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Executives

Patrick Davidson – VP, IR

David Sagehorn –CFO

Wilson Jones – EVP, President

Analysts

Jamie Cook – Crédit Suisse

Charles Brady – BMO Capital Markets

Stephen Volkmann – Jefferies & Company

Andrew Owen – Bank of America

Jerry Revich – Goldman Sachs

Basili Alukos – Morningstar, Inc.

Oshkosh Corporation (OSK) F1Q12 Earnings Call January 31, 2012 9:00 AM ET

Operator

Greetings, welcome to the Oshkosh Corporation Reports Fiscal 2012 First Quarter 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, Pat Davidson, Vice President of Investor Relations for Oshkosh Corporation. Thank you, Mr. Davidson, you may begin.

Patrick Davidson

Good morning, and thanks for joining us everybody. Earlier today, we published our first quarter results for fiscal 2012. A copy of the release is available on our website at oshkoshcorporation.com.

Today's call is being webcast and is accompanied by a slide presentation, which is also available on our website. The audio replay and slide presentation will be available on our website for approximately 12 months. Please refer now to Slide 2 of that slide presentation.

Our remarks should 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. These risks include, among others, matters that we have described in our Form 8-K, filed with the 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 at all.

Presenting today for Oshkosh Corporation will be Dave Sagehorn, Executive Vice President and Chief Financial Officer, normally Charlie Szews, our President and Chief Executive Officer will present, but Charlie has come down with a case of the flu and is unable to be with us today. Dave will be handling today’s call. Dave with that I'll turn it over to you and let’s turn to slide three everybody.

Dave Sagehorn

Okay, thanks Pat and good morning everyone. Over the last two months we probably talked to most of you on calls in connection with the proxy contest for which we do not yet have final results. While we have urgent views among our shareholders with regard to what the strategy should be, it’s fair to say that all shareholders want and expect management and the board to deliver superior value creation for shareholders and that’s our clear objective. We intend along with our Chairman, Dick Donnelly to share your feedback and ideas that we receive during this process with our full board and management team and respond over the next few months. We are mission driven to serve you, our shareholders, with urgency.

Overall, total company sales increased 10.5% to $1.88 billion for the first quarter of fiscal 2012 compared to the first quarter of fiscal 2011.

Earnings per share of $0.42 in the quarter was lower than the prior year quarter due primarily to an adverse sales mix in our defense segment while our access equipment segment experienced another quarter of higher year-over-year sales and orders.

Our actions to develop and implement our MOVE strategy enabled us to make important progress during the quarter. One of the most significant highlights was achieving profitability on our FMTV contract. We first announced this a few weeks back but it bears repeating as the FMTV program is an important part of our defense business.

Through hardwork and strong execution by our integrated project teams we were able to generate a profit one quarter earlier than we had most recently estimated. In the access equipment segment we introduced a new 10-meter rental rental scissor and a compact crawler boom [ph] for Asian markets.

In the commercial segment, we continue to analyze our footprint requirements resulting in our decision earlier this month to rationalize a smaller production facility.

In the fire emergency segment we downsized an additional 70 positions and overall our international sales increased 40% to 19.5% of sales in the quarter.

In our recent meetings with shareholders, we heard the message that shareholders would like us to provide more MOVE targets to measure our progress. As we go through our fiscal 2012, we’ll work on ways to provide targets. But I will reiterate that our targeted 250 basis point improvement in consolidated operating margins from our cost reduction initiatives is something we believe we can achieve even if we don’t see any improvement in our end markets.

By the way, we do expect to see improvement in our non-defense markets in the coming years and we do believe we’ll deliver consist international sales growth.

Let’s talk a little bit about our current market conditions please turn to slide 4.

President signed the fiscal year 2012 defense budget a few weeks ago, providing solid FHTV and FMTV funding and support of our sales in fiscal 2013. The administration has developed a new national defense strategy that is being implemented with the fiscal year 2013 budget. Program details are expected to be released on February 13.

While there are some uncertainties regarding future levels of US defense spending we’re busier than ever developing solutions to win multiple new programs that we believe will move forward. For example, we’re competing for the Canadian TAPV and the MSVS programs. These are two opportunities in which the Canadian Armed Forces are looking for an MRAP type high mobility vehicle and a medium payload truck respectively.

We believe, we have excellent solutions and are pleased to remain in the running to win both of these programs. The TAPV program is currently in the bid evaluation phase, and the request for proposal for the MSVS program is expected to be released in the very near future. We expect awards for these programs to be announced in June 2012 and February 2013 respectively.

