Oshkosh Corporation (OSK) Q3 2010 Earnings Report, Transcript and Summary

Greetings, and welcome to the Oshkosh Corporation Fiscal Year 2010 Third Quarter Financial Results Conference Call. [Operator Instructions] 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.

Thanks. Good morning, everybody, and thanks for joining us today. Earlier today, we published our third quarter results for fiscal 2010. 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 that 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 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.

Thank you, Pat. Good morning, and thank you, all, for joining us today. I'm happy to announce another excellent quarter, with results driven by continued outstanding execution and performance in our Defense segment. For the quarter, our sales increased 100% to $2.4 billion, leading to third quarter results for operating income of $340 million and earnings per share, EPS of $2.31. Our Defense segment continued to deliver strong results even as we began to ramp down M-ATV production in the quarter. It's been just over a year since we began shipping M-ATVs to support our Warfighters, and what a year it has been for Oshkosh. We achieved our commitment of producing 1,000, 1,000 units per month by December 2009 and ran at that level until the spring. We continue to produce these life-saving vehicles at a rate of a couple of hundred per month, and we'll be doing that until sometime later this fall. I'm also happy to report that we saw year-over-year sales growth for our construction-related products. Now this growth is coming off very low levels, but we do view this as a positive sign for these markets. Our strong performance again this quarter allowed us to reduce our debt by an additional $175 million. Debt reduction continues to be a primary focus for us. In addition, we remain committed to investing in our company, such as the start-up of our manufacturing facility in Tianjin, China in the third quarter to produce access equipment for Asian markets. We also expect to incur some costs in the coming year over and above our historical run rate, but we are confident that spending for new product development, manufacturing efficiencies and information systems, as examples, will yield great benefits as they help us improve and grow our businesses. We've also made some changes to our executive leadership, which was brought on by the recent retirement of Craig Paylor who spent more than 30 years with JLG. Craig has been one of the pioneers and icons of the industry, and we appreciate all that he has done for JLG and most importantly, for JLG's customers. We will truly miss him, and we thank him for his leadership and for his passion for the business. Wilson Jones who has been running our Fire & Emergency segment has stepped in to head up the Access Equipment segment. We are delighted to have such a strong and capable leader to guide the business that is the key to our future growth. Taking over for Wilson at Fire & Emergency is Jim Johnson who is recently our Vice President of Sales and Marketing Affairs. Like Wilson, Jim is a strong and capable leader who is well known by our dealer networks and our customers in this segment. With that, I'll turn it over to Charlie for a more detailed discussion. Charlie?

Thanks, Bob. Please turn with me to Slide 4. As we discussed in our last call, execution, especially on the M-ATV contract, continues to drive our company's stellar performance in fiscal 2010. M-ATV production has kept us very busy over the past year, but we are now preparing to transition from M-ATV production to FMTV production. And we are doing this while we continue to build solid volume of new and remanufactured FHTVs, or Family of Heavy Tactical Vehicles, LVSRs, MTVRs for our Army and Marine Corps customers. We do have sizable orders in our backlog for M-ATV kits and spares that we'll ship over the next few quarters as we service the need for the DoD's Joint Program Office and our Warfighters. Of course, we appreciate the positive comments we've received regarding the M-ATV and its performance on the battlefield. M-ATV is providing outstanding protection for our men and women in Afghanistan, saving numerous lives and enabling our Warfighters to extend their missions into more remote, difficult terrain. We continued to pursue additional opportunities for sales of the base M-ATV and M-ATV variants to both domestic and international customers. However, these sales often take time to develop. To reiterate a comment I made in the last earnings call, any additional vehicle deliveries for the M-ATV that we might receive will likely not be realized until fiscal 2011. Regarding the FMTV program, we remain busy with pre-production activities and have been able to meet all of the U.S. Army's original plan milestones for test units and evaluations despite the lengthy protests. We delivered all test units required to date and hear that they are performing well in rigorous Army testing. Additionally, we are nearing completion of our electric coating facility, which is a significant milestone in our production preparation. We expect to begin delivering units in the first quarter of fiscal 2011 and reach a higher normalized production rate in the spring of 2011. There is no shortage of story in the press about plans, terrain and Defense spending. There is increased scrutiny of many Defense programs and increased examples of programs being put out for bid, as the U.S. government looks to reduce cost. As we have said previously, it would not surprise us to see our Defense programs competed when our current contracts expire. The government has, in fact, contacted us to inquire about purchasing the design rights for some of our vehicles. Of course, as we mentioned in the last earnings call, we believe that we are well positioned to compete for and retain any of the programs that we currently supply. Now if you look at our Defense business, we're encouraged by our significant backlog, a large portion of which extends into fiscal 2011. We also recognize that our Family of Heavy Tactical Vehicles contract provides for the delivery of these vehicles through our fiscal 2012. And the Family of Medium Tactical Vehicles contract provides for deliveries of vehicles and trailers through our fiscal 2014. We believe this puts Oshkosh in a unique position for fiscal 2011, as the outlook for Defense business provide the solid foundation for what we believe will be a gradual economic recovery. In addition, as Bob mentioned in his opening remarks, we continued to invest in new product development. This is certainly characterized by the time and effort we are putting into opportunities, such as our June 18 bid to provide an improved suspensions system for the U.S. Marine Corps Humvees and the pursuit of foreign military sales of the M-ATV. We are particularly excited about the Marine's Humvee suspension upgrade opportunity. We are confident that our industry-leading tech for suspension would significantly upgrade humvee performance for the Marine Corps, and hope that we have the opportunity to be down-selected to prove that performance. We have also expanded our M-ATV product offerings to include ambulance, cargo and SOCOM, or Special Operations Command, variant. Please turn to Slide 5. This quarter, we saw continued Access Equipment sales growth in emerging markets. This is the trend that has been ongoing for a number of quarters. The big change this quarter, however, was that JLG sales, excluding M-ATV sales to our Defense segment, were up both year-over-year and sequentially in every major region of the world. We have not been able to make a statement like that for many quarters. We understand that these increases were off very low bases, but we believe it is still a positive overall sign that the access equipment market has begun to improve. Demand in the U.S. has been fueled mainly by replacement of aged units, although we have continued to see some encouraging data points in the form of equipment utilization and rental rates, as well as strengthening prices for used aerial work platforms. We've also seen surveys indicating a growing number of customers planning to increase their capital spending for access equipment next year. Of course, we are realistic in our assessment of this market, and our expectations for growth can probably best be described as measured. We also booked strong orders for military telehandlers during the quarter, further strengthening our outlook for this segment. JLG performed well again in the M-ATV contract in the third quarter as a wound-down production of complete M-ATVs. JLG will supply crew capsules for M-ATVs as they continue to support Defense segment M-ATV production. Many employees that were involved with complete M-ATV final assembly have been reassigned to production of traditional JLG products. Dave Sagehorn and I visited our new factory in Tianjin, China during the quarter, and we're encouraged by the progress that has been made there. Production is low now, as we slowly introduce additional models into China for assembly. We will be supplying China and the Asia Pacific region with products from the Tianjin factory. The official grand opening of this facility is scheduled for later this fall when we have achieved a higher rate of production. Finally, as Bob mentioned, we have a new segment president. We will miss Craig Paylor's leadership, his passionate dedication and his strong commitment to JLG and in the access equipment industry. As difficult as it is to replace Craig, we have the right person in Wilson Jones who'll assume leadership for this segment on July 1. Many of you already know Wilson is the man who has been leading our Fire & Emergency segment over the past several years. He did an outstanding job with that segment, and I'm very confident in Wilson's ability to lead this important business. Since Wilson previously managed Jerr-Dan, which is literally five minutes by car from JLG, and shares a number of common customers with JLG, he will continue to manage Jerr-Dan. Effectively, July 1, Jerr-Dan will be included in the Access Equipment segment instead of the Fire & Emergency segment. The integration of the two businesses has commenced, with the announcement in mid-July that two Jerr-Dan manufacturing facilities will be closed, with all production integrated into JLG's McConnellsburg and Shippensburg, Pennsylvania facilities. Please turn to Slide 6 to discuss our Fire & Emergency segment. As many of you are already aware, the North American fire truck market has experienced low order rates over the past year due to lower municipal spending. This trend has continued and will likely be with us through at least our fiscal 2011. Against this backdrop, our Pierce Fire Apparatus business has performed well, as it has been able to increase its share in the competitive fire truck market over the past several years. This has helped to offset some of the recent impact of lower municipal spending. Pierce has also continued to achieve success securing orders from international customers. Going global is a strategy we will continue to pursue, in part mitigate current weak domestic order trends. Our Airport Products business has also performed well in this challenging environment. The group recently launched, in both the U.S. and Europe, a brand-new striker ARFF Unit, the Global Striker. The Global Striker lowers maintenance times, offers improved performance and does it all with attractive European styling. With Wilson Jones' move from Fire & Emergency to Access Equipment, he gave us the opportunity to move one of our top performers, Jim Johnson, into the Fire & Emergency President position. During Jim's time in this segment, he has led Pierce's dealer development and sales and marketing efforts. He's been very successful in a physical environment; we know he is the right person for this job. Please turn to Slide 7 for a discussion of our Commercial segment. We increased sales in our Concrete Placement Products business this quarter, led by strength in international mixer shipment. International sales growth has been a consistent theme over the past several quarters. We also record a small sales increase in the U.S. for concrete placement products. We still need to see improved demand domestically, driven by increased construction activity before this business can be considered to be solidly on the road to recovery. During the third quarter, our Refuse Collection Vehicle business continued to perform relatively consistently in an inconsistent market. In May, we've participated in the Annual Waste Expo Show and highlighted two strong new products. We introduced the low-profile Pacific front loader and the ZR, zero-radius side loader. Both have been well received and are driving increased interest in McNeilus RCV. The Commercial segment has continued to benefit from IMT supplying components to our Defense segment, something that we expect to continue into fiscal 2011. IMT is our service body in Truck-Mounted Crane business and has done a super job of leveraging its core competencies to provide high-quality products and support the activities of our Defense business. Well, that's a brief overview of our operations. Dave, please take it from here.

