robert Bohn

Good morning.

Jerry Revich - Goldman Sachs

Can you please discuss the demand outlook for your heavy-tactical vehicles in Afghanistan? Perhaps, you can talk about that in the context of how much demand would increase if there is a 30% increase in the U.S. troop count as secretary Gates has discussed.

Charles Szews

Well, we have our funding for fiscal 2009 in place. So we are in good shape there. We have much of the funding in for fiscal 2010. There is a supplemental package that's expected to come out in the spring, maybe early summer of 2009. And that's really going to be determinant of where that tactical business head into the second half of fiscal 2010 and beyond.

So it's a bit premature for us to comment. We do believe that the new administration is supportive of the Warfighter in Afghanistan, and we'll get them the equipment that they need. We refer to those kind of comments from other congressional representatives. And so, and frankly this could be a stimulus spending when you look at from that prospective for the U.S. economy. So we are hopeful, but really there's nothing definitive we can tell you right now.

Jerry Revich - Goldman Sachs

Thanks Charlie. And at this point is it fair to assume that the vehicle demand breakout between Iraq and Afghanistan for you guys are similar to the troop count ratio that supports them (ph)?

Charles Szews

We're not really preview to the real specific details on that.

Jerry Revich - Goldman Sachs

Okay. And last question: can you please discuss your expectations on timing of the AMTV contract award and the FMTV rebid award as well?

Robert Bohn

Well, the M-ATV award, we believe is going to occur in May 2009. That's always subject to the vagaries of proposals and how that process runs off. But that is the current indication that we have. In terms of FMTV rebid, the RFP has not been issued. It has been delayed. And so when that actually gets issued, we will have a better view of the timing of that kind of a proposal.

Jerry Revich - Goldman Sachs

And what's the latest timing on when you expect RFP to be issued or what has the DoDs said about that?

Robert Bohn

We know it's been delayed, and I really don't have any better information on that.

Jerry Revich - Goldman Sachs

Okay. And on the AMTV contract, wondering if you expect that to be soul sourced or if you think it's going to be broken up like the original MRAP contract?

Robert Bohn

Well, certainly the armed services have said that they would prefer a soul source. However they have said it up be potentially multiple. So, really I think it's going to be depend a lot upon the quality of the vehicles that they come and are tested in production capability will be determined to... and really the progress of the actions in Afghanistan will all determined if it's a soul search or multiple.

Jerry Revich - Goldman Sachs

Thank you very much.

Robert Bohn

Thank you.

Patrick Davidson

Hey Rob?

Robert Bohn

Yes sir.

Patrick Davidson

It's Pat Davidson. I just want to make a quick announcement here. We are going to be speaking at the Collin Conference Illustration Defends Focus, next Thursday, which I believe is February 5. So Charlie Szews is here with us today, our President and COO will be our speaker. And I'd like to remind everybody who's still on the call to attend the conference.

Robert Bohn

Okay. With that, Pat, thank you for those attending the call today. We are in interesting times and an unprecedented times, but we continue to work hard for our shareholders. Thank you.

Operator

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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