We’ll also be submitting a bid for the engineering and manufacturing development phase of the JLTV program. The final RFP for this phase was released on January 26th, but the contract award is anticipated in June 2012. We’ve been testing our vehicle for this phase of the program for months and believe we have an excellent solution for the customer, and we are actively pursuing sales of up to 3000 M-ATVs across the Middle East and North Africa.

I’d also like to point out that we received the army’s bridge contract for FHTV program during the quarter. This contract along with the FMTV contract assures a strong base of business for our defense segment through fiscal 2014, and importantly, we retain the design rights to the FHTV products.

Overall, access equipment market conditions generally continue to recover. In North America replacement demand to reduce fleet ages continued during the quarter. Utilization rates generally remained at very high levels and the national rental companies have made positive comments about their outlook.

United Rentals and RFC recently filed various documents with the SEC as part of their plan combination. Both had very positive things to say about their outlooks for the next few years. Both have high utilization rates in their equipment fleets and both have continued to place orders since the announcement of their combination. We’ve also recently seen activity from the independent rental channel which had largely been on the sidelines until now.

Europe is a mixed bag. We have seen relative strength in the last few quarters in Northern Europe, but as expected Southern Europe remains weak. Overall, as the quarter progressed our European customers became more cautious as the uncertainly over the economy in Europe lingered. However, we continue to see positive signs in emerging markets.

Wilson Jones, President of our Access Equipment Segment recently returned from a trip to South America. Wilson reported the customers in that region of the world remain optimistic about the access equipment market, and we are hearing similar comments from other parts of the world. To summarize, we like the outlook for the access equipment market.

We have had good success implementing our previously announced price increase in this segment and expect that we will see the benefits of this action on operating income margins starting in our second quarter. Similar to last quarter, the U.S. fire truck market continued to experience weak demand with sales below 3000 units on a trailing 12 month basis. At this time we don’t believe we will see any significant improvement in this market before fiscal 2013 at the earliest.

In response, we are redoubling our efforts to secure international sales in the fire and emergency segment. We’ve made some important breakthroughs recently in Europe which had previously been unreceptive to U.S. products with new or pending orders in Spain, United Kingdom, and Poland. And orders from customers in Asia, especially China, continue to improve. The international sales cycle takes longer, but we believe that the investments we are making now in pursuing international opportunities will pay off in higher sales and profits in the future.

Our commercial segment reported a solid quarter as we delivered increased sales of RCVs. Last quarter we talked about RCV demand picking up ahead of calendar year 2012 to take advantage of bonus depreciation deductions and that’s the way the quarter played out. The trend towards CNG powered units continued and we remain a leader in this business.

Finally, while I won't say that demand is back, we did post higher concrete mixture sales in the quarter compared to the prior year first quarter which is an encouraging development. Now, let’s turn to slide five and it will provide an update on our operation initiatives.

We mentioned earlier we made strong progress on the FMTV program during the quarter enabling us to report a profit on this program ahead of our most recent expectations. This was due to strong execution arising largely from continued reduction in manufacturing hours and a reduced reliance on outside service providers. We continue to increase our production rates on this program and exited the quarter near to our targeted peak production rates.

Now that we have achieved profitability we will continue to work to improve FMTV margins similar to what we have done on other defense programs.

Turning to access equipment, we largely completed restructuring activities in our European factories that we initiated in fiscal 2011. To refresh your memories we consolidated some work in our Belgium and Romanian operations. Production is on schedule and we expect to realize cost savings from this move starting in the second half of fiscal 2012.

Over the last couple of quarters JLG experienced supply chain challenges that have been pervasive in the industry. But we don’t have all of the challenges behind us. We have seen steady improvements with supplier deliveries and believe that supply chain constraints will not significantly impact our JLG and JERR-DAN branded product sales in fiscal 2012.

In our commercial segment, our focus on eliminating supplier constraints in driving lean initiatives deeper into the organization attributed to increased year-over-year labor efficiencies and improved financial results.

Finally, we continued to struggle during the quarter with the consolidation of ambulance and mobile medical unit production into our Florida operations. We have made some changes in our manufacturing leadership for this project which has cost us sometime, but we believe we have a workable plan and have assigned additional internal and external resources to help us achieve the benefits of the facility consolidations that we first projected when we kicked this project off last year.

Now, let’s turn to slide six for a brief discussion of our financial performance for the quarter. Consolidated net sales for our first fiscal quarter were $1.88 billion, an increase of 10.5% from the prior year quarter. Higher FMTV and access equipment sales more than offset lower FHTV vehicle, then M-ATV aftermarket part sales in our defense segment.