Thanks, Charlie, and good morning, everyone. Please turn to Slide 8. Consolidated net sales of $2.44 billion for the third fiscal quarter were up more than 100% compared with the same quarter of last year, due primarily to M-ATV sales, including aftermarket parts and service in the current year quarter and an increase in sales of our traditional Access Equipment products. Operating income increased to $340.5 million or 14% of sales. Similar to our second quarter fiscal 2010, operating income margins benefited from improved margins in our Defense segment, as well as improved performance in our Access Equipment segment attributable to M-ATV production for Defense and better results in JLG's traditional business. Earnings per share from continuing operations for the quarter was $2.31 compared to a loss of $0.28 during the third quarter of fiscal 2009. Included in the results for this quarter was a $0.17 per share benefit from the settlement of an IRS tax audit. Corporate expenses were above prior-year levels, due primarily to higher incentive compensation expense. During the quarter, intersegment eliminations contributed to earnings as we recognized the earnings on previously recorded intersegment sales, primarily M-ATV that were still in inventory at the end of our second quarter. As Bob mentioned, we reduced our debt by $175 million in the quarter. We've been able to reduce debt in each of our last nine quarters. We ended the quarter with cash of $424.5 million, down from $844.9 million in the second quarter. The decrease in cash in the third quarter was in line with our expectations, as we used cash previously received from the U.S. government for M-ATVs to pay suppliers. Let's take a look at each of the segments in detail. Please turn to Slide 9. Defense segment sales were $1.7 billion in the third fiscal quarter, an increase of 181% compared with last year's third fiscal quarter due to M-ATV-related sales of $1.08 billion. We sold close to 1,600 M-ATVs in the quarter as we began to ramp down our delivery efforts for this program. Operating income increased from $92.9 million in last year's third fiscal quarter to $304.1 million in the third quarter of fiscal 2010. Operating income margins in the quarter increased to 17.9% compared with 15.3% in the third quarter fiscal 2009. The improvement in margins over the prior-year quarter was the result of high M-ATV-related volume and relatively fixed engineering and administrative expenses on a higher sales base. There was minimal impact on results in the quarter from the FMTV program, as our production has been limited to a few test vehicles. We have been incurring start-up costs related to the relocation of production to accommodate FMTV vehicle fabrication and assembly and other costs, all of which are expense as incurred. Backlog in the segment was $4.5 billion at June 30, 2010, up 36.5% compared with June 30, 2009. The M-ATV program accounted for approximately $1.4 billion of the total backlog at June 30, 2010. Please turn to Slide 10. Access Equipment segment sales were $689.9 million in the third fiscal quarter, up 226% compared with the same period last year. This increase was driven by intersegment M-ATV sales to the Defense segment of approximately $316 million and increased sales of JLG's traditional products. Access Equipment segment sales to external customers were $373.9 million, up 77% compared with the prior-year quarter. As Charlie mentioned, sales to external customers were up in all regions, led by North America, which was up approximately 70% and Latin America, Australia and the Pacific Rim, which were each up by more than 100%, albeit off generally low bases. While sales in Europe were up in the quarter, the growth rate in this region significantly trailed the growth rate of the other regions. The segment recorded operating income of $31.6 million compared with an operating loss of $71.2 million in the prior-year quarter. Operating income margins were significantly improved over the prior-year quarter, largely due to lower provisions for credit losses. Intersegment M-ATV sales, which had margins in the high single digits, including overhead allocations, higher sales volumes for traditional access equipment and lower material costs compared with last year, when they were still sales of units assembled with very high price of steel. When you exclude the impact of intersegment M-ATV sales, the Access Equipment segment achieved a small profit in the quarter for the first time since the fourth quarter of fiscal 2008. Backlog for Access Equipment was $186.5 million at June 30, 2010, an increase of 61.5% compared with June 30, 2009, largely reflecting higher orders in much of the world. Backlog at JLG also benefited from strong military telehandler orders earlier this year. JLG's backlog does not contain any M-ATV-related orders. Please turn to Slide 11. Turning to Fire & Emergency, sales in the third fiscal quarter declined 15.6% to $243.3 million compared with the prior year's third fiscal quarter. Lower sales in most businesses in this segment were the result of lower domestic municipal spending and overall weakness in the economy, as well as the timing of deliveries of airport products. The segment recorded operating income of $17.5 million compared with operating income of $32.7 million in the prior-year quarter. Operating income margins in the segment decreased to 7.2% compared with 11.4% in the prior-year quarter, due largely to an adverse product mix, investments in new products, lower absorption and dealer-transition costs. Compared with June 30, 2009, Fire & Emergency backlog was down 9.7% to $474.4 million at June 30, 2010, mainly due to lower order rates across most of the segment, as a result of lower municipal spending and the timing of prior-year orders. Please turn to Slide 12. Commercial segment sales increased 14.4% to $158.3 million compared with last year's third fiscal quarter. The increase in sales was largely a result of higher concrete mixer sales, mostly international, off extremely low volumes in the prior-year quarter and intersegment manufacturing for the Defense segment. RCV sales in the quarter were flat compared to the prior-year quarter. We recorded operating income of $7 million or 4.4% of sales for the segment in the third fiscal quarter compared with operating income of $2.1 million or 1.5% of sales in the prior-year quarter. The increases in operating income and operating income margins in the quarter were primarily due to increased intersegment manufacturing activity. Backlog for the Commercial segment at June 30, 2010, was $81.3 million, up 8.2% compared with June 30, 2009. Please turn to Slide 13 for a qualitative update to our outlook for fiscal 2010, starting with Defense. We expect to continue to deliver strong earnings through the remainder of fiscal 