Few comments about the segments. FMTV sales made up approximately 30% of defense segment sales in the quarter compared to less than 1% of sales in the first quarter of fiscal 2011. Sales to external customers in our access equipment segment were up more than 70% during the quarter and backlog was up more than 100% at December 31st reflecting the continued recovery in the access equipment market.

Double-digit sales increases were relies realize in all regions of the world and across all product lines as a result of replacement of aged equipment in North America and in parts of Europe. As well as an economic growth and increased product adoption in emerging market.

In addition, the fire and emergency segment experienced a sales decline that was largely concentrated in our airport products group. The driver of the decline was a difficult comparison to the prior year quarter which included a large international ARFF order.

We do except sequentially higher fire and emergency segment sales in the second quarter. Consolidated operating income for the quarter was $75.3 million or 4% of sales, compared to $168.7 million or 9.9% of sales in the prior year quarter.

The sales mix shift in the defense segment from higher margin FHTV vehicle and M-ATV aftermarket part sales to lower margin FMTV vehicle sales is the largest driver of the lower operating income and lower operating income margins in the quarter. FMTV profits in the quarter $4 million represented a $13.9 million improvement from the fourth quarter of fiscal 2011 reflecting the continued improved performance on this program.

Access equipment margins excluding M-ATV related sales to the defense segment improved compared to the first quarter of fiscal 2011 but we’re negatively impacted by higher material cost similar to what we saw in the fourth quarter of fiscal 2011.

Higher new product development spending in support of our MOVE strategy also negatively impacted margins in the current year quarter. First quarter results included $4.6 million of cost in the fire and emergency segment related the continued inefficiencies associated with the move of ambulance and mobile medical unit production to Florida in fiscal 2011.

Earnings per share for the quarter was $0.42 compared to $1.09 in the last year’s first quarter. Results for the current year quarter included $0.02 per share of cost related to the proxy contest that concluded last week $0.04 per share of negative foreign currency impact.

Results for the quarter also benefited from $0.07 per share of discrete tax items. Results for the first quarter of the prior year included $0.15 per share of restructuring related cost offset by $0.10 per share benefit from discrete tax items. We paid down $40 million of debt in the quarter.

Let’s take a look at our current outlook for fiscal 2012. Please turn to slide 7.

Our overall earnings per share outlook for fiscal 2012 is slightly improved from our commentary in our last earnings call and we’re updating our outlook for each of the segments as follows starting with defense. Our estimate of approximately 15% lower defense segment sales compared to fiscal 2011 remains unchanged. As a result of the first quarter performance on the FMTV program, we believe operating income margins in the defense segment will be slightly higher than on our previous expectations or nearly 5%.

The continued mix shift to a higher percentage of FMTVs is expected to be the main driver of lower operating income margins compared to fiscal 2011.

Turning to the access equipment segment, we now believe that sales in the segment will be 25% to 30% higher than fiscal 2011 compared to our previous estimate of approximately 20% higher. Our estimate of mid to high single digit margins for this segment remains unchanged. We believe that the price increase that was effective at the beginning of January and higher sales will drive higher margins and we saw in the segments seasonally weak first quarter.

In the fire and emergency segment, we now expect that fiscal 2012 sales will be slightly higher than fiscal 2011. We expect to deliver strong quarterly sales in the remaining quarters of the year than in the first quarter. However, we anticipate the previously discussed production inefficiencies in the segment and increased price pressure will likely lead to lower operating income than we previously believed and very low single digit margins in fiscal 2012.

Strong first quarter performance in the commercial segment, including a backlog that is up 30% compared to the prior year, has led us to adjust upward our full year outlook for the segment. We now expect the commercial segment sales will be up about 15% for the year led by sales of RCVs.

We also expect concrete mixer sales to be up slightly for the year. We believe that full year operating income margins in the segment will be higher than in fiscal 2011 due to increased overhead absorption as a result of the higher expected sales along with the benefits of improved manufacturing efficiencies but still in the low single digits.

We continue to believe that our corporate expenses will be slightly higher compared to fiscal 2011 due to proxy contest cost and as we support investments in our MOVE initiatives. We also expect lower interest expense reflecting an expiration of our interest rates swap in the first quarter and the full year impact of fiscal 2011 debt reduction.

We’ve reduced our estimated tax rate for fiscal 2012 slightly to 32% to 34%. We expect that the tax rate in the remaining quarters of the year will be higher than this range as discrete tax items reported in the first quarter resulted in lower tax rate in that quarter.

We also now believe that will generate slightly positive free cash flow for the year compared to our previous expectation of modestly negative free cash flow, primarily due to a new view on timing of performance based payments in the defense segment. We continue to expect capital expenditures of $85 million to $95 million for the year.