2010 due to strength in our base Defense business and strong performance from M-ATV-related products. We expect to deliver between 700 and 800 M-ATVs in the fourth fiscal quarter, down from close to 1,600 in the third quarter. We believe that M-ATV parts and service sales will be higher in the fourth quarter than in the third quarter. We also expect that our non-M-ATV Defense sales will be up modestly from the third quarter. We believe that Defense operating income margins in the fourth quarter will be modestly lower than third fiscal quarter operating income margins. In Access Equipment, we expect that sales in the fourth quarter will be lower than in the third quarter due to a decrease of more than 50% in intersegment M-ATV sales to the Defense segment. We believe sales of traditional JLG products to external customers will be down somewhat compared to the third fiscal quarter, as the third fiscal quarter is traditionally the seasonally strongest quarter of the year. We do harbor, believe that fourth fiscal quarter sales, excluding M-ATV intersegment sales, will be higher than prior-year fourth quarter sales. We expect that margins in this segment will be lower than in the third fiscal quarter due largely to the lower sales volume. Costs and charges associated with the move of Jerr-Dan production, which will be part of the Access Equipment segment in the fourth quarter, as Charlie mentioned, are expected to total between $0.06 and $0.08 per share. The timing of recording these amounts will depend on when production at the existing Jerr-Dan facilities ends. We could end up recognizing some of the costs in the fourth quarter of fiscal 2010 and some in the first quarter fiscal 2011. We expect a positive payback from these moves in approximately one year. We believe that sales in our Fire & Emergency segment will be near prior-year fourth quarter levels due largely to the timing of deliveries to both domestic and international customers. We expect that fourth fiscal quarter operating income margins will improve from the third fiscal quarter due to higher expected sales volumes. In the Commercial segment, we expect that sales in the fourth quarter will be near levels experienced in the third quarter at similar to lower operating income margins. We estimate that our tax rate for the year will now be near 34%, reflecting the favorable IRS audit results in the third quarter. We also continue to expect that our capital spending for fiscal 2010 will be approximately $100 million. Finally, we've paid down more than $600 million of debt though the first nine months of fiscal 2010 and plan to further reduce our debt in the fourth quarter. Before I turn it back over to Bob, let's take a look at our expectations for fiscal 2011. Please turn to Slide 14. We expect that our Defense segment will deliver solid performance in fiscal 2011. However, Defense sales and operating income will clearly not be at the levels that we're experiencing in fiscal 2010, which we expect to include close to $4.5 billion of M-ATV-related sales that will not be repeated in fiscal 2011. We expect that strong M-ATV parts and service sales to fulfill initial parts orders received in fiscal 2010 and the planned ramp-up of production of the FMTV program will help mitigate some of the decline in M-ATV trucks sales volume, although we believe that margins on the FMTV program will be very low initially. More than 60% of the Defense segment's June 30 backlog is expected to be filled in fiscal 2011. And as Charlie mentioned, we continue to pursue business that may result in additional amounts being added to the fiscal 2011 backlog. Turning to our non-Defense segments, we are seeing signs that lead us to believe that we will see improvement in a number of these businesses compared to fiscal 2010. We currently believe that excluding intersegment M-ATV activity, we will see higher sales in our Access Equipment segment in fiscal 2011. This is based on improvements that we are seeing in used equipment values, increased indications from customers of the need to replace units and average fleet ages that continue to increase over traditional levels. Geographically, we expect modest improvement in North America off current low levels, relatively flat sales in Europe, Africa and the Middle East and continued strong growth in emerging markets. We also believe that these higher sales of traditional JLG products will allow the Access Equipment segment to record positive operating income in fiscal 2011. We believe sales in our Fire & Emergency segment will be modestly lower compared to fiscal 2010, due mainly to continued weak municipal spending. We expect that margins in this segment will continue to be pressured due to expected lower sales volumes, a shift to units with lower content, increased new product development spending and a more challenging pricing environment, especially internationally. We believe that our Commercial segment will see modestly higher sales in fiscal 2011. We expect the concrete mixer sales domestically will remain relatively flat, but international concrete mixer sales will continue to grow. Turning to RCVs. We believe that our RCV sales will be flat to modestly higher in fiscal 2011 as we anticipate our customers will look to replace older units in their fleets. We have a larger concentration of private haulers as customers and as a result, our exposure in this market to municipal spending is limited. Finally, we expect that intersegment sales of components to the Defense segment will decrease in fiscal 2011. We expect that operating income margins in the Commercial segment will not differ significantly from fiscal 2010 operating income margins. Charlie talked about our commitment to continue investing in the business to allow us to maintain our market leadership positions and take advantage of future growth opportunities. These investments in the form of operating expenses and capital expenditures will occur in each of the segments and at corporate. We expect that our corporate expenses will be higher than in fiscal 2010, as we invest to support the international growth initiatives that our segments have undertaken in fiscal 2010 and plan to undertake in fiscal 2011. We also intend to invest in our information systems and organizational capabilities in fiscal 2011. We plan to continue focusing on debt reduction in fiscal 2011 as we did in fiscal 2010, although we anticipate that debt reduction will be at a more modest pace than we will achieve in fiscal 2010. Closing out with a few additional items before I turn it back over to Bob. We expect that our fiscal 2011 capital expenditures will approach $100 million, but could reach $125 million if the economic recovery strengthens and that our tax rate will be approximately 37% to 38%. I'll turn it back over to Bob for our closing remarks.

Thank you, Dave. Today, we announced another record quarter for revenue, operating income and earnings per share, powered by our Defense segment. Additionally, fiscal 2010 will be a record year, led by Defense and strong M-ATV deliveries. We won't repeat the stellar performance in our Defense segment in fiscal 2011, as Dave mentioned, but our traditional Defense programs and aftermarket opportunities should provide a solid foundation for us throughout the year. Our non-Defense, non-municipal businesses have begin to improve, and we see numerous signs, encouraging signs that bode well for these businesses, we believe, for next year. We have many reasons to be optimistic than we are, but we are also mindful and aware that the economic recovery is likely to be gradual and takes some time to be realized. With a responsible leadership team, we are appropriately managing our businesses to deliver outstanding products and services to our customers. To accomplish this, we will be working to strike the right balance of investing in people, products, processes and infrastructure to capture growth opportunities, to lower our cost structure and leverage our market position for the economic upturn. We believe that our approach is well planned, and we have a tradition of executing our plans at Oshkosh. We view this as our mission and we'll work hard and smart to ensure that the company performs as we strive to deliver value for both our customers and our shareholders. Thank you for your continued interest and support in the company. With that, I'll turn it back over to Pat, who will open it up for questions.

Thanks, Bob. [Operator Instructions] Operator, please begin the question-and-answer period of this call.

[Operator Instructions] Our first question is from Ann Duignan with JPMorgan and Chase (sic) [JPMorgan Chase]. Ann Duignan - JP Morgan Chase & Co: I guess my question is around the difference between your backlog sequentially, the timing and your level of kind of optimism that the non-Defense businesses in general are going to get better in 2010. Can you talk a little bit just about where is the optimism coming from and is there any explanation for why the backlog is shrinking?

Ann, let me talk about the -- Charlie talked about the optimism and then Dave can pick up some comments, hopefully by then, on the backlog. Optimism mainly lies in our Access Equipment and Commercial segments. If you start with the Access Equipment segment, that's where we probably have the most optimism. And that's really reflective of what we've seen for the past 12 months of increasing order rates, particularly in U.S. and emerging markets like the PacRim and Latin America, resurgence of Australia in terms of our marketplace, some improvement in Europe as well. But what we've seen is that utilization rates, pretty much globally, are up, rental rates are still a little bit challenged. And the average service life of the fleets, installed fleets, is increasing, and that's particularly problematic in the U.S. where there's been a lot of de-fleeting. So we just think that there's going to be a greater replacement demand for JLG equipment looking into next year than what we've seen in '09 and 2010, and that's probably the biggest source of optimism. Plus, we would hope that the economy would continue to gradually improve. When you look at our Commercial segment, probably our optimism realized mostly in our Refuse Collection Vehicle business, where we do believe that some of the fleets are being pressured to increase their replacement spending and that, that should drive stronger outlook for that segment. Fire & Emergency, of course, in our prepared comments, we talked about municipal spending, and that's going to be challenging that segment's performance next year.

Ann, this is Dave. I would really echo what Charlie said. And if you take a look at Access specifically, if you dial back a couple of years when the market was very strong, we did have the benefit of customers placing orders far in advance for delivery and to call into the next year. We don't have that luxury today. We are generally producing in-line with customer demand. And as Charlie said, we are seeing a lot of positive signs out there. We're also hearing what some of the other publicly traded companies are saying about their outlook for demand in the coming years. So that really is the basis for our optimism.

And Ann, as a short comment on the backlog decline sequentially, it's seasonal. Seasonally, we would have seen that the most recent quarter was the strongest seasonal quarter for our business, in our Commercial businesses. Ann Duignan - JP Morgan Chase & Co: And then my follow-up is just on the Defense business. Can you give us any kind of direction for what you might anticipate margins to be in that business as you ramp up the FMTV? I mean, any sense close to your long-term average of 12% or higher for some reason because you still have M-ATV parts and spares in there? Or can you give us any kind of a direction of how those margins might start out when you ramp up FMTV and then where they might end up on a normalized basis?

Well, Ann, we've consistently said that we did the FMTV very competitively. And so -- and I think what we've also said is that initially, certainly, we're going to be at a relatively low production rate. In fact, we're not producing many at all right now, mostly test units and testing out our processes. So initially, certainly, the margins are going to be challenged, and they would expect them to improve as we reach full-rate production next spring. So I can't get more specific than that. We always like to see what our actual performance is and how that compares to bid. But historically, if you've looked at our MTVR program, for example, we also bid that one very competitively back in 1998, and consistently worked their margins up. And that's going to be our challenge with this program as well. Ann Duignan - JP Morgan Chase & Co: So look and take a look at the MTVR program back in '98 as maybe some kind of a baseline for...