We believe that the second quarter will be the lowest quarter of the year in terms of earnings per share. We expect defense margins will be lower than the full year average for this segment as sales in this quarter will be most affected by the tighter allocation issue described in previous calls which will limit higher margin FHTV sales in the second quarter.

We expect higher access equipment margins in the quarter due to improved pricing and seasonally stronger sales although the access segment won’t benefit from the more than $120 million of MATV related sales to the defense segment that are recorded in the first quarter.

In fire and emergency, we expect higher sales in the quarter compared to the first quarter and a small operating profit. We expect lower sales in operating income margin in the commercial segment compared to the first quarter which benefited from strong RCV sales as customers thought to take advantage of bonus depreciation deduction.

We expect corporate expenses in the quarter will be higher than in the first quarter due to the timing of planned spending, and we expect that the tax rate for the second quarter will be approximately 36%.

I’d like to close with a few additional comments. We know what we need to do, deliver operational and restructure our portfolio changes to enhance value for shareholders. We’re taking actions to accelerate performance across all of our businesses and create more efficient operations.

We are continuing to reduce costs, lead our markets in product innovation and grow our businesses around the world, three key components of our MOVE strategy. We believe we’re optimally positioned to capitalize on an upturn in our markets, we are mission driven to do so and we work to provide metrics for you on our progress.

If you’re interested in asking questions I’ll turn it back over to Pat to get the Q&A started. Thanks for your continued support and interest in our Oshkosh Corporation.

Patrick Davidson

Thanks, Dave. I'd like to remind everyone to please limit your questions to one plus a follow-up, and after the follow-up we ask that you get back in queue and ask additional questions, and we’ll try to take as many as possible. Operator, please begin the Q&A session of period of this call.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) Thank you. Our next question is coming from the line of Jamie Cook, Crédit Suisse. Please proceed with your question.

Jamie Cook – Crédit Suisse

Hi, good morning and congratulations on a nice quarter. A couple questions, one you noted I think corporate expenses are moving up a little higher and you talked about the proxy contest cost. Can you – I mean there was a hit in the first quarter, can you just – what we should expect I guess for the full year. And then I guess my other follow up question is on the fire and emergency side. Can you just talk about when – at what point throughout the year do we expect to achieve profitability in that segment for you to get to your margin target for the year?

David Sagehorn

Thanks Jamie. Regarding the proxy cost, there is a lot of activity that occurred in the month of January leading up to the annual shareholders meeting. I think we’ll probably see some similar results in the second quarter as a result of the proxy contest. Beyond that the contest itself is behind us, so I wouldn’t expect to see significant costs in the third and fourth quarter.

Jamie Cook – Crédit Suisse

Okay. So another $0.02 or so.

David Sagehorn

Yeah, somewhere in that range. And then on fire and emergency, as we said, we do expect higher sales in the upcoming quarters and we saw in the first quarter we are on an annualized run rate of about $650 million in the first quarter, and as we talked about our full year outlook we expect slightly higher sales for the full year than FY’11 which would indicate a little more than $800 million. I think volume will definitely help us there. Also as we said, we do expect in the second quarter to generate a small profit. I anticipate that that will continue to grow in the subsequent quarters.

Jamie Cook – Crédit Suisse

Okay, great. Thanks I’ll get back in queue.

Operator

Thank you. Our next question is from the line of Ann Duignan with JPMorgan Chase. Please proceed with your question.

Ann Duignan – JPMorgan Chase

Hi, good morning guys.

Ann Duignan – JPMorgan Chase

Just on the commercial side we were out at the World of Concrete last week. While the sense out there is that quoting activities things are getting a little bit better. Can you talk about where exactly you’re seeing the activity picking up and is there a sense that this could be the first year of a recovery? Then, in connection with that you have done very well on the repu side with your CNG offering. Can you talk about potentially for maybe some performance in that sector? Should it start to recover just on the back of alternative field products?

David Sagehorn

Sure. If I don’t hit all your questions here please remind me. I think we said that we did see higher sales in the first quarter, I think that’s encouraging, I think it’s too early to call it a solid trend. I think obviously fleets are getting older, so that is moving in our favor. I think if we see housing starts trend up that is also going to be very positive movement. Or even the sentiment the things are headed for an improvement. But again, I think we’re kind of in the first innings of a nine innings ball game here as it relates to concrete.

Unidentified Company Representative

The highway build potential would be [indiscernible].