I don't know if they're going to be the same. But I guess the point is, is that we did bid it competitively, and so it'll start of low. And obviously, we're going to put a full-court press on to do the best we can with that program.

Our next question comes from David Raso with ISI Group.

My question's on '11 Access sales growth, if you can give a little more color up in '11. Because if you look at x M-ATV, right, sales were up 77% in the quarter, backlog's up 62% year-over-year, quarter is up over 200%, and I know these are versus easy comps. But can you give us a little more at least a range or some clarity around how you view the growth rates in '11 for Access?

David, that's a tough question. But I think directionally, we would expect growth rates to be higher in U.S., probably PacRim, Latin America, Australia. And the slowest growth would be in Europe, which is probably six, nine months behind the rest of the Access Equipment market in terms of how it's recovering.

Well, I think what I'm trying to quantify though, just given those order rates above 200%, backlog 62%, sales up 77%. I'm just trying to think at all in some kind of range you can help us with. Obviously, the numbers, I suspect, won't be this high that we're seeing right now given the comps get a little more difficult. But anyway, the comps don't get that much more difficult, given how tough the business has been even if it's year-to-date. So again, taking those kind of numbers, orders of 200%, backlog up 62%, can you at least help us quantify it to some degree?

David, this is Dave. We are sitting here today. And as we said, orders are coming in. There isn't a lot of visibility. We are seeing a lot of positive comments from the other publicly traded rental companies. We're seeing positive trends, when you look at the rentals report as an example. I think it's challenging for all of us to quantify what we think next year's sales in the segment are going to be. And I think we're just going to, unfortunately, have to see how it plays out. We do believe they will be up. And as we said on the prepared remarks, we believe that JLG will be profitable next year. But as we all know, depending on what you read in the paper from one day to the next, people are positive, the next day, they're negative, the next day, they're positive. But overall, we believe that it will be up next year.

May be a crack at the Defense business, and as a follow-up. If you look at 60% of your current Defense backlog shipping in '11, right there you have Defense revenues in '11 higher than you had in '09, and in '09, you had margins north of 15%. Now FMTV's clearly going to be drag, so truly, trying figure out the '11 margin versus '09. FMTV next year as a mix of business, it's probably a sub $1 billion revenue number, right? So it's telling you, FMTV is roughly no more than a third or so of your Defense revenues next year. Been trying to think mix of margins, can you maybe go '11 versus '09, something like that?

David, that's directionally correct.

Can you help little bit on -- if 2/3 is kind of be traditional core business maybe a little M-ATV parts and so forth, but a third is just lower margin FMTV. How do I comp '11 versus '09? Sales are higher are than '09, but margins...

I think the other thing I would say is that, typically, when we enter the fiscal year, all of our sales aren't under contract in the backlog. A significant percentage would be. But generally, we do have additional funded business that isn't under contract when we enter a fiscal year.

Just so I understand that comment, that would imply sure -- we've got about $2.7 billion of Defense...

Basically, that implies that we would have some additional sales.

But again, on the margin, the additional's probably not FMTV? I'm just trying to think to if FMTV is no more than a third of $3 billion plus in Defense revenues next year. I'm higher in '11 and '09 on Defense revenues. But how much of a hit do I take on margin, because FMTV, if much at all?

I think as the year plays out, we would expect some increases in orders probably across our portfolio, could include FMTV as well.

Our next question comes from Alex Blanton with Ingalls & Snyder. Alexander Blanton - Ingalls & Snyder: I'd like to talk about JLG for a minute. Your sales were at $374 million, and that was up 77% from last year and up 48% from the prior quarter. And that is very much larger than Genie, which reported $232 million of sales, and sales up 12% from last year and 9% from the prior quarter. This is the first time I can recall that the sales of JLG have diverged that much on the upside from Genie. How do you explain that? Can you give us an update on the competitive situation there? Because you two are the -- you have 90% of the world market, so it looks as if the world market's going in your direction.

Well, I do have to comment, Alex, about the 90% of world market. There are a lot of other large players, and I don't think... Alexander Blanton - Ingalls & Snyder: Wait, which ones are they in Access Equipment? There's the French company, Haulotte, but who else?

There's Haulotte, Aichi, there a lot of other smaller ones globally in telehandlers. Alexander Blanton - Ingalls & Snyder: Oh, yes, in telehandlers, but not in the aerials?

But our business does include telehandlers in our numbers. But I would make this remark that our segment of course this period is just JLG. We are performing well globally. But without knowing their business intimately, I don't think it's appropriate for us to talk about the comparisons. What we can really talk about is our own business. And there, we work hard for every sale, as you might expect. We certainly did enjoy some Defense orders this past quarter. In the last year, I think that's helped us some. I think our plans for deploying of people globally has helped us some as well. Alexander Blanton - Ingalls & Snyder: And I did -- you're right, I did misstated. When I said 90%, I was really talking only about Aerials, not the Telehandler business where you have a lot more competition in Europe. Now the second question is on the M-ATV business you had orders for 8,079 units and a bunch of spare parts and add-ons, which the total, according to my numbers, is $5.26 billion, of which $700 million will be delivered next year, but most of it this year. But Dave said at one point that they might order up to 10,000 of these units. So has that gone away or could you get more orders for units over the next few months? What do you think?

Well that's a speculative question. Alexander Blanton - Ingalls & Snyder: Absolutely.

Certainly, we've developed multiple variants with the hope and desire being able to sell more to the U.S. Department of Defense, also to sell them globally. We're active working both the domestic, international front, attempting to sell additional M-ATVs. Unfortunately, if the long lead times' sort of an effort, particularly internationally, so we don't have anything to announce today. And I think we just need to see how, in particular, how the conflict in Afghanistan develops over the next several months to see whether or not there'll be additional need. Alexander Blanton - Ingalls & Snyder: Well, you'll be getting some more spare parts, so why don't you -- you're probably going to deliver about 500 million of spare parts next year. But won't you get additional orders for that as you go forward on the M-ATV?

We would expect to get some. The magnitude is what we can't answer.

Our next question comes from the line of Charlie Brady with BMO Capital Markets.

With respect to the Fire & Emergency segment and the commentary around the Airport Products delayed at Q3 and your commentary in Q4, are you recognizing that in Q4, that slip in Q3?

Yes, Charlie, it's Dave. We had some international units that had, on the water or in the port, hadn't cleared customs yet, so that will just move in to the fourth quarter.