David Sagehorn

Highway, yeah. That could also help. As it relates to CNG we do have the CNG product or offerings for concrete mixers, and again similar to CNG we are a leader in that market. We do think there are significant opportunities there, but until we see some increase in the overall demand in the market, a meaningful increase, the numbers are going to be fairly small.

Ann Duignan – JPMorgan Chase

Okay, thank you. Just a follow-up, restructuring cost, can you just give us some guidance by segment for the rest of the year, if you did already I apologize?

David Sagehorn

In terms of restructuring cost themselves the we are expecting?

Ann Duignan – JPMorgan Chase

Yeah.

David Sagehorn

I mean we are looking at a number of things, but we haven’t actually made any announcements on what we would expect for restructuring costs.

Ann Duignan – JPMorgan Chase

Would it be correct to say that it will be concentrated in fire and emergency only?

David Sagehorn

I mean we are going to continue to look at things across the board as part of our MOVE strategy. We need to work on improving the performance at Florida which we have talked about, and that was something that was initiated last fiscal year.

Ann Duignan – JPMorgan Chase

Okay, I will get back in line, thank you.

Operator

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

Charles Brady – BMO Capital Markets

Hi, good morning guys. Hey with respect to access equipment and your second quarter sales outlook, if we exclude the benefit you guys got in M-ATV in Q1, just on an apples to apples basis, is it fair to say are you expecting sequentially sales to be up in Q2 for access?

David Sagehorn

Absolutely. Yeah, I think we probably saw more of a traditional seasonality pattern in the first quarter than we may have seen in the last year or two.

Charles Brady – BMO Capital Markets

Okay. Can you clarify the commentary on you bringing in external resources for ambulance and the medical mobile consolidation there, what exactly does that mean?

David Sagehorn

It’s just people that – you know, we have got a number of things that we need to accomplish there and we have been able to redirect some internal resources to that, but we were also just bring in some external that will help us get through things more quickly.

Charles Brady – BMO Capital Markets

And that should last throughout the rest of fiscal 2012?

David Sagehorn

I wouldn’t expect that it’s going to last that long.

Charles Brady – BMO Capital Markets

Okay. And one final one, and I’ll hop back on the queue. On the FMTV profitability, it looks like it’s about a 1.3% operating margin this quarter. Should we expect that to be kind of the run-rate for the remainder of the year or, you know, you talked about trying to get that margin up a little bit and you get more into foray production. Is there more room upside this year from that?

David Sagehorn

Yeah, I think it might tick up a little bit over the remaining quarters of the year and I think we’ll continue to see additional movement as we go through fiscal 2013.

Charles Brady – BMO Capital Markets

Great, thanks very much.

David Sagehorn

Okay, thanks.

Operator

Thank you. Our next question is from the line of Stephen Volkmann of Jefferies & Company. Please state your question.

Stephen Volkmann – Jefferies & Company

Good morning guys. A couple of quick follow ups Dave. I think you mentioned price, cost, sort of issues in the couple of your segment discussions and I guess I am curious how you think that’s going to look for the full 2012. Are you kind of back where you need to be, could it even be a bit of a [indiscernible].

David Sagehorn

I think in access we’ve been very open about the price increase that's effective January 1st. In that segment we feel good about the traction that we’ve gained with that as we’ve looked at the backlog, so we expect to see some meaningful impact from that starting in the second quarter leading through the rest of the quarters here. The other segments, fire and emergency, actually the pricing has become, in our view, a little more challenging as we’ve seen competitive OEMs chasing pure deals, so that’s something that we’re going to have to deal with here as we move forward.

In commercial I don’t know that I see a lot of change in the dynamics in pricing compared to what we’ve seen in the prior quarters.

Stephen Volkmann – Jefferies & Company

Okay, great, that's helpful. Maybe I am splitting air here, but I guess I was surprised you raised your access revenue line fairly meaningfully, but didn’t really change your margin target. Can I assume it’s going from the low end to the high end of that margin range or is there something else that might keep you from – benefiting from overhead absorption and all that other good stuff.

David Sagehorn

I think the operating income was arranged and compared to where we previously thought it probably has moved to the right sum as a result of that, but still within that range.

Stephen Volkmann – Jefferies & Company

Okay, that's great. Historically when we’ve seen these big combination in the rental pool, Dave sort of backed off from CapEx for a little while, to try to kind of figure out what they have and where they want to put all their eggs in whatever baskets. Are you seeing anything like that, it doesn’t sound like it, but that's what – historically I might have expected that.

David Sagehorn

Yeah. I think – we still continue to receive orders from both United and RFC, and we anticipate that we will be a major supplier to them post acquisition. I think generally what you see is prior to a deal like that closing, they are precluded from having a lot of interaction with each other. To do that that would probably happen post closing of the transaction.

Stephen Volkmann – Jefferies & Company

Great, thanks very much.

Operator

Our next question is from the line of Andrew Owen, Bank of America.

Andrew Owen – Bank of America

Good morning. Just to follow up, and I apologize I dialed in a little bit late. But looking at profitability for the year, and I understand your comment about the mix, but it still seem to just arithmetically imply that every other program will be sort of in high single digits if you just do the mix. Given that FMTV was breakeven in Q1 I am just having a hard time sort of – I mean that's the implications on having a hard time understanding why would profitability collapse in every other defense program, because that's what seems to be implied by the numbers.

David Sagehorn

I guess Andrew we’d have to go back and look at that. I know that for example in the FHTV program we have talked about in [indiscernible] we’ve seen new variance of vehicles come on that are comprising a larger percentage of sales in that program and those generally when you introduce newer variance you do see initially lower margins on those. That may be part of what you are seeing and again we can go back and take a look at it.

Andrew Owen – Bank of America

But I guess I'm just trying to understand. I mean all I'm saying if two-thirds of the business is a 10% margin and one-third of the business is a zero pc margin, you still get margin between 6% and 7%, and I'm trying to understand are we being conservative here or there is something structural going on that is impairing significantly profitability in other business.

David Sagehorn

I think we’ve got costs that we are incurring this year as we were pursuing new sales opportunities I think we talked about a lot. You know there are a number of competitions ongoing out there right now. So we are seeing investments in those that are probably impacting things as well.

Andrew Owen – Bank of America

I will take it offline. Thank you very much.

David Sagehorn

Thanks.

Operator

Thank you. Our next question is from the line of Jerry Revich of Goldman Sachs. Please proceed with your question.

Jerry Revich – Goldman Sachs

Hi, good morning. Dave and Pat, can you say more about your outlook for the access equipment business. In Europe what kind of sales and order gw did you see in this past quarter and what range of European sales does your segment outlook assume with any other color you can provide? Thanks.

David Sagehorn

Jerry, we experienced strong double digit year-over-year increases again this quarter similar to what we did in the fourth quarter. You got to remember this is coming off of significantly lower sales levels than we had prior to the downturn. As we said in the prepared remarks that as the quarter progress we saw customers become more cautious, I would say. Taking them longer to make their decisions or they are pushing things out. For the full year I think we still expect that we will see sales up year-over-year, but we will have to see how things play out given all the concerns about the economy in Europe.

Andrew Owen – Bank of America

There is that regional aspect you mentioned Dave where you’ve got some of the Scandinavian where it has been pretty strong and some of the other more Southern European countries, Jerry that have been a little less certain.

Andrew Owen – Bank of America

I appreciate the color gentlemen. On the military business what were total M-ATV truck and part sales in the quarter and what are your expectations for part sales for the full year or if you don’t have visibility for just the next couple of quarters?

David Sagehorn

In the quarter I think all-in we were probably around $400 million for M-ATV related sales that would be truck and parts. We delivered more than 400 M-ATV vehicles this quarter. Currently we do not have any vehicles in the backlog to be produced and sold for the remainder of fiscal 2012, as you know we are pursuing a number of opportunities internationally. So I would expect that going forward at least for the rest of fiscal 2012 you are going to see significantly lower M-ATV related revenues than we saw in the first quarter.

Andrew Owen – Bank of America

Dave can you give us a rough run-rate of, are we talking $100 million per quarter in parts or less than that, do you have a feel?

David Sagehorn

We are just not going to get into that level of granularity.

Andrew Owen – Bank of America

Okay, thank you.

Operator

Thank you. Our next question is from the line of Robert Mccarthy with Robert W. Baird. Please state your question.

Robert Mccarthy – Robert W. Baird

Good morning gentlemen. Looking for a little more color on the access equipment segment, your increased top line outlook, is that just the function of strength that you saw on the first quarter or have you raised your expectations for the balance of the year?

Unidentified Company Representative

It’s both Rob. I think we did see relatively strong performance in the quarter versus what we were expecting given the weak quarter from the seasonality standpoint, but we continue to see strong orders as we have entered January here and that we are going to see improved performance through the remainder of the year.

Robert Mccarthy – Robert W. Baird

Do you think that upside is, I mean is it more geographic or does it have to do with national rental being stronger or – the release talks about seeing some improvement in smaller independents?

Wilson Jones

Sure, I think it’s – when we talk geographically I’d say it’s – versus three months ago our outlook has improved pretty much everywhere except Europe, and again Europe has become more cautionary I would say. Then the independence have started to pop up, so in the U.S. that’s contributing the things as well.