And as we look at the margin on that business, in Q4, your commentary says improving from Q3. A year ago x the LIFO benefit, you had somewhere around nine-plus-percent or so. Would you expect margins to be on par with the year ago numbers given the sales around the same level?

I think we'd probably have a little different sales mix this year, Charlie, and have not really compared it specifically against the fourth quarter. I guess my initial thought is it probably be not quite that high.

Despite having the -- because I'm assuming Q4 is going to have a higher mix of airport product to that?

Yes, it will.

Switch gears. On the FMTV, what are initial production rates in terms of units? Can you give us some guidance on kind of Q on where you start off? Is it 20% to 50%? Is it 100%? Kind of what normalized production rate ought to be?

I'm sorry, Charlie, on the FMTV?

On the FMTV production rates, initial and kind of normalized?

I think that, if I remember correctly, from the first quarter to sometime next spring, they probably double in terms of daily production.

And Charlie, just to clarify, we did go back and look at the numbers while you were asking the second question. In Fire & Emergency in the fourth quarter, excluding LIFO, I do think we can get back to where we were last year.

Our next question comes from the line of Josephine Millward with Benchmark Company.

You talked about some upcoming opportunities in Defense, in particular the Marine Humvee upgrade and FMS on the M-ATV. Can you help us quantify these opportunities? And also, can you give us an update on the Army's Humvee recap? I understand Congress had rejected the Army's request on that.

All right. In terms of quantifying the opportunities, on the Humvee suspension contract for the Marine Corps, we're really not going to quantify it for you right now for two reasons. One is that there's a great disparity in terms of how many suspensions they might buy. They might buy suspensions for 2,500 or so, vehicles up to maybe 12,500. So it's a wide range and very difficult for us to assess what that contract could be. It's an IDIQ contract, which basically says, they can buy whatever quantity they want. In terms of the M-ATV for global sale, it's a highly fluid situation. I can tell you is we are working in a number of opportunities. The volumes could be relevant and interesting, but it takes some time here, and we don't have anything to announce right now. On the recap, you're correct, they did reject the reprogramming effort on the Humvee recap for the U.S. Army. There's a lot of debate and discussion around this. We could probably talk for hours about what direction this could take. But I think it's fair to say that between the U.S. Army and the Marine Corps, that they want to invest in their light tactical fleet. Could that be the JLTV? Could it be Humvee recap? Humvee suspension for the Marine Corps? They have demands. How the funding shakes up between all of those programs or something new that could be developed, is hard to tell. What I can tell you is that we will seek to compete in all of those.

Just one follow-up question. Can you let us know how much cash you need to hold on to on your balance sheet to pay your suppliers and if you have a target for debt reduction?

I think when you look at just cash in the system, I guess I'll call it somewhere around $150 million is probably the minimum run rate there. In terms of the debt reduction for the year, as we said in the prepared remarks, we do anticipate paying down additional debt in the fourth quarter, but we have not provided a target number for that.

Our next question comes from Andrew Obin with Bank of America.

In terms of cash flows for next year, you talked about growth initiatives. Should we expect a disproportionate consumption of working capital relative to history? Are there any initiatives that would make us think about cash for next year different from your historic relations between net income and free cash flow?

In terms of the specific initiatives, I don't anticipate that those will have a significant impact on working capital. We did talk a little bit about on the CapEx, that may range from $100 million to $125 million depending on how the economic outlook is as we go through the year. And some of that would be to support some of the initiatives that we've been talking about.

And not to beat sort of the dead horse but in terms of incremental margins for JLG business, how should we be thinking about them as the company ramps up because the workforce should be in better shape, given that they have been working on M-ATV stuff, you have done a lot of restructuring. So is it logical to assume without putting any numbers that we should get pretty good incremental margins as volumes come back within the next year or two?

We think so. As you've mentioned, we have taken a lot of actions to address the cost structure at JLG, and we do expect that when we see the recovery and the improvement in sales that, that will be reflected in the incremental margins.

So we should see better bang for the buck relative to history as volumes come back given all the actions you've taken?

I think some of it will depend on product mix, customer mix. But in general, yes.

Our next question comes from Jerry Revich with Goldman Sachs.

Given the change in JLG leadership, can you step us through the key initiatives that you see for the business? Perhaps start by stepping us through what kind cost savings you're targeting from where we do shipping and labor costs on the production shift for the Asia market to China?

So given the change of leadership, where Wilson's key initiatives, I think is what I heard. Well, first of all, he's globetrotting the next several months, meeting all of our customers and attempting to get the direct voice of the customer globally, and getting to know his team stronger and developing those initiatives. But Wilson, I'm sure, will continue to do what he's done at the Fire & Emergency segment. And that is, identify growth initiatives and then pursue them relentlessly. So that's not being very specific for you, but that's our mode of operation in terms of cost savings, and we're not here to quantify cost savings. There will be cost savings derived from the integration of Jerr-Dan manufacturing into the JLG facilities that we announced in early July and again on the call. So I do think you'll see that. We have a expanded team of -- our global manufacturing operations team has been expanded with some strong lean talent. So we are deploying those globally we would expect some payback from those initiatives, but we can't quantify that either right now.

And were there any transition costs in Access Equipment from reducing M-ATV production in the quarter. Excluding the M-ATV business, your sequential incremental margins were only, call it, in the 10% to 15% range, despite sharply higher external customers sales? Or was that just a mix issue on the telehandler side? And lastly, what was the FMTV expense in the quarter?

Jerry, on the M-ATV ramp down at JLG, there might had been a little there in terms of -- as we ramped down production and try to move personnel over to production of JLG traditional products. I don't think it was significant. As we look to the quarter, I guess nothing really jumped out at us as it relates to the incremental margins. So I'm guessing, it was just probably driven by product mix. And then, I'm sorry, your last part of the question was?

The FMTV expense in the quarter. Can you just quantify that.

They were insignificant in the quarter.

Our next question comes from Peter Chang of Credit Suisse.

I just had a real quick question on -- I mean, you've talked about the geographic strength in sales for the Access Equipment line. Could you sort of give some color around the inventory situation by geography?

Well, I think we're targeting inventory levels generally, globally.

And then just a follow-up on Jerry's question with the FMTV startup costs. Are there going to be any type of significant startup costs for your fiscal 2011?

I think we will be ramping up production, so I would expect that we'll see efficiencies improve as we go through that. But I think any of those costs were included in the guidance, where we talked about initially very low margins on the program.