Robert Mccarthy – Robert W. Baird

Okay, and I'm just curious separately. The comments about more fire and emergency sales in Europe, is that – are we talking about fire equipment or airport equipment or what and how do you – I mean is this going to be export business out of the U.S.?

Wilson Jones

Yes, most of it is right now concentrated in airport and yes it would be exported out of the U.S.

Robert Mccarthy – Robert W. Baird

Yeah, okay. All right, thank you.

Operator

Thank you. Our next question is from the line of Steve Barger with Keybanc Capital Markets. Please state your question.

Steve Barger – Keybanc Capital Markets

Hi, good morning. Before the downturn commercial margin struggled for various regions that have been resolved, and we know there has been a lot of cost take up over the last couple of years. If we are going to see a revenue recovery in that segment, how should we think about operating margin on a more normalized basis?

David Sagehorn

Well, I would say as we talked about in the past we’d like to get all of our segments up to double digit margins, and with some of the actions that we have undertaken in the commercial segment and with some of the change over and personnel there, I think that we do have the opportunity to see that segment get back to double digit margins when things get more to a normalized sales level.

Steve Barger – Keybanc Capital Markets

Can that happen on 600 or $700 million in revenue or do you need bigger numbers than that to get there?

David Sagehorn

No, not on 600 or $700 million of revenue. I mean this is a business that's still down or segment is still down probably more than 30% from prior peaks. But I think what we saw in the first quarter here is encouraging. I think we are probably seeing a little bit of lumpiness as we go through the remainder of the year but definitely headed in the right direction.

Steve Barger – Keybanc Capital Markets

I am sorry if I mentioned this, I think you said FMTV was 30% of revenue that implies a little over $300 million, is that the run rate we should expect for that program for the remainder of the year or is that still ramping?

David Sagehorn

I think it’s still ramping but it’s not going to be significantly higher than that in the upcoming quarters, I don’t believe.

Steve Barger – Keybanc Capital Markets

So, low to mid 300 range per quarter.

David Sagehorn

I think that's a good target for now.

Steve Barger – Keybanc Capital Markets

Okay, thanks

Operator

Our next question is from the line of Walt Liptak with Barrington Research, please proceed with your question.

Walt Liptak – Barrington Research

I wanted to ask a follow up on AWPs in Europe, you talked about the price increase, is that a global price increase or is that geographically mixed?

David Sagehorn

That's global.

Walt Liptak – Barrington Research

Okay, great, just a follow up on the bridge contract. Could you refresh our memories on just the size of that bridge contract and the timing of when the trucks are supposed to shift, and I guess I am thinking about 2013 and 2014 as well.

David Sagehorn

Sure, we signed the contract Walt, the actually delivery orders have not been received yet. There is money sitting in the FY12 budget that was not finalized until as you know mid December, and they have not – the dollars have not made their way down through take-on in the form of delivery orders yet. But, you can expect that those will largely be late, FY13, and FY14 sales for us.

Walt Liptak – Barrington Research

In the past you have talked about just kind of generally what you think the long term defense revenue would be, I guess going out to 2013 and 2014, can we get an update on that?

David Sagehorn

Sure, we talked about longer term, this being a $2 billion to $2.5 billion that's what we are targeting. I think we’ll have a better outlook after the FY13 budget is [indiscernible] couple of weeks, along with that we are expecting that they will issue a – it’s called a program objective memorandum or the POM, which is kind of their five year outlook, so that will give us some better clarity and color. But as we stand here today in order for us to achieve that $2 billion to $2.5 billion we do believe that we are going to need to win some business to get there and as you know we are competing in Canada for programs or competing in US for programs, and we have other international opportunities out there. There are a number of avenues that we are purusing, but again I would say that call it mid to late February we will have a better view at least from the US program standpoint.

Operator

(Operator Instructions) Our next question is from Robert McCarthy with Robert W. Baird. Please proceed with your question.

Robert McCarthy – Robert W. Baird

Will you new any benefits this year out of the JLF cost savings or is that going to be largely absorbed by the issues that you’ve had with the consolidation in Florida in the fire and emergency segment.

David Sagehorn

Well, I think Rob we are investing – you are talking JLG…

Robert McCarthy – Robert W. Baird

Save money in Europe at JLF but you’ve got incremental cost in Florida.

David Sagehorn

Yeah. I think this year it will largely be a wash between the two. I think I see positive benefits next year.

Robert McCarthy – Robert W. Baird

Can you remind us rough annual run rate on the JLG cost savings.

David Sagehorn

Sure, between the – there is a couple of JLG programs within Europe and some other things we are doing domestically here. That's about $12 million a year, and then on access once we get that up to where we had originally planned that's probably between $10 and $15 million a year, between the move to Florida and some of the things that we’ve done at peers here in Wisconsin.

Robert McCarthy – Robert W. Baird

Can you just clarify, I though maybe you said JLG and access.

David Sagehorn

All right, I meant access and fire and emergency.

Operator

Our next question is from the line of Jerry Ravich with Goldman Sachs. Please proceed with your question.

Jerry Revich – Goldman Sachs

Dave, can you talk about the timing of the potential M-ATV bid opportunities in Africa you alluded to in your prepared remarks.

David Sagehorn

Yeah, we talked about the Middle East and Africa, and as we’ve talked on previous calls either things that do take time, we can continue to work them, I think depending on how successful we are, we are probably looking at FY13 and FY14 sales for those units.

Jerry Revich – Goldman Sachs

That's helpful, in terms of the FHTV bridge can you outline the rough terms, any key aspects of that contract that we should think about as being different from the last FHTV contract, any changes in margin structure or payments that we should think about?

David Sagehorn

Again, we’ve got the contract itself, pricing as we go forward that is yet to be negotiated but that will be a sole sourced effort as we have done previously on this program. I don’t expect that we’ll see any meaningful differences in how we go about that. Payment structure I would assume is going to be consistent with the current program.

Wilson Jones

Jerry, it should be little richer I believe in remanufacturer, right, a number of vehicles coming back on the FHTV kind of reset, recap.

David Sagehorn

Yeah. And then just take that a little bit farther I don’t anticipate there would be significant margin differences between reman vehicle and a new one.

Jerry Revich – Goldman Sachs

For the access equipment business, can you give us a rough sense of what kind of tailwind we should expect from pricing net of material cost. You have been very public with the price increases, I wonder if you just put that in perspective relative to some cost creep that we might be seeing on the material side?

David Sagehorn

I guess Jerry we feel confident that we are going to achieve – largely achieve the price increases that we put out there, based on our review of the backlog, so I would expect we’ll capture most on that side. On the material cost standpoint as we look at material cost, and steel has ticked up a little bit here over the last month or so. Our view going forward is we don’t anticipate significant movement in that over the course of the remainder of the fiscal year. So, I would expect that we will see most of that price increase brought through in the formal months.

Jerry Revich – Goldman Sachs

Thank you very much.

Operator

Thank you. Ladies and gentlemen you are approaching the end of our time for question and answer session. We have time for one final question. That question this morning will be from the line of Basili Alukos of Morningstar, Inc. Please state your question.

Basili Alukos – Morningstar, Inc.

Hey, good morning guys. Question on the FMTV I think when you initially won the contract you mentioned it’s going to be a very lucrative form of parts and service business perspective. And I'm just wondering if you can talk about as you think about that contract, what percentage of the overall revenue could come from parts and service? Would it be any difference from a traditional contract?

David Sagehorn

I think over time we will approach what we have seen with traditional programs and those have actually fluctuated depending on the amount of proprietary content versus what would call off the shelf product in there, but you certainly anticipate that the parts buying would pick up over the coming years on that program.

Basili Alukos – Morningstar, Inc.

Thanks and then can given the profitability struggles this has been happening on at least the manufacturing units back - back to alter with the parts and service profitability would be?

David Sagehorn

No, no, we don’t.

Basili Alukos – Morningstar, Inc.

Got you and then one more switching gears going back to JLG. Could you remind us when the acquisition occurred if it was considered for tax purposes and asset sale because I'm just trying to get at if there is any goodwill associated with it that might be tax deductable in that.

David Sagehorn

It was a stock sale.

Basili Alukos – Morningstar, Inc.

Okay, great those are my questions. Thank you.

David Sagehorn

Thanks.

Operator

Thank you. I will now turn the floor back to Mr. Davidson at this time for closing comments.

Patrick Davidson

Thanks very much. Thanks for joining us everybody. Just a quick remainder that several of you will be attending the rental show in New Orleans next week and I will be there throughout the duration of the show. I know you have got some booth tours and some meeting scheduled for Monday and Tuesday so we look forward to seeing you then. We look forward to seeing you out in the future as well whether it’s trade shows or events and with that I will turn it back over to the guy carrying extra workload this morning and Dave, I will turn it over to you.

Dave Sagehorn

Thanks Pat and thanks everyone again for participating in the call today and for your interest in Oshkosh Corporation and hope you all have a great day.

Operator

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

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