When you start up in electric coating facility, for example, it's something that's meant to run with higher volumes when you initially start up a facility like that, with the heat, light, power, the chemical costs et cetera. You really need to burn that against higher volume, which we won't have. So I suppose there are going to be some under absorption early on the program. But as we ramp up production, we should get to address that.

And I guess one other item would be as we ramp down production of the M-ATVs and transfer the workforce over to production of FMTVs, there may not be a perfect match there. So we may have a little bit of inefficiency related to that, but that will largely be yet in fiscal 2010.

Our next question comes from Walt Liptak with Barrington Research Associates.

My question is on the Commercial and Access segments. On an annual basis, have we seen the losses now? I mean, are we going to see profits from here on out?

We're still in the middle of finalizing our budget for fiscal 2011, Walt, on Commercial. So in terms of the quarterly breakdown, we haven't refined that. But I think in general, we expect to be solidly profitable next year.

Walt, you have to understand that from a seasonal standpoint, certainly for the Commercial segment, we're coming into the two lowest seasonal quarters of the calendar year. But you know, for fiscal 2011, we would expect Commercial to be profitable. For Access Equipment, the next quarter is generally, historically, a reasonably good volume quarter. The quarter ended December though, it's always be their weakest quarter of the year. So if you want to look at a quarterly basis, we're not here to tell you, profitability or not. But I just want to understand how the quarters go from a seasonal standpoint. In the quarters ended March and June, again, would sequentially, typically, it's stronger from a seasonal standpoint.

I wanted to ask about the Access plant in China. Are the Chinese ready for AWPs now? How big is the plant? How many units are you expecting to produce? What's your expected opportunity there?

It's a relatively large plant. The demand for access equipment continues to grow in China and Asia Pacific, generally. As there have to be at least 10, 12 or more Chinese manufacturing access equipment. So I think they are beginning to recognize the value of the product. So we will continue to ramp up production of the facility, adding more and more models with each passing month. We are enjoying a high localized content in the plant already with day one. And we're ramping up with very high localized content, so the cost structure should be good as we start to fill the plant.

Can you give me an idea of the square footage of the plant or the number of units you can produce there?

We're not commenting on that.

Our next question comes from Robert McCarthy with Robert W. Baird. Robert McCarthy - Robert W. Baird & Co. Incorporated: I wonder if I could ask the question about the Defense outlook a little differently. As we look to fiscal 2011, if we exclude both any affect from M-ATV and the startup from the FMTV program, is it your expectation that the balance of the Defense business or we might call the legacy business, will post a higher revenue in 2011?

Than when? Robert McCarthy - Robert W. Baird & Co. Incorporated: Than 2010.

Rob, off the top of the head, I think it will be close in 2011 to 2010. We got some paper shuffling here looking for, to give you a little further on guidance that, but I think it will be close. Robert McCarthy - Robert W. Baird & Co. Incorporated: And if that's the case, can one also assume that profitability measured the same way excluding the two swing factors would also be close?

I think relatively. Robert McCarthy - Robert W. Baird & Co. Incorporated: As we look at the incremental margin question in the Access business, putting Jerr-Dan into the mix there is going to have some impact. Can I assume that -- I mean, since we're really talking about strictly incremental volume into a business, can we talk about the incremental margins will be stronger than they otherwise would be or our comparisons with last year so weak at Jerr-Dan, that's simply not possible?

Rob, would you mind asking that again, please? Robert McCarthy - Robert W. Baird & Co. Incorporated: What I'm trying to get at is what impact Jerr-Dan's transfer into the Access Equipment segment might have on realizable incremental operating margins in Access? I mean, you answered the traditional question based on the traditional composition of business, but Jerr-Dan is now going to be part of that mix, so it will have some impact, and I'm wondering if you have any visibility you can share with us.

Well, Jerr-Dan isn't that large, that it's going to have significant impact on the margins in the segment.

It's been 10% or so far in Emergency right now, it's pretty minimal.

Less than 10%, we should some positive absorption impact. But again, it won't be that significant. Robert McCarthy - Robert W. Baird & Co. Incorporated: When you guys get to reporting next quarter, this will be the fourth quarter of the year but the first quarter that you're going to have Jerr-Dan in the Access segment. Can we count on you to give us restated first through third quarters, with the business move from one segment to the other, so that we can build appropriate models for the coming year?

Absolutely, Rob. We will do that. We'll go back to 2008, 2009, 2010. Robert McCarthy - Robert W. Baird & Co. Incorporated: And the last thing I wanted to ask about was just there were a couple of little clues, call them, or comments in the prepared remarks that wasn't quite clear whether you're trying to tell us something or not. You had inquiries from the Pentagon about selling some portion of your proprietary content out of the FHTV program. Is that something that you simply -- I mean, it doesn't strike me as something that you can simply say no to, given the importance of the customer. Could you talk about how you're managing that, the risk that it entails? How concerned you are about it in front of a potential rebid et cetera?

Rob, this is Charlie. We're certainly in discussions with our customer, and we're attempting to be as responsive as we can to their request. Their strategy overall is also very fluid. And we just don't really know where they're going to come out yet. And I think that affect our customers, and various defense trade magazines has been just as specific and said that, they're looking at a range of options. One of which could be to buy the design rights, one of which maybe not too. And they are looking at all other options and they have not communicated their decision to us at this time. Robert McCarthy - Robert W. Baird & Co. Incorporated: Positively, that suggests that you can have a role in helping them determine the best options. And then the other thing I was going to add, with all the conversations about when certain businesses might be seeing seasonally low volumes that at least presents a potential that they might not be above breakeven in a given quarter, sort of begs the question for the FMTV startup as well. I mean, do you really want -- my sense is right now, in the investment community, people expect to see a positive although very tiny, a positive margin from the very first quarter of any kind of volume production. Is that really likely?

Rob, I don't know that the FMTV will be significant contributor or detractor to the first quarter, for example. The volume of production isn't that significant. Robert McCarthy - Robert W. Baird & Co. Incorporated: What I meant was, then you step it up in the second quarter to more of a run rate level. Can we count on seeing a positive number in that quarter, do you believe?

Well, we bid a contract to be profitable.

Our next question comes from Steve Barger with KeyBanc Capital Markets.

I wanted to go back to the cash. You've got plenty right now relative to $150 million cushion that you might want to have. Can you give us some idea of what working cap conversion could be over the next quarter or two, as M-ATV winds down. Just so we can think about, how much cash you could have relative to the $1.4 billion in debt that you have right now?

I think you're going to see a continued trend of cash coming down as we progress through the fourth quarter, driven by the same reasons that you saw it in the third quarter, as the timing of cash receipts come in for the M-ATV program, as is that continues to wind down from a production standpoint.

As that rolls out though, you should see a significant bump in cash as you go into '11 though, right?

A significant bump in cash?

You're going continue to get paid on the M-ATVs that you're producing right now, or have you already taken all the payments for those?

Not all the payments. We get paid for a portion of the M-ATV. What I would expect is you're going to see cash come down because we will continue to pay suppliers. So for a given unit that we sell in the month of July, we will only get x percentage of the sales price of that vehicle in terms of cash.

I see, so the majority of the cash generation is now behind you, hence, your reduced payment rates going into FY '11 in terms of the debt?

Correct. If you recall back to the fourth quarter of fiscal 2009, that's when you saw the first really spike in the cash balance and that was due to the timing of the initial payments on the M-ATVs and in that quarter, we did not have a significant sales volume for M-ATVs.

And you have expressed some optimism about some of the weak -- the businesses that have been weaker for the last year, potentially troughing out here, and steel prices have moderated a bit. Given that you do have a decent amount of cash on the balance sheet, are you locking in better prices for raw materials for any of the segments in anticipation of increasing production?

We haven't been locking into any price.

Generally, the willingness of suppliers to lock in on a long-term basis is significantly diminished from what it was previously.

If you lock in for anything longer than three months, you're paying a significant premium.

So you really don't have the ability to buy ahead right now?

We're not.

Our next question comes from Paul Bodnar with Longbow Research.

On the Defense business, compared to this year, what does next year look like in terms of your expectations on just refurbishment work and that sort of thing?

We will continue to do some refurbishment work next year. I don't see any gains. There could be some losses in that relative to per year. It's a very fluid situation. The Defense budget do not provide great visibility into the O&M budget. The operations and maintenance budget, which is where all this funding comes from. So we don't have significant visibility. What we would say, ultimately, if President Obama is successful in his strategy to begin pulling troops out some time next summer. At that point in time, you would expect that recapping, resetting, remanufacturing of the fleet would have to be something that would increase their pulling assets out of theater and refurbishing them to be in a good ready state. So at some point, you would expect that, that kind of funding level would improve.

So it sounds like that's more of a 2012 story, I'll be saying, it should not have much of an impact on next year?

Probably.

Our next question is from Basili Alukos with Morningstar Inc.

Two questions, one on the Defense business. Can you talk a little bit about the other contracts or potential contracts that you might be bidding on? That would be looking out, say, three or four years. I know the JLTV is kind of a big thing and I think that was answered on the question about the Humvee recap. But is there anything in the pipeline that you're looking at?

Well, a few months ago, Chris (sic) [Basili], we announced that we're competing in Canada, teamed with General Dynamics Land Systems up in Canada, on some contract to provide both armored vehicles, as well as medium trucks into Canada. There other programs that we're active globally, but we prefer to pull those closer to the vest.

Follow-up, kind of more of a thematic question. If I look back at the past 15 years, Oshkosh, at least in my understanding, and the way I look at it is trying to diversify the portfolio outside of Defense. And now as you look on your driver seat now, obviously, the Defense because of the MRAP contract was such a huge boost, and now the Defense is still a significant portion of the firm's overall business. Has anything changed in the last 15 years that may make you look a little differently as far as diversifying your business going forward, or is that kind of still the plan?

I think always our strategy has been to grow the business, that's number one. And we will see growth wherever we see that opportunity. So I think when you go forward, you'll still see us seeking to diversify into other revenue streams, certainly to revenue streams that are less cyclical. But also we're in Defense and we expect to be a strong competitor in Defense for the long term.

And our last question comes from Alex Blanton with Ingalls & Snyder. Alexander Blanton - Ingalls & Snyder: I wanted to take up this matter of JLG's business doing so well versus Genie again. Could you give us a little more detail on that? I mean, this is a very unusual divergence. It hasn't really happened before. I've been following these companies for -- well, since the mid-90s. And Genie and JLG have pretty much moved together quarter-over-quarter, year-over-year. It really hasn't been a big divergence between the two of them. And now all of a sudden, in this quarter, your business is 60% bigger than theirs. Can you give us a little more indication of just exactly what's happening here? I mean, you must have an idea, I know you don't want to talk about Genie. But what are you doing that is different, that could have caused this?

Alex, when you compare any business against another, if maybe some traditional customers that you deal with. Maybe our customers are the ones buying right now, their customers might be buying next quarter. So I think the best thing to do, Alex, is to look over time and come back a year from now and we'll see where we are. Alexander Blanton - Ingalls & Snyder: One customer you both serve is United Rentals and they're not buying anything in the aerial field according to their last conference call. So I don't know what the other rental fleets are doing to the smaller independent fleets. But maybe you could give us some color on that. I mean, are the smaller fleets starting to buy as opposed to larger fleets or just what?

I don't think there's a lot changed in the smaller fleets, Alex. They, more than the larger fleets are dealing with credit issues and access to credit that's more difficult. So I'd say that probably the national rental companies globally and I see it from a small fleet. But the national rental companies in the U.S., similar large rental companies in Europe, Asia-Pac, Australia, Latin America that are doing most of the buying, access to credit is restricting the independent rental companies more so. I mean, obviously, there are exceptions to that but say it for the larger firms, they are buying globally. Alexander Blanton - Ingalls & Snyder: Finally, when are you going to get back to giving us a numerical guidance? I mean, you've provided wonderful detail, qualitatively, on the different parts of your business for next year and for the fourth quarter. But it's not possible at this point to translate that into a number?

Alex, it's still a very volatile market, I mean you see it in the stock market everyday of the week. When that volatility ends, then maybe we'll think about it some more. But at this time, we really have... Alexander Blanton - Ingalls & Snyder: Is that a way of saying that next year is pretty uncertain?

Again, we won't give any certainty but we gave you our outlook and that is that we do see, generally speaking, our Access Equipment and Commercial segments growing next year. From what you say, it will be challenged, of course, our Defense segment will have lower volumes but we'll still, again, we still expect solid volume next year in Defense.

Alex, I will comment. This is Bob. The people at JLG are really working hard. And they're making a lot of sales calls, they're doing a lot of things and they're really working hard and I'm sure Genie is too. Thank you for your interest today. We're going to continue to stay focused on making sure we are paying down debt. Investing in new product development and of course exceeding our customers expectations. We're very pleased with the performance we had for the quarter, and I want to thank our employees, and also thank you for your interest in our company. Have a great day.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.